TUGAS MAKALAH AKUNTANSI

DOSEN PENGAMPU
FAMI ROY DALIMUNTHE S.E, M.M.

Oleh
Muhammad Noor Fadillah
(22)10312210095)

UNIVERSITAS LAMBUNG MANGKURAT

FAKULTAS EKONOMI DAN BISNIS
PROGRAM STUDI S-1 MANAJEMEN
BANJARBARU

2023
Contoh soal
S11-2 Recording sales tax
Learning Objective 1

On July 5, Brenner Company recorded sales of merchandise inventory on account,$15,000. The sales were subject to sales tax of 7%. On
August 15, Brenner Companypaid $800 of sales tax to the state.

Requirements
1. Journalize the transaction to record the sale on July 5. Ignore cost of goods sold.
2. Journalize the transaction to record the payment of sales tax to the state.

SOLUTION
Requirement 1
Journalize the transaction to record the sale on July 5. Ignore cost of goods sold.

Date Accounts and Explanation Debit Credit

July 5 Accounts Receivable 16,050
Sales Revenue 15,000
Sales Tax Payable 1,050
To record sales revenue on account and
the related sales tax.

Sales Tax Payable ($15,000 × 7%) = $1,050

Accounts Receivable ($15,000 + $1,050) = $16,050
Requirement 2
Journalize the transaction to record the payment of sales tax to the state.
 Date Accounts and Explanation Debit Credit
Aug. 15 Sales Tax Payable 800
Cash 800
To record cash payment for sales tax
payable.

S11-3 Recording unearned revenue

Learning Objective 1

On June 1, Guitar Magazine collected cash of $51,000 on future annual subscriptions starting on July 1.

Requirements
1. Journalize the transaction to record the collection of cash on June 1.
2. Journalize the transaction required at December 31, the magazine’s year-end, assuming no revenue earned has been recorded. (Round
adjustment to the nearest whole dollar.)

SOLUTION

Requirement 1

Date Accounts and Explanation Debit Credit

June 1 Cash 51,000
Unearned Revenue 51,000
Collected cash for future services.
Requirement 2

Date Accounts and Explanation Debit Credit

Dec. 31 Unearned Revenue 25,500
Subscription Revenue ($51,000 × 6/12) 25,500
To record subscription revenue earned that
was collected in advance.
S11-4 Accounting for a note payable
Learning Objective 1

On December 31, 2015, Franklin purchased $7,000 of merchandise inventory on a one-year, 11% note payable. Franklin uses a perpetual
inventory system.

Requirements
1. Journalize the company’s purchase of merchandise inventory on December 31, 2015.
2. Journalize the company’s accrual of interest expense on June 30, 2016, its fiscal year-end.
3. Journalize the company’s payment of the note plus interest on December 31, 2016.

SOLUTION

Requirement 1

Date Accounts and Explanation Debit Credit

2015
Dec. 31 Merchandise Inventory 7,000
Notes Payable 7,000
Purchased merchandise inventory in
 exchange for one year, 11% note.

Requirement 2

Date Accounts and Explanation Debit Credit

2016
Jun. 30 Interest Expense ($7,000 × 0.11 × 6/12) 385
Interest Payable 385
Accrued interest expense at year-end.

Requirement 3

Date Accounts and Explanation Debit Credit

2016
Dec. 31 Notes Payable 7,000
Interest Expense ($7,000 × 0.11 × 6/12) 385
Interest Payable 385
Cash 7,770
Paid note and interest at maturity.

S11-6 Computing and journalizing an employee’s total pay

Learning Objective 2

Jenna Lindsay works at College of Boston and is paid $40 per hour for a 40-hour workweek and time-and-a-half for hours above 40.

Requirements
1. Compute Lindsay’s gross pay for working 54 hours during the first week of February.
2. Lindsay is single, and her income tax withholding is 10% of total pay. Lindsay’s only payroll deductions are payroll taxes. Compute
Lindsay’s net (take-home) pay for the week. Assume Lindsay’s earnings to date are less than the OASDI limit.
3. Journalize the accrual of salaries and wages expense and the payments related to the employment of Jenna Lindsay.

SOLUTION

Requirement 1

Straight-time pay for 40 hours ($40 × 40 hours) $ 1,600

Overtime pay for 14 hours: 14× $40 × 1.5 840
Gross Pay $ 2,440

Requirement 2

Gross pay $ 2,440.00

Withholding deductions:
Employee income tax (10%) $ 244.00
Employee OASDI tax (6.2%) 151.28
Employee Medicare tax (1.45%) 35.38
Total withholdings 430.66
Net (take-home) pay $ 2,009.34

Requirement 3

Date Accounts and Explanation Debit Credit

Wages Expense 2,440.00
Employee Income Taxes Payable 244.00
 FICA—OASDI Taxes Payable 151.28
FICA—Medicare Taxes Payable 35.38
Wages Payable 2,009.34
To record wages expense and payroll
withholdings.

