Prob 6-1 Prob 6-4

2021 Req. 1
1-Jan Cash 1,000,000.00 2021
Notes Receivable 6,000,000.00 31-Dec
Land 5,000,000.00
Gain on Sale of Land 2,000,000.00

31-Dec Accr. Int. Rec. 720,000.00 2022

Int. Inc. (12% x 6,000,000) 720,000.00 31-Dec

2022
31-Dec Accr. Int. Rec. 806,400.00
Int. Inc. (12% x 6,720,000) 806,400.00

2023 Req. 2
1-Jan Cash 7,526,400.00
Notes Receivable 6,000,000.00
Accr. Int. Rec. 1,526,400.00

Prob 6-2 Req. 3

1-Jan Notes Receivable 600,000.00
Sales 540,000.00
Unearned Int. Inc. 60,000.00 Prob 6-5

31-Dec Cash 200,000.00

Notes Receivable 200,000.00

Unearned Int. Inc. 30,000.00

Int. Inc. (600,000 x 6/12) 30,000.00

Prob 6-3
FV 900,000.00
PV (300,000 x 2.4018) 720,540.00
Unearned Int. Inc. 179,460.00 2021
1-Jan
PV 720,540.00
Cash Received 100,000.00
Sales Price 820,540.00
Cost of generator 700,000.00
Gross Income 120,540.00
 1-Jan Cash 100,000.00 31-Dec
Notes Receivable 900,000.00
Sales 820,540.00
Unearned Int. Inc. 179,460.00 2022
31-Dec
31-Dec Cash 300,000.00
Notes Receivable 300,000.00
2023
Unearned Int. Inc. 86,464.80 31-Dec
Int. Inc. (720,540 x 12%) 86,464.80

2024
1-Jan
 Prob 6-6
Req. 1

Notes Receivable 2,500,000.00

Sales (500,000 x 3.99) 1,995,000.00
Unearned Int. Inc. 505,000.00

Cash 500,000.00
Notes Receivable 500,000.00

Unearned Int. Inc. 159,600.00 Req. 2

Int. Inc. (1,995,000 x 8%) 159,600.00

N/R (2,500,000 - 500,000) 2,000,000.00

U Int. Inc. (505,000 - 159,600) (345,400.00)
CA - 12/31/2022 1,654,600.00

Int. Inc. for 2021 (1,654,600 x 8%) 132,368.00

FV 400,000.00
PV (400,000 x 0.7118) 284,720.00
Unearned Int. Inc. 115,280.00

PV 284,720.00
Cash Received 125,000.00
Sales Price 409,720.00
CA 350,000.00
Gain on sale 59,720.00

Cash 125,000.00
N/R 400,000.00
Accum. Dep. 150,000.00
Equipment 500,000.00
Gain on Sale 59,720.00
U Int. Inc. 115,280.00
U Int. Inc. 34,166.40
Int. Inc. (284,720 x 12%) 34,166.40

U Int. Inc. 38,266.37

Int. Inc. [(284,720 + 34,166) x 12%)] 38,266.37

U Int. Inc. 42,848.00

Int. Inc. (off set dito pra mabuo 400K) 42,848.00
[(284,720 + 34,166 + 38,266) x 12%)]

Cash 400,000.00
N/R 400,000.00
 Prob 6-7
N/R from sale of building due 5/1/2022 2,500,000.00
Accrued Int. on N/R from sale of building
from 5/1/2021 to 12/31/2021 (5,000,000 x 9% x 8/12) 300,000.00
Principal payment of N/R from sale of land dun 7/1/2022
Annual Installment 880,000.00
Interest from 7/1/2021 to 7/1/2022 (10% x 2,800,000) 280,000.00 600,000.00
Accrued Int. on N/R from sale of land from 7/1/2021 Prob 6-8
to 12/31/2021 (1/2 x 280,000) 140,000.00 1
Total current receivables - 12/31/2021 3,540,000.00

N/R from sale of building due 5/1/2023 2,500,000.00

N/R from officer 2,000,000.00 2
N/R from sale of land - noncurrent portion:
Principal 2,800,000.00
Due 7/1/2022 (600,000.00) 2,200,000.00
Total noncurrent N/R - 12/31/2021 6,700,000.00
 Prob 6-9
last interest payment was made on Nov 1, 2021
the Nov and Dec is unpaid as of Dec 31, 2021
2 months of interest is receivable
(2/12)(12%)(500,000) 10,000.00
no principal payment have yet been made

Prob 6-10
N/R june 31, 2021 1,500,000.00 1
payment on july 1, 2022 (500,000.00)
balance of NR on July 1, 2022 1,000,000.00

2
Accrued int. receivable 6/30/2022
(1,000,000 x 8%) 80,000.00
 Prob 6-11
N/R from Hart Co. 1,000,000.00 N/R
(current asset at FV) PV(4,000,000 x 0.75)
N/R from Maxx Co. 680,000.00 Unearned
(1,000,000 x 0.680) 2021
CA of NR 1,680,000.00 31-Dec PV
(3,000,000 x 10%)

Total payments (500,900 x 5) 2,504,500.00 2022

PV of note (1,948,500.00) 31-Dec PV
total int. revenue 556,000.00 int. rev. (3,300,000 x 10%)

int. revenue for current year 111,200.00 Prob 6-12

(556,000/5) N/R
PV(6,000,000 x 0.75)
Unearned

1 PV
int. rev. 2021 (4,500,000 x 10%)

2 N/R
CA
gain
 Prob 6-13 Prob 6-14
4,000,000.00 1 3,000,000 x 3/12 x 8% (Jan. 1 - Mar. 1, 2021) 60,000.00 1
(3,000,000.00) 1,000,000 x 10/12 x 6% (Jan. 1 - Oct. 31, 2021) 50,000.00
1,000,000.00 int. inc. 2021 110,000.00

3,000,000.00 2 A/R 5,100,000.00 2

300,000.00 Credit sales 21,000,000.00
Cash Collection (18,000,000.00)
Writeoff (600,000.00) 3
3,300,000.00 A/R 7,500,000.00
330,000.00 doubt. Acc. Exp. 750,000.00
(7,500,000 x 10%) 4

6,000,000.00
(4,500,000.00)
1,500,000.00

4,500,000.00
450,000.00

6,000,000.00
4,800,000.00
1,200,000.00
 Prob 6-15 Prob 6-16
600,000.00 1 FV 2,500,000.00 1
PV (600,000 x 4.36) 2,616,000.00 PV (500,000 x 3.99) 1,995,000.00
sales rev. jan, 2021 3,216,000.00 gain 505,000.00 2

CA of NR Jan 1, 2021 2,616,000.00 2 PV 1,995,000.00 3

(600,000 x 4.36) Int. inc. 2022 159,600.00
(1,995,000 x 8%)
Int. Inc. 2021 261,600.00 4
(2,616,000 x 10%) 3 (2,500,000 - 500,000) 2,000,000.00
(505,000 - 159,600) 345,400.00
CA of NR Dec. 31, 2021 2,877,600.00 CA of NR Dec. 31, 2022 1,654,600.00
(2,616,000 + 261,000)
4 Int. Inc. 2023 132,368.00
(1,654,600 x 8%)
 Prob 6-17 Prob 6-18
FV 5,000,000.00 1 cash received 1,000,000.00 1
PV (500,000 x 5.65) 2,825,000.00 PV (1,000,000 x 6.25) 6,250,000.00
gain 2,175,000.00 sales rev. 7,250,000.00

Int. Inc. 2022 339,000.00 2 CA - 12/31/2021 6,250,000.00 2

(2,825,000 x 12%)
3 int. Inc 2022 500,000.00
(5,000,000 - 500,000) 4,500,000.00 (6,250,000 x 8%)
gain (2,175,000.00)
CA of NR Dec. 31, 2022 2,325,000.00 4 CA - 12/31/2021 6,250,000.00
int. Inc 2022 500,000.00
CA - 12/31/2022 6,750,000.00 3

