Assingments For MODULE 08: P8.1 Flynt 'S Inventory Record For Product X

Advanced Accounting Problem
12/08/2021 Student: LE VIET

Instructors: Dr. Lewis
Assingments for MODULE 08

P8.1
Flynt 's inventory record for Product X
Units Unit cost
Jan 1, 2007 (Beginning inventory) 1,600.00 $ 18.00
Purchase
Jan 5, 2007 2,600.00 $ 20.00
Jan 25, 2007 2,400.00 $ 21.00
Feb 16,2007 1,000.00 $ 22.00
Mar 15, 2007 1,800.00 $ 23.00
A physical inventory on March 31, 2007, shows 2,500 units on hand
a - using FIFO method (Cost = Units * Unit Cost)

We are to assume you sell the goods that have been in stock the longest.
(Unit cost in ending inventory = Unit cost of the last one purchased)
(1800 units with $23 and 700 Units with $22)
Units Unit cost Cost
Jan 1, 2007 (Beginning inventory) 1,600.0 $ 18.00 $ 28,800.00
Purchase
Jan 5, 2007 2,600.0 $ 20.00 $ 52,000.00
Jan 25, 2007 2,400.0 $ 21.00 $ 50,400.00
Feb 16,2007 1,000.0 $ 22.00 $ 22,000.00
Mar 15, 2007 1,800.0 $ 23.00 $ 41,400.00
Total Purchase 7,800.0 $ 165,800.00
Mar 31, 2007 (Ending Inventory) 2,500.0 $ 56,800.00
b - using LIFO method

We are to assume you sell the goods that have been in stock the shortest.
(Unit cost in ending inventory = Unit cost of the First one purchased)
(2500 Units with $23)
Purchase
Jan 5, 2007 2,600.0 $ 20.00 $ 52,000.00
Jan 25, 2007 2,400.0 $ 21.00 $ 50,400.00
Feb 16,2007 1,000.0 $ 22.00 $ 22,000.00
Mar 15, 2007 1,800.0 $ 23.00 $ 41,400.00
Total Purchase 7,800.0 $ 165,800.00
Mar 31, 2007 (Ending Inventory) 2,500.0 $ 20.00 $ 50,000.00
c - Weight - average Wa= (BI cost+Total Purchased cost)/(Total Units)

EI = Wa * Units
Purchase
Jan 5, 2007 2,600.0 $ 20.00 $ 52,000.00
Jan 25, 2007 2,400.0 $ 21.00 $ 50,400.00
Feb 16,2007 1,000.0 $ 22.00 $ 22,000.00
Mar 15, 2007 1,800.0 $ 23.00 $ 41,400.00
Total (BI & Purchase) 9,400.0 $ 194,600.00
We have:
Wa=$19460/940 = $ 20.70
Ending Inventory(on Mar 31,2007) = 2500*$20.70213 = $ 51,755.32
P8.2 Transaction on May

Purchase Sale
Date Units Unit cost Date Units Unit cost
May 1 (Balance) 400.0 $ 4.2 May 3 300.0 $ 7.0
4 1,300.0 $ 4.1 6 1,000.0 $ 7.0
8 800.0 $ 4.3 12 900.0 $ 7.5
14 700.0 $ 4.4 18 400.0 $ 7.5
22 1,200.0 $ 4.5 25 1,400.0 $ 8.0
29 500.0 $ 4.6
Perpetual inventory records are kept in dollars
Required: Determine the inventory using LIFO
Balance Purchase (Inventory) Sale

Date Units Unit cost Total cost Units Unit sale Total sale
May 1 400.0 $ 4.2 $ 1,680.0
300.0 $ 7.0 $ 2,100.0
3 100.0 $ 4.2 $ 420.0 $ 420.0
4 1,300.0 $ 4.1 $ 5,330.0
100.0 $ 4.2 $ 420.0 1,000.0 $ 7.0 $ 7,000.0
6 300.0 $ 4.1 $ 1,230.0 $ 1,650.0
8 800.0 $ 4.3 $ 3,440.0
100.0 $ 4.2 $ 420.0 900.0 $ 7.5 $ 6,750.0
12 200.0 $ 4.1 $ 820.0 $ 1,240.0
14 700.0 $ 4.4 $ 3,080.0
100.0 $ 4.2 $ 420.0 400.0 $ 7.5 $ 3,000.0
200.0 $ 4.1 $ 820.0
18 300.0 $ 4.4 $ 1,320.0 $ 2,560.0
22 1,200.0 $ 4.5 $ 5,400.0
100.0 $ 4.2 $ 420.0 1,400.0 $ 8.0 $ 11,200.0
200.0 $ 4.1 $ 820.0
25 100.0 $ 4.4 $ 440.0 $ 1,680.0
29 500.0 $ 4.6 $ 2,275.0
Inventory on May (in Dollars): = Total cost purchased on 29, May +Inventory on 25, May = $2275 + $1680 = $3955
P8.3
We know that: Gross profit = Sales - Cost of goods sold; So in this case, increasing
on Gross profit caused by either increasing on Sales or reducing on cost of goods
sold. However, I think that during 2007, Hill's Drug company significantly increased on
sales. With total sales was $ 1,800,000 at average price of $40, they sold 45000 units
to the market more 5000 units than total purchased materials (Purchased $960,000 at
average cost of $24 equals to 40,000 units purchased).
Because of buying faster, more of goods to the market, they reducing the cost for
inventory, increasing on sale (based on the LIFO method), so the company increased the Gross Profit
(Percent on Sale), because of the faster selling and reducing 4000 units inventory in 2006
average cost of $24 equals to 40,000 units purchased).
Because of buying faster, more of goods to the market, they reducing the cost for Advanced Accounting Problem
12/08/2021 Student:
inventory, increasing on sale (based on the LIFO method), LE VIET
so the company increased the Gross Profit Instructors: Dr. Lewis
(Percent on Sale), because of the faster selling and reducing 4000 units inventory in 2006
P8.4 Dollar Value LIFO
On 12/31/06: (base-year)
Item Number of Units Cost per Unit Total Cost

