March 28

MOJAKOE
2013
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PROBLEM 1: LONG TERM LIABILITY (20%)

PT Sikukana owes Rp. 400.000.000 plus Rp. 36.000.000 of accrued interest to Bank Mandiri,
The debt is 10 year, 10% note. During 2010, PT Sikukana’s business deteriorated due to a
faltering regional economy.

On December 31, 2010, Bank Mandiri agrees to accept an old machine and cancel the entire
debt. The machine has a cost of Rp. 780.000.000. Accumulated depreciation of Rp
442.000.000 and a fair value of Rp. 360.000.000

Instruction:

a) Prepare joural entries for PT Sikukana to record this debt settlement

b) How should PT Sikukana report the gain or loss on the disposition of machine and on
restructuring of debt in its 2010 income statement?
c) Assume that, instead of transferring the machine, PT Sikukana decides to grant
15.000 of its ordinary shares (Rp. 20.000 par), which have a fair value of Rp.
360.000.000 in full settlement of the loan obligation. Prepare the entries to record the
transaction.

PROBLEM 2: STOCKHOLDERS EQUITY (20%)

Royal Golden Sparrow Company (RGS) was established on January 1, 2009. Its articles of
associations authorize the issuance of 300.000 shares of $10 par value ordinary shares and
100.000 shares of 4%, $25 par value, cumulative and non-participating preference shares.
RGS has a January 1-December 31 fiscal year. The following information relates to the
equity accounts of RGS.

Ordinary Shares

Prior to 2011 RGS had 130.000 ordinary shares outstanding issued as follows:

1. 100,000 shares weere issued for cash on January 1, 2009, at $30 per share.
2. O january 24, 2009, 10.000 shares were exhanged for a plot of land which cost the
seller $150.000 in 2002 and had an estimated fair value of $400.000 on January
24,2009.
3. 20.000 shares were issued on March 1, 2010, for $45 per share.

During 2011, the following transactions regarding ordinary shares took place:

 May 31, 2011: RGS purchased 5.000 of its own shares on the open market at $45 per
share. RGS uses the cost method for treasury shares.
 June 15, 2011: RGS declared a 10% share dividend for shareholders of record on July
15, 2012, to be issued on July 21, 2012. RGS was having a liquidity problem and
could not afford a cash dividend at the time. RGS ordinary shares were selling at $50
per share on June 15, 2011.
 November 30, 2011: RGS sold 1.000 of its own ordinary shares that it had purchased
on May 31, 2011, for $46.000
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 December 28, 2011: RGS sold additional 2.000 of the treasury shares for $86.000.

Preference shares

RGS issued 60.000 preference shaes at $40 per share on January 1, 2010

Cash Dividends

The dividends that RGS has declared since inception of the company through December 31,
2011 are shown below:

Declaration Date Ordinary Shares Preference Shares

June 15, 2010 $0.30 per share $1.00 per share
June 15, 2011 - $1.00 per share

Retained Earnings

As of December 31, 2010, RGS retained earnings account has a balance of $850.000. For the
fiscal year ending December 31, 2011, RGS reported net income of $80.000

Required:

Prepare the equity section of the income statement of financial position for RGS as of
December 31, 2011 (Hints: to help you answer the question (i) prepare all the journal entries
affecting equity accounts, (ii) use T-accounts to summarize the journal entries; (iii) calculate
the number of shares outstanding prior to the announcement of share dividends)

PROBLEM 3: DILUTIVE SECURITIES AND EPS (20%)

A. Dilutive Securities (10%)

Axis Inc. Issues 1.000 convertible bonds at the beginning of 2010. The bonds have a five-
year term with a stated rate of interest at 8%, and are issued at par with a face value of
$1.000 per bond (the total proceeds received from the issuance of the bonds are
$1.000.000). Interest is payable semi-annually at June 30 and December 31. Each bond is
convertible into 20 ordinary shares with a par value of $5. The market rate of interest on
similiar non-convertible debt is 10%.

