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P3-1A P3-2A E3-4 E3-5 E3-6

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Fundamental Accounting Principles 20e

P3-1A Meyer Co. follows the practice of recording prepaid expenses and unearned revenues in balance sheet accounts.
The company’s annual accounting period ends on December 31, 2011. The following information
concerns the adjusting entries to be recorded as of that date.

a. The Office Supplies account started the year with a $3,000 balance. During 2011, the company purchased supplies for $12,400, which was added to the Office Supplies account. The inventory of supplies available at December 31, 2011, totaled $2,640.

b. An analysis of the company’s insurance policies provided the following facts.
Policy Date of Purchase Coverage Cost
A April 1, 2010 24 $15,840
B April 1, 2011 36 13,068
C August 1, 2011 12 2,700

The total premium for each policy was paid in full (for all months) at the purchase date, and the
Prepaid Insurance account was debited for the full cost. (Year-end adjusting entries for Prepaid
Insurance were properly recorded in all prior years.)

c. The company has 15 employees, who earn a total of $2,100 in salaries each working day. They are
paid each Monday for their work in the five-day workweek ending on the previous Friday. Assume
that December 31, 2011, is a Tuesday, and all 15 employees worked the first two days of that week.
Because New Year’s Day is a paid holiday, they will be paid salaries for five full days on Monday,
January 6, 2012.

d. The company purchased a building on January 1, 2011. It cost $855,000 and is expected to have a
$45,000 salvage value at the end of its predicted 30-year life. Annual depreciation is $27,000.
e. Since the company is not large enough to occupy the entire building it owns, it rented space to a tenant at $2,400 per month, starting on November 1, 2011. The rent was paid on time on November 1, and the amount received was credited to the Rent Earned account. However, the tenant has not paid the December rent. The company has worked out an agreement with the tenant, who has promised to pay both December and January rent in full on January 15. The tenant has agreed not to fall behind again.

f. On November 1, the company rented space to another tenant for $2,175 per month. The tenant paid
five months’ rent in advance on that date. The payment was recorded with a credit to the Unearned
Rent account.

P3-2A For each of the following entries, enter the letter of the explanation that most closely describes it in the space beside each entry. (You can use letters more than once.)
A. To record receipt of unearned revenue.
B. To record this period’s earning of prior
unearned revenue.
C. To record payment of an accrued expense.
D. To record receipt of an accrued revenue
E. To record an accrued expense.
F. To record an accrued revenue.
G. To record this period’s use of a prepaid expense.
H. To record payment of a prepaid expense.
I. To record this period’s depreciation expense

1. Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Prepaid Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
______ 2. Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Interest Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
______ 3. Depreciation Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . 4,000
______ 4. Unearned Professional Fees . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Professional Fees Earned . . . . . . . . . . . . . . . . . . . . . . 3,000
and so on .....

E3-4 The following three separate situations require adjusting journal entries to prepare financial statements as of April 30. For each situation, present both the April 30 adjusting entry and the subsequent entry during May to record the payment of the accrued expenses.

a. On April 1, the company retained an attorney for a flat monthly fee of $2,500. This amount is paid to the attorney on the 12th day of the following month in which it was earned.

b. A $780,000 note payable requires 9.6% annual interest, or $6,240 to be paid at the 20th day of each month. The interest was last paid on April 20 and the next payment is due on May 20. As of April 30, $2,080 of interest expense has accrued.

c. Total weekly salaries expense for all employees is $9,000. This amount is paid at the end of the day on Friday of each five-day workweek. April 30 falls on Tuesday of this year, which means that the employees had worked two days since the last payday. The next payday is May 3.

E3-5 Determine the missing amounts in each of these four separate situations a through d.
a b c d
Supplies available — prior year-end . . . . . . . . . . . . . . . . $ 300 $1,600 $1,360 ?
Supplies purchased during the current year . . . . . . . . . 2,100 5,400 ? $6,000
Supplies available — current year-end . . . . . . . . . . . . . . 750 ? 1,840 800
Supplies expense for the current year . . . . . . . . . . . . . ? 1,300 9,600 6,575

E3-6 Pablo Management has five part-time employees, each of whom earns $100 per day. They are normally paid on Fridays for work completed Monday through Friday of the same week. They were paid in full on Friday, December 28, 2011. The next week, the five employees worked only four days because New Year’s Day was an unpaid holiday. Show (a) the adjusting entry that would be recorded on Monday, December 31, 2011, and (b) the journal entry that would be made to record payment of the employees’ wages on Friday, January 4, 2012.

ACC380 E7-13 City of Sweetwater

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7–13. The City of Sweetwater maintains an Employees’ Retirement Fund, a singleemployer, defined benefit plan that provides annuity and disability benefits. The fund is financed by actuarially determined contributions from the city’s General Fund and by contributions from employees. Administration of the retirement fund is handled by General Fund employees, and the retirement fund does not bear any administrative expenses. The Statement of Net Assets for the Employees’ Retirement Fund as of July 1, 2011, is shown here:

Employees’ Retirement Fund
Statement of Net Assets

As of July 1, 2011
Cash $ 50,000
Accrued Interest Receivable 135,000
Investments, at Fair Value:
Bonds 4,500,000
Common Stocks 1,300,000
Total Assets 5,985,000
Accounts Payable and Accrued Expenses 350,000
Net Assets Held in Trust for Pension for Benefits $5,635,000
During the year ended June 30, 2012, the following transactions occurred:

1. The interest receivable on investments was collected in cash.

2. Member contributions in the amount of $400,000 were received in cash.
The city’s General Fund also contributed $600,000 in cash.

3. Annuity benefits of $700,000 and disability benefits of $150,000 were
recorded as liabilities.

4. Accounts payable and accrued expenses in the amount of $900,000 were
paid in cash.

5. Interest income of $240,000 and dividends in the amount of $40,000
were received in cash. In addition, bond interest income of $140,000 was
accrued at year-end.

6. Refunds of $130,000 were made in cash to terminated, nonvested

7. Common stocks, carried at a fair value of $500,000, were sold for
$480,000. That $480,000, plus an additional $300,000, was invested in

8. At year-end, it was determined that the fair value of stocks held by the
pension plan had decreased by $50,000; the fair value of bonds had
increased by $30,000.
9. Nominal accounts for the year were closed.

a. Record the transactions on the books of the Employees’ Retirement

b. Prepare a Statement of Changes in Net Assets for the Employees’
Retirement Fund for the Year Ended June 30, 2012.

c. Prepare a Statement of Net Assets for the Employees’ Retirement Fund
as of June 30, 2012.

ASHFORD ACC380 Spencer County

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5–2. A concerned citizen provides resources and establishes a trust with the local
government. What factors should be considered in determining which fund to
report the trust activities?

5-4. The citizens of Spencer County approved the issuance of $2,000,000 in
6 percent general obligation bonds to finance the construction of a courthouse
annex. A capital projects fund was established for that purpose.
The preclosing trial balance of the courthouse annex capital project fund
Trial Balance—December 31, 2012 Debits Credits
Cash $1,265,000
Contract payable $ 550,000
Due from state government 200,000
Encumbrances 750,000
Expenditures—capital 1,485,000
Intergovernmental grant 400,000
OFS: premium on bonds 35,000
OFS: proceeds sale of bonds 2,000,000
Budgetary fund balance— 750,000
Reserve for encumbrances
Transfer out 35,000
$3,735,000 $3,735,000

a. Prepare any closing entries necessary at year-end.

b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance
for the courthouse annex capital project fund.

c. Prepare a balance sheet for the Courthouse Annex Capital Project Fund,
assuming all unexpended resources are restricted to construction of the
courthouse annex.

