中级财务会计英文版第九章课后题答案

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财务会计习题参考答案第11-13章

财务会计第11-13章课后习题参考答案Chapter 9 Accounting for ReceivablesPROBLEM 9-7ABYP 9-4(b)Accounts receivable represent 35.1% [$304.7 – $20.0)/$810.2] of the company’scurrent assets. This is a material amount of the current assets.(c)The ratios would probably vary throughout the year as receivables increaseduring the busy season and decrease in the “off” season. To improve the accuracy of the ratio, average receivables should be calculated using monthly or quarterly data, rather than just the beginning and ending balance.(d)It is difficult to evaluate Scott s’ credit risk with only a single year’s data and noindustry norms. An average collection period of 51 days may be reasonable for the type of customers that make up Scotts’ receivables.Scotts explained that a majority of its receivables were from its North American Consumer segment. Within this segment, there were several subgroups. If each subgroup (i.e. home centers, mass merchandisers, hardware stores, etc) is comprised of many smaller customers, this would indicate less credit risk than that associated with several large customers. The significant concentration of receivables within this largest segment was 79% from its top 3 customers. This represents a high concentration and therefore potentially greater risk.(e)Note 17 addressed the issues that surround credit risk. It provided the reader withat least a moderate degree of “comfort” that Scotts’accounts receivable and allowance policies were acceptable. The note also appears to comply with the full disclosure principle required under GAAP. In 2003 Scotts initiated disclosure on the company’s credit expense to its largest and second largest customers, 24.8% and 13.9% respectively. This may represent added risk, depending on the continuing relationship and the customer’s credit ratings.Chapter 10 Plant Assets, Natural Resources, and Intangible AssetsE10-4(a) Straight-line method:($96,000- $12,000)/5= $16,800 per year.2006 depreciation = $16,800 X 3/12 = $4,200.(b) Units-of-activity method:($96,000- $12,000)/10,000 = $8.40 per hour.2006 depreciation = 1,700 hours X $8.40 = $14,280.(c) Declining-balance method:2006 depreciation = $96,000 X 40% X 3/12 = $9,600.Book value January 1, 2007 = $96,000 – $9,600 = $86,400.2007 depreciation = $86,400 X 40% = $34,560.E10-5P10-5ABYP10-2A(f)The asset turnover ratio measures how efficiently a company uses its assets togenerate sales. It shows the dollars of sales generated by each dollar invested in asse ts. PepsiCo’s asset turnover ratio(1.11) was higher than Coca-Cola’s (.81).Therefore, it can be concluded that PepsiCo was more efficient during 2003 in utilizing assets to generate sales.Chapter 11 LiabilitiesE11-1(a) Jun. 1 Cash..................................................................... 70,000Notes Payable............................................ 70,000 (b) Jun. 30 Interest Expense. (700)Interest Payable (700)[($70,000 X 12%) X 1/12](c) Dec. 1 Notes Payable .................................................. 70,000Interest Payable ($70,000 X 12% X 6/12).... 4,200Cash.............................................................. 74,200 (d) $4,200E11-3(a)Nov. 30 Cash................................................................. 180,000Unearned Subscriptions .................. 180,000(9,000 X $20)(b) Dec. 31 Unearned Subscriptions ........................... 15,000Subscription Revenue ...................... 15,000($180,000 X 1/12)(c) Mar. 31 Unearned Subscriptions ............................... 45,000Subscription Revenue........................... 45,000($180,000 X 3/12)E11-5(a) Jan. 1 Cash................................................................. 200,000Bonds Payable .................................... 200,000 (b) July 1 Bond Interest Expense .............................. 10,000Cash ($200,000 X 10% X 1/2)........... 10,000 (c) Dec. 31 Bond Interest Expense .............................. 10,000Bond Interest Payable....................... 10,000 P11-1A(a) Jan. 1 Cash ..................................................................... 15,000Notes Payable .......................................... 15,0005 Cash ..................................................................... 10,400Sales ($10,400 ÷ 104%).......................... 10,000Sales Taxes Payable (400)($10,400 – $10,000)12 Unearned Service Revenue.......................... 9,000Service Revenue...................................... 9,00014 Sales Taxes Payable ....................................... 5,800Cash............................................................. 5,80020 Accounts Receivable...................................... 37,856Sales............................................................ 36,400Sales Taxes Payable .............................. 1,456(700 X $52 X 4%)25 Cash .....................................................................12,480Sales ($12,480 ÷ 104%).......................... 12,000Sales Taxes Payable (480)($12,480 – $12,000)(b) Jan. 31 Interest Expense (100)Interest Payable (100)($15,000 X 8% X 1/12)(c) Current liabilitiesNotes payable................................................................................ $15,000 Accounts payable ........................................................................ 42,500 Unearned service revenue ($15,000 – $9,000).................... 6,000Sales taxes payable ($400 + $1,456 + $480)........................ 2,336Interest payable (100)Total current liabilities....................................................... $65,936 BYP11-4。

(完整版)会计英语课后习题参考答案解析

Suggested SolutionChapter 11.3.4.5.(a)(b) net income = 9,260-7,470=1,790(c) net income = 1,790+2,500=4,290Chapter 21.a.To increase Notes Payable -CRb.To decrease Accounts Receivable-CRc.To increase Owner, Capital -CRd.To decrease Unearned Fees -DRe.To decrease Prepaid Insurance -CRf.To decrease Cash - CRg.To increase Utilities Expense -DRh.To increase Fees Earned -CRi.To increase Store Equipment -DRj.To increase Owner, Withdrawal -DR2.a.Cash 1,800Accounts payable ........................... 1,800 b.Revenue ..................................... 4,500Accounts receivable ................... 4,500 c.Owner’s withdrawals ........................ 1,500Salaries Expense ....................... 1,500 d.Accounts Receivable (750)Revenue (750)3.Prepare adjusting journal entries at December 31, the end of the year.Advertising expense 600Prepaid advertising 600Insurance expense (2160/12*2) 360Prepaid insurance 360Unearned revenue 2,100Service revenue 2,100Consultant expense 900Prepaid consultant 900Unearned revenue 3,000Service revenue 3,000 4.1. $388,4002. $22,5203. $366,6004. $21,8005.1. net loss for the year ended June 30, 2002: $60,0002. DR Jon Nissen, Capital 60,000CR income summary 60,0003. post-closing balance in Jon Nissen, Capital at June 30, 2002: $54,000Chapter 31. Dundee Realty bank reconciliationOctober 31, 2009Reconciled balance $6,220 Reconciled balance $6,2202. April 7 Dr: Notes receivable—A company 5400Cr: Accounts receivable—A company 540012 Dr: Cash 5394.5Interest expense 5.5Cr: Notes receivable 5400June 6 Dr: Accounts receivable—A company 5533Cr: Cash 553318 Dr: Cash 5560.7Cr: Accounts receivable—A company 5533Interest revenue 27.73. (a) As a whole: the ending inventory=685(b) applied separately to each product: the ending inventory=6254. The cost of goods available for sale=ending inventory + the cost of goods=80,000+200,000*500%=80,000+1,000,000=1,080,0005.(1) 24,000+60,000-90,000*0.8=12000(2) (60,000+24,000)/( 85,000+31,000)*( 85,000+31,000-90,000)=18828Chapter 41. (a) second-year depreciation = (114,000 – 5,700) / 5 = 21,660;(b) second-year depreciation = 8,600 * (114,000 – 5,700) / 36,100 = 25,800;(c) first-year depreciation = 114,000 * 40% = 45,600second-year depreciation = (114,000 – 45,600) * 40% = 27,360;(d) second-year depreciation = (114,000 – 5,700) * 4/15 = 28,880.2. (a) weighted-average accumulated expenditures (2008) = 75,000 * 12/12 + 84,000 * 9/12 + 180,000 * 8/12 + 300,000 * 7/12 + 100,000 * 6/12 = 483,000(b) interest capitalized during 2008 = 60,000 * 12% + ( 483,000 – 60,000) * 10% =49,5003. (1) depreciation expense = 30,000(2) book value = 600,000 – 30,000 * 2=540,000(3) depreciation expense = ( 600,000 – 30,000 * 8)/16 =22,500(4) book value = 600,000 – 30,000 * 8 – 22,500 = 337,5004. Situation 1:Jan 1st, 2008 Investment in M 260,000Cash 260,000June 30 Cash 6000Dividend revenue 6000Situation 2:January 1, 2008 Investment in S 81,000Cash 81,000June 15 Cash 10,800Investment in S 10,800December 31 Investment in S 25,500Investment Revenue 25,5005. a. December 31, 2008 Investment in K 1,200,000Cash 1,200,000June 30, 2009 Dividend Receivable 42,500Dividend Revenue 42,500December 31, 2009 Cash 42,500Dividend Receivable 42,500 b. December 31, 2008 Investment in K 1,200,000Cash 1,200,000December 31, 2009 Cash 42,500Investment in K 42,500 Investment in K 146,000 Investment revenue 146,000 c. In a, the investment amount is 1,200,000net income reposed is 42,500In b, the investment amount is 1,303,500Net income reposed is 146,000Chapter 51.a. June 1: Dr: Inventory 198,000Cr: Accounts Payable 198,000 June 11: Dr: Accounts Payable 198,000Cr: Notes Payable 198,000 June 12: Dr: Cash 300,000Cr: Notes Payable 300,000b. Dr: Interest Expenses (for notes on June 11) 12,100Cr: Interest Payable 12,100 Dr: Interest Expenses (for notes on June 12) 8,175Cr: Interest Payable 8,175c. Balance sheet presentation:Notes Payable 498,000Accrued Interest on Notes Payable 20,275d. For Green:Dr: Notes Payable 198,000 Interest Payable 12,100Interest Expense 7,700Cr: Cash 217,800For Western:Dr: Notes Payable 300,000Interest Payable 8,175Interest Expense 18,825Cr: Cash 327,0002.(1) 20⨯8 Deferred income tax is a liability 2,400 Income tax payable 21,60020⨯9 Deferred income tax is an asset 600Income tax payable 26,100(2) 20⨯8: Dr: Tax expense 24,000Cr: Income tax payable 21,600 Deferred income tax 2,400 20⨯9: Dr: Tax expense 25,500Deferred income tax 600Cr: Income tax payable 26,100 (3) 20⨯8: Income statement: tax expense 24,000Balance sheet: income tax payable 21,600 20⨯9: Income statement: tax expense 25,500Balance sheet: income tax payable 26,1003.a. 1,560,000 (20000000*12 %* (1-35%))b. 7.8% (20000000*12 %* (1-35%)/20000000)4.5.Notes Payable 14,400 Interest Payable 1,296 Accounts Payable 60,000+Unearned Rent Revenue 7,200 Current Liabilities 82,896Chapter 61. Mar. 1Cash 1,200,000Common Stock 1,000,000Paid-in Capital in Excess of Par Value 200,000Mar. 15Organization Expense 50,000Common Stock 50,000Mar. 23Patent 120,000Common Stock 100,000Paid-in Capital in Excess of Par Value 20,000The value of the patent is not easily determinable, so use the issue price of $12 per share on March 1 which is the issuing price of common stock.2. July.1Treasury Stock 180,000Cash 180,000The cost of treasury purchased is 180,000/30,000=60 per share.Nov. 1Cash 70,000Treasury Stock 60,000Paid-in Capital from Treasury Stock 10,000Sell the treasury at the cost of $60 per share, and selling price is $70 per share. The treasury stock is sold above the cost.Dec. 20Cash 75,000Paid-in Capital from Treasury Stock 15,000Treasury Stock 90,000The cost of treasury is $60 per share while the selling price is $50 which is lower than the cost.3. a. July 1Retained Earnings 24,000Dividends Payable—Preferred Stock 24,000b.Sept.1Dividends Payable—Preferred Stock 24,000Cash 24,000c. Dec.1Retained Earnings 80,000Dividends Payable—Common Stock 80,000d. Dec.31Income Summary 350,000Retained Earnings 350,0004.a. Preferred stock gives its owner certain advantages over common stockholders. These benefits include the right to receive dividends before the common stockholders and the right to receive assets before the common stockholders if the corporation liquidates. Corporation pay a fixed amount of dividends on preferred stock.The 7% cumulative term indicates that the investors earn 7% fixed dividends.b. 7%*120%*20,000=504,000c. If corporation issued debt, it has obligation to repay principald. The date of declaration decrease the stockholders’ equity; the date of record and the date of payment have no effect on stockholders.5.a. Jan. 15Retained Earnings 35,000Accumulated Depreciation 35,000To correct error in prior year’s depreciation.b. Mar. 20Loss from Earthquake 70,000Building 70,000c. Mar. 31Retained Earnings 12,500Dividends Payable 12,500d. Apirl.15Dividends Payable 12,500Cash 12,500e. June 30Retained Earnings 37,500Common Stock 25,000Additional Paid-in Capital 12,500To record issuance of 10% stock dividend: 10%*25,000=2,500 shares;2500*$15=$37,500f. Dec. 31Depreciation Expense 14,000Accumulated Depreciation 14,000Original depreciation: $40,000/40=$10,000 per year. Book value on Jan.1, 2009 is $350,000(=$400,000-5*$10,000). Deprecation for 2009 is $14,000(=$350,000/25). g. The company does not need to make entry in the accounting records. But the amount of Common Stock ($10 par value) decreases 275,000, while the amount of Common Stock ($5 par value) increases 275,000.Chapter 71.Requirement 1If revenue is recognized at the date of delivery, the following journal entries would be used to record the transactions for the two years:Year 1Inventory............................................... 480,000 Cash/Accounts payable ............................... 480,000 To record purchase of inventoryInventory............................................... 124,000 Cash/Accounts payable ............................... 124,000 To record refurbishment of inventoryAccounts receivable ..................................... 310,000 Sales revenue ....................................... 310,000 To record sale of goods on accountCost of goods sold ...................................... 220,000 Inventory ........................................... 220,000 To record the cost of the goods sold as an expenseSales returns (I/S) ..................................... 15,500* Allowance for sales returns (B/S) ................... 15,500 To record provision for return of goods sold under 30-day return period* 5% of $310,000Warranty expense ........................................ 31,000* Provision for warranties (B/S) ...................... 31,000 To record provision, at time of sale, for warranty expenditures* 10% of $310,000Allowance for sales returns ............................. 12,400 Accounts receivable ................................. 12,400 To record return of goods within 30-day return period.It is assumed the returned goods have no value and are disposed of.Provision for warranties (B/S) .......................... 18,600 Cash/Accounts payable ............................... 18,600 To record expenditures in year 1 for warranty workCash ................................................... 297,600*Accounts receivable ................................. 297,600 To record collection of Accounts Receivable* $310,000 – $12,400Year 2Provision for warranties (B/S) .......................... 8,400 Cash/Accounts payable ............................... 8,400 To record expenditures in year 2 for warranty workRequirement 2If revenue is recognized only when the warranty period has expired, the following journal entries would be used to record the transactions for the two years:Year 1Inventory............................................... 480,000 Cash/Accounts payable ............................... 480,000 To record purchase of inventoryInventory............................................... 124,000 Cash/Accounts payable ............................... 124,000 To record refurbishment of inventoryAccounts receivable ..................................... 310,000 Inventory ........................................... 220,000 Deferred gross margin ............................... 90,000 To record sale of goods on accountDeferred gross margin ................................... 12,400 Accounts receivable ................................. 12,400 To record return of goods within the 30-day return period. It is assumed the goods have no value and are disposed of.Deferred warranty costs (B/S) ........................... 18,600 Cash/Accounts payable ............................... 18,600 To record expenditures for warranty work in year 1. The warranty costs incurred are deferred because the related revenue has not yet been recognizedCash ................................................... 297,600* Accounts receivable ................................. 297,600 To record collection of Accounts receivable* $310,000 – $12,400Year 2Deferred warranty costs ................................. 8,400 Cash/Accounts payable ............................... 8,400 To record warranty costs incurred in year 2 related to year 1 sales. The warranty costs incurred are deferred because the related revenue has not yet been recognized.Deferred gross margin ................................... **77,600Cost of goods sold ...................................... 220,000 Sales revenue ....................................... 297,600* To record recognition of sales revenue from year 1 sales and related cost of goods sold at expiry of warranty period* $310,000 – $12,400** ($90,000 – $12,400)Warranty expense ........................................ 27,000* Deferred warranty costs ............................. 27,000 To record recognition of warranty expense at same time as related sales revenue recognition* $18,600 + $8,400Requirement 3Allied Auto Parts Inc. might choose to recognize revenue only after the warranty period has expired if they are not able to make a good estimate, at the time of sale, of the amount of warranty work that will be required under the terms of the one-year warranty. If Allied is not able, at the time of sale, to make a good estimate of the warranty work that will be required, then the measurability criterion of revenue recognition is not met at the time of sale. The measurability criterion means that the amount of revenue can be reliably measured. If the seller is not able to estimate the amount of work that will have to be done under the warranty agreement, then it is not able to reasonably measure the profit that it will eventually earn on the sales. The performance criteria might also be invoked here. The performancecriterion means that the seller has transferred the significant risks and rewards of ownership to the buyer. As long as there is warranty work to be performed after the sale that is the responsibility of the seller, you might argue that performance is not substantially complete. However, if the seller was able to reliably estimate the amount of warranty work, then performance would be satisfied on the assumption that we could measure the risk that remains with the seller, and make a provision for it.2.Percentage-of-completion method:The first step in applying revenue recognition using the percentage-of-completion method (using costs incurred to date compared to estimated total costs to determinethe percentage of completion) is to estimate the percentage of completion of the project at the end of each year. This is done in the following table (in $000s):End of 2005 End of 2006 End of 2007Total costs incurred $ 5,400 $ 12,950 $ 18,800 Total estimated costs 18,000 18,500 18,800 % completed 30% 70% 100%Once the percentage of completion at the end of each year has been calculated as above, the next step is to allocate the appropriate amount of revenue to each year, based on the percentage completed to date, less what has previously been recordedin revenue. This is done in the following table (in $000s):2005 2006 20072005 $20,000 × 30%$ 6,0002006 $20,000 × 70%$ 14,0002007 $20,000 × 100%$ 20,000 Less: Revenue recognized in prior years (0) (6,000) (14,000) Revenue for year $ 6,000 $ 8,000 $ 6,000Therefore, the profit to be recognized each year on the construction project would be:2005 2006 2007 TotalRevenue recognized $ 6,000 $ 8,000 $ 6,000 $ 20,000 Construction costs incurred (expenses) (5,400) (7,550) (5,850) (18,800) Gross profit for the year $ 600 $ 450 $ 150 $ 1,200The following journal entries are used to record the transactions under the percentage-of-completion method of revenue recognition:2005 2006 20071. Costs of construction:Construction in progress ....... 5,400 7,550 5,850 Cash, payables, etc. 5,400 7,550 5,850 2. Progress billings:Accounts receivable ..... 3,100 4,900 12,000 Progress billings ... 3,100 4,900 12,000 3. Collections on billings:Cash .................... 2,400 4,000 12,400 Accounts receivable . 2,400 4,000 12,400 4. Recognition of profit:Construction in progress 600 450 150Construction expense .... 5,400 7,550 5,850 Revenue from long-termcontract .......... 6,000 8,000 6,000 5. To close construction in progress:Progress billings ....... 20,000 Construction in progress 20,0002005 2006 2007Balance sheetCurrent assets:Accounts receivable $ 700 $ 1,600 $ 1,200 Inventory:Construction in process 6,000 14,000Less: Progress billings (3,100) (8,000)Costs in excess of billings 2,900 6,000Income statementRevenue from long-term contracts $ 6,000 $ 8,000 $ 6,000 Construction expense (5,400) (7,550) (5,850) Gross profit $ 600 $ 450 $ 1503.a. The three criteria of revenue recognition are performance, measurability, andcollectibility.Performance means that the seller or service provider has performed the work.Depending on the nature of the product or service, performance may mean quitedifferent points of revenue recognition. For example, for the sale of products,IAS18 defines performance as the point when the seller of the goods hastransferred the risks and rewards of ownership to the buyer. Normally, this meansthat performance is done at the time of sale. Although the seller may haveperformed much of the work prior to the sale (production, selling efforts, etc.),there is still significant risk to the seller that a buyer may not be found.Therefore, from a reliability point of view, revenue recognition is delayed untilthe point of sale. Also, there may be significant risks remaining with the sellerof the product even after the sale. Warranties given by the seller are a riskthat remains with the seller. However, if this risk can be reliably estimatedat the time of sale, revenue can be recognized at the point of sale. Performanceis quite different under a long-term construction contract. Here, performancereally is considered to be a measure of the work done. Revenue is recognizedover the production period as the work is performed. It is intended to reflectthe amount of effort expended by the seller (contractor). Although legal titlewon’t transfer to the buyer until the project is completed, revenue can berecognized because there is a known and committed buyer. If the contractor is not able to estimate how much of the work has been done (perhaps because he or she can’t reliably estimate how much work must still be done), then profit would not be recognized until the extent of performance is known.Measurability means that the seller or service provider must be able to reliably estimate the amount of the revenue from the sale or service. For the sale of products this is generally known at the time of sale (the sales price is set).However, if the seller provides a return period, it may be necessary to estimate the volume of returns at the time of sale in order to measure the revenue that will be recognized.Collectibility means that the seller or the service provider has reasonable assurance that the sales price will actually be collected. In most cases for the sales of products, the seller is able to recognize revenue at the time of sale even if the sale is on account. This is because the seller has experience with its customers and is able to estimate reliably the risk of non payment.As long as the seller is able to make this estimate, it is appropriate to recognize the revenue but to offset it with a provision for possible non collection. If the seller is unable to make reliable estimates of future collection of amounts owing, the recognition of revenue would be delayed until the cash is actually received. This is what is done using the instalment sales method of revenue recognition.b. Because of the performance criterion of revenue recognition, it would seem to be most appropriate to recognize most revenue as the seller or service provider performs the work. This would be the best measure of performance. This would mean, for example, that sellers of products would recognize their revenue over the whole production, selling, and post sales servicing periods. As we saw above, this is not commonly done because, in many cases, there are still significant risks that are retained by the seller (risk of not being able to sell the product, for example). There are also measurement risks (knowing the selling price) that exist prior to the sale. The percentage-of-completion method of revenue used for some long-term construction contracts would seem to most closely recognize revenue as the work is performed. As mentioned in Part 1, we are able to recognize revenue on this basis since a contract exists which commits the purchaser to buy the project (assuming certain conditions are met) and the sales price is known because of the existence of the contract.4.If all revenue is recognized when a student registers for the course, profit for 2007 would be:Sales Revenue1:Manuals and initial lessons (200 × $100)$ 20,000 Additional lessons ((200 × 8) × $30)48,000 Examinations ((200 × 80%) × $130)20,800 Total sales revenue 88,800Cost of sales:Manuals and initial lessons (200 × ($15 + $3))3,600 Additional lessons ((200 × 8) × $3))4,800 Examinations ((200 × 80%) × $30)4,800 Total cost of sales 13,200Depreciation of development costs:$180,000 × (200/1,000)36,000Profit $ 39,6005.FINISH ENTERPRISESIncome Statementfor the year ending December 31, 2005Continuing operations (excluding the chemical division)Sales ($35,000,000 – $5,500,000) $ 29,500,000Cost of sales ($15,000,000 – $2,800,000) (12,200,000)Gross profit 17,300,000Selling & administration expenses($18,000,000 – $3,200,000) (14,800,000)Profit from operations 2,500,000Income tax expense (40%) 1,000,000Profit after tax $ 1,500,000Discontinuing operations (Chemical division)Sales 5,500,000Cost of sales (2,800,000)Gross profit 2,700,000Selling & administration expenses (3,200,000)Loss from operations (500,000)Income tax expense(40%) 200,000Loss after tax (300,000) Gain on discontinuance of the Chemical division 3,500,000Tax thereon (1,400,000)After-tax gain on discontinuance of the Chemical division2,100,000$ 3,300,000Chapter 81.Payment of account payable. operatingIssuance of preferred stock for cash. financingPayment of cash dividend. financingSale of long-term investment. investingAmortization of bond discount. no effectCollection of account receivable. operatingIssuance of long-term note payable to borrow cash. financing Depreciation of equipment. no effectPurchase of treasury stock. financingIssuance of common stock for cash. financingPurchase of long-term investment. investingPayment of wages to employees. operatingCollection of cash interest. investingCash sale of land. InvestingDistribution of stock dividend. no effectAcquisition of equipment by issuance of note payable. no effect Payment of long-term debt. financingAcquisition of building by issuance of common stock. no effect Accrual of salary expense. no effect2.(a) Cash received from customers = 816,000(b) Cash payments for purchases of merchandise. =468,000(c) Cash payments for operating expenses. = 268,200(d) Income taxes paid. =36,9003.Cash sales …………………………………………... $9,000 Payment of accounts payable ………………………. -48,000Payment of income tax ………………………………-13,000Payment of interest ……………………………..…..-16,000 Collection of accounts receivable ……………………93,000 Payment of salaries and wages ………………………..-34,000 Cash flows from operating activitiesby the direct method -9,0004.Operating activities:Net loss -200,000 Add: loss on sale of land 250,000 Add: depreciation 300,000Add: amortization of patents 20,000Less: increases in current assets other than cash -750,000 Add: increases in current liabilities 180,000 Net cash flows from operating-200,000Investing activitiesSale of land -50,000 Purchase of PPE -1,500,000Net cash flows from investing-1,550,000Financing activitiesIssuance of common shares 400,000 Payment of cash dividend -50,000 Issuance of non-current liabilities 1,000,000 Net cash flows from financing1,350,000Net changes in cash-400,0005.。

中级财务会计(第九章)流动负债-课件(1)

如果该企业是按30天计算日工资率，在日工资制下 7月份应得工资＝
(18+9)×28+120+60+28×2×(1-20%)＝980.80(元)
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工资核算的账务处理
“工资结算表”一般编制一式三份，一份由劳动工资部门存查；一份按每一职工裁成“工资条”，连同工资一起发给职工以便核对；一份在发放时由职工签章后，交财会部门作为工资核算的原始凭证。
向国家的负债。应交税费向员工的负债。应付职工薪酬向投资者的负债。应付股利
8
流动负债的定义、分类及计价
流动负债的计价：理论上讲，应按未来应偿付金额的现值
计量。但会计实务中，考虑到流动负债偿还期短，到期值与现值相差不大，故一般直接以负债发生时的实际金额作为到期应付金额记账，不考虑贴现因素。
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工资的计算
【例】职工王银月标准工资为840元，7月份出勤18 天，事假2天(扣100%)，病假2天(扣20%)，本月应得奖金120元，各种津贴和补贴60元，日工资率按 20.92天计算。王银7月份应得工资的计算如下：日工资率＝840÷20.92＝40.15（元/日）王银7月份应得工资=840+120+60-40.15×240.15×2×20%=923.64(元)
现时义务是指企业在现行条件下已承担的义务.未来发生的交易或者事项形成的义务.不属于现时义务，不应当确认为负债。
3
负债的定义及分类
负债的分类：
负债按其偿还期限长短不同，分为流动负债长期负债
4
流动负债的定义、分类及计价
流动负债的定义：
流动负债是指应在一年或超过一年的一个营业周期内偿还的债务
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工资的核算

中级财务会计习题(英文)