Wages Payable 2,009.34

Cash 2,009.34
To record payment of wages.
S11-8 Computing and journalizing the payroll expense of an employer
Learning Objective 2

Orchard Company has monthly salaries of $10,000. Assume Orchard pays all the standard payroll taxes and no employees have reached the
payroll tax limits. Journalize the accrual and payment of employer payroll taxes for Orchard Company.

SOLUTION

Date Accounts and Explanation Debit Credit

Payroll Tax Expense 1,365
FICA—OASDI Taxes Payable 620
(6.2% × $10,000)
FICA—Medicare Taxes Payable 145
(1.45% × $10,000)
Federal Unemployment Taxes Payable 60
(0.6% × $10,000)
State Unemployment Taxes Payable 540
(5.4% × $10,000)
To record employer's payroll tax expense.

FICA—OASDI Taxes Payable 620

FICA—Medicare Taxes Payable 145
Federal Unemployment Taxes Payable 60
State Unemployment Taxes Payable 540
Cash 1,365
Payment of payroll taxes

S11-11 Accounting for warranty expense and warranty payable

Learning Objective 3
Hipster Corrector guarantees its snowmobiles for three years. Company experience indicates that warranty costs will be approximately 3% of
sales.

Assume that the Hipster dealer in Colorado Springs made sales totaling $350,000 during 2016. The company received cash for 20% of the
sales and notes receivable for the remainder. Warranty payments totaled $8,000 during 2016.

Requirements
1. Record the sales, warranty expense, and warranty payments for the company. Ignore cost of goods sold.
2. Post to the Estimated Warranty Payable T-account. At the end of 2016, how much in Estimated Warranty Payable does the company owe?
Assume the Estimated Warranty Payable is $0 on January 1, 2016.

SOLUTION

Requirement 1

Date Accounts and Explanation Debit Credit

2016 Cash (20% × $350,000) 70,000
Notes Receivable (80% × $350,000) 280,000
Sales Revenue 350,000
Sales for 2016.

Warranty Expense (3% × $350,000) 10,500

Estimated Warranty Payable 10,500
To accrue warranty payable.

Estimated Warranty Payable 8,000

Cash 8,000
 Warranty payments.

Requirement 2

Estimated Warranty Payable

Payments 8,000 10,500 Accrual
2,500Bal.
E11-14 Recording sales tax
Learning Objective 1
Sales Tax Payable $8,500

Consider the following transactions of Moore Software:

Journalize the transactions for the company. Ignore cost of goods sold.

SOLUTION

Date Accounts and Explanation Debit Credit

Mar. 31 Cash 178,500
Sales Revenue 170,000
Sales Tax Payable ($170,000 × 0.05) 8,500
 To record cash sales and the related sales tax.

Apr. 6 Sales Tax Payable 8,500

Cash 8,500
To record cash payment for sales tax payable.

E11-17 Journalizing current liabilities

Learning Objectives 1, 2
Salaries Expense $3,100

Erik O’Hern Associates reported short-term notes payable and salaries payable as follows:

During 2016, O’Hern paid off both current liabilities that were left over from 2015, borrowed money on short-term notes payable, and
accrued salaries expense. Journalize all four of these transactions for O’Hern during 2016. Assume no interest onshort-term notes payable of
$15,200.

Date Accounts and Explanation Debit Credit

2016
Short-Term Notes Payable 15,200
Cash 15,200
To record payment of 2015 notes.
 Salaries Payable 3,900
Cash 3,900
To record payment for salaries payable.

Cash 16,800
Short-Term Notes Payable 16,800
To record money borrowed on notes
payable.

Salaries Expense 3,100

Salaries Payable 3,100
To record accrued salaries.

E11-18 Computing and recording gross and net pay

Learning Objective 2
1. Net Pay $362.44

Hubert Sollenberger manages a Dairy House drive-in. His straight-time pay is $8 per hour, with time-and-a-half for hours in excess of 40 per
week. Sollenberger’s payroll deductions include withheld income tax of 20%, FICA tax, and a weekly deduction of$8 for a charitable
contribution to United Way. Sollenberger worked 56 hours during the week.