X 200 $ 2.0 $ 400.0
Y 600 $ 4.5 $ 2,700.0
$ 3,100.0
Addition information:
Dec-31
2007 2008
1. Units of X in inventory 300 400
2. Cost of each X unit $ 3.00 $ 3.25
3. Units of Y in inventory 800 1200
4. Cost of each Y unit $ 5.50 $ 6.00
a- Price index for 2007 (Round to 2 decimal places) Price index = EI end-of-year price/EI base-year price
EI cost in 2007 EI cost in 2006 Conversion Price index 2007

Units Unit cost Total Units Unit cost Total
X 200 $ 3.0 $ 600.0 200 $ 2.0 $ 400.0
Y 600 $ 5.5 $ 3,300.0 600 $ 4.5 $ 2,700.0
Total $ 3,900.0 $ 3,100.0 1.26
c- Price index for 2008
EI cost in 2008 (current) EI cost in 2006 (base) Conversion Price index 2008
Units Unit cost Total Units Unit cost Total
X 200 $ 3.25 $ 650.0 200 $ 2.0 $ 400.0
Y 600 $ 6.00 $ 3,600.0 600 $ 4.5 $ 2,700.0
Total $ 4,250.0 $ 3,100.0 1.37
b,d- Inventory on 12/31/2007 & 2008. Label all numbers
EI end-of-year Convert price index EI base-year Changes

2006 $ 3,100.0 1 $ 3,100.00 $ 3,100.00
2007 $ 5,300.0 1.26 $ 4,206.35 $ 1,106.35
2008 $ 8,500.0 1.37 $ 6,204.38 $ 1,998.03
EI end of-year Convert price index EI base-year

12/31/2006 3100 1 3100
12/31/2007 1106.35 1.26 1394
EI 2007 4206.35 4494
12/31/2008 1998.03 1.37 2737.3
EI 2008 6204.38 7231.3
P8.5 Analysis of Errors
AR Inventory AP Sales Cost of goods sold
1. Goods in transit shipped

"f.o.b destination" by supplier
were recorded as a purchase NE U NE NE O
but were excluded from ending
inventory
2. Goods held on consignment

were included in inventory
O NE U O NE
count and recorded as a
purchase
3. Goods in transit shipped

"f.o.b shipping point" were
not recorded as a sale and U O O U U
were included in ending
inventory
4. Goods were shipped and

appropriatetly excluded from
U NE O U NE
ending inventory but sale was
not recorded
P8.6 Accounting for purchase discounts
Net Method For Periodic Systems

Date Account Titles Debit Credit
Purchased date Purchases $ 294,000.00
Account payable $ 294,000.00
[$300,000* (100%-2%)]
The first payment Account payable $ 58,800.00
Cash $ 58,800.00
[$60,000*(100%-2%)]
The second payment Account payable $ 235,200.00
[$294000-$58800]
Purchases Discount Lost $ 4,800.00
[($300,000-$60,000)*2%]
Cash $ 240,000.00
Reporting: Net method Gross method

Beginning Inventory $0.00 Beginning Inventory $0.00
Net Purchases $294,000.00 Net Purchases $300,000.00
Purchase discout lost $4,800.00 Purchase discout $1,200.00

Goods available for sale $298,800.00 Goods available for sale $298,800.00
Less: Less:
Ending Inventory (10% Ending Inventory (10%
purchased) $29,880.00 purchased) $29,880.00
Cost of Goods Sold $268,920.00 Cost of Goods Sold $268,920.00
P8.7 Lower-of-cost-or-market Selling expense: $8 per Unit; Normal profit: $5 per Unit
Selling Upper Replacement Lower Selling Normal Profit

Price Limit Cost Limit Cost Expense
LCM
a $54 $46 $38 $41 $43 $8 $5
b $47 $39 $36 $34 $40 $8 $5
c $56 $48 $39 $43 $40 $8 $5
d $47 $39 $42 $34 $40 $8 $5
* Upper limit = selling price - selling cost

* Lower limit = Upper limit - normal profit
LCM RP Cost NRV (ceiling) MRV-NP (floor) Designated market value Cost LCM
a $38 $46 $41 $41 $43 $41
b $36 $39 $34 $36 $40 $36
c $39 $48 $43 $43 $40 $40
d $42 $39 $34 $39 $40 $39
LCM = min(Designated market value and Cost)
P8.8 Original Net Net realizable Appropriate (10% SP) (30% SP)
Cost Replacement Realizable Value Less Inventory Disposal Normal
Item Per Unit Cost Value Normal Profit Value Selling Price Cost Profit
A $0.65 $0.45 $0.90 $0.60 $0.60 $1.00 $0.10 $0.30
B $0.45 $0.40 $0.90 $0.60 $0.45 $1.00 $0.10 $0.30
C $0.70 $0.75 $0.90 $0.60 $0.70 $1.00 $0.10 $0.30
D $0.75 $0.65 $0.90 $0.60 $0.65 $1.00 $0.10 $0.30
E $0.90 $0.85 $0.90 $0.60 $0.85 $1.00 $0.10 $0.30
On 12/31/06
Cost inventory $4,100.00
Market inventory $2,800.00
On 12/31/07
Inventory Units 1000 (each item)
a- Prepare the entry at 12/31/06

Using contra account
Inventory $4,100.00
Cost of Goods sold $4,100.00
Loss due to market decline of inventory $1,300.00

[$4,100-$2,800]
Allowance to reduce inventory to market $1,300.00
[a contra-inventory account]
c-Prepare the entries at 12/31/07
Item Cost Market Loss

A $650.00 $600.00 $50.00
B $450.00 $600.00
C $700.00 $750.00
D $750.00 $650.00 $100.00
E $900.00 $850.00 $50.00
Total $3,450.00 $3,450.00
For the items
Inventory on A item $650.00

Inventory on B item $600.00
Inventory on C item $750.00
Inventory on D item $750.00
Inventory on E item $900.00
Cost of goods sold A $650.00

Cost of goods sold B $600.00
Cost of goods sold C $750.00
Cost of goods sold D $750.00
Cost of goods sold E $900.00
Loss due to market decline of inventory A $50.00

Loss due to market decline of inventory D $100.00
Loss due to market decline of inventory E $50.00
Allowance to reduce inventory A $50.00

