PA9–3
Req. 1
Date
Assets
Liabilities
Stockholders’ Equity
Jan. 2
Cash
Equipment
–20,000
+250,000
Note Payable
(long–term)
+230,000
Jan. 2
Equipment …………………………………………………..
250,000
Cash …………………………………………………….
20,000
Note Payable (long-term) …………………………
230,000
Date
Assets
Liabilities
Stockholders’ Equity
Jan. 3
Equipment
+20,000
Accts Payable
+20,000
Jan. 3
Equipment …………………………………………………..
20,000
Accounts Payable …………………………………..
20,000
Date
Assets
Liabilities
Stockholders’ Equity
Jan. 30
Cash
–20,000
Accts Payable
–20,000
Jan. 30
Accounts Payable …………………………………………
20,000
Cash …………………………………………………….
20,000
Date
Assets
Liabilities
Stockholders’ Equity
Feb. 1
Cash
–800
Repairs and
Maintenance
Expense (+E)
–800
Feb. 1
Repairs and Maintenance Expense …………………
800
Cash …………………………………………………….
800
PA9–3 (continued)
Req. 1 (continued)
Date
Assets
Liabilities
Stockholders’ Equity
Mar. 1
Cash
Licensing Rights
–3,600
+3,600
PA9–4
2015
Jan 2
Building ………………………………………………………..
95,000
Cash ……………………………………………………..
95,000
Jan 3
Building ………………………………………………………..
5,000
Cash ……………………………………………………..
5,000
April 1
Equipment …………………………………………………….
38,000
Cash ……………………………………………………..
38,000
May 13
Repairs and Maintenance Expense ………………….
250
Cash ……………………………………………………..
250
July 1
Patent ………………………………………………………….
20,000
Cash ……………………………………………………..
20,000
Dec. 31
Depreciation Expense …………………………………….
24,500
Amortization Expense …………………………………….
2,000
Accumulated Depreciation–Building …………….
20,000
Accumulated Depreciation–Equipment …………
4,500
Accumulated Amortization ………………………….
2,000
Building (double declining balance): ($95,000 + $5,000 – $0) x 2/10 = $20,000
Truck (straight line; partial year): ($38,000 – $8,000) x 1/5 x 9/12 = $4,500
Patent (straight line; partial year): $20,000 x 1/5 x 6/12 = $2,000
2016
June 30
Depreciation Expense …………………………………….
3,000
Accumulated Depreciation–Equipment ………..
3,000
($38,000 – $8,000) x 1/5 x 6/12 = $3,000
June 30
Cash ……………………………………………………………
33,000
Accumulated Depreciation–Equipment ……………..
7,500
Equipment ……………………………………………….
38,000
Gain on Disposal ………………………………………
2,500
Dec 31
Depreciation Expense …………………………………….
16,000
Accumulated Depreciation–Building ……………
16,000
Impairment Loss ……………………………………………
18,000
Patent …………………………………………………….
18,000
Building: ($95,000 + $5,000 – $20,000) x 2/10 = $16,000 (a full year)
Patent Book Value (prior to write-down): $20,000 – $2,000 = $18,000
9– 34 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
PB9–1
Req. 1
Cost of each machine:
Machine
A
B
C
Total
Purchase price …………………………..
$19,600
$10,100
$9,800
$39,500
Installation costs ………………….……….
300
500
200
1,000
Renovation costs …………………………..
100
300
600
1,000
Total cost ………………………..…
$20,000
$10,900
$10,600
$41,500
Depreciation Expense ($2,700 + $1,000 + $5,300) …………………..
9,000
Accumulated Depreciation, Machine A ………………………
2,700
Accumulated Depreciation, Machine B ………………………
1,000
Accumulated Depreciation, Machine C . ………………………
5,300
PB9–2
Req. 1
Machine A – Jan. 2:
(a)
Depreciation expense in current year – none recorded because
disposal date was Jan. 2 (beginning of year).
(b)
To record disposal:
Cash ……………………………………………………………………..
33,500
Accumulated Depreciation–Equipment ………………………
28,000
Gain on Disposal ……………………………………………….
1,500
Equipment ………………………………………………………..
60,000
Req. 2
Machine B – Jan. 2:
(a)
Depreciation expense in current year – none recorded because
disposal date was Jan. 2 (beginning of year).
(b)
To record disposal:
Accumulated Depreciation–Equipment ……………………….
7,365
Loss on Disposal …………………………………………………….
6,835
Equipment ………………………………………………………..
14,200
PB9–3
Req. 1
Date
Assets
Liabilities
Stockholders’ Equity
Apr. 1
Cash
Equipment
–1,000
+5,000
Note Payable
(short–
term)
+4,000
Apr. 1
Equipment …………………………………………………..
5,000
Cash …………………………………………………….
1,000
Note Payable (short-term) ……………………….
4,000
Date
Assets
Liabilities
Stockholders’ Equity
Apr. 2
Equipment
+3,000
Accts Payable
+3,000
Apr. 2
Equipment …………………………………………………..
3,000
Accounts Payable …………………………………..
3,000
Date
Assets
Liabilities
Stockholders’ Equity
Apr. 30
Cash
–3,000
Accts Payable
–3,000
Apr. 30
Accounts Payable …………………………………………
3,000
Cash …………………………………………………….
3,000
Date
Assets
Liabilities
Stockholders’ Equity
May 1
Cash
–120
Repairs and
Maintenance
Expense (+E)
–120
May 1
Repairs and Maintenance Expense …………………
120
Cash …………………………………………………….
120
PB9–3 (continued)
Req. 1 (continued)
Date
Assets
Liabilities
Stockholders’ Equity
June 1
Cash
Franchise Rights
–9,120
+9,120
PB9–4
2015
Jan 2
Building ………………………………………………………..
175,000
Cash ……………………………………………………..
175,000
July 1
Equipment …………………………………………………….
40,000
Cash ……………………………………………………..
40,000
Oct 2
Repairs and Maintenance Expense ………………….
500
Cash ……………………………………………………..
500
Oct 13
Repairs and Maintenance Expense ………………….
150
Cash ……………………………………………………..
150
Dec 1
Franchise Right ……………………………………………..
90,000
Cash ……………………………………………………..
90,000
Dec. 31
Depreciation Expense …………………………………….
20,700
Amortization Expense …………………………………….
1,500
Accumulated Depreciation–Building ……………..
17,500
Accumulated Depreciation-Equipment …………..
3,200
Accumulated Amortization …………………………..
1,500
Building (double declining balance) ($175,000 – $0) x 2/20 = $17,500
Delivery van (straight line; partial year) ($40,000 – $8,000) x 1/5 x 6/12 = $3,200
Franchise right (straight line; partial year) $90,000 x 1/5 x 1/12 = $1,500
2016
June 30
Depreciation Expense …………………………………….
7,875
Accumulated Depreciation–Building …………..
7,875
$7,875 = ($175,000 – $17,500) x 2/20 x 6/12
June 30
Cash ……………………………………………………………
140,000
Accumulated Depreciation–Building …………………
25,375
Loss on Disposal ……………………………………………
9,625
Building ………………………………………………….
175,000
Dec 31
Depreciation Expense ……………………………………….
6,400
Amortization Expense ……………………………………….
18,000
Accumulated Depreciation-Equipment …………….
6,400
Accumulated Amortization …………………………….
18,000
($40,000 – $8,000) x 1/5 = $6,400; $90,000 x 1/5 = $18,000
Fundamentals of Financial Accounting, 5/e 9– 39
© 2016 by McGraw– Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
ANSWER TO COMPREHENSIVE PROBLEM
C9–1
Req. 1
1.
Cash …………………………………………………………..
100,000
Common Stock ………………………………………
100,000
2.
Building ………………………………………………………
40,000
Equipment …………………………………………………..
10,000
Cash …………………………………………………….
50,000
3.
Equipment …………………………………………………..
260
Cash …………………………………………………….
260
4.
Accounts Receivable …………………………………….
4,000
Service Revenue ……………………………………
4,000
5.
Cash …………………………………………………………..
36,000
Service Revenue ……………………………………
34,000
Unearned Revenue ………………………………..
2,000
6.
Salaries and Wages Expense ………………………..
23,000
Utilities Expense …………………………………………..
7,000
Cash …………………………………………………….
30,000
7.
Depreciation Expense …………………………………..
586
Accumulated Depreciation-Building ……………
158*
Accumulated Depreciation-Equipment ……….
428**
8.
Advertising Expense ……………………………………..
350
Accounts Payable …………………………………..
350
9.
Bad Debt Expense ……………………………………….
120
Allowance for Doubtful Accounts ………………..
120
($120 = $4,000 x 3%)
10.
Income Tax Expense …………………………………….
2,083
Income Tax Payable …………………………..…..
2,083
($2,083 = $6,944 net income before tax*** x 30%)
C9–1 (continued)
Req. 2
Cash (A)
Accounts Receivable (A)
Bal.
1.
5.
0
100,000
36,000
50,000 2.
260 3.
30,000 6.
Bal.
4.
0
4,000
55,740
4,000
Allowance for Doubtful
Accounts (xA)
Building (A)
0
120
Bal.
9.
Bal.
2.
0
40,000
120
40,000
0
Bal.
7.
Bal.
2.
10,260
100,000
Salaries and Wages Expense (E)
38,000
23,000
7,000
350
2,000
2,083
0
0