Balance sheet for Ribbons an' bows Inc as on ending of 30-jun2010 in USD

Assets L + OE
Current Assets Current liability
Cash Cs loan 10000
Inventory 4100 Accrued wages 90
Supplies 20 Accrued interest 200
prepaid advtmnt 0 Longterm Liablity
Accounts receivable 320

Non Current assetes Owners's Equity

Prepaid rent FOR 2 months 1200 Capital 1000
computer(2000-250) 1750
Sewing m/c(1800-60) 1740
Retained earning
 Income statement of RBI for period ending on 30-jun 2010 in USD
Revenues
cash sales 7400
credit sales 320

T.Rev 7720

Expense
wages 1510(cash) + 90(credit) tot. 1600
rent for 3 months 1800
CGS (3300+2900-4100) 2100
Supplies consumed (100-20) 80
Interest exp (10000*(6/100)*(4/12)) 200
Depr. For computer (2000/24)*3 250
Depr. Sewing machine (1800/6)*2 60
expiry of prepaid advertisement 150
PBT 1480
 Cash flow statement for RBI ending on 30-jun 2010 in USD
OB cash 4000

(+)receipts (-)payments
Cash sales 7400 sewing machine -1800
wages -1510
Rent paid -1800

Cb cash 6290
1
Balance sheet of Charles Company as of Dec 31 (IN USD)
Assets L + OE
Liability
Cash 12000 Loan 40000
Inventory 95000
Other Items 13000 O.E (balancing term) 80000

Total Assets 120000 L+OE 12000

2 Year 1 Year 2 Year 3 Year 4

Current Assets 113624 90442 85124 69090
Non Current Assets 410976 198014 162011 151021
Total Assets(C.A + N.C.A) 524600 288456 247135 220111

Current Liabilities 56142 40220 15583 17539

Noncurrent Liabilities 240518 78585 60100 30222
Paid-in capitals 214155 173295 170000 170000
Retained earning 13785 -3,644 1452 2350
Total liability and owners
Equity (CL+NCL+PIC+RE)=
Total assets 524600 288456 247135 220111

3
Year 1 Year 2 Year 3 Year 4
Sales 12011 11968 11545 10000
Cost of goods sold 3011 2992 2886 2481
Gross marging(= Sales-
COGS) 9000 8976 8659 7519
Other expenses 6201 6429 6296 5332
Profit Before taxes(=G.M-
Other Exp.) 2799 2547 2363 2186
Tax expense(=PBT-Net Inc) 1120 1019 945 875
Net Income 1679 1528 1418 1312

y4 COGS 10000/4.03
y4 Other expenses 7519/1.41
y4 tax expense 40% PBT
 4
a. 1. Owner invests 20000$ in company
2.Equipments worth 7000$ were bought for 5000$ cash and 2000$ credit
3.Inventories worth 1000$ were bought
4. Owners took 4500$ cash as salary.
5. Earned revenue of 10000$ of which 5000$ were cash and 5000$ were amounts receivable.
6.Paid 1500$ in cash to debtors
7. Received 1000$ cash from amounts receivanle
8. Rent of 750$ paid in cash
9. 500$ in cash was used to buy utilities
10. 200$ was paid as credit due to travel expenses
11. Inventories supply worth 200$ was used.

b. Balance sheet of Acme consulting as of july (IN USD)

Assets L + OE
Equipments 7000 Liability
Cash 12750 Accounts payable 700
Accounts receivable 4000
Supply Inv. 800 O.E (balancing term) 23850

Total Assets 24550 L+OE 24550

c.
Income statement of Acme consulting for period ending onjuly in USD
Revenues 10000
Expense
wages 4500
Rent 750
Utilities 500
Supplies consumed 200
Travel 200
total exp 6150

Income PBT 3850

2-1
a. A=L+O.E.
O.E.= 95000-40000
55000

b. A=L+O.E.
L= 65000-40000
25000

c. T.A= C.A. + N.C.A

A=L+O.E.
N.C.A= 40000+55000-25000
70000

d. C.R=C.A./C.L.
C.L= 33000/2.2
15000
O.E= 33000+55000-15000
73000

e. T.A= C.A. + N.C.A

C.A= 95000-60000
35000
L= 95000-70000
25000
C.R=C.A./C.L.
C.R.= 35000/25000
1.4
2-2
Balance sheet of J.L. Gregory Company as of Jun 30 (In USD)
Current Assets L + OE
Cash 89000 Liability
Accounts receivable 505000 Taxes payable 125000
Inventory 513000 Accounts Payable 241000
Marketable security 379000 Accrued expenses 107000
Total CA 1486000 Bonds Payable 700000
NCA Notes payable 200000
Equipments (761000-
386000) 375000 Total L 1373000
Land 230000 O.E
Investment in peerless company 320000 Capital stock 1000000
Building cost (1120000 -
538000) 582000 Retained earnings (2993000-2373000) 620000
Total Assets 2993000 L+OE 2993000