Allowance to reduce inventory D $100.00
Allowance to reduce inventory E $50.00
Total
Cost of goods sold $3,450.00
Inventory $3,450.00
d- Inventory losses are disclosed on the income statement

Because we need to estimate the value of inventory at present and it affected to Net income account throught the cost of goods sold
account.
P8.10 Gross profit method
Date Account
Mar-01 Inventory $84,000.0
Mar-11 Purchases $63,000.0
Total Goods available for sales (cost) $147,000.0
Sales (at selling price) $120,000.0
Less Gross Profit (50% cost) -$60,000.0
Sales at cost -$60,000.0
Mar-11 Ending inventory at the end of the day $87,000.0
Less (the theft loss) -$27,000.0
Mar-12 Beginning Inventory at the morning $60,000.0
P8.11
1. E
Because cost or market applied to individual items will always be as low as, and usually lower than, cost
or market applied to the inventory as a whole. Thus the reported value of catagoties of inventory items
is as equal as or lower then that of the inventory as a whole
2. C
Because using the moving average methods, the ending inventory is always higher than LIFO method
3. E
Because the markdown cancellation is upward price adjustment that is offset again a formar markdown
after the goods have been marked down temporarily.
4. C
Based on inventory methods, the reported value of inventory using LIFO is always lower than that using
FIFO method. That is why the FIFO method brings the higher gross profit compared to LIFO method
5. B
P8.12
Vancey company data
At cost At retail
Inventory, February 1, 2006 $70,800 $98,500
Markdowns 35,000
Markups 63,000
Markdown cancellations 20,000
Markup cancellations 10,000
Purchases 219,500 294,000
Sales 345,000
Purchases returns and allowances 4,300 5,500
Sales returns and allowances 10,000
Compute the ending inventory at cost as of January 31, 2007 using the retail method which
approximates lower of cost or market. Your solution should be in good form with amounts clearly
labeled
Solution:
At cost
Beginning inventory 70800
Purchases 219500
Less purchases returns and allowances 4300
+Net purchases 215200
Total 286000
At retail
Beginning inventory 98500
Purchases 294000
Less purchases returns and allowances 5500
+Purchases 288500
Markups 63000
Less markups cancellations 10000
+Net retail price increases 53000
Markdowns 35000
Less markdowns cancellations 20000
-Net retail price decreases -15000
Total retail value of goods available for Sales 425000
Sales 345000
Less sales returns and allowance 10000
Total retail value of goods sold 335000
Ending inventory at retail 90000
Cost-to-retail ratio = 286000/(98500+288500+53000) = 65%
Ending inventory at cost = 65% *90000 = 58500
Cost of goods sold = 286000 - 58500 = 227500
*Note: The above ratio is referred to as a "Lower of Cost or Market" approach because it results in a smaller valuation of Ending Inventory and a larger figure for Cost of Goods Sold.
That is why the net markdowns are not included in the denominator
P8.13
Determine the approximate valuation of the final inventory by the dollar-value, LIFO-retail method
The records of Evans Stores provided the following data for the year:
Cost Retail Ratio
(Base) Inventory, January 1 $155,000 $250,000
Net purchases 830,800 1,318,000
Freight-in 14000
Net markups _ 8,000
Net markdowns -6,000
Goods available $999,800 1,570,000 63.68%
Sales -1,240,000
Inventory at retail 330,000
Inventory at retail in current year at price index 110 300000
Total inventory at 63.68% cost ratio 191040
P8.14
Horne Book Store uses the conventional retail method and is now considering
converting to the LIFO retail method for the period beginning 1/1/07. Available
information consists of the following:
2006 2007
Cost Retail Cost Retail
Inventory 1/1 $12,500 $22,500 $ ? $ ?
Purchases (net) 250,000 347,500 245,000 345,000
Net markups — 5,000 — 10,000
Net markdowns — 2,500 — 5,000
Sales (net) — 309,000 — 311,000
Loss from breakage — 500 — -0-
Applicable price index — 100 — 110
(a) Prepare the journal entry to convert the inventory from the conventional retail to the LIFO retail
method. Show detailed calculations to support your entry.
(b) Prepare a schedule showing the computation of the 12/31/07 inventory based on the LIFO retail method as adjusted for fluctuating prices. Without
prejudice to your answer to (a) above, assume that you computed the 1/1/07 inventory (retail value $49,000) under the LIFO retail method at a cost of
$34,000.
Solution
a. The ending inventory 12/31/06 using the LIFO retail method as follows:
Cost Retail Ratio
Inventory 1/1/06 $12,500 $22,500
Purchases (net) 250,000 347,500
Net markups _ 5000
Net markdowns -2,500
Goods available $262,500 372,500 70.47%
Sales (net) -309,000
Loss from breakage -500
Inventory 12/31/06 at retail $63,000
Inventory 12/31/06 at LIFO ($63,000 × 70.47%) $44,396
Journal entries to convert the inventory from the conventional retail to the LIFO retail method:
Inventory account
LIFO reserve 296
Account payable 296
Convert from LCM to LIFO method
b. Compute the 12/31/07 inventory based on LIFO retail method as adjusted

Cost Retail Ratio
Inventory 1/1/07 $34,000 $49,000 69.39%
Purchases (net) 245,000 345,000
Net markups — 10,000
Net markdowns — -5,000 70.00%
Goods available $279,000 399,000
Sales (net) -311,000
Loss from breakage 0
Inventory 12/31/07 at retail $88,000
Price index 2007 is 110

Computation of inventory for the year 2007 as follows:
Inventory at retai88000/1.10 = $80,000
Beginning inventory $49000 at 100 price index at 69.39% cost ratio = $34,000
New layer $31000 at 110 price index at 70% cost ratio = $23,870
Total inventory = 34000+23870 = $57,870
Student: LE VIET
12/08/2021 Instructor: Dr. LEWIS
ASSIGNMENT MODULE 10
Problem 10.1 - Entries for bad debt expense
Accounts Debit Credit

Account receivable 100000
Allowance for doubtful accounts 2500
Sales (all on credit) 750000
Sales returns and allowances 40000
a.
(1) Doubtful accounts = 6% Gross AR
Debit
Gross account receivable $100,000
Rate 6%
Doubtful accounts (AP*Rate) $6,000
Allowance for doubtfull accounts -$2,500 (*)
Bad debt expense estimated $3,500