Requirements
1. Compute Sollenberger’s gross pay and net pay for the week. Assume earnings to date are $11,000.
2. Journalize Dairy House wages expense accrual for Sollenberger’s work. An explanation is not required.
3. Journalize the subsequent payment of wages to Sollenberger.
SOLUTION

Requirement 1

Straight-time pay for 40 hours ($8 × 40 hours) $ 320.00

Overtime pay for 16 hours: (16× $8 × 1.5) 192.00
Gross Pay $ 512.00

Gross pay $ 512.00

Withholding deductions:
Employee income tax (20%) $ 102.40
Employee OASDI tax (6.2%) 31.74
Employee Medicare tax (1.45%) 7.42
Employee contribution to United Way 8.00
Total withholdings 149.56
Net (take-home) pay $ 362.44

Requirement 2

Date Accounts and Explanation Debit Credit

Wages Expense 512.00
Employee Income Taxes Payable 102.40
FICA—OASDI Taxes Payable 31.74
FICA—Medicare Taxes Payable 7.42
United Way Payable 8.00
Wages Payable 362.44
Requirement 3

Date Accounts and Explanation Debit Credit

Wages Payable 362.44

Cash 362.44

E11-20 Recording employee and employer payroll taxes

Learning Objective 2
2. Salaries & Wages Payable$17,060.10

District Company had the following partially completed payroll register:

Requirements
 1. Complete the payroll register.
2. Journalize District’s wages expense accrual for the current pay period.
3. Journalize District’s expenses for employer payroll taxes for the current pay period.
4. Requirement 1
5.
Earnings Withholdings      
Beginning Ending
Cumulative Current Cumulativ Health Total Salaries
Period e Medica Income Insuranc United Withholdi Check and Wages
Earnings Earnings Earnings OASDI re Tax e Way ngs Net Pay No. Expense
$ $ $ 266.60 $62.35 $ $ 86.00 $ 20.00 $1,294.95 $
83,000.00 4,300.00 $87,300.00 860.00 $3,005.05 801 4,300.00
110,900.00 7,800.00 118,700.00 378.20 113.10 1,560.00 156.00 15.00 2,222.30 5,577.70 802 7,800.00
37,000.00 2,100.00 39,100.00 130.20 30.45 420.00 42.00 0.00 622.65 1,477.35 803 2,100.00
60,500.00 4,500.00 65,000.00 279.00 65.25 900.00 90.00 35.00 1,369.25 3,130.75 804 4,500.00
0 5,500.00 5,500.00 341.00 79.75 1,100.00 110.00 0.00 1,630.75 3,869.25 805 5,500.00
$ $ $315,600.0 $1,395.00 $350.90 $ $ 484.00 $ 70.00 $7,139.90
291,400.00 24,200.00 0 4,840.00 $17,060.10   $ 24,200.00

6.
7.
 8. E11-20, cont.
9. Requirement 2
10.
Date Accounts and Explanation Debit Credit
Salaries and Wages Expense 24,200.00
Employee Income Taxes Payable 4,840.00
FICA—OASDI Taxes Payable* 1,395.00
FICA—Medicare Taxes Payable 350.90
Health Insurance Payable 484.00
United Way Payable 70.00
Salaries and Wages Payable 17,060.10
To record salaries and wages expense and
payroll withholdings.
11.
12. *Calculation of tax for OASDI
13. Employee earnings subject to tax $
14. 117,0
15. 00.00
16. Employee earnings prior to the current –
17. month 110,9
18. 00.00
19. Current pay subject to tax $
20. 6,100.
21. 00
22. Requirement
Tax rate 3 ×
23. 0.062
Dat Accounts
Employer and
tax Explanation Debit $ Credit
e 378.2
Payroll Tax Expense 2,075.90 0
FICA—OASDI
All others Taxes Payable
($24,200 *
− $7,800) × 6.2% 1,016. 1,395.00
FICA—Medicare Taxes Payable 80 350.90
(1.45% × $24,200) $
Federal Unemployment Taxes Payable 1,395. 33.00
(0.6% × $5,500 (first $7,000 only)) 00
State Unemployment Taxes Payable 297.00
(5.4% × $5,500 (first $7,000 only))
To record employer's payroll tax expense.

P11-34B Computing times-interest-earned ratio

Learning Objective 5
1. Net Income $5,790

The income statement for Virginia Communications follows. Assume Virginia

Communications signed a 120-day, 6%, $10,000 note on June 1, 2016, and that this was the
only note payable for the company.
Requirements
1. Fill in the missing information for Virginia’s year ended July 31, 2016, income statement.
2. Compute the times-interest-earned ratio for the company.
SOLUTION

Requirement 1

VIRGINIA COMMUNICATIONS
Income Statement
Year Ended July 31, 2016

Sales Revenue $ 31,000

Less: Sales Returns and Allowances (4,700)
Sales Discounts (3,400)
Net Sales Revenue $ 22,900
Cost of Goods Sold (13,200)
Gross Profit 9,700
Operating Expenses:
Selling Expenses 710
Administrative Expenses 1,650
Total Operating Expenses (2,360)
Operating Income 7,340
Other Revenues and (Expenses):
Interest Expense (100)
Total Other Revenues and (Expenses) (100)
Net Income before Income Tax Expense 7,240
Income Tax Expense (1,450)
Net Income $5,790

Interest Expense = $10,000 ×6% × 60/360 = $100

Requirement 2

Times-interest-earned ratio
Net Income $ 5,790
+ Income Tax Expense + 1,450
+ Interest Expense + 100
Total $ 7,340
÷ Interest Expense ÷ 100
Ratio for 2016 73.40
Financial Statement Case 11-1

Details about a company’s liabilities appear in a number of places in the annual re- port. Visit
http://www.pearsonhighered.com/Horngren to view a link to Starbucks Corporation’s
Annual Report. Use Starbucks Corporation’s fiscal 2013 financial statements to answer the
following questions.

Requirements
1. Give the breakdown of Starbucks’s current liabilities at September 29, 2013.
2. Calculate Starbucks’s times-interest-earned ratio for the year ending September 30, 2012.

SOLUTION

Requirement 1

STARBUCKS
Balance Sheet (partial)
September 29, 2013 (In millions)
Liabilities
Current Liabilities:
Accounts payable $ 491.7
Accrued litigation charge 2,784.1
Accrued liabilities 1,269.3
Insurance reserves 178.5
Deferred revenue 653.7
Total current liabilities $ 5,377.3

Requirement 2

Times-Interest-Earned Ratio
September
30, 2012
Net Income $ 1,383.8
+ Income Tax Expense + 674.4
+ Interest Expense + 32.7
 Total $ 2,090.9
÷ Interest Expense ÷ 32.7
Starbuck’s Ratio 63.94

BAB 14
S14-1 Accounting for a long-term note payable
Learning Objective 1

On January 1, 2016, Locker-Farrell signed a $200,000, 10-year, 13% note. The loan required
Locker-Farrell to make annual payments on December 31 of $20,000 principal plus interest.

Requirements
1. Journalize the issuance of the note on January 1, 2016.
2. Journalize the first note payment on December 31, 2016.

SOLUTION

Requirement 1

Date Accounts and Explanation Debit Credit

2016
Jan. 1 Cash 200,000
Notes Payable 200,000
Received cash in exchange for a 10-
year,13% note.

Requirement 2

Date Accounts and Explanation Debit Credit

2016
Dec. 31 Notes Payable 20,000
Interest Expense ($200,000 × 0.13 × 1 year) 26,000
Cash 46,000
 Paid principal and interest payment.
S14-2 Accounting for mortgages payable
Learning Objective 1

Elie purchased a building with a market value of $335,000 and land with a market value of
$55,000 on January 1, 2016. Elie paid $10,000 cash and signed a 15-year, 12% mortgage
payable for the balance.

Requirements
1. Journalize the January 1, 2016, purchase.
2. Journalize the first monthly payment of $4,561 on January 31, 2016. (Round to the
nearest dollar.)

SOLUTION

Requirement 1

Date Accounts and Explanation Debit Credit

2016
Jan. 1 Building 335,000
Land 55,000
Mortgages Payable 380,000
Cash 10,000
Purchased building and land with a
mortgages payable and cash payment.

Requirement 2

Date Accounts and Explanation Debit Credit

2016
Jan. 31 Mortgages Payable ($4,561 − $3,800) 761
Interest Expense (380,000 × .12× 1/12) 3,800
Cash 4,561
Paid principal and interest payment.

S14-6 Journalizing bond transactions

Learning Objective 3
Piper Company issued a $800,000, 8%, 10-year bond payable at face value on January 1,
2016.

Requirements
1. Journalize the issuance of the bond payable on January 1, 2016.
2. Journalize the payment of semiannual interest on July 1, 2016.

SOLUTION

Requirement 1

Date Accounts and Explanation Debit Credit

2016
Jan. 1 Cash 800,000
Bonds Payable 800,000
Issued bonds at face value.

Requirement 2

Date Accounts and Explanation Debit Credit

2016
Jul. 1 Interest Expense 32,000
Cash ($800,000 × 0.08 × 6/12) 32,000
Paid semiannual interest.

S14-7 Journalizing bond transactions

Learning Objective 3

Ogden issued a $70,000, 12%, 10-year bond payable at 90 on January 1, 2016.

Requirements
1. Journalize the issuance of the bond payable on January 1, 2016.
2. Journalize the payment of semiannual interest and amortization of the bond discount or
premium on July 1, 2016.