2-3
1 Cash increases by 100000 Capital stock increases by 100000
2 Bonds payable decreases by 25000 Capital stock increases by 25000
3 Acquired dep. Increases by 8500 Retained earning decreases by 8500
4 Cash decreases by 15900 inventory increases by 15900
5 Accounts payable increases by 9400 inventory increases by 9400
retained earning
6 Accounts receivable increses by 7200 inventory decreases by 4500 increases by 2700
7 Cash increases by 3500 Accounts receivable decreases by 3500
Dividends/ withdrawals increases
8 by 3000 Retained earning decreases by 3000
9 Cash decreases by 3000 Dividends/ withdrawals decreases by 3000
10 no change going concern concept
2-4
Balance sheet of Carson and Legatt shoe store as of june 1 (IN USD)
Assets L + OE
Cash 50000 Liability
Inventory 50000 O.E.(50000+50000) 100000

Total Assets 100000 L+OE 100000

Cash flow statement for Carson's account from Cash flow statement for Legatt's account from
june 1 to June 30 (IN USD) june 1 to June 30 (IN USD)
O/B 50000 O/B 50000
Revenues Revenues
Profit 7750 Profit 7750

Expense Expense
Withdrawal 6200 Withdrawal 3700

total exp 51550 total exp 54050

Balance sheet of Carson and Legatt shoe store as of june 30 (IN USD)
Assets L + OE
Cash (50000-24000+31000-6200-
3700+50000-25000-50000) 22100 Liability
Inventory (50000+24000-15500) 58500 Loan 50000
Land 25000 O.E.(51550+54050) 105600
Building 50000
Total Assets 155600 L+OE 155600

2-5
Balance sheet of Marvin Company as of Jan 31 (In USD)
Current Assets L + OE
Cash (25000+12000+2500-4200-
20000-2800) 12500 Liability
Inventory (50000-7000+7000-
1500-2000) 46500 Accounts payable 7000
Accounts receivable 3400
Total CA 62400 Notes payable 20000

NCA
Land 20000
insurance 2800 O.E
Capital 55000
R.E(5000+1000+1400-4200) 3200
Total Assets 85200 L+OE 85200

Jan-04 cash increases by 12000 R.E increases by 5000

Inventory decreases by 7000
Jan-06 No change
Jan-08 Inventory increases by 7000 A.P increases by 7000
Jan-11 cash increases by 2500 R.E increases by 1000
Inventory decreases by 1500
Jan-16 A.R increases by 3400 R.E increases by 1400
Inventory decreases by 2000
Jan-26 cash decreases by 4200 R.E decreases by 4200
Jan-29 NCA land 20000
cash decreases by 20000
Jan-31 NCA Insurance 2800
cash decreases by 2800
2-6 Lone pine café case
Balance sheet of Lone pine cafe as of 2 Nov 2009 (IN USD)
Assets L + OE
Cash (48000-35000-1428-1400) 10172 Liability
Inventory 2800 Loan 21000
Prepaid license 1428 O.E.(16000+16000+16000) 48000
Equipment(53200+1400) 54600
Total Assets 69000 L+OE 69000

Balance sheet of Lone pine cafe as of 30 Mar 2010 (IN USD)

Current Assets L + OE
Cash (311+1030) 1341 Liability
Inventory 2430 Accounts payable 1583
Accounts receivable 870 Loan (21000-2100) 18900
Prepaid license(1428-1428*5/12) 833 Total L 20483
Total CA 5474 O.E
NCA (57629-20483)/3
A.D -2445 12382+12382+12382 37146
Equipment(53200+1400) 54600

Total Assets 57629 L+OE 57629

Long term funding 56046

Net fixed assets 52155
Working capital 2550
Liquidity{(56046-52155)/2550} 1.53

This ia very low value so it will be difficult to pay the equity if the company is dissolved.
3-1:
a. no expense as no transaction took place during this accounting period
b. expenses for june
c. expenses as decrease in inventory
d. expenses as decrease in inventory
e. expenses as cash decreased
f. increase in inventory so not an expense.

Income statement for Hoshmer company

3-2: ending on june (In USD)
Revenues
sales 275000

Expenditure
COGS 164000
rent 3300
salaries 27400
taxes 1375
other expenses 50240
total exp. 246315
Net Income 28685

3-3: COGS (IN USD)

O/B of inventory 27000
Purchases 78000
C/B of inventory 31000

COGS(78000+27000-31000) 74000

3-4: Net sales 85000

COGS 45000
Gross margin 40000

Gross margin 40000

Net sales 85000
Gross margin percentage 47.06

Net income 9000

Net sales 85000
profit margin 10.59

The margin obtained for selling the goods is 47% which is good.
The profit margin is 10. It is said that a business with 8 or higher PM is doing good.
3-5:
a. (40000/5) AD goes to expenses every 5 years
b. No expense. 135000 added to asset
c. (7000/2) expense as COGS for the first year and the same amount for 2nd year too
d. (72/2) for the first and second year

3-6: Insurance period 1 oct 20x5 - 30 sep 20x7

24 months

Expense each month 30000/24 1250

Expenses Asset
1 oct 20x5 0 30000
31 dec 20x5 3750 26250
31 dec 20x6 15000 11250
31 dec 20x7 11250 0

Income statement for QED Electronics ending

3-7: on April (In USD)
Revenues
sales(20500+0.95*12900) 32755

Expenditure
COGS 1900
AD 2700
salaries 10000
interest expenses 880
taxes 2800
inventory 3700
others(utility + Adm Misc) 5500
total exp. 27480
Net Income 5275

3-8: C.R(CA/CL) closing 1.6

CL closing 50000
CA 80000

COGS (IN USD)

O/B of inventory 35000
Purchases 40000
C/B of inventory 30000

COGS(35000+40000-30000) 45000

gross margin% 45
net sales (COGS/(1-0.45)) 81818

Profit margin 10%

Net income(PF marg*Net
sales) 8182
 L+OE at the end of period
CL 50000
NCL(long term debt) 40000
Total L 90000

O.E 120000
Net income 8182
Total O.E 128182
L + O.E 218182

Total assets 218182

Case 3-2 COGS (IN USD)

O/B of inventory 2800
Purchases(1583+10016) 11599
C/B of inventory 2430
COGS 11969

Income statement for Lone Pine Cafe ending

on Marc 30,2010 (In USD)
Revenues
sales(43480+870) 44350

Expenditure
COGS 11969
Rent 7500
AD 2445
prepaid license 595
salaries 5480
interest expenses 540
others(utility + Adm Misc) 3525
total exp. 32054
Net Income 12296

If we remove the share of partners we get loss of 10854

This means Mrs can't afford to pay their partners even if she forgoes
her share of 7717 from the payment
4-1:
Dr(+) Cash Cr(-) Dr(-) Accounts payable Cr(+)
O/B 900 Accounts payable (3) 3400 Cash(3) 3400 O/B 3600
Accounts rec,(4) 5350 Notes payable(5) 950 C/B 2550 Inventory (1) 2350
C/B 1900 5950 5950
6250 6250

Dr(+) Accounts receivable Cr(-) Dr(-) Notes Payable Cr(+)

O/B 3000 Cash(4) 5350 Cash(5) 950 O/B 950
Sales(2) 6350 C/B 4000 C/B 0
9350 9350

Dr(+) Inventory Cr(-) Dr(-) Sales Cr(+)

O/B 5700 Sales(2) 4150 I.S 2200 Inventory (2) 2200
Accounts payable (1) 2350 C/B 3900
8050 8050
4-2:
Dr(+) Cash Cr(-) Dr(-) Sales Cr(+)
Discount and
O/B Prepaid rent 14340 allowance (2) 34150
Loan(3) 3500 Bad debt(7) 1350
Deferred rev.(5) 2730
Inventory(6) 172 Dr(-) Deferred rev. Cr(+)
Cash(5) 2730
Dr(+) Prepaid rent Cr(-)
O/B
Cash(1) 14340

Dr(+) Accounts receivable Cr(-)

O/B Cash(4) 5350
Cash(3) 3500
Interest(3) 35

Dr(-) Accumulated Depr. Cr(+)

O/B
Depr. Exp.(5) 13660

Dr(+) Inventory Cr(-)

O/B Consumed(6) 100
Cash(6) 172 C/B 72
4-3:
Dr(+) Cash Cr(-) Dr(-) Accounts payable Cr(+)
O/B 1440 Salary expenses(2) 730 Cash(7) 1720 O/B 3070
sales(3) 1940 other exp.(5) 900 C/B 2650 Inventory(1) 1300
A.R(6) 1510 A.P(7) 1720 4370
Deferred rev.(8) 650 C/B 2390
note payable(9) 200
5740

Dr(+) Accounts receivable Cr(-) Dr(-) Note payable Cr(+)

O/B 2160 Cash(6) 1510 O/B 600
sales(4) 1810 doubt Acc 70 C/B 800 cash(9) 200
3970 C/B 2390
Dr(-) Owner's equity Cr(+)
Dr(-) Accumulated Depr. Cr(+) C/B 4990 O/B 4990
O/B 2800
C/B 3100 other expenses(11) 300
Dr(+) Salary expenses Cr(-)
Dr(+) Fixed asset(at cost) Cr(-) Cash(2) 730 I.S 730
O/B 6200 C/B 6200
Dr(-) Sales Cr(+)
I.S. 3750 Cash(3) 1940
Dr(+) Inventory Cr(-) A.R (4) 1810
O/B 1730 COGS 1280 3750
Acc. Payable(1) 1300 C/B 1750 Dr(+) Other expenses Cr(-)
Cash(5) 900 I.S 1200
A.D(11) 300
1200
COGS Dr(-) Deferred rev. Cr(+)
O/B Inv. 1730 Cash(8) 650
Goods purchased 1300
C/B 1750
COGS 1280