ASHFORD ACC380 WEEK 1 General Fund of the City

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2–8. The following information is available for the preparation of the governmentwide
financial statements for the city of Northern Pines for the year ended
June 30, 2012:
General government $10,300,000
Public safety 22,900,000
Public works 11,290,000
Health and sanitation 6,210,000
Culture and recreation 4,198,000
Interest on long-term debt, governmental type 621,000
Water and sewer system 11,550,000
Parking system 419,000
Charges for services, general government 1,110,000
Charges for services, public safety 210,000
Operating grant, public safety 698,000
Charges for services, health and sanitation 2,555,000
Operating grant, health and sanitation 1,210,000
Charges for services, culture and recreation 2,198,000
Charges for services, water and sewer 12,578,000
Charges for services, parking system 398,000
Property taxes 27,112,000
Sales taxes 20,698,000
Investment earnings, business-type 319,000
Special item—gain on sale of unused land,
governmental type 1,250,000
Transfer from governmental activities to
business-type activities 688,000
Net assets, July 1, 2011, governmental activities 11,222,000
Net assets, July 1, 2011, business-type activities 22,333,000
From the previous information, prepare, in good form, a Statement of Activities
for the city of Northern Pines for the year ended June 30, 2012. Northern
Pines has no component units

2–9. The following General Fund information is available for the preparation of
the financial statements for the city of Eastern Shores for the year ended
September 30, 2012:
Property taxes $27,000,000
Sales taxes 13,216,000
Fees and fines 1,124,000
Licenses and permits 1,921,000
Intergovernmental 868,000
Investment earnings 654,000
General government 8,192,000
Public safety 24,444,000
Public works 6,211,000
Health and sanitation 1,693,000
Culture and recreation 2,154,000
Debt service—principal 652,000
Debt service—interest 821,000
Proceeds of long-term, capital-related debt 2,210,000
Transfer to special revenue fund 1,119,000
Special item—proceeds from sale of land 821,000
Fund balance, October 1, 2011 13,211,000

From the information given above, prepare, in good form, a General Fund
Statement of Revenues, Expenditures, and Changes in Fund Balances for the
city of Eastern Shores General Fund for the Year Ended September 30, 2012.

3–12. Following are transactions and events of the General Fund of the City of
Springfield for the fiscal year ended December 31, 2012.
1. Estimated revenues (legally budgeted)
Property taxes $5,000,000
Sales taxes 4,000,000
Licenses and permits 1,500,000
Miscellaneous 500,000
2. Appropriations
General government $5,000,000
Culture and recreation 4,500,000
Health and welfare 1,000,000
3. Revenues received (cash)
Property taxes $4,783,541
Sales taxes 4,501,009
Licenses and permits 1,700,000
Miscellaneous 800,000
4. Encumbrances issued (includes salaries and other recurring items)
General government $5,100,000
Culture and recreation 4,650,000
Health and welfare 905,000
5. Goods and services received (paid in cash)
Estimated Actual
General government $5,100,000 $5,035,450
Culture and recreation 4,650,000 4,610,000
Health and welfare 905,000 891,550
6. Budget revisions
Increase appropriations:
General government $100,000
Culture and recreation 150,000
7. Fund balance—Unrestricted on January 1, 2012, was $735,000. There
were no outstanding encumbrances at that date.

a. Record the transactions using appropriate journal entries.
b. Prepare a budgetary comparison schedule for the General Fund.

ASHFORD ACC310 WEEK5 16-28 16-56

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The following data reflect the current month’s activity for Sills, Inc.:

Actual total direct labor                                     546,000
Actual hours worked                                       26,000
Standard labor-hours allowed for actual output (flexible budget)     27,000
Direct labor price variance                                  19500 U 
Actual variable overhead                                   132,600
Standard variable overhead rate per standard direct labor-hour     5.25

Variable overhead is applied based on standard direct labor-hours allowed.

Compute the labor and variable overhead price and efficiency variances.

16-56 Farmer Frank’s produces items from local farm products and distributes them to supermarkets. Over the years, price competition has become increasingly important, so Susan Kramer, the company's controller, is planning to implement a standard cost system for Farmer Frank's. She asked her cost accountant, Margaret Chang, to gather cost information on the production of blueberry preserves (Farmer Frank’s most popular product). Margaret reported that blueberries cost $.75 per quart, the price she intends to pay to her good friend who has been operating a blueberry farm that has been unprofitable for the last few years. Because of an oversupply in the market, the price for blueberries has dropped to $.60 per quart. Margaret is sure that the $.75 price will be enough to pull her friend's farm out of the red and into the black. Required: Is Margaret's behavior regarding the cost information she provided to Susan unethical? Explain.

ASHFORD ACC310 WEEK4 13-38 Cameron Paris has the following data from year 1 operations, which are to be used for developing year 2 budget estimates

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Prepare Budgeted Financial Statements
Problem 13-38 Cameron Paris has the following data from year 1 operations, which are to be used for developing year 2 budget estimates: P13-38 Prepare budgeted Financial Statements

Cameron Parts has the following data from year 1 operations, which are to be used for developing year 2 budget estimates:
Revenues (12,500 units) $1,119,000
Manufacturing costs Materials 199,500
Variable cash costs 271,350
Fixed cash costs 108,000
Depreciation (fixed) 133,500
Marketing and administrative costs
Marketing (variable, cash) 142,500
Marketing depreciation 33,900
Administrative (fixed, cash) 135,165
Administrative depreciation 2,600
Total costs 1,036,515
Operating profits 82,485

All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $14,550 will be replaced in year 2 with new equipment that will incur an annual depreciation charge of $21,000. Sales volume and prices are expected to increase by 12 percent and 6 percent, respectively. On a per unit basis, expectations are that materials costs will increase by 10 percent and variable manufacturing costs will decrease by 4 percent. Fixed manufacturing costs are expected to decrease by 7 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 8 percent. Inventories are kept at zero. Cameron operates on a cash basis.
Required: Prepare a budgeted income statement for year 2.

Ashford ACC310 WEEK3 9-39

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9-30 Pickle Motorcycles, Inc. (PMI), manufactures three motorcycle models: a cruising bike (Route 66), a street bike (Main Street), and a starter model (Alley Cat). Because of the different materials used, production processes for each model differ significantly in terms of machine types and time requirements. Once parts are produced, however, assembly time per unit required for each type of bike is similar. For this reason, PMI allocates overhead on the basis of machine-hours. Last year, the company shipped 1,000 Route 66s, 4,000 Main Streets, and 10,000 Alley Cats and had the following revenues and expenses:

The consultant found no basis for allocating the plant administration and other fixed overhead costs and recommended that these not be applied to products.

a. Using machine-hours to allocate production overhead, complete the income statement for Pickle Motorcycles. (See the "using energy" activity for machine-hours.) Do not attempt to allocate plant administration of other fixed overhead.
b. Complete the income statement using the bases recommended by the consultant.
c. How might activity-based costing result in better decisions by Pickle Motorcycles' management?
d. After hearing the consultant's recommendations, the CFO decides to adopt activity-based costing but expresses concern about not allocating some of the overhead to the products (plant administration and other fixed overhead). In the CFO's view, "Products have to bear a fair share of all overhead or we won't be covering all of the costs." How would you respond to this comment?

Ashford ACC310 WEEK 2 Lanen

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Ashford acc310 week 2 4-23 4-24 6-8 6-14 4-48

Fundamental cost accounting 3e lanen

4-23 one of your acquaintances notes, this whole subject of differential costing is easy; variable costs are the only costs that are relevant”. How would you respond?

4-24 A manager in your organization just received a special order at a price that is “below cost”. The manager points to the document and says, “These are the kinds of orders that will get you in trouble. Every sale must bear its share of the full cost of running the business. If we sell below our full cost, we’ll be out of business in no time.” What do you think of this remark? ....and so on

6-8 “Cost allocation is arbitrary, so there is nothing gained by it. We should report only the costs that we know are direct.” Do you agree? Why?

6-14 what criteria are important in determining the choice of an allocation base?

4-48 Sherene Nili manages a company that produces wedding gowns. She produces both a custom product that is made to order and a standard product that is sold in bridal salons. Her accountant prepared the following forecasted income statement for March, which is a busy month:

Ms. Nili already has orders for the 10 custom dresses reflected in the March forecasted income
statement. The depreciation charges are for machines used in the respective product lines.
Machines depreciate at the rate of $1 per hour based on hours used, so these are variable costs. In
March, cutting and sewing machines are expected to operate for 900 hours, of which 600 hours
will be used to make custom dresses. The rent is for the building space, which has been leased for
several years at $7,000 per month. The rent, heat, and light are allocated to the product lines based
on the amount of fl oor space occupied.