4
PV(1,000,000 x 0.712) 712,000.00
CA (800,000.00)
loss (88,000.00)

int. inc. 85,440.00

(712,000 x 12%)

NR 1,000,000.00
PV (712,000.00)
Unearned Int. Inc. 288,000.00

NR 1,000,000.00
Unearned Int. Inc.
(288,000 - 85,440) (202,560.00)
CA - 12/31/2021 797,440.00

Int. Inc. 2020

(797,440 x 12%) 95,692.80
Prob 7-1 Prob 7-3
2021
1-Jan LR 4,000,000.00
Cash 4,000,000.00

Cash 342,100.00
U Int. Inc. 342,100.00

U Int. Inc. 150,000.00

Cash 150,000.00

31-Dec Cash 400,000.00

Int. Inc. 400,000.00 4,000,000.00
150,000.00
U Int. Inc. 150,000.00 (342,100.00)
Int. Inc. 150,000.00 3,807,900.00

date Int. Rec. Int. Inc. Amort. CA

1/1/2021 3,807,900.00 Prob 7-4
12/31/2021 400,000.00 456,948.00 56,948.00 3,864,848.00
12/31/2022 400,000.00 463,781.76 63,781.76 3,928,629.76
12/31/2023 400,000.00 471,370.24 71,370.24 4,000,000.00
2022
31-Dec Cash 400,000.00
Int. Inc. 400,000.00

U Int. Inc. 63,781.76

Int. Inc. 63,781.76
2023
31-Dec Cash 400,000.00
Int. Inc. 400,000.00

U Int. Inc. 71,370.24

Int. Inc. 71,370.24

Cash 4,000,000.00
LR 4,000,000.00

Prob 7-2
DOF 350,000.00
 DOC (61,500.00)
unearned int. inc. 288,500.00

1 NR 4,000,000.00
unearned int. inc. (288,500.00)
CA 1/1/2021 3,711,500.00

2
date Int. Rec. Int. Inc. Amort. CA
1/1/2021 3,711,500.00
12/31/2021 400,000.00 445,380.00 45,380.00 3,756,880.00
12/31/2022 400,000.00 450,825.60 50,825.60 3,807,705.60
12/31/2023 400,000.00 456,924.67 56,924.67 3,864,630.27
12/31/2024 400,000.00 463,755.63 63,755.63 3,928,385.90
12/31/2025 400,000.00 471,614.10 71,614.10 4,000,000.00

3
2021
1-Jan LR 4,000,000.00
Cash 4,000,000.00

Cash 350,000.00
U Int. Inc. 350,000.00

U Int. Inc. 61,500.00

Cash 61,500.00

31-Dec Cash 400,000.00

Int. Inc. 400,000.00

U Int. Inc. 45,380.00

Int. Inc. 45,380.00

2022 Cash 400,000.00

Int. Inc. 400,000.00

U Int. Inc. 50,825.60

Int. Inc. 50,825.60
 Prob 7-5
LR 3,000,000.00 1
DOC 260,300.00 12/31/2022 1,000,000 x .93 930,000.00
DOF (100,000.00) 12/31/2023 2,000,000 x .86 1,720,000.00
CA 1/1/2021 3,160,300.00 12/31/2024 3,000,000 x .79 2,370,000.00
PV 5,020,000.00
Int. rec 240,000.00
(3,000,000 x 8%) LR 6,000,000.00
Int. Inc. (189,618.00) Accrued Int. (6,000,000 x 8%) 480,000.00
(3,160,300 x 6%) CA 6,480,000.00
amort. 50,382.00 PV (5,020,000.00)
Impairment loss 11,500,000.00
CA 1/1/2021 3,160,300.00
amort. (50,382.00)
CA 12/31/2021 3,109,918.00
LR 3,000,000.00
DOC 109,918.00

LR 5,000,000.00
DOC 457,500.00
DOF (200,000.00)
CA 1/1/2021 5,257,500.00

Int. rec 500,000.00

(5,000,000 x 10%)
Int. Inc. 420,600.00
(5,257,500 x 8%)
amort. 920,600.00

CA 1/1/2021 5,257,500.00
amort. 920,600.00
CA 12/31/2021 6,178,100.00
LR 5,000,000.00
DOC 1,178,100.00
Prob 7-6 Prob 7-7
1 1
12/31/2023 500,000 x 0.89 445,000.00 12/31/2022 no interest payment
12/31/2024 1,000,000 x 0.80 800,000.00 12/31/2023 no interest payment
12/31/2025 2,000,000 x 0.71 1,420,000.00 12/31/2024 360,000 x 0.772
12/31/2026 4,000,000 x 0.64 2,560,000.00 12/31/2025 360,000 x 0.708
PV 5,225,000.00 12/31/2026 360,000 x 0.650
12/31/2027 4,360,000 x 0.596
LR 7,500,000.00 PV
Accrued Int. (7,500,000 x 12%) 900,000.00
CA 8,400,000.00 FV
PV (5,225,000.00) PV
Impairment loss 3,175,000.00 Impairment loss
 Prob 7-8
2021 CA - 12/31/2021 3,000,000.00 1-Jan
- PV of expected cash flows 12/31/2021
- (3,000,000 x 90% x 0.65) (1,755,000.00) 31-Dec
277,920.00 Expected credit loss 1,245,000.00
254,880.00 12 month probability of default 2%
234,000.00 12 month expected credit loss allow. 24,900.00
2,598,560.00
3,365,360.00 2022 CA - 12/31/2022 3,000,000.00 31-Dec
PV of expected cash flows 12/31/2022
4,000,000.00 (3,000,000 x 60% x 0.71) (1,278,000.00)
(3,365,360.00) Expected credit loss 1,722,000.00
634,640.00 Probability of default within 4 years 30%
lifetime expected credit loss allow. 516,600.00
Unadjusted allowance (24,900.00)
Impairment loss 491,700.00

2023 CA - 12/31/2023 3,000,000.00 31-Dec

PV of expected cash flows 12/31/2023
(3,000,000 x 40% x 0.77) (924,000.00)
Expected credit loss 2,076,000.00
lifetime expected credit loss allow. (516,600.00)
Impairment loss 1,559,400.00

LR 3,000,000.00
Allow. For loan impairment (24,900.00)
CA - 12/31/2021 2,975,100.00

LR 3,000,000.00
Allow. For loan impairment (516,600.00)
CA - 12/31/2021 2,483,400.00

LR 3,000,000.00
Allow. For loan impairment
(516,600 - 240,600) (276,000.00)
CA - 12/31/2021 2,724,000.00
 Prob 7-9
LR 3,000,000.00 1 Principal Amount 5,000,000.00
3,000,000.00 Unearned Int. Inc.
Cash 270,000.00 (340,000 - 100,000) (240,000.00)
Int. Inc. 270,000.00 CA - 1/1/2021 4,760,000.00
Impairment loss 24,900.00
Allow for imp. Loss 24,900.00 2 Int. Inc
(4,760,000 x 12%) 571,200.00
Cash 270,000.00 Int. Rec. 500,000.00
Int. Inc. 270,000.00 Amort. 71,200.00

Impairment loss 491,700.00 3 LR - 12/31/2021 5,000,000.00

Allow for imp. Loss 491,700.00 Unearned Int. Inc.
(240,000 - 71,200) (168,800.00)
CA - 12/31/2021 4,831,200.00

Cash 270,000.00
Int. Inc. 270,000.00

Impairment loss 1,559,400.00

Allow for imp. Loss 240,600.00
LR 1,800,000.00
Prob 7-10 Prob 7-12
1 NR 1,500,000.00 1/1/2022
DOC 40,000.00 1/1/2023 1,000,000 x 0.93
Total 1,540,000.00 1/1/2024 1,000,000 x 0.86
Nonrefundable origination fee PV
(1,500,000 x 4%) (60,000.00)
CA 1,480,000.00 1 LR
PV
Impairment loss
Prob 7-11
2 LR
Collect on 1/1/2022
LR - 1/1/2022
Allow. For loan impair.
CA - 1/1/2022

Int. Inc. 2022

(1,790,000 x 8%)

3 LR - 12/31/2022
allow. For imp. 12/31/20222
(210,000 - 143,200)
CA - 12/31/2022
 Prob 7-13 Prob 7-14
1,000,000.00 12/31/2023 1,500,000 x 0.89 1,335,000.00 1
930,000.00 12/31/2024 2,000,000 x 0.80 1,600,000.00
860,000.00 12/31/2025 2,500,000 x 0.71 1,775,000.00
2,790,000.00 12/31/2026 3,000,000 x 0.64 1,920,000.00
PV 6,630,000.00
3,000,000.00
2,790,000.00 1 LR 9,000,000.00 2
210,000.00 Accrued Int. Rec.
(9,000,000 x 12%) 1,080,000.00
3,000,000.00 CA - 12/31/2022 10,080,000.00
(1,000,000.00) PV (6,630,000.00) 3
2,000,000.00 Impairment loss 3,450,000.00
(210,000.00)
1,790,000.00 2 Int. Inc 2023
(6,630,000 x 12%) 795,600.00

143,200.00 3 LR - 12/31/2023 7,500,000.00

allow for imp. 12/31/2023
2,000,000.00 (2,370,000 - 795,600) (1,574,400.00)
CA - 12/31/2023 5,925,600.00
(66,800.00)
1,933,200.00
 Prob 7-15
PV of principal (5,000,000 x 0.75) 3,750,000.00 1 PV of principal (5,000,000 x 0.57)
PV of Interest (200,000 x 2.49) 498,000.00 PV of interest (5,000,000 x 10% x 3.60)
PV 4,248,000.00 Cash paid to borrower or PV
CA 5,000,000.00
Impairment loss 752,000.00 Principal
PV
Int. Inc 2022 (4,248,000 x 10%) 424,800.00 Unearned Int. Inc.
Int. Rec. (5,000,000 x 4%) (200,000.00)
amort 224,800.00
12/31/2021
LR - 12/31/2022 5,000,000.00 12/31/2022
allow for imp (752,000 - 224,800) (527,200.00) 12/31/2023
CA - 12/31/2022 4,472,800.00 2 LR
Unearned Int. Inc.
(350,000 - 58,000 - 64,960)
CA - 12/31/2023

3 PV of principal (3,000,000 x 0.71)

PV of interest (500,000 x 2.40)
PV
CA - 12/31/2023
Impairment loss
2,850,000.00
1,800,000.00
4,650,000.00

5,000,000.00
4,650,000.00
350,000.00

5,000,000.00

(227,040.00)
4,772,960.00

2,130,000.00
1,200,000.00
3,330,000.00
4,772,960.00
1,442,960.00
Prob 8-1
1-Mar Cash 2,000,000.00
N/P - Bank

1-Apr Cash 980,000.00

Sales Discount 20,000.00
A/R

1-Jun Cash 2,000,000.00

A/R

1-Sep N/P - Bank 2,000,000.00

Int. Exp. (12% x 2,000,000 x 6/12)
Cash

Prob 8-2
2021
1-Oct Cash 3,600,000.00
Discount on N/P (10% x 4,000,000) 400,000.00
N/P - Bank

Int. exp. (400,000 x 3/12) 100,000.00

Discount on N/P

2022
1-Oct N/P - Bank 4,000,000.00
Cash

31-Dec Int. exp. 300,000.00

Discount on N/P

Req. 2
Current Liab:
N/P - Bank (Note 3)
Discount on N/P
CA

Note 3 N/P - Bank

Accounts of 5,000,000 are pledged to secure the bank loan of 4,000,000.
 Prob 8-3 Prob 8-14
1-May A/R - assigned 800,000.00 1
2,000,000.00 A/R 800,000.00
Cash (640,000 - 20,000) 620,000.00
Service Charge 20,000.00
N/P - Bank 640,000.00 2
1,000,000.00
5-May Sales return 30,000.00
A/R - assigned 30,000.00
2,000,000.00
10-May Cash 490,000.00
Sales Discount (2% x 500,000) 9,800.00 3
120,000.00 A/R - Assigned 500,000.00
1,880,000.00
1-Jun N/P - Bank 490,000.00
Int. Exp. (2% x 640,000) 12,800.00
Cash 502,800.00

7-Jun Allow. For doubtful acc 10,000.00

4,000,000.00 A/R - assigned 10,000.00

20-Jun Cash 200,000.00

100,000.00 A/R - assigned 200,000.00

1-Jul N/P - Bank (640,000 - 490,000) 150,000.00

Int. Exp. (2% x 150,000) 3,000.00
4,000,000.00 Cash 153,000.00
A/R 60,000.00
A/R - assigned 60,000.00
300,000.00
A/R - assigned 800,000.00
less: collections 690,000.00
Sales discount 10,000.00
Sales return 30,000.00
worthless acc 10,000.00 740,000.00
Balance 60,000.00
 Prob 8-15
N/P 4,000,000.00 1
Finance fee (5% x 5,000,000) (250,000.00)
Cash received dec 1 2021 3,750,000.00

N/P 4,000,000.00
Principal payment:
Remittance 1,800,000.00 2
Interest (4,000,000 x 12% x 1/12) (40,000.00) 1,760,000.00
N/P dec 31 2021 2,240,000.00

A/R - assigned 5,000,000.00 Prob 8-16

collections (1,800,000.00)
sales discounts (200,000.00)
sales returns (100,000.00)
accounts written off (300,000.00)
bal of acc assigned 2,600,000.00
N/P (2,240,000.00)
equity in assigned accounts 360,000.00
 Prob 8-17
A/R 8,000,000.00 1 A/R
Factors fee (5% x 8,000,000) (400,000.00) Factors fee (2% x 750,000)
Factors holdback (10% x 8,000,000) (800,000.00) Factors holdback (4% x 750,000)
Interest (8,000,000 x 15% x 30/365) (98,630.14) interest (750,000 x 12% x 51/365)
Cash initially received from factoring 6,701,369.86 Cash received

Factoring fee 400,000.00 2 Factors fee

Interest 98,630.14 interest
Total loss on factoring 498,630.14 Recourse obligation
loss on factoring

Commission (5% x 2,000,000) 100,000.00 Prob 8-18

Recourse obligation 50,000.00 1 A/R
Loss on factoring 150,000.00 Factors charged (15% x 6,000,000)
Factors Heldback (10% x 6,000,000)
Cash received

2 Factors charged
 Prob 8-19 Prob 8-20
750,000.00 1 A/R 6,000,000.00 1
(15,000.00) Factors fee (3% x 6,000,000) (180,000.00)
(30,000.00) Factors holdback (5% x 6,000,000) (300,000.00)
(12,575.34) interest (6,000,000 x 15% x 54/365) (133,150.68)
692,424.66 Cash received 5,386,849.32

15,000.00 2 Factors fee 180,000.00 2

12,575.34 interest 133,150.00
20,000.00 loss on factoring 313,150.00
47,575.34
3 Factors fee 180,000.00 3
interest 133,150.00
6,000,000.00 Recourse obligation 100,000.00
(900,000.00) loss on factoring 413,150.00
(600,000.00)
4,500,000.00

900,000.00
cash received from factoring 1,400,000.00
cash received from assignment:
Loan 2,500,000.00
Finance charge (2% x 2,500,000) (50,000.00) 2,450,000.00
cash received 3,850,000.00

A/R - unassigned 1,000,000.00

A/R - assigned 5,000,000.00
Total A/R 6,000,000.00

Required allow. (10% x 6,000,000) 600,000.00

allow for bad debts (100,000.00)
bad debts 2021 500,000.00
Prob 9-1 Prob 9-3
1-Jan N/R 500,000.00 req. a
Sales 500,000.00 5-Apr

