会计学：企业决策的基础rcises-chapter4答案.doc

SOLUTIONS TO EXERCISES Ex 4 1a Book value b Materiality c Matching principle d Unrecorded revenue e Adjusting entries f Unearned revenue g Prepaid expenses h None This is an example of depreciation expense Ex 4 2 Income StatementBalance Sheet Adjusting Entry Revenue Expenses Net IncomeAssets Liabilities Owners Equity aNEIDDNED bNEIDNEID cINEIINEI dNEIDNEID eNEIDDNED fINEINEDI Ex 4 3a Rent Expense 240 000 Prepaid Rent 240 000 To record rent expense for May 1 200 000 5 months 240 000 per month b Unearned Ticket Revenue 148 800 Ticket Revenue 148 800 To record earning portion of season ticket revenue relating to May home games Ex 4 4a 1 Interest Expense 375 Interest Payable 375 50 000 x 9 annual rate x 1 12 375 2 Accounts Receivable 10 000 Consulting Fees Earned 10 000 To record ten days of unbilled consulting fees at 1 000 per day b 2 250 50 000 x 9 x 6 12 2 250 c 15 000 25 000 10 000 earned in December 2002 Ex 4 5a The balance of TWA s Advance Ticket Sales account represents unearned revenue that is amounts collected from customers prior to rendering the related services air travel As TWA has an obligation to render these services the Advanced Ticket Sales account appears among the liabilities in TWA s balance sheet b TWA normally reduces the balance of this liability account by rendering services to customers that is by providing flights for which the customers have purchased tickets On some occasions however TWA reduces the balance of this liability by making cash refunds to customers Ex 4 6a 1 Interest Expense 1 200 Interest Payable 1 200 To record interest accrued on bank loan during December 2 Depreciation Expense Office Building 1 100 Accumulated Depreciation Office Building 1 100 To record depreciation on office building 330 000 25 years 1 12 1 100 3 Accounts Receivable 64 000 Marketing Revenue Earned 64 000 To record accrued Marketing revenue earned in December 4 Insurance Expense 150 Prepaid Insurance 150 To record insurance expense 1 800 12 months 150 5 Unearned Revenue 3 500 Marketing Revenue Earned 3 500 To record portion of unearned revenue that had become earned in December 6 Salaries Expense 2 400 Salaries Payable 2 400 To record accrued salaries in December b 62 650 64 000 3 500 1 200 1 100 150 2 400 Ex 4 7a The total interest expense over the life of the note is 5 400 120 000 09 6 12 5 400 The monthly interest expense is 900 5 400 6 900 b The liability to the bank at December 31 2002 is 121 800 Principal 120 000 1 800 accrued interest c 2002 Oct 31 Cash 120 000 Notes Payable 120 000 Obtain from bank six month loan with interest at 9 a year d Dec 31 Interest Expense 900 Interest Payable 900 To accrue interest expense for December on note payable 120 000 9 1 12 e The liability to the bank at March 31 2003 is 124 500 consisting of 120 000 principal plus 4 500 accrued interest for five months Ex 4 8a May 1 Cash 300 000 Notes Payable 300 000 Obtained a three month loan from National Bank at 12 interest per year May 31 Interest Expense 3 000 Interest Payable 3 000 To record interest expense for May on note payable to National Bank 300 000 12 1 12 3 000 b May 1 Prepaid Rent 180 000 Cash 180 000 Paid rent for six months at 30 000 per month May 31 Rent Expense 30 000 Prepaid Rent 30 000 To record rent expense for the month of May c May 2 Cash 910 000 Unearned Admissions Revenue 910 000 Sold season tickets to the 70 day racing season May 31 Unearned Admissions Revenue 260 000 Admissions Revenue 260 000 To record admissions revenue from the 20 racing days in May 910 000 20 70 260 000 d May 4 No entry required e May 6 Prepaid Printing 12 000 Cash 12 000 Printed racing forms for first 30 racing days May 31 Printing Expense 8 000 Prepaid Printing 8 000 To record printing expense for 20 racing