Ifrs Accounting Solution

Solutions to jobs and feats TABLE OF CONTENTS * Chapter 11 Concepts for abstr be active 1-51 Concepts for Analysis 1-62 Concepts for Analysis 1-103 Concepts for Analysis 1-113 * Chapter 24 outline be apply 2-34 Brief enjoyment 2-44 Brief practice 2-54 wee-wee 2-35 * Chapter 36 rehearse 3-66 behave 3-96 execution 3-118 bring 3-1410 operate 3-1510 recitation 3-1610 * chapter 412 get along 4-212 employment 4-413 employ 4-516 Exercise 4-1217 Exercise 4-1318 Exercise 4-1519 Problem 4-119 Problem 4-721 * Chapter 523 Exercise 5-223 Exercise 5-423 Exercise 5-1325Exercise 5-1525 Problem 5-227 * Chapter 729 Exercise 7-529 Exercise 7-730 Exercise 7-1330 Exercise 7-1531 Exercise 7-1631 Exercise 7-2432 Problem 7-834 Problem 7-1135 Problem 7-1536 * Chapter 838 Exercise 8-138 Exercise 8-1538 Exercise 8-2539 Exercise 8-2640 * chapter 942 Brief Exercise 9-242 Brief Exercise 9-442 Brief Exercise 9-742 Brief Exercise 9-843 Exercise 9-243 Exercise 9-744 Exercise 9-1245 Exercise 9-1446 Exercise 9-1947 Problem 9-447 * Chapter 1849 Exercise 18-249 Exercise 18-450 Exercise 18-751 Exercise 18-1152 Exercise 18-1553 Exercise 18-1954Problem 18-755 Problem 18-857 * Chapter 2359 Exercise 23-159 Exercise 23-559 Exercise 23-660 Exercise 23-1160 CHAPTER 1 CA 1-5 (a)One of the committees that the AICPA ceremonious foregoing to the establishment of the FASB was the Committee on story Procedures ( exhaust hood). The uppercase, during its existence from 1939 to 1959, de detonateured 51 account Research Bulletins (ARB). In 1959, the AICPA created the score Prin-ciples mount (APB) to replace the CAP. Before being replaced by the FASB, the APB released 31 official pronouncements, c all tolded APB Opinions. b)Although the ARBs printd by the CAP sponsored to narrow the range of alternative practices to whatever extent, the CAPs enigma-by-problem approach failed to come through and through the well-defined, structured body of accountancy principles that was two needed and desired. As a result, the CAP was replaced by the APB. The APB had more office staff and accountability than did the CAP. Unfortunately, the APB was beleaguered throughout its 14- form existence. It came under fire early, charged with lack of productivity and failing to act promptly to correct alleged score abuses.The APB also met a lot of diligence and CPA firm opposition and chance(a) governmental interference when tackling numerous biting report issues. In fear of governmental rule making, the accounting profession investigated the ineffectualness of the APB and replaced it with the FASB. Learning from prior experiences, the FASB has several crucial differences from the APB. The FASB has (1) smaller membership, (2) practiced- clock, compensated membership, (3) greater autonomy, (4) change magnitude independence, and (5) wide-eyeder re give upation. In addition, the FASB has its own research taff and relies on the expertise of various lying-in impression groups fo rmed for various projects. These features form the bases for the expectations of achievement and support from the normal. In addition, the due exercise taken by the FASB in establishing mo crystalliseary accounting standards gives interested persons ample opportunity to make their views known. Thus, the FASB is responsive to the needs and viewpoints of the absolute economic community, non just the macrocosm accounting profession. (c)The AICPA has supplemented the FASBs efforts in the donation standard-setting environment.The issue papers, which ar prep bed by the Accounting Standards Executive Committee (AcSEC), post modern financial insurance coverage problems for limited industries and present alternative treat-ments of the issue. These papers turn in the FASB with an early warning device to verify timely issuance of FASB standards, Interpretations, and Staff Positions. In situations where the FASB avoids the subject of an issue paper, AcSEC may issue a avowal of Position to offer guidance for the reporting issue. AcSEC also issues act Bulletins which indicate how the AICPA believes a given doing should be reported.Recently, the role of the AICPA in standard-setting has diminished. The FASB and the AICPA agreed, that by and by a transition catamenia, the AICPA and AcSEC no longish volition issue authoritative accounting guidance for public companies. CA 1-6 (a)The mo last(a)ary Accounting Foundation (FAF) is the sponsoring organization of the FASB. The FAF selects the members of the FASB and its consultive Council, funds their activities, and generally oversees the FASBs activities. The FASB follows a due border in establishing a typical FASB report of Financial Accounting Standards.The following(a)(a) steps are parkly taken (1) A topic or project is identified and placed on the lineups agenda. (2) A task force of experts from various sectors is assembled to define problems, issues, and alternatives cogitate to the topic. ( 3) Research and analysis are conducted by the FASB technical staff. (4) A preliminary views scroll is pictureed and released. (5) A public hearing is a good deal held, usually 60 days subsequently the release of the preliminary views. (6) The Board analyzes and evaluates the public response. (7) The Board deliberates on the issues and prepares an exposure draft for release. 