Chapter 1 A. An example of a business stakeholder is the federal government.B. A corporation is a business that is legally separate and distinct from its owners.C. Accounting is a service that provides many different users with financial information to make economic decisions.D. Small ethical lapses are harmless in and of themselves.E. Managerial accounting is primarily concerned with the recording and reporting of economic data and activities of an entity for use by owners, creditors, governmental agencies, and the public.F. The unit of measurement concept requires that economic data be recorded in a common unit of measurement.G. If a building is appraised for $90,000, offered for sale at $95,000, and the buyer pays $85,000 cash for it, the buyer would record the building at $90,000.H. The owner’s rights to the assets rank ahead of the creditors’ rights to the assets.I. Business transactions are economic events that directly or indirectly change an entity’s financial condition or results f rom operations.J. If net income for a proprietorship was $25,000, the owner withdrew $10,000 in cash and the owner invested $5,000 in cash, the capital of the owner increased by $20,000. K. The owner is only allowed to withdraw cash from the business.L. Receiving a bill or otherwise being notified that an amount is owed is amount is paid.M. The principal financial statements of a proprietorship are the income statement, statement of owner’s equity, and the balance sheet.N. An income statement is a summary of the revenues and expenses of a business as of a specific date.O. A low ratio of liabilities to owner’s equity indicates that a business is near bankruptcy. 1. Profit is the difference betweena. assets and liabilitiesb. the incoming cash and outgoing cashc. the assets purchased with cash contributed by the owner and the cash spent to operate the businessd. the assets received for goods and services and the amounts used to provide the goods and services2. Which of the items below is not a business organization form?a. entrepreneurshipb. proprietorshipc. partnershipd. corporation3. Which of the following is not a step in providing accounting information to stakeholders? a. design the accounting information systemb. prepare accounting surveysc. identify stakeholdersd. record economic data4. For accounting purposes, the business entity should be considered separate from its owners if the entity isa. a corporationb. a proprietorshipc. a partnershipd. all of the above5. Which of the following is not a business transaction?a. make a sales offerb. sell goods for cashc. receive cash for services to be rendered laterd. pay for supplies6. The Reynolds Company estimated that the value of its land had increased from $10,000 to $16,000 and therefore wrote up the land account to $16,000. Which accounting concept(s) was (were) violated?a. cost conceptb. objectivity conceptc. all of the aboved. none of the above7. Goods purchased on account for future use in the business, such as supplies, are called a. prepaid liabilities b. revenuesc. prepaid expensesd. liabilities8. All of the following are financial statement(s) of a proprietorship except thea. statement of retained ear ningsb. statement of owner’s equityc. income statementd. statement of cash flowsChapter 2 A. A chart of accounts is a listing of accounts that make up the journal.B. Drawings are an example of an expense.C. To determine the balance in an account, always subtract credits from debits.D. The double-entry accounting system records each transaction twice.E. The increase side of all accounts is the normal balance.F. The journal is the book of original entry.G. Journalizing transactions using the double-entry bookkeeping system will eliminate fraud. H. The process of transferring the data from the journal to the ledger accounts is posting. I. The post reference notation used in the journal is the page number.J. When a business receives a bill from the utility company, no entry should be made until the invoice is paid.K. A proof of the equality of debits and credits in the ledger at the end of an accounting period is called a balance sheet.L. Even when a trial balance is in balance, there may be errors in the individual accounts. M. Posting a part of a transaction to the wrong account will cause the trial balance totals to be unequal.N. Horizontal analysis is used to compare the financial statements of the same company for different periods. 1. A group of related accounts that comprise a complete unit is called aa. Journalb. liability2.3.4.5.6. c. ledger d. transaction Which statement(s) concerning cash is (are) true? a. cash will always have more debits than credits b. cash will never have a credit balance c.cash is increased by debiting d. all of the above Which of the following types of accounts have a normal credit balance? a. assets and liabilities b. liabilities and expenses c. revenues and liabilities d. capital and drawing Which of the following entries records the receipt of cash from patients on account? a. Accounts Payable, debit; Fees Earned, credit b. Accounts Receivable, debit; Fees Earned, credit c. Accounts Receivable, debit; Cash, credit d. Cash, debit; Accounts Receivable, credit If the two totals of a trial balance are not equal, it could be due to a. failure to record a transaction b. recording the same erroneous amount for both the debit and the credit parts of a transaction c. an error in determining the account balances, such as a balance being incorrectly computed d. recording the same transaction more than once Which of the following errors, each considered individually, would cause the trial balance totals to be unequal?a. a transaction was not postedb. a payment of $96 for insurance was posted as a debit of $46 to Prepaid Insurance and a credit of $46 to Cashc. a payment of $311 to a creditor was posted as a debit of $3,111 to Accounts Payable and a debit of $311 to Accounts Receivabled. cash received from customers on account was posted as a debit of $140 to Cash and a credit of $140 to Accounts PayableChapter 3 1. The accrual basis of accounting requires revenue be recorded when cash is received from customers.2. The matching concept requires expenses be recorded in the same period that the related revenue is recorded.3. Adjusting entries are made at the end of an accounting period to adjust accounts on the balance sheet.4. The difference between deferred revenue and accrued revenue is that accrued revenue has been recorded and needs adjusting and deferred revenue has never been recorded.5. The systematic allocation of land’s cost to expense is called depreciation.6. The difference between the balance of a fixed asset account and the balance of its related accumulated depreciation account is termed the book value of the asset.7. If the adjustment for accrued salaries at the end of the period is inadvertently omitted, both liabilities and owner’s equity will be overstated for the period.8. The financial statements are prepared from the unadjusted trial balance.9. Vertical analysis compares each item in a statement with another item in the same statement.The correct: 2,6,91. Which account would normally not require an adjusting entry?a. Wages Expenseb. Accounts Receivablec. Accumulated Depreciationd. Smith, Capital2. What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $15,500, and unexpired amounts per analysis of policies, $4,500?a. debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500b. debit Insurance Expense, $15,500; credit Prepaid Insurance, $15,500c. debit Prepaid Insurance, $11,500; credit Insurance Expense, $11,500d. debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,0003. Depreciation Expense and Accumulated Depreciation are classified, respectively, asa. expense, contra assetb. asset, contra liabilityc. revenue, assetd. contra asset, expense4. If there is a balance in the unearned subscriptions account after adjusting entries are made, it represents a(n)a. deferralb. accrualc. drawingd. revenue5. What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $15,500, and unexpired amounts per analysis of policies, $4,500?a. debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500b. debit Insurance Expense, $15,500; credit Prepaid Insurance, $15,500c. debit Prepaid Insurance, $11,500; credit Insurance Expense, $11,500d. debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,0006. Depreciation Expense and Accumulated Depreciation are classified, respectively, asa. expense, contra assetb. asset, contra liabilityc. revenue, assetd. contra asset, expense7. If there is a balance in the unearned subscriptions account after adjusting entries are made, it represents a(n)a. deferralb. accrualc. drawingd. revenueMultiple choice: d d a aChapter 41. The most important output of the accounting cycle is the financial statements.2. A net loss is shown on the work sheet in the credit columns of both the Income Statement columns and the Balance Sheet columns.3. The difference between a classified balance sheet and one that is not classified is that the classified one has subheadings.4. Since the adjustments are entered on the work sheet, it is not necessary to record them in the journal or post them to the ledger.5. The post-closing trial balance will generally have fewer accounts than the trial balance.6. Solvency is essentially the ability of an organization to pay its bills.7. Working capital is current assets plus current liabilities.ANS:T F T F T T F1. The worksheeta. is an integral part of the accounting cycleb. eliminates the need to rewrite the financial statementsc. is a working paper that is requiredd. is used to summarize account balances and adjustments for the financial statements2. Which one of the fixed asset accounts listed below will not have a related contra asset account? a. Office Equipment b. Land c. Delivery Equipment d. Building3. Which of the accounts below would be closed by making a debit to the account?a. Unearned Revenueb. Fees Earnedc. Jeff Ritter, Drawingd. Rent Expense4. Which of the following accounts ordinarily appears in the post-closing trial balance?a. Bill Smith, Drawingb. Supplies Expensec. Fees Earnedd. Unearned Rent5. A fiscal yeara. ordinarily begins on the first day of a month and ends on the last day of the following twelfth monthb. for a business is determined by the federal governmentc. always begins on January 1 and ends on December 31 of the same yeard. should end at the height of the business’s annual operating cycle6. A current ratio of 4.3 means thata. there are $4.30 in current assets available to pay each dollar of current liabilitiesb. the company cannot pay its debts as they come duec. there are $4.30 in current assets for every $4.30 in current liabilitiesd. there are $4 in current assets for every $3 in current liabilitiesANS: dbbdaaChapter 61. In a merchandise business, sales minus operating expenses equals net income.2. In a perpetual inventory system, the Merchandise Inventory account is only used to reflect the beginning inventory.3. The single-step income statement is easier to prepare, but a criticism of this format is that gross profit and income from operations are not readily available.4. Under the perpetual inventory system, when a sale is made, both the retail and cost values are recorded.5. Sales Discounts is a revenue account with a credit balance.6. Discounts taken by the buyer for early payment of an invoice are credited to Cash Discounts by the buyer.7. If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment, the terms are stated as FOB destination.8. If merchandise costing $2,500, terms FOB destination, 2/10, n/30, with prepaid transportation costs of $100, is paid within 10 days, the amount of the purchases discount is $50.9. The adjusting entry to record inventory shrinkage would generally include a debit to Cost of Merchandise Sold. 1. The primary difference between a periodic and perpetual inventory system is that aa. periodic system determines the inventory on hand only at the end of the accounting periodb. periodic system keeps a record showing the inventory on hand at all timesc. periodic system provides an easy means to determine inventory shrinkaged. periodic system records the cost of the sale on the date the sale is made2. A sales invoice included the following information: merchandise price, $4,000; transportation, $300; terms 1/10, n/eom, FOB shipping point. Assuming that a credit for merchandise returned of $600 is granted prior to payment, that the transportation is prepaid by the seller, and that the invoice is paid within the discount period, what is the amount of cash received by the seller? a.$3,366 b.$3,400c.$3,666d.$3,9503. The net sales to asset s ratio measures a company’sa. working capitalb. net worthc. effective use of sales to support the purchase of new assetsd. effective use of assets to generate salesThe correct: 3,4,8,9 Multiple choice: a c dChapter 74. A customer’s c heck received in settlement of an account receivable is considered cash.5. If the balance in Cash Short and Over at the end of a period is a credit, it indicates that cash shortages have exceeded cash overages for the period.6. A voucher system is an example of an internal control procedure over cash payments.7. A remittance advice is the notification accompanying the check issued to a creditor that states the specific invoice being paid.8. The amount of the "adjusted balance" appearing on the bank reconciliation as ofa given date is the amount that is shown on the balance sheet for that date.9. When the petty cash fund is replenished, the petty cash account is credited for the total of all expenditures made since the fund was last replenished.10. Cash equivalents are short -term investments that will be converted to cash within 120 days.11. The doomsday ratio is almost always less than one.ANS:T F T T T F F T1. Credit memorandums from the banka. decrease a bank custom er’s accountb. are used to show a bank service chargec. show that a company has deposited a customer’s NSF checkd. show the bank has collected a note receivable for the customer2. Journal entries based on the bank reconciliation are required in the depositor’s accounts for a. outstanding checks b. deposits in transitc. bank errorsd. book errorsANS: d dChapter 81. Receivables from company owners and officers should be disclosed separately on the balance sheet.2. Since those responsible for receivables record keeping and credit approval do not handle cash, these duties do not need to be separated to maintain good internal control.3. Of the two methods of accounting for uncollectible receivables, the allowance method provides inadvance for uncollectible receivables.4. Although Allowance for Doubtful Accounts normally has a credit balance, it may have either a debit or a credit balance before adjusting entries are recorded at the end of the accounting period.5. At the end of a period, before the accounts are adjusted, Allowance for Doubtful Accounts has a debit balance of $2,000. If the estimate of uncollectible accounts determined by aging the receivables is $30,000, the current provision to be made for uncollectible accounts expense is $30,000.6. The due date of a 60-day note dated July 10 is September 10.7. If the maker of a note fails to pay the debt on the due date, the note is said to be dishonored.8. The discounting of a note receivable creates a contingent liability that continues in effect until the due date of the note. ANS: T F T T F F T T 1. Allowance for Doubtful Accounts has a debit balance of $500 at the end of the year (before adjustment), and uncollectible accounts expense is estimated at 3% of net sales. If net sales are $600,000, the amount of the adjusting entry to record the provision for doubtful accounts is a. $18,500 b. $17,500 c. $18,000 d. none of the above 2. On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the a. Uncollectible accounts expense for the year b. total of the accounts receivables written-off during the year c. total estimated uncollectible accounts as of the end of the year d. sum of all accounts that are past due. 3. What is the type of account and normal balance of Allowance for Doubtful Accounts? a. Contra asset, credit b. Asset, debit c. Asset, credit d. Contra asset, debit 4. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer’s account as uncollectible? a. Uncollectible Accounts Expense b. Accounts Receivable c. Allowance for Doubtful Accounts d. Interest Expense 5. A 90-day, 12% note for $10,000, dated May 1, is received from a customer on account. Thematurity value of the note isa. $10,000b. $10,300c. $450d. $9,550ANS: c c a b bChapter 91. 2. 3. 4. A business using the perpetual inventory system, with its detailed subsidiary records, does not need to take a physical inventory. Purchased goods in transit, shipped FOB destination, should be excluded from ending inventory. Unsold consigned merchandise should be included in the consignee’s inventory. Of the three widely used inventory costing methods (FIFO, LIFO, and average), the LIFO method of costing inventory is based on the assumption that costs are charged against revenues in the reverse order in which they were incurred.During inflationary periods, the use of the FIFO method of costing inventory will yield an inventory amount for the balance sheet approximating the current replacement cost.When using the FIFO inventory costing method, the most recent costs are assigned to the cost of goods sold.The use of the lower-of-cost-or-market method of inventory valuation increases net income for the period in which the inventory replacement price declined. Generally, the lower the number of days’ sales in inventory, the better.ANS: F F F T T F F TTaking a physical count of inventorya. is not necessary when a periodic inventory system is usedb. is a detective controlc. has no internal control relevanced. is not necessary when a perpetual inventory system is usedMerchandise inventory at the end of the year was inadvertently overstated. Which of the following statements correctly states the effect of the error on net income, assets, and owner’s equity?a. net income is overstated, assets are overstated, owner’s equity is understatedb. net income is overstated, assets are overstated, ow ner’s equity is overstatedc. net income is understated, assets are understated, owner’s equity is understatedd. net income is understated, assets are understated, owner’s equity is overstated Inventory costing methods place primary emphasis on assumptions abouta. flow of goodsb. flow of costsc. flow of goods or costs depending on the methodd. flow of valuesIf merchandise inventory is being valued at cost and the purchase price is steadily falling, which method of costing will yield the largest net income?a. average costb. LIFO 5. 6. 7. 8. 1. 2. 3. 4.c. FIFOd. weighted average 5. On the basis of the following data, what is the estimated cost of the merchandise inventory on October 31 by the retail method? Oct. 1 Merchandise Inventory $225,000 $324,500 Oct. 1-31 Purchases (net) 335,000 475,500 Oct. 1-31 Sales (net) 700,000 a. $372,000 b. $140,000 c. $100,000 d. $ 70,000 6. If the estimated rate of gross profit is 40%, what is the estimated cost of the merchandise inventory on June 30, based on the following data? June 1 Merchandise inventory $ 75,000 June 1-30 Purchases (net) 150,000 June 1-30 Sales (net) 135,000 a. $144,000 b. $140,000 c. $ 81,000 d. $ 54,500 7. Too much inventory on handa. reduces solvencyb. increases the cost to safeguard the assetsc. increases the losses due to price declinesd. all of the aboveANS: b b b b d a dChapter 10 1. The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs to get the asset in place and ready for use.2. Land acquired as a speculation is reported under Investments on the balance sheet.3. Standby equipment held for use in the event of a breakdown of regular equipment is reported as property, plant, and equipment on the balance sheet.4. As a company depreciates a piece of equipment, it cash flow goes up.5. All property, plant, and equipment assets are depreciated over time.6. The declining-balance method is an accelerated depreciation method.7. The cost of replacing an engine in a truck is an example of ordinary maintenance.8. The cost of new equipment is called a revenue expenditure because it will help generate revenues in the future.9. A gain can be realized when a fixed asset is discarded.10. When exchanging equipment, if the trade-in allowance is greater than the book value a loss results.11. The cost of a patent with a remaining legal life of 10 years and an estimated useful life of 7 years is amortized over 10 years.12. The method used to calculate the depletion of a natural resource is the straight line method.13. The higher the ratio of fixed assets to long-term liabilities the greater the margin of safety.ANS: T T T F F T F F F F F F T1. Factors contributing to a decline in the usefulness of a fixed asset may be divided into the following two categoriesa. salvage and functionalb. physical and functionalc. residual and salvaged. functional and residual2. Accumulated Depreciationa. is used to show the amount of cost expiration of intangiblesb. is the same as Depreciation Expensec. is a contra asset accountd. is used to show the amount of cost expiration of natural resources3. Equipment with a cost of $80,000, an estimated residual value of $5,000, and an estimated life of 15 years was depreciated by the straight-line method for 5 years. Due to obsolescence, it was determined that the useful life should be shortened by 5 years and the residual value changed to zero. The depreciation expense for the current and future years isa. $5,500b. $11,000c. $10,000d. $5,0004. A fixed asset with a cost of $42,000 and accumulated depreciation of $38,500 is traded for a similar asset priced at $60,000. Assuming a trade-in allowance of $5,000, the cost basis of the new asset isa. $58,000b. $58,500c. $60,000d. $61,5005. A machine with a cost of $65,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the second full year, using the declining-balance method at double the straight-line rate?a. $15,000b. $30,000c. $16,250d. $32,500ANS: b c b b cChapter 11 1. For a current liability to exist, the following two tests must be met. The liability must be due usually within a year and must be paid out of current assets.2. For an interest bearing note payable, the amount borrowed is equal to the face value of the note.3. The proceeds of a discounted note are equal to the face value of the note.4. Obligations that depend on past events and that are based on future transactions are contingent liabilities.5. The journal entry to record the cost of warranty repairs that were incurred during the current period, but related to sales made in prior years, includes a debit to Warranty Expense.6. Generally, all deductions made from an employee’s gross pay are required by law.7. FICA tax is a payroll tax that is paid only by employers.8. The higher the quick ratio, the more liquid a company is.ANS: T T F F F F F T1. On June 8, Acme Co. issued an $80,000, 6%, 120-day note payable to Still Co. Assume that the fiscal year of Acme Co. ends June 30. What is the amount of interest expense recognized by Acme in the current fiscal year?a. $293.33b. $400.00c. $391.11d. $1,600.002. Proceeds of $48,750 were received from discounting a $50,000, 90-day note at a bank. The discount rate used by the bank in computing the proceeds wasa. 6.25%b. 10.00%c. 10.26%d. 9.75%3. Pilgrim Company sells merchandise with a one year warranty. In 2005, sales consisted of 1,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2005 and 70% in 2006. In the 2005 income statement, Pilgrim should show warranty expense ofa. $4,500b. $10,500c. $15,000d. $0ANS: a b cChapter 12 1. A corporation is a separate entity for accounting purposes but not for legal purposes.2. Double taxation is a disadvantage of a corporation because the same party has to pay taxes twice on the income.3. The two main sources of stockholders’ equity are investments contributed by stockholders and net income retained in the business.4. The balance in retained earnings should be interpreted as representing surplus cash left over for dividends.5. Preferred stock with a preferential right to dividends in arrears is referred to asparticipating preferred.6. If 50,000 shares are authorized, 37,000 shares are issued, and 2,000 shares are reacquired, the number of outstanding shares is 39,000.7. When a corporation issues stock at a premium, it reports the premium as an other income item on the income statement.8. If 100 shares of treasury stock were purchased for $50 per share and then sold at $60 per share, $1,000 of income is reported in the income statement.9. Since a stock split changes information of a business, this transaction needs to be recorded.10. If 20,000 shares are authorized, 14,000 shares are issued, and 500 shares are held as treasury stock, a cash dividend of $1 per share would amount to $14,000.11. The declaration and issuance of a stock dividend does not affect the total amount of a corporation’s assets, liabilities, or stockholders’ equity.12. The dividend yield indicates the rate of return to stockholders in terms of cash dividend distributions.ANS: F F T F F F F F F F T T1. The outstanding stock is composed of 10,000 shares of $100 par, cumulative preferred $8 stock, and 50,000 shares of no-par common stock. Preferred dividends have been paid every year except for the preceding year and the current year. If $380,000 is to be distributed as a dividend for the current year, what total amount will be distributed to the common stockholders? a. $380,000b. $220,000c. $80,000d. $160,0002. A corporation issues 2,000 shares of common stock for $ 32,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock fora. $20,000b. $32,000c. $12,000d. $2,0003. When common stock is issued in exchange for a noncash asset, the transaction should be recorded ata. the par value of the stock issuedb. the fair market value of the stockc. the fair market value of the asset acquiredd. the fair market value of the asset acquired or the fair market value of the stock, whichever canbe determined more objectively.4. Treasury stock that had been purchased for $5,400 last month was reissued this month for $7,500. The journal entry to record the reissuance would include a credit。

《中级财务会计习题与案例》第九章答案知识分享

第九章资产减值（一）单项选择题1．B 2．C 3．D 4．D 5．A 6．C 7．C 8．B 9．B 10．A 11．D 12．A 13．D 14．D 15．B 16．D 17．D 18．A 19．D 20．D 21．C 22．A 23．B 24．C 25．A 26．D 27．C （二）多项选择题1．BD 2．ACD 3．ABD 4．ABE 5．BDE 6．ABC 7．CD 8．DE 9．AD 10．AD 11．ACD 12．ABCD 13．ACE 14．CE 15．AD 16．BDE 17．ACE 18．ACDE 19．ADE 20．AC 21．BCE 22．ABC 23．BCDE 24．ABDE 25．ABCE 26．ABCE 27．CD （三）判断题1．× 2．√ 3．× 4．√ 5．× 6．√7．√ 8．√ 9．√ 10．×11．× 12．√ 13．√ 14．× 15．√16．× 17．× 18．√ 19．×20．× 21．√ 22．√ 23．√ 24．×25．√ 26．√ 27．√ 28．× 29．√ 30．√（四）计算及账务处理题1．（1）未计提减值准备前资产的账面价值＝600－600÷10×3.5=600－210=390（万元）应计提减值准备＝390－240=150（万元）（2）无形资产摊销。

借：管理费用50 000贷：累计摊销50 000计提无形资产减值准备。

借：资产减值损失1 500 000贷：无形资产减值准备1 500 000（3）20×9年1月应摊销金额＝240÷5÷12=4（万元）借：管理费用40 000贷：累计摊销40 0002．（1）未计提减值准备前资产的账面价值＝360-360÷10÷12×26=360-78=282（万元）应计提减值准备＝282-162=120（万元）（2）无形资产摊销。

