CASE 7-1

STERN CORPORATION (B)

Presented by GROUP 1:
Afif Saipudin | 140-651-3104
Agung | 140-658-3110
Ahmad Purbaya | 140-658-8534
Ariston Tjendra | 140-651-3306
Camelia Indah Murniwati | 140-651-3376
Accounting For Managers F141 MMUI

Exhibit 1
STERN CORPORATION
Balance Sheet
As of December 31, 2009
Liabilities and Shareholders' Equity

Assets
Current assets:
Cash
Accounts receivable
Less: Allowance for doubtful accounts
U.S. Treasury securities at cost
Inventories
Total current assets
Other assets:
Investments
Land
Building
Less: Accumulated depreciation
Factory machinery
Less: Accumulated depreciation
Furniture and fixtures
Less: Accumulated depreciation
Automotive equipment
Less: Accumulated depreciation
Office machines
Less: Accumulated depreciation
Tools
Patent
Prepaid Expense
Total assets

671,344

958,609
274,060
1,734,405
3,638,418

988,257
29,648

412,294
186,563
2,405,259
663,379
3,425,585
1,642,358
56,484
40,400
58,298
37,156
42,534
28,005

1,741,880
1,783,227
16,084
21,142

14,529
61,294
56,250
100,190
8,031,871

Current liabilities:
Accounts payable
Taxes payable
Accrued salaries, wages, and interest
Long-term debt, due within one year
Total current liabilities
Noncurrent liabilities:
Long-term debt
Shareholders' equity:
Common stock
Retained earnings
Total shareholders' equity
Total liabilities and shareholder's equity

510,000
709,354
141,478
69,300
1,430,132
1,247,368

2,503,275
2,851,096
5,354,371
8,031,871

Company Transaction
1.

On January 2, 2010, one of the factory machines was sold for its book value, $3,866. This
machine was recorded on the books at $31,233 with accumulated depreciation of $27,367.
Factory Machines, at cost
Acc. Depreciation
Factory Machines, net
Sold
Loss/gain on sales

2.

Journal 1 - 2

31,233
27,367
3,866
3,866
-

Tools were carried on the books at cost, and at the end of each year a physical inventory was
taken to determine what tools still remained. The account was written down to the extent
of the decrease in tools as ascertained by the year-end inventory. At the end of 2010, it was
determined that there had been a decrease in the tool inventory amounting to $7,850.
Tools Acc. depreciation

7,850

Company Transaction
3.

Journal 3

On March 1, 2010, the company sold for $2,336 cash an automobile that was recorded on the
books at a cost of $8,354 and had an accumulated depreciation of $5,180, giving a net book
value of $3,174 as of January 1, 2010. In this and other cases of the sale of long-lived assets
during the year, the accumulated depreciation and depreciation expense items were both
increased by an amount that reflected the depreciation chargeable for the months in 2010 in
which the asset was held prior to the sale, at rates listed in item 7 below.
Automobile, at cost
Acc. Depreciation (Jan 1,2010)
Automobile, net (Jan 1, 2010)
Acc. Depreciation (March 1,2010)
Automobile, net (March 1, 2010)
Sold
Loss/gain on sales

8,354
5,180
3,174
5,458
2,896
2,336
(560)

Depreciation Expense for 2 months (Jan-Feb)

= 2/12 * (depreciation rate*cost)
= 2/12 * (20%*8354)
= 278
Accumulated Depreciation (March 1, 2010)
= Accumulated Depreciation (Jan 1, 2010) + Depreciation Expense for 2 months
= 3174 + 278
= 5458
Automobile, net (March 1, 2010)
= Automobile at cost - Accumulated Depreciation (March 1, 2010)
= 8354 - 5458
= 2896

Company Transaction
4.

The patent listed on the balance sheet had been purchased by the Stern Corporation. The
cost of the patent was written off as an expense over the remainder of its legal life as of
December 31, 2009, the patent's remaining legal life was five years.
Amortization 1 year

5.

Journal 4-5

11,250

On July 1, 2010, a typewriter that had cost $1,027 and had been fully depreciated on
December 31, 2009, was sold for $75.
Office Machines, at cost
Acc. Depreciation (Dec 31, 2009)
Office Machines, net
Sold
Loss/gain on sales

1,027
1,027
75
75

Company Transaction
6.