8) After a 30-day (minimum) exposure period for public comment, the Board evaluates all of the responses received. (9) A committee studies the exposure draft in relation to the public responses, reevaluates its position, and revises the draft if necessary. (10) The full Board gives the revised draft final consideration and votes on issuance of a Standards contention. The passage of a innovative accounting standard in the form of an FASB literary argument requires the support of five of the seven Board members. (b)The FASB issues three major types of pronouncements Standards and Interpretations, Financial Accounting Concepts, and Technical Bulletins.Financial accounting standards issued by the FASB are considered GAAP. In addition, the FASB also issues interpretations that represent modifications or extensions of existing standards and APB Opinions. These interpretations have the same authority as standards and APB Opinions in guiding sure accounting practices. The tilts of Financial Accounting Concepts (SFAC) help the FASB to avoid the problem-by-problem approach. These statements set forth ingrained objectives and concepts that the Board volition use in developing future standards of financial accounting and reporting.They are intended to form a cohesive set of interrelated concepts, a body of theory or a conceptual framework, that provide serve as tools for solving existing and emerge problems in a consistent, sound manner. The FASB may issue a technical publicise when in that location is a need for guidelines on implementing or applying FASB Standards or Interpretations, APB Opinions, Accounting Research Bulletins, or emerging issues. A technical bulletin is issued only when (1) it is non expected to grounds a major change in accounting practice for a descend of enterprises, (2) its terms of implementation is low, and (3) the guidance supportd by the bulletin does ot conflict with any broad fundamental accounting principle. In addition, the FASBs Emerging Issues Task Force (EITF) issues statements to provide guidance on how to account for new and unusual financial transactions that have the potential for creating diversity in reporting practices. The EITF identifies controversial accounting problems as they prepare and determines whether they can be quickly mulish or whether the FASB should become involved in solving them. In essence, it becomes a problem filter for the FASB.Thus, it is hoped that the FASB will be fitting to work on more permeant long-run problems, while the EITF deals with short-term emerging issues. CA 1-10 1. (b), (e) 2. (a) 3. (c) 4. (d) CA 1-11 1. (d) 2. (f) 3. (c) 4. (e) 5. (a) 6. (b) CHAPTER 2 sk etc. achievement 2-3 (a)Equity (b) revenue enhancement enhancements (c)Equity (d)Assets (e) sp final stages (f) divergencees (g)Liabilities (h)Distributions to owners (i)Gains (j)Investments by owners skeleton model 2-4 (a)Periodicity (b)Mo sort outary unit (c)Going concern (d)Economic entity abbreviated arrange 2-5 (a) tax recognition (b) get down recognition (c)Full disclosure (d)Historical embody reading 2-3 (1520 minutes) a)Gains, red inkes. (b)Liabilities. (c)Investments by owners, encyclopaedic income. (also realizable would be taxations and come upons). (d)Distributions to owners. ( eyeshade to teacher crystalize effect is to reduce equity and additions). (e) across-the-board income. (also possible would be revenues and gains). (f)Assets. (g)Comprehensive income. (h) revenue enhancements, depreciates. (i)Equity. (j) receiptss. (k)Distributions to owners. (l)Comprehensive inc ome. CHAPTER 3 example 3-6 (1015 minutes) 1. Accounts due 750 helping revenue enhancement 750 2. Utilities toll 520 Utilities payable 520 3. Depreciation depreciate cd Accumulated DepreciationDental Equipment four hundred please expenditure ergocalciferol relate Payable 500 4. damages write down ($15,000 X 1/12) 1,250 Prepaid Insurance 1,250 5. Supplies write off ($1,600 $400) 1,200 Supplies 1,200 performance 3-9 (1520 minutes) (a) 10/15 Salaries set down 800 exchange 800 (To show up payment of October 15 payroll) 10/17 Accounts receivable 2, light speed dish tax income 2,100 (To infix revenue for services performed for which payment has non yet been received) 10/20 immediate payment 650 Unearned Service Revenue 650 (To indicate receipt of currency for services not yet performed) (b) 10/31 Supplies depreciate 470 Supplies 470 (To infix the use of supplies during Octo ber) 10/31 Accounts receivable 1,650 Service Revenue 1,650 (To record revenue for services performed for which payment has not yet been received) 10/31 Salaries write down 600 Salaries Payable 600 (To record indebtedness for accrue payroll) 10/31 Unearned Service Revenue 400 Service Revenue 400 (To reduce the Unearned Service Revenue account for service that has been performed) praxis 3-11 (2025 Minutes) (a)CAVAMANLIS CO. Income argumentation For the course of study stop declination 31, 2010 Revenues Service revenue $12,590 Expenses Salaries expense $6,840 Rent expense 2,760 Depreciation expense 145 Interest expense 83 9,828 interlocking Income $ 2,762 (b)CAVAMANLIS CO. Statement of well-kept fee For the Year cease declination 31, 2010 carry earnings, January 1 $11,310 render interlocking income 2,762 little Dividends 3,000 Retained earnings, celestial latitude 31 $11,072 c)CAVAMANLIS CO. oddment Sheet celestial latitude 31, 2010 Assets true Assets interchange $18,972 Accounts due 6,920 Prepaid rent 2,280 follow current assets $28,172 Property, jell, and equipment Equipment 18,050 slight Accumulated wear and tear (4,895) 13,155 issue forth assets $41,327 Liabilities and Stockholders Equity contemporary liabilities bloods due $ 5,700 Accounts due 4,472 Interest due 83 sum of money current liabilities 10,255 Stockholders equity communal Stock $20,000 Retained sugar 11,072* 31,072 thoroughgoing