KUIS INTERMEDIATE ACCOUNTING

Name: I Gusti Ayu Tresza Dharmayani

NIM:2440038830
Class:LA16
TRUE/FALSE @2%

1. The time value of money refers to the fact that a dollar received today is worth less than a dollar
promised at some time in the future. (False)

2. Interest is the excess cash received or repaid over and above the amount lent or borrowed. (True)

3. Simple interest is computed on principal and on any interest earned that has not been
withdrawn. (False)

4. Compound interest, rather than simple interest, must be used to properly evaluate long- term
investment proposals. (True)

5. Compound interest uses the accumulated balance at each year end to compute interest in the
succeeding year. (True)

6. Inadequacy is the replacement of one asset with another more efficient and economical asset.
(False)

7. The major objection to the straight-line method is that it assumes the asset’s economic
usefulness and repair expense are the same each year. (True)

8. The units-of-production approach to depreciation is appropriate when depreciation is a function of

time instead of activity.(False)

9. An accelerated depreciation method is appropriate when the asset’s economic usefulness is the same
each year.(False)

10. The declining-balance method does not deduct the residual value in computing the depreciation
base.(True)

KASUS @20%

1. Presented below is information related to Carpenter Inc.

Cost Retail
Inventory, 12/31/18 €375,000 € 550,000
Purchases 1,369,000 2,050,000
Purchase returns 90,000 120,000
Purchase discounts 27,000 –
 Gross sales (after employee discounts) – 2,110,000
Sales returns – 145,000
Markups – 180,000
Markup cancellations – 60,000
Markdowns – 65,000
Markdown cancellations 30,000
Freight-in 63,000 –
Employee discounts granted – 12,000
Loss from breakage (normal) – 8,000

Instructions
Assuming that carpenter Inc. uses the conventional retail inventory method, compute the cost of its
ending inventory at December 31, 2019.

  Cost   Retail
Beginning of Inventory € 375.000   € 550.000
Purchase € 1.369.000   € 2.050.000
Purchase returns -€ 90.000   -€ 120.000
Purchase discount -€ 27.000   -
Freight-in € 63.000   -
€
Markups - 180.000 -
-€
Markups Cancellations   60.000 € 120.000
Totals € 1.690.000   € 2.600.000
-€
Markdowns   65.000 -
€
Markdowns Cancellations   30.000 -€ 35.000
-€
Sales   2.110.000 -
€
Sales Return   145.000 -€ 1.965.000
Inventory losses due to
breakage     -€ 8.000
Employee discounts     -€ 12.000
Ending inventory at retail     € 580.000

 Cost retail ratio = €1.690.000/€2.600.000 65%

 Ending inventory at cost: €580.000 x 65% €377.000
2. Rogers Co. had a sheet metal cutter that cost £96,000 on January 5, 2014. This old cutter had an estimated
life of ten years and a salvage value of £16,000. On April 3, 2019, the old cutter is exchanged for a new
cutter with a fair value of £48,000. The exchange had commercial substance. Rogers also received
£12,000 cash. Assume that the last fiscal period ended on December 31, 2018, and that straight-line
depreciation is used.

Instructions
(a) Show the calculation of the amount of the gain or loss to be recognized by Rogers Co.
(b) Prepare all entries that are necessary on April 3, 2019.
a)
Cost £ 96.000
Accumulated depreciation -£ 42.000*
Book Value (96.000 – 42.000) £ 54.000
Fair Value (48.000 + 12.000) £ 60.000
Gain £ 6.000
Depreciation per year under SLM = (Cost of asset-Salvage value)/Life of the asset
Depreciation per year under SLM = (96.000 – 16.000)/10 = 8.000
Depreciation from 2014 to 2018 = 8.000 x 5 = 40.000
The machine is sold on April 3 2019. Calculate 3-month depreciation for 2019
Depreciation for 2019 = 8.000*3/12 = 2.000
Accumulated depreciation = 40.000 + 20.000  42.000*
b) Entries on April 3, 2019

£
Depreciation Expense 2.000  
Accumulated Depreciation   £ 2.000
     
£
Accumulated Depreciation 42.000  
£
Machinery 48.000  
£
Cash 12.000  
Machinery   £ 96.000
Gain on disposal   £ 6.000

3. Ford Inc. plans to acquire an additional machine on January 1, 2019 to meet the growing demand for its
product. Stever Company offers to provide the machine to Ford using either of the options listed below
(each option gives Ford exactly the same machine and gives Stever Company approximately the same net
present value cash equivalent at 10%).
Option 1 — Cash purchase €800,000.
Option 2 — Installment purchase requiring 15 annual payments of €105,179 due December 31
each year.

The expected economic life of this machine to Ford is 15 years. Salvage value at that time is estimated to
be €50,000. Straight-line depreciation is used. Interest expense under Option 2 is computed using the
effective interest method.
 Instructions
Based upon IFRS, state how, if at all, the book value of the machine and the obligation should appear on
the December 31, 2019 statement of financial position of Ford Inc., for each option. Present your answer
on an answer sheet in the following format. If an item should not appear in the statement of financial
position, write "not shown" opposite the option.

Assets Liabilities
Account Name Amount Account Name Amount
Option1 Machinery € 800.000 Not Shown € -
Accumulated Deprec € 50.000 Not Shown € -
Notes-payable
Option2 Machinery € 800.000 Current € 77.482^
Notes-payable long
Accumulated Deprec € 50.000 term € 747.12^^

 Explanation
Depreciation per year under straight line = (Purchase price – Salvage) / Life of assets
Depreciation per year under straight line = (800.000 – 50.000) / 15  50.000
At January 1, 2019 the note payable is 800.000
Interest for 1st year = 800.000*10% = 80.000
Payment for 1st year = 105.179
Principle in first payment = 105.179 – 80.000  25.179
Balance principle = 800.000 – 25.179  774.821
Next year payment = 105.179
Interest = Balance principle*int rate
Interest^ = 774.821 * 10%  77.482
Principle in 2nd year payment = 105.179 – 77.482  27.697
Hence current portion will be payable in next year = 27.697
Balance principle^^ = 774.821 – 27.697  747.124
Notes payable long term = 747.124

4. Cimory Dairy began operations on April 1, 2019, with purchase of 250 milking cows for
¥8,500,000. It has completed the first month of operations and has the following information for its
milking cows at the end of April 2019 (000 omitted).
Milking cows
Change in fair value due to growth and price changes* ¥(250,000)
Decrease in fair value due to harvest (15,000)
Milk harvested during April 2019 (at net realizable value) 90,000
*Due to a very high rate of calving in the past month, there is a glut of milking cows on the
market.

Instructions
(a) Prepare the journal entries for Cimory’s biological asset (milking cows) for the month of April
2019.
(b) Prepare the journal entry for the milk harvested by Cimory during April 2019.
(c) Cimory sells the milk harvested in April on the local milk exchange and receives
¥93,000.

a) Journal entries for Cimory’s biological asset (Milking Cows)

 ¥
Unrealized Holding Gain or Loss- Income (250.000 + 15.000 265.000  
¥
Biological Assets - Milking Cows   265.000

b) Journal entry for milk harvested by Cimory during April 2019

¥
Milk Inventory 90.000  
¥
Unrealized Holding Gain or Loss - Income   90.000

c) Journal entries for sells milk harvested in April on the milk exchange

¥
Cash 93.000  
¥
Cost of Goods Sold 90.000  
¥
Milk Inventory   90.000
¥
Sales Revenue   93.000