Balance sheet of Luft Corp. (IN USD) Income statement for Luft Corp. (In USD)
Current Assets L + OE Revenues
Cash 2390 Liability sales 3750
Inventory 1750 Accounts payable 2650
Accounts receivable 2390 Notes payable 800 Expenditure
Deferred pay 650 COGS 1280
Total CA 6530 Total L 4100 AD 300
NCA O.E salaries 730
A.D -3100 Capital 4990 other expenses 900
Fixed Assets 6200 R.E 540
total exp. 3210
Total Assets 9630 L+OE 9630 Net Income 540
4-4:
Dr(+) Cash & Equivalent Cr(-) Dr(+) Selling expenses Cr(-)
O/B 119115 Selling exp. 24900 I.S 24900
C/B 119115
Dr(+) Salary Expenses Cr(-)
Dr(+) Accounts receivable Cr(-) Salary 105750 I.S 109325
O/B 162500 Accrued salary 3575
interest recev. 390 C/B 162890 109325
162890
Dr(+) Inventories Cr(-) Dr(+) Interest Expense Cr(-)
O/B 700680 COGS(1) 302990 Interest 9300 I.S 13030
Supply invent. 10265 Debited inv. 5210 Interest on N.P (5) 3730
710945 C/B 402745 13030
Dr(+) Equipment Cr(-)
O/B 215000 Dr(-) Sales Cr(+)
C/B 215000 Discount 6220 Sales rev. 716935
IS 710715 716395
Dr(+) Prepaid insurance Cr(-)
O/B 38250 Expired insurance(4) 4660 Dr(+) Tax expense Cr(-)
38250 C/B 33590 Social Sec. Tax 9600 I.S 9600

Dr(-) Accumulated Depr. Cr(+) Dr(-) Accounts payable Cr(+)

O/B 37300 C/B 118180 O/B 118180
C/B 50050 Dep on Equipment(2) 12750
50050 Dr(-) Notes payable Cr(+)
C/B 143000 O/B 143000

Dr(+) Insurance exp. Cr(-)

Income statement for Dindorf Co, (In USD) expired insurance 4660 I.S 4660
Revenues
sales 710715 Dr(-) Common stock Cr(+)
Interest income 390 C/B 300000 O/B 300000
Expenditure
COGS 302990 Dr(-) Retained Earnings Cr(+)
AD 12750 O/B 122375
salaries 109325 C/B 314960 Net income 192585
Selling expenses 24900
Tax expense 9600 314960
interest exp. 13030
Insurance expense 4660
Miscelleneous exp. 31000 Balance sheet of Dindorf Co. (IN USD)
supply exp. 10265 Current Assets L + OE
total exp. 518520 Cash 119115 Liability
Net Income 192585 Inventory 402745 Accounts payable 118180
Accounts receivable 162890 Notes payable 143000
prepaid ins. 33590 Accrued int. & Sal. 7305
Total CA 718495 Total L 268485
NCA O.E
Equipment 215000 Common stock 300000
A.D -50050 R.E 314960

Total Assets 883445 L+OE 883445

4-1:
1. Took a loan of 100,000 from bank at an interest of 15% and the owner invested 65,000 so cash increased by 165,000
2. Rent for the month of september was paid in cash so cash decreased by 1485
3. Merchandise inventory worth 137500 was purchased on credit
4. Equipments like furniture and fixtures worth 15500 with a life of 10 years was purchased using cash
5. Advertising expense for the month of september is 1320 and it was paid by cash
6. Wages expense for the month is 935 and it is paid in cash
7. office supply worth 1100 is consumed and it was paid by cash
8. utilities worth 275 is consumed and is paid by cash