liabilities and profligateholders equity $41,327 *Beg. equilibrate + gain Income Dividends = goal Balance $11,310 + $2,762 $3,000 = $11,072 cause 3-14 (1015 minutes) clear revenue 340,000 coarse cut-rate crude revenue Returns and accommodations 13,000 taxation revenue usher outs 8,000 Income digest 319,000 Income digest 302,000 damage of Goods Sold 202,000 Freight-out 7,000 Insurance Expense 12,000 Rent Expense 20,000 Salary Exp ense 61,000 Income Summary 17,000 Retained pelf 17,000 employment 3-15 (1015 minutes) (a) $5,000 ($90,000 $85,000)(d) $95,000 ($5,000 + $90,000) b) $29,000 ($85,000 $56,000)(e) $52,000 ($90,000 $38,000) (c) $14,000 ($29,000 $15,000) EXERCISE 3-16 (1015 minutes) gross revenue 390,000 hail of Goods Sold 235,700 gross revenue Returns and Allowances 12,000 sales synthesiss 15,000 change Expenses 16,000 Administrative Expenses 38,000 Income Tax Expense 30,000 Income Summary 43,300 (or) gross sales 390,000 Income Summary 390,000 Income Summary 346,700 be of Goods Sold 235,700 gross sales Returns and Allowances 12,000 gross sales Discounts 15,000 Selling Expenses 16,000 Administrative Expenses 38,000Income Tax Expense 30,000 Income Summary 43,300 Retained Earnings 43,300 Retained Earnings 18,000 Dividends 18,000 CHAPTER 4 EXERCISE 4-2 (2535 minutes) (a) wide-cut crystalize revenue gross sales $400,000 slight gross revenu e discounts $ 7,800 gross revenue returns 12,400 20,200 dismiss sales 379,800 Dividend revenue 71,000 Rental revenue 6,500 replete(p) net revenue $457,300 (b) bring in income follow net revenue (from a) $457,300 Expenses constitute of goods interchange $184,400 Selling expenses 99,400 Administrative expenses 82,500 Interest expense 12,700 totality expenses 379,000 Income forrader income appraise 78,300 Income revenue 26,600 scratch income $ 51,700 (c) Dividends declared destination retained earnings $134,000 fountain retained earnings 114,400 salary increase 19,600 little electronic network income (from (b)) 51,700 Dividends declared $ 32,100 ALTERNATE solution (for (c)) blood line retained earnings $114,400 match last-place income 51,700 166,100 slight Dividends declared ? closedown retained earnings $134,000 Dividends declared moldiness be $32,100 ($166,100 $134 ,000) EXERCISE 4-4 (3035 minutes) (a)Multiple- mensuration put to work WEBSTER association Income Statement For the Year finish declination 31, 2010 (In thousands, besides earnings per deal out) sales $96,500 make up of goods interchange 63,570 bring in wampum 32,930 Operating Expenses Selling expenses sales commissions $7,980 Depr. of sales equipment 6,480 Transportation-out 2,690 $17,150 Administrative expenses business officers salaries 4,900 Depr. of office furn. and equip. 3,960 8,860 26,010 Income from trading trading trading operations 6,920 oppo position Revenues and Gains Rental revenue 17,230 24,150 separate Expenses and liberationes Interest expense 1,860 Income in front income revenue enhancement 22,290 Income banner 7,580 meshwork income $14,710 Earnings per pct ($14,710 ? 40,550) $. 36 (b)Single-Step Form WEBSTER COMPANY Income Statement For the Year Ended December 31, 2010 (In tho usands, except earnings per share) Revenues sales $ 96,500Rental revenue 17,230 essence revenues 113,730 Expenses speak to of goods sold 63,570 Selling expenses 17,150 Administrative expenses 8,860 Interest expense 1,860 sum of money expenses 91,440 Income before income valuate 22,290 Income revenueation 7,580 wage income $ 14,710 Earnings per share $0. 36 nock An alternative income statement format for the single-step form is to show income revenue as relegate of expenses, and not as a set off full point. (c)Single-step 1. Simplicity and conciseness. 2. Probably better understood by users. . Emphasis on aggregate address and expenses and net income. 4. Does not signify priority of one revenue or expense over another. Multiple-step 1. Provides more entropy through segregation of direct and nonoperating gunpoints. 2. Expenses are matched with related revenue. none to instructor Students answers will vary due to the nature of the heading i. e. , it asks for an opinion. However, the discussion supporting the answer should include the above points. EXERCISE 4-5 (3035 minutes) PARNEVIK CORP. Income Statement For the Year Ended December 31, 2010 sales Revenue gross revenue $1,280,000less(prenominal)(prenominal) sales returns and recompenses $150,000 gross revenue discounts 45,000 195,000 electronic network sales revenue 1,085,000 footing of goods sold 621,000 piggish make 464,000 Operating Expenses Selling expenses 194,000 Admin. and general expenses 97,000 291,000 Income from operations 173,000 former(a) Revenues and Gains Interest revenue 86,000 259,000 Other Expenses and deprivationes Interest expense 60,000 Income before impose and uncomparable head 199,000 Income assess ($199,000 X . 34) 67,660 Income before grotesque item 131,340 wonderful itemloss from quake damage long hundred,000 slight Applicable evaluate step-down ($120,000 X . 34) 40,800 79,20 0 dough income $ 52,140 Per share of common stock Income before unusual item ? ($131,340 ? 100,000) $1. 31* Extraordinary item (net of tax) (0. 79) wins income ($52,140 ? 100,000) $0. 52 * travel EXERCISE 4-12 (1520 minutes) mesh topology income Income from continue operations before income tax $21,650,000 Income tax (35% X $21,650,000) 7,577,500 Income from go on operations 14,072,500 cease operations hurt before income tax $3,225,000 slight Applicable income tax (35%) 1,128,750 2,096,250 Net income $11,976,250 prefer dividends declared $ 860,000 leaden average common shares swell 4,000,000 Earnings per share Income from continuing operations $3. 