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COMPREHENSIVE PROBLEM SOLUTION
(a)
Dec. 6
Salaries and Wages Payable .......................
Salaries and Wages Expense ......................
Cash ......................................................
1,000
600
1,600
13
Inventory .......................................................
Accounts Payable ................................
9,000
9,000
15
Supplies ........................................................
Cash ......................................................
2,000
2,000
18
Accounts Receivable ................................
Sales Revenue ......................................
Cost of Goods Sold ......................................
Inventory ...............................................
15,000
10,000
15,000
10,000
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(c)
Dec. 31
Salaries and Wages Expense .......................
Salaries and Wages Payable ................
840
840
(b) & (c) General Ledger
Cash
12/1 Bal. 7,200
12/8 2,200
12/6 1,600
12/15 2,000
Accounts Receivable
12/1 Bal. 4,600
12/18 15,000
12/8 2,200
12/27 15,000
12/31 Bal. 2,400
Supplies
12/1 Bal. 1,200
12/31 1,700
Equipment
12/1 Bal. 22,000
12/1 Bal. 2,200
12/31 200
12/31 Bal. 2,400
Accounts Payable
12/23 9,000
12/1 Bal. 4,500
12/31 840
12/31 Bal. 840
COMPREHENSIVE PROBLEM SOLUTION (Continued)
Owner’s Capital
12/1 Bal. 39,300
12/31 Bal. 39,300
Sales Discounts
12/27 450
12/31 Bal. 450
Depreciation Expense
12/31 200
12/31 Bal. 200
Supplies Expense
12/31 1,700
12/31 Bal. 1,700
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(d) RODRIGUEZ DISTRIBUTING COMPANY
Adjusted Trial Balance
December 31, 2017
DR.
CR.
Cash ................................................................
$16,030
Accounts Receivable ........................................
2,400
Accounts Payable .............................................
4,500
Salaries and Wages Payable ............................
840
Owner’s Capital .................................................
39,300
Sales Revenue ...................................................
21,300
(e) RODRIGUEZ DISTRIBUTING COMPANY
Income Statement
For the Month Ending December 31, 2017
Sales revenue ....................................................
$21,300
Less: Sales discounts .....................................
450
Operating expenses
Salaries and wages expense ....................
$3,240
COMPREHENSIVE PROBLEM SOLUTION (Continued)
RODRIGUEZ DISTRIBUTING COMPANY
Owner’s Equity Statement
For the Month Ended December 31, 2017
RODRIGUEZ DISTRIBUTING COMPANY
Balance Sheet
December 31, 2017
Assets
Current assets
Cash ............................................................
$16,030
Property, plant, and equipment
Liabilities and Owner’s Equity
Current liabilities
Accounts payable ......................................
$4,500
BYP 5-1 FINANCIAL REPORTING PROBLEM
2012
2013
(a)
(1)
Percentage change in sales:
(2)
Percentage change in net income:
(b)
Gross profit rate:
2011 ($108,249 – $64,431) ÷ $108,249
40.5%
(c)
Percentage of net income to sales:
2011 ($25,922 ÷ $108,249)
23.9%
Comment
The percentage of net income to sales increased 11.7% from 2011 to 2012
BYP 5-2 COMPARATIVE ANALYSIS PROBLEM
PepsiCo
Coca-Cola
(a)
(1)
2013 Gross profit
$35,1721
$28,4332
(4)
Percent change in operating
income, 2012 to 2013
6.5%5
increase
5.1%6
decrease
(b) PepsiCo has a higher gross profit but a lower gross profit rate than
Coca-Cola. This can be explained by PepsiCo’s higher sales.
BYP 5-3 COMPARATIVE ANALYSIS PROBLEM
Amazon
Wal-Mart
(a)
(1)
2013 Gross profit
$6,7221
$115,0072
(2)
2013 Gross profit rate
11.0%3
24.3%4
(b) Wal-Mart has a much higher gross profit and gross profit rate than
Amazon. This can be explained by Wal-Mart’s higher markup.