罗斯-公司理财-英文练习题-附带答案-第九章

罗斯-公司理财-英⽂练习题-附带答案-第九章CHAPTER 9Risk Analysis, Real Options, and Capital Budgeting Multiple Choice Questions:I. DEFINITIONSSCENARIO ANALYSISb 1. An analysis of what happens to the estimate of the net present value when you examinea number of different likely situations is called _____ analysis.a. forecastingb. scenarioc. sensitivityd. simulatione. break-evenDifficulty level: EasySENSITIVITY ANALYSISc 2. An analysis of what happens to the estimate of net present value when only onevariable is changed is called _____ analysis.a. forecastingb. scenarioc. sensitivityd. simulatione. break-evenDifficulty level: EasySIMULATION ANALYSISd 3. An analysis which combines scenario analysis with sensitivity analysis is called _____ analysis.a. forecastingb. scenarioc. sensitivityd. simulatione. break-evenDifficulty level: EasyBREAK-EVEN ANALYSISe 4. An analysis of the relationship between the sales volume and various measures ofprofitability is called _____ analysis.a. forecastingb. scenarioc. sensitivityd. simulatione. break-evenDifficulty level: EasyVARIABLE COSTSa 5. Variable costs:a. change in direct relationship to the quantity of output produced.b. are constant in the short-run regardless of the quantity of output produced.c. reflect the change in a variable when one more unit of output is produced.d. are subtracted from fixed costs to compute the contribution margin.e. form the basis that is used to determine the degree of operating leverage employed by a firm.Difficulty level: EasyFIXED COSTSb 6. Fixed costs:a. change as the quantity of output produced changes.b. are constant over the short-run regardless of the quantity of output produced.c. reflect the change in a variable when one more unit of output is produced.d. are subtracted from sales to compute the contribution margin.e. can be ignored in scenario analysis since they are constant over the life of a project. Difficulty level: EasyACCOUNTING BREAK-EVENc 7. The sales level that results in a project’s net income exactly equaling zero is called the_____ break-even.a. operationalb. leveragedc. accountingd. cashe. present valueDifficulty level: EasyPRESENT VALUE BREAK-EVENe 8. The sales level that results in a project’s net present value exactly equaling zero is called the _____ break-even.a. operationalb. leveragedc. accountingd. cashe. present valueDifficulty level: EasyII. CONCEPTSSCENARIO ANALYSISb 9. Conducting scenario analysis helps managers see the:a. impact of an individual variable on the outcome of a project.b. potential range of outcomes from a proposed project.c. changes in long-term debt over the course of a proposed project.d. possible range of market prices for their stock over the life of a project.e. allocation distribution of funds for capital projects under conditions of hard rationing. Difficulty level: EasySENSITIVITY ANALYSISb 10. Sensitivity analysis helps you determine the:a. range of possible outcomes given possible ranges for every variable.b. degree to which the net present value reacts to changes in a single variable.c. net present value given the best and the worst possible situations.d. degree to which a project is reliant upon the fixed costs.e. level of variable costs in relation to the fixed costs of a project.Difficulty level: EasySENSITIVITY ANALYSISc 11. As the degree of sensitivity of a project to a single variable rises, the:a. lower the forecasting risk of the project.b. smaller the range of possible outcomes given a pre-defined range of values for the input.c. more attention management should place on accurately forecasting the future value of that variable.d. lower the maximum potential value of the project.e. lower the maximum potential loss of the project.Difficulty level: MediumSENSITIVITY ANALYSISc 12. Sensitivity analysis is conducted by:a. holding all variables at their base level and changing the required rate of return assigned to a project.b. changing the value of two variables to determine their interdependency.c. changing the value of a single variable and computing the resulting change in the current value of a project.d. assigning either the best or the worst possible value to each variable and comparing the results to those achieved by the base case.e. managers after a project has been implemented to determine how each variable relates to the level of output realized.Difficulty level: MediumSENSITIVITY ANALYSISd 13. To ascertain whether the accuracy of the variable cost estimate for a project will havemuch effect on the final outcome of the project, you should probably conduct _____ analysis.a. leverageb. scenarioc. break-evend. sensitivitye. cash flowDifficulty level: EasySIMULATIONd 14. Simulation analysis is based on assigning a _____ and analyzing the results.a. narrow range of values to a single variableb. narrow range of values to multiple variables simultaneouslyc. wide range of values to a single variabled. wide range of values to multiple variables simultaneouslye. single value to each of the variablesDifficulty level: MediumSIMULATIONe 15. The type of analysis that is most dependent upon the use of a computer is _____ analysis.a. scenariob. break-evenc. sensitivityd. degree of operating leveragee. simulationDifficulty level: EasyVARIABLE COSTSd 16. Which one of the following is most likely a variable cost?a. office rentb. property taxesc. property insuranced. direct labor costse. management salariesDifficulty level: EasyVARIABLE COSTSa 17. Which of the following statements concerning variable costs is (are) correct?I. Variable costs minus fixed costs equal marginal costs.II. Variable costs are equal to zero when production is equal to zero.III. An increase in variable costs increases the operating cash flow.a. II onlyb. III onlyc. I and III onlyd. II and III onlye. I and II onlyDifficulty level: MediumVARIABLE COSTSa 18. All else constant, as the variable cost per unit increases, the:a. contribution margin decreases.b. sensitivity to fixed costs decreases.c. degree of operating leverage decreases.d. operating cash flow increases.e. net profit increases.Difficulty level: MediumFIXED COSTSc 19. Fixed costs:I. are variable over long periods of time.II. must be paid even if production is halted.III. are generally affected by the amount of fixed assets owned by a firm.IV. per unit remain constant over a given range of production output.a. I and III onlyb. II and IV onlyc. I, II, and III onlyd. I, II, and IV onlye. I, II, III, and IVDifficulty level: MediumCONTRIBUTION MARGINc 20. The contribution margin must increase as:a. both the sales price and variable cost per unit increase.b. the fixed cost per unit declines.c. the gap between the sales price and the variable cost per unit widens.d. sales price per unit declines.e. the sales price minus the fixed cost per unit increases.Difficulty level: MediumACCOUNTING BREAK-EVENa 21. Which of the following statements are correct concerning the accounting break-evenpoint?I. The net income is equal to zero at the accounting break-even point.II. The net present value is equal to zero at the accounting break-even point.III. The quantity sold at the accounting break-even point is equal to the total fixed costs plus depreciation divided by the contribution margin.IV. The quantity sold at the accounting break-even point is equal to the total fixed costs divided by the contribution margin.a. I and III onlyb. I and IV onlyd. II and IV onlye. I, II, and IV onlyDifficulty level: MediumACCOUNTING BREAK-EVENb 22. All else constant, the accounting break-even level of sales will decrease when the:a. fixed costs increase.b. depreciation expense decreases.c. contribution margin decreases.d. variable costs per unit increase.e. selling price per unit decreases.Difficulty level: MediumPRESENT VALUE BREAK-EVENd 23. The point where a project produces a rate of return equal to the required return isknown as the:a. point of zero operating leverage.b. internal break-even point.c. accounting break-even point.d. present value break-even point.e. internal break-even point.Difficulty level: EasyPRESENT VALUE BREAK-EVENb 24. Which of the following statements are correct concerning the present value break-even point of a project?I. The present value of the cash inflows equals the amount of the initial investment.II. The payback period of the project is equal to the life of the project.III. The operating cash flow is at a level that produces a net present value of zero.IV. The project never pays back on a discounted basis.a. I and II onlyb. I and III onlyc. II and IV onlyd. III and IV onlyDifficulty level: MediumINVESTMENT TIMING DECISIONb 25. The investment timing decision relates to:a. how long the cash flows last once a project is implemented.b. the decision as to when a project should be started.c. how frequently the cash flows of a project occur.d. how frequently the interest on the debt incurred to finance a project is compounded.e. the decision to either finance a project over time or pay out the initial cost in cash.Difficulty level: MediumOPTION TO WAITe 26. The timing option that gives the option to wait:I. may be of minimal value if the project relates to a rapidly changing technology.II. is partially dependent upon the discount rate applied to the project being evaluated.III. is defined as the situation where operations are shut down for a period of time.IV. has a value equal to the net present value of the project if it is started today versus the net present value if it is started at some later date.a. I and III onlyb. II and IV onlyc. I and II onlyd. II, III, and IV onlye. I, II, and IV onlyDifficulty level: ChallengeOPTION TO EXPANDb 27. Last month you introduced a new product to the market. Consumer demand has beenoverwhelming and appears that strong demand will exist over the long-term. Given thissituation, management should consider the option to:a. suspend.b. expand.c. abandon.d. contract.e. withdraw.Difficulty level: EasyOPTION TO EXPANDc 28. Including the option to expand in your project analysis will tend to:a. extend the duration of a project but not affect the project’s net present value.b. incre ase the cash flows of a project but decrease the project’s net present value.c. increase the net present value of a project.d. decrease the net present value of a project.e. have no effect on either a project’s cash flows or its net present value.Difficulty level: MediumSENSITIVITY AND SENARIO ANALYSISd 29. Theoretically, the NPV is the most appropriate method to determine the acceptabilityof a project. A false sense of security can be overwhelm the decision-maker when the procedure is applied properly and the positive NPV results are accepted blindly. Sensitivity and scenario analysis aid in the process bya. changing the underlying assumptions on which the decision is based.b. highlights the areas where more and better data are needed.c. providing a picture of how an event can affect the calculations.d. All of the above.e. None of the above.Difficulty level: MediumDECSION TREEa 30. In order to make a decision with a decision treea. one starts farthest out in time to make the first decision.b. one must begin at time 0.c. any path can be taken to get to the end.d. any path can be taken to get back to the beginning.e. None of the above.Difficulty level: MediumDECISION TREEc 31. In a decision tree, the NPV to make the yes/no decision is dependent ona. only the cash flows from successful path.b. on the path where the probabilities add up to one.c. all cash flows and probabilities.d. only the cash flows and probabilities of the successful path.e. None of the above.Difficulty level: MediumDECISION TREEe 32. In a decision tree, caution should be used in analysis becausea. early stage decisions are probably riskier and should not likely use the same discount rate.b. if a negative NPV is actually occurring, management should opt out of the project and minimize their loss.c. decision trees are only used for planning, not actually daily management.d. Both A and C.e. Both A and B.Difficulty level: MediumSENSITIVITY ANALYSISd 33. Sensitivity analysis evaluates the NPV with respect toa. changes in the underlying assumptions.b. one variable changing while holding the others constant.c. different economic conditions.d. All of the above.e. None of the above.Difficulty level: MediumSENSITIVITY ANALYSISd 34. Sensitivity analysis provides information ona. whether the NPV should be trusted, it may provide a false sense of security if all NPVs are positive.b. the need for additional information as it tests each variable in isolation.c. the degree of difficulty in changing multiple variables together.d. Both A and B.e. Both A and C.Difficulty level: MediumFIXED COSTSb 35. Fixed production costs area. directly related to labor costs.b. measured as cost per unit of time.c. measured as cost per unit of output.d. dependent on the amount of goods or services produced.e. None of the above.Difficulty level: MediumVARIABLE COSTSd 36. Variable costsa. change as the quantity of output changes.b. are zero when production is zero.c. are exemplified by direct labor and raw materials.d. All of the above.e. None of the above.Difficulty level: EasySENSITIVITY ANALYSISb 37. An investigation of the degree to which NPV depends on assumptions made about any singular critical variable is called a(n)a. operating analysis.b. sensitivity analysis.c. marginal benefit analysis.d. decision tree analysis.e. None of the above.Difficulty level: EasySENSITIVITY AND SCENARIOS ANALYSISb 38. Scenario analysis is different than sensitivity analysisa. as no economic forecasts are changed.b. as several variables are changed together.c. because scenario analysis deals with actual data versus sensitivity analysis which deals with a forecast.d. because it is short and simple.e. because it is 'by the seat of the pants' technique.Difficulty level: MediumEQUIVALENT ANNUAL COSTc 39. In the present-value break-even the EAC is used toa. determine the opportunity cost of investment.b. allocate depreciation over the life of the project.c. allocate the initial investment at its opportunity cost over the life of the project.d. determine the contribution margin to fixed costs.e. None of the above.Difficulty level: MediumBREAK-EVENb 40. The present value break-even point is superior to the accounting break-even point becausea. present value break-even is more complicated to calculate.b. present value break-even covers the economic opportunity costs of the investment.c. present value break-even is the same as sensitivity analysis.d. present value break-even covers the fixed costs of production, which the accounting break-even does not.e. present value break-even covers the variable costs of production, which the accounting break-even does not.Difficulty level: EasyABANDONMENTd 41. The potential decision to abandon a project has option value becausea. abandonment can occur at any future point in time.b. a project may be worth more dead than alive.c. management is not locked into a negative outcome.d. All of the above.e. None of the above.Difficulty level: EasyTYPES OF BREAK-EVEN ANALYSISd 42. Which of the following are types of break-even analysis?a. present value break-evenb. accounting profit break-evenc. market value break-evend. Both A and B.e. Both A and C.Difficulty level: EasyMONTE CARLO SIMULATIONc 43. The approach that further attempts to model real word uncertainty by analyzingprojects the way one might analyze gambling strategies is calleda. gamblers approach.b. blackjack approach.c. Monte Carlo simulation.d. scenario analysis.e. sensitivity analysis.Difficulty level: MediumMONTE CARLO SIMULATIONc 44. Monte Carlo simulation isa. the most widely used by executives.b. a very simple formula.c. provides a more complete analysis that sensitivity or scenario.d. the oldest capital budgeting technique.e. None of the above.Difficulty level: EasyOPTIONS IN CAPITAL BUDGETINGd 45. Which of the following are hidden options in capital budgeting?a. option to expand.b. timing option.c. option to abandon.d. All of the above.e. None of the above.Difficulty level: EasyIII. PROBLEMSUse this information to answer questions 46 through 50.The Adept Co. is analyzing a proposed project. The company expects to sell 2,500units, give or take 10 percent. The expected variable cost per unit is $8 and the expected fixed costs are $12,500. Cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $4,000. The saleprice is estimated at $16 aunit, give or take 2 percent. The company bases their sensitivity analysis on the expected case scenario. SCENARIO ANALYSISd 46. What is the sales revenue under the optimistic case scenario?a. $40,000b. $43,120c. $44,000d. $44,880e. $48,400Difficulty level: MediumSCENARIO ANALYSISd 47. What is the contribution margin under the expected case scenario?a. $2.67b. $3.00c. $7.92d. $8.00e. $8.72Difficulty level: MediumSCENARIO ANALYSISc 48. What is the amount of the fixed cost per unit under the pessimistic case scenario?a. $4.55b. $5.00c. $5.83d. $6.02e. $6.55Difficulty level: MediumSENSITIVITY ANALYSISb 49. The company is conducting a sensitivity analysis on the sales price using a salesprice estimate of $17. Using this value, the earnings before interest and taxes will be:a. $4,000b. $6,000c. $8,500d. $10,000e. $18,500Difficulty level: MediumSENSITIVITY ANALYSISb 50. The company conducts a sensitivity analysis using a variable cost of $9. The totalvariable cost estimate will be:a. $21,375b. $22,500c. $23,625d. $24,125e. $24,750Difficulty level: MediumUse this information to answer questions 51 through 55.The Can-Do Co. is analyzing a proposed project. The company expects to sell 12,000units, give or take 4 percent. The expected variable cost per unit is $7 and the expectedfixed cost is $36,000. The fixed and variable cost estimates are considered accuratewithin a plus or minus 6 percent range. The depreciation expense is $30,000. The tax rate is 34 percent. The sale price is estimated at $14 a unit, give or take 5 percent. Thecompany bases their sensitivity analysis on the expected case scenario.SCENARIO ANALYSISa 51. What is the earnings before interest and taxes under the expected case scenario?a. $18,000b. $24,000c. $36,000d. $48,000e. $54,000Difficulty level: MediumSCENARIO ANALYSISc 52. What is the earnings before interest and taxes under anoptimistic case scenario?a. $22,694.40b. $24,854.40c. $37,497.60d. $52,694.40Difficulty level: ChallengeSCENARIO ANALYSISb 53. What is the earnings before interest and taxes under the pessimistic case scenario?b. -$422.40c. -$278.78d. $3,554.50e. $5,385.60Difficulty level: ChallengeSENSITIVITY ANALYSISd 54. What is the operating cash flow for a sensitivity analysis using total fixed costs of$32,000?a. $14,520b. $16,520c. $22,000d. $44,520e. $52,000Difficulty level: MediumSENSITIVITY ANALYSISd 55. What is the contribution margin for a sensitivity analysis using a variable cost per unitof $8?a. $3b. $4c. $5d. $6e. $7Difficulty level: MediumVARIABLE COSTc 56. A firm is reviewing a project with labor cost of $8.90 per unit, raw materials cost of $21.63 a unit, and fixed costs of $8,000 a month. Sales are projected at 10,000 units over the three-month life of the project. What are the total variable costs of the project?a. $216,300c. $305,300d. $313,300e. $329,300Difficulty level: MediumVARIABLE COSTd 57. A project has earnings before interest and taxes of $5,750, fixed costs of $50,000, aselling price of $13 a unit, and a sales quantity of 11,500 units. Depreciation is $7,500. What is the variable cost per unit?a. $6.75c. $7.25d. $7.50e. $7.75Difficulty level: MediumFIXED COSTb 58. At a production level of 5,600 units a project has total costs of $89,000. The variable cost per unit is $11.20. What is the amount of the total fixed costs?a. $24,126b. $26,280c. $27,090d. $27,820e. $28,626Difficulty level: MediumFIXED COSTe 59. At a production level of 6,000 units a project has total costs of $120,000. The variablecost per unit is $14.50. What is the amount of the total fixed costs?a. $25,165b. $28,200c. $30,570d. $32,000e. $33,000Difficulty level: MediumCONTRIBUTION MARGINc 60. Wilson’s Meats has computed their fixed costs to be $.60 for every pound of meatthey sell given an average daily sales level of 500 pounds. They charge $3.89 per pound of top-grade ground beef. The variable cost per pound is $2.99. What is the contribution margin per pound of ground beef sold?a. $.30b. $.60c. $.90d. $2.99e. $3.89Difficulty level: MediumCONTRIBUTION MARGINe 61. Ralph and Emma’s is considering a project with total sales of $17,500, total variablecosts of $9,800, total fixed costs of $3,500, and estimated production of 400 units. The depreciation expense is $2,400 a year. What is the contribution margin per unit?a. $4.50b. $10.50d. $19.09e. $19.25Difficulty level: MediumACCOUNTING BREAK-EVENa 62. You are considering a new project. The project has projected depreciation of $720, fixed costs of $6,000, and total sales of $11,760. The variable cost per unit is$4.20. What is the accounting break-even level of production?a. 1,200 unitsb. 1,334 unitsc. 1,372 unitsd. 1,889 unitse. 1,910 unitsDifficulty level: MediumACCOUNTING BREAK-EVENb 63. The accounting break-even production quantity for a project is 5,425 units. The fixed costs are $31,600 and the contribution margin is $6. What is the projected depreciation expense?a. $700b. $950c. $1,025d. $1,053e. $1,100Difficulty level: MediumACCOUNTING BREAK-EVENd 64. A project has an accounting break-even point of 2,000 units. The fixed costs are$4,200 and the depreciation expense is $400. The projected variable cost per unit is $23.10. What is the projected sales price?a. $20.80b. $21.00c. $21.20d. $25.40e. $25.60Difficulty level: MediumACCOUNTING BREAK-EVENa 65. A proposed project has fixed costs of $3,600, depreciation expense of $1,500, and a sales quantity of 1,300 units. What is the contribution margin if the projected level of sales is the accounting break-even point?a. $3.92c. $4.50d. $4.80e. $5.00Difficulty level: MediumPRESENT VALUE BREAK-EVENc 66. A project has a contribution margin of $5, projected fixed costs of $12,000, projectedvariable cost per unit of $12, and a projected present value break-even point of 5,000 units. What is the operating cash flow at this level of output?a. $1,000b. $12,000c. $13,000d. $68,000e. $73,000Difficulty level: MediumPRESENT VALUE BREAK-EVENa 67. Thompson & Son have been busy analyzing a new product. They have determined that an operating cash flow of $16,700 will result in a zero net present value, which is a company requirement for project acceptance. The fixed costs are $12,378 and the contribution margin is $6.20. The company feels that they can realistically capture10 percent of the 50,000 unit market for this product. Should the company develop thenew product? Why or why not?a. yes; because 5,000 units of sales exceeds the quantity required for a zero net present valueb. yes; because the internal break-even point is less than 5,000 unitsc. no; because the firm can not generate sufficient sales to obtain at least a zero net present valued. no; because the project has an expected internal rate of return of negative 100percente. no; because the project will not pay back on a discounted basisDifficulty level: ChallengePRESENT VALUE BREAK-EVENe 68. Kurt Neal and Son is considering a project with a discounted payback just equal to the project’s life. The projections include a sales price of $11, variable cost per unit of$8.50, and fixed costs of $4,500. The operating cash flow is $6,200. What is the break-even quantity?a. 1,800 unitsb. 2,480 unitsc. 3,057 unitsd. 3,750 unitse. 4,280 unitsDifficulty level: MediumDECISION TREE NET PRESENT VALUEb 69. At stage 2 of the decision tree it shows that if a project is successful, the payoff will be $53,000 with a 2/3 chance of occurrence. There is also the 1/3 chance of a $-24,000payoff. The cost of getting to stage 2 (1 year out) is $44,000. The cost of capital is15%. What is the NPV of the project at stage 1?a. $-13,275b. $-20,232c. $ 2,087d. $ 7,536e. Can not be calculated without the exact timing of future cash flows.Difficulty level: MediumUse the following to answer questions 70-71:The Quick-Start Company has the following pattern of potential cash flows with their planned investment in a new cold weather starting system for fuel injected cars.DECISION TREEa 70. If the company has a discount rate of 17%, what is the value closest to time 1 netpresent value?a. $ 48.6 millionb. $ 80.9 millionc. $108.2 milliond. $181.4 millione. None of the above.Difficulty level: ChallengeDECISION TREEb 71. If the company has a discount rate of 17%, should they decide to invest?a. yes, NPV = $ 2.2 millionb. yes, NPV = $ 21.6 millionc. no, NPV = $-1.9 milliond. yes, NPV = $ 8.6 millione. No, since more than one branch is NPV = 0 or negative you must reject.Difficulty level: ChallengeACCOUNTING BREAK-EVENe 72. The Mini-Max Company has the following cost information on their new prospectiveproject. Calculate the accounting break-even point.Initial investment: $700。

中级财务会计课后习题答案(全部)教材习题答案(全部).docx

教材练习题参考答案第二章货币资金【参考答案】（1）①出差借支时借：其他应收款一一张某1000贷：银行存款1000②归来报销时借：管理费用850库存现金150贷：其他应收款1000（2）①开立临时采购户吋借：其他货币资金一一外埠存款80 000贷：银行存款80 000②收到购货单位发票时借：原材料60 000应交税费一一应交增值税（进项税额）10 200贷：其他货币资金一一外埠存款70 200③将多余资金转回原来开户行时借：银行存款9 800贷：其他货币资金一一外埠存款9 800（3）①收到开户银行转来的付款凭证吋借:其他货币资金一一信用卡3 000贷：银行存款3 000②收到购物发票账单时借：管理费用2 520贷：其他货币资金一一信用卡25 20（4）拨出备用金时借：备用金1000贷：银行存款10 00（5）总务部门报销时借:管理费用900贷：库存现金9 00（6）①期末盘点发现短缺时借：待处理财产损溢一一待处理流动资产损溢50贷：库存现金50②经批准计入损益吋借：管理费用5 0贷：待处理财产损溢一一待处理流动资产损溢50第三章应收款项【参考答案】1.（1）办妥托收银行收款手续时：借:应收账款11700贷：主营业务收入10 000应交税费一应交增值税（销项税额）17 0 00（2）如在10天内收到货款时借：银行存款11 466财务费用23 4贷：应收账款11700（3）如在30内收到货款时借：银行存款11700贷：应收账款117002.（1）收到票据时借：应收票据93 6 00贷：主营业务收入80 000应交税费一应交增值税（销项税额）13 600（2）年终计提票据利息借:应收票据15 60贷:财务费用1560（3 ）到期收回货款借:银行存款98 280贷：应收票据95 160财务费用3 1203.（1）第一年末借:资产减值损失5 000贷：坏账准备5 000（2）第二年末借:资产减值损失7 500贷：坏账准备7 500（3 ）第三年末借：坏账進备1500贷：资产减值损失1500（3）第四年6月发生坏账时借：坏账准备18 000贷:应收账款18 00010月收回己核销的坏账时借:应收账款5 00 0贷：坏账准备5 000借：银行存款5 000贷：应收账款5000年末计提坏账准备时借：资产减值损失1 2 000贷：坏账准备12 00 0第四章存货【参考答案】1.（1）实际成本核算：该批甲材料的实际总成本=20 000+200=2 0 200 （元）借：原材料•甲材料20 2 00应交税费•应交增值税3 400贷：银行存款23 600（2）计划成本核算①购进借:材料采购■甲材料20 200应交税费•应交增值税3 400贷：银行存款23 600②入库材料成本差异=20 200-990X18 =2380元，超支差异借：原材料--- 甲材料17 820 （=990X18）材料成本差异2380贷：材料采购——甲材料20 20 02.（1）先进先出法6月7日①发出A材料的成本=200X 60+20 0X 66=25 20 0 （元）6月18日②发出A材料的成本=300X 66 +500X 70=54 800 （元）6月29日③发出A材料的成本=100 X70+200X68 =20 600 （元）期末结存A材料成本=300X68=20 400 （元）（2）月末一次加权平均法加权平均单位成本二（12 000+109 0 00） 4- （200+1 600） ^67.22 （元/公斤）期末结存A材料的成本=300 X67.22=201 66 （元）本月发出A 材料的成本二（12 000+109 00 0） -20166=1 00834 （元）（3 ）移动加权平均法6月5日①购进后移动平均单位成本二（12000+33 000）一（200+500） =64.29 （元/公斤）6月7日结存A材料成本=300X64 .29=19287 （元）6 月7 日发出A 材料成本=（12000+330 00） -19287=25713 （元）6月16日②购进后移动平均单位成本二（19287+42 000） 4- （300+600） =68.10 （元/公斤）6月18日结存A材料成本=100X68 .10=6810 （元）6 月18 日发出A 材料成本二（19287+4200 0） -6810=54 477 （元）6月27日③购进后移动平均单位成本二（6810+34000 ）0 （100+500 ）=68.02 （元/公斤）6月29日结存A材料成本=300X68.02 =20406 （元）6月29日发出A材料成本二（68 10+34000）・20406=2040 4 （元）期末结存A材料成本=300X68 .02=20406 （元）3.A产品：有销售合同部分：A产品可变现净值=40X （1105）=4 20（万元），成本=40X10=400 （万元），这部分存货不需计提跌价准备。

(完整word版)国际财务管理课后习题答案chapter9

CHAPTER 9 MANAGEMENT OF ECONOMIC EXPOSURESUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. How would you define economic exposure to exchange risk?Answer: Economic exposure can be defined as the possibility that the firm’s cash flows and thus its market value may be affected by the unexpected exchange rate changes.2. Explain the following statement: “Exposure is the regression coefficient.”Answer: Exposure to currency risk can be appropriately measured by th e sensitivity of the firm’s future cash flows and the market value to random changes in exchange rates. Statistically, this sensitivity can be estimated by the regression coefficient. Thus, exposure can be said to be the regression coefficient.3. Suppose that your company has an equity position in a French firm. Discuss the condition under which the dollar/franc exchange rate uncertainty does not constitute exchange exposure for your company.Answer: Mere changes in exchange rates do not necessarily constitute currency exposure. If the French franc value of the equity moves in the opposite direction as much as the dollar value of the franc changes, then the dollar value of the equity position will be insensitive to exchange rate movements. As a result, your company will not be exposed to currency risk.4. Explain the competitive and conversion effects of exchange rate changes on the firm’s operating cash flow.Answer: The competitive effect: exchange rate changes may affect operating cash flows by altering the firm’s competitive position.The conversion effect: A given operating cash flows in terms of a foreign currency will be converted into higher or lower dollar (home currency)amounts as the exchange rate changes.5. Discuss the determinants of operating exposure.Answer: The main determinants of a firm’s operating exposure are (1) the structure of the markets in which the firm sources its inputs, such as labor and materials, and sells its products, and (2) the firm’s ability to mitigate the effect of exchange rate changes by adjusting its markets, product mix, and sourcing.6. Discuss the implications of purchasing power parity for operating exposure.Answer: If the exchange rate changes are matched by the inflation rate differential between countries, firms’ competitive positions will not be altered by exchange rate changes. Firms are not subject to operating exposure.7. General Motors exports cars to Spain but the strong dollar against the peseta hurts sales of GM cars in Spain. In the Spanish market, GM faces competition from the Italian and French car makers, such as Fiat and Renault, whose currencies remain stable relative to the peseta. What kind of measures would you recommend so that GM can maintain its market share in Spain.Answer: Possible measures that GM can take include: (1) diversify the market; try to market the cars not just in Spain and other European countries but also in, say, Asia; (2) locate production facilities in Spain and source inputs locally; (3) locate production facilities, say, in Mexico where production costs are low and export to Spain from Mexico.8. What are the advantages and disadvantages of financial hedging of the firm’s operating exposure vis-à-vis operational hedges (such as relocating manufacturing site)?Answer: Financial hedging can be implemented quickly with relatively low costs, but it is difficult to hedge against long-term, real exposure with financial contracts. On the other hand, operational hedges are costly, time-consuming, and not easily reversible.9. Discuss the advantages and disadvantages of maintaining multiple manufacturing sites as a hedge against exchange rate exposure.Answer: To establish multiple manufacturing sites can be effective in managing exchange risk exposure, but it can be costly because the firm may not be able to take advantage of the economy of scale.10. Evaluate the following statement: “A firm can reduce its currency exposure by diversifying across different business lines.”Answer: Conglomerate expansion may be too costly as a means of hedging exchange risk exposure. Investment in a different line of business must be made based on its own merit.11. The exchange rate uncertainty may not necessarily mean that firms face exchange risk exposure. Explain why this may be the case.Answer: A firm can have a natural hedging position due to, for example, diversified markets, flexible sourcing capabilities, etc. In addition, to the extent that the PPP holds, nominal exchange rate changes do not influenc e firms’ competitive positions. Under these circumstances, firms do not need to worry about exchange risk exposure.PROBLEMS1. Suppose that you hold a piece of land in the City of London that you may want to sell in one year. As a U.S. resident, you are concerned with the dollar value of the land. Assume that, if the British economy booms in the future, the land will be worth £2,000 and one British pound will be worth $1.40. If the British economy slows down, on the other hand, the land will be worth less, i.e., £1,500, but the pound will be stronger, i.e., $1.50/£. You feel that the British economy will experience a boom with a 60% probability and a slow-down with a 40% probability.(a) Estimate your exposure b to the exchange risk.(b) Compute the variance of the dollar value of your property that is attributable to the exchange rate uncertainty.(c) Discuss how you can hedge your exchange risk exposure and also examine the consequences of hedging.Solution: (a) Let us compute the necessary parameter values:E(P) = (.6)($2800)+(.4)($2250) = $1680+$900 = $2,580E(S) = (.6)(1.40)+(.4)(1.5) = 0.84+0.60 = $1.44Var(S) = (.6)(1.40-1.44)2 + (.4)(1.50-1.44)2= .00096+.00144 = .0024.Cov(P,S) = (.6)(2800-2580)(1.4-1.44)+(.4)(2250-2580)(1.5-1.44)= -5.28-7.92 = -13.20b = Cov(P,S)/Var(S) = -13.20/.0024 = -£5,500.You have a negative exposure! As the pound gets stronger (weaker) against the dollar, the dollar value of your British holding goes down (up).(b) b2Var(S) = (-5500)2(.0024) =72,600($)2(c) Buy £5,500 forward. By doing so, you can eliminate the volatility of the dollar value of your British asset that is due to the exchange rate volatility.2. A U.S. firm holds an asset in France and faces the following scenario:In the above table, P* is the euro price of the asset held by the U.S. firm and P is the dollar price of the asset.(a) Compute the exchange exposure faced by the U.S. firm.(b) What is the variance of the dollar price of this asset if the U.S. firm remains unhedged against thisexposure?(c) If the U.S. firm hedges against this exposure using the forward contract, what is the variance of thedollar value of the hedged position?Solution: (a)E(S) = .25(1.20 +1.10+1.00+0.90) = $1.05/€E(P) = .25(1,800+1,540+1,300 +1,080) = $1,430Var(S) = .25[(1.20-1.05)2 +(1.10-1.05)2+(1.00-1.05)2+(0.90-1.05)2]= .0125Cov(P,S) = .25[(1,800-1,430)(1.20-1.05) + (1,540-1,430)(1.10-1.05)(1,300-1,430)(1.00-1.05) + (1,080-1,430)(0.90-1.05)]= 30b = Cov(P,S)/Var(S) = 30/0.0125 = €2,400.(b) Var(P) = .25[(1,800-1,430)2+(1,540-1,430)2+(1,300-1,430)2+(1,080-1,430)2]= 72,100($)2.(c) Var(P) - b2Var(S) = 72,100 - (2,400)2(0.0125) = 100($)2.This means that most of the volatility of the dollar value of the French asset can be removed by hedging exchange risk. The hedging can be achieved by selling €2,400 forward.MINI CASE: ECONOMIC EXPOSURE OF ALBION COMPUTERS PLCConsider Case 3 of Albion Computers PLC discussed in the chapter. Now, assume that the pound is expected to depreciate to $1.50 from the current level of $1.60 per pound. This implies that the pound cost of the imported part, i.e., Intel’s microprocessors, is £341 (=$512/$1.50). Other variables, such as the unit sales volume and the U.K. inflation rate, remain the same as in Case 3.(a) Compute the projected annual cash flow in dollars.(b) Compute the projected operating gains/losses over the four-year horizon as the discounted present value of change in cash flows, which is due to the pound depreciation, from the benchmark case presented in Exhibit 12.4.(c) What actions, if any, can Albion take to mitigate the projected operating losses due to the pound depreciation?Suggested Solution to Economic Exposure of Albion Computers PLCa) The projected annual cash flow can be computed as follows:______________________________________________________Sales (40,000 units at £1,080/unit) £43,200,000Variable costs (40,000 units at £697/unit) £27,880,000Fixed overhead costs 4,000,000Depreciation allowances 1,000,000Net profit before tax £15,315,000Income tax (50%) 7,657,500Profit after tax 7,657,500Add back depreciation 1,000,000Operating cash flow in pounds £8,657,500Operating cash flow in dollars $12,986,250______________________________________________________b) ______________________________________________________Benchmark CurrentVariables Case Case______________________________________________________Exchange rate ($/£) 1.60 1.50Unit variable cost (£) 650 697Unit sales price (£) 1,000 1,080Sales volume (units) 50,000 40,000Annual cash flow (£) 7,250,000 8,657,500Annual cash flow ($) 11,600,000 12,986,250Four-year present value ($) 33,118,000 37,076,946Operating gains/losses ($) 3,958,946______________________________________________________c) In this case, Albion actually can expect to realize exchange gains, rather than losses. This is mainly due to the fact that while the selling price appreciates by 8% in the U.K. market, the variable cost of imported input increased by about 6.25%. Albion may choose not to do anything.。

中级财务会计第九章练习及答案

第九章非流动负债一、单项选择题1.下列项目中，不属于借款费用的是（）。

A.外币借款发生的汇兑收益B.借款的手续费和佣金C.支付公司股票的股利D.发行公司债券的印刷费2.用于购建固定资产的长期借款，在所购建的固定资产达到预定可使用状态之前，其符合资本化条件的利息费用应记入（）科目的借方。

A.长期借款B.在建工程C.财务费用D.预计负债3.企业为建造固定资产而发行长期债券，在该固定资产完工交付使用后，债券的利息费用应当计入的科目是（）。

A.财务费用B.管理费用C.在建工程D.固定资产4.下列借款费用应予以资本化的是（）。

A.为建造固定资产而发生的长期借款费用，在固定资产交付使用前发生的B.为建造固定资产而发生的长期借款费用，在固定资产支付使用后发生的C.未动用的一般借款当期发生的利息费用D.属于长期借款性质但不用于购建资产的借款费用5.下列各项借款费用应予停止资本化的是（）。

A.固定资产的各部分分别完工，且每部分在其他部分继续建造期间可单独使用，应停止该部分资产借款费用的资本化B.固定资产的各部分分别完工，但每一部分都必须等到固定资产整体完工后才可使用，应在资产分别完工时停止资本化C.一项固定资产已经完工，但另一项与其关联的独立资产尚未完工，导致已完工资产无法使用，应在关联资产完工时，方可停止借款费用的资本化D.固定资产的各部分分别完工，且每部分在其他部分继续建造期间可单独使用，应继续该部分资产借款费用的资本化6.B公司于2008年1月1日从银行取得一笔专门用于工程建设的长期借款，本金1000万元，年利率为10%，期限3年，每年末付息，到期还本。