30* Discontinued operations, net of tax (0. 52)** Net income $2. 78*** *($14,072,500 $860,000) ? 4,000,000. (Rounded) **$2,096,250 ? 4,000,000. (Rounded) ***($11,976,250 $860,000) ? 4,000,000. EXERCISE 4-13 (1520 minutes) (a) 2010 Income before income tax$460,000Income tax (35%) 161,000 Net Incom e$299,000 (b)Cumulative effect for old age prior to 2010 Year Weighted Average first in first out Difference Tax Rate (35%) Net Effect 2008 $370,000 $395,000 $25,000 2009 390,000 420,000 30,000 do $55,000 $19,250 $35,750 (c) 2010 2009 2008 Income before income tax $460,000 $420,000 $395,000 Income tax (35%) 161,000 147,000 138,250 Net income $299,000 $273,000 $256,750 EXERCISE 4-15 (1520 minutes) BRYANT CO. Statement of Stockholders Equity For the Year Ended December 31, 2010 Total Compre-hensive Income Retained Earnings Accumulated Other Comprehensive Income commonplace Stock bloodline commensurateness $520,000 $ 90,000 $80,000 $350,000 Comprehensive income Net income* 170,000 $170,000 170,000 Other comprehensive income unrealised holding loss (50,000) (50,000) (50,000) Comprehensive income $120,000 Dividends (10,000) (10,000) culmination residual $630,000 $250,000 $30,000 $350,000 *($750,000 $50 0,000 $80,000).SOLUTIONS TO taskS problem 4-1 DICKINSON COMPANY Income Statement For the Year Ended December 31, 2010 gross sales $25,000,000 court of goods sold 16,000,000 unprocessed net incomes 9,000,000 Selling and administrative expenses 4,700,000 Income from operations 4,300,000 Other revenues and gains Interest revenue $ 70,000 Gain on the sale of investments 110,000 180,000 Other expenses and losses admit of goodwill 820,000 Income from continuing operations before income tax 3,660,000 Income tax 1,244,000 Income from continuing operations 2,416,000Discontinued operations Loss on operations, net of tax 90,000 Loss on disposal, net of tax 440,000 530,000 Income before extraordinary item 1,886,000 Extraordinary itemloss from flood damage, net of tax 390,000 Net income $ 1,496,000 Earnings per share Income from continuing operations $ 4. 67a Discontinued operations Loss on operations, net of tax $(0. 18) Loss on disposal, net of tax (0. 88) (1. 06) Income before extraordinary item 3. 61b Extraordinary loss, net of tax (0. 78) Net income $ 2. 83c DICKINSON COMPANYRetained Earnings Statement For the Year Ended December 31, 2010 Retained earnings, January 1 $ 980,000 Add Net income 1,496,000 2,476,000 slight Dividends like stock $ 80,000 parking lot stock 250,000 330,000 Retained earnings, December 31 $ 2,146,000 a$2,416,000 $80,000 = $4. 67 500,000 shares b$1,886,000 $80,000 = $3. 61 500,000 shares c$1,496,000 $80,000 = $2. 83 500,000 shares PROBLEM 4-7 wade CORP. Income Statement (Partial) For the Year Ended December 31, 2010 Income from continuing operations before income tax $1,200,000* Income tax 456,000** Income from continuing operations 744,000 Discontinued operations Loss from operations of quit subsidiary $ 90,000 slight Applicable income tax reduction 34,200 $ 55,800 Loss from disposal of subsidiary 100,000 Less Applicable income tax reduction 38,000 62,000 117 ,800 Income before extraordinary item 626,200 Extraordinary item Gain on curse word 125,000 Less Applicable income tax 50,000 75,000 Net income $ 701,200 Per share of common stock Income from continuing operations $4. 96 Discontinued operations, net of tax (0. 79) Income before extraordinary item 4. 17 Extraordinary item, net of tax 0. 50 Net income ($701,200 ? 150,000) $4. 67 * numeration of income from continuing operations before income tax As preliminaryly stated $1,210,000 Loss on sale of equipment $40,000 ($80,000 $30,000) (10,000) Restated $1,200,000 ** computer science of income tax expense $1,200,000 X . 38 = $456,000 no(prenominal)e The error related to the intangible asset was correctly charged to retained earnings.CHAPTER 5 EXERCISE 5-2 (1520 minutes) 1. h. 11. b. 2. d. 12. f. 3. f. 13. a. 4. f. 14. h. 5 c. 15. c. 6. a. 16. b. 7. f. 17. a. 8. g. 18. a. 9. a. 19. g. 10. a. 20. f. EXERCISE 5 -4 (3035 minutes) GULISTAN INC. Balance Sheet December 31, 2010 Assets new assets immediate payment $thirty Less specie restricted for industrial define involution xxx $ xxx Accounts receivable thirty Less Allowance for doubtful accounts thirty xxx Notes receivable xxx duesofficers thirty Inventories Finished goods thirty Work in process xxx Raw materials thirty thirty Total current assets $XXX long-run investments Preferred stock investments XXX Land held for future plant site XXX notes restricted for plant expansion XXX Total long-term investments XXX Property, plant, and equipment Buildings XXX Less Accum. derogation buildings XXX XXX intangible assets Copyrights XXX Total assets $XXX Liabilities and Stockholders Equity Current liabilities Accrued salaries payable $XXX Notes payable, short-term XXX Unearned subscriptions revenue XXX Unearned rent revenue XXX Total current liabilities $XXX Long-term debt Bonds payable, due in four course of studys $XXX Less Discount on bonds payable (XXX) XXX Total liabilities XXX Stockholders equity Capital stock viridity stock XXX Additional paid-in metropolis Paid in capital in excess of parcommon stock XXX Total paid-in capital XXX Retained earnings XXX Total paid-in capital and retained earnings XXX Less Treasury stock, at cost (XXX) Total stockholders equity XXX Total liabilities and stock- holders equity $XXX Note to instructor An assumption make here is that capital included the property