Instruction:

1. Prepare entry at time of issuance of convertible debt

PV PVOA
N=5 ; i=8% 0,68058 3,99271
N=5 ; i=10% 0,62092 3,79079
N=10 ; i=4% 0,67556 8,11090
N=10 ; i=5% 0,61391 7,72174
2. AXIS wishes to reduce its annual interest cost. To do so, AXIS agrees to pay the
holders of its convertible bonds an additional $100.000 it they will convert. Assuming
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that on December 31, 2012, 50% of its bonds is converted into ordinary shares,
prepare the journal entry.

3B-Diluted EPS

Presented below are AXIS Inc’s Balance Sheet as of December 31, 2012

Account Axis Inc.

Cash $470.000
Accounts Receivable 300.000
Inventory 780.000
Land 467.500
Building 750.000
Accumulated Depreciation (330.000)
Investment in Centro Co. 262.500
Total 2.700.000

Accounts payable 120.000

Bonds Payable 900.000
Share Capital Preference ($10 par value,10%) 600.000
Share Capital-Ordinary ($10 par value) 450.000
Retained earnings 630.000
Total 2.700.000

Additional Information:

 AXIS’s 8% bonds can be converted into 20.000 ordinary shares

 AXIS’s preference shares can be converted into 36.000 ordinary shares.
 The average market price of AXIS’s ordinary shares is $60.
 AXIS reported 2012 net income of $900.000 from its own operation and paid
$300.000 of cash dividend.
 The company is subject to 30% income tax rate

Based on the above information, you are required to calculate Basic and Diluted EPS!

PROBLEM 4: INVESTMENT (20%)

PT Utama Design produces and sells theater set designs and costumes. The following
transactions relate to certain investments acquired by PT Utama Design, which has a fiscal
year ending on December 31:

2011

 Feb 1 Purchased Bango Company ordinary shares, $100 par, 200 shares for
$37.400. The investment is classified as available for sale.
 Feb10 Acquired 10% of the 200.000 ordinary shares of PT Moda Ria at a total cost
of $14 per share on March 18, 2010. The investment is classified as trading.
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 March 1 Obtained significant influence over Kenko Corporation by buying 25% of

Kenko’s 300.000 outstanding shares at a total cost of $9 per share.
 June 15 Kenko declared and paid a cash dividend of $36.000
 June 30 Moda Ria declared and paid a $75.000 cash dividend.
 Dec 31 Moda Ria reported a net income of $122.000 for the year. Kenko reported
net income of $85.000 for the year. The market price of Moda Ria was $15
per share, The fair value of the Bango Company was $31.800
 2012
 March 1 Sold the 100 ordinary shares of Bango at $200
 May 20 Sold the 10.000 of the ordinary shares of PT Moda Ria at $17 per share less
fees of $2.150.

Instructions: prepare the general journal entries for all of the transactions above.

PROBLEM 5: STATEMENT OF CASH FLOW (20%)

Pullman Inc. Has prepared the following comparative statement of financial position for 2010
and 2011:

2011 2010
Plant Assets $1.260.000 $1.050.000
Accumulated Depreciation (450.000) (375.000)
Patent 153.000 174.000
Prepaid Expenses 18.000 27.000
Inventory 150.000 180.000
Receivables 159.000 117.000
Cash 297.000 153.000
$1.587.000 $1.326.000
Mortgage Payable $525.000 -
Accounts Payable 120.000 -
Accrued Liabilities 600.000 $600.000
Share Capital-Preference 129.000 66.000
Share Premium-Preference - 450.000
Share Capital –Ordinary 153.000 168.000
Retained Earnings 60.000 42.000
$1.587.000 $1.326.000

1. The Accumulated Depreciation account has been credited only for the depreciation
expense for the period.
2. The retained earnings account has been charged for dividends of 183.000 and credited
for the net income for the year.
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The income statement for 2011 is as follows:

Sales $1.980.000
Cost of Sales 1.089.000
Gross Profit 891.000
Operating Expenses 690.000
Net Income $201.000

Instructions:

a. From the information above, prepare a statement of cash flows (direct method) for
Pullman, Inc. For the year ended December 31, 2011
b. From the information above, prepare reconcilliation of net income to cash flows from
operating activities!