工程开工日为2008年1月1日。

2008年资产支出如下：①1月1日支出500万元；②7月1日支出500万元。

闲置资金因购买国债可取得12%的年收益，则2008年资本化金额为（）万元。

A.100B.70C.30D.507.企业以溢价方式发行债券时，每期实际负担的利息费用是（）。

毕晓方改编+《财务会计》的课后习题答案第九章习题答案

Ex. 9–1Switching to a perpetual inventory system will strengthen Onsite Hardware’s i nternal controls over inventory, since the store managers will be able to keep track of how much of each item is on hand. This should minimize shortages of good-selling items and excess inventories of poor-selling items.On the other hand, switching to a perpetual inventory system will not eliminate the need to take a physical inventory count. A physical inventory must be taken to verify the accuracy of the inventory records in a perpetual inventory system. In addition, a physical inventory count is needed to detect shortages of inventory due to damage or theft.Ex. 9–2Include in inventory: c, e, g, iExclude from inventory: a, b, d, f, hEx. 9–3a.Balance SheetMerchandise inventory $1,950 understatedCurrent assets $1,950 understatedTotal assets $1,950 understatedOwner’s equity$1,950 understatedb.Income StatementCost of merchandise sold $1,950 overstatedGross profit $1,950 understatedNet income $1,950 understatedEx. 9–4When an error is discovered affecting the prior period, it should be corrected. In this case, the merchandise inventory account should be debited and the owner’s capital a ccount credited for $12,800.Failure to correct the error for 2005 and purposely misstating the inventory and the cost of merchandise sold in 2006 would cause thebalance sheets and the income statements for the two years to not be comparable.Ex. 9–5Total cost of merchandise sold ..................................................... 2,121 Inventory, April 30: $802 ($424 + $378)Ex. 9–6Total cost of merchandise sold ..................................................... 4,260 Inventory, March 31: $1,295 ($630 + $665)Ex. 9–7a. $700 ($50 × 14 units)b. $663 [($45 × 5 units) + ($47 × 4 units) + ($50 × 5 units)]Ex. 9–8a. $360 (8 units at $33 plus 3 units at $32)b. $318 (6 units at $28 plus 5 units at $30)c. $341 (11 units at $31; $1,240 ÷ 40 units = $31)Cost of merchandise available for sale:6 units at $28 ........................................................... $ 16812 units at $30 (360)14 units at $32 (448)8 units at $33 (264)40 units (at average cost of $31) ............................. $1,240Ex. 9–91. a. LIFO inventory < (less than) FIFO inventoryb. LIFO cost of goods sold > (greater than) FIFO cost of goodssoldc. LIFO net income < (less than) FIFO net incomed. LIFO income tax < (less than) FIFO income tax2. Under the lifo conformity rule a company selecting lifo for taxpurposes must also use lifo for financial reporting purposes. Thus, inperiods of rising prices the reported net income would be lower thanwould be the case under fifo. However, the lower reported incomewould also be shown on the corpora tion’s tax return; thus, there is atax advantage from using lifo. Firms electing to use lifo believe thetax advantage from using lifo outweighs any negative impact fromreporting a lower earnings number to shareholders. Lifo is supportedbecause the tax impact is a real cash flow benefit, while a lower lifoearnings number (compared to fifo) is merely the result of a reportingassumption.Ex. 9–10Unit Unit TotalInventory Cost Market LowerCommodity QuantityPrice Price Cost Market of C or M M76 ...................... 8 $150 $160 $1,200 $1,280$1,200 T53 ....................... 20 75 70 1,500 1,400 1,400 A19 ...................... 10 275 260 2,750 2,600 2,600 J81 ....................... 15 50 40 750 600 600 K10 ...................... 25 1011052,525 2,625 2,525 Total ...............$8,725 $8,505$8,325Ex. 9–11The merchandise inventory would appear in the Current Assets section, as follows:Merchandise inventory —at lower of cost, fifo, or market ............ $8,325Alternatively, the details of the method of determining cost and the method of valuation could be presented in a note.Ex. 9–12Cost Retail Merchandise inventory, June 1 .................................. $160,000 $ 180,000 Purchases in June (net) .............................................. 680,000 1,020,000Merchandise available for sale .................................. $840,000$1,200,000Ratio of cost to retail price:70%$1,200,000840,000$Sales for June (net) ..................................................... 875,000Merchandise inventory, June 30, at retail price ........ $ 325,000 Merchandise inventory, June 30,at estimated cost ($325,000 × 70%) ......................$ 227,500Ex. 9–13a. Merchandise inventory, Jan. 1 ................................... $180,000 Purchases (net), Jan. 1–May 17 ................................. 750,000 Merchandise available for sale ..................................$930,000Sales (net), Jan. 1–May 17 .......................................... $1,250,000Less estimated gross profit ($1,250,000 × 35%) ....... 437,500Estimated cost of merchandise sold ......................... 812,500Estimated merchandise inventory, May 17 ...............$117,500b. The gross profit method is useful for estimating inventories formonthly or quarterly financial statements. It is also useful in estimating the cost of merchandise destroyed by fire or other disasters.Ex. 9–14a. Apple: 147.8 {$4,139,000,000 ÷ [($45,000,000 + $11,000,000) ÷ 2]}American Greetings: 3.1 {$881,771,000 ÷ [($278,807,000 +$290,804,000) ÷ 2]}b. Lower. Although American Greetings’ business is seasonal in nature, with most of its revenue generated during the major holidays, much of its nonholiday inventory may turn over very slowly. Apple, on the other hand, turns its inventory over very fast because it maintains a low inventory, which allows it to respond quickly to cust omer needs. Additionally, Apple’s computer pro ducts can quickly become obsolete, so it cannot risk building large inventories.Ex. 9–15a. Number of days’ sales in inventory =sold/365goods of Cost periodof end Inventory,Albertson’s,5$25,242/36$2,973= 43 daysKroger,5$37,810/36$4,175= 40 daysSafeway,5$22,303/36$2,558= 42 daysInventory turnover =inventoryAverage soldgoods of CostAlbertson’s,$3,196)/2($2,973$25,242+ = 8.2Kroger,$4,178)/2($4,175$37,810+ = 9.1Safeway,$2,437)/2($2,558$22,303+ = 8.9b. The number of days’ sale in inventory and inventory turnover ratiosare con sistent. Albertson’s has slightly more inventory than does Safeway. Kroger has relatively less inventory (2–3 days) than does Albert son’s and Safeway.Ex. 9–21 Concludedc. If A lbertson’s matched Kroger’s days’ sales in inventory, then itshypothetical ending inventory would be determined as follows,Number of days’ sales in inventory =sold/365goods of Cost periodof end Inventory,40 days =5$25,242/36XX = 40 ($25,242/365)X = $2,766Thus, the additional cash flow that would have been generated is the difference between the actual ending inventory and the hypothetical ending inventory, as follows:Actual ending inventory .......................... $ 2,973 million Hypothetical ending inventory ................ 2,766Positive cash flow potential ....................$ 207 millionThat is, a lower ending inventory amount would have required less cash than actually was required.。

mbafa《financialaccounting》习题答案9

mbafa《financialaccounting》习题答案9CHAPTER 9LONG-LIVED ASSETSBRIEF EXERCISESBE9–1a. The new method, straight-line depreciation, will increase net income in the early years andreduce income in the later years versus using an accelerated method. An accelerated method of depreciation increases the depreciation charges in the early years of the life of an asset and reduces the depreciation charges in the later years.b. Allegheny may have decided that it wanted depreciation charges to be spread evenly over thelife of an asset so that the impact on net income in any one reporting period was less. It may also feel that it will make its financial statements easier to compare with its competitors.During periods of high fixed asset investment Allegheny’s results may look unfavorable versus other companies that use a straight-line method instead of an accelerated method.c. In the annual report one could look through footnote #1. This footnote typically highlights all ofthe significant accounting policies and methods used by the company to prepare the financial statements.BE9–2a. The recognition of depreciation and amortization affects the basic accounting equation byreducing assets and reducing retained earnings in the stockholders’ equity section. Fixed assets such as property, plant and equipment are reduced through depreciation charges(which are collected in the contra asset account Accumulated Depreciation) which lower net income.Intangible assets are reduced by amortization charges which reduce the net income of the company. This reduction in net income reduces the retained earnings of the company.b. Boeing recognized a gain of $117 million, computed as follows:Accumulated depreciation 2002 $12,719 million+ Depreciation charges for 2003 1,005 million– Accumulated depreciation 2003 12,963 millionAccumulated depreciation on assets sold $ 761 millionPP&E 2002 $21,484 million+ PP&E purchases for 2003 741 million– PP&E 2003 21,395 millionPP&E sold $ 830 million1Derived Journal Entry:Cash (+A) 186Accumulated Depreciation (+A) 761Property, Plant & Equipment (-A) 830Gain on Sale (R, +SE) 117The gain on the sale of property, plant and equipment would be shown in the income state ment, usually in an “other gains and losses” section. These transactions would affect the statement of cash flows in the “funds from investing activities section”. Any sales would be a source of funds in the amount of cash received.BE9–3a. Johnson and Johnson invested $122 million ($594– $472) of land during 2003.b. Accumulated depreciation increased during 2003 because of depreciation expense taken byJohnson and Johnson. Instead of reducing the asset account directly, depreciation expense is added to accumulated depreciation, which offsets the asset account to show its reduction in value.c. During 2003 Johnson and Johnson must have sold some assets that were classified in thefixed assets accounts. These accounts are carried at historical cost so that only the sale of an asset will reduce the account. Any gains or losses on the sale of these assets would be shown on the income statement. The change from 2002 ($14,314) to 2003 ($17,052) is $2,738. Since Johnson & Johnson spent $5,074 on fixed assets, then $2,336 ($5,074 - $2,738) must have been sold.d. Johnson and Johnson would show $9,846 million for property, plant and equipment on itsfinancial statement for 2003. The gross amount and the accumulated depreciation would be disclosed in the footnote.EXERCISESE9–1a. Lowery, Inc., should capitalize all costs associated with getting the equipment in a serviceablecondition and location. These costs would be the actual purchase price of $920,000, the transportation cost of $62,000, and the insurance cost of $10,000. Therefore, the total cost of the equipment is $992,000.b. The depreciation base equals the dollar amount of a fixed asset's cost that the company doesnot expect to recover over the asset's useful life, but instead expects to consume over the asset's useful life. Since the plantequipment's total cost is $992,000 and since Lowery, Inc., expects to sell the equipment for $50,000 at the end of its useful life, Lowery, Inc., does not expect to recover $942,000 of the asset's cost. Therefore, the depreciation base equals $942,000. The depreciation base always equals the capitalized cost of a fixed asset less its estimated salvage value.c. The amount that will be depreciated over the life of the plant equipment is its depreciation base.The depreciation base equals the amount of the equipment's future benefits that the company will consume. The outflow of future benefits are expenses, in this case depreciation expense.Therefore, the total amount that Lowery, Inc., will depreciate over the equipment's useful life is $942,000.E9–2Lot 1 Lot 2 Lot 3 Lot 4Revenue $ 160,000 $ 120,000 $ 60,000 $ 60,000Expenses 128,000* 96,000* 48,000* 48,000*Net income $ 32,000 $ 24,000 $ 12,000 $ 12,000_______________* Expenses were calculated as follows:1. Calculate total market value.Total Market value = $160,000 + $120,000 + $60,000 + $60,000 = $400,0002. Allocate costs to each lot based upon relative market values.Lot 1 = $320,000 × (160,000/400,000) = $128,000Lot 2 = $320,000 × (120,000/400,000) = $ 96,000Lot 3 = $320,000 × (60,000/400,000) = $ 48,000Lot 4 = $320,000 × (60,000/400000) = $ 48,000E9–3a. All costs that are necessary and reasonable to get an asset ready for its intended use should becapitalized as part of the cost of that asset. In the case of property, plant, and equipment, "ready for its intended use" means that the asset is in a serviceable condition and location.LandItem Land Improvements Building Tract of land $90,000Demolition of warehouse 10,000Scrap from warehouse (7,000)Construction of building $140,000Driveway and parking lot $32,000Permanent landscaping 4,000Total $ 97,000 $32,000 $140,000b. Land:Since land is assumed to have an indefinite life, it is never depreciated.Land Improvements:Depreciation Expense—Land Improvements (E, –SE)................... 1,600 Accumulated Depreciation—Land Improvements (–A)............... 1,600 Depreciated land improvements.Building:Depreciation Expense—Building (E, –SE)....................................... 7,000 Accumulated Depreciation—Building (–A).................................. 7,000 Depreciated building.E9–4a. Maintenanceb. Maintenancec. Maintenanced. Bettermente. Maintenancef. Maintenanceg. Bettermenth. Maintenancei. BettermentNote:The classification of these expenditures can be quite subjective. Some accountants might very well classify some of these expenditures differently. For example, one might argue that the cost of the muffler in (h) is actually a betterment expenditure if the reduced noise allows workers to work more efficiently, thereby increasing the productive capacity of the machine.E9–5a. (1) Expensed immediately:Income Statement2008 2007 2006 Revenues $ 65,000 $ 65,000 $ 65,000Amortization 0 0 (40,000)Other expenses (20,000) (20,000) (20,000)Net income $ 45,000 $ 45,000 $ 5,000Balance Sheet12/31/08 12/31/07 12/31/06 AssetsCurrent assets $ 135,000 $ 90,000 $ 45,000Long-lived assets(including land) 50,000 50,000 50,000Total assets $ 185,000 $ 140,000 $ 95,000Liabilities and Stockholders' EquityLiabilities $ 35,000 $ 35,000 $ 35,000Stockholders' equity 150,000 105,000 60,000Total liabilities & stockholders'equity $ 185,000 $ 140,000 $ 95,000E9–5 Continued(2) Amortized over two years:Income Statement2008 2007 2006 Revenues $ 65,000 $ 65,000 $ 65,000 Amortization 0 20,000 20,000Other expenses 20,000 20,000 20,000Net income $ 45,000 $ 25,000 $ 25,000Balance Sheet12/31/08 12/31/07 12/31/06 AssetsCurrent assets $ 135,000 $ 90,000 $ 45,000Long-lived assets (includingland) 50,000 50,000 70,000Total assets $ 185,000 $ 140,000 $ 115,000 Liabilities and Stockholders' EquityLiabilities $ 35,000 $ 35,000 $ 35,000 Stockholders' equity 150,000 105,000 80,000Total liabilities & stockholders'equity $ 185,000 $ 140,000 $ 115,000(3) Amortized over three years:Income Statement2008 2007 2006 Revenues $ 65,000 $ 65,000 $ 65,000 Amortization 13,334 13,333 13,333Other expenses 20,000 20,000 20,000Net income $ 31,666 $ 31,667 $ 31,667Balance Sheet12/31/08 12/31/07 12/31/06 AssetsCurrent assets $ 135,000 $ 90,000 $ 45,000Long-lived assets (includingland) 50,000 63,334 76,667Total assets $ 185,000 $ 153,334 $ 121,667 Liabilities and Stockholders' EquityLiabilities $ 35,000 $ 35,000 $ 35,000Stockholders' equity 150,000 118,334 86,667Total liabilities & stockholders'equity $ 185,000 $ 153,334 $ 121,667b. 2008 2007 2006 TotalMethod 1: $45,000 $45,000 $ 5,000 $95,000 Method 2: 45,000 25,000 25,000 95,000 Method 3: 31,666 31,667 31,667 95,000E9–5 Concludedc. The balance sheets under all three methods report identical amounts for each balance sheetaccount. Since the asset was fully amortized by December 31, 2008, the method used to amortize the asset does not affect the amounts reported on the balance sheet as of December 31, 2008.E9–6a. andb.Stork Freight CompanyIncome StatementFor the Year Ended December 3112-Year Useful Life 6-Year Useful Life Revenues $ 50,000,000 $ 50,000,000 Expenses:Operating expenses $ 25,000,000 $ 25,000,000 Depreciation expense 1,250,000 2,500,000 Total expenses 26,250,000 27,500,000 Net income $ 23,750,000 $ 22,500,000 The percentage decrease in net income would be approximately 5.26% [($22,500,000 – $23,750,000) ÷ $23,750,000].c.12-Year Useful Life 6-Year Useful Life Net income $ 23,750,000 $ 22,500,000Dividend payout percentage 30% 30%Dividends $ 7,125,000 $ 6,750,000The difference in dividends due simply to using different estimated useful lives for the planes would be $375,000 ($7,125,000 – $6,750,000).E9–7a. An asset's book value equals the asset's initial capitalized value less the associatedaccumulated depreciation. With straight-line depreciation, accumulated depreciation equals depreciation expense per year times the number of years the asset has been used. Therefore, the asset's book value would be calculated as follows: Depreciation expense per year = (Cost –Salvage Value) ÷ Useful Life= ($60,000 –$12,000) ÷ 5 years= $9,600 per yearBook Value = Capitalized Cost – Accumulated Depreciation = $60,000 –($9,600 × 3 years)= $31,200E9–7 Concludedb. Depreciation Expense = [(Cost –Accumulated Depreciation) –Salvage Value] ÷Remaining Useful Life= (Book value –Salvage value) ÷ Remaining useful li fe= ($31,200 –$12,000) ÷ 5 remaining years= $3,840Depreciation Expense (E, –SE)....................................................... 3,840 Accumulated Depreciation (–A)................................................. 3,840 Depreciated asset for 2005.E9–8Straight- Double-Declining- ActivityObjective Line Balance Method(a) x1x1x1(b) x x x(c) x x2(d) x(e) x(f) x(g) x x3(h) x x x1Under certain conditions, all three methods could meet this objective. However, for the straight-line method and the double-declining-balance method, this objective will be met only by chance.The activity method will always meet this objective because depreciation is based upon the actual use of the asset.2It is possible that the activity method would generate the largest net income in the last year of an asset's useful life. However, this result would be due to the company's use patterns of the asset and would not be due to the depreciation method per se.3See note (2). The same rationale would hold in this case too.E9–9a. (1) Straight-line depreciation:Depreciation per Year = (Cost –Salvage Value) ÷ Useful Life = ($300,000 –$60,000) ÷ 4 years= $60,000 per year for 2005, 2006, 2007, and 2008E9–9 Concluded(2) Double-declining-balance depreciation:Depreciation Depreciation Accumulated Book Date Factor Expense Cost Depreciation Value1/1/05 $300,000 $ 0 $300,00012/31/05 50% $150,000a300,000 150,000 150,00012/31/06 50% 75,000 300,000 225,000 75,00012/31/07 50% 15,000b300,000 240,000 60,00012/31/08 50% 0 300,000 240,000 60,000 ______________a Depreciation Expense = Book Value at Beginning of the Period × Depreciation Factorb Book Value ×Depreciation Factor = $75,000 ×50% = $37,500. If Benick Industriesdepreciated $37,500 in 2007, the asset's book value would drop below its salvage value. To prevent this from happening, depreciation expense for 2007 can be only $15,000.b. A manager should consider the costs and benefits associated with each depreciation method.The most likely benefit is the impact of depreciation methods on income taxes. An accelerated method decreases the present value of tax payments. However, since there is no requirement that a company use the same depreciation method for financial reporting purposes as it does for tax reporting, tax considerations are not an issue for financial reporting. A manager should also consider the bookkeeping costs associated with each method. However, with computers the bookkeeping costs should be relatively consistent across methods. Finally, since the choice of depreciation methods affects net income, managers might consider the impact of the different depreciation methods on contracts such as debt covenants and incentive compensation contracts. Comparability with other in the same industry may also be a factor.E9–10a. Computer System (+A)....................................................................335,000Cash (–A)........................................................................... 335,000 Purchased computer system.Note: Capitalizing the $10,000 of training costs could be debated. But, without incurring these costs, the computer system would not be in a serviceable condition. Hence, thetraining costs meet the requirement to be capitalized as part of the fixed asset.b. (1) Straight-line depreciation:Depreciation per Year = (Cost –Salvage Value) ÷ Useful Life = ($335,000 –$70,000) ÷ 5 years= $53,000 per year for 2005, 2006, 2007, 2008, and 2009E9–10 Concluded(2) Double-declining-balance depreciation:Depreciation Depreciation Accumulated Book Date Factor Expense Cost Depreciation Value1/1/05 $335,000 $ 0 $335,00012/31/05 40% $134,000a335,000 134,000 201,00012/31/06 40% 80,400 335,000 214,400 120,60012/31/07 40% 48,240 335,000 262,640 72,36012/31/08 40% 2,360b335,000 265,000 70,00012/31/09 40% 0 335,000_____________a Depreciation expense = Book value at beginning of the period×Depreciation factorb Book value ×Depreciation factor = $72,360 ×40% = $28,944. If Stockton Corporationdepreciated $28,944 in 2008, the asset's book value would drop below its salvage value. To prevent this from happening, depreciation expense for 2008 can be only $2,360.c. Depreciation Expense (E, –SE)................................................. 134,000Accumulated Depreciation (–A)......................................... 134,000 Depreciated fixed asset for 2005.E9–111. Activity Method:Depreciation Expense per Mile = ($100,000 –$20,000) ÷ 200,000 Miles= $0.4/MileDepreciation Expense (E, –SE)....................................................... 19,200 Accumulated Depreciation (–A)................................................. 19,200 Depreciated asset for 2005.Depreciation Expense (E, –SE)....................................................... 14,000 Accumulated Depreciation (–A)................................................. 14,000 Depreciated asset for 2006.Depreciation Expense (E, –SE)....................................................... 16,000 Accumulated Depreciation (–A)................................................. 16,000 Depreciated asset for 2007.Depreciation Expense (E, –SE)....................................................... 10,000 Accumulated Depreciation (–A)................................................. 10,000 Depreciated asset for 2008.E9–11 ConcludedDepreciation Expense (E, –SE)....................................................... 14,000Accumulated Depreciation (–A)................................................. 14,000 Depreciated asset for 2009.Depreciation Expense (E, –SE)....................................................... 4,000 Accumulated Depreciation (–A)................................................. 4,000 Depreciated asset for 2010.Cash (+A) .........................................................................................12,000Accumulated Depreciation (+A)....................................................... 77,200Loss on Sale of Truck (Lo, –SE)...................................................... 10,800 Truck (–A)................................................................................... 100,000 Sold truck.2. Straight-line Method:Depreciation Expense per Year = ($100,000 –$20,000) ÷ 5 Years= $16,000/yearDepreciation Expense (E, –SE)....................................................... 16,000 Accumulated Depreciation (–A)................................................. 16,000 Depreciated asset.Note:This entry would be made each year for five years. No entry would be made in Year 6 since the truck's estimated useful life ended at the end of Year 5, which means that the truck would have been depreciated down to its estimated salvage value.Cash (+A) ....................................................................................... 12,000Accumulated Depreciation (+A)....................................................... 80,000Loss on Sale of Truck (Lo, –SE)...................................................... 8,000 Truck (–A)................................................................................. 100,000 Sold truck.E9–12a. Depletion (E, –SE)............................................................................ 1,200,000*Oil Deposits (–A)........................................................................ 1,200,000 Depleted oil deposits.___________* $1,200,000 = ($4,000,000 ÷ 100,000 barrels)×30,000 barrels extractedb. Depletion (E, –SE)............................................................................ 2,000,000*Oil Deposits (–A)........................................................................ 2,000,000 Depleted oil deposits.___________* $2,000,000 = ($4,000,000 ÷ 100,000 barrels)×50,000 barrels extractedc. $800,000E9–13a.Depreciation Expense Correct Annual Cumulative Year Per Company's Books Depr. Exp. Difference Difference2005 $120,000 $25,000 $95,000 $95,0002006 0 25,000 (25,000) 70,0002007 0 25,000 (25,000) 45,0002008 0 25,000 (25,000) 20,000b. After adjusting entries are prepared and posted on December 31, 2007, AccumulatedDepreciation will be understated by $75,000.c. After adjusting entries, but before closing entries have been prepared and posted on December31, 2007, Retained Earnings will be understated by $70,000.d. After both adjusting and closing entries have been prepared and posted on December 31, 2007,Retained Earnings will be understated by $45,000.E9–14a. Cash (+A) .......................................................................................235,000Accumulated Depreciation—Office Equipment (+A)....................... 300,000 Office Equipment (–A)............................................................... 500,000 Gain on Sale of Fixed Assets (Ga, +SE)................................... 35,000 Sold office equipment.b. Cash (+A) ......................................................................................... 185,000Accumulated Depreciation—Office Equipment (+A)....................... 300,000Loss on Sale of Fixed Assets (Lo, –SE)........................................... 15,000 Office Equipment (–A)............................................................... 500,000 Sold office equipment.E9–15Assuming that Paris Company kept the equipment for its entire five-year estimated useful life, the depreciation schedule on the equipment would be as follows.Depreciation Depreciation Accumulated Book Date Factor Expense Cost Depreciation Value1/1/03 $25,000 $ 0 $25,00012/31/03 40% $10,000 25,000 10,000 15,00012/31/04 40% 6,000 25,000 16,000 9,00012/31/05 40% 3,600 25,000 19,600 5,40012/31/06 40% 400* 25,000 20,000 5,00012/31/07 40% 0 25,000 20,000 5,000__________________* Because the equipment's book value cannot drop below its estimated salvage value, depreciation expense for 2006 cannot exceed $400.a. Accumulated Depreciation—Equipment (+A).................................. 19,600Loss on Disposal of Equipment (Lo, –SE)....................................... 5,400 Equipment (–A).......................................................................... 25,000 Disposed of equipment.b. Accumulated Depreciation—Equipment (+A).................................. 20,000Loss on Disposal of Equipment (Lo, –SE)....................................... 5,000 Equipment (-A)........................................................................... 25,000 Disposed of equipment.c. Cash (+A) ....................................................................................... 8,000Accumulated Depreciation—Equipment (+A).................................. 19,600 Equipment (–A).......................................................................... 25,000 Gain on Sale of Fixed Assets (Ga, +SE)................................... 2,600 Sold equipment.d. Fixed Asset (new) (+A).................................................................... 30,000Accumulated Depreciation—Equipment (+A).................................. 20,000Loss on Disposal of Fixed Asset (Lo, –SE)...................................... 3,000 Cash (–A)................................................................................... 28,000 Equipment (old) (–A).................................................................. 25,000 Exchanged fixed assets.E9–16a. andb. First, let us compute the original cost of the equipment that was sold in 2005 asfollows:Equipment Equipment Equipment Equipmentat the End + Purchased – sold during = at the Endof 2004 during 2005 2005 of 2005$32,700 + $12,000 – X = $37,500X = $7,200Now, let us compute the related accumulated depreciation for the equipment sold during 2005 as follows:Accumulated Depreciation Exp. Accumulated Accumulated Depreciation at + for 2005 – Depreciation = Depreciationthe End of 2004 for the Sold at the EndEquipment of 2005during 2005$14,300 + $7,200 – X = $17,600X = $ 3,900 Now, we can reconstruct the journal entry.Cash.................................................................................................5,400*Accumulated Depreciation............................................................... 3,900 Equipment.................................................................................. 7,200 Gain on Sale of Equipment........................................................ 2,100 ___________* $7,200 + $2,100 – $3,900 = $5,400E9–17Account Financial Statementa. Property, plant & equipment Balance SheetLess: accumulated depreciation Balance SheetDepreciation expense Income StatementInvestments in property, plant & equipment Statement of Cash Flowsb. Property, plant & equipment – 2002 $36,912Plus: investments in property, plant & equipment 3,656Less: property, plant & equipment – 2003 38,692Property, plant & equipment sold in 2003 $ 1,876c. Accumulated depreciation – 2002 $19,065Plus: depreciation expense – 2003 4,651Less: accumulated depreciation – 2003 22,031Accumulated depreciation – sold property $ 1,685E9–17 Concludedd. Compute the gain on the sale:Cost of property sold $1,876Less: accumulated depreciation 1,685Book value of property sold $ 191Sales price of property $100Less: book value of property 191Loss on sale of property $ 91This loss on sale of property would appear on the income statement.E9–18a. First, let us compute the related accumulated depreciation for the equipment sold during 2005as follows:Accumulated Depreciation Cap. Accumulated Accumulated Depreciation at + for 2005 – Depreciation = Depreciationthe End of 2004 for the Sold at the EndEquipment 0f 2005during 2005$9,800 + $3,800 – X = $10,500X = $ 3,100 Now, we can reconstruct the journal entry.Cash................................................................................................. 4,300 Loss on Sale of Equipment (900)Accumulated Depreciation............................................................... 3,100 Equipment.................................................................................. 8,300 b. Equipment Equipment Equipment Equipmentat the End + Purchased – sold during = at the Endof 2004 during 2005 2005 of 2005$23,400 + X – $8,300 = $26,900X = $11,800___________Equipment purchased during 2000 = $11,800E9–19a. Swift Corporation should capitalize these costs. Assets are defined as items that are expectedto provide future economic benefits to the entity. Organization costs are costs incurred by an entity prior to starting operations. Such costs include legal fees to incorporate and accountant's fees to set up an accounting system. Without incurring these costs, most companies could not be in business. Consequently, organization costs allow a company to be in business, thereby helping it to generate future benefits. Since these costs help in generating future benefits, they should most definitely be capitalized.b. Theoretically, organization costs should be amortized over their useful life. In the extreme,organization costs provide a benefit over the entire life of a company. Since under the going concern assumption accountants assume that entities will exist indefinitely, it would seem that organization costs should be amortized over an indefinite period. Since this position is not practical, the accounting profession has decided that organization costs should be amortized over a period not to exceed forty years.Assuming that Swift Corporation amortizes its organization costs over the maximum period of forty years, the appropriate adjusting journal entry for a single year would be as follows: Amortization Expense (E, –SE)........................................................1,125 Organization Costs (–A)............................................................. 1,125 Amortized organization costs.c. As mentioned in part (b), organization costs theoretically provide benefits over the entire life ofthe company. Under the going concern assumption, the company is assumed to exist indefinitely. If the company is assumed to exist indefinitely and if organization costs provide benefits over the entire life of the company, then these costs should provide an indefinite benefit. Consequently, organization costs should provide a benefit for an indefinite period of time, which implies that they should be reported as an asset (i.e., future benefit) indefinitely.But if organization costs are amortized, the asset will at some point in time have a zero balance, and the cost of the asset cannot be matched against the benefits the asset will help generate in the future. This situation contradicts the matching principle and the concept of an asset.d. A patent gives a company the exclusive right to use or market a particular product or process,thereby providing the company with an expected future benefit. Consequently, the costs incurred to acquire a patent should be capitalized as an asset and amortized over the patent's useful life. If Swift were to immediately expense the $65,000, the company would be implying that it did not expect to receive any benefits from the patent in the future. If this were the case, one would have to question why Swift purchased the patent in the first place.e. Research and development costs may or may not provide a company with future benefits. Thecompany will not know whether or not a particular R & D。

财务会计第九章课后答案[1]1

实务题第四题(a)过期天数Total 0–30 31–60 61–90 91–120 Over 120 应收账款$260,000 $100,000 $60,000 $50,000 $30,000 $20,000 预计坏账率1% 5% 7.5% 10% 12% 预计坏账$13,150 $1,000 $3,000 $3,750 $3,000 $2,400 (b) 坏账费用 .......................................................... 3,150坏账准备.............................................................................. 3,150[$13,150 – $10,000](c) 坏账准备..................................................................... 2,000应收账款............................................................. 2,000(d) 应收账款..................................................................... 1,000坏账准备............................................................. 1,000 现金........................................................................... 1,000应收账款............................................................. 1,000实务题第五题(a) (1) Dec. 31 坏账费用............................................. 16,250($17,550 – $1,300)坏账准备 ..................................... 16,250(2) Dec. 31 坏账费用............................................. 17,600($880,000 X 2%)坏账准备 ..................................... 17,600 (b) (1) Dec. 31 坏账费用............................................. 18,850($17,550 + $1,300)坏账准备 ..................................... 18,850(2) Dec. 31 坏账费用............................................. 17,600坏账准备 ..................................... 17,600 (c) 坏账准备...................................................................... 4,500应收账款 .............................................................. 4,500 (d) 坏账费用...................................................................... 4,500应收账款 .............................................................. 4,500实务题第六题(a) July 5 应收账款..................................................... 6,200销售收入 ............................................. 6,20014 现金($700 – $28) (672)服务费 (28)($700 X 4%)销售收入 (700)14 应收账款 (440)利息收入 (440)15 现金 .................................................. 6,100应收票据 ............................................. 6,000应收利息 (75)($6,000 X 10% X 45/360)利息收入 (25)($6,000 X 10% X 15/360)25 应收账款..................................................... 15,275应收票据 ............................................. 15,000应收利息 (165)($15,000 X 11% X 36/360)利息收入 (110)($15,000 X 11% X 24/360)31 应收利息 (60)($9,000 X 8% X 1/12)利息收入 (60)(b)应收票据Date Explanation Ref. 借贷余额July 11525 余额6,00015,00030,00024,0009,000应收账款Date Explanation Ref. 借贷余额July 514256,20044015,2756,2006,64021,915应收利息Date Explanation Ref. 借贷余额July 1152531 余额调整607516524016560(c) 流动资产应收票据 ............................................................................ $ 9,000应收账款 ............................................................................ 21,915应收利息 (60)应收款总计 ................................................................. $30,975。