BYP 5-4 REAL-WORLD FOCUS
The answers to this assignment will be dependent upon the articles
selected from the Internet by the student.
BYP 5-5 DECISION MAKING ACROSS THE ORGANIZATION
(a) (1) FAMILY DEPARTMENT STORE
Income Statement
For the Year Ended December 31, 2017
Net sales [$700,000 + ($700,000 X 6%)] ...... $742,000
Cost of goods sold ($742,000 X 76%)* ........ 563,920
(2) FAMILY DEPARTMENT STORE
Income Statement
For the Year Ended December 31, 2017
Net sales ....................................................... $700,000
Cost of goods sold ....................................... 553,000
(b) Amy’s proposed changes will increase net income by $31,080. Jacob’s
proposed changes will reduce operating expenses by $28,000 and
BYP 5-5 (Continued)
(c) FAMILY DEPARTMENT STORE
Income Statement
For the Year Ended December 31, 2017
Net sales ............................................................. $742,000
Cost of goods sold ............................................ 563,920
*$72,000 + [2% X ($742,000 – $700,000)] = $72,840.
If both plans are implemented, net income will be $58,240 ($85,240 –
$27,000) higher than the 2016 results. This is an increase of over 200%.
BYP 5-6 COMMUNICATION ACTIVITY
(a), (b)
President
Surfing USA Co.
Dear Sir:
As you know, the financial statements for Surfing USA Co. are prepared in
accordance with generally accepted accounting principles. One of these
principles is the revenue recognition principle, which provides that revenues
should be recognized when they are earned.
Whether Parker makes a down payment with the purchase order is
irrelevant in recognizing sales revenue because at this time, you have not
done anything to earn the revenue. A down payment may be an indication
of Parker’s “good faith.” However, its effect on your financial statements is
limited entirely to recognizing the down payment as unearned revenue.
BYP 5-7 ETHICS CASE
(a) Tiffany Lyons, as a new employee, is placed in a position of res-
ponsibility and is pressured by her supervisor to continue an unethical
practice previously performed by him. The unethical practice is taking
(b) The stakeholders (affected parties) are:
• Tiffany Lyons, the assistant treasurer.
• Jay Barnes, the treasurer.
(c) Tiffany’s alternatives:
1. Tell the treasurer (her boss) that she will attempt to take every allow-
able cash discount by preparing and mailing checks within the
2. Join the team and continue the unethical practice of taking undeserved
cash discounts.
3. Go over her boss’s head and take the chance of receiving just and
reasonable treatment from an officer superior to Jay. The company
may not condone this practice. Tiffany definitely has a choice, but
BYP 5-8 ALL ABOUT YOU
In order for revenue to be recognized the performance obligation must be
satisfied. In this case Impact has an obligation to provide goods with a
BYP 5-9 FASB CODIFICATION ACTIVITY
(a) (1) Inventory is the aggregate of those items of tangible personal
property that have any of the following characteristics:
a. Held for sale in the ordinary course of business
b. In process of production for such sale
c. To be currently consumed in the production of goods or services
to be available for sale.
(2) A customer is a reseller or a consumer, either an individual or a
business that purchases a vendor’s products or services for end use
rather than for resale. This definition is consistent with paragraph
BYP 5-9 (Continued)
(b) 330-10-35-15 Only in exceptional cases may inventories properly be
IFRS EXERCISES
IFRS5-1
Expenses may be classified by “nature” or by “function”. The “nature-of-
expense” classification organizes expenses by type of expense, such as
IFRS5-2
By function
Cost of goods sold
By nature
Depreciation expense
IFRS5-3
MATILDA COMPANY
Comprehensive Income Statement
For the Year Ended 2017
(in thousands of euros)
Net income ............................................................................... €150
INTERNATIONAL FINANCIAL REPORTING PROBLEM
IFRS5-4
(a) Vuitton uses a multiple step format. The income statement isolates
(b) Vuitton uses Cost of Net Financial Debt rather than Interest Expense on
its income statement.
(c) Inventory is composed of:
