Chapter 2
Asset and Liability Valuation
and Income Recognition
2-20
in whole or in part.
c.
CC AOCI RE
Inventory +40,000 Accounts Payable +40,000
Shareholders’ Equity
+LiabilitiesAssets =
d.
CC AOCI RE
Accounts Receivable +65,000 Sales +65,000
Inventory –30,000 Cost of Goods Sold –30,000
Shareholders’ Equity
+LiabilitiesAssets =
e.
CC AOCI RE
Case –15,000 Compensation
Expense –15,000
Shareholders’ Equity
+LiabilitiesAssets =
f.
CC AOCI RE
Case +45,000
Accounts Receivable –45,000
Shareholders’ Equity
+LiabilitiesAssets =
g.
CC AOCI RE
Case –28,000 Accounts Payable –28,000
Shareholders’ Equity
+LiabilitiesAssets =
Chapter 2
Asset and Liability Valuation
and Income Recognition
2-21
in whole or in part.
h.
CC AOCI RE
Accumulated Depreciation
Depreciation –7,000 Expense –7,000
Shareholders’ Equity
+LiabilitiesAssets =
i.
CC AOCI RE
Compensation
Wages Payable +4,000 Expense –4,000
Shareholders’ Equity
+LiabilitiesAssets =
j.
CC AOCI RE
Cash –2,400 Interest Expense –2,400
Shareholders’ Equity
+LiabilitiesAssets =
k.
CC AOCI RE
Deferred Tax Income Tax
Cash –1,440
b
Liability +1,200
c
Expense –2,640
a
Shareholders’ Equity
+LiabilitiesAssets =
aSales …………………………………………………………………………………….. $ 65,000
Depreciation Expense …………………………………………………………….. 7,000
Interest Expense …………………………………………………………………….. 2,400
Chapter 2
Asset and Liability Valuation
and Income Recognition
2-22
in whole or in part.
bSales …………………………………………………………………………………….. $ 65,000
Cost of Goods Sold ………………………………………………………………… 30,000
c$1,200 = $2,640 – $1,440
2.21 Analyzing Transactions.
(1)
a.
CC AOCI RE
Marketable Equity
Securities +100,000
Case –100,000
Shareholders’ Equity
+LiabilitiesAssets =
b.
CC AOCI RE
Marketable Equity Unrealized Holding
Securities –10,000 Gain or Loss–OCI –10,000
Shareholders’ Equity
+LiabilitiesAssets =
c.
CC AOCI RE
Unrealized Holding
Deferred Tax Asset +4,000 Gain or Loss–OCI +4,000
Shareholders’ Equity
+LiabilitiesAssets =
Chapter 2
Asset and Liability Valuation
and Income Recognition
2-23
in whole or in part.
d.
CC AOCI RE
Unrealized Holding Loss on Marketable
Cash +94,000 Gain or Loss–AOCI +10,00
0
Equity Securities –6,000
Marketable Equity
Securities –90,000
Shareholders’ Equity
+LiabilitiesAssets =
e.
CC AOCI RE
Cash +2,400 Unrealized Holding Income Tax
0
Shareholders’ Equity
+LiabilitiesAssets =
(2)
a.
CC AOCI RE
Accounts Receivable +500,000 Sales +500,000
Shareholders’ Equity
+LiabilitiesAssets =
b.
CC AOCI RE
Inventory –400,000 Cost of Goods Sold –400,000
Shareholders’ Equity
+LiabilitiesAssets =
c.
CC AOCI RE
Allowance for
Uncollectible Accounts –10,000 Bad Debt Expense –10,000
Shareholders’ Equity
+LiabilitiesAssets =
Chapter 2
Asset and Liability Valuation
and Income Recognition
2-24
in whole or in part.
d.
CC AOCI RE
Warranty Reserve +20,000 Warranty Expense –20,000
Shareholders’ Equity
+LiabilitiesAssets =
e.
CC AOCI RE
Accounts Receivable –3,000
Allowance for
Uncollectible Accounts +3,000
Shareholders’ Equity
+LiabilitiesAssets =
f.
CC AOCI RE
Cash –8,000 Warranty Reserve –8,000
Shareholders’ Equity
+LiabilitiesAssets =
g.
CC AOCI RE
Cash –35,600
a
Income Tax Expense –28,000
Deferred Tax Asset +7,600
b
Shareholders’ Equity
+LiabilitiesAssets =
(3)
a.
CC AOCI RE
Bonds Investment +68,058
Cash –68,058
Shareholders’ Equity
+LiabilitiesAssets =
Chapter 2
Asset and Liability Valuation
and Income Recognition
2-25
in whole or in part.
b.
CC AOCI RE
Bonds Investment +5,445 Interest Revenue +5,445
a
Shareholders’ Equity
+LiabilitiesAssets =
a$5,445 = 0.08 × $68,058
c.
CC AOCI RE
Cash –2,178 Income Tax Expense –2,178
Shareholders’ Equity
+LiabilitiesAssets =
d.
CC AOCI RE
Bond Investment +5,880 Interest Revenue +5,880
b
Shareholders’ Equity
+LiabilitiesAssets =
b$5,880 = 0.08 × $73,503
e.
CC AOCI RE
Cash +2,352 Income Tax Expense –2,352
Shareholders’ Equity
+LiabilitiesAssets =
f.
CC AOCI RE
Cash +83,683 Gain on Sale of Bonds +4,30
0
Deferred Tax Asset –79,383
c
Shareholders’ Equity
+LiabilitiesAssets =
Chapter 2
Asset and Liability Valuation
and Income Recognition
2-26
in whole or in part.
g.
CC AOCI RE
Cash –1,720 Income Tax Expense –1,720
Shareholders’ Equity
+LiabilitiesAssets =
Integrative Case 2.1: Starbucks
b. Starbucks will report an addition to net income when computing cash flow from
c. Given Starbucks’ success, it is a desirable tenant and might receive rent
abatements as inducements to sign long-term leases. Rent abatements might take
d. Starbucks recognizes deferred compensation expense for financial reporting earlier
than it claims an income tax deduction. When Starbucks contributes cash to a
e. When Starbucks collects cash from customers purchasing stored value cards, the
company must report these amounts as taxable income immediately. However,
because these amounts are not recognized in financial reporting income until they
are tendered at stores (or deemed to have been lost), the company pays taxes on
expense on the income statement.
Chapter 2
Asset and Liability Valuation
and Income Recognition
2-27
in whole or in part.
allowance due to the uncertainty of their realization.” Presumably, there are
restrictions on the use of such net operating losses to offset future taxes, so
Starbucks’ management has determined that a portion of such deferred tax assets is
“more likely than not” going to be utilized.
depreciation-related temporary differences suggests that Starbucks has increased
its capital expenditures during 2012 as compared to 2011. Note: The authors
attempted to obtain an explanation for the large deferred tax asset for property,
plant, and equipment, but Starbucks’ Investor Relations department did not
respond.
Chapter 2
Asset and Liability Valuation
and Income Recognition
2-28
in whole or in part.
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