A valued customer, who is a wedding consultant, has asked Ms. Nili for a special favor. This
customer has a client who wants to get married in early April. Ms. Nili’s company is working at
capacity and would have to give up some other business to make this dress. She can’t renege on
custom orders already agreed to, but she can reduce the number of standard dresses produced in
March to 10. Ms. Nili would lose permanently the opportunity to make up the lost production of
standard dresses because she has no unused capacity for the foreseeable future. The customer is
willing to pay $25,000 for the special order. Materials and labor for the order will cost $6,000 and
$10,000, respectively. The special order would require 140 hours of machine time. Ms. Nili’s company
would save 150 hours of machine time from the standard dress business given up. Rent, heat
and light, and other production costs would not be affected by the special order.

a. Should Ms. Nili take the order? Explain your answer.
b. What is the minimum price Ms. Nili should accept to take the special order?
c. What are the other factors, if any, besides price that she should consider?

ACC310 WEEK1 1-18 2-19 3-16 3-33 3-36


Fundamentals of cost accounting 3e Lanen

1-18 Cost Data for Managerial Purposes

Beige Computers operates retail stores in both downtown (City) and suburban (Mall) locations.
The company has two responsibility centers: the City Division, which contains stores in downtown
locations, and the Mall Division, which contains stores in suburban locations. Beige’s CEO is concerned about the profitability of the City Division, which has been operating at a loss for the last
several years. The most recent income statement follows. The CEO has asked for your advice on
shutting down the City Division’s operations. If the City Division is eliminated, corporate administration is not expected to change, nor are any other changes expected in the operations or costs
of the Mall Division

Beige Computers, City Division
Divisional Income Statement
For the Year Ending January 31
Sales revenue   12,900,000
   Advertising - city division   525,000
   Cost of goods sold   6,450,000
   Divisional administrative salaries   870,000
   Selling costs (sales commissions)   1,730,000
   Rent   2,215,000
   Share of corporate administration   1,425,000
     Total costs   13,215,000
Net differential gain before income tax   (315,000)
Tax expense at 40% rate 126,200
Net differential gain from store  (189,000)

What revenues and costs are probably differential for the decision to discontinue City Division’s
operations? What will be the effect on Beige’s profits if the division is eliminated?

2-19 Basic Concepts
For each of the following costs incurred in a manufacturing firm, indicate whether the costs are
most likely fixed (F) or variable (V) and whether they are most likely period costs (P) or product
costs (M) under full absorption costing.

a. Energy to run machines producing units of output in the factory.
b. Depreciation on the building for administrative staff offices.
c. Bonuses of top executives in the company.
d. Overtime pay for assembly workers.
e. Transportation-in costs on materials purchased.
f. Assembly line workers’ wages.
g. Sales commissions for sales personnel.
h. Administrative support for sales supervisors.
i. Controller’s office rental.
j. Cafeteria costs for the factory.

Exercise 3-16 “I am going to work for a hospital, which is a not-for-profit organization. Because there are no profits, I will not be able to apply any CVP analysis in my work.” Do you agree with this statement? Why or Why not?

Exercise 3-33 CVP with Income Taxes
Crest Industries sells a single model of satellite radio receivers for use in the home. The radios have
the following price and cost characteristics:

Sales price 80 per radio
Variable costs 32 per radio
Fixed costs 360,000 per month 

Crest is subject to an income tax rate of 40 percent.

a. How many receivers must Crest sell every month to break even?
b. How many receivers must Crest sell to earn a monthly operating profit of $90,000 after taxes?

3-36 CVP Analysis and Price Changes: Argentina Partners.

Argentina Partners is concerned about the possible effects of inflation on its operations. Presently,
the company sells 60,000 units for $30 per unit. The variable production costs are $15, and fixed
costs amount to $700,000. Production engineers have advised management that they expect unit
labor costs to rise by 15 percent and unit materials costs to rise by 10 percent in the coming year.
Of the $15 variable costs, 50 percent are from labor and 25 percent are from materials. Variable
overhead costs are expected to increase by 20 percent. Sales prices cannot increase more than
10 percent. It is also expected that fixed costs will rise by 5 percent as a result of increased taxes
and other miscellaneous fixed charges.
The company wishes to maintain the same level of profit in real dollar terms. It is expected
that to accomplish this objective, profits must increase by 6 percent during the year.

a. Compute the volume in units and the dollar sales level necessary to maintain the present profit
level, assuming that the maximum price increase is implemented.
b. Compute the volume of sales and the dollar sales level necessary to provide the 6 percent
increase in profits, assuming that the maximum price increase is implemented.
c. If the volume of sales were to remain at 60,000 units, what price increase would be required to
attain the 6 percent increase in profits?

Problem Sparks Company Inc.

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P4-2B The adjusted trial balance columns of the worksheet for Sparks Company Inc. owned
by Billy Sparks, are as follows

For the Year Ended December 31, 2008

Account Trial Balance
No. Account Titles Dr. Cr.
101 Cash 11,600
112 Accounts Receivable 15,400
126 Supplies 2,000
130 Prepaid Insurance 2,800
151 Office Equipment 34,000
152 Accumulated Depreciation—Office Equipment 8,000
200 Notes Payable 20,000
201 Accounts Payable 9,000
212 Salaries Payable 3,500
230 Interest Payable 800
311 Common Stock 15,000
320 Retained Earnings 10,000
332 Dividends 10,000
400 Service Revenue 85,000
610 Advertising Expense 12,000
631 Supplies Expense 5,700
711 Depreciation Expense 8,000
722 Insurance Expense 5,000
726 Salaries Expense 44,000
905 Interest Expense 800
Totals 151,300 151,300

(a) Complete the worksheet by extending the balances to the financial statement columns.

(b) Prepare an income statement, a retained earnings statement, and a classified balance sheet.

(Note: $10,000 of the notes payable become due in 2009.) No additional common stock was
issued during the year.

(c) Prepare the closing entries. Use J14 for the journal page.

(d) Post the closing entries. Use the three-column form of account. Income Summary is No. 350.

(e) Prepare a post-closing trial balance.

Exercise Goode Company

Price: $ 1.99

E4-4 Worksheet data for Goode Company are presented below

Instructions(a) Journalize the closing entries at April 30.
(b) Post the closing entries to Income Summary and Retained Earnings. Use T accounts.
(c) Prepare a post-closing trial balance at April 30.

E4-3 Worksheet data for Goode Company are presented in E4-2. No common stock was issued during April

Price: $1.99

E4-3 Worksheet data for Goode Company are presented in E4-2. No common stock was issued
during April.

Prepare an income statement, a retained earnings statement, and a classified balance sheet

Exercise 4-2 The adjusted trial Goode Company

Price: $1.99

E4-2 The adjusted trial balance columns of the worksheet for Goode Company are as follows.
Worksheet (partial)
For the Month Ended April 30, 2008

Complete the worksheet

Curtis Hamilton started a new business and completed these transactions during December.

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Curtis Hamilton started a new business and completed these transactions during December.

1 Curtis Hamilton transferred $56,000 cash from a personal savings account to a checking ac-
count in the name of Hamilton Electric in exchange for common stock.
2 The company rented office space and paid $800 cash for the December rent.
3 The company purchased $14,000 of electrical equipment by paying $3,200 cash and agreeing to
pay the $10,800 balance in 30 days.
5 The company purchased office supplies by paying $900 cash.
6 The company completed electrical work and immediately collected $1,000 cash for these services.
8 The company purchased $3,800 of office equipment on credit.
15 The company completed electrical work on credit in the amount of $4,000.
18 The company purchased $500 of office supplies on credit.
20 The company paid $3,800 cash for the office equipment purchased on December 8.
24 The company billed a client $600 for electrical work completed; the balance is due in 30 days.
28 The company received $4,000 cash for the work completed on December 15.
29 The company paid the assistant’s salary of $1,200 cash for this month.
30 The company paid $440 cash for this month’s utility bill.
31 The company paid $700 cash for dividends.