1-Mar Cash 503,500.00

Loss on note disc. 6,500.00 19
N/R 500,000.00
Int. Inc. 10,000.00

Principal 500,000.00
Interest (500,000 x 12% x 6/12) 30,000.00
Maturity Value 530,000.00
Discount (530,000 x 15% x 4/12) (26,500.00)
Net proceeds 503,500.00

Principal 500,000.00
Accrued Int. Rec. (500,000 x 12% x 2/12) 10,000.00
CA of N/R 510,000.00

Net proceeds 503,500.00

CA of N/R (510,000.00)
Loss on note discounting (6,500.00)

1-Jul no entry
3-May
Prob 9-2
14-Mar A/R 2,050,000.00
Sales 2,050,000.00 16

7-Apr N/R 2,000,000.00

Freight out 50,000.00
A/R 2,050,000.00

20-Apr Cash 2,001,750.00

Loss on discounting 8,250.00
N/R discounted 2,000,000.00 25
Int. Inc. 10,000.00

Principal 2,000,000.00
Interest (2,000,000 x 12% x 60/360) 40,000.00
Maturity Value 2,040,000.00
Discount (2,040,000 x 15% x 45/360) (38,250.00)
Net proceeds 2,001,750.00

Principal 2,000,000.00
Accrued Int. Rec. (2,000,000 x 12% x 15/360) 10,000.00 7-Jun
CA of N/R 2,010,000.00

Net proceeds 2,001,750.00

CA of N/R (2,010,000.00)
Loss on note discounting (8,250.00) 15

18

req. b
1

2
 Prob 9-4
1-May
N/R 500,000.00
A/R 500,000.00

Cash 501,075.00
Loss on note discounting 1,425.00
NR discounted 500,000.00 30-Jul
Int. Inc. 2,500.00

Principal 500,000.00
Interest (500,00 x 12% x 60/360) 10,000.00 1-Aug
Maturity Value 510,000.00
Discount (510,000 x 14% x 45/360) (8,925.00)
Net proceeds 501,075.00

Principal 500,000.00
Accrued Int. Rec. (500,000 x 12% x 15/360) 2,500.00
CA of NR 502,500.00

Net proceeds 501,075.00

CA of NR (502,500.00)
Loss on discounting (1,425.00)

NR 1,000,000.00
AR 1,000,000.00

Cash 995,000.00
Loss on discounting 5,000.00
NR discounted 1,000,000.00
1-Sep
Principal 1,000,000.00
Discount (1,000,000 x 12% x 15/360) (5,000.00)
Net Proceeds 995,000.00
28
NR 1,500,000.00
Int. Inc. 4,500.00
AR 1,504,500.00
1-Oct
principal 1,500,000.00
interest (1,500,000 x 12% x 60/360) 30,000.00
Maturity value 1,530,000.00 1-Nov
discount (1,530,000 x 12% x 50/360) (25,500.00)
Net credit 1,504,500.00

AR (510,000 + 20,000) 530,000.00

Cash 530,000.00
NR discounted 500,000.00 30-Dec
NR 500,000.00

NR 800,000.00
Sales 800,000.00 31

Cash 532,650.00
AR 530,000.00
Int. Inc. (530,000 x 12% x 15/360) 2,650.00

adjustments on june 30
Accrued int. rec. 4,000.00
Int Inc (800,000 x 12% x 15/360) 4,000.00

NR discounted 1,000,000.00
NR 1,000,000.00
 Prob 9-5
NR 200,000.00 1
AR 200,000.00

NR 300,000.00
AR 300,000.00

AR 206,000.00
NR 200,000.00
Int inc (200,000 x 12% x 90/360) 6,000.00

Cash 306,075.00
Loss on note discounting 2,925.00
NR discounted 300,000.00
Int inc 9,000.00

principal 300,000.00
Interest (300,000 x 12% x 6/12) 18,000.00
Maturity value 318,000.00
discount (318,000 x 15% x 3/12) (11,925.00)
net proceeds 306,075.00 2

principal 300,000.00
Accrued int rec (300,000 x 12% x 3/12) 9,000.00 Prob 9-6
CA of NR 309,000.00 1-Jan

Net proceeds 306,075.00

CA of NR (309,000.00)
loss on discounting (2,925.00) 1-Apr

NR 132,000.00
AR 120,000.00
Int. Inc 12,000.00

Cash 210,120.00
AR 206,000.00
Int inc (206,000 x 12% x 60/360) 4,120.00

NR 500,000.00
Sales 500,000.00
AR (318,000 + 12,000) 330,000.00
Cash 330,000.00

NR discounted 300,000.00
NR 300,000.00

Cash 515,000.00 1-Oct

NR 500,000.00
int inc (500,000 x 12% x 90/360) 15,000.00
1
Cash 336,000.00
AR 330,000.00
int inc (330,000 x 12% x 2/12) 6,000.00 31-Dec
 Prob 9-7
Cash 5,021,250.00 req 1
Int exp 28,750.00 1-Jun
Liab for NR discounted 5,000,000.00
Int inc 50,000.00
1-Jul
principal 5,000,000.00
int (5,000,000 x 12% x 90/360) 150,000.00
MV 5,150,000.00
Discount (5,150,000 x 15% x 60/360) (128,750.00)
net proceeds 5,021,250.00

principal 5,000,000.00
accrued int rec (5,000,000 x 12% x 30/360) 50,000.00
CA of NR 5,050,000.00

net proceeds 5,021,250.00

CA of NR (5,050,000.00)
loss on discounting (28,750.00)

liab for NR discounted 5,000,000.00

NR 5,000,000.00

NR 2,000,000.00
Land 1,500,000.00
gain on sale of land 500,000.00
16-Jul
Cash 2,021,000.00
int exp 29,000.00
Liab for NR discount 2,000,000.00
int inc 50,000.00

principal 2,000,000.00
int (2,000,000 x 10% x 9/12) 150,000.00
MV 2,150,000.00
discount (2,150,000 x 12% x 6/12) (129,000.00)
net proceeds 2,021,000.00

principal 2,000,000.00
accrued int rec (2,000,000 x 10% x 3/12) 50,000.00
CA of NR 2,050,000.00

net proceeds 2,021,000.00

CA of NR (2,050,000.00)
loss on discounting (29,000.00)
30-Aug
AR 2,160,000.00
Cash (2,150,000 + 10,000) 2,160,000.00

liab of NR discounted 2,000,000.00

NR 2,000,000.00

Cash 2,224,800.00
AR 2,160,000.00
Int inc (2,160,000 x 12% x 3/12) 64,800.00 30-Dec

req 2
1-Jun

1-Jul

16

30-Aug

30

30
30-Dec
 Prob 9-8
1
NR 5,000,000.00
Sales 5,000,000.00

NR 6,000,000.00
AR 6,000,000.00
2
Cash 5,047,000.00
int exp 3,000.00
liab for NR discounted 5,000,000.00
Int inc 50,000.00

principal 5,000,000.00
int (5,000,000 x 12% x 90/360) 150,000.00
MV 5,150,000.00 Prob 9-9
dis (5,150,000 x 12% x 60/360) (103,000.00) 1
net proceeds 5,047,000.00

principal 5,000,000.00
accrued int rec (5,000,000 x 12% x 30/360) 50,000.00 2
CA of NR 5,050,000.00

net proceeds 5,047,000.00

CA of NR (5,050,000.00)
int exp or loss on discounting (3,000.00)

Cash 6,008,500.00
int exp 16,500.00
liab for NR discounted 6,000,000.00
Int inc 25,000.00

principal 6,000,000.00
int (6,000,000 x 10% x 60/360) 100,000.00
MV 6,100,000.00
dis (6,100,000 x 12% x 45/360) (91,500.00)
net proceeds 6,008,500.00

principal 6,000,000.00
accrued int rec (6,000,000 x 12% x 15/360) 25,000.00
CA of NR 6,025,000.00

net proceeds 6,008,500.00

CA of NR (6,025,000.00)
int exp or loss on discounting (16,500.00)

liab for NR discounted 6,000,000.00

NR 6,000,000.00

AR 5,170,000.00
Cash (5,150,000 + 20,000) 5,170,000.00

liab for NR discounted 5,000,000.00

NR 5,000,000.00

Cash 5,376,800.00
AR 5,170,000.00
int inc (5,170,000 x 12% x 4/12) 206,800.00

NR 5,000,000.00
Sales 5,000,000.00

NR 6,000,000.00
AR 6,000,000.00

Cash 5,047,000.00
loss on discounting 3,000.00
liab for NR discounted 5,000,000.00
Int inc 50,000.00

Cash 6,008,500.00
int exp 16,500.00
liab for NR discounted 6,000,000.00
Int inc 25,000.00

NR discounted 6,000,000.00
NR 6,000,000.00

AR 5,170,000.00
Cash 5,170,000.00

NR discounted 5,000,000.00
NR 5,000,000.00
Cash 5,376,800.00
AR 5,170,000.00
int inc 206,800.00
 Prob 9-10
principal 500,000.00 1
int (500,000 x 8%) 40,000.00
MV 540,000.00
dis (540,000 x 10% x 6/12) (27,000.00)
net proceeds 513,000.00

principal 500,000.00 2
accrued int rec (500,000 x 8% x 6/12) 20,000.00
CA of NR 520,000.00

net proceeds 513,000.00

CA of NR (520,000.00)
loss on NR discounting (7,000.00) Prob 9-11
1

principal 2,000,000.00
dis (2,000,000 x 10% x 6/12) (100,000.00)
net proceeds 1,900,000.00

principal 2,000,000.00 2
net proceeds (1,900,000.00)
loss 100,000.00

0
 Prob 9-12
principal 4,000,000.00 1 Principal
int (4,000,000 x 12% x 90/360) 120,000.00 int (1,000,000 x 8% x 6/12)
MV 4,120,000.00 MV
dis (4,120,000 x 15% x 60/360) (103,000.00) disc (1,040,000 x 10% x 6/12)
net proceeds 4,017,000.00 net proceeds

principal 4,000,000.00 2 Principal

accrued int rec (4,000,000 x 12% x 30/360) 40,000.00 net proceeds
CA of NR 4,040,000.00 loss
net proceeds (4,017,000.00)
loss on NR discounting 23,000.00 Prob 9-13
1 Principal
int (1,000,000 x 10% x 6/12)
principal 6,000,000.00 MV
int (6,000,000 x 10% x 6/12) 300,000.00 disc (550,500 x 12% x 6/12)
MV 6,300,000.00 net proceeds
dis (6,300,000 x 12% x 4/12) (252,000.00)
net proceeds 6,048,000.00 2 MV
net proceeds
principal 6,000,000.00 loss
accrued int rec (6,000,000 x 10% x 2/12) 100,000.00
CA of NR 6,100,000.00
net proceeds (6,048,000.00)
loss on NR discounting 52,000.00
 Prob 9-14
1,000,000.00 1 Principal 4,000,000.00
40,000.00 int (4,000,000 x 10%) 400,000.00
1,040,000.00 MV 4,400,000.00
(52,000.00) disc (1,040,000 x 10% x 6/12) (220,000.00)
988,000.00 net proceeds 4,180,000.00

1,000,000.00 Prob 9-15

(988,000.00) 1 Principal 5,000,000.00
12,000.00 int (5,000,000 x 10.8%) 540,000.00
MV 5,540,000.00
disc (1,040,000 x 10% x 6/12) (277,000.00)
500,000.00 net proceeds 5,263,000.00
50,000.00
550,000.00
(33,000.00)
517,000.00

550,000.00
(517,000.00)
33,000.00
Prob 10-1
items counted in the bodega 4,000,000.00
items included in the count specifically segregated per sales contract (100,000.00)
items returned by customer 50,000.00
items ordered and in receiving department 400,000.00
items shipped today, FOB destination 150,000.00
items for display 200,000.00
items on counter for sale 800,000.00
damaged and unsalable items included in count (50,000.00)
items in shipping department 250,000.00
inventory 5,700,000.00

deduct
items included in the count specifically segregated per sales contract
damaged and unsalable items included in count

ignore
items ordered, invoice received but goods not received. freight is paid by seller
items shipped today, invoive mailed, FOB shipping point
items in receiving department, refused by us because of damage
Prob 10-2 Prob 10-4
materials 1,400,000.00 req a
goods in process 650,000.00
finished goods in factory 2,000,000.00 1
finished goods in company-owned retail store (750,000/150%) 500,000.00
finished goods in the hands of consignees (400,000 x 60%) 240,000.00
finished goods in transit FOB destination at cost 250,000.00 2
finished goods put on approval 100,000.00
materials in transit (330,000 + 30,000) 360,000.00
correct inventory 5,500,000.00 3

deduct -
ignore 4
advance for materials ordered
unexpired insurance on inventories
advertising catalogs and shipping cartons
Unsalable finished goods, at cost
office supplies
goods held on consignment, at sales price, cost 150,000 5

Prob 10-3
finished goods 2,000,000.00
finish goods held by salesmen 100,000.00
goods in process (720,000/80%) 900,000.00
materials 1,000,000.00 6
defective materials returned to suppliers for replacement 100,000.00
gasoline and oil for testing finished goods 110,000.00
machine lubricants 60,000.00 7
correct inventory 4,270,000.00

deduct -
ignore
finished goods in transit, including freight charge, FOB shipping point
materials in transit, FOB destination
shipping supplies req b
Prob 10-5
a

b
 periodic system
purchases (800 x 1,000) 800,000.00 Merch. Inv.
AP 800,000.00 AP

AP (50 x 1,000) 50,000.00 AP

Purchase returns 50,000.00 Merch. Inv.

AP (600 x 1,000) 600,000.00 AP

Cash 600,000.00 Cash

AR (790 x 2,000) 1,580,000.00 AR

Sales 1,580,000.00 Sales

cost of sales (790 x 1,000)

merch. Inv.

sales return (20 x 2,000) 40,000.00 sales return

40,000.00 AR

merch inv (20 x 1,000)

cost of sales

cash (680 x 2,000) 1,360,000.00 cash

AR 1,360,000.00 AR

inv. Dec 31 60,000.00 inv. Shortage

inc summary 60,000.00 merch. Inv.
(60 x 1,000)
merch inv per book
physical count
shortage

periodic system
inv jan 1 90,000.00 cost of sales recorded (790,000 - 20,000)
purchases 800,000.00 inv shortage
purchase returns (50,000.00) 750,000.00 adjusted cost of sales
goods available for sale 840,000.00
inv dec 31 (60,000.00)
cost of sales 780,000.00
list price 500,000.00
1st trade disc. (20% x 500,000) (100,000.00)
400,000.00
2nd trade disc. (10% x 400,000) (40,000.00)
360,000.00
3rd trade disc. (10% x 360,000) (36,000.00)
invoice price 324,000.00
cash discount (2% x 324,000) (6,480.00)
payment within the discount period 317,520.00

list price 500,000.00

trade discount (35% x 500,000) (175,000.00)
invoice price 325,000.00
cash discount (2% x 325,000) (6,500.00)
payment within the discount period 318,500.00
 Prob 10-6
gross method
perpetual system 1 purchases 4,750,000.00
800,000.00 AP
800,000.00 2 freight in 250,000.00
cash
50,000.00 3 AP 1,650,000.00
50,000.00 Cash
purchase discount
600,000.00 AP (3,717,000 - 1,617,000) 2,100,000.00
600,000.00 cash

1,580,000.00
1,580,000.00 4 no entry

790,000.00
790,000.00 5 inventory 1,000,000.00
inc summary
40,000.00
40,000.00

20,000.00 req b gross method

20,000.00 purchases 4,750,000.00
freight in 250,000.00
1,360,000.00 total 5,000,000.00
1,360,000.00 purchase discounts (33,000.00)
goods available for sale 4,967,000.00
10,000.00 inv. Dec 31 (1,000,000.00)
10,000.00 cost of sales 3,967,000.00

70,000.00 ending inv.