西方财务会计课后习题答案

Chapter 9Stockholders’ EquityCheck Points(5 min.) CP 9-11. The stockholders hold ultimate power in a corporation.2. The chairperson of the board of directors is usually the mostpowerful person in a corporation.3. The president is in charge of day-to-day operations.4. The treasurer has primary responsibility for cash.5. The controller manages the accounting.(5-10 min.) CP 9-2 1. The right to vote on management matters clearly separates astockholder from a creditor.2. The common stockholders are the real owners of a corporation3. Preferred stockholders have priority over commonstockholders in (1) receipt of dividends and (2) receipt of assets if the corporation liquidates.4. Common stockholders benefit more from a successfulcorporation because the preferred stockholders’ dividends are limited to a specified amount. The common stockholders’ potential for gains through an increase in the company’s stock price is unlimited.(5-10 min.) CP 9-3 1. The $61,938,000 was paid-in capital. It was not a profit andtherefore had no effect on net income.2. The par value of stock has no effect on total paid-in capital.Total paid-in capital is the total amount that stockholders have invested in (paid into) a corporation, including the par value of stock issued plus any additional paid-in capital.(10 min.) CP 9-4Thousands1. Common stock, December 31, 2003………………$ 649Common stock, December 31, 2002 (623)Increase during 2003…………………………….. $ 26 Additional paid-in capital, December 31, 2003….$3,937,160Additional paid-in capital, December 31, 2002…. 3,108,131 Increase during 2003…………………………….. 829,029 Total increase in paid-in capital during 2003…… $829,055 eBay must have issued common stock during 2003,as shown by the increase in the Common Stock account.JournalDATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDITThousands 2. Cash……………………………………………………829,055Common Stock (26)Additional Paid-in Capital ……………………...829,029 Issued stock.3. eBay had a profit during 2003, as indicated by theincrease in Retained Earnings.(10 min.) CP 9-5 Case A — Issue stock and buy the assets in separatetransactions:JournalDATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Cash………………………………………500,000Common Stock (10,000 ⨯$5)……...50,000Paid-in Capital in Excess of Par….450,000 Issued stock.Building…………………………………..400,000Equipment……………………………….100,000Cash……………………………………500,000 Purchased plant assets.Case B — Issue stock to acquire the assets:JournalDATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Building………………………………….400,000Equipment……………………………….100,000Common Stock (10,000 ⨯$5)……..50,000Paid-in Capital in Excess of Par….450,000 Issued stock to acquire building and equipment.The balances in all accounts are the same:Building…………………………………… $400,000Equipment……………………………….… 100,000Common Stock…………………………... 50,000Paid-in Capital in Excess of Par……… 450,000(5-10 min.) CP 9-6Millions Stockholders’ equity:Common stock, $.01 par, 376 million shares issued... $ 4 Paid-in capital in excess of par. (198)Retained earnings (846)Other stockholders’ equity (29)Total stockholders’ equity……………………………….. $1,077(10 min.) CP 9-7Millions a. Total revenues……………………………………………….. $1,099Total expe nses (805)Net income………………………………….………………. $ 294 b. Accounts payable…………………………………………. $ 22Other current liabilities.......................................... 2,566 Long-term liabilities. (25)Total liabilities……………………………………………… $2,613 c. Total liabilities (from Req. b)……………………………. $2,613Total stockholders’ equity (from CP 9-6)……………… 1,077 Total assets………………………………………………… $3,690(5 min.) CP 9-8JournalDATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDITMillions Treasury Stock (28)Cash (28)Cash (7)Treasury Stock (3)Paid-in Capital from Treasury StockTransactions (4)Overall, stockholders’ equity decreased by $21 million ($28 million paid out minus $7 million received).(5-10 min.) CP 9-9 General Dynamics does not have more treasury stock than the amount of stock the company has issued. That would be impossible, because treasury stock is also issued stock.A company’s balance of Treasury Stock can exceed the sum of Common Stock and Additional Paid-In Capital because treasury stock is accounted for at cost whenever it is purchased. Common Stock and Additional Paid-In Capital hold historical balances that arose from the original issuance of the stock, which may have occurred when the stock price was much lower.(10 min.) CP 9-10JournalDATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT20X6Dec. 15 Retained Earnings($50,000 ⨯ .045) + (25,000 ⨯$.50)…..14,750Dividends Payable…………………14,750 Declared a cash dividend……………20X7Jan. 4 Dividends Payable……………………14,750Cash………………………………….14,750 Paid the cash dividend.During 20X6, Retained Earnings increased by $46,000 (net income of $60,750 – dividends of $14,750).(5-10 min.) CP 9-111. $150,000 (100,000 shares ⨯ $1.50 per share)2. Preferred: $150,000Common: $150,0003. Cumulative, because it is not labeled noncumulative4. Preferred: $450,000 ($150,000 ⨯ 3)Common: $200,000 ($650,000 – $450,000)(5-10 min.) CP 9-12 Req. 1JournalDATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Aug. 12 Retained Earnings (60,000 ⨯ .05 ⨯$11.50)………34,500Common Stock (60,000 ⨯ .05 ⨯$1)…………... 3,000Paid-in Capital in Excess of Par-Common…..31,500Req. 2No effect on total assets.No effect on total liabilities.No effect on total stockholders’ equity.(10 min.) CP 9-13 Total stockholders’ equity…………………………….$4,053,000 Less: Preferred stock…………………………………(310,000) Preferred dividends in arrears(30,000 ⨯ $10 ⨯.08)……………………………. (24,000) Common equity…………………………………………$3,719,000 Number of common shares outstanding(60,000 –1,400)……………………………………….) 58,600 Book value per share of common stock…………… $ 63.46(5-10 min.) CP 9-14 (a) Rate of returnon common= Net income – Preferred dividendsstockholders' Average common stockholders’ equity equity(b) Rate of returnon total assets =Net income + Interest expenseAverage total asssets1. Preferred stockholders have the first claim on the company’snet income through preferred dividends. Therefore, preferred dividends are subtracted from net income to compute ROE.Preferred dividends are not subtracted in computing ROA because the preferred stockholders have invested in the company. Net income includes both the preferred stockholders’ and the common stockhold ers’ returns on their investments.2. Creditors have loaned money to the company and earn interest.Stockholders have invested in the corporation’s stock and thus own the company’s net income. The sum of interest expense plus net income is the return to the two groups that have financed the company.(5-10 min.) CP 9-15Rate of return on totalassetsNet Interest=income + expense=$1,221 + $276 Average total assets ($15,084 + $13,753) / 2=$1,497= 10.4%$14,419Note: 10% is considered good in most industries. Therefore, Sara Lee’s 10.4% return is good.Rate of return Net Preferredon common= income – dividends=$1,221 – $0stockholders’ Average common ($2,052 + $1,742) / 2 equity stockholders’ equity= $1,221= 64.4% $1,897Note: 15% is considered good in most industries, so Sara Lee’s return on equity is outstanding!(5-10 min.) CP 9-16Millions Cash flows from financing activities:Borrowed money.............................................$397 Paid off debt (151)Issued common stock (53)Purchased treasury stock (139)Net cash provided by financing activities………$160Exercises(5-10 min.) E 9-1 DATE: _____________TO: Katy Jax and Marta FraserFROM: Student NameRE: Steps in forming a corporationThe first step in organizing a corporation is to obtain a charter from the state. The charter authorizes the corporation to issue a certain number of shares of stock to the owners of the business, who are called stockholders. The incorporators (Jax and Fraser) will need a set of bylaws to determine how the corporation is to be governed internally. The stockholders will elect a board of directors who in turn appoint officers to manage the corporation on a day-to-day basis.Student responses may vary.(10-15 min.) E 9-2 Req. 1JournalDATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Feb. 19 Cash (1,000 ⨯ $6.50) ............................ 6,500Common Stock (1,000 ⨯ $2.50) ..... 2,500Paid-in Capital in Excess ofPar — Common ........................... 4,000Mar. 3 Cash ..................................................... 50,000Preferred Stock .............................. 50,00011 Inventory .............................................. 11,000Equipment ........................................... 8,500Common Stock (3,300 ⨯ $2.50) ..... 8,250Paid-in Capital in Excess ofPar — Common ........................... 11,250Req. 2Stockholders’ equity:Preferred stock, $1.50, no par5,000 shares authorized, 500 shares issued………$50,000 Common stock, $2.50 par,100,000 sha res authorized, 4,300 shares issued…10,750 Paid-in capital in excess of par-common($4,000 + $11,250)……………………………………….15,250 Retained earnings (deficit)………………………….……(42,000) Total stockholders’ equity……………………….……$34,000(10-15 min.) E 9-3Stockholders’ EquityPreferred stock, $4.50 no-par, 5,000 sharesauthorized, 300 shares issued ................................. $ 20,000 Common stock, $1 par, 10,000 shares authorized,4,000 shares issued .................................................. 4,000 Paid-in capital in excess of par — common ................ 86,000* Retained earnings .......................................................... 88,000 Total stockholders’ equity ....................................... $198,000_____*Computation:June 23: 1,000 shares ⨯ ($22 –$1) =………………………………$21,000 July 12: $25,000 + $43,000 – (3,000 shares ⨯$1.00) =………... 65,000$86,000(10 min.) E 9-4Paid-in capital consists of:Preferred equity:Issued for cash (5,000 shares ⨯ $110) ........ $ 550,000 Common equity:Issued for cash (50,000 shares ⨯ $15) ....... 750,000 Issued for organization cost ....................... 20,000 Issued for patent .......................................... 150,000 Total paid-in capital ............................................... $1,470,000Unused data:Net incomeDividends declared(10-15 min.) E 9-5Stockholders’ Equity (Millions)Common stock, $0.25 par, 800 sharesauthorized, 361 shares i ssued..............................$ 90 Paid-in capital in excess of par................................. 1,188 Retained earnings................................................... 2,202 Other stockholders’ equity (729)Less: Treasury stock, common, 126 shares at cost….. (2,380) Tota l stockholders’ equity……………………………..$ 371Avon paid a higher price to acquire treasury stock than the price Avon received when it issued its stock. This explains why Treasury Stock has a greater balance than the sum of Common Stock plus Paid-in Capital in Excess of Par.(10-15 min.) E 9-6JournalDATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Jan. 19 Cash (10,000 ⨯$5)…………………………50,000Common Stock (10,000 ⨯$1)………...10,000Paid-in Capital in Excess of Par…….40,000To issue common stock.Oct. 22 Treasury Stock — Common (900 ⨯ $7)... 6,300Cash……………………………………...6,300 To purchase treasury stock.Dec. 11 Cash (800 ⨯$12)…………………………...9,600Treasury Stock — Common (800 ⨯ $7)5,600Paid-in Capital from TreasuryStock Transactions………………..4,000 To sell treasury stock.Overall effect on stockholders’ equity($50,000 –$6,300 + $9,600)……………………………. $53,300(10 min.) E 9-7JournalDATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDITMillions b. Cash (6 million ⨯$15.50) (93)Common Stock (6 million ⨯$1.50) (9)Capital in Excess of Par Value (84)c. Treasury Stock (14)Cash (14)d. Retained Earnings (30)Dividends Payable (30)Dividends Payable (30)Cash (30)or one entry only:Retained Earnings (30)Cash (30)(10 min.) E 9-8DollarsinMillions Stockholders’ Equity:Common stock, $1.50 par value,1,835 million shares issued ($2,744 + $9)...........$ 2,753 Capital in excess of par value ($10,076 + $84)........ 10,160 Retained earnings ($261 + $440 –$30) (671)Treasury stock, 1 million shares at cost (14)Total stockholders’ equity…………………………..$13,570(20-30 min.) E 9-9 Req. 1Conversion of preferred stock into common stockRetirement of preferred stockReq. 2Issuance of common stock:a. To preferred stockholders who converted their preferredstock into common stockb. For cash or other assetsc. Stock dividendReq. 3(Millionsof sharesof stock)Dec. 31, 20X4 Common shares is sued (408)Less: Treasury stock, number of shares (29)379 Common sharesoutstanding……………………...(continued) E 9-9 Req. 4 (All amounts in millions)December 31, Purchases20X4 20X3 During 20X4 Cost of treasu ry stock……………….$1,235 –$215 = $1,020 Treasury stock, number of shares…29 –9 = 20 Average price per share paid fortreasury stock purchased during 20X4. $ 51 This price falls near the high end of the range during 20X4 (low of $38.25; high of $53.13).Req. 5Retained Earnings (Millions)Dividends Dec. 31, 20X3 Bal. 5,006 during 20X4 406 Net income 20X4 1,680Dec. 31, 20X4 Bal. 6,280(15 min.) E 9-10PREFERRED COMMON TOTAL 20X4 Total divi dend…………….$100,000 Preferred dividendsin arrears:20X2: $60,000 ⨯ .06 = $ 3,60020X3: $60,000 ⨯ .06 = 3,600Current year —20X4: $60,000 ⨯ .06 = 3,600Total to preferred………...$10,800Remainder to common….$89,20020X5 Total dividend…………….$100,000 Preferred dividends:Current year —20X5: $60,000 ⨯ .06 = $ 3,600Remainder to common….$96,400(15-20 min.) E 9-11 Req. 1 (All amounts in millions, except par value per share and market value per share.)JournalDATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDITMillions Apr. 15 Retained Earnings (500 ⨯ .10 ⨯ $51.50) ..... 2,575 Common Stock (500 ⨯ .10 ⨯$0.10) (5)Paid-in Capital in Excess ofPar — Common ................................. 2,570To distribute a common stock dividend.Req. 2Stockholders’ equity Millions Common stock, $0.10 par, 2,000 shares authorized, 550 issued ($50 + $5)………………………………. $ 55 Paid-in capital in excess of par — common($962 + $2,570)………………………………………. 3,532 Retained earnings ($7,122 –$2,575)………………... 4,547 Other……………………………………………………… (1,643) Total stockholders’ equity………………………... $6,491(continued) E 9-11 Req. 3The stock dividend did not change total stockholders’ equity because the company gave its stockholders no assets. The company merely transferred $2,575 million from Retained Earnings to Common Stock ($5 million) and Paid-in Capital in Excess of Par ($2,570 million).Req. 4EMS’s maximum cash dividend is limited to $3,000 million, the balance of its cash account.(10-15 min.) E 9-12a. No effect.b. No effect.c. Decrease stockholders’ equity by $8,500 (2,000 ⨯ $4.25).d. Increase stockholders’ equity by $3,000 (600 ⨯ $5).Note: Some students may think that the increase is $450 [600 ⨯($5.00 –$4.25)], but that is incorrect. To seethis, examine the entry to record sale of the treasurystock:Cash (600 ⨯$5)…………………………………..3,000Treasury Stock (600 ⨯$4.25)……………….2,550 Paid-in Capital from Treasury StockTransactions (or Additional Paid-in Capital) 450Observe that the sale of the treasury stock brought in $3,000. Also, the two credits to stockholders’ equity t otal $3,000, not $450.e. No effect.(10-15 min.) E 9-13Stockholders’ equity:Millions Common stock, $0.025 par, 1 billion shares(500 million ⨯ 2) authorized,880 million shares (440 million ⨯2) issued...... $ 22 Additional paid-in capital. (318)Retained earnings…………………………………….. 2,393 Other…………………………………………………….. (1,149) Total stockholders’ equity………………………. $1,584(10-15 min.) E 9-14 Req. 1Common:Total stockholders’ equity………………………….$92,000 Less: Preferred equity —redemption value……. (5,900) Total common equity………………………………..$86,100 Book value per share ($86,100 / 10,500 shares).. $ 8.20 Req. 2Common:Total stockh olders’ equity………………………….$92,000 Less: Preferred equity [$5,900 + ($4,800 ⨯ .06 ⨯3)]… (6,764) Total common equity………………………………..$85,236 Book value per share ($85,236 / 10,500 shares)…….. $ 8.12 Req. 3Frost’s stock is no t necessarily a good buy. Investment decisions should be based on more than one ratio.(10-15 min.) E 9-15 Rate of Net income +return= Interest expense=$2,662 + $219=$2,881= .136on assets Average total assets ($21,695 + $20,757) / 2 $21,226Net incomeRate of return – Preferredon common= dividends=$2,662 – $0=$2,662= .328stockholders' Average common ($8,648* + $7,604**) / 2 $8,126 equity stockholders’equity*$ 43 + $11,519 – $2,914 = $8,648**$388 + $16,510 – $9,294 = $7,604These profitability measures suggest strength because (1) Elsimate’s 32.8% return on stockholders’ equity is very good and (2) it exceeds return on assets by a wide margin.(10-15 min.) E 9-16 Net income +Return= Interest expense=$1,882 + $1,437=$3,319= .062on assets Average total assets ($55,798* + $52,071**) / 2 $53,935 *$32,320 + $23,478 = $55,798**$38,023 + $14,048 = $52,071Net income –Return= Preferred dividends=$1,882 – $0=$1,882= .100on equity Average commonequity($23,478 + $14,048) / 2 $18,763These rates of return are low —below the targets of most companies — but not terribly weak. The company is profitable, and return on equity exceeds return on assets. But both return measures could stand to be improved.(10 min.) E 9-17Cash flows from financing activities:Payment of long-term debt.............................$(17,055) Proceeds from issuance of common stock....... 8,425 Borrowings................................................... 6,582 Dividends paid. (225)(20-25 min.) E 9-18JournalDATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Cash (50,000* ⨯ $5) ..................................... 250,000Common Stock ...................................... 50,000Additional Paid-in Capital ..................... 200,000Issued stock.Treasury Stock (800 ⨯$4)……………...3,200Cash…………………………………….3,200 Purchased treasury stock.Cash………………………………………..1,800Treasury Stock ($3,200 –$2,000)….1,200Additional Paid-in Capital (or Paid-inCapital from Treasury Stock Transactions)($200,600 –$200,000) (600)Resold treasury stock.Revenues………………………………….171,000Expenses………………………………115,000Retained Earnings…………………...56,000 Closed net income to Retained Earnings.Retained Earnings ($56,000 – $38,000) 18,000Cash…………………………………….18,000 Decleared and paid dividends._____*$50,000 ) $1 par value per share = 50,000 shares issued.(15 min.) E 9-19Preferred stock:Gemini retired preferred stock of $82 million ($686 – $604).Common stock and Additional paid-in capital:Gemini issued 3 million shares of commonstock for $107 million, computed as follows: Millions Common stock ($894 –$891)……………………………..$ 3Additional paid-in capital ($1,572 –$1,468) (104)Total received for issuance of common stock………...$107Retained earnings: Millions Beginning balance……………………………………………... $19,108 Add: Net income…………………………………………….3,604 Less: Dividends……………………………………………… (2,051*) Ending balance………………………………………………….$20,661*$19,108 + $3,604 – $20,661 = $2,051Treasury stock:Gemini purchased treasury stock for $200 million ($2,843 – $2,643).(15 min.) E 9-20 AdditionalAmounts in Millions CommonStockPaid-inCapitalRetainedEarningsTreasuryStock TotalBalance, Dec. 31, 20X5… $ 81 $13 $40 $61 Issuance of stock………. 22 22 4 S tock dividend………….. 13 25(3)4—Purchase of treasurystock…………………..$(2) (2) Net income……………….26 26 Cash dividends………….(17) (17) Balance, Dec. 31, 20X6… $11 $17 $46 $(2) $72 Computations (not required):18,000,000 ⨯ $1 par = $8,000,00022,000,000 ⨯ $1 par = $2,000,0002,000,000 ⨯ ($2 – $1) = $2,000,0003(8,000,000 + 2,000,000) ⨯ .10 ⨯ $1 par = $1,000,0004(8,000,000 + 2,000,000) ⨯ .10 ⨯ $3 market value = $3,000,0005$3,000,000 market value – $1,000,000 par value = $2,000,000Practice Quiz1. b2. a3. d4. c ($313,000 + $280,285 + $12,160 + $89,000= $694,445)5. a ($694,445 + $71,890 – $5,000 = $761,335)6. b {($119,600 – $8,900) / [($681,425 + $766,335) ) 2] =.153}7. a8. c 20,000 ⨯ $100 ⨯ .08 = $160,0009. b ($350,000 – $160,000) / 20,000 = $9.5010. a11. b12. d13. e14. b15. d16. b17. d [($44,000 + $4,000) ) X = .125; X = $384,000]18. b19. a20. d21. b22. dProblemsGroup A(20-30 min.) P 9-1A 1. One important reason businesses organize as corporationsis the limited personal liability of stockholders for the obligations of the corporation. In a business organized as a proprietorship or a partnership, the owners are personally liable for the debts of the business. Another advantage of the corporation is its continuous life and the ease of transferring ownership from one stockholder to another. This feature allows the business to raise more money from more people than with a partnership and enables the corporation to grow larger than a partnership or a proprietorship.These advantages outweigh the disadvantage of paying additional income tax.2. Preferred stock is similar to common stock in that thecorporation is not obligated to pay the preferred or the common stockholders for their stocks. Preferred stock is similar to debt in that preferred stock specifies an annual dividend rate and debt specifies an annual interest rate. Both interest on debt and preferred dividends must be paid before paying dividends on common stock.(continued) P 9-1A 3. A gain on the sale of treasury stock is not profit to bereported on the income statement because the company is trading its stock back and forth with its stockholders. These transactions create paid-in capital from the stockholders, not profits from the sale of goods and services to customers.The two categories of ―gains‖ are different.4. Most stockholders prefer to receive cash dividends becausecash is an asset. By contrast, stock dividends transfer no cash or other assets of the corporation to the stockholders.In most cases the market price per share of common stock decreases after a stock dividend and leaves the stockholder with stock of the same overall market value as before the dividend.(30-45 min.) P 9-2A Req. 1JournalDATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Feb. 2 Organization Cost………………………………...1,800 Common Stock (300 ⨯$5)…………………...1,500Paid-in Capital in Excess ofStated Value —Common (300)Issued stock to promoter for assisting withissuance of stock.2 Cash (21,000 ⨯$6)………………………………..126,000Common Stock (21,000 ⨯$5)……………….105,000Paid-in Capital in Excess ofStated Value —Common………………..21,000Issued common stock to the incorporators.10 Patent……………………………………………….40,000Preferred Stock (400 ⨯$100)………………..40,000Issued preferred stock to acquire a patent.16 Cash…………………………………………………12,000Common Stock (2,000 ⨯$5)…………………10,000Paid-in Capital in Excess ofStated Value —Common………………..2,000Issued common stock for cash.(continued) P 9-2A Req. 2GH, Inc.Balance Sheet (partial)February 28, 20XXStockholders’ equity:Preferred stock, 6%, $100 par, 10,000 shares authorized, 400 shares issued………………………………………..$ 40,000 Common stock, no-par with $5 stated value, 100,000shared autho rized, 23,300 shares issued*………….. 116,500 Paid-in capital in excess of stated value —common… 23,300** Retained earnings…………………………………………… 119,000 Total stockholders’ equity……………………………...$298,800_____*300 + 9,000 + 12,000 + 2,000 = 23,300 shares**$300 + $21,000 + $2,000 = $23,300(10-15 min.) P 9-3AEli Jackson CompanyBalance Sheet (partial)December 31, 20X4Stockholders’ equity:Preferred stock, 5%, $100 par, 5,000 shares authorized,1,000 shares issued……………………………………...$100,000 Paid-in capital in excess of par, preferred………………5,000 Common stock, no-par, 500,000 shares authorized,100,000 shares issued…………………………………..519,000 Retained earnings…………………………………………… 131,000 Total stock holders’ equity……………………………...$755,000_____Computations:Preferred stock: 1,000 ⨯ $100 = $100,000Paid-in capital in excess of par, preferred:1,000 ⨯ ($105 – $100) = $5,000Common stock: Balance given as $519,000Retained earnings: $61,000 + $80,000 – ($100,000 ⨯ 0.05 ⨯ 2) = $131,000(30-40 min.) P 9-4A MEMORANDUMTO: Guilford Board of DirectorsFROM: Student NameRE: Proposal to fight off hostile takeover of the companyThe company should buy back enough of its stock (as treasury stock) that the outside investment group would find it difficult to obtain 51% of the outstanding stock. We should also announce to the stockholders that Guilford stands ready to match the offer made by the outside investment group. That is, the company would be willing to pay the stockholders as much as the outsiders would pay.Unfortunately, purchase of the treasury stock would decrease company assets and stockholders’ equity. It would leave liabilities unchanged.Student responses may vary.(20-30 min.) P 9-5A Common stock [(500,000 + 400,000) ⨯$1 + $35,000]….. $ 935,000 Additional paid-in capital —From issuance of stock:500,000 ⨯ ($5.00 –$1.00)……………..$2,000,000400,000 ⨯ ($8.50 –$1.00)…………….. 3,000,000 From sale of treasury stock[40,000 ⨯ ($8 –$7)]…………………….40,000 From stock dividend…………………….. 185,000 5,225,000 Retained earnings ($1,020,000 – $640,000 – $220,000). 160,000 Treasury stock [(60,000 – 40,000) ⨯$7]…………………. (140,000) Total stockholders’ equity………………………………….$ 6,180,000Total assets………………………………………………..$13,100,000 –Total liabilities…………………………………………….. (6,920,000) = Total stockholders’ equity………………………………$ 6,180,000(15-25 min.) P 9-6A Req. 1Bethlehem has $5.00 cumulative convertible preferred stock, $2.50 cumulative convertible preferred stock, and common stock outstanding.Req. 2Bethlehem issued the preferred stock at stated value and the common stock at a premium. This can be determined by dividing the balance of the three stock accounts by the number of shares issued, as follows:$5.00 preferred: $125,000,000 / 2,500,000 shares = $50 stated value.$2.50 preferred: $100,000,000 / 4,000,000 shares = $25 stated value.Common: $621,000,000 / 48,308,516 shares = $12.85, which is more than $8 par.We see that Bethlehem issued only its common stock at a price above par.Req. 3Bethlehem would have to pay preferred dividends in arrears before paying dividends to common stockholders because the preferred stock is cumulative.(continued) P 9-6A Req. 4Bethlehem must pay preferred dividends of $22,500,000 each year to avoid having preferred dividends in arrears._____Computations:$5.00 Preferred: 2,500,000 shares ⨯ $5.00 = $12,500,000 $2.50 Preferred: 4,000,000 shares ⨯ $2.50 = 10,000,000 Total preferred dividends………………………….$22,500,000 Req. 5JournalDATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT Retained Earnings………………………..61,000,000Dividends Payable, $5.00 Preferred(2,500,000 shares ⨯ $5.00 ⨯2)…...25,000,000Dividends Payable, $2.50 Preferred(4,000,000 ⨯ $2.50 ⨯2)…………….20,000,000Dividends Payable, Common($61,000,000 – $25,000,000 –$20,000,000) ……………………….16,000,000。

国际会计第七版英文版课后答案(第九章)