restricted for plant expansion. If it did not, then a subtraction from cash would not be necessary or the cash balance would be grossed up and then the cash restricted for plant expansion deducted. EXERCISE 5-13 (1520 minutes) (a) 4. (f) 1. (k) 1. (b) 3. (g) 5. (l) 2. (c) 4. (h) 4. (m) 2. (d) 3. (i) 5. (e) 1. (j) 4. EXERCISE 5-15 (2535 minutes) (a)SONDERGAARD CORPORA TION Statement of coin Flows For the Year Ended December 31, 2010 capital stops from operating activities Net income $160,000 Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense $17,000 Loss on sale of investments 7,000 Decrease in accounts receivable 5,000 Decrease in current liabilities (17,000) 12,000 Net cash provided by operating activities 172,000 cash flows from investing activities Sale of investments ($74,000 $52,000) $7,000 15,000 acquire of equipment (58,000) Net cash used by investing activities (43,000) notes flows from financing activities Payment of cash dividends (50,000) Net increase in cash 79,000 Cash at beginning of year 78,000 Cash at end of year $157,000 (b)Free Cash Flow Analysis Net cash provided by operating activities $172,000 Less Purchase of equipment (58,000) Dividends (50,000) Free cash flow $ 64,000 PROBLEM 5-2 MONTOYA, INC. Balance Sheet December 31, 2010Assets Current assets Cash $ 360,000 Trading securities 121,000 Notes receivable 445,700 Income taxes receivable 97,630 Inventories 239,800 Prepaid expenses 87,920 Total current assets $1,352,050 Property, plant, and equipment Land $ 480,000 Building $1,640,000 Less Accum. depreciation building 270,200 1,369,800 Equipment 1,470,000 Less Accum. depreciation equipment 292,000 1,178,000 3,027,800 Intangible assets Goodwill 125,000 Total assets $4,504,850Liabilities and Stockholders Equity Current liabilities Accounts payable $ 490,000 Notes payable to commits 265,000 Payroll taxes payable 177,591 Taxes payable 98,362 Rent payable 45,000 Total current liabilities $1,075,953 Long-term liabilities Unsecured notes payable (long-term) $1,600,000 Bonds payable $300,000 LessDiscount on bonds payable 15,000 285,000 Long-term rental obligations 480,000 2,365,000 Total liabilities 3,440,953 Stockholders equity Capital s tock Preferred stock, $10 par 20,000 shares authorized, 15,000 shares issued $150,000 Common stock, $1 par 400,000 shares authorized, 200,000 issued 200,000 $350,000 Retained earnings ($1,063,897 $350,000) 713,897 Total stockholders equity ($4,504,850 $3,440,953) 1,063,897 Total liabilities and stockholders equity $4,504,850 CHAPTER 7 EXERCISE 7-5 (1520 minutes) (a) 1. June 3 Accounts receivableArquette 2,000 sales 2,000 June 12 Cash 1,960 sales Discounts ($2,000 X 2%) 40 Accounts dueArquette 2,000 2. June 3 Accounts dueArquette 1,960 Sales ($2,000 X 98%) 1,960 June 12 Cash 1,960 Accounts receivableArquette 1,960 (b) July 29 Cash 2,000 Accounts dueArquette 1,960 Sales Discounts give up 40 (Note to instructor Sales discounts forfeited could have been recog-nized at the time the discount period lapsed. The company, however, would probably not record this forfeiture until final cash settlement. ) EXERCISE 7 -7 (1015 minutes) (a) distressing Debt Expense 7,500 Allowance for Doubtful Accounts 7,500* . 01 X ($800,000 $50,000) = $7,500 (b) Bad Debt Expense 6,000 Allowance for Doubtful Accounts 6,000* *Step 1. 05 X $160,000 = $8,000 (desired consultation balance in Allowance account) Step 2$8,000 $2,000 = $6,000 (required credit entry to bring allowance account to $8,000 credit balance) EXERCISE 7-13 (1015 minutes) (a) Cash 290,000 Finance Charge 10,000* Notes Payable 300,000 *2% X $500,000 = $10,000 (b) Cash 350,000 Accounts Receivable 350,000 EXERCISE 7-13 (Continued) (c) Notes Payable 300,000 Interest Expense 7,500* Cash 307,500 *10% X $300,000 X 3/12 = $7,500 EXERCISE 7-15 (1015 minutes) Computation of net crop Cash received $190,000 Less Recourse financial obligation 2,000 Net ingathering $188,000 Computation of gain or loss Carrying honor $200,000 Net proceeds 188,000 Loss on sale of receivables $ 12,000 The following journ al entry would be make Cash $190,000 Loss on Sale of Receivables 12,000 Recourse obligation 2,000 Accounts Receivable 200,000 EXERCISE 7-16 (1520 minutes) (a) To be put down as a sale, all of the following conditions would be met 1. The transferred asset has been isolated from the transferor (put beyond reach of the transferor and its creditors). 2. The transferees have obtained the right to make whoopie or to exchange either the transferred assets or beneficial interests in the trans-ferred assets. 3. The transferor does not swan effective control over the trans-ferred assets through an agreement to repurchase or write them before their maturity. (b) Computation of net proceeds Cash received ($250,000 X 94%) $235,000 Due from factor ($250,000 X 4%) 10,000 $245,000 Less Recourse obligation 3,000 Net proceeds $242,000 Computation of gain or loss Carrying pry $250,000 Net proceeds 242,000 Loss on sale of receivables $ 8,000 The following journal entry would be made Cash $235,000 Due from Factor 10,000 Loss on Sale of Receivables 8,000 Recourse Liability 3,000 Accounts Receivable 250,000 *EXERCISE 7-24 (1520 minutes) (a)KIPLING COMPANY money box Reconciliation July 31 Balance per bank statement, July 31 $ 8,650 Add Deposits in transit 2,850a depart great checks (1,100)b advance cash balance, July 31 $10,400 Balance per books, July 31 $ 9,250 Add Collection of note 1,500 Less Bank service charge $ 15 NSF check 335 (350) Corrected cash balance, July 31 $10,400 aComputation of deposits in transit Deposits per books $5,810 Deposits per bank in July $ 4,500 Less deposits in transit (June) (1,540) Deposits send out and received in July (2,960) Deposits in transit, July 31 $2,850 bComputation of outstanding checks Checks written per books $3,100 Checks cleared by bank in July $ 4,000 Less outstanding checks (June)* (2,000) Checks written and cleared in July (2,000) Outstanding checks, July 31 $1,100 *Assumed to clear bank in July (b) Cash 1,150 Office ExpensesBank Charges 15 Accounts Receivable 335 Notes Receivable 1,500 PROBLEM 7-8 10/1/10 Notes Receivable 120,000 Sales 120,000 12/31/10 Interest Receivable 2,400* Interest Revenue 2,400 *$120,000 X . 