Archives: Solution Manual

CHAPTER 2 CONSOLIDATION OF FINANCIAL INFORMATION Accounting standards for business combination are found in FASB ASC Topic 805, “Business Combinations” and Topic 810, “Consolidation.” These standards require the acquisition method which emphasizes acquisition-date fair values for recording all combinations. In […]

Cash……………..………..………..………..………..………….…. 81,000 Part b. ESTATE OF LENNIE POPE Charge and Discharge Statement As to principal and income I charge myself with: Assets per original inventory ……………………………… $1,201,000 Assets subsequently discovered: Land…………..………..………..………..………..…………… 15,000 Gain on sale of Ford Motor Co. stock […]

30.(30 Minutes) (Define terms used in estate accounting) a. Will—the instructions, prepared consistent with the applicable state laws, given by an individual to direct the distribution to be made of the person’s property after death. result of the specifications of […]

CHAPTER 19 ACCOUNTING FOR ESTATES AND TRUSTS Chapter Outline I. Estate accounting encompasses the recording and reporting of events that occur from the time of a person’s death until distribution of all property. A. An individual who dies “testate” had […]

48. (10 minutes) (Adjusting totals for incorrectly reported student tuition) a. The tuition was properly recorded as revenue. However, the financial aid figure should have been a direct reduction to the tuition revenue rather 49. (15 minutes) (Adjusting totals for […]

42. (continued) University of Danville Statement of Activities Unrestricted Temporarily Permanently Total Net Restricted Restricted Assets Net Assets Net Assets Revenues and Gains -Tuition 1,200,000 Contributions -Cash and Other Assets 707,000 300,000 1,007,000 -Services 80,000 80,000 Total Revenues, Gains, And […]

20. B (This transaction is an acquisition and the acquired entity is not supported predominantly by contributions or investment income. Thus, the difference 23.C 24.C (The charity care work should not be recorded in any way because the entity has […]

CHAPTER 18 ACCOUNTING AND REPORTING FOR PRIVATE NOT-FOR-PROFIT ENTITIES Chapter Outline I. Historically, the financial reporting for private not-for-profit entities has differed significantly according to the type of organization (such as a health care entity versus a college or university). […]

50. (10 Minutes) (Reporting by a government of a landfill) a. True – The amount of the liability to be reported in each of the past years would then have been based on $3 million rather than on $2 million. […]

41. (continued) City of Pfeiffer Statement of Revenues, Expenditures, and Changes in Fund Balance Fund Financial Statements – Governmental Funds Year ending December 31, 2015 Total General Special Capital Projects Governmental Fund Revenue Funds Funds Funds Revenues -Property Taxes $560,000 […]

CITY OF BERNARD BALANCE SHEET Governmental Funds December 31, 2015 General Fund ASSETS Cash and cash equivalents $139,000 Investments 116,000 LIABILITIES AND FUND BALANCES Liabilities: Salaries Payable $ 36,000 Fund Balances: –Nonspendable $12,000 –Restricted for Salaries 3,000 –Committed for Equipment […]

36. (12 Minutes) (The reporting of a special purpose government and a component unit) a. The major criterion for inclusion in a government’s comprehensive annual financial report (CAFR) is financial accountability. b. An activity is viewed as a special purpose […]

Answers to Problems 1. A (Both the asset and liability are reported at the present value of the minimum lease payments.) 6. D 7. C (The liability must be increased from 8 percent of $1 million to 19 percent. The […]

CHAPTER 17 ACCOUNTING FOR STATE AND LOCAL GOVERNMENTS (PART TWO) Chapter Outline I. This chapter looks at the reporting for a number of significant transactions that are common for state and local governments. For example, these entities often obtain property […]

2) A number of items are shown in order to reconcile the net changes in fund balances for the governmental funds and the changes in net position. Here is the reconciliation for the City of Phoenix for the year ended […]

52. (12 Minutes) (The financial impact of fund transfers) A. False—A transfer out will be shown by the governmental activities and a transfer in will be reported by the business-type activities. Those two figures will be netted together so that […]

Part b — FUND FINANCIAL STATEMENTS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE For the Year Ended December 31, 2015 General Fund Revenues —Property Taxes $370,000 —Student Fees 3 ,000 Total Revenues $373,000 Expenditures Change in Fund Balance […]

40. (25 Minutes) (Answer questions about ledger account balances) a. As the Appropriations account balance in the General Fund shows a total of $171,000, that amount of money has been authorized for b. The governmental funds are all designed to […]

