8-38
EXERCISE 8-14A
a. MACRS depreciation = Cost x MACRS Table %
EXERCISE 8-15A
Depreciation
Expense
2016: $42,000 − $3,000 = $39,000; $39,000 3 = $13,000
8-39
EXERCISE 8-16A
Tow Truck:
Book value would still be $6,500; the $1,550 repair cost will be
expensed.
8-40
EXERCISE 8-17A
a.
Assets
=
Stockholders’ Equity
Rev.
Exp.
=
Net Inc.
Cash Flow
Cash
Book Value of Comp
=
C. Stock
+
Ret. Ear.
45,000
16,000
=
40,000
+
21,000
NA
NA
=
NA
NA
(6,000)
NA
=
NA
+
(6,000)
NA
6,000
=
(6,000)
(6,000) OA
Assets
=
Stockholders’ Equity
Rev.
Exp.
=
Net Inc.
Cash Flow
Cash
Book Value of Comp
=
C. Stock
+
Ret. Ear.
45,000
16,000
=
40,000
+
21,000
NA
NA
=
NA
NA
(6,000)
6,000
=
NA
+
NA
NA
NA
=
NA
(6,000) IA
Assets
=
Stockholders’ Equity
Rev.
Exp.
Net Inc.
Cash Flow
Cash
Book Value of Comp
=
C. Stock
+
Ret. Ear.
45,000
16,000
=
40,000
+
21,000
NA
NA
NA
NA
(6,000)
6,000
=
NA
+
NA
NA
NA
NA
(6,000) IA
8-41
EXERCISE 8-18A
2017.
b. $22,000 of expense would be recognized in 2016 and $-0- in 2017.
c. $-0- cash outflow from operating activities in 2016, $-0- cash outflow
2017.
8-42
EXERCISE 8-19A
a. Depletion charge per unit: $600,000 40,000 tons = $15 per ton
b.
Depletion Calculation:
Year 1 $15 x 15,000 = $225,000
Year 2 $15 x 18,000 = $270,000
Colorado Mining Co.
Statements Model
Assets
=
Stockholders’ Equity
Rev.
Exp.
Net Inc.
Cash Flow
Cash
+
Coal Res.
=
C. Stock
+
Ret. Ear.
800,000
+
NA
=
800,000
+
NA
NA
NA
NA
NA
(600,000)
+
600,000
=
NA
+
NA
NA
NA
NA
(600,000) IA
Depletion for Year 1
NA
+
(225,000)
=
NA
+
(225,000)
NA
225,000
(225,000)
NA
Depletion for Year 2
NA
+
(270,000)
=
NA
+
(270,000)
NA
270,000
(270,000)
NA
c.
Date
Account Titles
Debit
Credit
Year 1
Depletion Expense
225,000
Coal Reserves
225,000
Date
Account Titles
Debit
Credit
Year 2
Depletion Expense
270,000
Coal Reserves
270,000
EXERCISE 8-20A
a. Patent $40,000 4 = $10,000 per year
The goodwill is not amortized under GAAP.
b.
Dynamo Manufacturing
Statements Model
Assets
Liab.
+
Equity
Rev.
–
Exp.
=
Net Inc.
Cash Flow
Cash
+
Patent
+
Goodwill
=
90,000
NA
NA
NA
90,000
NA
NA
NA
NA
Acq.
(75,000)
40,000
35,000
NA
NA
NA
NA
NA
(75,000) IA
Amort
.
NA
(10,000)
NA
NA
(10,000)
10,000
(10,000)
NA
c.
Account Titles
Debit
Credit
Patents
40,000
Goodwill
35,000
Cash
75,000
Account Titles
Debit
Credit
Amortization Expense – Patents
10,000
Patents
10,000
EXERCISE 8-21A
a. Acquisition Price:
Cash Paid $320,000
Liabilities Assumed 40,000
8-10
Cash
320,000
8-11
EXERCISE 8-22A
a. U.S. GAAP requires research and development cost to be expensed in
8-12
EXERCISE 8-23A
a. Under U.S. GAAP, the land would be reported at its original cost of
$600,000. The building would be reported at its book value,
determined as follows:
8-13
EXERCISE 8-23A (cont.)
c. Under IFRS, the land would be reported on the 2017 balance sheet at
$600,000, and on the 2018 balance sheet at $650,000.
The building would be reported at its book value of $2,850,000 in
2017; (see the computations for U.S. GAAP above). For 2018 the
2018. See computations above.
8-14
SOLUTIONS TO PROBLEMS – SERIES A – CHAPTER 8
PROBLEM 8-24A
Office Equipment
List Price $60,000
Discount ($60,000 x 2%) (1,200)
Transportation-In 1,500
8-15
PROBLEM 8-25A
Bensen Company
Financial Statements
For the Year Ended December 31
Income Statements
2016
2017
2018
2019
2020
Revenue
$26,100
$28,500
$32,000
$31,300
$ -0-
Depr. Expense1
(10,000)
(10,000)
(10,000)
(10,000)
-0-
Operating Income
16,100
18,500
22,000
21,300
-0-
Gain/(Loss)
-0-
-0-
-0-
-0-
(1,200)2
Net Income
$16,100
$18,500
$22,000
$21,300
$(1,200)
Statements of Changes in Stockholders’ Equity
Beg. Com. Stock
$ -0-
$60,000
$60,000
$60,000
$60,000
Plus: Stock Issued
60,000
-0-
-0-
-0-
-0-
End. Com. Stock
60,000
60,000
60,000
60,000
60,000
Beg. Ret. Earn.