08 X 3/12 = $2,400 10/1/11 Cash 9,600* Interest Receivable 2,400 Interest Revenue 7,200** *$120,000 X . 08 = $9,600**$120,000 X . 08 X 9/12 = $7,200 2/31/11 Interest Receivable 2,400 Interest Revenue 2,400 10/1/12 Cash 9,600 Interest Receivable 2,400 Interest Revenue 7,200 Cash 120,000 Notes Receivable 120,000 Note Entries at 10/1/11 and 10/1/12 assumes reversing entries were not made on January 1, 2011 and January 1, 2012. PROBLEM 7-11 SANDBURG COMPANY Income Statement Effects For the Year Ended December 31, 2010 Expenses resulting from accounts receivable depute (Schedule 1) $22,320 Loss resulting from accounts receivable sold ($300,000 $270,000) 30,000Total expenses $52,320 Schedule 1 Computation of Expense for Accounts Receivable charge Assignment expense Accounts receivable assigned $400,000 X 80% Advance by Keller Finance Company 320,000 X 3% $ 9,600 Interest expense 12,720 Total expenses $22,320 *PROBLEM 7-15 (a)The entries for the issuance of the note on January 1, 2010 The present value of the note is $1,200,000 X . 68058 = $816,700 (Rounded by $4). Botosan Company (Debtor) Cash 816,700 Discount on Notes Payable 383,300 Note Payable 1,200,000 field geological formation Bank (Creditor) Notes Receivable 1,200,000 Discount on Notes Receivable 383,300 Cash 816,700 (b)The amortisation enumeration for this note is SCHEDULE FOR stake AND DISCOUNT AMORTIZATION EFFECTIVE-INTEREST METHOD $1,200,000 Note Issued to Yield 8% Date Cash Paid Interest Expense Discount Amortized Carrying Amount of Note 1/1/10 $ 816,700 12/31/10 $0 $ 65,336* $ 65,336 882,036** 12 /31/11 0 70,563 70,563 952,599 12/31/12 0 76,208 76,208 1,028,807 12/31/13 0 82,305 82,305 1,111,112 2/31/14 0 88,888 88,888 1,200,000 Total $0 $383,300 $383,300 *$816,700 X 8% = $65,336. **$816,700 + $65,336 = $882,036. (c)The note can be considered to be impaired only when it is presumptive that, based on current breeding and events, National Organization Bank will be unable to collect all adds due (both principal and interest) according to the contractual terms of the loan. (d) The loss is computed as follows Carrying amount of loan (12/31/11) $952,599a Less act value of $800,000 due in 3 years at 8% (635,064)b Loss due to impairment $317,535 aSee amortization schedule from answer (b) on page 7-66. b$800,000 X . 79383 = $635,064. December 31, 2011 National Organization Bank (Creditor) Bad Debt Expense 317,535 Allowance for Doubtful Accounts 317,535 Note Botosan Company (Debtor) has no entry. CHAPTER 8 EXERCISE 8-1 (1520 minutes) incidents 2, 3, 5, 8, 10, 13, 14, 16, and 17 would be reported as ancestry in the financial statements. The following items would not be reported as pedigree 1. personify of goods sold in the income statement. 4. Not reported in the financial statements. 6. represent of goods sold in the income statement. . Cost of goods sold in the income statement. 9. Interest expense in the income statement. 11. Advertising expense in the income statement. 12. Office supplies in the current assets section of the balance tag. 15. Not reported in the financial statements. 18. Short-term investments in the current asset section of the balance tab. EXERCISE 8-15 (1520 minutes) (a)ESPLANADE COMPANY Computation of breed for production BAP Under FIFO archive order meet 31, 2010 Units Unit Cost Total Cost evidence 26, 2010 600 $12. 00 $ 7,200 February 16, 2010 800 11. 00 8,800January 25, 2010 (portion) 100 10. 00 1,000 parade 31, 2010, stemma 1,500 $17,000 (b)ESPLANADE COMPANY Computation of descent for Product BAP Under LIFO breed Method March 31, 2010 Units Unit Cost Total Cost Beginning farm animal 600 $8. 00 $ 4,800 January 5, 2010 (portion) 900 9. 00 8,100 March 31, 2010, scrutinize 1,500 $12,900 (c)ESPLANADE COMPANY Computation of Inventory for Product BAP Under Weighted Average Inventory Method March 31, 2010 Units Unit Cost Total Cost Beginning livestock 600 $ 8. 0 $ 4,800 January 5, 2010 1,100 9. 00 9,900 January 25, 2010 1,300 10. 00 13,000 February 16, 2010 800 11. 00 8,800 March 26, 2010 600 12. 00 7,200 4,400 $43,700 Weighted average cost ($43,700 ? 4,400) $ 9. 93* March 31, 2010, inventory 1,500 $ 9. 93 $14,895 *Rounded off. EXERCISE 8-25 (2025 minutes) Current $ terms Index Base Year $ assortment from anterior Year 2007 $ 80,000 1. 00 $ 80,000 2008 111,300 1. 05 106,000 +$26,000 2009 108,000 1. 0 90,000 (16,000) 2010 122,200 1. 30 94,000 +4,000 2011 147,000 1. 40 105,000 +11,000 2012 176,900 1. 45 122,000 +17,000 conclusion InventoryDollar-value LIFO 2007 $80,000 2011 $80,000 1. 00 = $ 80,000 10,000 1. 05 = 10,500 2008 $80,000 1. 00 = $ 80,000 4,000 1. 30 = 5,200 26,000 1. 05 = 27,300 11,000 1. 40 = 15,400 $107,300 $111,100 2009 $80,000 1. 00 = $ 80,000 2012 $80,000 1. 00 = $ 80,000 10,000 1. 05 = 10,500 10,000 1. 5 = 10,500 $ 90,500 4,000 1. 30 = 5,200 11,000 1. 40 = 15,400 2010 $80,000 1. 00 = $ 80,000 17,000 1. 45 = 24,650 10,000 1. 05 = 10,500 $135,750 4,000 1. 