SOLUTION
Requirement 1

Date Accounts and Explanation Debit Credit

2016
Jan. 1 Cash ($70,000 × 0.90) 63,000
Discount on Bonds Payable ($70,000 – $63,000) 7,000
Bonds Payable 70,000
Issued bonds at a discount.

Requirement 2

Date Accounts and Explanation Debit Credit

2016
Jul. 1 Interest Expense ($4,200 + $350) 4,550
Discount on Bonds Payable ($7,000 × 1/20) 350
Cash ($70,000 × 0.12 × 6/12) 4,200
Paid semiannual interest and amortized discount.

S14-8 Journalizing bond transactions

Learning Objective 3

Watson Mutual Insurance Company issued a $65,000, 11%, 10-year bond payable at 109 on
January 1, 2016.

Requirements
1. Journalize the issuance of the bond payable on January 1, 2016.
2. Journalize the payment of semiannual interest and amortization of the bond discount or
premium on July 1, 2016.

SOLUTION

Requirement 1

Date Accounts and Explanation Debit Credit

2016
Jan. 1 Cash ($65,000 × 1.09) 70,850
 Premium on Bonds Payable ($70,850 – $65,000) 5,850
Bonds Payable 65,000
Issued bonds at a premium.

Requirement 2

Date Accounts and Explanation Debit Credit

2016
Jul. 1 Interest Expense ($3,575 − $293) 3,282
Premium on Bonds Payable ($5,850 × 1/20) 293
Cash ($65,000 × 0.11 × 6/12) 3,575
Paid semiannual interest and amortized premium.

S14-10 Retiring bonds payable before maturity

Learning Objectives 3, 4

On January 1, 2016, Patel issued $400,000 of 7%, five-year bonds payable at 109. Patel has
extra cash and wishes to retire the bonds payable on January 1, 2017, immediately after
making the second semiannual interest payment. To retire the bonds, Patel pays the market
price of 95.

Requirements
1. What is Patel’s carrying amount of the bonds payable on the retirement date?
2. How much cash must Patel pay to retire the bonds payable?
3. Compute Patel’s gain or loss on the retirement of the bonds payable.

SOLUTION

Requirement 1

Face value × Issue price Market price or Premium on bond

Cash received
$400,000 × 1.09 $436,000 $36,000

Amortization of bond premium $36,000 / 10 periods = 3,600 per interest payment

 Face value of the bonds being retired $
40
0,0
00
Plus: Premium ($36,000 – ($3,600 × 2)) 28,
80
0
Carrying amount of bonds payable on the 42
retirement date 8,8
00

Requirement 2

Market price paid to retire the bonds ($400,000 × 38

0.95) 0,0
00

Requirement 3

Carrying amount of bonds payable 42

8,8
00
Market price paid to retire the bonds ($400,000 × 38
0.95) 0,0
00
Gain on retirement of bonds payable $4
8,8
00

S14-11 Preparing the liabilities section of the balance sheet

Learning Objective 5

Master Suites Hotels includes the following selected accounts in its general ledger at
December 31, 2016:
Prepare the liabilities section of Master Suites’s balance sheet at December 31, 2016.

SOLUTION

MASTER SUITES HOTELS

Balance Sheet (Partial)
December 31, 2016

Liabilities
Current Liabilities
Accounts Payable $ 41,000
Salaries Payable 3,100
Sales Tax Payable 700
Interest Payable 1,700
Estimated Warranty Payable 1,500
Total Current Liabilities $ 48,000
Long-term Liabilities
Notes Payable 250,000
Bonds Payable $ 450,000
Less: Discount on Bonds (13,500) 436,500
Payable
Total Long-term 686,500
Liabilities
Total Liabilities $ 734,500

S14A-13 Using the time value of money

Learning Objective 7
Appendix 14A

Your grandfather would like to share some of his fortune with you. He offers to give you
money under one of the following scenarios (you get to choose):
1. $8,000 per year at the end of each of the next five years
2. $50,250 (lump sum) now
3. $100,250 (lump sum) five years from now

Requirements
1. Calculate the present value of each scenario using an 8% discount rate. Which scenario
yields the highest present value?
2. Would your preference change if you used a 12% discount rate?

SOLUTION
Requirement 1

Present Amount of each cash Annuity PV factor for

Scenario 1 = ×
value inflow i =8%, n = 5
= $8,000 × 3.993
= $31,944

Present
Scenario 2 = Lump sum now
value
= $50,250

Present PV factor for

Scenario 3 = Future value ×
value i =8%, n = 5
= $100,250 × 0.681
= $68,270

Scenario 3 has the highest present value.