days in May f May 31 Concessions Receivable 16 500 Concessions Revenue 16 500 Earned 10 of refreshment sales of 165 000 during May Something to Consider Effects of omission of May 31 adjusting entry for rent expense on May 31 financial statements RevenueNot affected ExpensesUnderstated by May s rent of 30 000 Net IncomeOverstated because May rent expense was not recognized AssetsOverstated Prepaid Rent should be reduced by portion expired in May LiabilitiesNot affected Owners EquityOverstated because net income is overstated Ex 4 9a Materiality refers to the relative importance of an item An item is material if knowledge of it might reasonably influence the decisions of users of financial statements If an item is immaterial by definition it is not relevant to decision makers Accountants must account for material items in the manner required by generally accepted accounting principles However immaterial items may be accounted for in the most convenient and economical manner b Whether a specific dollar amount is material depends upon the 1 size of the amount and 2 nature of the item In evaluating the size of a dollar amount accountants consider the amount in relation to the size of the organization Based solely upon dollar amount 2 500 is not material in relation to the financial statements of a large publicly owned corporation For a small business however this amount could be material In addition to considering the size of a dollar amount accountants must also consider the nature of the item The nature of an item may make the item material to users of the financial statements regardless of its dollar amount Examples might include bribes paid to government officials or theft of company assets or other illegal acts committed by management In summary one cannot say whether 2 500 is a material amount The answer depends upon the related circumstances c Two ways in which the concept of materiality may save time and effort for accountants are 1 Adjusting entries may be based upon estimated amounts if there is little or no possibility that the use of an estimate will result in material error For example an adjusting entry to reflect the amount of supplies used may be based on an estimate of the cost of supplies remaining on hand 2 Adjusting entries need not be made to accrue immaterial amounts of unrecorded expenses or unrecorded revenue For example no adjusting entries normally are made to record utility expense payable at year end Ex 4 10 a None or Materiality Accounting for immaterial items is not wrong or a violation of generally accepted accounting principles it is merely a waste of time The bookkeeper is failing to take advantage of the concept of materiality which permits charging im material costs directly to expense thus eliminating the need to record depreciation in later periods b Matching c Realization Ex 4 11 a Accounts likely to have required an adjusting entry are 1 Investments 2 Accounts Receivable 3 Inventories 4 Prepaid Expenses 5 Deferred Income Taxes 6 Buildings 7 Machinery and Equipment 8 Intangible Assets 9 Accounts Payable 10 Accrued Liabilities 11 Income Taxes Payable 12 Deferred Compensation and Other Liabilities Note to the Instructor The adjustments required for many of the accounts listed above are discussed in subsequent chapters Some are beyond the scope of an introductory course SOLUTIONS TO PROBLEMS 20 Minutes Easy PROBLEM 4 1 FLORIDA PALMS COUNTRY CLUB Adjusting Entries 20 1 Dec 31 Salary Expense9 6 0 0 Salaries Payable9 6 0 0 To record accrued salaries at December 31 2 31 Accounts Receivable 1 8 0 0 Green Fee Revenue 1 8 0 0 To record green fees owed by the Tampa Univ golf team 3 31 Unearned Membership Dues1 0 6 0 0 0 Membership Dues Earned1 0 6 0 0 0 To record the portion of annual membership dues earned