TRƯƠNG CAO THIỆN – 2053456

Chapter 2:

2.21.

+ Johnson company:
A/P = L/B + A/R + Cash - M/P - OE = 12000
+ Best company:
L/B= A/P + M/P + OE - A/R - Cash = 40400
+ Coury company:
OE = L/B + A/R + Cash - M/P - A/P = 43000

2.25.

1 7
2 8
3 9
4 10
5 11
6

Owners’equity, 12/31/12 = 4 + 10 – 6 = 375650

TA = L + OE
CASH: 153600 A/P: 74300 375650
A/R: 113500 M/P: 423400
Supplies: 4250
Buildings: 512000
Land: 90000
873,350 873350
2.27.

1.
Reveneus 476000
-
Advertising expenses 145000
Suppliers expenses 31500
Rent expenses 12000
Utilities expenses 25000
Miscellaneous expenses 5100
Salaries expenses 78000
Net income before taxes 332400
Income taxes (30% on Net income) 99720
Net income after taxes 232680
2. EPS tells the reader that for every individual share of stock outstanding,
Pickard and Associates earned $21.15 during 2012. This helps investors see
how profitable their individual investments in Pickard and Associates are.

2.28.
1.
2.

Increase in 375000 2.40.

1. retained Earning Balance sheet
(BGN)
Dividends paid 135000 Assets
Net income for 510000 Cash
year 7500

Revenue 830000
Net income 510000
Expense for the 320000
year
Accounts receivable 20000
Building 49500
Supplies 2000
Land 20000
Total assets $99000
Liabilities and Owner’s Equity
Liabilities:
Accounts payable $24000
Owner’s equity: $75000
Capital stock 42000
Retained earnings 33000 _______
Total liabilities and owner’s equity $99000

2. Retained earnings = Owner’s equity - Capital stock = 75000 – 42000 =

$33000
3. The balance sheet a depiction of the basic accounting equation because it
shows to total assets being equal to total liabilities and owner’s equity.

Chapter 3:

3.31.

Date Debit Credit

02-Jul Cash 320000  
  Capital stock    320000
04-Jul Equipment 90000  
  Cash   67500
  Note Payable    22500
05-Jul Utillities Expense 2300  
  Cash   2300
09-Jul Cash 15000  
  Equipment   15000
13-Jul Inventory 250000  
  Cash   100000
  Accounts Payable    150000
14-Jul Prepaid Insurance 6000  
  Cash   6000
18-Jul Accounts Receivables 81000  
  Sales   81000
  Costs of Goods Sold 62000  
  Inventory    62000
20-Jul Cash 7500  
  Accounts Receivables   7500
24-Jul Accounts Receivables 43000  
  Sales   43000
  Costs of Goods Sold 32000  
  Inventory   32000
27-Jul Property Tax Expense 1200  
  Cash   1200
July 30  Accounts Payable 150000  
  Cash   150000

3.34.
 a) The company purchased a building for 90000. A down payment of 35000
was paid in cash. A mortgage loan was arranged for the remaining 55000.
b) An investor invested 25000 cash in the company in exchange for capital
stock.
c) The company received a loan from the bank for 40000.
d) The company paid salaries of 12000.
e) The company purchased inventory on account for 12500.
f) The company sold inventory for 84000 on account. The inventory cost
51000.
g) The company received a payment on account for 62000.
h) The company paid 38000 on account.
3.41.
1.Journal entries

S.No Particulars  Debit   Credit 

a Cash             42000  
Accounts
                42000
Receivable
b Accounts Payable             33000  

  Cash               33000

c Inventory             70000  

  Cash               70000

d Utilities expense             12600  

  Cash               12600

e Cash         333000  

Accounts
              37000  
Receivable
  Sales Revenue           370000

  Cost of Goods Sold         197000  

  Inventory           197000

f Mortgage Payable             20000  

  Interest expense             30000  
  Cash               50000
g Salaries expense         120000  