2) & 3)
Dr(+) Cash Cr(-) Dr(-) Notes Payable Cr(+)
O/B 0 Rent expense (2) 1485 O/B 0
notes payable,(1) 100000 Equipments(4) 15500 C/B 100000 Cash(1) 100000
paid in capital (1) 65000 Advertising exp.(5) 1320
Sales(9) 38000 wages exp.(6) 935 Dr(-) Paid in capital Cr(+)
Accounts rec1(11) 3614 office supply exp.(7) 1100 O/B 0
Utilities Exp.(8) 275 C/B 65000 cash(1) 65000
total 206614 Accounts payable(12) 96195
wages exp.(15) 688 Dr(+) Rent expense Cr(-)
Prepaid rent(17) 1485 Cash(2) 1485 I.S 1485
Prepaid insurance(18) 2310
Equipments(20) 660 Dr(-) Accounts payable Cr(+)
C/B 84661 Cash(12) 96195 O/B 0
Dr(+) Merchandise inventory Cr(-) Merchandise inv.(3) 137500
O/B 0 COGS(14) 38140 C/B 92571 Merchandise inv.(13) 49940
Account payable (3) 137500 Utilities exp.(19) 226
Accounts payable(13) 49940 c/b 149300 Equipments(20) 1100
Total 188766
Dr(+) Equipments Cr(-)
O/B 0 Dr(+) Advertising expense Cr(-)
Cash(4) 15500 C/B 17260 Cash(5) 1320 I.S 1320
Cash(20) 660
Acc payable(20) 1100 Dr(+) Wages expense Cr(-)
Cash(6) 935 I.S 2063
Cash(15) 688
Dr(+) Accounts receivable Cr(-) Accrued wages(16) 440
O/B 0 Cash(11) 3614
sales(10) 14850 C/B 11236 Dr(-) Accrued wages Cr(+)
O/B 0
Dr(+) Prepaid rent Cr(-) C/B 440 Wages exp(16) 440
O/B 0 C/B 1485
Cash(17) 1485 Dr(+) Office expense Cr(-)
Cash(7) 1100 I.S 1100
Dr(+) Prepaid Insurance Cr(-)
O/B 0 insurance exp.(23) 193 Dr(+) Utilities expense Cr(-)
Cash(17) 2310 C/B 2117 Cash(8) 275 I.S 501
Acc. Payable(19) 226
Dr(-) Accumulated Depr. Cr(+) Dr(+) COGS Cr(-)
O/B 0 Inventory(14) 38140 IS 38140
C/B 144 Depriciation exp.(21) 144
 Dr(+) Insurance exp. Cr(-)
Prepaid ins.(23) 193 I.S 193
Income statement for PC Depot ending on Sep.
(In USD)
Revenues Dr(+) Depreciation exp. Cr(-)
sales 52850 A.D(21) 144 I.S 144

Expenditure Dr(+) Interest exp. Cr(-)

COGS 38140 Interest payable(22) 1250 I.S 1250
rent 1485
Wages 2063 Dr(-) Interest payable Cr(+)
Depreciation 144 O/B 0
Interest 1250 C/B 1250 Interest expense(22) 1250
Advertisement 1320
insurance 193 Dr(-) Sales Cr(+)
Office supplies 1100 IS 52850 Cash(9) 38000
utilities 501 Acc. Rec.(10) 14850
total exp. 46196
Net Income 6654

Balance sheet of PC Depot ending on Sep. (IN USD)

Current Assets L + OE
Cash 84661 Liability
Merchandise Inventory 149300 Accounts payable 92571
Accounts receivable 11236 Notes payable 100000
prepaid ins. 2117 Accrued Sal. 440
prepaid rent 1485 Interest payable 1250
Total CA 248799 Total L 194261
NCA O.E
Equipment 17260 Paid in cap. 65000
A.D -144 R.E 6654

Total Assets 265915 L+OE 265915

4-2: The closed T accounts with adjusting entries

Dr(+) Cash Cr(-) Dr(+) Sales exp. Cr(-)
O/B 88860 Bank ser exp. (7) 750 Sales exp 10880 I.S 10880
C/B 88110
Dr(+) Salary exp. Cr(-)
Dr(+) Accounts receivable Cr(-) Salary exp 47140 I.S 49480
O/B 127430 Accrued salary(6) 2340
C/B 127430 Dr(+) Misc. Exp Cr(-)
Misc. Exp 18930 I.S 18930
Dr(+) Merchandise inventory Cr(-)
O/B 903130 COGS(1) 604783 Dr(-) Sales Cr(+)
C/B 298347 Discounts 3340 Sales 988700
IS 985360
Dr(+) Supply Inventory Cr(-) Dr(+) Tax exp Cr(-)
O/B 17480 Supplies exp(3) 13603 Tax exp 3400 I.S 3400
C/B 3877
 Dr(-) Notes payable Cr(+)
Dr(+) Store equipment Cr(-) O/B 88500
O/B 70970 C/B 88500
C/B 70970
Dr(-) Acc. Payable Cr(+)
Dr(+) Prepaid insurance Cr(-) O/B 88970
O/B 12430 Insurance exp(4) 7125 C/B 88970
C/B 5305
Dr(-) Capital stock Cr(+)
Dr(-) Accumulated Depr. Cr(+) O/B 100000
O/B 11420 C/B 100000
C/B 21559 Depriciation exp.(2) 10139
Dr(+) COGS Cr(-)
Inventory(1) 604783 IS 604783

Income statement for Save-mart ending on Feb

28. (In USD)
Revenues Dr(+) Depreciation exp. Cr(-)
sales 985360 A.D(2) 10139 I.S 10139

Expenditure Dr(+) Supply inv exp. Cr(-)