Chapter 9International Financial Statement AnalysisDiscussion Questions1. a. Business strategy analysisDifficulties in cross-border business strategy analysis: Identifying key profit drivers and business risk in two or more countries can be daunting. Business and legal environments and corporate objectives vary around the world. Many risks (such as regulatory risk, foreign exchange risk, and credit risk) need to be evaluated and brought together coherently. In some countries, sources of information are limited and may not be accurate.b. Accounting analysisDifficulties in accounting analysis: Two issues are important here. The first is cross-country variation in accounting measurement quality, disclosure quality, and audit quality. National characteristics that cause this variation include required and generally accepted practices, monitoring and enforcement, and extent in managerial discretion in financial reporting. The second issue concerns the difficulty in obtaining information needed to conduct accounting analysis. The level of credibility and rigor of financial reporting in Anglo-American countries generally is much higher than that found elsewhere. In fact, financial reporting quality can be surprisingly low in both developed and emerging-market countries.c. Financial analysis (ratio analysis and cash flow analysis)Difficulties in financial analysis: Extensive evidence reveals substantial cross-country differences in profitability, leverage, and other financial statement ratios and amounts that result from both accounting and non-accounting factors. Differences in financial statement items caused by national differences in accounting principles can be significant, and unpredictable in amount. Even after financial statement amounts are made reasonably comparable, interpretation of those amounts must consider cross-country differences in economic, competitive, and other conditions.d. Prospective analysis (forecasting and valuation)Difficulties in prospective analysis: Exchange rate fluctuations, accounting differences, different business practices and customs, capital market differences, and many other factors have major effects on international forecasting and valuation. Application of price multiples in a cross-border setting requires that the determinants of each multiple, and reasons why multiples vary across firms, be thoroughly understood. National differences in accounting principles are one source of cross-country variations in these ratios.Finally, all four stages of business analysis may be affected by:i. information access,ii. timeliness of informationiii. foreign currency issuesiv. differences in financial statement formatsv. language and terminology barriers.2. Here we will consider the information needs of investors, creditors, regulators, and competitors.Investors have high information needs at all stages of business analysis. They need to be able to accurately assess the merits of the company’s business strategy, the quality of its accounting, the company’s financial strength, and its future prospects. Since each step in the business analysis process builds on its predecessors, each step is critical in its turn. It can’t be said that any one step is more or less important than the others.Creditors need to go through much the same analysis, but are advantaged in that through direct contact with the companies they often have more extensive and detailed information than do investors. The goal of analysis is also often somewhat different. Many investors, hoping that their shares will increase in value, are interested in prospective analysis. The creditor’s interest is more often limited to being sure (with a margin of safety) that the loan will be repaid. For the creditor, the accounting analysis, financial analysis, and forecasting, all are important; valuation is less so. Regulators have much different interests. Since regulators have no direct interest in the future earnings of the companies they regulate, a prospective analysis (in most cases) is of limited value to them. However, if regulators need to be aware of the financial strength of the companies they regulate, they will need to conduct accounting analysis and (in many cases) financial analysis, particularly when assessing how much of an economic burden can be imposed on companies resulting from a particular regulation.Competitors are intensely interested in finding out as much about a company as possible. Business strategy analysis of one’s competitors is an important part of formulating one’s own business strategy, especially in terms of assessing strengths and weaknesses. Accounting and financial analysis also can uncover strengths and weaknesses. Prospective analysis may be important if a merger or acquisition is contemplated.3. Information accessibility is a major condition for an efficient capital market, that is, information must be rapidly analyzed and made available to investors capable of acting on it. In the United States and other broadly-based financial markets, a whole industry specializing in information analysis and dissemination has developed. Similar investment analysis services in many non-U.S. capital markets are at an earlier stage of development.4. Investment analysis almost always involves paired comparisons, even if the benchmark alternative is to do nothing. In evaluating the risk and return characteristics of a non-domestic company differences in accounting measures of risk and return are often due as much to differences in measurement rules between countries as they are to real economic differences. Corporate transparency compounds the problem by depriving analysts of information necessary to adjust for national measurement differences. Many analysts consider the disclosure issue to be even more important than measurement differences.5. One way of coping with GAAP differences is to restate foreign accounting measures to an internationally recognized set of principles or the reporting framework of the investor’s home country. An alternative tack is to develop a detailed understanding of accounting practices in the investee’s country.Students will definitely disagree on this one. Eventually some will offer a compromise: use the former coping mechanism if the investee company is being compared with a firm in the investor’s home country and adopt a “multiple principles capability” when comparing the investee company to another company in the same country. Another tack would be to examine who is making the market for the investee’s shares. If local investors are making th e market, one should not ignore local norms. However, if investors in the investor’s country are making the market; e.g., U.S. institutional investors, then restatement to the investor’s home country GAAP makes sense.6. Prospective analysis invo lves forecasting a firm’s future cash flows and then valuing those cash flows. As future cash flow estimates are based on accounting measurements, differences in measurement rules between countries complicate this effort. The range of accounting choicesavailable abroad add to this complexity. However, measurement differences are only one of the variables that complicates prospective analysis, Differences in environmental variables such as rates of inflation, sovereign risk, business practices, and institutions complicate both forecasting and valuation. Different institutions include financial norms, tax regimes and market enforcement mechanisms. In terms of valuation, while P/E multiples may be popular in one country, discounted dividends may be more popular in another. Even if two countries employ the same valuation framework, differences in investment horizons and methods of calculating discount rates/cost of capital will vary.7. Translation of foreign financial statements for the convenience of domestic readers is fundamentally distinct from the translation of branch or subsidiary accounts for purposes of consolidation. In the latter case, translation involves a remeasurement process. In most countries, foreign accounts first are restated to the accounting principles of the parent country prior to restatement to parent currency. Convenience translations merely involve a restatement process in the sense that foreign accounts are multiplied by a constant to change the currency of denomination fro m domestic currency to the currency of the reader’s domicile.8. Rules of thumb can vary substantially from one country to another due to both accounting and non-accounting factors. Japan provides a striking example. Many Japanese companies are members of large trading groups (keiretsu) with large commercial banks at their core. Keiretsu often postpone interest and principal payments, so that long-term debt in Japan works more like equity in the United States. Short-term debt is attractive to Japanese companies because short-term obligations typically have lower interest rates than long-term obligations, and normally are renewed or “rolled over” rather than repaid. Thus, debt has a much different nature and purposein Japan than in the United States.The acid test ratio specifically involves cash, marketable securities and receivables as the numerator in the equation, and current liabilities as the denominator. But what counts as current liabilities versus long-term debt (or how long-term debt is viewed) is very different in Japan than in the U.S. In Japan, high short-term debt is less likely to indicate a lack of liquidity, for the reasons stated above. Banks often are willing to renew these loans because it allows them to adjust their interest rates to changing market conditions. Thus, short-term debt works like long-term debt elsewhere, and Japanese companies can operate successfully with a quick ratio at a level that would be entirely unacceptable in the United States. Note, however, that banking practices in Japan are changing rapidly, and the tolerance in Japan for high levels of debt financing may well decrease in the future.9. Important recommendations include the following:∙Be aware that national differences in accounting measurement rules c an add “noise” to reported performance comparisons. The reader should be prepared to unwind accounting differences where necessary.∙Use a structured approach, such as the one presented in this chapter, to ensure that all relevant factors are considered.∙Cash flow-related measures are less affected by accounting principle differences than are earnings-based measures, thus making them potentially valuable in international analysis.∙Audit quality varies dramatically across countries. Become familiar with the level of audit quality in a particular country before reaching conclusions using financialstatements prepared by companies in that country.∙Corporate transparency also varies dramatically across countries. Be sure to assess accurately the quality of financial disclosures before reaching conclusions based on them.Above all, appreciate that measurement and disclosure practices are environmentally based. Appreciation for institutional differences will greatly aid in proper interpretation of accounting based performance and risk measures.10. The following list describes in general fashion what probable effect the Dutch translation practice would have on selected financial ratios in comparison with the temporal method. The analysis assumes that the original financial statements of the two companies are identical in all respects save for the currency translation method used. Inventories are assumed to be carried at cost._________________________________ _______________________________________________ Devaluation ___ R evaluationCurrent ratio (liquidity) decrease increaseInv. At mkt goes downInv at mkt goes upDebt ratio (solvency) increase decreaseLoss goes in ATA so eq. smallerGain in ata eq lrg.Fixed asset turnover (efficiency) increase decreaseNet sales/assets assets smaller so inc.A ssets larger so dec.Return on assets (profitability) increase decreaseloss not in incomeGain not in incomeAs can be seen, the current rate method can have a significant effect on key financial indicators. Accordingly, security analysts must be careful to distinguish between the currency in which a foreign account is denominated and the currency in which it is measured.11. The attest function is what gives credibility to the financial statements. If this function is important in the domestic case, it is even more important internationally where statement readers are separated from the companies they are interested in not only by physical distance but also by cultural distance.12. Internal control is an activity performed by a firm’s int ernal auditors that helps to assure that management’s policies and procedures are being carried out effectively, that financial transactions are being properly reported both internally and externally and that the assets of the firm are safeguarded. Intern al control is relied upon by a firm’s external auditors in determining to what extent their work should replicate the work of the internal auditor. The role of the internal auditor has become even more important in assuring the reliability of management’s financial representations owing to the large number of financial scandals that has rocked the U.S. and other financial markets during the start of this decade. Recent legislation in the U.S., which is increasingly being emulated elsewhere, has made management responsible for assuring that their system of internal controls are not only in place but are working well. This has beennecessary to reduce investor uncertainty regarding the quality and reliability of a firm’s published financial accounts.In the absence of a strong system of internal controls, investors will adopt a more passive approach to investing as opposed to relying on firm-specific information. This involves taking a mutual fund approach to investing which attempts to diversify away information risk, although at the cost of lesser performance.Exercises1. The trend of dividends from a U.S. dollar perspective can be ascertained by translating the peso dividend stream using the $/P exchange rate prevailing at the beginning of the time series or the end. Use of the ending exchange rate provides the following trend data:20X6 ________ 20X7 ________ 20X8 ______Net income (P) 8,500 10,800 15,900Dividends (P mill’s)2,550 3,240 4.770Dividends ($000) 850 1,080 1,590Percentage change --- 27.1% 47.2%2.How the statement of cash flows appearing in Exhibit 9.5 was derived:Beg. Bal. DR. CR. End. Bal.Cash 2,400 3.990New fixed assets 8,500 (3) 2,695 (2) 555 10,640ST $ payable 500 500LT debt 4,800 (3) 1,584 6,384Capital stock 3,818 3,818Retained earnings 1,782 (1) 250 2,030Translation adjustment 1,898Sources Usesof ofFunds FundsSources:Net income (1) 250Depreciation (2) 555Increase in LT debt (3) 1,584Translation adjustment (4) 1,898Uses of funds:Increase in fixed assets (3) 2,6954,287 2,695Net increase in cash 1,5924,287 4,2873. Consolidated Funds Statement(figures appearing in parentheses denote changes due primarily to translation effects) Sources:Net income 250Depreciation 555Increase in LT debt 1,584 (1,584)Translation adjustment 1,898 (1,898)less intercompany payable 138Uses of funds:Increase in fixed assets 2,695 (2,695)Net increase in cash 1,590 (924) The $924 translation effect is that part of the $1,898 gain on the translation of net worth which is related to the translation of cash. It is derived as follows.a. Opening cash of 24,000 krona translated at .10 =$2,400Opening cash retranslated at 12/31 at .133 = 3,192Gain 792b. 6,000 krona increase in cash during the yearinitially translated at .111 =$6666,000 krona retranslated at 12/31 at .133 = 798Gain 132Total translation gain applicable to cash 9244. Yes, Infosys added value for its shareholders as its EVA was a positive RPE 1,540. Operating income more than covered the company’s cost of debt and equity.5. Debit: Cost of goods sold ¥250,000,000Taxes payable 87,500,000Credit Inventories ¥250,000,000Tax expense 87,500,0006. a.20X6 20X7 20X8Sales revenue (£) 23,500 28,650 33,160Sales revenue ($) 49,350 63,030 53,056b. Percentage change 20X7/20X6 20X8/20X7Pounds 21.9% 15.7%Dollars 27.8% -15.8%The two time series do not move in parallel fashion because of changes in exchange rates used to perform the convenience translations.c. This problem can be minimized by translating the time series using the 20X6 exchange rate or by using the 20X8 exchange rate. Trend analysis can also be performed in the local currency.7. a. ROE (per Swedish GAAP) = 4,709/88,338 = 5.3%ROE (per U.S. GAAP) = 3,127/84,761 = 3.7%b. Some students will favor using the ROE based on Swedish GAAP, especially if Volvo’sperformance is being compared with that of another company in Sweden. Others willfavor basing their performance assessment on ROE per U.S. GAAP, especially if Volvois being compared to a U.S. counterpart. The latter at least minimizes the apples tooranges issue. It is not clear which viewpoint is correct, and this question should provoke good discussion of the value of restated accounting numbers.c. Even if students all agreed that an ROE based on U.S. GAAP were preferable, the user ofthis information should take into account all institutional considerations, such asdifferences in tax laws, financial norms and business practices that affect all ratios in the Swedish business environment. In the absence of such analysis, restated ratios are likely to be misinterpreted.8. Assessing reasons for P/E ratio trends and cross-country comparisons is difficult. Thetext discusses two studies that have analyzed differences in P/E ratios between Japan and the United States in the late 1980s. The studies differ greatly in their explanations of the(then) much higher Japanese P/E ratios, and neither study claims to explain more than apart of the difference. Part but not all of the reasons were attributable to accountingmeasurement differences. We suspect that differences in institutional factors probablyexert the dominant reason for observed differences internationally.9. Students answers will naturally vary. However, they should recognize that audit practiceare influenced as much by differences in social, economic and political environments as are measurement standards. They should also recognize that standard setting is as mucha political process as it is a process of logic or sound principles.10. Judging from information provided in Exhibit 9-22, liability cases vary far more bycountry than by auditor – with 35 cases in the U,.S., over twice as many as in the nexthighest country (the U.K., with 17). No audit firms had cases in every country, and thetotal number for each auditor is relatively similar, ranging from 11 (Arthur Andersen) to18 (KPMG). The country where liability cases were least frequent was the Netherlands,with only one case.Why? Laws and regulations in the Anglo-American countries, including the UnitedStates, stress investor protection. This places more liability on the auditor and makes iteasier for companies or shareholders to bring or prove a suit. In response to the threat of litigation, auditors are probably more careful in the United States, and more willing tosubject themselves to strict regulations.Implications? It is reasonable to argue that financial reporting quality is positivelycorrelated with frequency of audit litigation. For example, the patterns of auditorlitigation shown in the table above are consistent with the relatively high financialreporting quality found in the U.S., the U.K., Australia and Canada.11. Student opinions are likely to vary on this one as well. Some will argue for opinionscoined by private professional bodies. Others, in light of Enron, et. al., will opt for more legal opinions. In the end, students should conclude that enforcement mechanisms arealso very important. Recent U.S. indictments of company officers for accountingviolations as well as mandated prison terms is unprecedented. Together with increasing recourse to the courts by aggrieved investors, the imbalance between an auditor’sresponsibility and authority is being redressed.12. Reasonable criteria for judging the merits of a database for company research include(but are not limited to):-coverage (number of companies, countries, years of data).-amount of information for each company (number of financial, market-based measures per company).-reliability, ease of use, language translations, search features.-cost (a re only some of the data “freely available?”).-access and links to other Web sites provided?Case 9-1Sandvik1.a. There are several advantages that accrue to Swedish firms employing the system of special reserves. First, political dividends accrue to firms that align their goals with those of the government. Second, there are tax advantages as expenses recognized in establishing a reserve are tax deductible. Third, the use of reserving allows companies to manage their earnings. Disadvantages include the risk of reducing a company’s reporting credibility with the international investing community. This, in turn, may limit the company’s external financing flexibility.2. The government benefits from the reserving system in that it has ally in maintaining full employment. That is to say, its macroeconomic tool kit is expanded in that it yet another vehicle for managing the economy in addition to monetary and fiscal policy.3. The use of reserves makes it difficult for statement readers who are unfamiliar with Swedish reporting practices to assess the risk and return attributes of the firm. For example, it will not be clear to what extent observed differences in financial ratios between a Swedishcompany and a non-Swedish company are due to accounting differences as opposed to real economic differences in the attributes being measured.4. The use of reserves had a dampening effect on Sandvik’s reported earnings.5. The entries used to increase the reserves can be determined by examining the change in Untaxed Reserves in the balance sheet as well as examining the relevant notes to the financial statements. The entries were:Depreciation expense 172Excess depreciation reserve 172Other expenses 13Other untaxed reserves 136. With reserves Without reservesROS 3,731/15,242 3,731 + 185(1-.03)/15,242= 24.5% = 25.7%ROA 3,731 + 1 + 633 3,731 + 1 + 633 + 185(38,142 + 22,286)/ 2 [(38,142 – 185) + (22,286 + 85)] /2= 14.4% = 15.1%Case 9-2Continental A.G.Students will first gravitate to the notes to the financial statements dealing with Special Reserves and Provisions. Their instincts are correct. The problem facing an external analyst is that it is difficult to determine which of the reserve and provision items are legitimate and which are not. It turns out that two important keys to this case are to be found in footnotes 21 and 22. Focusing on the consolidated figures, we see that Continental is using entries under Other operating income and Other operating expenses to smooth reported earnings. The following analysis backs out 1) Credit to income from the reversal of provisions, 2) Credit to income from the reduction of the general bad debt reserve, and 3) Credit to income from the reversal of special reserves appearing in note 21 and Allocation to special reserves under note 22.Adjustments:19X9Operating income DM68,029Provisions DM33,559General B/D Reserve 2,014Special reserve 32,456Special reserves 1,278Operating income 1,27820X0Operating income DM57,237Provisions DM17,312General B/D Reserves 1,101Special Reserves 38,824Special Reserves 168Operating income 168To determine the net overstatement on an after-tax basis, the students should attempt to approximate Continental’s effective tax rate. Information to do this are contained in footnote 24 and Continental’s income statement.Effective Taxes: 19X9 20X0Income tax 141,476 59,884Income after tax 227,838 93,435Income before tax 369,314 153,319Effective rate: 141,476/369,314 59,884/153,319= 39% = 39%Reduction in taxes:66,751 X .39 57,069 X .39= 26,033 = 22,257Net overstatement:66,751 57,069-26,033 -22,25740,718 34,812This overstatement, as a percentage of reported consolidated earnings, was 18% for 19X9and 37% for 20X0. Dietrich and Marissa have cau se to pay Continental’s CFO a visit.。

毕晓方改编财务会计的课后复习题答案第九章复习题答案

Ex. 9–1Switching to a perpetual inventory system will strengthen Onsite Hardware’s i nternal controls over inventory, since the store managers will be able to keep track of how much of each item is on hand. This should minimize shortages of good-selling items and excess inventories of poor-selling items.On the other hand, switching to a perpetual inventory system will not eliminate the need to take a physical inventory count. A physical inventory must be taken to verify the accuracy of the inventory records in a perpetual inventory system. In addition, a physical inventory count is needed to detect shortages of inventory due to damage or theft.Ex. 9–2Include in inventory: c, e, g, iExclude from inventory: a, b, d, f, hEx. 9–3a.Balance SheetMerchandise inventory $1,950 understatedCurrent assets $1,950 understatedTotal assets $1,950 understatedOwner’s equity$1,950 understatedb.Income StatementCost of merchandise sold $1,950 overstatedGross profit $1,950 understatedNet income $1,950 understatedEx. 9–4When an error is discovered affecting the prior period, it should be corrected. In this case, the merchandise inventory account should be debited and the owner’s capital a ccount credited for $12,800.Failure to correct the error for 2005 and purposely misstating the inventory and the cost of merchandise sold in 2006 would cause the balance sheets and the income statements for the two years to not be comparable.Ex. 9–5Total cost of merchandise sold ............................ 2,121 Inventory, April 30: $802 ($424 + $378)Ex. 9–6Total cost of merchandise sold ............................ 4,260 Inventory, March 31: $1,295 ($630 + $665)Ex. 9–7a. $700 ($50 × 14 units)b. $663 [($45 × 5 units) + ($47 × 4 units) + ($50 × 5 units)]Ex. 9–8a. $360 (8 units at $33 plus 3 units at $32)b. $318 (6 units at $28 plus 5 units at $30)c. $341 (11 units at $31; $1,240 ÷ 40 units = $31)Cost of merchandise available for sale:6 units at $28 .............................. $ 16812 units at $30 (360)14 units at $32 (448)8 units at $33 (264)40 units (at average cost of $31) ............. $1,240Ex. 9–91. a. LIFO inventory < (less than) FIFO inventoryb. LIFO cost of goods sold > (greater than) FIFO cost of goodssoldc. LIFO net income < (less than) FIFO net incomed. LIFO income tax < (less than) FIFO income tax2. Under the lifo conformity rule a company selecting lifo for taxpurposes must also use lifo for financial reporting purposes. Thus,in periods of rising prices the reported net income would be lowerthan would be the case under fifo. However, the lower reported incomewould also be shown on the corpora tion’s tax return; thus, there isa tax advantage from using lifo. Firms electing to use lifo believethe tax advantage from using lifo outweighs any negative impact fromreporting a lower earnings number to shareholders. Lifo is supportedbecause the tax impact is a real cash flow benefit, while a lower lifoearnings number (compared to fifo) is merely the result of a reportingassumption.Ex. 9–10Unit Unit TotalInventory Cost Market Lower Commodity Quantity Price Price Cost Market of C or MM76 ............ 8 $150 $160 $1,200 $1,280 $1,200 T53 ............ 20 75 70 1,500 1,400 1,400 A19 ............ 10 275 260 2,750 2,600 2,600 J81 ............ 15 50 40 750 600 600 K10 ............ 25 101 105 2,525 2,625 2,525 Total ....... $8,725 $8,505 $8,325Ex. 9–11The merchandise inventory would appear in the Current Assets section,as follows:Merchandise inventory—at lower of cost, fifo, or market ... $8,325Alternatively, the details of the method of determining cost and themethod of valuation could be presented in a note.Ex. 9–12Cost Retail Merchandise inventory, June 1 .................. $160,000 $ 180,000 Purchases in June (net) ........................ 680,000 1,020,000Merchandise available for sale.................. $840,000 $1,200,000Ratio of cost to retail price:70%$1,200,000840,000$Sales for June (net) ........................... 875,000 Merchandise inventory, June 30, at retail price . $ 325,000 Merchandise inventory, June 30,at estimated cost ($325,000 × 70%) ..........$ 227,500Ex. 9–13a. Merchandise inventory, Jan. 1 .................. $180,000 Purchases (net), Jan. 1–May 17 ................. 750,000 Merchandise available for sale..................$930,000Sales (net), Jan. 1–May 17 .................... $1,250,000 Less estimated gross profit ($1,250,000 × 35%) . 437,500 Estimated cost of merchandise sold .............. 812,500Estimated merchandise inventory, May 17 .........$117,500b. The gross profit method is useful for estimating inventories for monthly or quarterly financial statements. It is also useful in estimating the cost of merchandise destroyed by fire or other disasters.Ex. 9–14a. Apple: 147.8 {$4,139,000,000 ÷ [($45,000,000 + $11,000,000) ÷ 2]}American Greetings: 3.1 {$881,771,000 ÷ [($278,807,000 + $290,804,000) ÷ 2]}b. Lower. Although American Greetings’ business is seasonal in nature,with most of its revenue generated during the major holidays, much of its nonholiday inventory may turn over very slowly. Apple, on the other hand, turns its inventory over very fast because it maintains a low inventory, which allows it to respond quickly to customer needs.Additionally, Apple’s computer pro ducts can quickly become obsolete, so it cannot risk building large inventories.Ex. 9–15a. Number of days’ sales in inventory =sold/365goods of Cost periodof end Inventory,Albertson’s,5$25,242/36$2,973= 43 daysKroger,5$37,810/36$4,175= 40 daysSafeway,5$22,303/36$2,558= 42 daysInventory turnover =inventoryAverage soldgoods of CostAlbertson’s,$3,196)/2($2,973$25,242+ = 8.2Kroger,$4,178)/2($4,175$37,810+ = 9.1Safeway,$2,437)/2($2,558$22,303+ = 8.9b. The nu mber of days’ sale in inventory and inventory turnover ratiosare con sistent. Albertson’s has slightly more inventory than does Safeway. Kroger has relatively less inventory (2–3 days) than does Albert son’s and Safeway.Ex. 9–21 Concludedc. If Albertson’s matched Kroger’s days’ sales in inventory, then itshypothetical ending inventory would be determined as follows,Number of days’ sales in inventory =sold/365goods of Cost periodof end Inventory,40 days =5$25,242/36XX = 40 ($25,242/365)X = $2,766Thus, the additional cash flow that would have been generated is the difference between the actual ending inventory and the hypothetical ending inventory, as follows:Actual ending inventory ............. $ 2,973 million Hypothetical ending inventory ....... 2,766Positive cash flow potential ........$ 207 millionThat is, a lower ending inventory amount would have required less cash than actually was required.。

中级财务会计第九章非流动负债

三、借款费用应予资本化的借款范围
借款费用应予资本化的借款范围既包
括专门借款，也包括一般借款。其中，对于一般借款，只有在购建或者生产符合资本化条件的资产占用了一般借款时，才应将与一般借款相关的借款费用资本化；否则，所发生的借款费用应当计入当期损益。
四、借款费用资本化期间的确定
借款费用资本化期间，是指从借款费用开
一）
[例l4－6]某企业因建设长期工程所需，
于20×7年3月1日购入一批工程用物资，开出一张l00 000元的带息银行承兑汇票，期限为6个月，票面年利率为6%。对于该事项，企业尽管没有为工程建设的目的直接支付现金，但承担了带息债务，所以应当将l00 000元的购买工程用物资款作为资产支出，自3月1 日开出承兑汇票开始即表明资产支出已经发生。

一、应付债券的性质和分类性质：一种负债分类：一次还本，分次还本，可转换以及不可转换债券等二、分期付息债券的发行对交易费用的处理：计入债券的初始确认金额
三、分期付息债券的会计处理
1、企业发行的一般公司债券，无论是按面值发行，还是溢价发行或折价发行，均按债券面值记入“应付债券”科目的“面值”明细科目，实际收到的款项与面值的差额，记入“利息调整”明细科目。企业发行债券时，按实际收到的款项，借记“银行存款”、“库存现金”等科目，按债券票面价值，贷记“应付债券——面值”科目，按实际收到的款项与票面价值之间的差额，贷记或借记“应付债券— —利息调整”科目。
始资本化时点到停止资本化时点的期间，但借款费用暂停资本化的期间不包括在内。只有发生在资本化期间内的借款费用，才允许资本化，它是借款费用确认和计量的重要前提。
借款费用开始资本化时点的确定借款费用同时满足下列条件的，才能开始资本化： 1.资产支出已经发生； "资产支出"包括支付现金、转移非现金资产和承担带息债务形式所发生的支出。