16. C (Under the consumption method, the inventory is recorded when acquired and then reclassified as an expenditure as consumed.) fund financial statements as in the government-wide financial statements.) 21. A 22. C (Debt issuance costs are not capitalized in […]

CHAPTER 16 ACCOUNTING FOR STATE AND LOCAL GOVERNMENTS (PART ONE) Chapter Outline I. State and local government units are different than for-profit entities in a number of specific ways. A. Governments serve a broader group of stakeholders. B. Most government […]

31. (50 minutes) (Prepare a predistribution plan and journal entries for a partnership liquidation) Part A Preparation of Predistribution Plan Schedule 1 Maximum Loss Capital Balance/ That Can Be Partner Loss Allocation Absorbed Wingler $120,000/30% $400,000 Schedule 2 Maximum Loss […]

26. (25 minutes) (Prepare journal entries for a partnership liquidation) JOURNAL ENTRIES a. Cash ………………..………..………..………..………………..…. 56,000 March, Capital (2/6 of loss) ……………………..………….. 6,000 April, Capital (3/6) …………..………..………..………….…… 9,000 May, Capital (1/6) ………..………..………….…..…..…..…… 3,000 Inventory ………..…………………..………..…………..….. 74,000 d. Cash ………………..………..………..………..………………..…. 45,000 […]

19.(10 minutes) (Determine amount to be contributed by partner with a deficit capital balance) White and Blue are both insolvent and have negative capital balances (after offsetting the loan from White) totaling $15,000 (White, $3,000; Blue, $12,000). Absorption by the […]

CHAPTER 15 PARTNERSHIPS: TERMINATION AND LIQUIDATION Chapter Outline I. The termination of a partnership and liquidation of its property may take place for a number of reasons. A. The death, withdrawal, or retirement of a partner can lead to cessation […]

31.(75 Minutes) (Recording of changes in the composition of a partnership including allocation of income) a. 1/1/13 Building ………….………..……….…………….….. 52,000 Equipment……….……….………..……….……….. 16,000 12/31/13 Reese, capital ………..……….……..….…..……. 22,000 O’Donnell, capital ..…………………………. 12,000 Income summary ……………………..….…. 10,000 (The allocation plan specifies that […]

26. (45 Minutes) (P&L allocations and admission of a new partner) a. The interest factor was probably inserted to reward Hugh for contributing $50,000 more to the partnership than Jacobs. The salary allowance gives b. The drawings show the assets […]

11.A ASSIGNMENT OF INCOME—YEAR ONE WINSTON DURHAM SALEM TOTAL Interest—10% of beginning capital ..…..….…. $11,000 $ 8,000 $11,000 $30,000 Salary……………..….…..….….…… 20,000 -0- 10,000 30,000 Allocation of remaining loss ($80,000 divided on a 5:2:3 basis) (40 ,000) (16 ,000) (24 ,000) […]

CHAPTER 14 PARTNERSHIPS: FORMATION AND OPERATION Chapter Outline I. Business organizations that are formed legally as partnerships, although they are not always as visible as corporations, still proliferate throughout this country especially in the legal, medical, and accounting professions. A. […]

(2) Reflects the adjustments to assets and liabilities to estimated fair value, or other measurements specified by FASB ASC 805, in conjunction with the adoption of fresh start accounting. Significant adjustments are summarized as follows and all are considered a […]

51.(30 Minutes) (Prepare Journal entries for company emerging from bankruptcy using fresh start accounting) Holmes Corporation must use fresh start accounting because the reorganization value of $225,000 is less than the company’s allowed debts and the original owners hold less […]

46.(25 Minutes) (Prepare statement of realization and liquidation) a. LITZ CORPORATION Statement of Realization and Liquidation Stock- Liabilities Fully Partially Unsecured holders’ Noncash with Secured Secured Nonpriority Equity Cash Assets Priority Creditors Creditors Liabilities (Deficits) Payment is made on note […]

40.(40 Minutes) (Prepare journal entries for company emerging from bankruptcy using fresh start accounting) Preliminary computations: BOOK VALUES PRIOR TO EMERGING FROM REORGANIZATION — Total assets at book value = $710,000 ($100,000 + $112,000 + $420,000 + $78,000) BOOK VALUES […]

27.(5 Minutes) (Distribution of assets as a result of liquidation) Liabilities with Priority Paid first—administrative expense………………………..…. $3,450 Paid second—wages: total of $6,225 for Rankin but only up to a maximum of $12,475 for Key……………………. 18,700 No payments will be made […]