in December 4 31 Depreciation Expense Carts1 0 0 0 Accumulated Depreciation Carts1 0 0 0 To record December depreciation expense 180 000 15 years x 1 12 5 31 Interest Expense3 0 0 Interest Payable3 0 0 To record accrued interest expense in December 45 000 8 1 12 6 31 Insurance Expense 6 5 0 Unexpired Insurance 6 5 0 To record December insurance expense 7 800 1 12 7 No adjusting entry required Revenue is recognized when it is earned Entering into a contract does not constitute the earning of revenue 8 31 Income Taxes Expense1 9 0 0 0 Income Taxes Payable1 9 0 0 0 To record income taxes accrued in December PROBLEM 4 1 FLORIDA PALMS COUNTRY CLUB concluded b 1 Accruing unpaid expenses 2 Accruing uncollected revenue 3 Converting liabilities to revenue 4 Converting assets to expenses 5 Accruing unpaid expenses 6 Converting assets to expenses 7 No adjusting entry required 8 Accruing unpaid expenses c The clubhouse was built in 1925 and has been fully depreciated for financial accounting purposes The net book value of an asset reported in the balance sheet does not reflect the asset s fair market value Likewise depreciation expense reported in the income statement does not reflect a decline in fair market value physical obsolescence or wear and tear 40 Minutes Medium PROBLEM 4 2 ENCHANTED FOREST a General Journal Adjusting Entries 1 Dec31 Interest Receivable 4 0 0 Interest Revenue4 0 0 To record accrued interest revenue in CD on December 31 2 31 Interest Expense 8 5 Interest Payable 8 5 To record accrued interest expense in December 12 000 x 8 5 x 1 12 3 31 Depreciation Expense Buildings2 0 0 0 Accumulated Depreciation Buildings2 0 0 0 To record December depreciation expense 600 000 25 years x 1 12 4 No adjusting entry required Revenue is recognized when it is earned Entering into a contract does not constitute the earning of revenue 5 31 Salary Expense1 2 5 0 Salaries Payable1 2 5 0 To record accrued salary expense in December 6 31 Camper Revenue Receivable2 4 0 0 Camper Revenue2 4 0 0 To record accrued camper revenue earned in December 7 31 Unearned Camper Revenue 9 0 0 Camper Revenue 9 0 0 To record revenue earned by campers paying in advance 5 400 6 months 8 31 Bus Rental Expense1 0 0 0 Accounts Payable 1 0 0 0 To record accrued bus rental expense in December 40 per day x 25 days 9 31 Income Taxes Expense 8 4 0 0 Income Taxes Payable8 4 0 0 To record income taxes accrued in December PROBLEM 4 2 ENCHANTED FOREST concluded b 1 Accruing uncollected revenue 2 Accruing unpaid expenses 3 Converting assets to expenses 4 No adjusting entry required 5 Accruing unpaid expenses 6 Accruing uncollected revenue 7 Converting liabilities to revenue 8 Accruing unpaid expenses 9 Accruing unpaid expenses c Income StatementBalance Sheet AdjustmentRevenue Expenses Net IncomeAssets Liabilities Owners Equity 1 INEIINEI 2 NEIDNEID 3 NEIDDNED 4 NENENENENENE 5 NEIDNEID 6 INEIINEI 7 INEINEDI 8 NEIDNEID 9 NEIDNEID d 340 12 000 x 0 85 x 4 12 e Original cost of buildings 600 000 Accumulated depreciation buildings prior to adjusting entry 3 in part a 310 000 December depreciation expense from part a 2 000 Accumulated depreciation buildings 12 31 312 000 Net book value at December 31 288 000 25 Minutes Strong PROBLEM 4 3 SEA CAT a 1 Age of the catamaran in months accumulated depreciation monthly depreciation Useful life is given as 10 years or 120 months Cost 46 200 120 months 385 monthly depreciation expense Accumulated depreciation of 9 240 385 monthly depreciation 24 months 2 Tickets used in June 145 Tickets outstanding on June 30 825 15 55 Tickets sold to resort hotel on June 1 200 3 Prepaid rent of 6 000 5 months remaining 1 200 monthly rental expense 4 1 400 x 12 8 2 100 original cost Since 4 months of the 12 month life of the policy have expired the 1 400 