1. Arrange the following asset, liability, and equity titles in a table like Exhibit 1.9: Cash; Accounts Receivable; Office Supplies; Office Equipment; Electrical Equipment; Accounts Payable; C. Hamilton Capital, C. Hamilton Withdrawals, Revenues and Expenses.

2. Use additions and subtractions to show the effects of each transaction on the accounts in the accounting equation. Show new balances after each transaction.

3. Use the increases and decreases in the columns of the table from part 2 to prepare an income statement, a statement of owners' Equity, and a statement of cash flows each of these for the current month. Also prepare a balance sheet as of the end of the month.

ACC306 WEEK5 E20-18 P21-11 P21-14

Price: $10.99

E20-18, P21-11, and P21-14

The attached tutorials are in EXCEL FORMAT; however, if you have a template from your instructor in different formate, feel free to email me and I will help you fill it out.

E 20-18 Classifying accounting changes
Indicate with the appropriate letter the nature of each situation described below:
Type of Change
PR Change in principle reported retrospectively
PP Change in principle reported prospectively
E Change in estimate
EP Change in estimate resulting from a change in principle
R Change in reporting entity
N Not an accounting change
_____ 1. Change from declining balance depreciation to straight-line.
_____ 2. Change in the estimated useful life of office equipment.
_____ 3. Technological advance that renders worthless a patent with an unamortized cost of
_____ 4. Change from determining lower of cost or market for the inventories by the individual
item approach to the aggregate approach.
_____ 5. Change from LIFO inventory costing to the weighted-average inventory costing.
_____ 6. Settling a lawsuit for less than the amount accrued previously as a loss contingency.
_____ 7. Including in the consolidated financial statements a subsidiary acquired several years
earlier that was appropriately not included in previous years.
_____ 8. Change by a retail store from reporting bad debt expense on a pay-as-you-go basis to
the allowance method.
_____ 9. A shift of certain manufacturing overhead costs to inventory that previously were
expensed as incurred to more accurately measure cost of goods sold. (Either method
is generally acceptable.)
_____ 10. Pension plan assets for a defined benefit pension plan achieving a rate of return in
excess of the amount anticipated.

P21-11 The comparative balance sheets for 2011 and 2010 and the income statement for 2011 are given below for Arduous Company. Additional information from Arduous's accounting records is provided also.
Arduous Company
Comparative Balance Sheets
December 31, 2011 and 2010 ($ in millions)
2011 2010
Assets Cash 116 81
Accounts receivable 200 202
Less: allowance for uncollectible accounts (10) (8)
Investment revenue receivables 6 4
Inventory 205 200
Prepaid insurance 4 8
Long-term investment 156 125
Land 196 150
Buildings and equipment 412 400
Less: Accumulated depreciation (97) (120)
Patent 30 32 1,218 1,074
Liabilities Accounts payable 50 65
Salaries payable 6 11
Bond interest payable 8 4
Income tax payable 12 14
Deferred income tax liability 11 8
Note payable 23 -
Lease liability 82 -
Bonds payable 215 275
Less: Discount on bonds (22) (25)
Shareholders' Equity Common stock 430 410
Paid in capital - excess of par 95 85
Preferred stock 75 -
Retained earnings 242 227
Less: Treasury stock (9) - 1,218 1,074
Arduous Company Income Statement For Year Ended December 31, 2011 ($ in millions) Revenues Sales Revenue 410
Investment revenue 11
Gains on sale of treasury bills 2 423
Expenses Cost of goods sold 180
Salaries expense 65
Depreciation expense 12
Patent and amortization expense 2
Bad debt expense 8
Insurance expense 7
Bond interest expense 28
Extraordinary loss (flood) 18
Less: Tax savings (9) 9
Income tax expense 45 356
Net Income 67
Additional information from the accounting records:
a. During 2011, $6 million of customer accounts were written off as uncollectible.
b. Investment revenue includes Arduous Company's $6 million share of the net income of Demur Company, an equity method investee.
c. Treasury bills were sold during 2011 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.
d. A machine originally costing $70 million that was one-half depreciated was rendered unusable by a rare flood. Most major components of the machine were unharmed and were sold for $17 million.
e. Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $3 million.
f. The preferred stock of Tory Corporation was purchased for $25 million as a long-term investment.
g. Land costing $46 million was acquired by issuing $23 million cash and a 15%, four-year, $23 million note payable to the seller.
h. A building was acquired by a 15-year capital lease; present value of lease payments, $82 million. i. $60 million of bonds were retired at maturity. j. In February, Arduous issued a 4% stock dividend (4 million shares). The market price of the $5 par value common stock was $7.50 per share at that time.
k. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $9 million.

Prepare the statement of cash flows of Arduous Company for the year ended December 31, 2011. Present cash flows from operating activities by the indirect method. (A reconciliation schedule is not required.)

P21-14 The comparative balance sheets for 2011 and 2010 are given below for Surmise Company. Net income for 2011 was $50 million.
Surmise Company
Comparative Balance sheets
December 31, 2011 and 2010
($In millions)
2011 2010
Cash $45 $40
Accounts receivable 92 96
Less: Allowance for uncollectible accounts (12) (4)
Prepaid expense 8 5
Inventory 145 130
Long-term investment 80 40
Land 100 100
Buildings and equipment 411 300
Less: Accumulated depreciation (142) (120)
Patent 16 17
$743 $604
Account payable $17 $32
Accrued liabilities (2) 10
Notes payable 35 0
Lease liability 111 0
Bonds payable 65 125
Shareholder’s equity
Common Stock 60 50
Paid-in capital-excess of par 245 205
Retained earnings 212 182
$743 $604

Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2011. Use the indirect method to present cash flows from operating activities because you do not have sufficient information to use the direct method. You will need to make reasonable assumptions concerning the reasons for change in some account balances. A spreadsheet or T-account analysis will be helpful.

ACC306 WEEK4 E18-18 E18-24 P18-5 E19-2 E19-5 E19-9 E19-24

Price: $19.99

The attached tutorials are in EXCEL FORMAT; however, if you have a template from your instructor in different formate, feel free to email me and I will help you fill it out.

E18-18, E18-24, P18-5, E19-2, E19-5, E19-9, and E19-24
E 18-18 Transactions affecting retained earnings

Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2011. At January 1, 2011, the corporation had outstanding 105 million common shares, $1 par per share.

Retained Earnings ($ in millions)
90 Beginning balance Retirement of 5 million common Shares for $22 million 2
88 Net income for the year Declaration and payment of a 0.33 per share cash dividend 33

Declaration and distribution Of a 4% stock dividend 20 123 ending balance


1. From the information provided by the account changes you should be able to recreate the
transactions that affected Brenner-Jude's retained earnings during 2011. Prepare the journal
entries that Brenner-Jude must have recorded during the year for these transactions.

2. Prepare a statement of retained earnings for Brenner-Jude for the year ended 2011.

E 18-24 Profitability ratio
Comparative balance sheets for Softech Canvas Goods for 2011 and 2010 are shown below.
Softech pays no dividends, and instead reinvests all earnings for future growth.
Comparative Balance sheets ($in 000s)
December 31
2011 2010
Cash $ 50 $40
Accounts receivable 100 120
Short-term investment 50 40
Inventory 200 140
Property, plant, and equipment (net) 600 550
$1,000 $890
Liabilities and Shareholder’s Equity:
Current liabilities $240 $210
Bonds payable 160 160
Paid-in Capital 400 400
Retained earnings 200 120
$1,000 $890

1. Determine the return on shareholders' equity for 2011.
2. What does the ratio measure?

P 18-5 Shareholders' equity transactions; statement of shareholders' equity
Listed below are the transactions that affected the shareholders' equity of Branch-Rickie
Corporation during the period 2011–2013. At December 31, 2010, the corporation's accounts
($ in 000s)
Common stock, 105 million shares at $1 par $105,000
Paid-in capital-excess of par 630,000
Retained earnings 970,000

a. November 1, 2011, the board of directors declared a cash dividend of $.80 per share on its
common shares, payable to shareholders of record November 15, to be paid December 1.

b. On March 1, 2012, the board of directors declared a property dividend consisting of corporate
bonds of Warner Corporation that Branch-Rickie was holding as an investment. The bonds
had a fair value of $1.6 million, but were purchased two years previously for $1.3 million.
Because they were intended to be held to maturity, the bonds had not been previously written
up. The property dividend was payable to shareholders of record March 13, to be distributed
April 5.

c. On July 12, 2012, the corporation declared and distributed a 5% common stock dividend
(when the market value of the common stock was $21 per share). Cash was paid in lieu of
fractional shares representing 250,000 equivalent whole shares.

d. On November 1, 2012, the board of directors declared a cash dividend of $.80 per share on
its common shares, payable to shareholders of record November 15, to be paid December 1.

e. On January 15, 2013, the board of directors declared and distributed a 3-for-2 stock split
effected in the form of a 50% stock dividend when the market value of the common stock was
$22 per share.

f. On November 1, 2013, the board of directors declared a cash dividend of $.65 per share on
its common shares, payable to shareholders of record November 15, to be paid December 1.

