Problem 8-8A
Requirement 1
The reporting for this situation depends on the likelihood of loss occurring. If the
likelihood of loss is reasonably possible rather than probable, no journal entry is
Requirement 2
The contingent loss is probable and reasonably estimable, so it would be recorded as
follows:
Requirement 3
Dinoco has a contingent gain that is probable, and is reasonably estimable at $150
8-42 Financial Accounting, 5e
Problem 8-9A
Requirement 1
($ in millions)
Total
Current
Assets
÷
Total
Current
Liabilities
=
Current
Ratio
Requirement 2
($ in millions)
Quick
Assets
÷
Total
Current
Liabilities
=
Acid-Test
Ratio
Requirement 3
The purchase of additional inventory on credit would increase current assets
(inventory) and current liabilities (accounts payable) by the same amount. This
PROBLEMS: SET B
Problem 8-1B
List A
List B
_i__
1. Interest expense is recorded in the period
interest is incurred rather than in the period
interest is paid.
a. The riskiness of a
business’s obligations
5. Gift cards.
e. Interest expense
_b__
6. Long-term debt maturing within one year.
f. FICA
_f__
7. Social Security and Medicare.
g. Commercial paper
_e__
10. Incurred on a notes payable.
j. Deferred revenue
8-44 Financial Accounting, 5e
Problem 8-2B
Requirement 1
(a). November 1, 2021
Cash
21,000,000
Notes Payable
21,000,000
(Issuance of notes payable)
Notes Receivable
21,000,000
Cash
21,000,000
(Acceptance of notes receivable)
Requirement 2
(a). December 31, 2021
(b). December 31, 2021
Requirement 3
(a). April 30, 2022
Notes Payable
21,000,000
Interest Payable ($21 million × 7% × 2/12)
(b). April 30, 2022
Cash
21,735,000
Problem 8-3B
Requirement 1
January 31
Salaries Expense
500,000
Requirement 2
January 31
Salaries Expense (fringe benefits)
Requirement 3
January 31
Payroll Tax Expense (total)
69,250
Problem 8-4B
Requirement 1
January 24
Salaries Expense
2,500,000
Requirement 2
January 24
Salaries Expense (fringe benefits)
201,250
Requirement 3
January 24
Payroll Tax Expense (total)
346,250
8-48 Financial Accounting, 5e
Problem 8-5B
Requirement 1
$9,128,000
=
$560 per season ticket
16,300
Requirement 2
Cash
9,128,000
Deferred Revenue
9,128,000
Deferred Revenue
Problem 8-6B
Requirement 1
Cash
2,300
Deferred Revenue
2,300
(Sale of gift cards)
Requirement 2
Deferred Revenue
742
Sales Taxes Payable
Requirement 3
Deferred Revenue
Balance
Problem 8-7B
Requirement 1
Bad Debt Expense ($29 million × 3%) 870,000
Allowance for Uncollectible Accounts 870,000
(Estimated uncollectible accounts)
Requirement 2
Compact Electronics has a contingent gain that is probable and reasonably estimable.
Requirement 3
Requirement 4
The likelihood of loss is reasonably possible rather than probable, so no journal entry
Problem 8-8B
Requirement 1
The contingent liability is reasonably possible and can be reasonably estimated within
Requirement 2
The contingent liability is probable and reasonably estimable, so it must be reported.
Requirement 3
Authors Academic Press has a contingent gain that is probable and can be reasonably
8-52 Financial Accounting, 5e
Problem 8-9B
Requirement 1
($ in millions)
Total
Current
Assets
÷
Total
Current
Liabilities
=
Current
Ratio
Requirement 2
($ in millions)
Quick
Assets
÷
Total
Current
Liabilities
=
Acid-Test
Ratio
Requirement 3
The purchase of additional inventory with cash would not affect the current ratio as
ADDITIONAL PERSPECTIVES
Continuing Problem: Great Adventures
AP8-1
Requirement 1
Interest Expense
750
Interest Payable
750
(Accrue interest on note)
($750 = $30,000 × 6% × 5/12)
Deferred Revenue
20,000
Sales Revenue
(Record gift cards redeemed)
Loss
12,000
Contingent Liability
12,000
(Record a contingent liability)
Warranty Expense
Warranty Liability
(Estimate future warranty costs)
Requirement 2
No entry would be required.