8-21 Solutions
Plus Warranty Expense for 2009: .06 X $18,000 ……………. 1,080
Solutions 8-22
8.34 (Miele Company; journal entries for warranty liabilities and subsequent
expenditures.)
a. 2008
Accounts Receivable …………………………………………. 1,200,000
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+1,200,000
+1,200,000
IncSt → RE
Warranty Liability ………………………………………………. 12,000
Cash ……………………………………………………………. 12,000
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
–12,000
–12,000
Expenditures actually made.
Warranty Expense …………………………………………….. 48,000
Warranty Liability …………………………………………… 48,000
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+48,000
–48,000
IncSt → RE
.04 X 1,200,000.
2009
Accounts Receivable …………………………………………. 1,500,000
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+1,500,000
+1,500,000
IncSt → RE
Warranty Liability ………………………………………………. 50,000
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
–50,000
–50,000
8-23 Solutions
Solutions 8-24
8.34 a. continued.
Warranty Expense …………………………………………….. 60,000
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+60,000
–60,000
IncSt → RE
.04 X 1,500,000.
8.35 (Kingspeed Bikes; journal entries for estimated warranty liabilities and
subsequent expenditures.)
a. 2008
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+800,000
+800,000
IncSt → RE
Warranty Liability ………………………………………………. 22,000
Cash ……………………………………………………………. 13,200
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
–13,200
–22,000
–8,800
Warranty Expense …………………………………………….. 48,000
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+48,000
–48,000
IncSt → RE
8-25 Solutions
8.35 a. continued.
2009
Cash ……………………………………………………………….. 1,200,000
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+1,200,000
+1,200,000
IncSt → RE
Warranty Liability ………………………………………………. 55,000
Parts Inventory ……………………………………………… 22,000
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
–33,000
–55,000
–22,000
Warranty Expense …………………………………………….. 72,000
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+72,000
–72,000
IncSt → RE
2010
Cash ……………………………………………………………….. 900,000
Sales Revenue ……………………………………………… 900,000
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+900,000
+900,000
IncSt → RE
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
–31,200
–52,000
Solutions 8-26
–20,800
8-27 Solutions
8.35 a. continued.
Warranty Expense …………………………………………….. 54,000
Warranty Liability …………………………………………… 54,000
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+54,000
–54,000
IncSt → RE
8.36 (Sappi Paper Limited; journal entries for restructuring liabilities and
subsequent expenditures.)
2008
Restructuring Provision ……………………………………………. 32
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
–32
–32
To record cash expenditures on previously accrued re-
structuring costs.
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+7
–7
IncSt → RE
8.37 (Delhaize Group; journal entries for restructuring liabilities and subsequent
expenditures.)
a. Journal entries for 2007
Solutions 8-28
8-29 Solutions
8.37 a. continued.
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+14.2
–14.2
IncSt → RE
Restructuring Provision ……………………………………… 7.3
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
–7.3
+7.3
IncSt → RE
Restructuring Provision ……………………………………… 40.0
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
–40.0
–40.0
To record cash expenditures to settle restructuring
b. Delhaize will report a total restructuring provision of 50.9, classified as
follows on its balance sheet:
Current Portion of Restructuring Provision …………………… 12.5 million
c. Delhaize’s income in 2007 is lower by 6.9 million (= 14.2 million – 7.3
million). The net change in income of 6.9 million is added to income as
a noncash expense to calculate cash flow from operations in the
statement of cash flows:
Solutions 8-30
8.38 (Katherine’s Outdoor Furniture preparation of journal entries and income
statement for a manufacturing firm.)
a. (1) Raw Materials Inventory …………………………..….. 667,200
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+667,200
+667,200
(2) Work-in-Process Inventory …………………………... 689,100
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+689,100
–689,100
(3) Work-in-Process Inventory …………………………... 432,800
Selling Expenses ………………………………………… 89,700
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+432,800
–89,700
IncSt → RE
–544,800
–22,300
IncSt → RE
(4) Work-in-Process Inventory …………………………... 182,900
Selling Expenses ………………………………………… 87,400
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+182,900
–87,400
IncSt → RE
–282,500
–12,200
IncSt → RE
(5) Work-in-Process Inventory …………………………... 218,500
8-31 Solutions
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+218,500
–55,100
IncSt → RE
–308,300
–34,700
IncSt → RE
Solutions 8-32
8.38 a. continued.
(6) Finished Goods Inventory …………………………….. 1,564,500
Work-in-Process Inventory ……………………….. 1,564,500
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+1,564,500
–1,564,500
(7) Accounts Receivable …………………………………… 2,400,000
Sales Revenue ……………………………………….. 2,400,000
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+2,400,000
+2,400,000
IncSt → RE
(8) Cost of Goods Sold …………………………………….. 1,536,600
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
–1,536,600
–1,536,600
IncSt → RE
$182,700 + $1,564,500 – $210,600 = $1,536,600.
b. KATAHERINE’S OUTDOOR FURNITURE
Income Statement
For the Month of January
Sales ……….. ………………………………………………. $ 2,400,000
Less Expenses:
Cost of Goods Sold …… ……………………………. $ 1,536,600
Note:
Instead of using a functional classification of expenses (that is, selling,
administrative), classification by their nature (salary, depreciation,
other operating) is acceptable.
8-33 Solutions
8.39 (Lord Cromptom Plc.; flow of manufacturing costs through the accounts.)
a. Beginning Raw Materials Inventory …………………………………. 46,900
Raw Materials Purchased ……………………………………………… 429,000
b. Beginning Work-in-Process Inventory ……………………………… 110,900
Cost of Raw Materials Used (from Part
a
.) ……………………….. 432,300
Cost of Factory Supplies Used (from Part
a
.) ……………………. 22,200
c. Beginning Finished Goods Inventory ………………………………. 76,700
Cost of Units Completed and Transferred to Finished Goods
8.40 (Toyota Corporation; flow of manufacturing costs.)
Solutions 8-34
a. Ending Balance of Total Inventory = Ending Balance of Raw Materials
Inventory + Ending Balance of Work–in-Process Inventory + Ending
Balance of Finished Goods Inventory.
8-35 Solutions
8.40 continued.
b. Beginning Finished Goods Inventory + Cost of Units Completed = Cost of
Products Sold + Writedowns + Ending Finished Goods Inventory.
c. Beginning Balance in Work-in-Process Inventory + Direct Materials +
Direct Labor + Overhead = Cost of Units Completed + Ending Balance in
Work-in-Process Inventory.
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
+8,462,574
–8,462,574
d. Beginning Balance in Raw Materials Inventory + Raw Materials
Purchases = Raw Materials Used in Production + Ending Balance of Raw
Materials Inventory.
8.41 (Sandvik Group; flow of manufacturing costs.)
a. Ending Balance of Total Inventory = Ending Balance of Raw Materials
Inventory + Ending Balance of Work–in-Process Inventory + Ending
Balance of Finished Goods Inventory.
Solutions 8-36
b. Loss on Impairment of Inventory …………………………. 281
Finished Goods Inventory ………………………………. 281
Assets
=
Liabilities
+
Shareholders’
Equity
(Class.)
–281
–281
IncSt → RE
8.41 continued.
c. Cost of Sales, after Writedown = Cost of Sales, before Writedown +
Writedown.
d. Beginning Finished Goods Inventory + Cost of Units Completed = Cost of
Sales + Writedowns + Ending Finished Goods Inventory.
e. Beginning Balance in Work-in-Process Inventory + Direct Materials +
Direct Labor + Overhead = Cost of Units Completed + Ending Balance in
Work-in-Process Inventory.