Allowance for doubts accounts $3,500
(2) Doubtful accounts = 1% Net Sales

Credit
Sales $750,000
Sales returns and allowances -$40,000
Net Sales $710,000
Rate 1%
Doubtful accounts (1%*Net Sales) $7,100

b.
(Allowance for doubtful accounts (debit $2500)
Debit
Gross account receivable $100,000
Rate 6%
Doubtful accounts (AP*Rate) $6,000
Allowance for doubtfull accounts $2,500 (*)

Because Net Sale ignored the allowances for bad debt so the entry would not change
under the percentage of sales method, if fail, it will be adjust the percentage rate in
future estimates(when we change allowance for doubtful accounts from credit account to
debit account)
Problem 10.2 - Accounts receivable assigned

Debit Credit
a. Account receivable $500,000
Charged Rate 3%
Finance Charge (3% on account receivale) $15,000
Note Payable $425,000
10
Student: LE VIET
Cash $410,000
b. Debit Credit
Cash $200,000
Discounts $450
Assigned account (allowances) $530
Account Payable $200,980
c. Debit Credit
Notes payable $200,000
Interest expense (12% Loan /12 months) $4,250
Cash (paid) $204,250
Problem 10.3 - Factoring Accounts Receivable
a. Prepare the Journal entry required on Carter's books on May 1

Debit Credit
Account receivable $800,000
Due from Factor (2% AR factored) $16,000
Loss on sale of receivable (6% AR factored) $48,000
Cash $736,000
b. Journal entry required on Rapid Finance's books on May 1

Debit Credit
Account receivalbe $800,000
Due to Carter (2%) $16,000
Financing Revenue $48,000
Cash $736,000
c. Prepare the Journal entry required on Carter's books on May 1

Debit Credit
Account receivable $800,000
Recourse liability $14,000
Due from Factor (2% AR factored) $16,000
Loss on sale of receivable (6%+Recourse Receivable) $62,000
Cash $736,000
Problem 10.4 - Bank Reconciliation
MARCH 31 BANK RECONCILIATION
Balance per bank $26,746

Add: Deposits in transit $2,100
Deduct: Outstanding checks -$3,800
Balance per books $25,046
Month of april results

Per bank Per books
Balance April 30 $27,995 $28,855
April Deposits $10,784 $13,889
April Checks $11,600 $10,080
April note collected (not included in April Deposits) $3,000 $0
April bank service charge $35 $0
April NSF check of a customer returned by the bank
(recorded by bank as a charge) $900 $0
a. Calculate the amount of the April 30
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Student: LE VIET
(1) Deposits in transit
Deposits per books April $13,889

Deposits per bank April $10,784
Deposits in transit March -$2,100
Less: Actual deposit per bank April $8,684
Deposit in transit April $5,205
(2) Outstanding checks
Checks per books April $10,080

Checks per bank April $11,600
Outstanding Checks -$3,800
Less: Actual Checks April $7,800
Outstanding Checks $2,280
b.
APRIL 30 BANK RECONCILIATION

Add: Deposits in transit $5,205
Deduct: Outstanding checks -$2,280
APRIL 30 BANK RECONCILIATION

Add: Interest collected $3,000
Deduct: Bank service charge $35
Deduct: NSF checks $900
Problem 10.5 - Payroll entries
a.
Wages and Salaries paid for employees to $90,000 = $920,000-$160,000=$760,000
Wages and salaries paid for employees over $90,000 = $160,000
Taxes for Wages and Salaries expense = $760,000*7.65% + $160,000*1.45%=$60,640
Wages and Salaries expense $920,000

Withholding taxes payable $225,000
F.I.C.A taxes payable $60,640
Cash $634,360
b.
Payroll tax expense $64,640
F.I.C.A taxes payable $60,640
Federal Unemployment taxes payable 1600
State unemployment taxes payable 2400
(Note: a person who earn less than $7000 is counted as in unemployments)
Problem 10.6 - Contingent liabilities
(1) Rooney Co. should introduce its problem in the notes to the financial statement the existence of a possible contingent
liability related to the law suit. It will involve the possible loss and separate it from anothers because the loss is not probable
(2) The probable award should be accrued by a charge to an estimated loss and a credit to an estimated liability of 12
$600,000. Early Co. should disclose the following in the notes to the financial statements: the amount of the suit, the nature
of the contingency, the reason for the accrual, and the range of the possible loss.
Student: LE VIET
(2) The probable award should be accrued by a charge to an estimated loss and a credit to an estimated liability of
$600,000. Early Co. should disclose the following in the notes to the financial statements: the amount of the suit, the nature
of the contingency, the reason for the accrual, and the range of the possible loss.
The accrual is made because it is probable that a liability has been incurred and the amount of the loss can be reasonably
estimated. The lowest amount of the range of possible losses is used when no amount is a better estimate than any other
amount.
(3) Peete should not record the gain contingency until it’s realized. Usually, gain contingencies are neither accrued nor
disclosed. The $1,000,000 gain contingency should be disclosed only if the probability that it will be realized is very high.
Problem 10.7 Refinancing of short-term debt
Current liabilities:
Devidends payable on common stock $60,000
Notes payable to Admire State Bank $470,000 (not intent to refinance)
Currently maturing portion of Serial bonds $250,000
Total Current liabilities $780,000
Long-term Debts:
Note payable to Third National Bank $300,000 intent to refinance (*)

Serial bonds not maturing currently $750,000
Total long-term debts $1,050,000
Total Liabilities: $1,830,000
Note (*): On January 26, 2007, the corporation issued 40,000 shares of common stock and received of $350,000, of which
$300,000 was used to liquidate a note payable that matured on January 27,2007. This note payable will be refinanced and
classified as long-term debt at December 31 2006 because it was paid along with issueing 40,000 shares (gain $350,000)
in 2007.
Problem 10.8 - Premiums