(60,000.00) gross (5,000,000/5) 1,000,000.00
10,000.00 net (4,905,000/5)

Prob 10-7
perpetual system gross method
ded (790,000 - 20,000) 770,000.00 1 merch inv 1,000,000.00
10,000.00 AP
780,000.00 2 AP 50,000.00
cash
3 AP 8,000,000.00
Cash
 cost of sales

4 AP (3,717,000 - 1,617,000) 150,000.00

cash

4 no entry

5 inventory 1,000,000.00
inc summary
 Prob 10-8
net method 1
purchases 4,655,000.00
4,750,000.00 AP 4,655,000.00
freight in 250,000.00 2
250,000.00 cash 250,000.00
AP 1,617,000.00
1,617,000.00 Cash 1,617,000.00 3
33,000.00
AP 2,058,000.00
2,100,000.00 purchase discount loss 42,000.00
cash 2,100,000.00

purchase discount loss 20,000.00 4

AP (1,000,000 x 2%) 20,000.00

inventory 981,000.00 5
1,000,000.00 inc summary 981,000.00
invoices:

net method
4,655,000.00
250,000.00
4,905,000.00
-
4,905,000.00
(981,000.00)
3,924,000.00

981,000.00

net method
purchases 4,655,000.00
1,000,000.00 AP 4,655,000.00
freight in 250,000.00
50,000.00 cash 250,000.00
AP 1,617,000.00
784,000.00 Cash 1,617,000.00
 16,000.00
AP 2,058,000.00
purchase discount loss 42,000.00
150,000.00 cash 2,100,000.00

purchase discount loss 20,000.00

AP (1,000,000 x 2%) 20,000.00

inventory 981,000.00
1,000,000.00 inc summary 981,000.00
 Prob 10-9
inv 50,000.00
inc sum 50,000.00

AP 75,000.00
purchases 75,000.00
Prob 10-10
purchases 30,000.00
AP 30,000.00

inv 30,000.00
inc sum 30,000.00
Prob 10-11
inc sum 90,000.00
inv 90,000.00

purchases 140,000.00
AP 140,000.00

FOB shipping inv

not included in inventory inc sum

FOB destination AP
not included in inventory purchases

FOB shipping purchases

excluded from inventory AP

inv
inc sum

FOB shipping inc sum

included in the inventory inv

FOB destination purchases

included in inventory AP

deduct -
FOB shipping
included in the inventory
ignore
materials 700,000.00
irrecoverable purchase taxes 60,000.00
inventory 760,000.00

purchased goods FOB destination 500,000.00

The shipping costs from overseas are inventory costs. Three quarters of the inventory
was sold while one quarter remains; thus three quarters of the shipping costs from
overseas have already been included in Cost of Goods Sold while one quarter,
$375,000, remains in ending inventory ((1/4) X 1.5 million = 375,000). The shipping
costs to export customers are selling costs and are not included in inventory

375,000.00

ignore
storage costs of finished goods
delivery to customers
packaging for shipment
shipping
special handling charges
Prob 10-12
inventory shipped on consignment to a consignee 600,000.00
freight paid 50,000.00
consigned inventory 650,000.00

deduct -
ignore
inventory received on consignment from a consignor
freight paid by consignor

Prob 10-13

Prob 10-14

list price 900,000.00

1st trade discount (900,000 x 20%) (180,000.00)
720,000.00
2nd trade discount (720,000 x 10%) (72,000.00)
Invoice price 648,000.00
freight 50,000.00
698,000.00
Prob 10-15 Prob 10-23
 Prob 10-26
Physical count 4,410,000.00
goods sold in transit, FOB destination 380,000.00
Goods purchased in transit, FOB shipping point 510,000.00
Adjusted inventory 5,300,000.00
 Prob 10-27
inventory before adjustment 7,600,000.00
goods purchased FOB shipping point 250,000.00
goods sold FOB shipping point (850,000.00)
goods sold FOB destination 260,000.00
goods purchased FAS 350,000.00
goods sold FOB destination 840,000.00
correct dec 31 inventory 8,450,000.00
Prob 11-1
FIFO
20-Jan purchase (2,500 x 300) 750,000.00
25 purchase (2,000 x 400) 800,000.00
1,550,000.00

units unit cost inventory cost

1-Jan bal on hand 6,000.00 150.00 900,000.00
5 purchase 2,000.00 200.00 400,000.00
10 sale (4,000.00) 150.00 (600,000.00) jan 1 bal on hand
15 sale (1,000.00) 150.00 (150,000.00) jan 1 bal on hand
20 purchase 2,500.00 300.00 750,000.00
25 purchase 2,000.00 400.00 800,000.00
31 sale (1,000.00) 150.00 (150,000.00) jan 1 bal on hand
(2,000.00) 200.00 (400,000.00) jan 5 purchase
4,500.00 1,550,000.00

Prob 11-2
Prob 11-3
FIFO units unit cost total cost
17-Dec 10,000.00 45.00 450,000.00
20,000.00 43.00 860,000.00
30,000.00 1,310,000.00

units unit cost inventory cost

1-Dec beg 10,000.00 52.00 520,000.00
7 purchase 30,000.00 50.00 1,500,000.00
12 sale (10,000.00) 52.00 (520,000.00)
(10,000.00) 50.00 (500,000.00)
17 purchase 60,000.00 45.00 2,700,000.00
22 purchase 20,000.00 43.00 860,000.00
28 sale (20,000.00) 50.00 (1,000,000.00)
(50,000.00) 45.00 (2,250,000.00)
30,000.00 1,310,000.00

FIFO
goods available for sale 5,580,000.00
inventory dec 31 (1,310,000.00)
cost of goods sold 4,270,000.00

weighted ave
1-Dec 10,000.00 52.00 520,000.00
7 30,000.00 50.00 1,500,000.00
17 60,000.00 45.00 2,700,000.00
22 20,000.00 43.00 860,000.00
120,000.00 5,580,000.00
avail. for sale
inv (5,580,000/120,000) 30,000.00 46.50 1,395,000.00

goods avail for sale 5,580,000.00

inv dec 31 (1,395,000.00)
cost of goods sold 4,185,000.00

Prob 11-4
FIFO
units unit cost inventory cost
1-Mar beginning 1,000.00 270.00 270,000.00
6 purchase 3,000.00 250.00 750,000.00
14 purchase 6,000.00 280.00 1,680,000.00
25 purchase 4,000.00 210.00 840,000.00
9-Mar sale (1,000.00) 270.00 (270,000.00)
(1,000.00) 250.00 (250,000.00)
31 sale (2,000.00) 250.00 (500,000.00)
(6,000.00) 280.00 (1,680,000.00)
4,000.00 840,000.00

end inv 4,000.00 210.00 840,000.00

9-Mar sale 520,000.00
31-Mar sale 2,180,000.00
cost of goods sold 2,700,000.00

moving average units unit cost inventory cost

1-Mar beg 1,000.00 270.00 270,000.00
6 purchase 3,000.00 250.00 750,000.00
4,000.00 255.00 1,020,000.00
9 sale (2,000.00) (510,000.00)
2,000.00 510,000.00
14 purchase 6,000.00 280.00 1,680,000.00
8,000.00 273.75 2,190,000.00
25 purchase 4,000.00 210.00 840,000.00
12,000.00 252.50 3,030,000.00
31 sale (8,000.00) (2,020,000.00)
end inv 4,000.00 252.50 1,010,000.00