  Cash           120000

Interest  
h           10000
expense
  Interest Payable             10000

2. T-accounts with the proper account balances

Cash      
01/01/2012             63000  b              33000

a             42000  c             70000

e         333000  d              12600

     f              50000

     g          120000

     h              10000

     Balance          142400

          438000           438000

Accounts
     
Receivable
 01/01/2012             47000  a              42000

e             37000  Balance              42000

             84000               84000

Inventory      
01/01/2012        184000  e          197000
c            70000  Balance             57000
          254000           254000

Office Building      
01/01/2012         416000  Balance          416000
Accounts
     
Payable
b             33000  Balance              33000
Mortgage
     
Payable
f             20,000  01/01/2012         360000
Balance         340000    
          360000           360000
Interest expense      

f             30000  Balance             30000

Notes Payable      

h             10000  01/01/2012         137000

Balance         127000    
          137000           137000
Salaries expense      
g         120000  Balance          120000
Capital Stock      
 Balance          115000  01/01/2012         115000
Retained
     
Earnings
 Balance              65000 01/01/2012             65000
Utilities expense      
d             12600  Balance              12600
Sales Revenue      
 Balance          370000  e          370000
Cost of Goods
     
Sold
e         197000  Balance          197000

TRIAL BALANCE  Debits Credits

Cash 142400  
 A/R 42000  
Inventory 57000  

Office building 416000  

M/P   340000

Notes payable   127000

Capital stock   115000
R/E   65000
Revenue   370000
CoGS 197000  
Utilities Exp 12600  
Interest Exp 30000  

Salaries Exp 120000  

  1017000 1017000
3. Although the debits and credits of a trial balance must be equal to ensure
that there are no mathematical errors, accounting systems may nevertheless
have faults or errors.

3.44.
 1. Journal entries
Date Account Debit Credit
01/03/2012 Inventory 16200  

  Account Payable   16200

       

04/03/2012 Account Receivables 13000  

  Sales   13000

  Cost of goods sold 9000  

  Inventory   9000
       
05/03/2012 Equipment 1900  
  Cash   1900
       
06/03/2012 Cash 4400  

  Account Receivables   4400

10/03/2012 Rent 720  
  Cash   720
       
15/03/2012 Utilities Expenses 95  
  Cash   95
       
17/03/2012 Salary 325  
  Cash   325
       
20/03/2012 Cash 7300  

  Account Receivables   7300

       
25/03/2012 Property Taxes 550  

  Cash   550
       
26/03/2012 Cash 9400  
  Sales   9400

  Cost of goods sold 7000  

  Inventory   7000
       
28/03/2012 Account Payable 16200  
  Cash   16200

2. T-account
Closing
Date Debit Credit
Balance
01/03/2012 Account Payable 16200   16200

04/03/2012 Cost of Goods Sold   9000 7200

26/03/2012 Cost of Goods Sold   7000 200

         

  Account Payable      
Closing
Date Particular Debit Credit
Balance
01/03/2012 Inventory   16200 (16200)
28/03/2012 Cash 16200   0
         
  Account Receivable      
Closing
Date Particular Debit Credit
Balance
04/03/2012 Sales 13000   13000

06/03/2012 Cash   4400 8600

20/03/2012 Cash   7300 1300

         
  Sales      
Closing
Date Particular Debit Credit
Balance
04/03/2012 Account Receivable   13000 (13000)
26/03/2012 Cash   9400 (22400)
         
  Cost of Goods Sold      
Closing
Date Particular Debit Credit
Balance
04/03/2012 Inventory 9000   9000

26/03/2012 Inventory 7000   16000

         
  Equipment      
Closing
Date Particular Debit Credit
Balance
04/03/2012 Cash 1900   1900
         
  Cash      
 Closing
Date Particular Debit Credit
Balance
04/03/2012 Equipment   1900 (1900)
06/03/2012 Account Receivable 4400   2500
10/03/2012 Rent   720 1780
15/03/2012 Utilities Expenses   95 1685
17/03/2012 Salary Expenses   325 1360
20/03/2012 Account Receivable 7300   8660
25/03/2012 Property Taxes   550 8110
26/03/2012 Sales 9400   17510
28/03/2012 Account Payable   16200 1310
         