2006 2007
Coffee mugs purchased 720,000 800,000
Candy bars sold 5,600,000 6,750,000
Wrappers redeemed 2,800,000 4,200,000
2006 wrappers expected to be redeemed in 2007 2,000,000
2007 wrappers expected to be redeemed in 2008 2,700,000
a. Journal entries in 2006 and 2007

Journal entries in 2006
Inventory of premium Mugs $648,000
Cash $648,000
(720,000*$0.9=$648,000)
Cash $2,800,000
Sales $2,800,000
(5,600,000*$0.5 = $2,800,000)
Cash $112,000
Premium expense $140,000
Inventory of premium mugs $252,000 (*)
(*)
Total numbers premium mugs will be: Wrappers redeemed / 10 = 2,800,000/10 =280,000
Credit on inventory Premium mugs: 280,000* $0.9 = $252,000
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Student: LE VIET
Cash received: 280,000 * ($1-$0.6) = $112,000

Estimated Liability for Premiums (1) $100,000 (*)
(*)
Total numbers premium mugs estimated: Wrappers redeemed / 10 = 2,000,000/10 =200,000
Credit on inventory Premium mugs: 200,000* $0.9 = $180,000
Cash received: 200,000 * ($1-$0.6) = $80,000
Premium expense = $180,000-$80,000 = $100,000
Journal entries in 2007

Inventory of premium Mugs $720,000
Cash $720,000
(800,000*$0.9=$720,000)
Cash $3,375,000
Sales $3,375,000
Cash $168,000
Estimated Liability for Premiums (1) $100,000
Inventory of premium mugs $378,000

Estimated Liability for Premiums (1) $135,000
b. Balance sheet and income statement
Balance Sheet for 2006 and 2007

Accounts Class 2006 2007
Inventory of Premium on Mugs Current Asset $396,000 $738,000
Estimated liability for Premiums Current Liability $100,000 $135,000
(inventory 2007 = inventory 2006 + purchased 2007 - used 2007)
Income statement for 2006 and 2007

Accounts Class 2006 2007
Premium expenses Operating expenses $240,000 $245,000
Problem 10.9 - Warranties
2006
sold Cost per unit Liability for warranties

700 1500 1050000 31500
Actual
28000
a. the entries (accrual method) for 2006 and 2007

2006
Cash 1050000
Sales 1050000
Warranty expense 63000

Warranty liability estimated 63000
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Student: LE VIET
2007
Warranty liability estimated 28000
Inventory 10000
Accrued payroll 18000
b. Warranty expenses for 2006 and 2007
In 2006, all sales occur at December 31,2006 so they did not pay any money for warranty
In 2007, they acctually paid $28,000 for warranties (on Cost and Labor)
c. Current liability of warranty in 2006 balance sheet will be $31,500 (should be paid in next one year)
15
Chapter 13 Stockholders' Equity
Problem 13.1 Lump sum issuance of stock

a,
Number Amount Total Percent
Common stock 2,000.0 $30.0 $60,000.0 0.75
Preferred stock 400.0 $50.0 $20,000.0 0.25
Fair market value = $80,000.0 1
Allocation:
Common Preferred
Issue price $72,000.0 $72,000.0
(x) Allocation % 0.75 0.25
Total $54,000.0 $18,000.0
Journal entry:
Cash $72,000.0
Common stock (2,000 * $5) $10,000.0
Additional paid-in capital of common stock $44,000.0
Preferred stock (400 * $40) $16,000.0
Additional paid-in capital of preferred stock $2,000.0
b,
Number Amount Total
Common stock 2,000.0 $25.0 $50,000.0
Preferred stock 400.0 $0.0 $0.0
Fair market value = $50,000.0
Allocation: common preferred

issue price $72,000.0
common -$50,000.0
Total $50,000.0 $22,000.0
Journal entry:
Cash $72,000.0
Common stock (2,000 * $5) $10,000.0
Additional paid-in capital of common stock $40,000.0
Preferred stock (400 * $40) $16,000.0
Additional paid-in capital of preferred stock $6,000.0
Problem 13.2 Treasure stock
Camby Corporation's balance sheet reported the following:
Capital stock outstanding, 5000 shares,par $30 per share $150,000.0

Paid in capital in excess of par $80,000.0
Retained earnings $100,000.0
Total $330,000.0
a, Treasury stock (120 shares, $60 per share) $7,200.0
Cash (purchase) $7,200.0
b, Cash (sell) $5,850.0
Treasury stock $5,400.0
Paid in capital from treasury stock (Gain) $450.0
c, Cash (sell) $1,500.0
Paid in capital from treasury stock (loss) $300.0
Treasury stock $1,800.0
Accrual:
Cash $150.0
Paid in capital from treasury stock $150.0
Problem 13.3 Stockholders' Equity

Increase Decrease No Effect
1. Treasury stock is resold at more than cost x
2. Operating loss for the period x
3. Retirement of bonds payable at more than book value x
4. Declaration of a stock dividend x
5.Acquisition of machinery for common stock x
6. Conversion of bonds payable into common stock x
7. Not declaring a dividend on cumulative preferred stock x
8. Declaration of cash dividend x
9. Payment of cash dividend x
Problem 13.4 Equity transactions
2 Land $300,000
Common stock ($5 Stated value, 8000 shares) $40,000
Paid in Land capital from common stock $260,000
3 Cash $600,000
Preferred stock ($100 per share; 5,000 shares) $500,000
Paid in capital from preferred stock $100,000
4 Organization expenses $6,000
Common stock ($5 per share; 100 shares) $500
Paid in capital from common stock $5,500
Problem 13.5 Treasury stock transactions
Cash $290,000
Common stock $250,000
Paid in capital in excess of par $40,000
a, Treasury stock ($62 per share, 300 shares) $18,600

Cash $18,600
b, Cash ($60 per share, 80 shares) $4,800
Paid in capital from treasury stock $160
Treasury stock $4,960
c, Cash ($68 per shares, 40 shares) $2,720
Accural:
Cash $11,080
Problem 13.6 Stock dividends
Stockholders' equity at December 31, 2006

Common stock, $5 par value; authorized, 2,000,000 shares;
issued, 400,000 shares $2,000,000
Retained earnings $3,000,000
$5,850,000
Jan. 05 Cash $80,000

