会计学：企业决策的基础exercises-chapter4答案

SOLUTIONS TO EXERCISESEx 4–1 a. Book valueb. Materialityc. Matching principled. Unrecorded revenuee. Adjusting entriesf. Unearned revenueg. Prepaid expensesh. None (This is an example of ―depreciation expense.‖)Ex. 4–2 Income Statement Balance SheetAdjustingEntryab NE I D NE I Dc I NE I I NE Id NE I D NE I De NE I D D NE Df I NE I NE D I Ex. 4–3 a. Rent Expense....................................................................................... 240,000Prepaid Rent ........................................................................... 240,000 To record rent expense for May ($1,200,000 ÷ 5 months =$240,000 per month).b. Unearned Ticket Revenue .................................................................. 148,800Ticket Revenue ....................................................................... 148,800 To record earning portion of season ticket revenue relating toMay home games.Ex. 4–4 a. (1) Interest Expense (375)Interest Payable (375)$50,000 x 9% annual rate x 1/12 = $375.(2) Accounts Receivable .................................................................... 10,000Consulting Fees Earned ................................................... 10,000 To record ten days of unbilled consulting fees at $1,000 perday.b. $2,250 ($50,000 x 9% x 6/12 = $2,250)c. $15,000 ($25,000 - $10,000 earned in December, 2002)Ex. 4–5 a. The balance of TWA’s Advance Ticket Sales account represents unearned rev enue—that is, amounts collected from customers prior to rendering the related services (airtravel). As TWA has an obligation to render these services, the Advanced Ticket Salesaccount appears among the liabilities in TWA’s balance sheet.b. TWA normally reduces the balance of this liability account by rendering services tocustomers—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 cashrefunds to customers.Interest Payable ...................................................................... 1,200 To record interest accrued on bank loan during December.2. D epreciation Expense: Office Building ............................................ 1,100Accumulated Depreciation: Office Building ........................ 1,100 To record depreciation on office building ($330,000 ÷ 25 years ⨯1/12 = $1,100).3. A ccounts Receivable ........................................................................... 64,000Marketing Revenue Earned................................................... 64,000 To record accrued Marketing revenue earned in December.4. I nsurance Expense (150)Prepaid Insurance (150)To record insurance expense (1,800 ÷ 12 months = $150).5. U nearned Revenue ............................................................................. 3,500Marketing Revenue Earned................................................... 3,500 To record portion of unearned revenue that had become earnedin December.6. S alaries Expense ................................................................................. 2,400Salaries Payable ...................................................................... 2,400 To record accrued salaries in December.b. $62,650 ($64,000 + $3,500 - $1,200 - $1,100 - $150 - $2,400).Ex. 4–7 a. 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 + $1,800accrued interest).c. 2002Oct. 31 Cash .................................................................................... 120,000Notes 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 notepayable ($120,000 ⨯ 9% ⨯1/12).e. The liability to the bank at March 31, 2003, is $124,500, consisting of $120,000 principalplus $4,500 accrued interest for five months.Notes Payable ........................................................ 300,000 Obtained a three-month loan from National Bank at12% interest per year.May 31 Interest Expense ................................................................ 3,000Interest Payable ..................................................... 3,000 To record interest expense for May on note payable toNational Bank ($300,000 ⨯ 12% ⨯1/12 = $3,000).b. May 1 Prepaid Rent ...................................................................... 180,000Cash ........................................................................ 180,000 Paid rent for six months at $30,000 per month.May 31 Rent Expense ..................................................................... 30,000Prepaid Rent .......................................................... 30,000 To record rent expense for the month of May.c. May 2 Cash .................................................................................... 910,000Unearned Admissions Revenue ............................ 910,000 Sold season tickets to the 70-day racing season.May 31 Unearned Admissions Revenue ........................................ 260,000Admissions Revenue ............................................. 260,000 To record admissions revenue from the 20 racing daysin May ($910,000 ⨯ 20/70 = $260,000).d. May 4 No entry required.e. May 6 Prepaid Printing ................................................................ 12,000Cash ........................................................................ 12,000 Printed racing forms for first 30 racing days.May 31 Printing Expense ............................................................... 8,000Prepaid Printing .................................................... 8,000 To record printing expense for 20 racing days in May.f. May 31 Concessions Receivable..................................................... 