SOLUTIONS

Problem 1

a. Notes Payable 400.000.000

Interest Payable 36.000.000
Acc. Depreciation-Machine 442.000.000
Machine 780.000.000
Gain on disposition of machine 22.000.000
Gain on extinguishment of debt 76.000.000
b. Income Statement

PT Sikukana
Income Statement
For the period ended Dec 31, 2010

Other Income & Expense

Gain on disposition of machine 22.000.000
Gain on extinguishment of debt 76.000.000

c. Notes Payable 400.000.000

Interest Payable 36.000.000
Share Capital-Ordinary 300.000.000
Share Premium-Ordinary 60.000.000
Gain on extinguishment of debt 76.000.000

Problem 2

Jan 1, 2009 Cash (100.000 x $30) 3.000.000

Share Capital-Ordinary 1.000.000
Share Premium-Ordinary 2.000.000
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Jan 24, 2009 Land 400.000

Share Capital-Ordinary 100.000
Share Premium-Ordinary 300.000

May 1, 2010 Cash (20.000 x $45 ) 900.000

Share Capital-Ordinary 200.000
Share Premium-Ordinary 700.000

May 31, 2011 Treasury Shares (5.000 x $45) 225.000

Cash 225.000
June 15, 2011 Retained Earnings (12.500 x $50) 625.000
Ordinary Share Dividend Distributable 125.000*
Share premium- ordinary 500.000
*) Shares outstanding :
Beginning of year [100.000+10.000+20.000] 130.000
Treasury Shares ( 5.000)
As of June 15, 2011 125.000

Nov 30,2011 Cash 46.000

Treasury Shares 45.000
Share Premium-Treasury 1.000
Dec 28, 2011 Cash 86.000
Share Premium-Treasury 1.000
Retained Earning 3.000
Treasury Shares (2.000 x $45) 90.000
Preference Share
Jan 1, 2010 Cash 2.400.000
Share Capital-Preference 1.500.000
Share Premium-Preference 900.000
Retained Earning
Dividend for Preference Shares :
Retained Earnings 60.000
Dividends Payable 60.000

Net Income of $80,000

Income Summary 80.000
Retained Earning 80.000
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T-Account
Share Premium- Share Capital-
Share Capital-Ordinary Ordinary Preference
1.000.000 2.000.000 1.500.000
100.000 300.000
200.000 700.000
500.000
1.300.000 3.500.000 1.500.000

Share Premium- Share Premium-

Preference Treasury Shares Treasury
900.000 225000 45.000 1000 1.000
90.000

900.000 90.000 0

Retained Earnings OS Dividend Dist.

625000 850.000 125.000
60000 80.000
3000

242.000 125.000

Number of ordinary shares outsanding: 100.000 + 10.000 + 20.000 – 5.000 + (10% *

125.000) + 1.000 + 2.000 = 140.500 shares

RGS Company
Statement of Financial Position
as of December 31, 2011
Share Capital-Preference 1.500.000
Share Capital Ordinary 1.300.000
Ordinary Share Div. Dist 125.000
2.925.000
Share Premium-Preference 900.000
Share Premium-Ordinary 3.500.000
Retained Earnings 242.000
Treasury Shares (90.000)
Total Equity 7.477.000

Problem 3A
Present Value of Principal : 0,61391 * $1.000.000 = $613.910
Present Value of the interest payment : 7,72174 * $40.000 = $308.896,6
Present Value of the liability component = $922.779,6
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1. Journal:

Cash 1.000.000
Bonds Payable 922.779,6
Share Premium-Conversion equity 77.220,4

2. Discount Amortization

Cash
Date Paid Interest Expense Amortization Carrying Amount
Jan 1 2010 40000 922.779,60
Dec 31 2010 40000 46138,98 6138,98 928.918,58
Jan 1 2011 40000 46445,929 6445,929 935.364,51
Dec 31 2011 40000 46768,22545 6768,22545 942.132,74
Jan 1 2012 40000 47106,63672 7106,636723 949.239,37
Dec 31 2012 40000 47461,96856 7461,968559 956.701,34

Dec 31, 2012 Bonds Payable 482.268

Share Premium-Conversion Equity 38.610
Conversion Expense 11.390
Share Capital-Ordinary 50.000
Share Premium-Ordinary 432.268
Cash 50.000
Problem 3B
Basic EPS: 900.000 – 60.000 = $18,67
45.000
Diluted EPS : 900.000 + (72.000 *0,7) = $9,41
45.000+20.000+36.000
Problem 4
2011
Feb 1 Equity Investment $37.400
Cash $37.400
Feb 10 Equity Investment $280.000
Cash $280.000
(10% x 200.000 x $ 14)
March 1 Equity Investment - Kenko $675.000
Cash $675.000
(25% x 300.000 x $ 9)
June 15 Cash $9.000
Equity Investment - Kenko $9.000
(0,25 x 36.000)
June 30 Cash $7500
Dividend Revenue $7500
(0,1 x 7500)
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Dec 31 Investment in Kenko $21.250

Revenue from Investment $21.250
Securities Fair Value Adjustment $20.000
Unrealized holding gain-Income $20.000
For moda securities (15-14) x $20.000

Unrealized holding loss-Equity $5.600

Securities Fair Value Adjustment $5.600
For Bango securities (37.400-31.800)

2012
Marc h 1 Security Fair Value Adjustment 2.800
Unrealized Gain/loss 2.800

Cash 20.000
Equity Investment 18.700
Gain on sale of investment 1.300
May 20 Cash 167.850
Equity Investment( 15 * 10000) 150.000
Gain on sale of investment 17.850

Problem 5

Accrual Basis Adjustment Add (subtract) Cash Basis

Revenues from Sales 1980000 (-)Increase in AR -42000 1938000
Cost of Sales 1089000 (-)Decrease in Inventory -30000
(-)Increase in AP -120000 939000
Operating Expenses 594000 (-)Decrease in Pr. Expenses -9000 585000
Depreciation Expense 75000 (-)Depreciation Expense 75000 0
Amortization Expense 21000 (-)Amortization Expense -21000 0
Total Expenses 1524000
Net Income 201000 Net cash provided by operating activities 414000
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Pullman Inc
Statement of Cash Flow
for the year ended December 31, 2011
Cash flow from operating activities
Cash received from customers 1938000
Cash payments
To suppliers 939000
For Operating expenses 585000 -1524000
Net Cash Provided by operating activities 414000

Cash flows from investing activities

Purchase of Plant Assets -210000
Increase in Mortgage Payable 525000
Net cash flow for investing activities 315000

Cash flow from financing activities

Issuance of share capital-preference 63000
Decrease in share capital-ordinary -15000
Decrease in share premium-preference -450000
Payment of cash dividends -183000
Net cash used in financing activities -585000
Net increase in cash 144000
Cash January 1, 2011 153000
Cash December 31, 2011 297000

Pullman Inc
Reconcilliation
Net Income 201.000
Adjustment to reconcile net income to net cash
provided by operating activities
Depreciation Expense 75000
Amortization Expense 21000
Increase in AR -42000
Decrease in Inventory 30000
Decrease in Prepaid Expenses 9000
Increase in AP 120000 213000
Net cash provided by operating expenses 414.000

Note : Mortage Payable dapat diartikan sebagai kegiatan financing atau kegiatan investing;
apabila sudah diklasifikasikan kepada salah satu kegiatan tersebut, maka sesuai PSAK 2
perusahaan harus konsisten melakukannya.

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