  Rent      
Closing
Date Particular Debit Credit
Balance
10/03/2012 Cash 720   720
         
  Utilities Expenses      
Closing
Date Particular Debit Credit
Balance
15/03/2012 Cash 95   95
         
  Salary Expenses      
Closing
Date Particular Debit Credit
Balance
17/03/2012 Cash 325   325
         
  Property Taxes      
Closing
Date Particular Debit Credit
Balance
25/03/2012 Cash 550   550
Chapter 4:

4.24.
1.
a) Accrual accounting

Transactions Account
Debit Credit
Sales to customers 303000
Interest earned and received on savings 3500
accounts
Cost of goods sold 152000
Wage owed to employees at year-end 5500
Wage paid to employees 75000
Interest due at 12/31 on loan to be paid in 2400
March of next year
Amount paid for one and one-half years’ 24000
rent, beginning Jan. 1, 2012
Income taxes owed at year-end 7000
Utility bill owed: to be paid next month 1750
NET CF 38850

b) Cash-basis accounting

Transactions Account
Debit Credit
Collections from customers 262000
Interest earned and received on savings 3500
accounts
Amount paid to supliers 170000
Wage paid to employees 75000
Amount paid for one and one-half years’ 36000
rent, beginning Jan. 1, 2012
NET INCOME (15500)

2. Accrual accounting provides an appropriate measure of Daniel McGrath's

Company's operating results. Cash transactions include not only margin
transactions but also cash transactions, because the cash standard only calculates
cash transactions to determine the outcome of a company's operations.

4.28.

Debit Credit
Unearned Revenue 28500  
Revenue   28500
Subscription expense 107  
Prepaid expense   107
Tax expense 5000  
Prepaid tax expense   5000 4.31.
Unearned rent revenue 2792  
  Details DR CR
Rent revenue   2792
1 Borrowed
Insurance expense Expense 5000   130500  
  Unrecorded
Prepaid insurance Liabilities    5000 130500
2 Unearned
Unearned interest revenueRent Revenue 3325   14000  
  Rent Revenue   14000
3 Unrecorded Supplies Receivable 3985  
  Supplies Revenue   3985
 4 Unrecorded Loaned Receivable 88275  
  Loaned Revenue   88275

4.46.

  Debit Credit
a. Salaries expenses 17840  
  Salaries payable   17840
b. Interest expenses 5225  
  Interest payable   5225
c. Rent expenses 6000  
  Prepaid rent expenses   6000

d. Unearned rent revenue 33900  

  Rent revenue   33900
e. Insurance expenses 2400  
Prepaid insurance
    2400
expenses
Unrecorded interest
f. 400  
revenue
  Interest revenue   400

4.51.
1.

Date Debit Credit

31/12/2021 Net sales and revenues 904000  
Cost of sales and other
    726000
expense
  Salaries expense   144000
  Interest expense   10500
  Office supplies expense   7640
  Insurance expense   9860
  Property tax expense   22400
  Retained earnings 16400  

2.
To close dividends at December 31, 2012
  Debit Credit
Retained earning 36000  
Dividends   36000
Chapter 6:

6.33.

Solution:
As per given data the company is having bad debt of 430000 for the year and
auditor suggests the higher amount to be considered as bad debt expense to adjust
with entry data for clearance of report.

Allowance for Bad Debt:

Particulars Amount ($)
As of 1.1.2012 opening balance 300000
Written off bad debts during that year 360000
 60000
Estimated closing balance by 420000
company
Bad debts to be recognized 480000

Auditors estimate on uncollectible 650000

As per company estimated less 420000
uncollectible
Extra bad debts to be recognized 230000

Journal Entry:
Date Particulars Debit Credit in USD ($)
31.12.2012 Expense (bad 230000
debt)
Allowance to 230000
make up bad debt

6.55.

