8-85
EXERCISE 8-22B
a. (Cost − Salvage) ÷ Useful Life; ($60,000 − $10,000) ÷ 4 = $12,500
b. If fair value is less than book value, the IFRS revaluation model
8-86
EXERCISE 8-23B
a. Under U.S. GAAP, the land would be reported at its original cost of
$400,000. The building would be reported at its book value,
determined as follows:
8-87
EXERCISE 8-23B – (continued)
c. Under IFRS, the land would be reported on the 2017 balance sheet at
$400,000, and on the 2018 balance sheet at $450,000.
The building would be reported at its book value of $1,895,000 in
2017; (see the computations for U.S. GAAP above). For 2018 the
2018. See computations above.
8-88
SOLUTIONS TO PROBLEMS – SERIES A – CHAPTER 8
PROBLEM 8-24B
Office Equipment:
List Price $50,000
Discount ($50,000 x 1%) (500)
Transportation-In 1,200
8-89
PROBLEM 8-25B
Scott Company
Financial Statements
For the Year Ended December 31
Income Statements
2016
2017
2018
2019
2020
Revenue
$9,500
$10,000
$10,500
$8,500
$ –0-
Depr. Expense*
(9,000)
(9,000)
(9,000)
(9,000)
-0-
Oper. Income (Loss)
500
1,000
1,500
(500)
-0-
Gain
-0-
-0-
-0-
-0-
500**
Net Income
$ 500
$1,000
$1,500
$ (500)
$ 500
Statements of Changes in Stockholders’ Equity
Beg. Com. Stock
$ -0-
$40,000
$40,000
$40,000
$40,000
Plus: Stk. Issued
40,000
-0-
-0-
-0-
-0-
End. Com. Stock
40,000
40,000
40,000
40,000
40,000
Beg. Ret. Earn.
-0-
500
1,500
3,000
2,500
Plus: Net Income
500
1,000
1,500
(500)
500
End. Ret. Earn.
500
1,500
3,000
2,500
3,000
Total Stk. Equity
$40,500
$41,500
$43,000
$42,500
$43,000
8-90
PROBLEM 8-25B (cont.)
Scott Company
Financial Statements
Balance Sheets as of December 31
2016
2017
2018
2019
2020
Assets
Cash
$ 9,500
$19,500
$30,000
$38,500
$43,000
Equipment
40,000
40,000
40,000
40,000
-0-
Less: Acc. Dep.
(9,000)
(18,000)
(27,000)
(36,000)
-0-
Total Assets
$40,500
$41,500
$43,000
$42,500
$43,000
Stockholders’ Equity
Common Stock
$40,000
$40,000
$40,000
$40,000
$40,000
Retained Earnings
500
1,500
3,000
2,500
3,000
Total Stk. Equity
$40,500
$41,500
$43,000
$42,500
$43,000
Statements of Cash Flows for the Year Ended December 31
Operating Act.:
Inflow from Cust.
$ 9,500
$10,000
$10,500
$ 8,500
$ -0-
Net Cash Op. Act.
9,500
10,000
10,500
8,500
-0-
Investing Act.:
Inflow from Sale
-0-
-0-
-0-
-0-
4,500
Outflow for
Equip.
(40,000)
-0-
-0-
-0-
-0-
Net Cash Inv. Act.
(40,000)
-0-
-0-
-0-
4,500
Financing Act.
Inflow from Stock
40,000
-0-
-0-
-0-
-0-
Net Cash Fin. Act.
40,000
-0-
-0-
-0-
-0-
Net Change in Cash
9,500
10,000
10,500
8,500
4,500
Plus: Beg. Cash Bal.
-0-
9,500
19,500
30,000
38,500
Ending Cash Bal.
$ 9,500
$19,500
$30,000
$38,500
$43,000
8-91
PROBLEM 8-26B
a.
Accounting Solutions, Inc.
Horizontal Statements Model
Event
Assets
=
Liab.
+
Equity
Net Income
Cash Flow
2016
1.
+
NA
+
NA
+ FA
2.
+−
NA
NA
NA
− IA
3.
+−
NA
NA
NA
− IA
4.
+
NA
+
+
+ OA
5.
−
NA
−
−
− OA
6.