1. Prepare the journal entries that Branch-Rickie recorded during the three-year period for these
2. Prepare comparative statements of shareholders' equity for Branch-Rickie for the three-year
period ($ in 000s). Net income was $330 million, $395 million, and $455 million for 2011,
2012, and 2013, respectively
E 19-2 Restricted stock award plan
On January 1, 2011, VKI Corporation awarded 12 million of its $1 par common shares to key
personnel, subject to forfeiture if employment is terminated within three years. On the grant date, the shares have a market price of $2.50 per share.
1. Determine the total compensation cost pertaining to the restricted shares.
2. Prepare the appropriate journal entry to record the award of restricted shares on January 1,
3. Prepare the appropriate journal entry to record compensation expense on December 31, 2011.
4. Prepare the appropriate journal entry to record compensation expense on December 31, 2012.
5. Prepare the appropriate journal entry to record compensation expense on December 31, 2013.
6. Prepare the appropriate journal entry to record the lifting of restrictions on the shares at
December 31, 2013.

E 19-5 Stock options
American Optical Corporation provides a variety of share-based compensation plans to its
employees. Under its executive stock option plan, the company granted options on January 1,
2011, that permit executives to acquire 4 million of the company's $1 par common shares within the
next five years, but not before December 31, 2012 (the vesting date). The exercise price is the
market price of the shares on the date of grant, $14 per share. The fair value of the 4 million
options, estimated by an appropriate option pricing model, is $3 per option. No forfeitures are
anticipated. Ignore taxes.
1. Determine the total compensation cost pertaining to the options.
2. Prepare the appropriate journal entry to record the award of options on January 1, 2011.
3. Prepare the appropriate journal entry to record compensation expense on December 31, 2011.
4. Prepare the appropriate journal entry to record compensation expense on December 31, 2012.

E 19-9 Employee share purchase plan

In order to encourage employee ownership of the company's $1 par common shares, Washington
Distribution permits any of its employees to buy shares directly from the company through payroll
deduction. There are no brokerage fees and shares can be purchased at a 15% discount. During
March, employees purchased 50,000 shares at a time when the market price of the shares on the
New York Stock Exchange was $12 per share.

Prepare the appropriate journal entry to record the March purchases of shares under the employee
share purchase plan.

ACC306 WEEK3 E16-24 E16-25 P16-7 E17-10 E17-19 and P17-16

Price: $18.99

This tutorials are in WORD FORMAT

Templates for Week 3 Homework:
Please complete the following in “XX” and answer and complete the following questions for the enclosed problems and exercises
Complete these problems and turn them in via the dropbox:
E16-24, E16-25, P16-7, E17-10, E17-19, and P17-16

E 16-24 Balance sheet classification LO4 LO5 LO6 LO8
At December 31, DePaul Corporation had a $16 million balance in its deferred tax asset account
and a $68 million balance in its deferred tax liability account. The balances were due to the
following cumulative temporary differences:

1. Estimated warranty expense, $15 million: expense recorded in the year of the sale;
tax-deductible when paid (one-year warranty).

2. Depreciation expense, $120 million: straight-line in the income statement; MACRS on the tax

3. Income from installment sales of properties, $50 million: income recorded in the year of the
sale; taxable when received equally over the next five years.

4. Bad debt expense, $25 million: allowance method for accounting; direct write-off for tax

Show how any deferred tax amounts should be classified and reported in the December 31
balance sheet. The tax rate is 40%.

E 16-25 Multiple tax rates; balance sheet classification
Case Development began operations in December 2011. When property is sold on an installment basis, Case recognizes installment income for financial reporting purposes in the year of the sale. For tax purposes, installment income is reported by the installment method. 2011 installment income was $600,000 and will be collected over the next three years. Scheduled collections and enacted tax rates for 2012-2014 are as follows:

2012 $150,000 30%
2013 250,000 40
2014 200,000 40

Pretax accounting income for 2011 was $810,000, which includes interest revenue of $10,000 from municipal bonds. The enacted tax rate for 2011 is 30%.


1. Assuming no differences between accounting income and taxable income other than those described above, prepare the appropriate journal entry to record Case’s 2011 income taxes.

2. What is Case’s 2011 net income?

3. How should the deferred tax amount be classified in a classified balance sheet?

P16-7 Sherrod, Inc., reported pretax accounting income of $76 million for 2011. The following information relates to differences between pretax accounting income and taxable income:

a. Income from installment sales of properties included in pretax accounting income in 2011 exceeded that reported for tax purposes by $3 million. The installment receivable account at year-end had a balance of $4 million (representing portions of 2010 and 2011 installment sales), expected to be collected equally in 2012 and 2013.

b. Sherrod was assessed a penalty of $2 million by the Environmental Protection Agency for violation of a federal law in 2011. The fine is to be paid in equal amounts in 2011 and 2012.

c. Sherrod rents its operating facilities but owns one asset acquired in 2010 at a cost of $80 million. Depreciation is reported by the straight-line method assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions):

Income Statement Tax Return Difference

2010 $20 $26 ($6)

2011 20 35 (15)

2012 20 12 8

2013 20 7 13

$80 $80 $0

d. Bad debt expense of $3 million is reported using the allowance method in 2011. For tax purposes, the expense is deducted when accounts prove uncollectible (the direct write-off method): $2 million in 2011. At December 31, 2011, the allowance for uncollectible accounts was $2 million (after adjusting entries). The balance was $1 million at the end of 2010.

e. In 2011, Sherrod accrued and expense and related liability for estimated paid future absences of $7 million relating to the company’s new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years ($4 million 2012; $3 million in 2013).

f. During 2010, accounting income included as estimated loss of $2 million from having accrued a loss contingency. The lost is paid in 2011 at which time it is tax deductible.

Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2011, were $1.2 million and $2.8 million, respectively. The enacted tax rate is 40% each year.


1. Determine the amounts necessary to record income taxes for 2011 and prepare the appropriate journal entry.

2. What is the 2011 net income?

3. Show how deferred tax amounts should be classified and reported in the 2011 balance sheet.

E 17-10 Determine pension expense
Abbott and Abbott has a noncontributory, defined benefit pension plan. At December 31, 2011,
Abbott and Abbott received the following information:

($in millions)
Projected Benefit Obligation
Balance, January 1 $120
Service cost 20
Interest cost 12
Benefits paid (9)
Balance, December 31 $143
Plant Assets
Balance, January 1 $80
Actual return on plan assets 9
Contribution 2011 20
Benefits paid (9)
Balance, December 31 $100

The expected long-term rate of return on plan assets was 10%. There was no prior service cost and a negligible net loss AOCI on January 1, 2011.

1)Determine Abbott and Abbott’s pension expense for 2011.
2) Prepare the journal entries to record Abbott and Abbott’s pension expense, funding, and payment for 2011.