The purpose using the allowance method for recognizing bad debt expense as against the direct
method is to ensure that the matching principle of accounting is complied. The allowance
method ensures that bad debt expenses are recognized in the year which the revenue is earned
ensuring uniformity as against the direct method wherein the bad debt is recognized in years
subsequent to the year of actual sale. In the given case the boss wants to recognize additional bad
debt expense in the current year as profit is good, however this would lead noncompliance of the
matching principle. The excess reserve creation would there not comply with the accounting
principles hence the accountant should not accept the proposal.

6.58.
1. As per given data, average collection period of IBM seems to be lower than Microsoft
because the sales of IBM is almost more than twice as much of Microsoft. But the balance
of account receivable of IBM as compared to Microsoft seems just a bit higher, about 3000
million.

2. Microsoft (2008)
- Average account receivable: (13588 + 11338)/2 = 12463.5
- Account receivable turnover ratio: 60420/12463.5
- Average collection period: 365/(60420/12463.5) = 75.3 (days)

3. IBM (2008)
- Average account receivable: (10906 + 11428)/2 = 11167
- Account receivable turnover ratio: 103630/11167
- Average collection period: 365/(103630/11167) = 39.3 (days)

6.60
Bad debt and warranty expenses are recognized based on estimates through past
experiences. John Verner should consider the following aspects:
- The actual bad debt and warranty expenses that is expected to be incurred
- The impact of the willful reduction of expenses on the company’s reputation
- Whether this is compliance with accounting standards
- Legal action against the company
Conclusion: The reporting of lower expense would lead to material mistakes in the
financial reports which is against the laws of the country. This would lead to legal
action against the company hence John is wrong.

Chapter 7:
7.32.

5 Ring A from beginning

3000
Inventory, 600 each
1 Ring A from beginning
650
Inventory, 650 each
2 Ring B from beginning
900
inventory, 450 each
2 Ring B from beginning
700
inventory, 350 each
4 Ring C from beginning
800
inventory, 200 each
4 Ring C from beginning
1000
inventory, 250 each
Total Cost of Goods Sold 7050
The ending inventory balance for November: 19650-7050= 12600
The gross margin
The gross margin= The beginning inventory + Purchase - The ending inventory
The gross margin of this company: 19650+7050-12600= 14100
7.33.
The methods of costing of inventory are:
• Average Cost Method:
In the Average Cost Method, an average cost is computed for the entire inventory available for sale
during the period. The Cost of Goods Sold and Ending Inventory are calculated by multiplying the
Average Cost by number of units.
• LIFO:
In Last in First out (LIFO) method the ending inventory is valued at the price of oldest units and Cost of
Goods Sold is valued at price of most recent units purchased.
• FIFO:
"First in First out method (FIFO) is opposite of LIFO. In this method ending inventory is valued at the
price of newest units and Cost of Goods Sold is valued at price of oldest units purchased.
- Because not include the cost (cost of goods for recent) should use the FIFO method.
- Applying the LIFO method is the most appropriate to record in this case.
- When there is a high cost of goods during a price increase.
- When the ending inventory value increases during the price increase period, we will apply the FIFO
calculation method to record.
- Ending inventory is between the levels of the other two methods should be recorded using the weighted
average (WA) method.Inventories are valued at old valuation, so LIFO method should be used for
recording"

7.38.

1.
 Particulars                                                                                                                             Amount
Tentative Balance                                                                                                            61800
Shipment of goods received on December 28, 2011                                                            2000
Shipment of goods (FOB destination) received on Jan 2, 2012                                        (1200)
Shipment of goods to customer on Jan 3                                                                           2300
Goods Consignment with a Customer                                                                                  8000
Merchandise in transit:  
Ordered by H, FOB destination   
Ordered by H, FOB shipping point                                                                                     900
Sold by H, FOB shipping point   
Sold by H, FOB destination                                                                                                 5100
Amount of ending inventory on December 31, 2011                                                      78900

2.
Beginning
38700
inventory
Purchase 79200
Ending inventory 78900
COGS 38700 + 79200 + 78900 = 39000

7.42.
7.45.