mov ave
end inv 4,000.00 252.50 1,010,000.00

mar 9 sale 510,000.00

mar 31 sale 2,020,000.00
cost of goods sold 2,530,000.00
weighted ave
end inv 4,000.00 252.50 840,000.00
 Prob 11-5
units unit cost
2019 purchases 5,000.00 50.00
sales (4,000.00) 50.00
2020 purchases 9,000.00 60.00
sales (1,000.00) 50.00
(6,000.00) 60.00
2021 purchases 15,000.00 75.00
sales (3,000.00) 60.00
dec 1 beg bal sales (9,000.00) 75.00
dec 7 purchase 6,000.00

purchases sales
dec 7 purchase 2019 5,000.00 4,000.00
dec 17 purchase 2020 9,000.00 7,000.00
2021 15,000.00 12,000.00
total inv dec 31,2021 (units)

sales
cost of goods sold
inv - 12/31/2020 (3,000 x 60) 180,000.00
purchases 1,125,000.00
goods avail for sale 1,305,000.00
inv - 12/31/2021 (6,000 x 75) (450,000.00)
gross inc
mar 1 beg bal
mar 6 purchase
mar 6 purchase
mar 14 purchase
 Prob 11-23
inventory cost
250,000.00 24,000,000.00
(200,000.00) 2019 purchases 16,000,000.00
540,000.00 20,000,000.00
(50,000.00) 2019 purchases 60,000,000.00
(360,000.00) 2020 purchases
1,125,000.00
(180,000.00) 2020 purchases
(675,000.00) 2021 purchases 8,400,000.00
450,000.00 11,400,000.00

inventory increment
1,000.00
2,000.00
3,000.00
6,000.00

1,200,000.00
Prob 11-24
sales price
a 10 x 100,000 1,000,000.00
b 20 x 80,000 1,600,000.00
(855,000.00) c 40 x 70,000 2,800,000.00
345,000.00 d 50 x 60,000 3,000,000.00
8,400,000.00

allocated cost of b
clearing cost of b
total cost

purchase price
taxes and documentation
total cost to be allocated
 0.40 2,880,000.00
0.27
0.33

3,600,000.00 11,000,000.00
6,600,000.00

fraction allocated cost

5/42 700,000.00
4/21 1,120,000.00
1/3 1,960,000.00
5/14 2,100,000.00
5,880,000.00

1,120,000.00
100,000.00
1,220,000.00

5,800,000.00
ation 80,000.00
ated 5,880,000.00
Prob 12-1
units unit cost estimated SP cost of sell NRV inventory value
a 1,000.00 120.00 180.00 30.00 150.00 120,000.00
b 1,500.00 110.00 140.00 20.00 120.00 165,000.00
c 1,200.00 150.00 170.00 30.00 140.00 168,000.00
d 1,800.00 140.00 190.00 30.00 160.00 252,000.00
e 1,700.00 130.00 200.00 40.00 160.00 221,000.00
926,000.00

Prob 12-2
unit cost estimated SP cost to dispose NRV LCNRV
1 700.00 800.00 150.00 650.00 650.00
2 475.00 950.00 205.00 745.00 475.00
3 255.00 300.00 50.00 250.00 250.00
4 450.00 1,000.00 260.00 740.00 450.00
Prob 12-3 cost NRV LCNRV
skis 2,200,000.00 2,500,000.00 2,200,000.00
boots 1,700,000.00 1,500,000.00 1,500,000.00
ski equip 700,000.00 800,000.00 700,000.00
ski apparel 400,000.00 500,000.00 400,000.00
5,000,000.00 5,300,000.00 4,800,000.00

direct method
end inv 4,800,000.00
inc sum 4,800,000.00

allow method
end inv 5,000,000.00
inc sum 5,000,000.00

loss on inv writedown 200,000.00

allow for inv writedown 200,000.00

Prob 12-4
axb axc
1 units (a) unit cost (b) NRV (c) total cost NRV
a 25,000.00 105.00 115.00 2,625,000.00 2,875,000.00
b 20,000.00 85.00 80.00 1,700,000.00 1,600,000.00
subtotal 4,325,000.00 4,475,000.00
2
c 40,000.00 50.00 40.00 2,000,000.00 1,600,000.00
d 30,000.00 65.00 60.00 1,950,000.00 1,800,000.00
subtotal 3,950,000.00 3,400,000.00

grandtotal 8,275,000.00 7,875,000.00

a LCNRV individual 7,625,000.00

b LCNRV by category total cost NRV
4,325,000.00 4,475,000.00
3,950,000.00 3,400,000.00

c total cost 8,275,000.00

total NRV 7,875,000.00
LCNRV by total 7,875,000.00
 Prob 12-5
1 sep 30 (40,000 x 75)
dec 31 (10,000 x 90)
total FIFO cost
NRV (50,000 x 72)
required allow for inv writedown

inv jan 1
purchases
purchase discount
goods avail for sale
inv dec 31
cost of goods sold before reversal of inv writedown
gain on reversal of inv writedown
cost of goods sold after inv writedown

2 inv dec 31 3,900,000.00

inc sum

allow for inv writedown (400,000 - 300,000) 100,000.00

LCNRV gain on reversal of inv writedown
2,625,000.00
1,600,000.00
4,225,000.00

1,600,000.00
1,800,000.00
3,400,000.00

7,625,000.00

lower
4,325,000.00
3,400,000.00
7,725,000.00
 Prob 12-6
3,000,000.00 a no adjustment because the market price is higher that the agreed price.
900,000.00 Any gain on purchase commitment is not recognized initially.
3,900,000.00
(3,600,000.00) b no adjustment because the market price has not declined as of dec 31 2021.
300,000.00 the market decline is only a possible loss

1,200,000.00 c loss on purchase commitment (10,000 x 30) 300,000.00

9,400,000.00 estimated liab for purchase commitment 300,000.00
(400,000.00)
10,200,000.00 d 31-Dec-21
(3,900,000.00) loss on purchase commitment 300,000.00
6,300,000.00 estimated liab for purchase commitment 300,000.00
(100,000.00)
6,200,000.00 31-Jan-22
purchases (100,000 x 150) 1,500,000.00
loss on purchase commitment 200,000.00
3,900,000.00 estimated liab for purchase commitment 300,000.00
AP (10,000 x 200) 2,000,000.00

100,000.00 e 31-Dec-21
loss on purchase commitment 300,000.00
estimated liab for purchase commitment 300,000.00

31-Jan-21
purchases 2,000,000.00
estimated liab for purchase commitment 300,000.00
AP 2,000,000.00
gain on purchase commitment 300,000.00

Prob 12-7
e.

2021.
Prob 13-3 Prob 13-6
inv jan 1 650,000.00
purchases 3,200,000.00
freight in 50,000.00
total 3,250,000.00
purchase returns (75,000.00) 3,175,000.00
GAS 3,825,000.00
COGS (4,500,000 x 60%) (2,700,000.00)
inv mar 1 1,125,000.00
 Prob 13-7
inv 1,100,000.00 1
purchases 6,000,000.00
GAS 7,100,000.00
COGS (7,280,000/130%) (5,600,000.00)
inv sep 30 1,500,000.00
realizable value of damaged goods (100,000.00)
fire loss on inv 1,400,000.00
2