S14A-14 Determining the present value of bond at issuance
Learning Objective 7
Appendix 14A

On December 31, 2016, when the market interest rate is 14%, McCann Realty
issues$400,000 of 11.25%, 10-year bonds payable. The bonds pay interest semiannually.
Determine the present value of the bonds at issuance.

SOLUTION

Present value of principal:

Present value = Future value × PV factor for
i = 7% (14% / 2),
n = 20 (10 years x 2)
= $400,000 × 0.258
 = $103,200

Present value of stated interest:

Present value = Amount of each cash flow × Annuity PV factor for
i = 7% (14% / 2),
n = 20 (10 years x 2)
= ($400,000 × 0.1125 ×
× 6/12)
= $22,500 × 10.594
= $238,365

Present value of bonds payable:

Present value = PV of principal + PV of stated interest
= $103,200 + $238,365
= $341,565

E14-17 Accounting for long-term notes payable transactions

Learning Objective 1
2. Total Liabilities $52,680

Consider the following note payable transactions of Caldwell Video Productions.

Requirements
1. Journalize the transactions for the company.
2. Considering the given transactions only, what are Caldwell Video Productions’ total
liabilities on December 31, 2017?

SOLUTION

Requirement 1
 Date Accounts and Explanation Debit Credit
2016
Apr. 1 Equipment 56,000
Notes Payable 56,000
Purchased equipment by issuing an7-year,
13% note.

Dec. 31 Interest Expense ($56,000 × 0.13×9/12) 5,460

Interest Payable 5,460
Recognized accrued interest.
2017
Apr. 1 Interest Expense ($56,000 × 0.13×3/12) 1,820
Interest Payable 5,460
Notes Payable 8,000
Cash 15,280
Paid first installment of note.

Dec. 31 Interest Expense ($48,000 × 0.13×9/12) 4,680

Interest Payable 4,680
Recognized accrued interest.

Requirement 2

Dec. 31, 2017

Interest Payable $ 4,680
Notes Payable 48,000
Total liabilities $ 52,680
E14-22 Journalizing bond issuance and interest payments
Learning Objective 3
1. June 30 Discount DR $7,200

On June 30, Danver Limited issues 5%, 20-year bonds payable with a face value of$120,000.
The bonds are issued at 94 and pay interest on June 30 and December 31.

Requirements
1. Journalize the issuance of the bonds on June 30.
2. Journalize the semiannual interest payment and amortization of bond discount on
December 31.

SOLUTION
Requirement 1

Date Accounts and Explanation Debit Credit

June 30 Cash ($120,000 × 0.94) 112,800

Discount on Bonds Payable ($120,000 – $112,800) 7,200
Bonds Payable 120,000
Issued bonds at a discount.

Requirement 2

Date Accounts and Explanation Debit Credit

Dec. 31 Interest Expense ($3,000 + $180) 3,180

Discount on Bonds Payable ($7,200 × 1/40) 180
Cash ($120,000 × 0.05 × 6/12) 3,000
Paid semiannual interest and amortized discount.
E14-23 Journalizing bond transactions
Learning Objective 3
2. Interest Expense DR $3,440

Franklin issued $80,000 of 10-year, 8% bonds payable on January 1, 2016. Franklin pays
interest each January 1 and July 1 and amortizes discount or premium by the straight-line
amortization method. The company can issue its bonds payable under various conditions.

Requirements
1. Journalize Franklin’s issuance of the bonds and first semiannual interest payment
assuming the bonds were issued at face value. Explanations are not required.
2. Journalize Franklin’s issuance of the bonds and first semiannual interest payment
assuming the bonds were issued at 94. Explanations are not required.
3. Journalize Franklin’s issuance of the bonds and first semiannual interest payment
assuming the bonds were issued at 103. Explanations are not required.
4. Which bond price results in the most interest expense for Franklin? Explain in detail.

SOLUTION

Requirement 1
 Date Accounts and Explanation Debit Credit
2016
Jan. 1 Cash 80,000
Bonds Payable 80,000