CHAPTER 13 ACCOUNTING FOR LEGAL REORGANIZATIONS AND LIQUIDATIONS Chapter Outline I. Because of a myriad of possible financial or business difficulties, a company may become insolvent, unable to pay its debts as they come due. A. To ensure the equitable […]

Answers to Problems 1. D – A is false because intrastate offerings are typically exempt from registration; B is false because the 1934 Securities Act regulates post-issuance trading of securities; and C is false because blue sky legislation is state […]

CHAPTER 12 FINANCIAL REPORTING AND THE SECURITIES AND EXCHANGE COMMISSION Chapter Outline I. In the United States, the Securities and Exchange Commission (SEC), created by Act of Congress, is responsible for ensuring that complete and reliable information concerning publicly traded […]

Answers to Problems 1. B 2. C 13. A 14. C Problems 15-19 are based on the comprehensive illustration. 15. (15 minutes) (Carrying inventory at the lower of cost or “market”) Historical cost $120,000 Replacement cost $111,900 Net realizable value […]

CHAPTER 11 WORLDWIDE ACCOUNTING DIVERSITY AND INTERNATIONAL STANDARDS Chapter Outline I. Accounting and financial reporting rules differ across countries. There are a variety of factors influencing a country’s accounting system. A. Legal system—primarily relates to how accounting principles are established; […]

Excel and Analysis Case (continued) a. Translation of Suffolk’s December 31, 2015 trial balance from British pounds to U.S. dollars. Suffolk PLC Trial Balance December 31, 2015 Exchange Pounds Rate Dollars Cash £ 1,500,000$1.68 $ 2,520,000 Accounts receivable 5,200,000$1.68 8,736,000 […]

38. (90 minutes) Remeasure the foreign currency transactions of a foreign subsidiary into the subsidiary’s functional currency and then translate the subsidiary’s trial balance into the parent’s reporting currency a. Remeasurement of BRL Trial Balance into Mexican Pesos MXN BRL […]

35. (continued) b. and c. The following C$ financial statements are produced by combining the figures from the main operation with the remeasured figures from the branch remeasured in C$. Income Statement c. Translation into U.S. dollars— For the Year […]

25. (15 minutes) (Determine the amounts at which foreign currency balances are reported on a foreign subsidiary’s trial balance and in the parent’s consolidated financial statements) a. Remeasurement of Swiss franc (CHF) balances into Israeli shekels (ILS) to report on […]

CHAPTER 10 TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS Chapter Outline I. In today’s global economy, many companies have invested in operations in foreign countries. A. In preparing consolidated financial statements on a worldwide basis, the foreign currency accounts prepared by […]

32. (65 Minutes) (Journal entries for several years. Includes conversion to equity method and a sale of a portion of the investment) 1/1/13 Investment in Sumter…………..……… 192,000 Cash……….……….…….…..….….….. 192,000 (To record cost of 16,000 shares of Sumter Company.) day, a […]

27. (30 minutes) (Conversion to equity method, sale of investment, and unrealized gross profit) Part a Allocation and annual amortization—first purchase Purchase price of 10 percent interest……………..………..…………. $92,000 Net book value ($800,000 × 10%)…………….…………………..………. (80 ,000) Annual Amortization…..………..…………………..………..……………………. $ 750 […]

17. (10 minutes) (Equity entries for one year, includes intra-entity transfers but no unearned gross profit) Purchase price of Burks stock…………….………..………….…..….….… $210,000 Book value of Burks stock ($360,000 × 40%)……………………….….. (144 ,000) No unearned intra-entity profit exists at year’s end […]

CHAPTER 1 THE EQUITY METHOD OF ACCOUNTING FOR INVESTMENTS Chapter Outline I. Three methods are principally used to account for an investment in equity securities along with a fair value option. A. Fair value method: applied by an investor when […]

Chapter 14S – Maintenance CHAPTER 14S MAINTENANCE Teaching Notes: Maintenance is critical to Lean and TQM implementation. Poor maintenance leads to direct repair expenses and other expenses resulting from lost production. The production line disruptions are particularly important in lean […]

Chapter 10S – Acceptance Sampling Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. c. AOQ Curve and AOQL for data in part b: Approximate AOQL = .0024. .001 […]

Chapter 10S – Acceptance Sampling 10S-1 CHAPTER 10S ACCEPTANCE SAMPLING Teaching Notes Accounting may be particularly appreciative of this segment on acceptance sampling because it involves exactly the same principles as auditing. There are three points in the production process […]