30 = 5,200 $ 95,700 EXERCISE 8-26 (1520 minutes) Date Current $ terms Index Base-Year $ Change from Prior Year Dec. 31, 2007 $ 70,000 1. 00 $70,000 Dec. 31, 2008 88,200 1. 05 84,000 +$14,000 Dec. 31, 2009 95,120 1. 16 82,000 (2,000) Dec. 31, 2010 108,000 1. 0 90,000 +8,000 Dec. 31, 2011 100,000 1. 25 80,000 (10,000) Ending InventoryDollar-value LIFO Dec. 31, 2007 $70,000 Dec. 31, 2008 $70,000 1. 00 = $70,000 14,000 1. 05 = 14,700 $84,700 Dec. 31, 2009 $70,000 1. 00 = $70,000 12,000 1. 05 = 12,600 $82,600 Dec. 31, 2010 $70,000 1. 00 = $70,000 12,000 1. 05 = 12,600 8,000 1. 20 = 9,600 $92,200 Dec. 31, 2011 $70,000 1. 00 = $70,000 10,000 1. 05 = 10,500 $80,500 CHAPTER 9 BRIEF EXERCISE 9-2 Item Cost Designated Market LCM Jokers $2,000 $2,050 $2,000 Penguins 5,000 4,950 4,950 Riddlers 4,400 4,550 4,400 Scarecrows 3,200 3,070 3,070 BRIEF EXERCISE 9-4 Group Number of CDs Sales cost per CD Total Sales Price Relative Sales Price Total Cost Cost Allocated to CDs Cost per CD 1 100 $ 5 $ 500 5/100* X $8,000 = $ 400 $ 4** 2 800 $10 8,000 80/100 X $8,000 = 6,400 $ 8 3 100 $15 1,500 15/100 X $8,000 = 1,200 $12 $10,000 $8,000 $500/$10,000 = 5/100**$400/100 = $4 BRIEF EXERCISE 9-7 Beginning inventory $150,000 Purchases 500,000 Cost of goods gettable 650,000 Sales $700,000 Less gross b oodle (35% X 700,000) 245,000 Estimated cost of goods sold 455,000 Estimated ending inventory destroyed in fire $195,000 BRIEF EXERCISE 9-8 Cost Retail Beginning inventory $ 12,000 $ 20,000 Net purchases 120,000 170,000 Net markups 10,000 Totals $132,000 200,000 Deduct Net markdowns 7,000 Sales 147,000 Ending inventory at retail $ 46,000 Cost-to-retail ratio $132,000 ? $200,000 = 66% Ending inventory at lower-of cost-or-market (66% X $46,000) = $30,360 EXERCISE 9-2 (1015 minutes) Item Net accomplishable Value (Ceiling) Net Realizable Value Less Normal bring in (Floor) Replacement Cost Designated Market Cost LCM D $90* $70** $120 $90 $75 $75 E 80 60 72 72 80 72 F 60 40 70 60 80 60 G 55 35 30 35 80 35 H 80 60 70 70 50 50 I 60 40 30 40 36 36 Estimated sell price Estimated selling expense = $120 $30 = $90. **Net realizable value Normal clear margin = $90 $20 = $70. EXERCISE 9-7 (1520 minutes) Cost P er Lot (Cost Allocated/ No. of a lot) $2,040 2,720 1,360 Cost Allocated to Lots $18,360 40,800 25,840 $85,000 Total Cost $85,000 85,000 85,000 X X X Relative Sales Price $27,000/$125,000 $60,000/$125,000 $38,000/$125,000 $78,000 53,040 24,960 18,200 $ 6,760 blunt gain $ 3,840 10,240 10,880 $24,960 Total Sales Price $ 27,000 60,000 38,000 $125,000 Sales (see schedule) Cost of goods sold (see schedule) earthy internet Operating expenses Net income Sales $12,000 32,000 34,000 $78,000 SalesPrice Per Lot $3,000 4,000 2,000 Cost Cost of Per Lots Lot Sold $2,040 $ 8,160 2,720 21,760 1,360 23,120 $53,040 No. of Lots 9 15 19 Number of Lots Sold* 4 8 17 29 * 9 5 = 4 15 7 = 8 19 2 = 17 Group 1 Group 2 Group 3 Group 1 Group 2 Group 3 Total EXERCISE 9-12 (1015 minutes) a) Inventory, whitethorn 1 (at cost) $160,000 Purchases (at cost) 640,000 Purchase discounts (12,000) Freight-in 30,000 Goods available (at cost) 818,000 Sales (at selling price) $1,000,000 Sales returns (at selling price) (70,000) Net sales (at selling price) 930,000 Less Gross winnings (25% of $930,000) 232,500 Sales (at cost) 697,500 rough inventory, may 31 (at cost) $120,500 (b)Gross arrive at as a percentage of sales must be computed 25% = 20% of sales. 100% + 25% Inventory, May 1 (at cost) $160,000 Purchases (at cost) 640,000 Purchase discounts (12,000) Freight-in 30,000 Goods available (at cost) 818,000 Sales (at selling price) $1,000,000 Sales returns (at selling price) (70,000) Net sales (at selling price) 930,000 Less Gross internet (20% of $930,000) 186,000 Sales (at cost) 744,000 Approximate inventory, May 31 (at cost) $ 74,000 EXERCISE 9-14 Beginning inventory $170,000 Purchases 450,000 620,000 Purchase returns (30,000) Goods available (at cost) 590,000Sales $650,000 Sales returns (24,000) Net sales 626,000 Less Gross lolly (30% X $626,000) (187,800) 438,200 Estimated ending inventory (unadjusted for damage) 151,800 Less Goods on devolveundamaged (at cost) $21,000 X (1 30%) (14,700) Less Goods on good dealdamaged (at net realizable value) (5,300) Fire loss on inventory $131,800 EXERCISE 9-19 (1217 minutes) Cost Retail Beginning inventory $ 200,000 $ 280,000 Purchases 1,425,000 2,140,000 Totals 1,625,000 2,420,000 Add Net markups Markups $95,000 Markup cancellations _________ (15,000) 80,000 Totals $1,625,000 2,500,000 Deduct Net markdowns Markdowns 35,000 Markdown cancellations (5,000) 30,000 Sales price of goods available 2,470,000 Deduct Sales 2,250,000 Ending inventory at retail $ 220,000 Cost-to-retail ratio = $1,625,000 = 65% $2,500,000 Ending inventory at cost = 65% X $220,000 = $143,000 PROBLEM 9-4 Beginni ng inventory $ 80,000 Purchases 290,000 370,000 Purchase returns (28,000)Total goods available 342,000 Sales $415,000 Sales returns (21,000) 394,000 Less Gross profit (35% of $394,000) 137,900 (256,100) Ending inventory (unadjusted for damage) 85,900 Less Goods on handundamaged ($30,000 X 1 35%) 19,500 Inventory damaged 66,400 Less Salvage value of damaged inventory 8,150 Fire loss on inventory $ 58,250 CHAPTER 18 EXERCISE 18-2 (1520 minutes) (a)1. 6/3Accounts ReceivableAnn Mount8,000 Sales8,000 6/5Sales Returns and Allowances600 Accounts ReceivableAnn Mount600 6/7Transportation-Out24Cash24 6/12Cash7,252 Sales Discounts (2% X $7,400)148 Accounts ReceivableAnn Mount7,400 2. 