会计学：企业决策的基础exercises-chapter4答案

SolutionstoExercises

Ex4–1

a.

Bookvalue

b.

Materiality

c.

Matchingprinciple

d.

Unrecordedrevenue

e.

Adjustingentries

f.

Unearnedrevenue

g.

Prepaidexpenses

h.

None(Thisisanexampleof“depreciationexpense.”)

Ex.4–2

IncomeStatement

BalanceSheet

AdjustingEntry

Revenue

Expenses

=

NetIncome

Assets

=

Liabilities

+

Owners’

Equity

a

NE

I

D

D

NE

D

b

NE

I

D

NE

I

D

c

I

NE

I

I

NE

I

d

NE

I

D

NE

I

D

e

NE

I

D

D

NE

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f

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I

Ex.4–3

a.

RentExpense

240,000

PrepaidRent

240,000

TorecordrentexpenseforMay($1,200,0005months=$240,000permonth).

b.

UnearnedTicketRevenue

148,800

TicketRevenue

148,800

TorecordearningportionofseasonticketrevenuerelatingtoMayhomegames.

Ex.4–4

a.

(1)

InterestExpense

375

InterestPayable

375

$50,000x9%annualratex1/12=$375.

(2)

AccountsReceivable

10,000

ConsultingFeesEarned

10,000

Torecordtendaysofunbilledconsultingfeesat$1,000perday.

b.

$2,250($50,000x9%x6/12=$2,250)

c.

$15,000($25,000-$10,000earnedinDecember,2002)

Ex.4–5

a.

ThebalanceofTWA’sAdvanceTicketSalesaccountrepresentsunearnedrevenue—thatis,amountscollectedfromcustomerspriortorenderingtherelatedservices(airtravel).AsTWAhasanobligationtorendertheseservices,theAdvancedTicketSalesaccountappearsamongtheliabilitiesinTWA’sbalancesheet.

b.

TWAnormallyreducesthebalanceofthisliabilityaccountbyrenderingservicestocustomers—thatis,byprovidingflightsforwhichthecustomershavepurchasedtickets.Onsomeoccasions,however,TWAreducesthebalanceofthisliabilitybymakingcashrefundstocustomers.

Ex.4–6

a.1.

InterestExpense

1,200

InterestPayable

1,200

TorecordinterestaccruedonbankloanduringDecember.

2.

DepreciationExpense:OfficeBuilding

1,100

AccumulatedDepreciation:OfficeBuilding

1,100

Torecorddepreciationonofficebuilding($330,00025years112=$1,100).

3.

AccountsReceivable

64,000

MarketingRevenueEarned

64,000

TorecordaccruedMarketingrevenueearnedinDecember.

4.

InsuranceExpense

150

PrepaidInsurance

150

Torecordinsuranceexpense(1,80012months=$150).

5.

UnearnedRevenue

3,500

MarketingRevenueEarned

3,500

TorecordportionofunearnedrevenuethathadbecomeearnedinDecember.

6.

SalariesExpense

2,400

SalariesPayable

2,400

TorecordaccruedsalariesinDecember.

b.

$62,650($64,000+$3,500$1,200$1,100$150$2,400).

Ex.4–7

a.

Thetotalinterestexpenseoverthelifeofthenoteis$5,400($120,000.09612=$5,400).

Themonthlyinterestexpenseis$900($5,4006=$900).

b.

TheliabilitytothebankatDecember31,2002,is$121,800(Principal,$120,000+$1,800accruedinterest).

c.

2002

Oct.

31

Cash

120,000

NotesPayable

120,000

Obtainfrombanksix-monthloanwithinterestat9%ayear.

d.

Dec.

31

InterestExpense

900

InterestPayable

900

ToaccrueinterestexpenseforDecemberonnotepayable($120,0009%112).

e.

TheliabilitytothebankatMarch31,2003,is$124,500,consistingof$120,000principalplus$4,500accruedinterestforfivemonths.

Ex.4–8

a.

May

 1

Cash

300,000

NotesPayable

300,000

Obtainedathree-monthloanfromNationalBankat12%interestperyear.

May

31

InterestExpense

3,000

InterestPayable

3,000

TorecordinterestexpenseforMayonnotepayabletoNationalBank($300,00012%112=$3,000).

b.

May

 1

PrepaidRent

180,000

Cash

180,000

Paidrentforsixmonthsat$30,000permonth.

May

31

RentExpense

30,000

PrepaidRent

30,000

TorecordrentexpenseforthemonthofMay.

c.