COGS 604783 Supply inv(3) 13603 I.S 13603
Sales exp 10880
Wages 49480 Dr(+) Insurance exp Cr(-)
Depreciation 10139 Prepaid ins(4) 7125 I.S 7125
Interest 7965
Misc Exp 18930 Dr(+) Interest exp Cr(-)
insurance 7125 Interest expense 7100 I.S 7965
supplies exp. 13603 Interest payable(5) 865
Bank Ser. Exp 750
Tax exp 3400 Dr(-) Interest payable Cr(+)
total exp. 727055 O/B 0
Net Income 258305 C/B 865 Interest exp.(5) 865

Balance sheet of Save-Mart as on Feb 28 (IN USD) Dr(-) Accrued salaries Cr(+)
Current Assets L + OE O/B 0
Cash 88110 Liability C/B 2340 salary exp(6) 2340
Merchandise Inventory 298347 Accounts payable 88970
Supplies inventor 3877 Notes payable 88500 Dr(+) Bank ser. Exp. Cr(-)
Accounts receivable 127430 Accrued Sal. 2340 Bank service exp.(7) 750 I.S 750
prepaid ins. 5305 Interest payable 865
Total CA 523069 Total L 180675
NCA O.E
Equipment 70970 Capital stock 100000
A.D -21559 R.E O/B 33500
R.E 258305
R.E C/B 291805
Total Assets 572480 L+OE 572480
5-1:
Sales Method Jan Feb Mar Apr May Jun
Sales 12000 8000 13000 11000 9000 13500

COGS (0.65*sales) 7800 5200 8450 7150 5850 8775

Gross Marg. 4200 2800 4550 3850 3150 4725

Installment Method Jan Feb Mar Apr May Jun

Sales 11000 10000 11500 10500 10500 9500
COGS (0.65*sales) 7150 6500 7475 6825 6825 6175
Gross Marg. 3850 3500 4025 3675 3675 3325

5-2:
Total income from Motel = 5-4.25=0.75 mil
a) Completed contract b) % completed method
Year 1 Year 1 Year 1 Year 1
Income exc. Motel Income exc. Motel
($millions) 1.25 1.25 ($millions) 1.25 1.25
Income exc. Motel Income exc. Motel
($millions) 0 0.75 ($millions) 0.45 0.3
Income before tax 1.25 2 Income before tax 1.7 1.55

5-3:
Occurrence of Bad debt in direct method
Dr Cr
Dr. Bad debt expense 3000
Cr. Accounts receivable 3000

Recovery in direct method

Dr. Cash 950
Cr.Bad debt expense 950

5-4:
Prob. Of Amt Amount not
Days Outstanding Amount coll. collected collected
0-15 450000 0.99 445500 4500
16-30 150000 0.94 141000 9000
31-45 75000 0.80 60000 15000
46-60 45000 0.65 29250 15750
61-75 15000 0.5 7500 7500
Total 51750
5-5: a)
Green lawn's book Dr Cr
Dr. Inventory on consignment 8400
Cr.Finished goods 8400

Carson's book
No entry

b)
Green lawn's book Dr Cr
Dr. Accounts Receivable 5040
Dr. COGS 3360
Cr.Sales 5040
Cr.Inventory on Consignment 3360

Carson's Book
Dr. Accounts receivable 6720
Dr. COGS 5040
Cr.Sales 6720
Cr.AP 5040
5-6:
Contract price= 4900000
Perc. Comp. that yr 20 30 45
20x4 20x5 20x6
% completed method
Revenue 980000 1470000 2205000
Cost incurred 721000 1190000 1715000
Income 259000 280000 490000

5-7:
a) Current Assets b)
Cash 23100 Day's cash= Cash/(cash expense/365)
Accounts rec. 34650 Cash expenses
Allowance for bad dbt -1850 COGS 161700
Inventory O/B 46200 Other exp. 69300
purchase 184800 231000
COGS -161700
Total CA 125200 Day's cash 36.50 Days

Current Liability c)
Accounts payable 38600 Day's rec.= Receivables/(Credit sales/365)
interest payable 25000 Credit sale 249018
notes payable 7700
Total L 71300 Receivables=34650-1850
32800
C.R=CA/CL 1.76 Day's rec 48.08 Days
Q.R=Mon. A/C.L 0.81
Case 5-3:

1. In India Power and electric utilities follow ACS(average cost of supply) and ARR(Average revenue realised)
per unit GAP. As per this the power used for a certain period is taken and it is assumed that it was uniform
throughout that period. For eg if 300 units is consumed in 30 days then it is assumed that for each day 10
units is consumed.

2. The revenue to be recognised at the end of 2010 should be 5000 because service if only 6 months out 12
is completed and recognising only half of the revenue is a conservative approach owing to uncertainities in
the future.

3. Raymond can not recognise revenue from $2600000 as they have not performed substantially yet and
since there is a question of cancellation and refunds we should not recognise revenue till they perform
substantially.

4. There should be no revenue recognised since oppurtunity cost are not recognised as revenues.

5. Renue of service renderiring firms charge on the basis of the performance or service completed and not
at the cost of the project. This doesn't make any change in the Owner's equity. If the revenue is recognosed
based on service rendered or percentage completion then it will be added to RE sooner rather than
recognising at cost.

