© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
PA10–3
Req. 1
Salaries and Wages Expense ………………………………..
80,000
Withheld Income Tax Payable …………………………….
8,000
FICA Payable …………………………………………………..
6,000
Charitable Contributions Payable ………………………..
3,000
Cash ……………………………………………………………….
63,000
Payroll Tax Expense …………………………………………….
6,600
FICA Payable …………………………………………………..
6,000
State and Federal Unemployment Taxes Payable …
600
Req. 2
(a) December 10:
Cash …………………………………………………………………..
6,000
Unearned Revenue ………………………………………….
6,000
Collection of rent revenue for one month.
(b) December 31:
Unearned Revenue ………………………………………………
4,000
Rent Revenue …………………………………………………
4,000
Earned 20 days of rent (20/30 x $6,000 = $4,000).
Alternatively, the collection could have been originally recorded as follows, which
would not require an adjusting entry at December 31:
Cash …………………………………………………………………..
6,000
Rent Revenue …………………………………………………
4,000
Unearned Revenue …….. ………………………………….
2,000
PA10–3 (continued)
Req. 3
Balance sheet at December 31:
Current Liabilities:
Withheld Income Taxes Payable …………………………..
8,000
FICA Payable …………………………………………………….
12,000
Charitable Contributions Payable ………………………….
3,000
State and Federal Unemployment Tax Payable ………
600
Unearned Revenue …………………………………………….
2,000
PA10–4
Req. 1
January 1, 2015—Financial statements:
a.
Bonds payable …………………………..……..
b.
Unamortized premium (discount) …………
)
c.
Carrying value …………………………………..
Note: The bonds in Case B were issued at 98, implying an issue price of $196,000 ( =
98% x $200,000). The bonds in Case C were issued at 102, implying an issue
price of $204,000 ( = 102% x $200,000). When the bond issue price is greater
(less) than the face value, the bonds have issued at a premium (discount).
PA10–5
The answer is (c). Under GAAP, contingent liabilities are to be recorded only when they
Bonds Payable ……………………………………………………….….
600,000
630,000
Bonds Payable ……………………………………………………. ……
600,000
588,000
PA10–6
Req. 1
Changes During the Period
Ending Bond Liability Balances
Period
Ended
(A)
Cash
Paid
(B)
Discount
Amortized
(C) (=A+B)
Interest
Expense
(D)
Bonds
Payable
(E)
Discount on
Bonds Payable
(F) (=D–E)
Carrying Value
01/01/15
–
–
–
600,000
16,050
583,950
12/31/15
30,000
5,350*
35,350
600,000
10,700
589,300
12/31/16
30,000
5,350
35,350
600,000
5,350
594,650
12/31/17
30,000
5,350
35,350
600,000
0
600,000
* Straight-line amortization of discount = $16,050 ÷ 3 periods = $5,350 per year.
Req. 2
January 1, 2015:
Cash …………………………………………………………………………
583,950
Discount on Bonds Payable (+xL) ………………………………….
16,050
Bonds Payable ………………………………………………………
600,000
Req. 3
December 31, 2015:
Interest Expense ………………………………………………………..
35,350
Discount on Bonds Payable (–xL) ……………………………..
5,350
Cash …………………………………………………………………….
30,000
December 31, 2016:
Interest Expense ………………………………………………………..
35,350
Discount on Bonds Payable (–xL) ……………………………..
5,350
Cash …………………………………………………………………….
30,000
PA10–7
Req. 1
Changes During the Period
Ending Bond Liability Balances
Period
Ended
(A)
Interest
Expense
(B)
Cash
Paid
(C) (=A–B)
Discount
Amortized
(D)
Bonds
Payable
(E)
Discount on
Bonds Payable
(F) (=D–E)
Carrying Value
01/01/15
–
–
–
600,000
16,648
583,352
12/31/15
23,334
18,000
5,334
600,000
11,314
588,686
12/31/16
23,547
18,000
5,547
600,000
5,767
594,233
12/31/17
23,767*
18,000
5,767
600,000
0
600,000
* Interest in 2014 calculates as $594,233 x .04 = $23,769. To accommodate rounding, we show
two dollars less, which brings the Discount on Bonds Payable to zero.
Req. 2
January 1, 2015:
Cash …………………………………………………………………………
583,352
Discount on Bonds Payable (+xL) …………………………..……..
16,648
Bonds Payable ………………………………………………………
600,000
Req. 3
December 31, 2015:
Interest Expense ………………………………………………………..
23,334
Discount on Bonds Payable (–xL) ($23,334 – $18,000)
5,334
Cash …………………………………………………………………….
18,000
December 31, 2016:
Interest Expense ………………………………………………………..
23,547
Discount on Bonds Payable (–xL) ($23,547 – $18,000)
5,547
Cash …………………………………………………………………….
18,000
Interest Expense ………………………………………………………..
23,767
Bonds Payable ……………………………………………………. ……
600,000
Discount on Bonds Payable (–xL) ($23,767 – $18,000)
5,767
Cash ($600,000 + $18,000) ……………………………….. ……
618,000
Req. 5
January 1, 2017:
Bonds Payable ……………………………………………………. ……
600,000
Loss on Bond Retirement ……………………………………… ……
11,767
Discount on Bonds Payable (–xL) ………………………. ……
5,767
Cash ($600,000 x 101%) …………………………………… ……
606,000
Education.