July 1 Interest Expense 3,200

Cash ($80,000 × 0.08 × 6/12) 3,200

Requirement 2

Date Accounts and Explanation Debit Credit

2016
Jan. 1 Cash ($80,000 × 0.94) 75,200
Discount on Bonds Payable ($80,000 − $75,200) 4,800
Bonds Payable 80,000

July 1 Interest Expense ($240 + $3,200) 3,440

Discount on Bonds Payable ($4,800 × 1/20) 240
Cash ($80,000 × 0.08 × 6/12) 3,200

Requirement 3

Date Accounts and Explanation Debit Credit

2016
Jan. 1 Cash ($80,000 ×1.03) 82,400
Premium on Bonds Payable ($82,400 − $80,000) 2,400
Bonds Payable 80,000

July 1 Interest Expense ($3,200 − $120) 3,080

Premium on Bonds Payable ($2,400 × 1/20) 120
Cash ($80,000 × 0.08 × 6/12) 3,200

Requirement 4

The bond issue at a discount results in a higher interest expense for the company. The
discount needs to be amortized over the life of the bond, resulting in interest expense greater
than the amount of interest actually paid.
E14-24 Journalizing bond issuance and interest payments
Learning Objectives 3, 4
1. Premium CR $3,600

On January 1, 2016, Dave Unlimited issues 10%, 20-year bonds payable with a face value of
$180,000. The bonds are issued at 102 and pay interest on June 30 and December 31.

Requirements
1. Journalize the issuance of the bonds on January 1, 2016.
2. Journalize the semiannual interest payment and amortization of bond premium on June
30, 2016.
3. Journalize the semiannual interest payment and amortization of bond premium on
December 31, 2016.
4. Journalize the retirement of the bond at maturity. (Give the date.)

SOLUTION

Requirement 1

Date Accounts and Explanation Debit Credit

2016
Jan. 1 Cash ($180,000 × 1.02) 183,600
Premium on Bonds Payable ($183,600 − $180,000) 3,600
Bonds Payable 180,000

Requirement 2

Date Accounts and Explanation Debit Credit

2016
Jun. 30 Interest Expense ($9,000 − $90) 8,910
Premium on Bonds Payable ($3,600 × 1/40) 90
Cash ($180,000 × 0.10 × 6/12) 9,000

Requirement 3

Date Accounts and Explanation Debit Credit

2016
Dec. 31 Interest Expense ($9,000 − $90) 8,910
Premium on Bonds Payable ($3,600 × 1/40) 90
Cash ($180,000 × 0.10 × 6/12) 9,000
Requirement 4

Date Accounts and Explanation Debit Credit

2035
Dec. 31 Bonds Payable 180,000
Cash 180,000

E14-27 Reporting liabilities

Learning Objectives 2, 3, 5
Total Liabilities $358,000

At December 31, MediAssist Precision Instruments owes $51,000 on Accounts Payable,

Salaries Payable of $12,000, and Income Tax Payable of $10,000. MediAssist also has
$280,000 of Bonds Payable that were issued at face value that require payment of a $50,000
installment next year and the remainder in later years. The bonds payable require an annual
interest payment of $5,000, and MediAssist still owes this interest for the current year. Report
MediAssist’s liabilities on its classified balance sheet.
SOLUTION

MEDIASSIST PRECISION INSTRUMENTS

Balance Sheet (Partial)
December 31

Liabilities
Current Liabilities
Accounts Payable $ 51,000
Current Portion of Bonds Payable 50,000
Salaries Payable 12,000
Income Tax Payable 10,000
Interest Payable 5,000
Total Current Liabilities $
128,000
Long-term Liabilities
Bonds Payable 230,000
Total Long-term Liabilities 230,000
Total Liabilities $ 358,000

P14-32A Analyzing, journalizing, and reporting bond transactions

Learning Objectives 2, 3
2. Discount CR $4,500

Bob’s Hamburgers issued 8%, 10-year bonds payable at 70 on December 31, 2016. At
December 31, 2018, Billy reported the bonds payable as follows:

Bob’s pays semiannual interest each June 30 and December 31.

Requirements
1. Answer the following questions about Bob’s bonds payable:
a. What is the maturity value of the bonds?
b. What is the carrying amount of the bonds at December 31, 2018?
c. What is the semiannual cash interest payment on the bonds?
d. How much interest expense should the company record each year?
2. Record the June 30, 2018, semiannual interest payment and amortization of discount.
SOLUTION

Requirement 1

a. $300,000
b. $228,000
c.
$300,000 × 0.08 × 12/12 = $24,000; $24,000 × 1/2 = $12,000
semiannual cash payment
d.
$300,000 – ($300,000 × 0.70) = $90,000 Discount / 10 years =
$9,000 per year plus $24,000 = $33,000 interest expense per year

Requirement 2

Date Accounts and Explanation Debit Credit

2018
Jun. 30 Interest Expense ($12,000 + $4,500) 16,500
Discount on Bonds Payable ($90,000 × 1/20) 4,500
Cash ($300,000 × 0.08× 6/12) 12,000
Paid semi-annual interest payment and amortized
discount.