6. The coupons are related only to the sales of their upcoming tea so allowances should be made in the
sales revenue of tea and the value of allowance is 0.6$ per coupon sold.

7. The transactions will be recorded as follows

In banks books
Dr. Cash 505
Cr.Payable to American Ex. 500
Cr.Revenue 5

In A.E books
Dr. Cash 500
Cr. Check outstanding 500

8. The manufacturer A cannnot recognise revenue of 100000 as there is a repurchase agreement and this
adds it ti the liability.

9. Yes the $10000 should be recognised as a revenue in year of signing the franchise and the completion of
training as it allows complete use of the franchise benefits. The service fee should be recognised only after
completion of substantial performance.

10. No the revenues should only be recognized only after receiving the payment in cash as there is a
uncertainity and all the shareholders may not agree to it. They need to change their their revenue
recognition policy accordingly.

6-1:
COGS= O/B + purchase - C/B
Gross margin = Sales - Cogs
Net income = Gross M- other exp
 Co.W Co.X Co.Y Co.Z
Sales 2250 1800 1350 2100
COGS
Beginning Inv. 300 225 500 300
Purchases 975 975 850 1200
Closing Inv. 225 300 300 150
COGS 1050 900 1050 1350
Gross margin 1200 900 300 750
period exp 300 400 150 800
Net income 900 500 150 -50

6-2:

Income statement for Gardener Pharmacy

ending (In USD)
Revenues COGS
sales 325000 O/B 50000
COGS 135500 Purchase. 167000
Gross marg. 189500 Freight in 4000
Other exp. 95000 171000
Purchase
PBT 94500 returns 8000
Tax exp 28350 Net Purchase 163000
Net Income 66150 C/B 77500
COGS 135500

6-6: Inventory balances

Materials Work in Finished
inventory progress goods

Opening Balance 100000 370000 60000

Purchases 872000
Delivery Charge 22000
Direct Labour 565000
Material Used 900000 900000
Indirect labour 27000
Supplies 46000
Dep. Of factory 54000
utilities 147000
Dep. Of manf. 46000
Taxes 14000
Fibished goods transfer 2035000 2035000
94000 134000 2095000
COGS 2002000
Closing Balance 94000 134000 93000

Sales 2600000
COGS 2002000
Gross Margin 598000

GM % 23
6-2:
a) FIFO 2009 2010 2011
Price per Price per Price per
Cartons carton Total Cartons carton Total Cartons carton Total
Sales 2820 34 95880 Sales 3080 35.75 110110 Sales 2950 35.75 105462.5

COGS 1840 20 36800 COGS 420 21 8820 COGS 40 22 880

600 20.25 12150 400 21.25 8500 1000 22.25 22250
380 21 7980 200 21.5 4300 1000 22.5 22500
Total 2820 56930 700 21.5 15050 700 22.75 15925
700 21.5 15050 210 23 4830
Inventory 420 21 8820 660 22 14520 Total 2950 66385
400 21.25 8500 Total 3080 66240
200 21.5 4300
Total 1020 21620 Inventory 40 22 880 Inventory 490 23 11270
1000 22.25 22250 700 23.5 16450
Total 1040 23130 Total 1190 27720

b)LIFO 2009 2010 2011

Price per Price per Price per
Cartons carton Total Cartons carton Total Cartons carton Total
Sales 2820 34 95880 Sales 3080 35.75 110110 Sales 2950 35.75 105462.5

COGS 200 21.5 4300 COGS 1000 22.25 22250 COGS 700 23.5 16450
400 21.25 8500 700 22 15400 700 23 16100
800 21 16800 700 21.5 15050 700 22.75 15925
600 20.25 12150 680 21.5 14620 850 22.5 19125
820 20 16400 Total 3080 67320 Total 2950 67600
2820 58150
Inventory 20 21.5 430 Inventory 150 22.5 3375
Inventory 1020 20 20400 1020 20 20400 20 21.5 430
Total 1020 20400 Total 1040 20830 1020 20 20400
Total 1190 24205

C)Avg.Cost 2009 2009

Price per Price per Price per

Cartons carton Total Cartons carton Total Cartons carton Total
Sales 2820 34 95880 Sales 3080 35.75 110110 Sales 2950 35.75 105462.5

purchases 3840 20.46 78550 purchases 4120 21.51 88619.2 purchases 4140 22.55 93345.4

COGS 2820 20.46 57697.2 COGS 3080 21.51 66250.8 COGS 2950 22.55 66522.5
Inventory 1020 20.46 20869.2 Inventory 1040 21.51 22370.4 Inventory 1190 22.55 26834.5
2)
2009 FIFO LIFO 2010 FIFO LIFO 2010 FIFO LIFO
Sales 95880 95880 Sales 110110 110110 Sales 105463 105463
COGS 56930 58150 COGS 66240 67320 COGS 66385 67600
Gross Gross Gross
margin 38950 37730 margin 43870 42790 margin 39078 37863
Tax 15580 15092 Tax 17548 17116 Tax 15631.2 15145.2
Net Inc. 23370 22638 Net Inc. 26322 25674 Net Inc. 23446.8 22717.8