−
NA
−
−
NA
7.
NA
NA
+−
NA
NA
2017
1.
−
NA
−
−
− OA
2.
−
NA
−
−
− OA
3.
+
NA
+
+
+ OA
4.
−
NA
−
−
− OA
5.
−
NA
−
−
NA
6.
NA
NA
+−
NA
NA
2018
1.
+−
NA
NA
NA
− IA
2.
−
NA
−
−
− OA
3.
+
NA
+
+
+ OA
4.
−
NA
−
−
NA
5.
NA
NA
+−
NA
NA
8-92
PROBLEM 8-26B (cont.)
b.
Accounting Solutions, Inc.
General Journal
Event
Account Titles
Debit
Credit
2016
1.
Cash
80,000
Common Stock
80,000
2.
Computer
35,000
Cash
35,000
3.
Computer
2,450
Cash
2,450
4.
Cash
65,000
Service Revenue
65,000
5.
Computer Service Expense
1,500
Cash
1,500
6.
Depreciation Expense1
14,980
Accumulated Depreciation
14,980
7. cl
Service Revenue
65,000
Computer Service Expense
1,500
Depreciation Expense
14,980
Retained Earnings
48,520
2017
1.
Maintenance Expense
1,000
Cash
1,000
2.
Maintenance Expense
1,500
Cash
1,500
3.
Cash
68,000
Service Revenue
68,000
8-93
PROBLEM 8-26B b. (cont.)
Accounting Solutions, Inc.
General Journal
Event
Account Titles
Debit
Credit
2017
4.
Computer Service Expense
1,500
Cash
1,500
5.
Depreciation Expense2
8,988
Accumulated Depreciation
8,988
6. cl
Service Revenue
68,000
Computer Maintenance Expense
2,500
Computer Service Expense
1,500
Depreciation Expense
8,988
Retained Earnings
55,012
2018
1.
Accumulated Depreciation
6,000
Cash
6,000
2.
Computer Service Expense
1,200
Cash
1,200
3.
Cash
70,000
Service Revenue
70,000
4.
Depreciation Expense3
9,741
Accumulated Depreciation
9,741
5. cl
Service Revenue
70,000
Computer Service Expense
1,200
Depreciation Expense
9,741
Retained Earnings
59,059
8-94
PROBLEM 8-26B b. (cont.)
Accounting Solutions, Ihc.
T-Accounts
Assets
=
Stockholders’ Equity
Cash
Common Stock
Retained Earnings
2016
2016
2016
1. 80,000
2. 35,000
1. 80,000
7. 48,520
4. 65,000
3. 2,450
Bal. 80,000
Bal. 48,520
5. 1,500
2017
Bal. 106,050
6. 55,012
2017
Bal. 103,532
3. 68,000
1. 1,000
2018
2. 1,500
5. 59,059
4. 1,500
Bal. 162,591
Bal. 170,050
2018
Service Revenue
3. 70,000
1. 6,000
2016
2. 1,200
7. 65,000
4. 65,000
Bal. 232,850
Bal. -0-
2017
6. 68,000
3. 68,000
Computer
Bal. -0-
2016
2018
2. 35,000
5. 70,000
3. 70,000
3. 2,450
Bal. -0-
Bal. 37,450
Maintenance Expense
Accumulated Depr.
2017
2016
1. 1,000
6. 14,980
2. 1,500
6. 2,500
Bal. 14,980
Bal. -0-
2017
5. 8,988
Bal. 23,968
2018
1. 6,000
4. 9,741
Bal. 27,709
8-95
PROBLEM 8-26B (cont.)
c.
Accounting Solutions, Inc.
T-Accounts
Assets
=
Stockholders’ Equity
Computer Service
Expense
2016
5. 1,500
7. 1,500
Bal. -0-
2017
4. 1,500
6. 1,500
Bal. -0-
2018
2. 1,200
5. 1,200
Bal. -0-
Depreciation Expense
2016
6. 14,980
7. 14,980
Bal. -0-
2017
5. 8,988
6. 8,988
Bal. -0-
2018
4. 9,741
5. 9,741
Bal. -0-
8-96
PROBLEM 8-26B (cont.)
c.
Accounting Solutions, Inc.