-0-
16,100
34,600
56,600
77,900
Plus: Net Income
16,100
18,500
22,000
21,300
(1,200)
End. Ret. Earn.
16,100
34,600
56,600
77,900
76,700
Total Stk. Equity
$76,100
$94,600
$116,600
$137,900
$136,700
loss
PROBLEM 8-25A (cont.)
Bensen Company
Financial Statements
Balance Sheets
2016
2017
2018
2019
2020
Assets
Cash
$36,100
$64,600
$96,600
$127,900
$136,700
Equipment
50,000
50,000
50,000
50,000
-0-
Less: Acc. Dep.
(10,000)
(20,000)
(30,000)
(40,000)
-0-
Total Assets
$76,100
$94,600
$116,600
$137,900
$136,700
Stockholders’ Equity
Common Stock
$60,000
$60,000
$60,000
$60,000
$60,000
Retained Earn.
16,100
34,600
56,600
77,900
76,700
Total Stkhldrs’ Equity
$76,100
$94,600
$116,600
$137,900
$136,700
Statements of Cash Flows
2016
2017
2018
2019
2020
Operating Act.:
Inflow from Cust.
$26,100
$28,500
$32,000
$31,300
$ -0-
Net Cash Op. Act.
26,100
28,500
32,000
31,300
-0-
Investing Act.:
Sale of Equip.
-0-
-0-
-0-
-0-
8,800
Paid for Equip.
(50,000)
-0-
-0-
-0-
-0-
Net Cash Inv. Act.
(50,000)
-0-
-0-
-0-
8,800
Financing Act.:
Inflow from
Stock Issue
60,000
-0-
-0-
-0-
-0-
Net Cash Fin. Act.
60,000
-0-
-0-
-0-
-0-
Net Change in Cash
36,100
28,500
32,000
31,300
8,800
Plus: Beg. Cash Bal.
-0-
36,100
64,600
96,600
127,900
8-17
Ending Cash Bal.
$36,100
$64,600
$96,600
$127,900
$136,700
PROBLEM 8-26A
a.
Academy Towing Service
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
8-19
PROBLEM 8-26A (cont.)
b.
Academy Towing Service, General Journal
Event
Account Titles
Debit
Credit
2016
1.
Cash
70,000
Common Stock
70,000
2.
Wrecker
32,000
Cash
32,000
3.
Wrecker
3,000
Cash
3,000
4.
Cash
56,100
Service Revenue
56,100
5.
Gas & Oil Expense
12,000
Cash
12,000
6.
Depreciation Expense*
10,000
Accumulated Depreciation
10,000
7. cl
Service Revenue
56,100
Gas & Oil Expense
12,000
Depreciation Expense
10,000
Retained Earnings
34,100
2017
1.
Maintenance Expense
900
Cash
900
2.
Maintenance Expense
1,250
Cash
1,250
3.
Cash
62,000
Service Revenue
62,000
PROBLEM 8-26A b. (cont.)
Academy Towing Service
General Journal
Event
Account Titles
Debit
Credit
2017
4.
Gas & Oil Expense
18,000
Cash
18,000
5.
Depreciation Expense
10,000
Accumulated Depreciation
10,000
6. cl
Service Revenue
62,000
Maintenance Expense
2,150
Gas & Oil Expense
18,000
Depreciation Expense
10,000
Retained Earnings
31,850
2018
1.
Accumulated Depreciation
4,800
Cash
4,800
2.
Gas & Oil Expense
19,100
Cash
19,100
3.
Cash
65,000
Service Revenue
65,000
4.
Depreciation Expense*
7,400
Accumulated Depreciation
7,400
5. cl
Service Revenue
65,000
Gas & Oil Expense
19,100
Depreciation Expense
7,400
Retained Earnings
38,500
8-21
PROBLEM 8-26A b. (cont.)
Academy Towing Service
T-Accounts
Assets
=
Stockholders’ Equity
Cash
Common Stock
Retained Earnings
2016
2016
2016
1. 70,000
2. 32,000
1. 70,000
7. 34,100
4. 56,100
3. 3,000
Bal. 70,000
Bal. 34,100
5. 12,000
2017
Bal. 79,100
6. 31,850
2017
Bal. 65,950
3. 62,000
1. 900
2018
2. 1,250
5. 38,500
4. 18,000
Bal. 104,450
Bal. 120,950
2018
Service Revenue
3. 65,000
1. 4,800
2016
2. 19,100
7. 56,100
4. 56,100
Bal. 162,050
Bal. -0-
2017
6. 62,000
3. 62,000
Wrecker
Bal. -0-
2016
2018
2. 32,000
5. 65,000
3. 65,000
3. 3,000
Bal. -0-
Bal. 35,000
Maintenance Expense
Accumulated Depr.
2017
2016
1. 900
6. 10,000
2. 1,250
6. 2,150
Bal. 10,000
Bal. -0–
2017
5. 10,000
Bal. 20,000
2018
1. 4,800
4. 7,400
Bal. 22,600
8-22
PROBLEM 8-26A b. (cont.)
Academy Towing Service
T-Accounts
Assets
=
Stockholders’ Equity
Gas & Oil Expense
2016
5. 12,000
7. 12,000
Bal. -0–
2017
4. 18,000
6. 18,000
Bal. -0–
2018
2. 19,100
5. 19,100
Bal. -0–
Depreciation Expense
2016
6. 10,000
7. 10,000
Bal. -0–
2017
5. 10,000
6. 10,000
Bal. -0–
2018
4. 7,400
5. 7,400
Bal. -0–