PA10–8
Req. 1
Beginning of
Year
Changes During the Period
End of Year
Period
(A)
Bonds
Payable, Net
(B)
Interest
Expense
(C)
Cash
Paid
(D) (=B–C)
Increase in Bonds
Payable, Net
(E) (=A–D)
Bonds Payable,
Net
01/01/15-12/31/15
583,352
23,334
18,000
5,334
588,686
01/01/16-12/31/16
588,686
23,547
18,000
5,547
594,233
01/01/17-12/31/17
594,233
23,767*
18,000
5,767
600,000
* Interest in 2014 calculates as $594,233 x .04 = $23,769. To accommodate rounding, we show
two dollars less, which brings the Bonds Payable, Net to its face value at maturity.
Req. 2
January 1, 2015:
Cash …………………………………………………………………………
583,352
Bonds Payable, Net ………………………………………………..
583,352
Req. 3
December 31, 2015:
Interest Expense ………………………………………………………..
23,334
Bonds Payable, Net ($23,334 – $18,000) ……………………
5,334
Cash …………………………………………………………………….
18,000
December 31, 2016:
Interest Expense ………………………………………………………..
23,547
Bonds Payable, Net ($23,547 – $18,000) ……………………
5,547
Cash …………………………………………………………………….
18,000
Interest Expense ………………………………………………………..
23,767
Bonds Payable, Net …………………………………………….. ……
594,233
Cash ($600,000 + $18,000) ……………………………….. ……
618,000
Req. 5
January 1, 2017:
Bonds Payable, Net …………………………………………….. ……
594,233
Loss on Bond Retirement ……………………………………… ……
11,767
Cash ($600,000 x 101%) …………………………………… ……
606,000
10-46 Solutions Manual
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
ANSWERS TO GROUP B PROBLEMS
PB10–1
Req. 1
Date
Assets
Liabilities
Stockholders’ Equity
January 3
Inventory
+ 24,000
Accounts Payable
+24,000
January 27
Cash – 24,000
Accounts Payable
– 24,000
April 1
Cash + 80,000
Note Payable + 80,000
June 13
Inventory +8,000
Accounts Payable
+ 8,000
July 25
Cash –8,000
Accounts Payable –8,000
August 1
Cash +8,000
Unearned Revenue
+ 8,000
December 31
Salaries and Wages
Payable +12,000
Salaries and Wages
Expense (+E)
–12,000
December 31
Interest Payable + 3,000*
Interest Expense (+E)
-3,000
December 31
Unearned Rent Revenue
-5,000**
Rent Revenue (+R)
+5,000
* $3,000 = $80,000 x 0.05 x 9/12;
**$5,000 = $8,000 x 5/8
8,000
Paid June 13 invoice.
PB10–1 (continued)
Req. 2
Transaction
Effect
Numerator
Denominator
January 3
Increased
Increased
Increased
January 27
Decreased
Decreased
Decreased
April 1
Increased
Increased
Increased
June 13
Increased
Increased
Increased
July 25
Decreased
Decreased
Decreased
August 1
Increased
Increased
Increased
December 31
Increased
Increased
No Change
December 31
Increased
Increased
No Change
December 31
Decreased
Decreased
No Change
PB10–2
Req. 1
January 3:
Inventory ……………………………………………………….……
24,000
Accounts Payable ……………………………………………..
24,000
Purchased merchandise.
Accounts Payable ………………………………………………..
24,000
Cash ………………………………………………………………
24,000
Paid January 3 invoice.
Cash …………………………………………………………………..
80,000
Note Payable (short term) ………………………………….
80,000
Borrowed on 12-month, 5%, interest-bearing note.
Inventory ……………………………………………………….……
8,000
Accounts Payable …………………………………………….
8,000
Purchased merchandise.
PB10–2 (continued)
Req. 1 (continued)
August 1:
Cash …………………………………………………………………..
8,000
Unearned Revenue ………………………………………….
8,000
Collected rent revenue for 8 months.
3,000
Unearned Revenue . ……………………………………………..
Rent Revenue ………………………………………………….
5,000
Current Liabilities
Note Payable ……………………………………………………..
Interest Payable ………………………………………………….
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
PB10–2 (continued)
Req. 4
Transaction
Effect
Numerator
Denominator
January 3
Increased
Increased
Increased
January 27
Decreased
Decreased
Decreased
April 1
Increased
Increased
Increased
June 13
Increased
Increased
Increased
July 25
Decreased
Decreased
Decreased
August 1
Increased
Increased
Increased
December 31
Increased
Increased
No Change
December 31
Increased
Increased
No Change
December 31
Decreased
Decreased
No Change
PB10–3
Req. 1
Salaries and Wages Expense ………………………………..
260,000
Withheld Income Tax Payable …………………………….
28,000
FICA Payable …………………………………………………..
20,000
Charitable Contributions Payable ………………………..
4,000
Cash ……………………………………………………………….
208,000
Payroll Tax Expense …………………………………………….
22,000
FICA Payable …………………………………………………..
20,000
State and Federal Unemployment Tax Payable …….
2,000
PB10–3 (continued)
Req. 2
(a) December 10:
Cash …………………………………………………………………..
1,500
Unearned Revenue ………………………………………….
1,500
Rent collected for one month, recorded as unearned revenue.
Unearned Revenue ………………………………………………
1,000
Rent Revenue …………………………………………………
1,000
Earned 20 days of rent but initially recorded as if none was earned. Need
to reduce unearned revenue for 20 days earned (20/30 x $1,500 =
$1,000).
Alternatively, the collection could have been originally recorded as follows, which
would not require an adjusting entry at December 31:
Cash …………………………………………………………………..
1,500
Rent Revenue …………………………………………………
1,000
Unearned Revenue ……… ………………………………….
500
Req. 3
Balance sheet at December 31:
Current Liabilities:
Withheld Income Taxes Payable …………………………..
28,000
FICA Payable …………………………………………………….
40,000
Charitable Contributions Payable ………………………….
4,000
State and Federal Unemployment Tax Payable ………
2,000
Unearned Revenue …………………………………………….
500