财务会计英语版课后答案

Chapter 1Page 81.Classify following items as either an expense (E),a revenue(R),an asset(A),or a liability( L);Cash, buildings, salaries of the sales force, $5 owed to a company for work performed, Mortgage to a bank, sales.Answer:Cash—A Buildings—A Salaries of the sales force—E$5 owed—L Mortgage to a bank—L Sales—R2. Classify each of the following as n operating (O), bank (I) , or financing (F) in a statement of cash flows; Wage paid to workers, Cash received form a bank in the form of a mortgage, cash dividends paid to a supplier of inventory, Cash paid to purchase a new machine.Answer:Wage paid—O Cash of mortgage-- F Cash dividends paid -- FCash paid to supplier of inventory—O Cash paid to purchase a machine—IPage111.List several economic decisions that rely on accounting information.Answer:·Whether to grant a loan·How much to pay for a share of common stock.·Whether to grant a rate increase to an electric utility·How much in damages the loser of a lawsuit must pay ·How much of a bonus to pay a plant manager·Whether to enter a new market2. Why do financial statements have footnotes, and what kinds of information might you find in them?Answer:Financial statements have footnotes because financial disclosure is a complex business. The notes tell us some of the specifics about the company environment , what accounting methods the company has used, what the accounting numbers might be if alternative methods had been used, and some of the major contingencies that are not formally included in the statement proper.Page 201.Describe the process of setting accounting standards. What are the roles of all the parties you mention?Answer:The FASB, a private, not-for-profit organization ,sets GAAP in the U.S. It publicly declares an agenda, promulgates "ExposureDrafts" of proposed standards, holds open meetings, and invites input from interested parties. The FASB has been delegated this authority by the SEC, a government agency with legal authority to determine GAAP.2.Think of an example, like the executive compensation example in the chapter, where incentives might exist to bias accounting numbers one way or another.Answer:There are other examples, but here is one that is different. A taxpayer has incentives to bias reported income downward in order to minimize income tax payments. However, it is important to understand that tax accounting rules are different from GAAP, and this book is about GAAP. Chapter 14 covers GAAP for taxes in more detail.Other examples include:·An entrepreneur seeking a loan from a bank or funding from a venture capitalist might have incentives to bias accounting numbers to look favorable.·A firm that is subject to scrutiny for earning excess profits(e.g.,an oil company）might have incentives to bias accounting numbers to look less favorable.·A utility subject to rate regulation might have an incentive tobias accounting numbers to look less favorable in order to gain more generous increases in its rates. (At this writing, there is a rather severe controversy about whether electric utilities in California are genuinely in financial difficulty and should be allowed to continue to impose large rate increase.)Chapter 2Page 381 Define assets, liabilities, and equities.Gave an example ofeach. How are assets valued? How are liabilities valued? Answer:An asset is a probable future economic benefit obtained or controlled by an entity as a result of a past transaction. Cash marketable securities, accounts receivable, inventories, prepaid expenses, patents, copyrights, trademarks, and property, plant and equipment are all examples of assets. A liability isa probable future sacrifice of economic benefits arisingfrom present obligations of an entity to transfer assets or provide services as a result of a past transaction or event.Accounts payable, accrued liabilities, unearned revenues, warranties, and bonds payable are all examples of liabilities.Accounting valuation of assets uses severaldifferent methods, including market value, expected realizable value, lower of cost or market, present value of future cash flows, and historical cost. Accounting valuation of liabilities is the expected amount that will be paid, perhaps adjusted for the time value of money.2. Explain what is meant by the entity concept. Answer:The entity is the person or organization about which accounting's financial history is being written.3 .A company signs a ten-year employee contract with a vicepresident. The salary is $ per year, guaranteed. Is this contract an asset? Would it appear on the balance sheet?Explain.Answer:The rights conveyed by the contrat may be an asset from an economic point of view, but they are not an asset under GAAP. The contract would not appear on the balance sheet as an asset, because GAAP does not record executory contracts, which are contracts that require future performance form both parties. That is ,GAAP views the contract as determining what services will be provided, no asset is recognized under GAAP.(Neither is a liability for payment recognized until services have beenperformed.)4 .A company purchased a parcel of land 10 years ago at a cost of $.The land has recently been appraised at $. At what value is the land carried in the balance sheet? How does the appraisal affect the carrying value in the balance sheet? Answer:The land is on the balance sheet at its historical cost of $.The carrying value of the land is unaffected by the appraisal. Page 421、Define debit and credit .What kind of balance ,debit or credit ,would you expect to find in the inventory T-account？In the Common Stock T-account?Answer:A debit is an entry on the left side of a T-account. A credit is an entry on the right side of a T-account. We would except to find a debit balance in Inventory, and credit balances in Bonds Payable and Common Stock. The reason is the convention that increases in assets are debits and increases in liabilities and equities are credits.2、If the trial balances, it means that you have analyzed all the effects of transactions correctly. True or false？Explain.Answer:False. A balanced means that the trial balance is consistent, not necessarily correct. For example. If an arbitrary entry is made that debits Cash and credits Common Stock for an equal amount, the trial balance will balance but it will be wrong. An accounting can receipt of cash and the issuance of common stock, but it alone can not make cash or additional common shares.3﹑Suppose Web sell leases a portion of its space to another company. Web sell’s accounts are debited and credited to record this transaction?Answer:Web sell would debit Cash and a liability, Rent Received in Advance, for the prepayment.Chapter 3Page 571. Define revenue and expense. How does one decide to list an item as revenue in an income statement? What is matching? Answer:Revenues are increases in net assets resulting from operations over a period of time .Expense are decreases in net assets resulting from operations over a period of time .Revenue isrecognized the earnings process is substantially complete , a transaction2. Give an example not found in the text , of an expense that is paid for in cash in a prior accounting period .In a subsequent accounting period.Answer:There are many allowable responses . An example is a patent that is purchased and paid for in one year and used in next .3. Give an example, not found in the text , of a revenue that is received in cash in a prior accounting period . In a subsequent accounting period .Answer:An example is a house painting contractor that receives payment for one-third of the contract price before beginning the painting .4. Explain why it is right to think of an asset as a cost and an expense as an expired cost .Answer:An asset is a future benefit . And there is an opportunity cost associated with not selling it for cash or exchanging it to settleChapter 6Page 120:1.The following table lists the adjustments and has an X in thecolumn indicating the approach:2. We first take adjustment for prepaid insurance and insurance expense. It would be easy to think of this adjustment as focusing on how much of the insurance coverage remained, as opposed to how much was used. In fact, the same type of logic could be used---computing a monthly rate for the coverage and applying that to the months reminding, instead of the months used.Now take adjustment for depreciation expense and accumulated depreciation. Estimating the value of the equipment at year end might be easy, for example, if there is a market for used equipment, or very difficult, for example, if the equipment was specially designed for Websell. Once a value estimate for the equipment at year end is obtained, depreciation expense would be the change in value over the year.Page 1231.$5000×(1+0.06)^10=$5000×1.79085=$8954.242.$5000×(1+0.06/2)^(10×2)=$5000×(1+0.03)^20=$5000×1.80611=$9030.563. $1000×(1.05)^3+$1000×(1.05)^2+$1000×(1.05)^1=$3310.134. ($1000×0.05/5)^13+$1000×(1+0.05/5)^10+$1000×(1+0.05/5)^5=($1000×(1.01)^15)+($1000×(1.01)^10)+($1000×(1.01)^5) =$1160.97+$1104.62+$1051.01=$3316.6Page 1241.x×.(1.07)^3=$3000 x=$3000/(1.07)^3=$2448.892. Calculate the present value at 10% of $1300 received two years from now. If that is greater than $1000, you are better offwith the $1300 to be received in two years. If its present value is less that $1000, you better off with $1000 now. $1300/(1.10)^2=$1074.38Therefore, you are better off receiving $1300 two years from now.Another way to do this problem is to take the future value at 10% of $1000. At the end of two years, the $1000 would compound up to:$1000×(1.10)^2=$1210,Which is less than you would have at that point if you took the $1300.3．The most I would be willing to pay is the present value at 8% of the stream of $1000 payment:$1000/(1.08)^1+$1000/(1,08)^2+$1000/(1,08)^3=$925.926+857.339+793.832=$ 2577.1(rounded)Chapter 8Page 1681.Aging takes the balance in accounts receivable at the end of the year, and sorts it by how long ago the transaction occurred that gave rise to that receivable. Experience has shown that “older” accounts have less likelihood of ever being collected.Percentages of likely uncollectibles for each category are applied to the totals in that category , and the results added to obtain an estimate of the allowance for uncollectibles required to value properly the estimated amount that will be collected from the accounts receivable. The bad debts expense then falls out as a “plug” in the allowance for uncollectibles.The percentage-of-sales method just estimates bad debt expense as a percent of sales, and plug the balance in the allowance account.2. Cash (118)Accounts receivable (118)12/31/2003(to recognize collection of cash from companies owing service co. from 2002 sales)Allow ance for doubtful accounts (7)Accounts receivable (7)12/31/2003(to write off accounts we know will not be collected) Ac counts receivable (125)Sales reven ue (125)12/31/2003(to recognize revenue and to anticipate collection of the receivable)If we focus on recording the bad debts expense that is associated with billings for 2003, we would record.06×$=$7500 in baddebts expense.B ad debts expense………………………………………7.5 Allowan ce for doubtful accounts…………………………7.5 12/31/2003(to record bad debt expense in anticipation of not collecting 100% of receivables)Method one: focus on the percentage of sales expected not to be collected.Allowance for doubtful accounts(10.5 is the “plug”,i.e., the number that drops out)Now we move to 2004, where events now proceed as expected . Collections are $117.5 thousand. Cash………………………………………………..117.5 Accounts receivable…………………………………117.512/31/2004(to recognize collection of cash form companies owing service co. from 2003 sales)Allowance for doubtful ac counts………………………7.5 Accounts receivable………………………………….7.512/31/2004(to write off accounts we know will not be collected)Accounts receivable (125)Sales revenue (125)12/31/2004(to recognize revenue and to anticipate collection of the receivable)If we focus on recording the bad debts expense that is associated with billings for 2004, we would record.06×$=$7500 in bad debts expense.Bad debts expense……………………………………7.5 Allowance for doubtful acco unts…………………………7.5 12/31/2003(to record bad debt expense in anticipation of not collecting 100% of receivables)The allowance for doubtful accounts using the peentage-of-sales method looks like this:Method one: focus on the percentage of sales expected not to be collected.Allowance for doubtful accountsOnly the entries recording bad debt expense are different using the aging method. Instead of the above entries recording bad debt expense, we would have the following analysis: Each year, we would adjust the balance in the allowance for doubtful accounts so that the net receivable ends up at $. That is, we would solve $-X=$,and find that the ending balance in the allowance for doubtful accounts must be $7500.Analyzing the account, we would determine that at 12/31/2003 we must add $4500 to the allowance for doubtful accounts: Bad debts expense………………………………..4.5 Allowanc e for doubtful accounts…………………….4.512/31/2004(to record bad debt expense in anticipation of not collecting 100% of receivables)At 12/31/2004, we must add $7500 to the allowance for doubtful accounts:Bad debts expense………………………………..7.5 Allowan ce for doubtful accounts…………………….7.512/31/2004(to record bad debt expense in anticipation of not collecting 100% of receivables)Using aging, the allowance for doubtful accounts T-account looks like this:Method two: focus on the ending balance in the allowance for doubtful accounts.Allowance for doubtful accountsChapter 9Page 1831.LIFO is last-in first-out. It means that in computing ending inventoryand cost of goods sold, the cost of items sold is assigned in reverse chronological order of their purchase, beginning from the most regent items purchased in a period. FIFO is first-in, first-out .It means that in computing ending inventory and cost of goods sold, the cost of items sold is assigned in chronological order of their purchase, beginning from the goods on hand at the beginning of the period. Average cost means that in computing ending inventory and cost of goods sold, the average unit cost of the beginning inventory and items purchased in a period is used to determine the cost of goods sold and remaininginventory.2.Yes, it is still a positive net present value project. In fact, its netpresent value is higher than when the purchase was made at$1.05 per unit, since the cash outflow is reduced but the cash inflow remains the same. The cash outflow on 12/31/01 when purchases are at $0.95 per unit is $114.This means the net cash flow at 12/31/01 is ($4) instead of ($16),and the NPV for Widget Company is:NPV=-100-$4/1.1+$10/ (1.1^2) +$144/ (1.1^3) =$12.82First, we redo the case of FIFO. The inventory T-account is:Widget Co. Inventory Account under FIFO Flow AssumptionInventory (FIFO)Ending inventory values can be read from the above T-account. Net incomes are:Widget Incomes using FIFONow we redo the case of FIFO. First, the inventory T-account is: Widget Co. Inventory Account under FIFO Flow AssumptionInventory (FIFO)Ending inventory values can be read from the above T-account. Net incomes are:Page 186To calculate the market-to-book ratios and accounting returns on equity: Market-to-book Ratios under Average CostAccounting Rates of Return under Average CostCollecting the results for FIFO from the chapter and these results for average cost, we have:Market-to-book Ratios under Various Cost Flow AssumptionAccounting Rates of Return under Various Cost Flow AssumptionAs is apparent, the market-to-book ratios and accounting rates of return for average cost are between for LIFO and FIFO.2. Because it has more recent costs on the balance sheet in the inventory account, FIFO has market-to-book ratios closer to 1regardless of whether prices rise or fall.Chapter 10Page 1961. The total profit on the transaction is the sales price of $880.00 less the original cost of $734.03:Sales price of securities $880.00Less : original cost ($735.03)Profit on transaction $144.97The cash flows were: $735.03 out on January1, 2001, and $880.00 in on January 3, 2003.There were profit in 2001, 2002, and 2003.In 2001, therewas a profit of $81.17.In 2003,there was a profit of $5.00.2. The unadjusted book value of the security on December 31,2002 was $793.83.If the market value of the security on that date was $790.00,an adjustment reducing its carrying value by $3.83 is required to write it down to its market value: Unrealized loss on market value securities-trading ……3.83 Marketable securities –trading ………… 3.83 If the security were sold for $810.00 on January 3, 2003, the entry would be:Cash ………………………………810.00Marketable securities –trading ………………790.00Gain on marketable securities-trading …………20.001/03/2003(To record the sale of the Marketable securities—trading )Page 1981. When a securities is classified as trading security, profits or losses show up on the income statement in every period from when the security is purchased until when it is sold. when a security is classified as available-for-sale ,profits or losses only show up on the income statement in the period in which the security is sold.2. the unadjusted book value of the security on December31,2002 was $793.83.If the market value of the security on that date was $790.00,an adjustment reducing it’s carrying value by $3.83 is required to write it down to it’s market value. however unlike the trading security case ,the unrealized loss is an equity account ,not a temporary account:Unrealized loss on marketable securities-available-for-sale 3.38 Marketable securities –trading ………………3.83To record the sale of the security for $810.00 on January 3,2003: Cash ………810.00Unrealized gain on marketable securities-available-for-sale(58.80-3.83) ………54.97Marketable securities-trading …………790.00Realized gain on marketable securities-available-for-sale ……………74.9712/31/2002(To mark-to-market the Marketable securities—available-for-sale)Chapter 111．a. Under straight-line depreciation, the depreciation expense each year is$600-$100/5 years=$100 per year.b. Under double-declining balance depreciation, the depreciation expense each year is given in the following table:c. Under sum-of-year’-digits depreciation, the depreciation expense each year is given in the following table:Sum-of years’-digits depreciation2. Intangible assets are most often shown in one line that is cost net of amortization. Tangible assets are sometimes shown in three lines: cost , accumulated depreciation, and net .3. Economic depreciation is the change in the economic value of the asset. Economic depreciation can be appreciation when the asset increases in value. We seen this already with marketable debt securities, which sometimes increase in valuebecause of unpaid interest4.It is easy and fulfills the requirement of GAAP to provide depreciation using a systematic and rational method. No GAAP depreciation method likely correctly reflects economic depreciation anyway ,so a simple expedient may be good enough.1．Sraight-line depreciation is $100 per year ($300/3 years).Double-declining balance depreciation is given in the following table:2.For straight-line depreciation,the entry is the same each year:Depreciation expense (100)Accumulateddepreciation (100)For double-declining balance depreciation,the entries are: Year1Depr eciation expense (200)Accu mulated depreciation (200)Year2Depreciation expense………………………………66.67 Acc umulated depreciation………………………66.67 Year3.declining balance because depreciation expense under straight-line is only $100,while under double-declining balance depreciation expense is $200.4.If the company buys one asset every year and each asset lasts three years,then in year 4 it will have three assets.Under straight-line depreciation,each of those assets generates a depreciation expense of $100;therefore total depreciation expense would be 3*$100,or $300.Under double-declining balance depreciation,total depreciation expense depends on the age of each asset.The company would have one asset in its first year of life,one in its second year of life,and one in its third year.Therefore,totaldepreciation expense would be:$200+$66.67+$33.33=$300,the same as under straight-line.Both depreciation methods give the same total depreciation because:1.Both methods fully depreciate the assets over their lives.2.The cost of the assets has remained constant.3.The company is in a steady state in which the number ofnew assets purchased in a period equals the number ofold assets being retired in that period.。

会计英语课后习题参考答案解析(最新整理)

60,000
3. post-closing balance in Jon Nissen, Capital at June 30, 2002: $54,000
专业整理知识分享
完美 WORD 格式
Chapter 3
1.
Dundee Realty bank reconciliation
October 31, 2009
April 30, 20XX
5,400 4,100
450 9,950
690
9,260
专业整理知识分享
完美 WORD 格式
Chapter 2
1.
a. To increase Notes Payable -CR b. To decrease Accounts Receivable-CR c. To increase Owner, Capital -CR d. To decrease Unearned Fees -DR e. To decrease Prepaid Insurance -CR f. To decrease Cash - CR g. To increase Utilities Expense -DR h. To increase Fees Earned -CR i. To increase Store Equipment -DR j. To increase Owner, Withdrawal -DR
6
Paid creditor, $1,500
7
Supplies used during the period, $630.
Owner’s equity +/+
+ + -
-
专业整理知识分享

国际财务管理（英文版）课后习题答案9

国际财务管理（英文版）课后习题答案9CHAPTER 8 MANAGEMENT OF TRANSACTION EXPOSURE SUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTER QUESTIONS ANDPROBLEMSQUESTIONS1. How would you define transaction exposure? How is it different from economic exposure?Answer: Transaction exposure is the sensitivity of realized domestic currency values of the firm’s contractual cash flows denominated in foreign currencies to unexpected changes in exchange rates. Unlike economic exposure, transaction exposure is well-defined and short-term.2. Discuss and compare hedging transaction exposure using the forward contract vs. money market instruments. When do the alternative hedging approaches produce the same result?Answer: Hedging transaction exposure by a forward contract is achieved by selling or buying foreign currency receivables or payables forward. On the other hand, money market hedge is achieved by borrowing or lending the present value of foreign currency receivables or payables, thereby creating offsetting foreign currency positions. If the interest rate parity is holding, the two hedging methods are equivalent.3. Discuss and compare the costs of hedging via the forward contract and the options contract.Answer: There is no up-front cost of hedging by forward contracts. In the case of options hedging, however, hedgers should pay the premiums for the contracts up-front. The cost of forward hedging, however, may be realized ex post when thehedger regrets his/her hedging decision.4. What are the advantages of a currency options contract asa hedging tool compared with the forward contract?Answer: The main advantage of using options contracts for hedging is that the hedger can decide whether to exercise options upon observing the realized future exchange rate. Options thus provide a hedge against ex post regret that forward hedger might have to suffer. Hedgers can only eliminate the downside risk while retaining the upside potential.5. Suppose your company has purchased a put option on the German mark to manage exchange exposure associated with an account receivable denominated in that currency. In this case, your company can be said to have an ‘insurance’ policy on its receivable. Explain in what sense this is so.Answer: Your company in this case knows in advance that it will receive a certain minimum dollar amount no matter what might happen to the $/€ exchange rate. Furthermore, if the German mark appreciates, your company will benefit from the rising euro.6. Recent surveys of corporate exchange risk management practices indicate that many U.S. firms simply do not hedge. How would you explain this result?Answer: There can be many possible reasons for this. First, many firms may feel that they are not really exposed to exchange risk due to product diversification, diversified markets for their products, etc. Second, firms may be using self-insurance against exchange risk. Third, firms may feel that shareholders can diversify exchange risk themselves, rendering corporate risk management unnecessary.7. Should a firm hedge? Why or why not?Answer: In a perfect capital market, firms may not need to hedge exchange risk. But firms can add to their value by hedging if markets are imperfect. First, if management knows about the firm’s exposure better than shareholders, the firm, not its shareholders, should hedge. Second, firms may be able to hedge at a lower cost. Third, if default costs are significant, corporate hedging can be justifiable because it reduces the probability of default. Fourth, if the firm faces progressive taxes, it can reduce tax obligations by hedging which stabilizes corporate earnings.8. Using an example, discuss the possible effect of hedging on a firm’s tax obligations.Answer: One can use an example similar to the one presented in the chapter.9. Explain contingent exposure and discuss the advantages of using currency options to manage this type of currency exposure.Answer: Companies may encounter a situation where they may or may not face currency exposure. In this situation, companies need options, not obligations, to buy or sell a given amount of foreign exchange they may or may not receive or have to pay. If companies either hedge using forward contracts or do not hedge at all, they may face definite currency exposure.10. Explain cross-hedging and discuss the factors determining its effectiveness.Answer: Cross-hedging involves hedging a position in one asset by taking a position in another asset. The effectiveness of cross-hedging would depend on the strength and stability of the relationship between the two assets.PROBLEMS1. Cray Research sold a super computer to the Max PlanckInstitute in Germany on credit and invoiced €10 million payable in six months. Currently, the six-month forward exchange rate is $1.10/€ and the foreign exchange advisor for Cray Research predicts that the spot rate is likely to be $1.05/€ in six months.(a) What is the expected gain/loss from the forward hedging?(b) If you were the financial manager of Cray Research, would you recommend hedging this euro receivable? Why or why not?(c) Suppose the foreign exchange advisor predicts that the future spot rate will be the same as the forward exchange rate quoted today. Would you recommend hedging in this case? Why or why not?Solution: (a) Expected gain($) = 10,000,000(1.10 – 1.05)= 10,000,000(.05)= $500,000.(b) I would recommend hedging because Cray Research can increase the expected dollar receipt by $500,000 and also eliminate the exchange risk.(c) Since I eliminate risk without sacrificing dollar receipt, I still would recommend hedging.2. IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed ￥250 million payable in three months. Currently, the spot exchange rate is ￥105/$ and the three-month forward rate is ￥100/$. The three-month money market interest rate is 8 percent per annum in the U.S. and 7 percent per annum in Japan. The management of IBM decided to use the money market hedge to deal with this yen account payable.(a) Explain the process of a money market hedge and compute the dollar cost of meeting the yen obligation.(b) Conduct the cash flow analysis of the money markethedge.Solution: (a). Let’s first compute the PV of ￥250 million, i.e., 250m/1.0175 = ￥245,700,245.7So if the above yen amount is invested today at the Japanese interest rate for three months, the maturity value will be exactly equal to ￥25 million which is the amount of payable.To buy the above yen amount today, it will cost:$2,340,002.34 = ￥250,000,000/105.The dollar cost of meeting this yen obligation is $2,340,002.34 as of today.(b)________________________________________________________________ ___Transaction CF0 CF1________________________________________________________________ ____1. Buy yens spot-$2,340,002.34with dollars￥245,700,245.702. Invest in Japan - ￥245,700,245.70￥250,000,0003. Pay yens- ￥250,000,000Net cash flow- $2,340,002.34________________________________________________________________ ____3. You plan to visit Geneva, Switzerland in three months to attend an international business conference. You expect to incur the total cost of SF 5,000 for lodging, meals and transportation during your stay. As of today, the spot exchange rate is $0.60/SF and the three-month forward rate is $0.63/SF. You can buy the three-month call option on SF with the exercise rate of $0.64/SFfor the premium of $0.05 per SF. Assume that your expected future spot exchange rate is the same as the forward rate. The three-month interest rate is 6 percent per annum in the United States and 4 percent per annum in Switzerland.(a) Calculate your expected dollar cost of buying SF5,000 if you choose to hedge via call option on SF.(b) Calculate the future dollar cost of meeting this SF obligation if you decide to hedge using a forward contract.(c) At what future spot exchange rate will you be indifferent between the forward and option market hedges?(d) Illustrate the future dollar costs of meeting the SF payable against the future spot exchange rate under both the options and forward market hedges.Solution: (a) Total option premium = (.05)(5000) = $250. In three months, $250 is worth $253.75 = $250(1.015). At the expected future spot rate of $0.63/SF, which is less than the exercise price, you don’t expect t o exercise options. Rather, you expect to buy Swiss franc at $0.63/SF. Since you are going to buy SF5,000, you expect to spend $3,150 (=.63x5,000). Thus, the total expected cost of buying SF5,000 will be the sum of $3,150 and $253.75, i.e., $3,403.75.(b) $3,150 = (.63)(5,000).(c) $3,150 = 5,000x + 253.75, where x represents the break-even future spot rate. Solving for x, we obtain x = $0.57925/SF. Note that at the break-even future spot rate, options will not be exercised.n ga re g oo (d) If the Swiss franc appreciates beyond $0.64/SF, which isthe exercise price of call option, you will exercise the option and buy SF5,000 for $3,200. The total cost of buying SF5,000 will be $3,453.75 =$3,200 + $253.75.This is the maximum you will pay.4. Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €20million which is payable in one year. The current spot exchange rate is $1.05/€ and the one-year forward rate is $1.10/€. The annual interest rate is 6.0% in the U.S. and 5.0% in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure.(a) It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borroweuros from the Credit Lyonnaise against the euro receivable. Which alternative would you recommend? Why?(b) Other things being equal, at what forward exchange rate would Boeing be indifferent between the two hedging methods?Solution: (a) In the case of forward hedge, the future dollar proceeds will be (20,000,000)(1.10) = $22,000,000. In the case of money market hedge (MMH), the firm has to first borrow the PV of its euro receivable, i.e., 20,000,000/1.05 =€19,047,619. Then the firm should exchange this euro amount intodollars at the current spot rate to receive: (€19,047,619)($1.05/€) = $20,000,000, which can be invested at the dollar interest rate for one year to yield:$20,000,000(1.06) = $21,200,000.Clearly, the firm can receive $800,000 more by using forward hedging.(b) According to IRP, F = S(1+i $)/(1+i F ). Thus the“indifferent” forward rate will be:F = 1.05(1.06)/1.05 = $1.06/€.$ Cost Options hedgeForward hedge$3,453.75$3,1500.5790.64(strike price)$/SF$253.755. Suppose that Baltimore Machinery sold a drilling machine to a Swiss firm and gave the Swiss client a choice of paying either $10,000 or SF 15,000 in three months.(a) In the above example, Baltimore Machinery effectively gave the Swiss client a free option to buy up to $10,000 dollars using Swiss franc. What is the ‘implied’ exercise exchange rate?(b) If the spot exchange rate turns out to be $0.62/SF, which currency do you think the Swiss client will choose to use for payment? What is the value of this free option for the Swiss client?(c) What is the best way for Baltimore Machinery to deal with the exchange exposure?Solution: (a) The implied exercise (price) rate is: 10,000/15,000 = $0.6667/SF.(b) If the Swiss client chooses to pay $10,000, it will cost SF16,129 (=10,000/.62). Since the Swiss client has an option to pay SF15,000, it will choose to do so. The value of this option is obviously SF1,129 (=SF16,129-SF15,000).(c) Baltimore Machinery faces a contingent exposure in the sense that it may or may not receive SF15,000 in the future. The firm thus can hedge this exposure by buying a put option onSF15,000.6. Princess Cruise Company (PCC) purchased a ship from Mitsubishi Heavy Industry. PCC owes Mitsubishi Heavy Industry 500 million yen in one year. The current spot rate is 124 yen per dollar and the one-year forward rate is 110 yen per dollar. The annual interest rate is 5% in Japan and 8% in the U.S. PCC can also buy a one-year call option on yen at the strike price of $.0081 per yen for a premium of .014 cents per yen.(a) Compute the future dollar costs of meeting this obligation using the money market hedge and the forward hedges.(b) Assuming that the forward exchange rate is the best predictor of the future spot rate, compute the expected future dollar cost of meeting this obligation when the option hedge is used.(c) At what future spot rate do you think PCC may be indifferent between the option and forward hedge?Solution: (a) In the case of forward hedge, the dollar cost will be 500,000,000/110 = $4,545,455. In the case of money market hedge, the future dollar cost will be: 500,000,000(1.08)/(1.05)(124) = $4,147,465.(b) The option premium is: (.014/100)(500,000,000) = $70,000. Its future value will be $70,000(1.08) = $75,600.At the expected future spot rate of $.0091(=1/110), which is higher than the exercise of $.0081, PCC will exercise its call option and buy ￥500,000,000 for $4,050,000 (=500,000,000x.0081).The total expected cost will thus be $4,125,600, which is the sum of $75,600 and $4,050,000.(c) When the option hedge is used, PCC will spend “at most” $4,125,000. On the other hand, when the forward hedging is used,PCC will have to spend $4,545,455 regardless of the future spot rate. This means that the options hedge dominates the forward hedge. At no future spot rate, PCC will be indifferent between forward and options hedges.7. Airbus sold an aircraft, A400, to Delta Airlines, a U.S. company, and billed $30 million payable in six months. Airbus is concerned with the euro proceeds from international sales and would like to control exchange risk. The current spot exchange rate is $1.05/€ and six-month forward exchange rate is $1.10/€ at the moment. Airbus can buy a six-month put option on U.S. dollars with a strike pric e of €0.95/$ for a premium of €0.02 per U.S. dollar. Currently, six-month interest rate is 2.5% in the euro zone and 3.0% in the U.S./doc/e67180396.html,pute the guaranteed euro proceeds from the American sale if Airbus decides to hedge using aforward contract.b.If Airbus decides to hedge using money market instruments, what action does Airbus need to take?What would be the guaranteed euro proceeds from the American sale in this case?c.If Airbus decides to hedge using put options on U.S. dollars, what would be the ‘expected’ europroceeds from the American sale? Assume that Airbus regards the current forward exchange rate as an unbiased predictor of the future spot exchange rate.d.At what future spot exchange rate do you think Airbus will be indifferent between the option andmoney market hedge?Solution:a. Airbus will sell $30 million forward for €27,272,727 = ($30,000,000) / ($1.10/€).b. Airbus will borrow the present value of the dollar receivable, i.e., $29,126,214 = $30,000,000/1.03, and then sell the dollar proceeds spot for euros: €27,739,251. This is the euro amount that Airbus is going to keep.c. Since the expected future spot rate is less than the strike price of the put option, i.e., €0.9091< €0.95, Airbus expects to exercise the option and receive €28,500,000 = ($30,000,000)(€0.95/$). This is gross proceeds. Airbus spent €600,000 (=0.02x30,000,000) upfront for the option and its future cost is equal to €615,000 = €600,000 x 1.025. Thus the net euro proceeds from the American sale is €27,885,000, which is the difference between the gross proceeds and the option costs.d. At the indifferent future spot rate, the following will hold:€28,432,732 = S T (30,000,000) - €615,000.Solving for S T , we obtain the “indifference” future spot exchange rate, i.e., €0.9683/$, or $1.0327/€.Note that €28,432,732 is the future value of the proceeds under money market hedging:€28,432,732 = (€27,739,251) (1.025).Suggested solution for Mini Case: Chase Options, Inc.[See Chapter 13 for the case text]Chase Options, Inc.Hedging Foreign Currency Exposure Through Currency OptionsHarvey A. PoniachekI. Case SummaryThis case reviews the foreign exchange options market and hedging. It presents various international transactions thatrequire currency options hedging strategies by the corporations involved. Seven transactions under a variety of circumstances are introduced that require hedging by currency options. The transactions involve hedging of dividend remittances, portfolio investment exposure, and strategic economic competitiveness. Market quotations are provided for options (and options hedging ratios), forwards, and interest rates for various maturities.II. Case Objective.The case introduces the student to the principles of currency options market and hedging strategies. The transactions are of various types that often confront companies that are involved in extensive international business or multinational corporations. The case induces students to acquire hands-on experience in addressing specific exposure and hedging concerns, including how to apply various market quotations, which hedging strategy is most suitable, and how to address exposure in foreign currency through cross hedging policies.III. Proposed Assignment Solution1. The company expects DM100 million in repatriated profits, and does not want the DM/$ exchange rate at which they convert those profits to rise above 1.70. They can hedge this exposure using DM put options with a strike price of 1.70. If the spot rate rises above 1.70, they can exercise the option, while if that rate falls they can enjoy additional profits from favorable exchange rate movements.To purchase the options would require an up-front premium of:DM 100,000,000 x 0.0164 = DM 1,640,000.With a strike price of 1.70 DM/$, this would assure the U.S.company of receiving at least:DM 100,000,000 – DM 1,640,000 x (1 + 0.085106 x 272/360) = DM 98,254,544/1.70 DM/$ = $57,796,791by exercising the option if the DM depreciated. Note that the proceeds from the repatriated profits are reduced by the premium paid, which is further adjusted by the interest foregone on this amount.However, if the DM were to appreciate relative to the dollar, the company would allow the option to expire, and enjoy greater dollar proceeds from this increase.Should forward contracts be used to hedge this exposure, the proceeds received would be:DM100,000,000/1.6725 DM/$ = $59,790,732,regardless of the movement of the DM/$ exchange rate. While this amount is almost $2 million more than that realized using option hedges above, there is no flexibility regarding the exercise date; if this date differs from that at which the repatriate profits are available, the company may be exposed to additional further current exposure. Further, there is no opportunity to enjoy any appreciation in the DM.If the company were to buy DM puts as above, and sell an equivalent amount in calls with strike price 1.647, the premium paid would be exactly offset by the premium received. This would assure that the exchange rate realized would fall between 1.647 and 1.700. If the rate rises above 1.700, the company will exercise its put option, and if it fell below 1.647, the other party would use its call; for any rate in between, both options would expire worthless. The proceeds realized would then fall between: DM 100,00,000/1.647 DM/$ = $60,716,454andDM 100,000,000/1.700 DM/$ = $58,823,529.o This would allow the company some upside potential, while guaranteeing proceeds at least $1 million greater than the minimum for simply buying a put as above.Buy/Sell Options DM/$ Spot Put Payoff “Put” Profits Call Payoff “Call” Profits Net Profit 1.60(1,742,846)01,742,84660,716,45460,716,4541.61(1,742,846)0 1,742,84660,716,45460,716,4541.62(1,742,846)01,742,84660,716 ,45460,716,4541.63(1,742,846)01,742,84660,716,45460,716,4541 .64(1,742,846)01,742,84660,716,45460,716,4541.65(1,742,846)60 ,606,0611,742,846060,606,0611.66(1,742,846)60,240,9641,742,8 46060,240,9641.67(1,742,846)59,880,2401,742,846059,880,2401. 68(1,742,846)59,523,8101,742,846059,523,8101.69(1,742,846)59, 171,5981,742,846059,171,5981.70(1,742,846)58,823,5291,742,84 6058,823,5291.71(1,742,846)58,823,5291,742,846058,823,5291.7 2(1,742,846)58,823,5291,742,846058,823,5291.73(1,742,846)58,8 23,5291,742,846058,823,5291.74(1,742,846)58,823,5291,742,84605 8,823,5291.75(1,742,846)58,823,5291,742,846058,823,5291.76(1, 742,846)58,823,5291,742,846058,823,5291.77(1,742,846)58,823, 5291,742,846058,823,5291.78(1,742,846)58,823,5291,742,84605 8,823,5291.79(1,742,846)58,823,5291,742,846058,823,5291.80(1, 742,846)58,823,5291,742,846058,823,5291.81(1,742,846)58,823, 5291,742,846058,823,5291.82(1,742,846)58,823,5291,742,84605 8,823,5291.83(1,742,846)58,823,5291,742,846058,823,5291.84(1, 742,846)58,823,5291,742,846058,823,5291.85(1,742,846)58,823,5291,742,84658,823,529Since the firm believes that there is a good chance that the pound sterling will weaken, locking them into a forward contract would not be appropriate, because they would lose the opportunity to profit from this weakening. Their hedge strategy should follow for an upside potential to match their viewpoint. Therefore, they should purchase sterling call options, paying a premium of:5,000,000 STG x 0.0176 = 88,000 STG.If the dollar strengthens against the pound, the firm allows the option to expire, and buys sterling in the spot market at a cheaper price than they would have paid for a forward contract; otherwise, the sterling calls protect against unfavorable depreciation of the dollar.Because the fund manager is uncertain when he will sell the bonds, he requires a hedge which will allow flexibility as to the exercise date. Thus, options are the best instrument for him to use. He can buy A$ puts to lock in a floor of 0.72 A$/$. Since he is willing to forego any further currency appreciation, he can sell A$ calls with a strike price of 0.8025 A$/$ to defray the cost of his hedge (in fact he earns a net premium of A$ 100,000,000 x (0.007234 –0.007211) = A$ 2,300), while knowing that he can’t receive less than 0.72 A$/$ when redeeming his investment, and can benefit from a small appreciation of the A$.Example #3:Problem: Hedge principal denominated in A$ into US$. Forgo upside potential to buy floor protection.I. Hedge by writing calls and buying puts1) Write calls for $/A$ @ 0.8025Buy puts for $/A$ @ 0.72# contracts needed = Principal in A$/Contract size100,000,000A$/100,000 A$ = 1002) Revenue from sale of calls = (# contracts)(size of contract)(premium)$75,573 = (100)(100,000 A$)(.007234 $/A$)(1 + .0825 195/360)3) Total cost of puts = (# contracts)(size of contract)(premium)$75,332 = (100)(100,000 A$)(.007211 $/A$)(1 + .0825 195/360)4) Put payoffIf spot falls below 0.72, fund manager will exercise putIf spot rises above 0.72, fund manager will let put expireg 5) Call payoffIf spot rises above .8025, call will be exercised If spot falls below .8025, call will expire 6) Net payoffSee following Table for net payoff Australian Dollar Bond Hedge Strike Price Put Payoff “Put” Principal Call Payoff “Call” PrincipalNet Profit 0.60(75,332)72,000,00075,573072,000,2410.61(75,332)72,000,00 075,573072,000,2410.62(75,332)72,000,00075,573072,000,2410. 63(75,332)72,000,00075,573072,000,2410.64(75,332)72,000,0007 5,573072,000,2410.65(75,332)72,000,00075,573072,000,2410.66( 75,332)72,000,00075,573072,000,2410.67(75,332)72,000,00075,5 73072,000,2410.68(75,332)72,000,00075,573072,000,2410.69(75, 332)72,000,00075,573072,000,2410.70(75,332)72,000,00075,573 072,000,2410.71(75,332)72,000,00075,573072,000,2410.72(75,33 2)72,000,00075,573072,000,2410.73(75,332)73,000,00075,57307 3,000,2410.74(75,332)74,000,00075,573074,000,2410.75(75,332) 75,000,00075,573075,000,2410.76(75,332)76,000,00075,573076, 000,2410.77(75,332)77,000,00075,573077,000,2410.78(75,332)78,000,00075,573078,000,2410.79(75,332)79,000,00075,573079,00 0,2410.80(75,332)80,000,00075,573080,000,2410.81(75,332)075,57380,250,00080,250,2410.82(75 ,332)075,57380,250,00080,250,2410.83(75,332)075,57380,250,00 080,250,2410.84(75,332)075,57380,250,00080,250,2410.85 (75,332)75,57380,250,00080,250,2414. The German company is bidding on a contract which they cannot be certain of winning. Thus, the need to execute a currency transaction is similarly uncertain, and using a forward or futures as a hedge is inappropriate, because it would force them to perform even if they do not win the contract.Using a sterling put option as a hedge for this transaction makes the most sense. For a premium of:12 million STG x 0.0161 = 193,200 STG,they can assure themselves that adverse movements in the pound sterling exchange rate will not diminish the profitability of the project (and hence the feasibility of their bid), while at the same time allowing the potential for gains from sterling appreciation.5. Since AMC in concerned about the adverse effects that a strengthening of the dollar would have on its business, we need to create a situation in which it will profit from such an appreciation. Purchasing a yen put or a dollar call will achieve this objective. The data in Exhibit 1, row 7 represent a 10 percent appreciation of the dollar (128.15 strike vs. 116.5 forward rate) and can be used to hedge against a similar appreciation of the dollar.For every million yen of hedging, the cost would be:Yen 100,000,000 x 0.000127 = 127 Yen.To determine the breakeven point, we need to compute the value of this option if the dollar appreciated 10 percent (spot rose to 128.15), and subtract from it the premium we paid. This profit would be compared with the profit earned on five to 10 percent of AMC’s sales (which would be lost as a result of the dollar appreciation). The number of options to be purchased which would equalize these two quantities would represent the breakeven point.Example #5:Hedge the economic cost of the depreciating Yen to AMC.If we assume that AMC sales fall in direct proportion to depreciation in the yen (i.e., a 10 percent decline in yen and 10 percent decline in sales), then we can hedge the full value of AMC’s sales. I have assumed $100 million in sales.1) Buy yen puts# contracts needed = Expected Sales *Current ￥/$ Rate / Contract size9600 = ($100,000,000)(120￥/$) / ￥1,250,0002) Total Cost = (# contracts)(contract size)(premium)$1,524,000 = (9600)( ￥1,250,000)($0.0001275/￥)3) Floor rate = Exercise – Premium128.1499￥/$ = 128.15￥/$ - $1,524,000/12,000,000,000￥4) The payoff changes depending on the level of the ￥/$ rate. The following table summarizes thepayoffs. An equilibrium is reached when the spot rate equals the floor rate.AMC ProfitabilityYen/$Spot Put Payoff Sales Net Profit 120(1,524,990)100,000,00098,475,010121(1,524,990)99,173,66497,648,564122(1,524,990)98,360,65696,835,666123(1,524,990)97,560,97686,035,986124(1,524,990)96,774,19495,249,204125(1,524,990)96,000,00094,475,010126(1,524,990)95,238,09593,713,105127(847,829)94,488,18993,640,360128(109,640)93,750,00093,640,360129617,10493,023,25693,640,3601301,332,66892,307,69293,640,3601312,037,30791,603,05393,640,3601322,731,26990,909,09193,640,3601333,414,79690,225,66493,640,3601344,088,12289,552,23993,640,3601354,751,43188,888,88993,640,3601365,405,06688,235,29493,640,3601376,049,11887,591,24193,640,3601386,683,83986,966,52293,640,3601397,308,42586,330,93693,640,3601407,926,07585,714,28693,640,3601418,533,97785,106,38393,640,3601429,133,31884,507,04293,640,3601439,724,27683,916,08493,640,36014410,307,02783,333,33393,640,36014510,881,74082,758,62193,640,36014611,448,57982,191,78193,640,36014712,007,70781,632,65393,640,36014812,569,27981,081,08193,640,360。