May

 2

Cash

910,000

UnearnedAdmissionsRevenue

910,000

Soldseasonticketstothe70-dayracingseason.

May

31

UnearnedAdmissionsRevenue

260,000

AdmissionsRevenue

260,000

Torecordadmissionsrevenuefromthe20racingdaysinMay($910,0002070=$260,000).

d.

May

 4

Noentryrequired.

e.

May

 6

PrepaidPrinting

12,000

Cash

12,000

Printedracingformsforfirst30racingdays.

May

31

PrintingExpense

8,000

PrepaidPrinting

8,000

Torecordprintingexpensefor20racingdaysinMay.

f.

May

31

ConcessionsReceivable

16,500

ConcessionsRevenue

16,500

Earned10%ofrefreshmentsalesof$165,000duringMay.

SomethingtoConsider:

EffectsofomissionofMay31adjustingentryforrentexpenseonMay31financialstatements:

Revenue

Notaffected

Expenses

Understated(byMay’srentof$30,000)

NetIncome

Overstated(becauseMayrentexpensewasnotrecognized)

Assets

Overstated(PrepaidRentshouldbereducedbyportionexpiredinMay)

Liabilities

Notaffected

Owners’Equity

Overstated(becausenetincomeisoverstated)

Ex.4–9

a.

Materialityreferstotherelativeimportanceofanitem.Anitemismaterialifknowledgeofitmightreasonablyinfluencethedecisionsofusersoffinancialstatements.Ifanitemisimmaterial,bydefinitionitisnotrelevanttodecisionmakers.

Accountantsmustaccountformaterialitemsinthemannerrequiredbygenerallyacceptedaccountingprinciples.However,immaterialitemsmaybeaccountedforinthemostconvenientandeconomicalmanner.

b.

Whetheraspecificdollaramountis“material”dependsuponthe(1)sizeoftheamountand(2)natureoftheitem.Inevaluatingthesizeofadollaramount,accountantsconsidertheamountinrelationtothesizeoftheorganization.

Basedsolelyupondollaramount,$2,500isnotmaterialinrelationtothefinancialstatementsofalarge,publiclyownedcorporation.Forasmallbusinesshowever,thisamountcouldbematerial.

Inadditiontoconsideringthesizeofadollaramount,accountantsmustalsoconsiderthenatureoftheitem.Thenatureofanitemmaymaketheitem“material”tousersofthefinancialstatementsregardlessofitsdollaramount.Examplesmightincludebribespaidtogovernmentofficials,ortheftofcompanyassetsorotherillegalactscommittedbymanagement.

Insummary,onecannotsaywhether$2,500isamaterialamount.Theanswerdependsupontherelatedcircumstances.

c.

Twowaysinwhichtheconceptofmaterialitymaysavetimeandeffortforaccountantsare:

1.

Adjustingentriesmaybebaseduponestimatedamountsifthereislittleornopossibilitythattheuseofanestimatewillresultinmaterialerror.Forexample,anadjustingentrytoreflecttheamountofsuppliesusedmaybebasedonanestimateofthecostofsuppliesremainingonhand.

2.

Adjustingentriesneednotbemadetoaccrueimmaterialamountsofunrecordedexpensesorunrecordedrevenue.Forexample,noadjustingentriesnormallyaremadetorecordutilityexpensepayableatyear-end.

Ex.4–10

a.

None(orMateriality).Accountingforimmaterialitemsisnot“wrong”ora“violation”ofgenerallyacceptedaccountingprinciples;itismerelyawasteoftime.Thebookkeeper

isfailingtotakeadvantageoftheconceptofmateriality,whichpermitschargingimmaterialcostsdirectlytoexpense,thuseliminatingtheneedtorecorddepreciationinlaterperiods.

b.

Matching.

c.

Realization.

Ex.4–11

a.

Accountslikelytohaverequiredanadjustingentryare:

1.

Investments

2.

AccountsReceivable

3.

Inventories

4.

PrepaidExpenses

5.

DeferredIncomeTaxes

6.

Buildings

7.

MachineryandEquipment

8.

IntangibleAssets

9.

AccountsPayable

10.

AccruedLiabilities

11.

IncomeTaxesPayable

12.

DeferredCompensationandOtherLiabilities

NotetotheInstructor:Theadjustmentsrequiredformanyoftheaccountslistedabovearediscussedinsubsequentchapters.Somearebeyondthescopeofanintroductorycourse.

solutionstoproblems

20Minutes,Easy

Problem4–1

FLORIDAPALMSCOUNTRYCLUB

Problem4–1

FLORIDAPALMSCOUNTRYCLUB(concluded)

b.