Tax savings Net Income decrease

2009 488 2009 732 In order to save tax of 1406 we have to sustain an net income decrease of 2109 so I
2010 432 2010 648 wouldn't recommend this.
2011 486 2011 729
1406 2109

3)
FIFO COGS LIFO COGS
Price per Price per
Cartons carton Total Cartons carton Total
490 23 11270 620 20 12400
700 23.5 16450 20 21.5 430
1510 24 36240 150 22.5 3375
2700 63960 1910 24 45840
Inventory 2700 62045
400 24 9600 Inventory
400 20 8000
FIFO LIFO
Sales at
2012 96525 96525
COGS 63960 62045 LIFO would increase tax by 766 and income by 1149 so I would recommend LIFO
Gross
margin 32565 34480
Tax 13026 13792
Net Inc. 19539 20688

4) 2009 2010
LIFO
reserve 1220 2300 Increase 1080

LIFO reserve = FIFO inv. - LIFO inv.

Difference 1080 is the LIFO cogs - FIFO Cogs in 2010

5) many companies used FIFO because to report less tax expense and show lesser inventory cost.
7-1: Units of production method:
a) Net cost = 300000-18000 282000
Depreciation per unit 0.08

Years Units Depreciation

1 930000 74400
2 800000 64000
3 580000 46400
4 500000 40000
5 415000 33200
6 300000 24000
Total 3525000 282000

b) Sum of the years digits:

Sun of the years = 21

Years Units Depreciation

1 930000 80571.43
2 800000 67142.86
3 580000 53714.29
4 500000 40285.71
5 415000 26857.14
6 300000 13428.57
Total 3525000 282000

There were some significant changes and they vary as per the number of units produced.

7-2: Dr Cash 14300

Eq301 Accumulated depreciation 59755
Cr. Equipment 70300
Gain 3755

Eq 415 Dr. Cash 63000

Acummulated Dep. 26640
Loss 6360
Cr.Equipment 96000
Eq573
Dr. Cash 38000
Acummulated Dep. 49500
Loss 7000
Cr.Equipment 94500

7-3:
Automobile 9900
AD Car 8400
AD Automobile 16000
Cash 8400
Furniture 8850
AD 13160
Loss in truck disposal 750
Truck 19860
Cash 3350
7-4:
1 Dr.Land 80600
Cr.Cash 80600

2 Dr.Office building 138000

Cr.Notes Payable 16000
Cr.Cash 32000
Cr.Common Stock 90000

3 Dr. Desks and chairs 6960

Bookcases 1760
Filing Cabinets 880
Cr.Cash 9600

7-5:
Land:
Land 21700000
Positive tests 35250
Negative tests 116252
Permits 41000
Total 21892502

Salvage value 2325000

Net cost 19567502
Service life 10

To. Units 800000

Depletion per unit 24.46

Year Units Depreciation

1 30000 733781
2 70000 1712156
3 75000 1834453

Building:
Purchase cost 271250
Service life 10
Depreciation/year 27125

Year Depreciation
1 27125
2 27125
3 27125

Machinery:
SYD 55
Purchase cost 1162500

Year O/B Depreciation C/B

1 1162500 211364 951136
2 951136 190227 760909
3 760909 169091 591818

Amortization of land improvements:

Cost 387500
Period 10
Per year 38750
Year Amortization
1 38750
2 38750
3 38750
Case 7-1:
A)
1 Dr.Cash 3866
Depreciation 27367
Cr.Machine 31233

2 Dr.Tool Expense 7850

Cr.Tool 7850

3
Depreciation for Jan and feb 2010
1/6*0.2*8354 278

Dr.Cash 2336
Accumulated dep 5458
Cr.Automobile 8354
Loss 560

4
Dr.Patent
amortization
expense 11250
Cr.Patent 11250

5 Dr. cash 75
Accumulated Dep 1027
Cr.Gain on sales 75
Office machines 1027

6 Depreciation for Jan and feb 2010

37
Dr. cash 80
Accumulated dep 432
Cr. Furnitures 490
Gain 22

7 Dr Deoreciation exp 398779

Cr.AD of buildings 48105
AD of Machinery 330935
AD of Furnitures 5599
AD of Automotives 9989
AD of office machine 4151

B) Gross cost Depreciation Net cost

Land 186563 186563
Building 2405259 711484 1693775
Factory
Machineries 3394352 1945926 1448426
Furnitures 55994 45604 10390
Automotives 49944 41965 7979
office machines 41507 31129 10378
Tools 53444 53444
patents 45000 45000
Total 6232063 2776108 3455955