E17-19 Beale Management has a noncontributory, defined benefit pension plan. On December 31, 2011 (the end of Beale’s fiscal year), the following pension-related data were available:

Projected Benefit Obligation ($in millions)

Balance, January 1, 2011 $480

Service cost 82

Interest cost, discount rate, 5% 24

Gain due to changes in actuarial assumptions in 2011 (10)

Pension benefits paid (40)

Balance, December 31, 2011 $536

Plant Assets

Balance, January 1, 2011 $500

Actual return on plan assets 40

(Expected return on plan assets, $45)

Cash Contributions 70

Pension benefits paid (40)

Balance, December 31, 2011 $570

January 1, 2011, balances:

Pension asset $20

Prior service cost-AOCI (amortization $8 per year) 48

Net gain-AOCI (any amortization over 15 years) 80


1. Prepare the 2011 journal entry to record pension expense.

2. Prepare the journal entry(s) to record any 2011 gains and losses.

3. Prepare the 2011 journal entries to record the contribution to plan assets and benefit payments to retirees.

4. Determine the balances at December 31, 2011, in the PBO, plan assets, the net gain-ACOI, and prior service cost-ACOI and show how the balances changed during 2011. [Hint: You might find T-accounts useful.]

5. What amount will Beale report in its 2011 balance sheet as a net pension asset or net pension liability for the funded status of the plan?

P17-16 Actuary and trustee reports indicate the following changes in the PBO and plan assets of Lakeside Cable during 2011:

Prior service cost at Jan. 1, 2011, from plan amendment at the

beginning of 2009 (amortization: $4 million per year) $32 million

Net loss-pensions at Jan. 1, 2011 (previous losses exceeded previous gains) $40million

Average remaining service life of the active employee group 10 years

Actuary's discount rate 8%

($in millions) PBO Plan Assets

Beginning of 2011 $300 Beginning of 2011 $200

Service cost 48 Return on plan assets.

Interest cost, 8% 24 7.5% (10% expected) 15

Loss (gain) on PBO (2) Cash contributions 45

Less: Retiree benefits (20) Less: Retiree benefits (20)

End of 2011 $350 End of 2011 $240


1. Determine Lakeside's pension expense for 2011 and prepare the appropriate journal entries to
record the expense as well as the cash contribution to plan assets and payment of benefits to

2. Determine the new gains and/or losses in 2011 and prepare the appropriate journal entry(s) to
record them.

3. Prepare a pension spreadsheet to assist you in determining end of 2011 balances in the PBO,
plan assets, prior service cost—AOCI, the net loss—AOCI, and the pension liability.

4. Assume the following actuary and trustee reports indicating changes in the PBO and plan
assets of Lakeside Cable during 2012:
Determine Lakeside's pension expense for 2012 and prepare the appropriate journal entries to
record the expense, the cash funding of plan assets, and payment of benefits to retirees.

5. Determine the new gains and/or losses in 2012 and prepare the appropriate journal entry(s) to
record them.

6. Using T-accounts, determine the balances at December 31, 2012, in the net loss–AOCI and
prior service cost–AOCI.

7. Confirm the balances determined in Requirement 6 by preparing a pension spreadsheet.

ACC422 WEEK5 TEAM P13-4 E14-21 E21-7

Price: $8.99

P13-4 (Payroll Tax Entries) Below is a payroll sheet for Jedi Import Company for the month of September 2007. The company is allowed a 1% unemployment compensation rate by the state; the federal unemployment tax rate is 0.8% and the maximum for both is $7,000. Assume a 10% federal income tax rate for all employees and a 7.65% F.I.C.A. tax on employee and employer on a maximum of $90,000. In addition, 1.45% is charged both employer and employee for an employee’s wage in excess of $90,000 per employee.
Earnings September Tax State Federal
Name to Aug. 31 Earnings Withholding F.I.C.A. U.C. U.C.
B.D. Williams $106,800 $10,800
D. Prowse 6,300 700
K. Baker 7,600 1,100
F. Oz 13,600 1,900
A. Daniels 105,000 15,000
B. Mayhew 112,000 16,000
(a) Complete the payroll sheet and make the necessary entry to record the payment of the payroll.
(b) Make the entry to record the payroll tax expenses of Jedi Import Company.
(c) Make the entry to record the payment of the payroll liabilities created. Assume that the company pays all payroll liabilities at the end of each month.

*E14-21 (Term Modification without Gain—Debtor’s Entries) On December 31, 2007, the Firstar Bank
enters into a debt restructuring agreement with Nicole Bradtke Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $2,000,000 note receivable by the following modifications:
1. Reducing the principal obligation from $2,000,000 to $1,600,000.
2. Extending the maturity date from December 31, 2007, to December 31, 2010.
3. Reducing the interest rate from 12% to 10%.
Bradtke pays interest at the end of each year. On January 1, 2011, Bradtke Company pays $1,600,000 in cash to Firstar Bank.

(a) Based on FASB Statement No. 114, will the gain recorded by Bradtke be equal to the loss recorded by Firstar Bank under the debt restructuring?
(b) Can Bradtke Company record a gain under the term modification mentioned above? Explain.
(c) Assuming that the interest rate Bradtke should use to compute interest expense in future periods is 1.4276%, prepare the interest payment schedule of the note for Bradtke Company after the debt restructuring.
(d) Prepare the interest payment entry for Bradtke Company on December 31, 2009.
(e) What entry should Bradtke make on January 1, 2011?

E21-7 (Lessee-Lessor Entries; Sales-Type Lease) On January 1, 2007, Bensen Company leased equipment to Flynn Corporation. The following information pertains to this lease.
1. The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease.
2. Equal rental payments are due on January 1 of each year, beginning in 2007.
3. The fair value of the equipment on January 1, 2007, is $150,000, and its cost is $120,000.
4. The equipment has an economic life of 8 years, with an unguaranteed residual value of $10,000.
Flynn depreciates all of its equipment on a straight-line basis.
5. Bensen set the annual rental to ensure an 11% rate of return. Flynn’s incremental borrowing rate is 12%, and the implicit rate of the lessor is unknown.
6. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by the lessor.

(Both the lessor and the lessee’s accounting period ends on December 31.)
(a) Discuss the nature of this lease to Bensen and Flynn.
(b) Calculate the amount of the annual rental payment.
(c) Prepare all the necessary journal entries for Flynn for 2007.
(d) Prepare all the necessary journal entries for Bensen for 2007.

ACC422 WEEK 4 Team E11-18 P11-10 P12-3

Price: $9.99

• Ch. 11: Exercise E11-18 & Problem P11-10
• Ch. 12: Problem P12-3

E11-18 (Impairment) The management of Petro Garcia Inc. was discussing whether certain equipment
should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2007. On December 31, 2007, management projected its future net cash flows from this equipment to be $300,000 and its fair value to be $230,000. The company intends to use this equipment in the future.

(a) Prepare the journal entry (if any) to record the impairment at December 31, 2007.
(b) Where should the gain or loss (if any) on the write-down be reported in the income statement?
(c) At December 31, 2008, the equipment’s fair value increased to $260,000. Prepare the journal entry
(if any) to record this increase in fair value.
(d) What accounting issues did management face in accounting for this impairment?

P11-10 (Comprehensive Depreciation Computations) Sheryl Crow Corporation, a manufacturer of
steel products, began operations on October 1, 2006. The accounting department of Crow has started the fixed-asset and depreciation schedule presented on page 563. You have been asked to assist in completing this schedule. In addition to ascertaining that the data already on the schedule are correct, you have obtained the following information from the company’s records and personnel.
1. Depreciation is computed from the first of the month of acquisition to the first of the month of disposition.
2. Land A and Building A were acquired from a predecessor corporation. Crow paid $820,000 for the
land and building together. At the time of acquisition, the land had an appraised value of $90,000, and the building had an appraised value of $810,000.
3. Land B was acquired on October 2, 2006, in exchange for 2,500 newly issued shares of Crow’s common stock. At the date of acquisition, the stock had a par value of $5 per share and a fair value of $30 per share. During October 2006, Crow paid $16,000 to demolish an existing building on this land so it could construct a new building.
4. Construction of Building B on the newly acquired land began on October 1, 2007. By September
30, 2008, Crow had paid $320,000 of the estimated total construction costs of $450,000. It is estimated that the building will be completed and occupied by July 2009.
5. Certain equipment was donated to the corporation by a local university. An independent appraisal of the equipment when donated placed the fair market value at $30,000 and the salvage value at $3,000.