Financial Statements For the Year Ended December 31
Income Statements
2016
2017
2018
Service Revenue
$65,000
$68,000
$70,000
Expenses
Maintenance Expense
-0-
(2,500)
-0-
Computer Fee Expense
(1,500)
(1,500)
(1,200)
Depreciation Expense
(14,980)
(8,988)
(9,741)
Total Expenses
(16,480)
(12,988)
(10,941)
Net Income
$48,520
$55,012
$59,059
Statements of Changes in Stockholders’ Equity
Beginning Common Stock
$ -0-
$80,000
$ 80,000
Plus: Stock Issued
80,000
-0-
-0-
Ending Common Stock
80,000
80,000
80,000
Beginning Retained Earnings
-0-
48,520
103,532
Plus: Net Income
48,520
55,012
59,059
Ending Retained Earnings
48,520
103,532
162,591
Total Stockholders’ Equity
$128,520
$183,532
$242,591
8-97
PROBLEM 8-26B b.(cont.)
Accounting Solutions Inc.
Financial Statements
Balance Sheets
2016
2017
2018
Assets
Cash
$106,050
$170,050
$232,850
Computer
37,450
37,450
37,450
Less: Accumulated Depr.
(14,980)
(23,968)
(27,709)
Total Assets
$128,520
$183,532
$242,591
Liabilities
$ -0-
$ -0-
$ – 0-
Stockholders’ Equity
Common Stock
80,000
80,000
80,000
Retained Earnings
48,520
103,532
162,591
Total Stockholders’ Equity
128,520
183,532
242,591
Total Liab. and Stkholders’ Equity
$128,520
$183,532
$242,591
Statements of Cash Flows
Cash Flows From Oper. Act.:
Inflow from Revenue
$65,000
$68,000
$ 70,000
Outflow for Expenses
(1,500)
(4,000)
(1,200)
Net Cash Flow from Oper. Act.
63,500
64,000
68,800
Cash Flows From Inv. Act.:
Outflow for Computer
(37,450)
-0-
(6,000)
Net Cash Flow from Inv. Act.
(37,450)
-0-
(6,000)
Cash Flows From Fin. Act.:
Inflow from Stock Issue
80,000
-0-
-0-
Net Cash Flow from Fin. Act.
80,000
-0-
-0-
Net Change in Cash
106,050
64,000
62,800
Plus: Beginning Cash Balance
-0-
106,050
170,050
Ending Cash Balance
$106,050
$170,050
$232,850
8-98
PROBLEM 8-27B
a. Straight-line
Cost $25,000
Delivery Cost 500
Total 25,500
8-99
PROBLEM 8-27B (cont.)
d. MACRS
8-100
PROBLEM 8-28B
a. Straight-Line
(Cost − Salvage Value) Useful Life = Annual Depreciation
Year 1 ($42,000 − 4,000) 5 = $7,600 per year
2 7,600
8-101
Gain $ 2,800
8-102
PROBLEM 8-28B d. (cont.)
Double-Declining-Balance
8-103
PROBLEM 8-29B
Units-of–Production
Total Estimated
8-104
PROBLEM 8-29B (cont.)
b. NC = Net Change in Cash
Friendly Corporation
Horizontal Statements Model
2016
Balance Sheet
Income Statement
Statement of
Assets
=
Stockholders’ Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flows
Event
Cash
+
Book Value of Van
=
C. Stock
+
Ret. Ear.
Bal.
50,000
+
=
50,000
+
NA
NA
−
NA
=
NA
NA
Van
(28,500)
+
28,500
=
NA
+
NA
NA
−
NA
=
NA
(28,500) IA
Rev.
26,000
+
=
NA
+
26,000
26,000
−
NA
=
26,000
26,000 OA
Depr.
NA
+
(7,800)
=
NA
+
(7,800)
NA
−
7,800
=
(7,800)
NA
Bal.
47,500
+
20,700
=
50,000
+
18,200
26,000
−
7,800
=
18,200
(2,500) NC
c. Sales Price $8,000
Book Value (7,050) (see a. above)
Gain on Sale $ 950
Debit Credit
Cash 8,000
Accumulated Depreciation 21,450
Gain on Sale 950
Delivery Van 28,500