P14-35A Reporting liabilities on the balance sheet and computing debt to equity ratio
Learning Objectives 5, 6
1. Total Liabilities $276,900

The accounting records of Router Wireless include the following as of December 31, 2016:

Requirements
1. Report these liabilities on the Router Wireless balance sheet, including headings and
totals for current liabilities and long-term liabilities.
2. Compute Router Wireless’s debt to equity ratio at December 31, 2016.

SOLUTION

Requirement 1

ROUTER WIRELESS
Balance Sheet (Partial)
December 31, 2016

Liabilities
Current Liabilities
Accounts Payable $ 69,000
Interest Payable 21,000
Salaries Payable 7,500
Unearned Revenue 3,400
Current Portion of Bonds Payable 25,000
Total Current Liabilities $
125,900
Long-term Liabilities
Mortgages Payable 75,000
Bonds Payable $ 63,000
Plus: Premium on Bonds 13,000 76,000
Payable
Total Long-term Liabilities 151,000
Total Liabilities $ 276,900

Requirement 2

Debt to equity ratio = Total liabilities / Total equity

1.73 = 276,900 / $160,000

P14-39B Analyzing, journalizing, and reporting bond transactions

Learning Objectives 2, 3
2. Discount CR $2,000
George’s Hamburgers issued 8%, 10-year bonds payable at 80 on December 31, 2016. At
December 31, 2018, George reported the bonds payable as follows:

George pays semiannual interest each June 30 and December 31.

Requirements
1. Answer the following questions about George’s bonds payable:
a. What is the maturity value of the bonds?
b. What is the carrying amount of the bonds at December 31, 2018?
c. What is the semiannual cash interest payment on the bonds?
d. How much interest expense should the company record each year?
2. Record the June 30, 2018, semiannual interest payment and amortization of discount.

SOLUTION

Requirement 1

a. $200,000
b. $168,000
c. $200,000 × 0.08× 12/12 = $16,000; semiannual is $16,000 × 1/2
= $8,000
d. $200,000 – ($200,000 × 0.80) = $40,000 Discount / 10 years =
$4,000 per year plus $16,000 = $20,000 interest expense per year

Requirement 2

Date Accounts and Explanation Debit Credit

2018
Jun. 30 Interest Expense ($2,000 + $8,000) 10,000
Discount on Bonds Payable ($40,000× 1/20) 2,000
Cash ($200,000 × 0.08× 6/12) 8,000
Paid semi-annual interest payment and amortized
discount.
P14-42B Reporting liabilities on the balance sheet and computing debt to equity ratio
Learning Objectives 5, 6
1. Total Liabilities $268,900

The accounting records of Path Leader Wireless include the following as of December 31,
2016:

Requirements
1. Report these liabilities on the Path Leader Wireless balance sheet, including headings and
totals for current liabilities and long-term liabilities.
2. Compute Path Leader Wireless’s debt to equity ratio at December 31, 2016.

SOLUTION

Requirement 1

PATH LEADER WIRELESS

Balance Sheet (Partial)
December 31, 2016

Liabilities
Current Liabilities
Accounts Payable $ 75,000
Interest Payable 15,000
Salaries Payable 7,500
Unearned Revenue 3,400
Current Portion of Bonds Payable 21,000
Total Current Liabilities $
121,900
Long-term Liabilities
Mortgages Payable 76,000
Bonds Payable $ 62,000
 Plus: Premium on Bonds 9,000 71,000
Payable
Total Long-term Liabilities 147,000
Total Liabilities $ 268,900

Requirement 2

Debt to equity ratio = Total liabilities / Total equity

1.49 = $268,900 / $180,000
Financial Statement Case 14-1

Use the Starbucks Corporation financial statements to answer the following questions. Visit
http://www.pearsonhighered.com/Horngren to view a link to Starbucks Corporation’s
Fiscal 2013 Annual Report.

Requirements
1. How much was Starbucks Corporation’s long-term debt at September 29, 2013?
2. Compute Starbucks Corporation’s debt to equity ratio at September 29, 2013. How does it
compare to Green Mountain Coffee Roasters, Inc.?

SOLUTION

Requirement 1

Starbuck’s long-term debt at September 29, 2013 was $1,299.4 million. Other long-term
liabilities are $357.7 million, so the total long-term liabilities are $1,657.1 million.

Requirement 2

Starbucks:
= Total liabilities / Total equity
Debt to equity ratio
1.57 = $7,034.4 million / $4,482.3 million
 Green Mountain:
= Total liabilities / Total equity
Debt to equity ratio
0.43 = $1,125,978 / $2,635,570

Starbucks’ debt to equity ratio indicates this company has greater debt than equity, while
Green Mountain Coffee’s ratio shows they have more equity then debt. Green Mountain
Coffee has less financial risk than Starbucks.