6. Machinery A’s total cost of $164,900 includes installation expense of $600 and normal repairs and maintenance
of $14,900. Salvage value is estimated at $6,000. Machinery A was sold on February 1, 2008.
7. On October 1, 2007, Machinery B was acquired with a down payment of $5,740 and the remaining
payments to be made in 11 annual installments of $6,000 each beginning October 1, 2007. The
prevailing interest rate was 8%. The following data were abstracted from present-value tables
Present value of $1.00 at 8% Present value of an ordinary annuity of $1.00 at 8%
10 years .463 10 years 6.710
11 years .429 11 years 7.139
15 years .315 15 years 8.559
Fixed Asset and Depreciation Schedule
For Fiscal Years Ended September 30, 2007, and September 30, 2008
Estimated Year Ended
Acquisition Depreciation Life in September 30
Assets Date Cost Salvage Method Years 2007 2008
Land A October 1, 2006 $ (1) N/A N/A N/A N/A N/A
Building A October 1, 2006 (2) $40,000 Straight-line (3) $17,450 (4)
Land B October 2, 2006 (5) N/A N/A N/A N/A N/A
Building B Under $320,000 — Straight-line 30 — (6)
Construction to date
Donated Equipment October 2, 2006 (7) 3,000 150% declining 10 (8) (9)
Machinery A October 2, 2006 (10) 6,000 Sum-of-the- 18 (11) (12)
Machinery B October 1, 2007 (13) — Straight-line 20 — (14)
N/A—Not applicable
For each numbered item on the schedule above, supply the correct amount. Round each answer to the
nearest dollar.

P12-3 (Accounting for Franchise, Patents, and Trade Name) Information concerning Haerhpin Corporation’s intangible assets is as follows.
1. On January 1, 2007, Haerhpin signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of $75,000. Of this amount, $15,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of $15,000 each, beginning January 1, 2008. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2007, of the 4 annual payments discounted at 14% (the implicit rate for a loan of this type) is $43,700. The agreement also provides that 5% of the revenue from the franchise must be paid to the franchisor annually. Haerhpin’s revenue from the franchise for 2007 was $950,000. Haerhpin estimates the useful life of the franchise to be 10 years. (Hint: You may want to refer to Appendix 18A to determine the proper accounting treatment for the franchise fee and payments.)

2. Haerhpin incurred $65,000 of experimental and development costs in its laboratory to develop a
patent that was granted on January 2, 2007. Legal fees and other costs associated with registration of the patent totaled $13,600. Haerhpin estimates that the useful life of the patent will be 8 years.

3. A trademark was purchased from Shanghai Company for $32,000 on July 1, 2004. Expenditures for
successful litigation in defense of the trademark totaling $8,160 were paid on July 1, 2007. Haerhpin estimates that the useful life of the trademark will be 20 years from the date of acquisition.

(a) Prepare a schedule showing the intangible assets section of Haerhpin’s balance sheet at December 31, 2007. Show supporting computations in good form.

(b) Prepare a schedule showing all expenses resulting from the transactions that would appear on
Haerhpin’s income statement for the year ended December 31, 2007. Show supporting computations
in good form.

ACC422 WEEK 4 E11-4 E11-11 E12-6 E12-16

Price: $10.99

• Ch. 11: Exercises E11-4 & E11-11
• Ch. 12: Exercises E12-6 & E12-16

E11-4 (Depreciation Computations—Five Methods) Jon Seceda Furnace Corp. purchased machinery
for $315,000 on May 1, 2007. It is estimated that it will have a useful life of 10 years, salvage value of $15,000, production of 240,000 units, and working hours of 25,000. During 2008 Seceda Corp. uses the machinery for 2,650 hours, and the machinery produces 25,500 units.

From the information given, compute the depreciation charge for 2008 under each of the following
methods. (Round to the nearest dollar.)
(a) Straight-line.
(b) Units-of-output.
(c) Working hours.
(d) Sum-of-the-years’-digits.
(e) Declining-balance (use 20% as the annual rate).

E11-11 (Depreciation—Change in Estimate) Machinery purchased for $60,000 by Tom Brady Co. in
2003 was originally estimated to have a life of 8 years with a salvage value of $4,000 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2008, it is determined that the total estimated life should be 10 years with a salvage value of $4,500 at the end of that time. Assume straight-line depreciation.

(a) Prepare the entry to correct the prior years’ depreciation, if necessary.
(b) Prepare the entry to record depreciation for 2008.

E12-6 (Recording and Amortization of Intangibles) Rolanda Marshall Company, organized in 2006,
has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2007.
1/2/07 Purchased patent (8-year life) $ 350,000
4/1/07 Purchased goodwill (indefinite life) 360,000
7/1/07 Purchased franchise with 10-year life; expiration date 7/1/17 450,000
8/1/07 Payment of copyright (5-year life) 156,000
9/1/07 Research and development costs 215,000

Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2007, recording any necessary amortization and reflecting all balances accurately as of that date. (Use straight-line amortization.)

E12-16 (Accounting for R&D Costs) Leontyne Price Company from time to time embarks on a research
program when a special project seems to offer possibilities. In 2006 the company expends $325,000
on a research project, but by the end of 2006 it is impossible to determine whether any benefit will be derived
from it.
(a) What account should be charged for the $325,000, and how should it be shown in the financial
(b) The project is completed in 2007, and a successful patent is obtained. The R&D costs to complete
the project are $110,000. The administrative and legal expenses incurred in obtaining patent number
472-1001-84 in 2007 total $16,000. The patent has an expected useful life of 5 years. Record
these costs in journal entry form. Also, record patent amortization (full year) in 2007.
(c) In 2008, the company successfully defends the patent in extended litigation at a cost of $47,200,
thereby extending the patent life to December 31, 2015. What is the proper way to account for
this cost? Also, record patent amortization (full year) in 2008.
(d) Additional engineering and consulting costs incurred in 2008 required to advance the design of
a product to the manufacturing stage total $60,000. These costs enhance the design of the product
considerably. Discuss the proper accounting treatment for this cost.

ACC291 WEEK 4 E11-15 P11-6A E12-1 E12-2

Price: $5.99

Resources: Ch. 11 & 12 of Financial Accounting.
Complete Exercises E11-15, E12-1, & E12-2.
Complete Problem 11-6A.
E11-15 E12-1 E12-2 P11-6A

E11-15 On October 31, the stockholders’ equity section of Omar Company consists of common
stock $600,000 and retained earnings $900,000. Omar is considering the following two
courses of action: (1) declaring a 5% stock dividend on the 60,000, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $14 per share.

Prepare a tabular summary of the effects of the alternative actions on the components of stockholders’ equity and outstanding shares. Use the following column headings: Before Action,After Stock Dividend, and After Stock Split.

P11-6A Arnold Corporation has been authorized to issue 40,000 shares of $100 par value, 8%,
noncumulative preferred stock and 2,000,000 shares of no-par common stock. The corporation
assigned a $5 stated value to the common stock. At December 31, 2011, the ledger contained the
following balances pertaining to stockholders’ equity.
Preferred Stock $ 240,000
Paid-in Capital in Excess of Par Value—Preferred 56,000
Common Stock 2,000,000
Paid-in Capital in Excess of Stated Value—Common 5,700,000
Treasury Stock—Common (1,000 shares) 22,000
Paid-in Capital from Treasury Stock 3,000
Retained Earnings 560,000
The preferred stock was issued for land having a fair market value of $296,000.All common stock
issued was for cash. In November, 1,500 shares of common stock were purchased for the treasury
at a per share cost of $22. In December, 500 shares of treasury stock were sold for $28 per share.
No dividends were declared in 2011.

(a) Prepare the journal entries for the:
(1) Issuance of preferred stock for land.
(2) Issuance of common stock for cash.
(3) Purchase of common treasury stock for cash.
(4) Sale of treasury stock for cash.
(b) Prepare the stockholders’ equity section at December 31, 2011.