16,500Concessions Revenue ............................................ 16,500 Earned 10% of refreshment sales of $165,000 duringMay.Something to Consider:Effects of omission of May 31 adjusting entry for rent expense on May 31 financialstatements:Revenue Not affectedExpenses Understated (by May’s rent of $30,000)Net Income Overstated (because May rent expense was not recognized)Assets Overstated (Prepaid Rent should be reduced by portion expired inMay)Liabilities Not affectedOwners’ Equity Overstated (because net income is overstated)Ex. 4–9 a. 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 itemis immaterial, by definition it is not relevant to decision makers.Accountants must account for material items in the manner required by generallyaccepted accounting principles. However, immaterial items may be accounted for in themost convenient and economical manner.b. Whether a specific dollar amount is ―material‖ depends upon the (1) size of the amountand (2) nature of the item. In evaluating the size of a dollar amount, accountants considerthe amount in relation to the size of the organization.Based solely upon dollar amount, $2,500 is not material in relation to the financialstatements of a large, publicly owned corporation. For a small business however, thisamount could be material.In addition to considering the size of a dollar amount, accountants must also considerthe nature of the item. The nature of an item may make the item ―material‖ to users ofthe financial statements regardless of its dollar amount. Examples might include bribespaid to government officials, or theft of company assets or other illegal acts committedby management.In summary, one cannot say whether $2,500 is a material amount. The answer dependsupon the related circumstances.c. Two ways in which the concept of materiality may save time and effort for accountantsare:1. Adjusting entries may be based upon estimated amounts if there is little or nopossibility that the use of an estimate will result in material error. For example, anadjusting entry to reflect the amount of supplies used may be based on an estimateof the cost of supplies remaining on hand.2. Adjusting entries need not be made to accrue immaterial amounts of unrecordedexpenses or unrecorded revenue. For example, no adjusting entries normally aremade 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 bookkeeperis 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 laterperiods.b. Matching.c. Realization.Ex. 4–11 a. Accounts likely to have required an adjusting entry are:1. Investments2. Accounts Receivable3. Inventories4. Prepaid Expenses5. Deferred Income Taxes6. Buildings7. Machinery and Equipment8. Intangible Assets9. Accounts Payable10. Accrued Liabilities11. Income Taxes Payable12. Deferred Compensation and Other LiabilitiesNote to the Instructor: The adjustments required for many of the accounts listed aboveare discussed in subsequent chapters. Some are beyond the scope of an introductorycourse.SOLUTIONS TO PROBLEMS20 Minutes, Easy PROBLEM 4–1FLORIDA PALMS COUNTRY CLUBPROBLEM 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 4–2PROBLEM 4–2ENCHANTED 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 Statement Balance SheetAdjustment Revenue Expenses =NetIncome Assets = Liabilities +Owners’Equity1. I NE I I NE I2. NE I D NE I D3. NE I D D NE D4. NE NE NE NE NE NE5. NE I D NE I D6. I NE I I NE I7. I NE I NE D I8. NE I D NE I D9. NE I D NE I Dd. $340 ($12,000 x 0.85% x 4/12)e. Original cost of buildings ......................................................................................$600,000Accumulated depreciation: buildings (prior to adjusting entry 3 in parta) ...............................................................................................................................$310,000December depreciation expense from part a ...................................................... 2,000Accumulated depreciation, buildings, 12/31 .......................................................(312,000) Net book value at December 31 ............................................................................$288,000SEA 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 ÷ (55)Tickets sold to resort hotel on June 1 (200)(3) Prepaid rent of $6,000 ÷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 unexpiredinsurance 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.PROBLEM 4–4CAMPUS THEATER (concluded) b. (1) Eight months (bills received January through August). Utilities bills are recorded asmonthly 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-endadjusting entries. Thus, depreciation for August is not included in the August unadjustedtrial 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 4–5KEN HENSLEY ENTERPRISES, INC.PROBLEM 4–5 KEN HENSLEY ENTERPRISES, INC. (continued)c. Monthly rent expense for the last two months of 2002 was $2,000 ($6,000 ÷ 3 months). The$21,000 rent expense shown in the studio’s trial balance includes a $2,000 rent expense forNovember, which means that total rent expense for January through October was $19,000($21,000 - $2,000). The monthly rent expense in these months must have been $1,900 ($19,000 ÷10 months). Thus, it appears that the studio’s monthly rent increased by $100 (from $1,900 t o$2,000) in November and December.15 Minutes, Medium PROBLEM 4–6KOYNE CORPORATION。