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Chapter 14Bonds and Long-Term NotesQUESTIONS FOR REVIEW OF KEY TOPICSQuestion 14-1Periodic interest is calculated as the effective interest rate times the amount of the debt outstanding during the period. This same principle applies to the flip side of the transaction, i.e., the creditor’s receivable or investment. The approach also is the same regardless of the specific form of the debt –that is, whether in the form of notes, bonds, leases, pensions, or other debt instruments.Question 14-2Long-term liabilities are appropriately reported at their present values. The present value of a liability is the present value of its related cash flows –specifically the present value of the face amount of the debt instrument, if any, plus the present value of stated interest payments, if any. Both should be discounted to present value at the effective (market) rate of interest at issuance. Question 14-3Bonds and notes are very similar. Both typically obligate the issuing corporation to repay a stated amount (e.g., the principal, par value, face amount,or maturity value) at a specified maturity date. In return for the use of the money borrowed, the company also agrees to pay interest to the lender between the issue date and maturity. The periodic interest is a stated percentage of face amount. In concept, bonds and notes are accounted for in precisely the same way.Normally a company will borrow cash from a bank or other financial institution by signing a promissory note. Corporations, especially medium- and large- sized firms, often choose to borrow cash by issuing bonds and instead of borrowing from a lending institution, it borrows from the public. A bond issue, in effect, breaks down a large debt into manageable parts ($1,000 units) which makes it more attractive to individual and corporate investors. Also, bonds typically have longer maturities than notes. The most common form of corporate debt is bonds.Question 14-4All of the specific promises made to bondholders are described in a bond indenture. This formal agreement will specify the bond issue’s face amount, the stated interest rate, the method of paying interest (whether the bonds are registered bonds or coupon bonds), whether the bonds are backed by a lien on specified assets, and whether they are subordinated to other debt. The bond indenture also might provide for redemption through a call feature, by serial payments, through sinking fund provisions, or by conversion. It also will specify the trustee (usually a commercial bank or other financial institution) appointed by the issuing firm to represent the rights of the bondholders. The bond indenture serves as a contract between the company and the bondholder(s). If the company fails to live up to the terms of the bond indenture, the trustee may bring legal action against the company on behalf of the bondholders.Answers to Questions (continued)Question 14-5In order for Brandon to sell its bonds that pay only 11.5% stated interest in a 12.25% market the bonds would have to be priced at a discount from face amount. The discount would be the amount that causes the bond issue to be priced to yield the market rate. In other words, an investor paying that price would earn an effective rate of return on the investment equal to the 12.25% market rate. Question 14-6The price will be the present value of the periodic cash interest payments (face amount x stated rate) plus the present value of the principal payable at maturity. Both interest and principal are discounted to present value at the market rate of interest for securities of similar risk and maturity. Question 14-7In a strict sense, it’s true that zero-coupon bonds pay no interest. ―Zeros‖ offer a return in the form of a ―deep discount‖ from the face amount. Still, in terest accrues at the effective rate times the outstanding balance, but no interest is paid periodically. So, interest on zero-coupon bonds is determined and reported in precisely the same manner as on interest-paying bonds. Under the concept of accrual accounting, the periodic effective interest is unaffected by when the cash actually is paid. Corporations can deduct for tax purposes the annual interest expense, but without cash outflow until the bonds mature.Question 14-8When bonds are issued at a premium the debt declines each period because the effective interest each period is less than the cash interest paid. The ―overpayments‖ each period reduce the balance owed. This is precisely the opposite of when debt is sold at a discount. In that case, the effective interest each period is more than the cash paid, and the ―underpayment‖ of interest adds to the amount owed.Question 14-9By the effective interest method, interest expense is recorded each period as the effective market rate of interest multiplied by the outstanding balance of the debt (during the interest period). This simply is an application of the accrual concept, consistent with accruing all expenses as they are incurred. The difference between the interest expense and the interest paid increases (or decreases) the existing bond liability and is reflected as ―amortization‖ of the discount (or premium).An exception to the conceptually appropriate method of determining interest for bond issues is the straight-line method. Companies are allowed to determine interest indirectly by allocating a discount or a premium equally to each period over the term to maturity if doing so produces results that are not materially different from the effective intere st method. The firm’s decision should be guided by whether the straight-line method would tend to mislead investors and creditors in the particular circumstance.The straight-line method results in a constant dollar amount of interest expense each period. By the straight-line method, the amount of the discount to be reduced periodically is calculated, and the effective interest is the ―plug‖ figure.By the effective interest method, the dollar amounts of interest vary over the term to maturity because the percentage rate of interest remains constant, but is applied to a changing debt balance. The ―straight-line method,‖ is not an alternative method of determining interest in a conceptual sense, but is an application of the materiality concept. Question 14-10The prescribed treatment requires a debit to an asset account – "debt issue cost s‖ which is then allocated to expense, usually on a straight-line basis. An appealing alternative would be to reduce the recorded amount of the debt by the debt issue costs. This approach has the appeal of reflecting the effect debt issue costs have on the effective interest rate.Debt issue costs reduce the net cash the company receives from the sale of the financial instrument. A lower net amount is borrowed at the same cost, increasing the effective interest rate. The actual increase in the effective interest rate is reflected in the interest expense if the issue cost is allowed to reduce the premium (or increase the discount) on the debt.This approach also is consistent with the treatment of issue costs when shares of stock are sold. Share issue costs are recorded as a reduction in the amount credited to stock accounts (Chapter 18).Question 14-11When the stated interest rate is not indicative of the market rate at the time a note is negotiated, the value of the asset (cash or noncash) or service exchanged for the note establishes the market rate. This rate is the implicit rate of interest.If the value of the asset (or service) is not readily determinable, the implicit rate may not be apparent. In that case an appropriate rate should be ―imputed‖ as the rate that would be expected in a similar transaction, under similar circumstances.The economic essence of a transaction should prevail over its outward appearance. The accountant should look beyond the form of this transaction and record its substance. The amount actually paid for the asset is the present value of the cash flows called for by the loan agreement, discoun ted at the ―imputed‖ market rate. Both the asset acquired and the liability used to purchase it should be recorded at the real cost.Question 14-12Mandatorily redeemable shares, which the issuing company is obligated to buy back in exchange for cash or other assets, must be reported as liabilities.Question 14-13When notes are paid in installments, rather than a single amount at maturity, installment payments typically are equal amounts each period. Each payment will include both an amount representing interest and an amount representing a reduction of principal. At maturity, the principal is completely paid. The installment amount is calculated by dividing the amount of the loan by the appropriate discount factor for the present value of an annuity.Determining periodic interest is the same as for a note whose principal is paid at maturity –effective interest rate times the outstanding principal. But the periodic cash payments are larger and there is no lump-sum payment at maturity.Question 14-14For all long-term borrowings, disclosure should include (a) the fair values, (b) the aggregate amounts maturing, and (c) sinking fund requirements (if any) for each of the next five years. Question 14-15Regardless of the method used to retire debt prior to its scheduled maturity date, the gain or loss on the transaction is simply the difference between the carrying amount of the debt at that time and the cash paid to retire it. To record the extinguishment the account balances pertinent to the debt are removed from the books. Cash is credited for the amount paid (the call price or market price). The difference between the carrying amount and the reacquisition price is the gain or loss. Question 14-16Gains and losses are reported as extraordinary items when they are considered to be material and both unusual and infrequent. In that case they are reported separate from ordinary operations and net of their tax effects.Question 14-17GAAP requires that the entire issue price of convertible bonds be recorded as debt, precisely the same way, in fact, as for nonconvertible bonds. On the other hand, the issue price of bonds with detachable warrants is allocated between the two different securities on the basis of their market values.The difference is based on the relative separability of the debt and equity features of the two securities. In the case of convertible bonds, the two features of the security, the debt and the conversion option, are physically inseparable — the option cannot be exercised without surrendering the debt. But the debt and equity features of bonds with detachable warrants can be separated. Unlike a conversion feature, warrants can be separated from the bonds and can be exercised independently or traded in the market separately from bonds. In substance, two different securities – the bonds and the warrants – are sold as a "package" for a single issue price.Question 14-18Additional consideration a company provides to induce conversion of convertible debt should be recorded as an expense of the period. It is measured at the fair value of that consideration. This might be cash paid, the market price of stock warrants given, or the market value of additional shares issued due to modifying the conversion ratio.Question 14-19Rising interest rates, other factors remaining the same, cause prices of fixed-rate securities to fall. For the investor in these securities, the price decline represents a loss; but for Cordova Tools, the debtor, the decline in the value of the liability is a gain. If Cordova has elected the fair value option for the bonds, it will report the gain on change in the fair value of the bonds in its income statement. Question 14-20Under International Financial Reporting Standards, unlike U.S. GAAP, convertible debt is divided into its liability and equity elements. If a company prepares its financial statements according to IFRS it accounts for convertible bonds it issues for $12.5 million by separating the $12.5 million into two parts. Effectively, the company is selling two securities – (1) bonds and (2) an option to convert to stock – for one package price. The bonds represent a liability; the option is shareholders’ equity. It would record the fair value of the bonds as the liability and the remaining difference between the fair value of the convertible bonds, $12.5 million, and the fair value of the bonds as equity. If the fair value of the bonds cannot be determined from an active trading market, that value can be calc ulated as the present value of the bonds’ cash flows, using the market rate of interestQuestion 14-21All bonds sell at their price plus any interest that has accrued since the last interest date to simplify the process of paying and recording interest. The buyer is asked to pay the seller accrued interest for any time that has elapsed since the last interest date in addition to the price of the bonds so that when a full six months’ interest is paid at the next interest date, the net interest paid/receive d will be correct for the time the bonds have been held by the investor.Question 14-22By definition, a troubled debt restructuring involves some concessions on the part of the creditor (lender). A creditor may feel it can minimize losses by restructuring a debt agreement, rather than forcing liquidation. A troubled debt restructuring takes one of two forms, with the second further categorized for accounting purposes:1. The debt may be settled at the time of the restructuring, or2. The debt may be continued, but with modified terms.a. Under the modified terms, total cash to be paid is less than the carrying amount of the debt.b. Under the modified terms, total cash to be paid exceeds the carrying amount of the debt. Question 14-23Pratt has a gain of $2 million (the difference between the carrying amount of the debt and the fair value of the property transferred). Pratt also must adjust the carrying amount of the land to its fair value prior to recording its exchange for the debt. Pratt would need to change the recorded amount for the property specified in the exchange agreement from $2 million to the $3 million fair value. This produces a ―gain on disposition of assets‖ of $1 million. So, Pratt would report two it ems on its income statement in connection with the troubled debt restructuring: (1) a $2 million gain on troubled debt restructuring and (2) a ―gain on disposition of assets‖ of $1 million.Question 14-24(a) When the total future cash payments are less than the carrying amount of the debt, the differenceis recorded as a gain to the debtor at the date of restructure. No interest is recorded thereafter.All subsequent cash payments produce reductions of principal.(b) When the total future cash payments exceed the carrying amount of the debt, no reduction of theexisting debt is necessary and no entry is required at the time of the debt restructuring. The accounting objective is to determine the new (lower) effective interest and to record interest expense for the remaining term of the loan at that new, lower rate.BRIEF EXERCISESBrief Exercise 14-1$30,000,000 x 6% x 6/12= $900,000face annual fraction of the cashamount rate annual period interestBrief Exercise 14-2Interest $ 2,000,000 ¥x 23.11477* = $46,229,540Principal $80,000,000 x 0.30656** = 24,524,800 Present value (price) of the bonds$70,754,340 ¥[5÷2] % x $80,000,000* present value of an ordinary annuity of $1: n=40, i=3%. (Table 4)** present value of $1: n=40, i=3%. (Table 2)Brief Exercise 14-3The price will be the present value of the periodic cash interest payments (face amount x stated rate) plus the present value of the principal payable at maturity. Both interest and principal are discounted to present value at the market rate of interest for securities of similar risk and maturity. When the stated rate and the market rate are the same, the bonds will sell at face value, $75 million in this instance. Brief Exercise 14-4Interest $ 2,500,000 ¥x 27.35548* = $ 68,388,700Principal $100,000,000 x 0.45289** = 45,289,000 Present value (price) of the bonds$113,677,700 ¥[5÷2] % x $100,000,000* present value of an ordinary annuity of $1: n=40, i=2%. (Table 4)** present value of $1: n=40, i=2%. (Table 2)Brief Exercise 14-5Interest will be the effective rate times the outstanding balance:4% x $82,218,585 = $3,288,743Brief Exercise 14-6Interest will be the effective rate times the outstanding balance:June 30Interest expense (2% x $69,033,776) ................................ 1,380,676Discount on bonds payable (difference) ................ 180,676Cash (1.5% x $80,000,000) ...................................... 1,200,000December 31Interest expense (2% x [$69,033,776 + 180,676]) ......... 1,384,289Discount on bonds payable (difference) ................ 184,289Cash (1.5% x $80,000,000) ...................................... 1,200,000 Interest expense for the year: $1,380,676 + 1,384,289 = $2,764,965 Brief Exercise 14-7Interest will be a plug figure:$80,000,000 – 69,033,776 = $10,966,224 discount$10,966,224 / 40 semiannual periods = $274,156 reduction each period June 30Interest expense (to balance) ............................................. 1,474,156Discount on bonds payable (difference) ................ 274,156Cash (1.5% x $80,000,000) ...................................... 1,200,000December 31Interest expense (to balance) ............................................. 1,474,156Discount on bonds payable (difference) ................ 274,156Cash (1.5% x $80,000,000) ...................................... 1,200,000 Interest expense for the year: $1,474,156 + 1,474,156 = $2,948,312Brief Exercise 14-8Interest will be the effective rate times the outstanding balance:June 30Cash (1.5% x $80,000,000) .......................................... 1,200,000Discount on investment in bonds (difference)........... 180,676Interest revenue (2% x $69,033,776) ............................ 1,380,676December 31Cash (1.5% x $80,000,000) .......................................... 1,200,000Discount on investment in bonds (difference)........... 184,289Interest revenue (2% x [$69,033,776 + 180,676])...... 1,384,289 Brief Exercise 14-9Interest $6,000¥x 2.72325 *=$ 16,340Principal $300,000 x 0.86384 **= 259,152Present value (price) of the note $275,492¥2% x $300,000* present value of an ordinary annuity of $1: n=3, i=5%. (Table 4)** present value of $1: n=3, i=5%. (Table 2)Equipment (price determined above) ................................ 275,492Discount on notes payable (difference) ......................... 24,508Notes payable (face amount) ...................................... 300,000Brief Exercise 14-10$300,000 ÷ 2.72325 = $110,162amount (from Table 4) installmentof loan n=3, i=5% paymentInterest expense (5% x ($300,000 – [$110,162 – 5% x $300,000]))10,242Note payable (difference)............................................... 99,920Cash (payment determined above)................................. 110,162 Brief Exercise 14-11($ in millions) Bonds payable (face amount) ..................................... 60.0Loss on early extinguishment (to balance) ................ 3.2Discount on bonds (given) .................................... 2.0Cash ($60,000,000 x 102%) ..................................... 61.2Brief Exercise 14-12The issue price of bonds with detachable warrants is allocated between the two different securities on the basis of their market values.($ in millions) Cash (102% x $60 million)...................................................... 61.2Discount on bonds payable (difference) ............................... 1.8Bonds payable (face amount)............................................. 60.0Equity – stock warrants outstanding($5 x 10 warrants x 60,000 bonds) ................................... 3.0Brief Exercise 14-13GAAP requires that the entire issue price of convertible bonds be recorded as debt, precisely the same way, in fact, as for nonconvertible bonds.($ in millions) Cash (102% x $60 million)...................................................... 61.2Premium on bonds payable (difference)............................ 1.2Bonds payable (face amount)............................................. 60.0Brief Exercise 14-14AI will report a gain when adjusting the bonds to fair value. A decrease in the fair value of a liability is a gain, just the opposite of a decrease in the value of an asset.If the change in fair value is attributable to a change in the interest rate, the rate increased. This is because as interest rates rise, the value of a fixed rate instrument – like bonds –falls as occurred with AI’s bonds.EXERCISESExercise 14-1The DD Corp. bonds are appropriately priced to yield the market rate of interest. The GG Corp. bonds are slightly underpriced at the stated price and therefore are the most attractive. The BB Corp. bonds are slightly overpriced and are the least attractive. Bonds are priced to yield the market rate, 10% in this case. When this rate is used to price the bonds, we get the prices shown below. Presumably, the market rate changed since the underwriters priced two of the bond issues.BB Corp. bonds:Interest $ 5,500,000 ¥x 17.15909 * = $ 94,374,995Principal $100,000,000 x 0.14205 ** = 14,205,000 Present value (price) of the bonds$108,579,995 ¥[11÷2] % x $100,000,000* present value of an ordinary annuity of $1: n=40, i=5% (Table 4)** present value of $1: n=40, i=5% (Table 2)DD Corp. bonds:Interest $ 5,000,000 ¥x 17.15909 * = $ 85,795,450Principal $100,000,000 x 0.14205 ** = 14,205,000 Present value (price) of the bonds$100,000,450 Note: The result differs from $100,000,000 only because the present value factors in any present value table are rounded. Because the stated rate and the market rate are thesame, the true present value is $100,000,000.¥[10÷2] % x $100,000,000* present value of an ordinary annuity of $1: n=40, i=5% (Table 4)** present value of $1: n=40, i=5% (Table 2)GG Corp. bonds:Interest $ 4,500,000 ¥x 17.15909 * = $77,215,905Principal $100,000,000 x 0.14205 ** = 14,205,000 Present value (price) of the bonds$91,420,905 ¥[9÷2] % x $100,000,000* present value of an ordinary annuity of $1: n=40, i=5% (Table 4)** present value of $1: n=40, i=5% (Table 2)Exercise 14-21. Maturity Interest paid Stated rate Effective (market) rate10 years annually 10% 12%Interest $100,000 ¥x 5.65022 * = $565,022 Principal $1,000,000 x 0.32197 ** = 321,970 Present value (price) of the bonds$886,992¥10% x $1,000,000* present value of an ordinary annuity of $1: n=10, i=12% (Table 4)** present value of $1: n=10, i=12% (Table 2)2. Maturity Interest paid Stated rate Effective (market) rate10 years semiannually 10% 12%Interest $50,000 ¥x 11.46992 * = $573,496 Principal $1,000,000 x 0.31180 ** = 311,800 Present value (price) of the bonds$885,296¥5% x $1,000,000* present value of an ordinary annuity of $1: n=20, i=6% (Table 4)** present value of $1: n=20, i=6% (Table 2)3. Maturity Interest paid Stated rate Effective (market) rate10 years semiannually 12% 10% Interest $60,000 ¥x 12.46221 * =$ 747,733 Principal $1,000,000 x 0.37689 ** = 376,890 Present value (price) of the bonds$1,124,623¥6% x $1,000,000* present value of an ordinary annuity of $1: n=20, i=5% (Table 4)** present value of $1: n=20, i=5% (Table 2)4. Maturity Interest paid Stated rate Effective (market) rate20 years semiannually 12% 10% Interest $60,000 ¥x 17.15909 * = $1,029,545 Principal $1,000,000 x 0.14205 ** = 142,050 Present value (price) of the bonds$1,171,595¥6% x $1,000,000* present value of an ordinary annuity of $1: n=40, i=5% (Table 4)** present value of $1: n=40, i=5% (Table 2)Exercise 14-2 (concluded)5. Maturity Interest paid Stated rate Effective (market) rate20 years semiannually 12% 12%Interest $60,000 ¥x 15.04630 * = $902,778 Principal $1,000,000 x 0.09722 ** = 97,220 Present value (price) of the bonds$999,998actually, $1,000,000 if PV table factors were not rounded¥6% x $1,000,000* present value of an ordinary annuity of $1: n=40, i=6% (Table 4)** present value of $1: n=40, i=6% (Table 2)Exercise 14-31. Price of the bonds at January 1, 2011Interest $4,000,000¥x 11.46992 * = $45,879,680Principal $80,000,000 x 0.31180 ** = 24,944,000 Present value (price) of the bonds$70,823,680¥5% x $80,000,000* present value of an ordinary annuity of $1: n=20, i=6% (Table 4)** present value of $1: n=20, i=6% (Table 2)2. January 1, 2011Cash (price determined above)...................................... 70,823,680Discount on bonds (difference).................................. 9,176,320Bonds payable (face amount) ................................. 80,000,0003. June 30, 2011Interest expense (6% x $70,823,680) ................................ 4,249,421Discount on bonds payable (difference) ................ 249,421Cash (5% x $80,000,000)......................................... 4,000,000 Partial amortization schedule (not required)4. December 31, 2011Interest expense (6% x [$70,823,680 + 249,421]) ............ 4,264,386Discount on bonds payable (difference) ................ 264,386 Cash (5% x $80,000,000)......................................... 4,000,000Exercise 14-41. January 1, 2011Interest $4,000,000¥x 11.46992 * = $45,879,680Principal $80,000,000 x 0.31180 ** = 24,944,000Present value (price) of the bonds$70,823,680¥5% x $80,000,000* present value of an ordinary annuity of $1: n=20, i=6% (Table 4)** present value of $1: n=20, i=6% (Table 2)Bond investment (face amount).................................. 80,000,000Discount on bond investment (difference)............. 9,176,320Cash (price determined above) .................................. 70,823,6802. June 30, 2011Cash (5% x $80,000,000)............................................. 4,000,000Discount on bond investment (difference) ....................249,421Interest revenue (6% x $70,823,680) ............................ 4,249,4213. December 31, 2011Cash (5% x $80,000,000)............................................. 4,000,000Discount on bond investment (difference)................. 264,386Interest revenue (6% x [$70,823,680 + 249,421]) ........ 4,264,386Exercise 14-51. Liability at December 31, 2011Bonds payable (face amount) ..................................... $320,000,000Less: discount .......................................................... 36,705,280Initial balance, January 1, 2011 .............................. $283,294,720June 30, 2011 discount amortization ...................... 997,683* Dec. 31, 2011 discount amortization ...................... 1,057,544** December 31, 2011 net liability .............................. $285,349,9472. Interest expense for year ended December 31, 2011June 30, 2011 interest expense ................................ $16,997,683* Dec. 31, 2011 interest expense ................................ 17,057,544** Interest expense for 2011 ........................................ $34,055,2273. Statement of cash flows for year ended December 31, 2011Myriad would report the cash inflow of $283,294,720*** from the sale of the bonds as a cash inflow from financing activities in its statement of cash flows.The $32,000,000 ($16,000,000* + 16,000,000**) cash interest paid is cashoutflow from operating activities because interest is an income statement(operating) item.。