of unexpired insurance applies to the remaining 8 months This indicates a monthly cost of 175 computed as 1 400 8 Therefore the 12 month policy originally cost 2 100 or 12 x 175 b General Journal Adjusting Entries 20 1 June 30 Depreciation Expense Catamaran3 8 5 Accumulated Depreciation Catamaran3 8 5 To record June depreciation on catamaran 2 30 Unearned Passenger Revenue2 1 7 5 Passenger Revenue2 1 7 5 To record earning of revenue from 145 future ride tickets used in June 145 x 15 2 175 3 30 Rent Expense1 2 0 0 Prepaid Rent1 2 0 0 To recognize rent expense for June 4 30 Insurance Expense 1 7 5 Unexpired Insurance 1 7 5 To record expiration of insurance in June 30 Minutes Medium PROBLEM 4 4 CAMPUS THEATER a General Journal Adjusting Entries 20 1 Aug 31 Film Rental Expense1 5 2 0 0 Prepaid Film Rental1 5 2 0 0 Film rental expense incurred in August 2 31 Depreciation Expense Buildings 7 0 0 Accumulated Depreciation Buildings 7 0 0 To record August depreciation 168 000 240 months 3 31 Depreciation Expense Fixtures and Equipment 6 0 0 Accumulated Depreciation Fixtures and Equipment 6 0 0 To record August depreciation 36 000 60 months 4 31 Interest Expense1 5 0 0 Interest Payable1 5 0 0 Interest expense accrued in August 5 31 Unearned Admissions Revenue YMCA 5 0 0 Admissions Revenue5 0 0 To record advance payment from YMA earned in August 1 500 x 1 3 6 31 Concessions Revenue Receivable2 2 5 0 Concessions Revenue2 2 5 0 To record accrued concessions revenue in August 7 31 Salaries Expense1 7 0 0 Salaries Payable1 7 0 0 To record accrued salary expense in August 8 31 Income Taxes Expense4 2 0 0 Income Taxes Payable4 2 0 0 To record income taxes accrued in August 9 31 No adjusting entry required PROBLEM 4 4 CAMPUS THEATER concluded b 1 Eight months bills received January through August Utilities bills are recorded as monthly bills are received As of August 31 eight monthly bills should have been received 2 Seven months January through July Depreciation expense is recorded only in month end adjusting entries Thus depreciation for August is not included in the August unadjusted trial balance 3 Twenty months 14 000 700 per month c Corporations must pay their income taxes in several installment payments throughout the year The balance in the Income Taxes Expense account represents the total amount of income taxes expense recognized since the beginning of the year But Income Taxes Payable represents only the portion of this expense that has not yet been paid In the example at hand the 4 740 in income taxes payable probably represents only the income taxes expense accrued in July as Pickwood should have paid taxes accrued in the first two quarters by June 15 50 Minutes Strong PROBLEM 4 5 KEN HENSLEY ENTERPRISES INC a General Journal Adjusting Entries 20 1 Dec 31 Accounts Receivable 4 4 0 0 Studio Revenue Earned 4 4 0 0 To record accrued studio revenue earned in December 2 31 Supplies Expense 7 0 0 Studio Supplies 7 0 0 To record studio supplies used in December 7 600 6 900 3 31 Insurance Expense 2 5 0 Unexpired Insurance 2 5 0 To record December insurance expense 1 500 x 1 6 4 31 Studio Rent Expense2 0 0 0 Prepaid Studio Rent2 0 0 0 To record studio rent in December 6 000 x 1 3 5 31 Depreciation Expense Recording Equipment1 5 0 0 Accumulated Depreciation Recording Equipment1 5 0 0 To record depreciation expense in December 90 000 x 1 60 6 31 Interest Expense 1 2 0 Interest Payable 1 2 0 To record accrued interest expense in December 16 000 x 9 x 1 12 7 31 Unearned Studio Revenue3 6 0 0 Studio Revenue Earned3 6 0 0 To record advance collections earned in December 8 31 Salaries Expense 5 4 0 Salaries Payable 5 4 0 To record salaries accrued in December 9 31 Income Taxes Expense1 7 0 0 Income Taxes Payable1 7 0 0 To record income taxes accrue