Common stock (sold 10,000 shares) $50,000
Jan. 16 Retained earning $82,000

Dividend payable $82,000
Feb. 05 No entry
Feb. 10 Cash $240,000

Common stock (sold 20,000 shares) $100,000
Feb. 15* Dividend payable $82,000

Cash $82,000
*. (paid cash for dividends)
Mar. 01 (Declare) Retained earning $645,000

Common stock dividend distributable
(Issue) Common stock dividend distributable $645,000
Common stock
Apr. 1 No entry
(Par value $2.5; issued commond stock = 1,118,000 (=2*1.3*(400,000+10,000+20,000))
Jul. 1 (Declare) Retained earning $1,677,000

Common stock dividend distributable
Paid in capital
(Issue) Common stock dividend distributable $419,250
Common stock
Aug. 1 Retained earning $257,140

Dividend payable $257,140
Aug. 21 No entry
Sep. 1 Dividend payable $257,140
cash $257,140
Problem 13.7 Equity transactions
6% preferred stock; $50 par value; 20,000 shares authorized

6,000 shares issued and outstanding $300,000
Common stock, $10 par value; 60,000 shares authorized
40,000 shares issued and outstanding $400,000
Total paid in capital $810,000
Retained earnings $440,000
Total stockholders' equity $1,250,000
a, 1 Retained earning $90,000

Dividends payable - preferred (6%) $18,000
Dividends payable - common $72,000
2 Retained earning $72,000
Common stock dividend distributable $40,000
3 Net income $150,000
Retained earning $70,000
Retained earnings for plant expansion $70,000
b, Paid in capital: $810,000

Common stock dividend distributable $40,000
Total paid in capital $882,000
Retained earning for cash dividend payable -$90,000
Retained earning -$72,000
Retained earnings (Net income) $150,000
Total retained earnings $428,000
Total shareholders' equity $1,310,000
Problem 13.8 Dividends on preferred and common stock
a, Common Preferred Total

Preferred in current year $64,000 $64,000
Common $424,000 $424,000
$64,000 $424,000 $488,000
b, Common Preferred Total

Preferred cumulate for two years $128,000 $128,000
Preferred in current year $64,000 $64,000
Remainder to common $296,000 $296,000
$192,000 $296,000 $488,000
c, Common Preferred Total

Current year dividend $64,000 $96,000 $160,000
Participating dividend 10% $80,000 $120,000 $200,000
$272,000 $216,000 $488,000
In current year (Preferred =$64.000; common =(1,200,000/800,000)*$64,000)
Participating dividend (Preferred =200,000 shares ($200,000/$10) divided by total shares =2,000,000)
d, Common Preferred Total

Current year dividend $64,000 $96,000 $160,000
Participating dividend 4% $32,000 $48,000 $80,000
Remainder to common $120,000 $120,000
$224,000 $264,000 $488,000
$645,000
$645,000
$419,250
$1,257,750
$419,250
MBA 6692
STUDENT: LE VIET
12/08/2021 ADVANCED ACCOUNTING PROBLEM
INSTRUCTOR: Dr LEWIS
Problem 9.1 - Plant asset accounting
2006 2007
Net book Value of Plant Assets 2006 Net Net book Value of Plant 2007 Net
at 12/31/2006 Income Assets at 12/31/2007 Income
Transactions
1. The cost of installing a new computer system in 2006

was not recorded in 2006. It was charged to expense in U O U U
2007
2. In 2007 clerical workers were trained to use the new

computer system at a cost of $15,000, which was
NE NE O O
erroneously capital-ized. The Cost is to be written off over
the expected life of the new computer system.
3. A major overhaul of factory machinery in 2006, which

extended its useful life by 5 years, was charged to NE NE NE NE
accumulated depreation in 2006
4. Interest cost qualifying for capitalization in 2006 was

U U U O
charged to interest expense in 2006
5. In 2006 land was bought for an employee parking lot.

The $2,000 title search fee was charged to expense in U U U NE
2006.
6. The cost of moving several manufacturing facilities from

metropolitan locations to suburban areas in 2006 was
NE NE NE NE
capitalized. The cost was written off over a 10-year period
beginning in 2006
Problem 9.2 Nonmonetary exchange
On 31/12/2006
Accumulated Annual
FV Cost Depreciation Depreciation
Old Machine $80,000.0 $40,000.0 $16,000.0
On 1/4/2007
Accumulated
Boot Paid FV BV Depreciation Loss
Old Machine $64,000.0 $32,000.0 $36,000.0 $44,000.0 $4,000.0
($40,000+$4,000)
New Machine $96,000.0
Cash = FV (new Machine)- FV (old Machine) = $96,000-$32,000=$64,000
Entry
New machine $96,000.0 (FV receipt)
Accumulated depreciation $44,000.0
Loss on Disposal $4,000.0
Old Machine $80,000.0
22
MBA 6692
STUDENT: LE VIET
Cash $64,000.0
Or
New machine $100,000.0 (BV+Boot value)
Accumulated depreciation $44,000.0
Old Machine $80,000.0
Cash $64,000.0
Problem 9.3 Donated assets
Entry by Perez for the receip of the properties
Account Debit Credit

Property (land) $490,000.0
Warehouse(building) $980,000.0
Contribution Revenue $1,470,000.0
Problem 9.4 Capitalizing & Expensing
1, b 6, a
2, c 7, b
3, a 8, a
4, e 9, e
5, a 10, d
Problem 9.5 Capitalization of interest
1. Weighted - Average
Capitalization accumulated
Date Expenditure Period Expenditures
Jun-01 $3,600,000 7/12 $2,100,000
Aug-31 $5,400,000 4/12 $1,800,000
Dec-31 $4,500,000 0 $0
$13,500,000 $3,900,000
Expenditures = Expenditure * period
2. Weighted Average
Avoidable interest
Expenditures Interest rate Interest
$3,100,000 9% $279,000 (Less than Note payable <$3,200,000)
$800,000 12% $96,000 (Greater than outstanding debt>$750,000)
$3,900,000 $375,000
3. Actual interest incurred during 2007
Actual interest
Expenditure Period Interest rate Interest
$3,200,000 7/12 9% $168,000
$750,000 12% $90,000
$19,416,667 $258,000
The interest cost to be capitalized is $258,000 during 2007
1-Jun 31-Aug 31-Dec
Work (started)
750
3200000
Difference long term debt (take it first, more than longterm debt)
Payment 3600000 5400000 900000 4500000
14400000
Problem 9.6 Calculate depreciation
a. straight-line for 2006
23
MBA 6692
STUDENT: LE VIET
On April 1, 2006
Cost Salvage Value Life time
Machine $500,000 $50,000 8
Total depreciation (8 years) = cost - salvage =$500,000-$50,000=$450,000
Depreciation for one year = total depreciation/period = $450,000/8=$56,250
Depreciation for 2006 = $56,250*3/4 = $42,188
b. Double declining balance for 2007