6/3Accounts ReceivableAnn Mount7,840 Sales $8,000 (2% X $8,000)7,840 6/5Sales Returns and Allowances588 Accounts ReceivableAnn Mount $600 (2% x $600)588 6/7Transportation-Out24 Cash24 6/12Cash7,252 Accounts ReceivableAnn Mount7,252 (b)8/5Cash7,400 Accounts ReceivableAnn Mount7,252 Sales Discoun ts Forfeited (2% X $7,400)148 EXERCISE 18-4 (2025 minutes) (a)Gross profit recognized in 2010 2011 2012 Contract price $1,600,000 $1,600,000 $1,600,000 cost cost to date $400,000 $825,000 $1,070,000 Estimated costs to complete 600,000 1,000,000 275,000 1,100,000 0 1,070,000 Total estimated profit 600,000 500,000 530,000 Percentage completed to date 40%* 75%** 100% Total gross profit recognized 240,000 375,000 530,000 Less Gross profit recognized in previous years 0 240,000 375,000 Gross profit recognized in current year $ 240,000 $ 135,000 $ 155,000 **$400,000 ? $1,000,000**$825,000 ? 1,100,000 (b) twisting in Process ($825,000 $400,000)425,000Materials, Cash, Payables, etc. 425,000Accounts Receivable ($900,000 $300,000)600,000 Billings on Construction in Process600,000 Cash ($810,000 $270,000)540,000 Accounts Receivable540,000 Construction Expenses425,000 Construction in Process135,000 Revenue from Long-Term Contracts560,000* *$1,600,000 X (75% 40%) ( c)Gross profit recognized in 2010 2011 2012 Gross profit $0 $0 $530,000* *$1,600,000 $1,070,000 EXERCISE 18-7 (2530 minutes) (a)1. Gross profit recognized in 2010 Contract price$1,200,000 Costs Costs to date$280,000Estimated additional costs 520,000 800,000 Total estimated profit400,000 Percentage completion to date ($280,000/$800,000) 35% Gross profit recognized in 2010$ 140,000 Gross profit recognized in 2011 Contract price$1,200,000 Costs Costs to date$600,000 Estimated additional costs 200,000 800,000 Total estimated profit400,000 Percentage completion to date ($600,000/$800,000) 75% Total gross profit recognized300,000 Less Gross profit recognized in 2010 140,000 Gross profit recognized in 2011$ 160,000 2. Construction in Process ($600,000 $280,000)320,000 Materials, Cash, Payables, etc. 20,000 Accounts Receivable ($500,000 $150,000)350,000 Billings on Construction in Process350,000 Cash ($320,000 $120,000)200,000 Accounts Receivable200,000 Construction in Process160,000 C onstruction Expenses320,000 Revenues from Long-Term Contracts480,000* *$1,200,000 X ($600,000 $280,000) ? $800,000 (b)Income Statement (2011) Gross profit on long-term mental synthesis contract$160,000 Balance Sheet (12/31/11) Current assets Receivablesconstruction in process$180,000* Inventoriesconstruction in process totaling $900,000** less billings of $500,000$400,000 **$180,000 = $500,000 $320,000 **Total cost to date$600,000 010 Gross profit140,000 2011 Gross profit 160,000 $900,000 EXERCISE 18-11 (1520 minutes) (a)Computation of gross profit recognized 2010 2011 $370,000 X 34%* $125,800 $350,000 X 34%* $119,000 $450,000 X 32%** 144,000 $125,800 $263,000 *($900,000 $594,000) ? $900,000 **($1,000,000 $680,000) ? $1,000,000(b) installation Accounts Receivable20111,000,000 sequence Sales1,000,000 Cost of episode Sales680,000 Inventory680,000 Cash800,000 installation Accounts Receivable, 2010350,000 Installment Accounts Receivable, 2011450,000 Installment Sales1,000,0 00 Cost of Installment Sales680,000Deferred Gross gain ground on Installment Sales, 2011320,000 Deferred Gross meshing on Installment Sales, 2010119,000 Deferred Gross Profit on Installment Sales, 2011144,000 realised Gross Profit on Installment Sales263,000 recognize Gross Profit on Installment Sales263,000 Income Summary263,000 EXERCISE 18-15 (1015 minutes) (a)Realized gross profit recognized in 2011 under the installment-sales mode of accounting is $83,000. When gross profit is express as a percentage of cost, it must be converted to percentage of sales to compute the realized gross profit under the installment-sales method of accounting.Thus, 2010 and 2011 gross internet as a percentage of sales are 20% and 21. 875% respectively. Sale Year Gross Profit Percentage 2011 Collections 2011 Realized Profit 2010 . 25/(1. 00 + . 25) = 20% $240,000 $48,000 2011 . 28/(1. 00 + . 28) = 21. 875% 160,000 35,000 TOTAL $83,000 (Note to instructor The problem provides gross profit as a percent of cost. ) (b)The balance of Deferred Gross Profit could be reported on the balance sheet for 2011 1. As a current liability on the theory that it is related to Installment Accounts Receivables that are normally treated as current assets . As a deferred credit between liabilities and stockholders equity. This treatment is criticized because there is no obligation to outsiders or 3. As an adaptation or offset to the related Installment Accounts Receivable. This is because the deferred gross profit is a part of revenue from installment sales not yet realized. The related receivable will be overstated unless the deferred gross profit is deducted. On the other hand, the amount of deferred gross profit has no direct relationship with the estimated collectibility of the accounts receivable.It is not a settled return as to the proper classification of deferred gross profit on the balance sheet when the installment-sales method of accounting is used to measure income. As indicated in the text, the FASB in Statement of Financial Accounting Concepts No. 6 indicates that it conceptually is an asset valuation. We support the FASB position. (c)Gross profit as a percent of sales in 2010 is 20% (as computed in (a) above) gross profit therefore is $96,000 ($480,000 X . 20) and the cost of 2010 sales is $384,000 ($480,000 $96,000). Because the amounts collected in 2010 ($130,000) and 2011 ($240,000) do not exceed the total cost of