1.

Accruingunpaidexpenses.

2.

Accruinguncollectedrevenue.

3.

Convertingliabilitiestorevenue.

4.

Convertingassetstoexpenses.

5.

Accruingunpaidexpenses.

6.

Convertingassetstoexpenses.

7.

Noadjustingentryrequired.

8.

Accruingunpaidexpenses.

c.

Theclubhousewasbuiltin1925andhasbeenfullydepreciatedforfinancialaccountingpurposes.Thenetbookvalueofanassetreportedinthebalancesheetdoesnotreflecttheasset’sfairmarketvalue.Likewise,depreciationexpensereportedintheincomestatementdoesnotreflectadeclineinfairmarketvalue,physicalobsolescence,orwear-and-tear.

40Minutes,Medium

Problem4–2

ENCHANTEDFOREST

Problem4–2

ENCHANTEDFOREST(concluded)

b.

1.

Accruinguncollectedrevenue.

2.

Accruingunpaidexpenses.

3.

Convertingassetstoexpenses.

4.

Noadjustingentryrequired.

5.

Accruingunpaidexpenses.

6.

Accruinguncollectedrevenue.

7.

Convertingliabilitiestorevenue.

8.

Accruingunpaidexpenses.

9.

Accruingunpaidexpenses.

c.

IncomeStatement

BalanceSheet

Adjustment

Revenue

Expenses

=

NetIncome

Assets

=

Liabilities

+

Owners’

Equity

1.

I

NE

I

I

NE

I

2.

NE

I

D

NE

I

D

3.

NE

I

D

D

NE

D

4.

NE

NE

NE

NE

NE

NE

5.

NE

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NE

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D

6.

I

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7.

I

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8.

NE

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D

NE

I

D

9.

NE

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D

NE

I

D

d.

$340($12,000x0.85%x4/12)

e.

Originalcostofbuildings

$600,000

Accumulateddepreciation:buildings(priortoadjustingentry3inparta)

$310,000

Decemberdepreciationexpensefromparta

2,000

Accumulateddepreciation,buildings,12/31

(312,000)

NetbookvalueatDecember31

$288,000

25Minutes,Strong

Problem4–3

SEACAT

a.

(1)

Ageofthecatamaraninmonths=accumulateddepreciationmonthlydepreciation.Usefullifeisgivenas10years,or120months.

Cost$46,200120months=$385monthlydepreciationexpense.

Accumulateddepreciationof$9,240$385monthlydepreciation=24months.

(2)

TicketsusedinJune

145

TicketsoutstandingonJune30($825$15)

55

TicketssoldtoresorthotelonJune1

200

(3)

Prepaidrentof$6,0005monthsremaining=$1,200monthlyrentalexpense.

(4)

$1,400x12/8=$2,100originalcost.

Since4monthsofthe12-monthlifeofthepolicyhaveexpired,the$1,400ofunexpiredinsuranceappliestotheremaining8months.Thisindicatesamonthlycostof$175,computedas$1,4008.Therefore,the12-monthpolicyoriginallycost$2,100,or12x$175.

30Minutes,Medium

Problem4–4

CAMPUSTHEATER

Problem4–4

CAMPUSTHEATER(concluded)

b.

(1)

Eightmonths(billsreceivedJanuarythroughAugust).Utilitiesbillsarerecordedasmonthlybillsarereceived.AsofAugust31,eightmonthlybillsshouldhavebeenreceived.

(2)

Sevenmonths(JanuarythroughJuly).Depreciationexpenseisrecordedonlyinmonth-endadjustingentries.Thus,depreciationforAugustisnotincludedintheAugustunadjustedtrialbalance.

(3)

Twentymonths($14,000$700permonth).

c.

Corporationsmustpaytheirincometaxesinseveralinstallmentpaymentsthroughouttheyear.ThebalanceintheIncomeTaxesExpenseaccountrepresentsthetotalamountofincometaxesexpenserecognizedsincethebeginningoftheyear.ButIncomeTaxesPayablerepresentsonlytheportionofthisexpensethathasnotyetbeenpaid.Intheexampleathand,the$4,740inincometaxespayableprobablyrepresentsonlytheincometaxesexpenseaccruedinJuly,asPickwoodshouldhavepaidtaxesaccruedinthefirsttwoquartersbyJune15.

50Minutes,Strong

Problem4–5

KENHENSLEYENTERPRISES,INC.

Problem4–5

KENHENSLEYENTE