(No deduct the salvage value)
Twice straight line rate (2*1/8 = 0.25) times the net book value at beginning of each year:
The DDB for 2006 = $500,000*(2/8)*(3/4) = $93,750
The beginning book value in 2007 = $500,000-$93,750 = $406,250
The DDB for 2007 = 0.25* $406,250=$101,563
c. Sum-of-the-years'-digits for 2007
The total depreciation for 8 years: $450,000
Sum of each year digits for 2007 Digits

2006 $25,000 (*) 8/36
2007 $65,625 (**) 7/36
$90,625
(*) one a fouth of the depreciation in 2007 is pushed to 2006 (to fufill balance in 2006)
Fufill = Depreciation for 2006 * 1/4 = $450,000*8/36*1/4 = $25,000
(**)
The last of depreciation for 2007 will be 3/4 of its
the last parts = depreciation for 2007 * 3/4 = $450,000*7/36*3/4=$65,625
Problem 9.7 Depletion allowance
Item Cost Salvage Depletion base Tons Per Ton

Ore $5,600,000.0 $200,000.0 $5,400,000.0 $2,000,000.0 $2.7
Building and Equipment $2,800,000.0 $0.0 $2,800,000.0 $2,000,000.0 $1.4
Labor and Operating Expense $450,000.0 $750,000.0 $0.6
Total Cost $4.7
Depletion base = Cost - Salvage value
Problem 9.8 Carrying value of patent
Fehr Co.
Fair value
Cost of patent at July 1,2004 $180,000.0
(less) Depreciation from July 1,2004 to July 1,2007 -$27,000.0 (amortization)
Carrying value at July 1,2007 $153,000.0
(added) Cost of successful defense $51,000.0
Carrying value $204,000.0
(less) Depreciation from July 1,2004 to December 31,2007 $6,000.0
Carrying value at 12/31/2007 $198,000.0
Problem 9.9 Acquisition of tangible and intangible assets
We have, the total owners equities are: common stock + retained earnings = $800,000+$835,000=$1,635,000
Find out the goodwill
24
MBA 6692
STUDENT: LE VIET
Purchase price $2,100,000

Less tangible net assets acquired:
Paid to previous owners $1,635,000
Inventory increasing $75,000
Plant assets increasing $200,000
Total Fair market value: $1,910,000
Goodwill $190,000
Problem 9.10 Intangible assets
Transaction
On Date of transaction On December 31,2007
1
Franchise $250,000 None needed
Cash $250,000
2
Developing expense $300,000 None needed
Cash $300,000
3
legal and registration cost $60,000 Amortization expense $6,000
Cash $60,000 Patent $6,000
4
Defending patent expense $96,000 Amortization expense $24,000
Cash $96,000 Patent defense $24,000
5
Patent defense exp $240,000 None needed
Cash $240,000
6 Developing expense $52,000 None needed

Cash $52,000
Problem 9.11 Goodwill, imprairment
a.
Goodwill = fair value of the division - fair value of the identifiable assets
($3,200,000-$2,700,000=$500,000)
b.
No impairment loss is recorded due to fair value ($1,900,000) is greater than carrying value ($1,800,000)
c.
Fair value of division (Eaton) $1,700,000
Carrying value (present book value) of division $1,800,000
Increase in fair value of Pro,Pla,Equi $200,000
Goodwill -$500,000
-$1,500,000
Implied value of goodwill $200,000
Less Goodwill -$500,000
Loss on impairment -$300,000
Loss on impairment $300,000

Goodwill $300,000
25
MBA 6692
STUDENT: LE VIET
(wrong
account
but not
affected)
26
Chapter 14 - Investment
Problem 14.1 Trading equity securities
a, TRADING DEBT SECURITY PORTFOLIO

DECEMBER 31, 2007
Investments Cost Fair value
5,000 shares of Milner Corp., Common $155,000 $139,000
10,000 shares of Eddy, Common $182,000 $190,000
Total of portfolio $337,000 $329,000
Previous securities fair value adjustment balance
Securities fair value adjustment - Cr
The 2007 Adjusting Entry:
Unrealized holding gain or loss - income $8,000

Securities fair value adjustment (trading) $8,000
b, Cash (*) $153,500

Fees (loss on sale of securities) $1,500
Trading securities $155,000
(* - cash = 5,000 shares *$31 - $1,500 fees = $153,500)
c, Trading securities $27,000
Gain on trading securities $550
Cash $27,550
d,
TRADING DEBT SECURITY PORTFOLIO
DECEMBER 31, 2008
10,000 shares of Eddy, Common $182,000 $195,500
600 shares of Yount Stores, Common $27,550 $25,500
Previous securities fair value adjustment balance -Cr
Securities fair value adjustment - Dr
d Securities fair value adjustment (trading) $19,450

Problem 14.2 Trading equity securities
a,
Unrealized holding gain or loss 2008 - Cr (30000)
Unrealized holding gain or loss 2007 - Dr 10000
Unrealized holding gain or loss 2006 - Cr (25000)
Balance at 12/31/2008 - Cr (45000)
b, Transactions in 2009
1. Sold 5,000 shares of AGH for $170,000
Cash $170,000
2. Acquired 1,000 shares of Norton Common for $40 per share, Brokerage commissions totaled $1,000