On October 1, 2010, the company sold a desk for $80. This piece of furniture was recorded on
the books at a cost of $490 with an accumulated depreciation of $395 as of January 1, 2010.
Furniture & Fixtures, at cost
Acc. Depreciation (Jan 1, 2010)
Furniture & Fixtures, net (Jan 1, 2010)
Acc. Depreciation (Oct 1,2010)
Furniture & Fixture, net (Oct 1, 2010)
Sold
Loss/gain on sales

490
395
95
432
58
80
22

Journal 6

Depreciation Expense for 9 months (Jan-Sept)

= 9/12 * (depreciation rate*cost)
= 9/12 * (10%*490)
= 37
Accumulated Depreciation (October 1, 2010)
= Accumulated Depreciation (Jan 1, 2010) + Depreciation Expense for 9 months
= 395 + 37
= 432
Furniture & Fixtures, net (October 1, 2010)
= Furniture & Fixtures at cost - Accumulated Depreciation (March 1, 2010)
= 490 - 432
= 58

Company Transaction
7.

Depreciation was calculated at the following rates:

Buildings
Factory machinery
Furniture & fixtures
Automotive equipment
Office machines

2%
10% *
10%
20%
10%

* Included in the factory machinery cost of $3,425,585 was a machine costing $85,000 that
had been fully depreciated on December 31, 2009, and that was stll in use.

Depreciation Expense
Building

= Depreciation Rate * Building at cost

= 2% * 2.405.259 = 48.105

Factory Machinery
= Depreciation Rate * (Factory Machinery at cost - fully depreciated machine Office machine sold at cost)

= 10% * (3.425.585 85.000 31.233)

= 330.935
Furniture & Fixtures
= Depreciation Rate * (Furniture & Fixtures at cost Desk sold at cost)
= 10% * (56.484 490)
= 5.599
Automotive Equipment

= Depreciation Rate * (Automotive Equipment at cost automobile sold at cost)

= 20% * (58.298 8.354)

= 9.989
Office Machines

= Depreciation Rate * (Office Machines at cost typewriter sold at cost)

= 10% * (42.534 1.027)
= 4.151

Journal 7
6/13/2015

Answer No. 1: Journal Entries

JOURNAL ENTRIES
1.

2.

3.

Cash
Accumulated Depreciation
Factory Machinery

3,866
27,367
31,233

Tools expense
Tools

7,850
7,850

Depreciation Expense
Acc. Depreciation - Automobile
Cash
Accumulated Depreciation
Loss on sale
Automotive Equipment
Transaction 4-5

278
278
2,336
5,458
560
8,354
Transaction 3

Transaction 1-2

Transaction 7

Journal Entries

Transaction 6
Transaction 4-5

4.

5.

6.

Amortization Expense
Patent
Cash
Accumulated Depreciation
Office Machines
Gain on sales
Depreciation Expense
Acc. Furniture & Fixture
Cash
Accumulated Depreciation
Gain on sale
Furniture & Fixture

11,250
11,250
75
1,027
1,027
75
37
37
80
432
22
490

Journal Entries
7.

Depreciation Expense
Acc. Depreciation - Buildings
Depreciation Expense
Acc. Depreciation - Factory Machinery

48,105
48,105
330,935
330,935

Depreciation Expense
Acc. Depreciation - Furniture & Fixtures

5,599

Depreciation Expense
Acc. Depreciation - Automotive Equipment

9,989

Depreciation Expense
Acc. Depreciation - Office machines

4,151

5,599

9,989

4,151

Answer No. 2

The correct totals for Property, Plant, and Equipment and the amount of accumulated
depreciation as of December 31, 2010
Gross

Land
Building

Accumulated depreciation

186,563
2,405,259

Net

186,563

711,484 1,693,775
(data exhibit 1+jurnal no 7)

Factory machinery

3,394,352

1,945,926 1,448,426

(data exhibit 1-jurnal no 1) (data exhibit 1+jurnal no 7-jurnal no 1)

Furniture and fixtures

55,994

45,604

10,390

(data exhibit 1-jurnal no 6) (data exhibit 1+jurnal no 7-jurnal no 6)

Automotive equipment

49,944

41,965

7,979

(data exhibit 1-jurnal no 3) (data exhibit 1+jurnal no 7-jurnal no 3)

Office machines

41,507

31,129

10,378

(data exhibit 1-jurnal no 5) (data exhibit 1+jurnal no 7-jurnal no 5)

Tools

53,444

53,444

(data exhibit 1-jurnal no 2)

Patent

45,000

45,000

(data exhibit 1- jurnal no 4)

Total

6,232,063

2,776,108 3,455,955