3
beg inv 5,000,000.00
purchases 26,000,000.00
freight in 2,000,000.00
purchase returns and allows (3,500,000.00)
purchase discounts (1,500,000.00)
COG avail for sale 28,000,000.00

sales 40,000,000.00
sales returns (3,000,000.00)
net sales 37,000,000.00
multiply b cost ratio 60%
COGS 22,200,000.00

net sales 100%

gross profit rate on sales -40%
cost ratio 60%

sales allow & sales disc are ignored in determining

netsales under the gross profit method

COG avail for sale 28,000,000.00

COGS (22,200,000.00)
end inv 5,800,000.00
physical count (4,000,000.00)
COG out on consignment (1,000,000 x 60%) (600,000.00)
cost of inv shortage 1,200,000.00
Prob 14-1 Prob 14-16
cost retail
beg inv 280,000.00 700,000.00
purchases 2,480,000.00 5,160,000.00
freight in 75,000.00
markup 500,000.00
markup cancellation (60,000.00)
GAS 2,835,000.00 6,300,000.00

cost ratio (2,835,000/6,300,000) 0.45

markdown (250,000.00)
markdown cancellation 50,000.00
GAS - average 2,835,000.00 6,100,000.00
sales (5,000,000.00)
shrinkage (2% x 5,000,000) (100,000.00)
end inv 1,000,000.00

conservative cost (1,000,000 x 0.45) 450,000.00

Prob 14-2 cost retail

beg inv 700,000.00 1,000,000.00
purchases 4,100,000.00 6,300,000.00
markup 700,000.00
markdown (500,000.00)
GAS 4,800,000.00 7,500,000.00

cost ratio (4,800,000/7,500,000) 0.64

sales (6,800,000.00)
normal shoplifting losses (100,000.00)
inv at retail 600,000.00

average cost (600,000 x 0.64) 384,000.00

 cost retail
inv jan 1, 2021 420,000.00 600,000.00
purchases adjusted for markup and markdown 73% 5,011,200.00 6,890,000.00
GAS 5,431,200.00 7,490,000.00

sales 2021 (6,839,000.00)

inv dec 31, 2021 651,000.00

FIFO cost (651,000 x 73%) 473,482.03

inv jan 1 2022 473,482.03 651,000.00

purchases adjusted 70% 4,970,000.00 7,110,000.00
GAS 5,443,482.03 7,761,000.00

Sales 2022 (7,033,000.00)

inv dec 31 2022 728,000.00

FIFO cost (728,000 x 70%) 508,883.26

Prob 17-1 Prob 17-6
2021 investment in associate 5,000,000.00 req 1
cash 5,000,000.00

investment in associate 1,200,000.00

invest. inc (30% x 4,000,000) 1,200,000.00

cash (30% x 3,000,000) 900,000.00

invest. in associate 900,000.00

invest. inc 200,000.00

invest. in associate (1,000,000/5) 200,000.00

2022 investment in associate 1,800,000.00

invest. inc (30% x 6,000,000) 1,800,000.00

cash (30% x 5,000,000) 1,500,000.00

cash 1,500,000.00

invest. inc 200,000.00 req 2

invest. in associate 200,000.00

Prob 17-2
investment in associate 3,500,000.00
cash 3,500,000.00
Prob 17-7
investment in associate 1,600,000.00 2018
invest. inc (40% x 4,000,000) 1,600,000.00

cash (40% x 1,000,000) 400,000.00

invest. in associate 400,000.00

invest. inc 150,000.00 2019

invest. in associate (600,000/4) 150,000.00

cost 3,500,000.00 2020

CA of net ass acquired (40% x 7,000,000) (2,800,000.00)
excess of cost over CA 700,000.00
excess attributable to equip (40% x 1,500,000) (600,000.00)
excess attributable to inv (40% x 500,000) (200,000.00)
excess net fair value over cost (100,000.00)

invest. inc 200,000.00 2021

investment in associate 200,000.00
investment in associate 100,000.00
invest. inc 100,000.00

share in net inc 1,600,000.00

amort of excess attributable to equip (150,000.00)
amort of excess attributable to inv (200,000.00)
excess net fair value over cost 100,000.00
net investment inc 1,350,000.00
 Prob 17-6
invest. In associate 6,500,000.00
cash 6,500,000.00

lost from invest. 1,600,000.00

invest. In associate (40% x 4,000,000) 1,600,000.00

cash (40% x 2,500,000) 1,000,000.00

invest. In associate 1,000,000.00

lost from invest. 150,000.00

invest. In associate 150,000.00

acquisition cost 6,500,000.00

CA of net ass acquired (40% x 12,500,000) (5,000,000.00)
excess attributable to equip 1,500,000.00

amort (1,500,000/10) 150,000.00

acquisition cost 6,500,000.00

share in net loss (1,600,000.00)
share in cash dividend (1,000,000.00)
amort of excess (150,000.00)
CA - 12/31/2021 3,750,000.00

invest. In associate 7,000,000.00

cash 7,000,000.00

loss from invest. 2,000,000.00

invest. In associate (40% x 5,000,000) 2,000,000.00

loss from invest. 2,800,000.00

invest. In associate (40% x 7,000,000) 2,800,000.00

advances to associate 2,000,000.00

cash 2,000,000.00

loss from invest. 3,200,000.00

invest. In associate (40% x 8,000,000) 2,200,000.00
advances to associate 1,000,000.00

loss from invest. (40% x 4,000,000) 1,000,000.00

advances to associate 1,000,000.00
acquisition cost 7,000,000.00
cash advances 2,000,000.00
total invest. 9,000,000.00
net loss 2018-2020 (40% x 20,000,000) (8,000,000.00)
CA of invest. 12/31/2020 1,000,000.00

share in net loss 2020 (40% x 4,000,000) 1,600,000.00

loss to be reported in 2021 should be equal 1,000,000.00

to the CA of the invest. Only
Prob 18-1 Prob 18-2
req 1 net inc 2021 3,000,000.00 req 1
unrealized profit in 12/31/2021 inv of heaven (900,000 - 600,000) (300,000.00)
adjusted net inc 2,700,000.00

investor's share (20% x 2,700,000) 540,000.00

req 2 net inc 2022 4,000,000.00

reliazed profit in 12/31/2021 inv of heaven co. 300,000.00 req 2
unrealized profit in 12/31/2022 inv of heaven (750,000 - 500,000) (250,000.00)
adjusted net inc 4,050,000.00

investor's share (20% x 4,050,000) 810,000.00

req 3
2021 invest. In associate 6,000,000.00
1-Jan cash 6,000,000.00
req 3
31-Dec invest. In associate 540,000.00 2021
invest. Inc 540,000.00 1-Jan

31 cash (20% x 1,000,000) 200,000.00 31-Dec

invest. In associate 200,000.00

2022 invest. In associate 810,000.00 31

31-Dec invest. Inc 810,000.00

31 cash (20% x 1,500,000) 300,000.00 2022

invest. In associate 300,000.00 31-Dec

req 4 31
acquisition cost 6,000,000.00
share in profit of associate 2021 540,000.00
share in cash dividend - 2021 (200,000.00) req 4
share in profit of associate 2022 810,000.00
share in cash dividend - 2022 (300,000.00)
CA 12/31/2022 6,850,000.00
net inc 2021 2,000,000.00
unrealized profit on sale of equip sold 1/1/2021 (800,000-500,000) (300,000.00)
realized profit on equip sold 1/1/2021 (10% x 300,000) 30,000.00
adjusted net inc 1,730,000.00

investor's share (40% x 1,730,000) 692,000.00

net inc 2022 3,000,000.00

realized profit on equip sold 1/1/2021 (10% x 300,000) 30,000.00
unrealized profit on sale of equip sold 1/1/2022 (900,000-500,000) (400,000.00)
realized profit on equip sold 7/1/2021 (400,000/5 x 6/12) 40,000.00
unrealized profit on sale of equip sold 12/31/2022 (2,800,000-2,000,000) (800,000.00)
adjusted net inc 1,870,000.00

investor's share (40% x 1,870,000) 748,000.00

invest. In associate 5,000,000.00

cash 5,000,000.00

invest. In associate 692,000.00

invest. Inc 692,000.00

cash (40% x 800,000) 320,000.00

invest. In associate 320,000.00

invest. In associate 748,000.00

invest. Inc 748,000.00

cash (40% x 1,000,000) 400,000.00

invest. In associate 400,000.00

acquisition cost 5,000,000.00

invest. Inc 2021 692,000.00
cash dividend 2021 (320,000.00)
invest. Inc 2022 748,000.00
cash dividend 2022 (400,000.00)
CA - 12/31/2022 5,720,000.00