E12-1 Max Weinberg is studying for an accounting test and has developed the following questions about investments.
1. What are three reasons why companies purchase investments in debt or stock securities?
2. Why would a corporation have excess cash that it does not need for operations?
3. What is the typical investment when investing cash for short periods of time?
4. What are the typical investments when investing cash to generate earnings?
5. Why would a company invest in securities that provide no current cash flows?
6. What is the typical stock investment when investing cash for strategic reasons?

Provide answers for Max

E12-2 Foren Corporation had the following transactions pertaining to debt investments.
Jan. 1 Purchased 50 8%, $1,000 Choate Co. bonds for $50,000 cash plus brokerage fees of
$900. Interest is payable semiannually on July 1 and January 1.
July 1 Received semiannual interest on Choate Co. bonds.
July 1 Sold 30 Choate Co. bonds for $34,000 less $500 brokerage fees.

(a) Journalize the transactions.
(b) Prepare the adjusting entry for the accrual of interest at December 31.

ACC291 WEEK1 E9-2 Trudy Company incurred the following costs.

Price: $2.99

Note:  The instructions is to "indicate to which account Trudy would debit each of the costs". There's not enough enough info to do the whole journal entry, so make sure your problem is matched with the descriptions below.  :)

Resources: Ch. 9 of Financial Accounting
Complete Exercise E9-2.

E9-2 Trudy Company incurred the following costs.
1. Sales tax on factory machinery purchased $ 5,000
2. Painting of and lettering on truck immediately upon purchase 700
3. Installation and testing of factory machinery 2,000
4. Real estate broker’s commission on land purchased 3,500
5. Insurance premium paid for first year’s insurance on new truck 880
6. Cost of landscaping on property purchased 7,200
7. Cost of paving parking lot for new building constructed 17,900
8. Cost of clearing, draining, and filling land 13,300
9. Architect’s fees on self-constructed building 10,000

Indicate to which account Trudy would debit each of the costs.

ACC290 Week2 E3-4 E3-9 P3-5A P3-6A

Price: $6.99

E3-4 A tabular analysis of the transactions made during August 2012 by Nigel Company
during its first month of operations is shown below. Each increase and decrease in
stockholders’ equity is explained.

(a) Determine how much stockholders’ equity increased for the month.
(b) Compute the net income for the month.

E3-9 The May transactions of StepAside Corporation were as follows.

May 4 Paid $700 due for supplies previously purchased on account.
7 Performed advisory services on account for $6,800.
8 Purchased supplies for $850 on account.
9 Purchased equipment for $1,000 in cash.
17 Paid employees $530 in cash.
22 Received bill for equipment repairs of $900.
29 Paid $1,200 for 12 months of insurance policy. Coverage begins June 1.

Journalize the transactions. Do not provide explanations.

P3-5A Towne Architects incorporated as licensed architects on April 1, 2012. During
the first month of the operation of the business, these events and transactions occurred:

Apr. 1 Stockholders invested $18,000 cash in exchange for common
stock of the corporation.
1 Hired a secretary-receptionist at a salary of $375 per week, payable monthly.
2 Paid office rent for the month $900.
3 Purchased architectural supplies on account from Spring Green Company $1,300.
10 Completed blueprints on a carport and billed client $1,900 for services.
11 Received $700 cash advance from J. Madison to design a new home.
20 Received $2,800 cash for services completed and delivered to M. Svetlana.
30 Paid secretary-receptionist for the month $1,500.
30 Paid $300 to Spring Green Company for accounts payable due.

The company uses these accounts: Cash, Accounts Receivable, Supplies, Accounts Payable,
Unearned Service Revenue, Common Stock, Service Revenue, Salaries and Wages Expense,
and Rent Expense.

(a) Journalize the transactions, including explanations.
(b) Post to the ledger T accounts.
(c) Prepare a trial balance on April 30, 2012.

P3-6A This is the trial balance of Mimosa Company on September 30.

Mimosa Company
Trial Balance
Cash  8,200
Accounts Receivable  2,600
Supplies  2,100
Equipment  8,000
Accounts Payable  4,800
Unearned Revenue  1,100
Common Stock  15,000
 20,900 20,900

The October transactions were as follows.
Oct. 5 Received $1,300 in cash from customers for accounts receivable due.
10 Billed customers for services performed $5,100.
15 Paid employee salaries $1,200.
17 Performed $600 of services for customers who paid in advance in August.
20 Paid $1,900 to creditors for accounts payable due.
29 Paid a $300 cash dividend.
31 Paid utilities $400.

(a) Prepare a general ledger using T accounts. Enter the opening balances in the ledger
accounts as of October 1. Provision should be made for these additional accounts:
Dividends, Service Revenue, Salaries and Wages Expense, and Utilities Expense.
(b) Journalize the transactions, including explanations.
(c) Post to the ledger accounts.
(d) Prepare a trial balance on October 31, 2012.

ACC290 WEEK 3 BE4-1 P4-2A P4-3A

Price: $5.99

Complete Exercise BE4-1.
Complete Problems 4-2A and 4-3A.

BE4-1 Transactions that affect earnings do not necessarily affect cash. Identify the effect, if any, that each of the following transactions would have upon cash and net income. The first transaction has been completed as an example.

Net Cash Income
(a) Purchased $100 of supplies for cash. $100
(b) Recorded an adjusting entry to record use of $20 of the above supplies.
(c) Made sales of $1,300, all on account.
(d) Received $800 from customers in payment of their accounts.
(e) Purchased equipment for cash, $2,500.
(f) Recorded depreciation of building for period used, $600.

P4-2A Gil Vogel started his own consulting firm, Vogel Consulting, on June 1, 2012.
The trial balance at June 30 is as follows.

Vogel Consulting
Trial Balance
Cash   6,850
Accounts Receivable   7,000
Prepaid Insurance   2,880
Supplies   2,000
Office Equipment   15,000
Accounts Payable   4,230
Unearned Service Revenue   5,200
Common Stock   22,000
Service Revenue   8,300
Salaries Expense   4,000
Rent Expense   2,000  
   39,730  39,730

In addition to those accounts listed on the trial balance, the chart of accounts for Vogel
also contains the following accounts: Accumulated Depreciation—Equipment, Utilities
Payable, Salaries and Wages Payable, Depreciation Expense, Insurance Expense, Utilities
Expense, and Supplies Expense.
Other data:
1. Supplies on hand at June 30 total $720.
2. A utility bill for $180 has not been recorded and will not be paid until next month.
3. The insurance policy is for a year.
4. $4,100 of unearned service revenue has been earned at the end of the month.
5. Salaries of $1,250 are accrued at June 30.
6. The equipment has a 5-year life with no salvage value and is being depreciated at
$250 per month for 60 months.
7. Invoices representing $3,900 of services performed during the month have not been
recorded as of June 30.
(a) Prepare the adjusting entries for the month of June.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance
as beginning account balances. Use T accounts.
(c) Prepare an adjusted trial balance at June 30, 2012.

P4-3A The Vang Hotel opened for business on May 1, 2012. Here is its trial balance before
adjustment on May 31.

Vang Hotel
Trial Balance
Cash   2,500
Prepaid Insurance   1,800
Supplies   2,600
Land   15,000
Lodge   70,000
Furniture   16,800
Accounts Payable   4,700
Unearned Rent Revenue   3,300
Mortgage Payable   36,000
Common Stock   60,000
Rent Revenue   9,000
Salaries Expense   3,000
Utilities Expense   800
Advertising Expense   500  
   113,000  113,000
Other data:
1. Insurance expires at the rate of $450 per month.
2. A count of supplies shows $1,050 of unused supplies on May 31.
3. Annual depreciation is $3,600 on the building and $3,000 on equipment.
4. The mortgage interest rate is 6%. (The mortgage was taken out on May 1.)
5. Unearned rent of $2,500 has been earned.
6. Salaries of $900 are accrued and unpaid at May 31.

(a) Journalize the adjusting entries on May 31.
(b) Prepare a ledger using T accounts. Enter the trial balance amounts and post the adjusting
(c) Prepare an adjusted trial balance on May 31.
(d) Prepare an income statement and a retained earnings statement for the month of
May and a classified balance sheet at May 31.
(e) Identify which accounts should be closed on May 31.