Cash $41,000
TRADING DEBT SECURITY PORTFOLIO

DECEMBER 31, 2009
10,000 shares of AGH Common $300,000 $280,000
2,000 shares of Del preferred $210,000 $220,000
100 bonds of Pratt Convertible bonds $115,000 $102,000
1000 shares of Norton Common $41,000 $42,000
Previous securities fair value adjustment balance -Cr
Securities fair value adjustment - Dr
Securities fair value adjustment (trading) 23000

Unrealized holding gain or loss - income 23000
Problem 14.3 Available for sale equity securities
1,
Pison company Common Stock
Jul-26 Simpson Corp. had 4400 shares at the costs of $220,000 on 26 July
Cost per shares for Pinson common stock will be = $220,000/4400=$50
Sep-28 (Sold 400 shares of Pinson Company common stock)

Cash $28,000
Available for sale securities $20,000
Gain on sale of trading securities $8,000
Entry made
Cash $28,000
Available for sale securities-Cr $28,000
Adjusting entry for entry made
Available for sale securities $8,000

Gain on sale of trading securities $8,000
Watts Inc., Common Stock
Oct-28 (received cash dividend of $1.2 per share)

Cash $24,000
Dividend revenue $24,000
Entry made
Cash $24,000
Available for sale of securities $24,000
Adjusting entry for entry made
Available for sale of securities $24,000

Dividend revenue $24,000
2, AVAILBLE FOR SALE EQUITY SECURITY PORTFOLIO AS OF

DECEMBER 31, 2007
4,000 shares of Pinson Company Common Stock $200,000 $296,000
20,000 shares of Watts Inc., Common Stock $800,000 $640,000
Total of Portfolio ### $936,000
Previous securities fair value adjustment balance
Securities fair value adjustment - Cr
The 2009 adjusting entry
Unrealized holding gain or loss - equity $64,000

Securities fair value adjustment -Cr $64,000
Problem 14.4 Fair value and equity methods
(a) Fair value method (b) Equity Method

Transactions Investment Dividend Investment Investment
Account Revenue Account Revenue
1. At the beginning of year 1, Maxey bought

30% of Linden's common stock at its book
$240,000 $240,000
value. Total book value of all Linden's
common stock was $800,000 on this date
2. During year 1, Linden reported $60,000

$18,000
of net income and paid $30,000 of $9,000 $18,000
($9,000)
dividends
3. During year 2, Linden reported $30,000

$9,000
of net income and paid $40,000 of $12,000 $9,000
($12,000)
dividends
4. During year 3, Linden reported a net loss ($3,000)

$1,500 ($3,000)
of $10,000 and paid $5,000 of dividends ($1,500)
5. Indicate the year 3 ending balance in the

investment account and cumulative totals
$240,000 $22,500 $241,500 $24,000
for year 1,2 and 3 for dividend revenue and
investment revenue
Problem 14.5 Investment in equity securities
Case I. At the end of last year, the company would have recognized an unrealized holding loss and
recorded a Securities Fair Value Adjustment (Trading securities). At the end of the current year, the
company would record an unrealized holding gain that would be reported in the other revenue and gains
section. The adjustment account would now have a debit balance.
Case II. When the decline in value is considered to be other than temporary, the loss should be
recognized as if it were realized and earnings will be reduced. The fair value becomes a new cost basis.
Unrealized Gain (loss)
-$16,000
$8,000
-$8,000
$0
-$8,000

$13,500
-$2,050
$11,450
-$8,000
$19,450
-$20,000
$10,000
-$13,000
$1,000
-$22,000
-$45,000
$23,000
OF
Unrealized gain (loss)

$96,000
-$160,000
-$64,000
$0
-$64,000

Assingments For MODULE 08: P8.1 Flynt 'S Inventory Record For Product X

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Advanced Accounting Problem

12/08/2021 Student: LE VIET

Assingments for MODULE 08

A physical inventory on March 31, 2007, shows 2,500 units on hand

a - using FIFO method (Cost = Units * Unit Cost)

b - using LIFO method

c - Weight - average Wa= (BI cost+Total Purchased cost)/(Total Units)

P8.2 Transaction on May

Balance Purchase (Inventory) Sale

P8.4 Dollar Value LIFO

Item Number of Units Cost per Unit Total Cost

EI cost in 2007 EI cost in 2006 Conversion Price index 2007

c- Price index for 2008

b,d- Inventory on 12/31/2007 & 2008. Label all numbers

EI end-of-year Convert price index EI base-year Changes

EI end of-year Convert price index EI base-year

P8.5 Analysis of Errors

AR Inventory AP Sales Cost of goods sold

1. Goods in transit shipped

2. Goods held on consignment

3. Goods in transit shipped

4. Goods were shipped and

P8.6 Accounting for purchase discounts

Net Method For Periodic Systems

Reporting: Net method Gross method

Purchase discout lost $4,800.00 Purchase discout $1,200.00

Selling Upper Replacement Lower Selling Normal Profit

* Upper limit = selling price - selling cost

LCM = min(Designated market value and Cost)

a- Prepare the entry at 12/31/06

Loss due to market decline of inventory $1,300.00

c-Prepare the entries at 12/31/07

Item Cost Market Loss

For the items

Inventory on A item $650.00

Cost of goods sold A $650.00

Loss due to market decline of inventory A $50.00

Allowance to reduce inventory A $50.00

d- Inventory losses are disclosed on the income statement

b. Compute the 12/31/07 inventory based on LIFO retail method as adjusted

Price index 2007 is 110

Problem 10.1 - Entries for bad debt expense

Accounts Debit Credit

Bad debt expense estimated $3,500

(2) Doubtful accounts = 1% Net Sales

Bad debt expense estimated $7,100

Bad debt expense estimated $8,500

Problem 10.2 - Accounts receivable assigned

Problem 10.3 - Factoring Accounts Receivable

a. Prepare the Journal entry required on Carter's books on May 1

b. Journal entry required on Rapid Finance's books on May 1

c. Prepare the Journal entry required on Carter's books on May 1

Problem 10.4 - Bank Reconciliation

MARCH 31 BANK RECONCILIATION

Balance per bank $26,746

Month of april results

a. Calculate the amount of the April 30

Deposits per books April $13,889

(2) Outstanding checks

Checks per books April $10,080

APRIL 30 BANK RECONCILIATION

Balance per bank $27,995