intermediate accounting(fifteenth edition) ch13

Time and Purpose of Problems (Continued)

Problem 13-9 (Time 30–45 minutes)

Purpose—to present the student with a slightly complicated problem related to accounting for premium offers. The problem is more complicated in that coupons redeemed are accompanied by cash payments, and in addition to the cost of the premium item postage costs are also incurred. The student is required to prepare journal entries for various transactions including sales, purchase of the premium inventory, and redemption of coupons for two years. The second year’s entries are more complicated due to the existence of the liability for claims outstanding. Finally the student is required to indicate the amounts related to the premium offer that would be included in the financial statements for each of two years. This very realistic problem challenges the student’s ability to account for all transactions related to premium offers.

Problem 13-10 (Time 25–30 minutes)

Purpose—to present the student with the problem of determining the proper amount of and disclosure for a contingent loss due to lawsuits. The student is required to prepare a journal entry and a footnote. The student is also required to discuss any liability incurred by a company due to the risk of loss from lack of insurance coverage. A straightforward problem dealing with contingent losses.

Problem 13-11 (Time 35–45 minutes)

Purpose—to provide the student with a comprehensive problem dealing with contingent losses. The student is required to prepare journal entries for each of three independent situations. For each situation the student must also discuss the appropriate disclosure in the financial statements. The situations pre-sented include a lawsuit, an expropriation, and a self-insurance situation. This problem challenges the student not only to apply the guidelines set forth in GAAP, but also to develop reasoning as to how the guidelines relate to each situation.

Problem 13-12 (Time 20–30 minutes)

Purpose—to provide the student with a problem to calculate warranty expense, estimated warranty liability, premium expense, inventory of premiums, and premium liability.

Problem 13-13 (Time 25–35 minutes)

Purpose—to present the student a comprehensive problem in determining various liabilities and present findings in writing. Issues addressed relate to contingencies, warranties, and litigation.

Problem 13-14 (Time 20–25 minutes)

Purpose—to present the student with a comprehensive problem in determining the amounts of various liabilities. The student must calculate (for independent situations) the estimated liability for warranties, and an estimated liability for premium claims outstanding. Journal entries are not required. This problem should challenge the better students.

Copyright ? 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only) 13-33

SOLUTIONS TO PROBLEMS

PROBLEM 13-1

(a) February 2 Purchases ($70,000 X 98%) ................................... 68,600 Accounts Payable .........................................

February 26 Accounts Payable .................................................. 68,600 Purchase Discounts Lost ...................................... 1,400 Cash ..............................................................

April 1 Trucks ..................................................................... 50,000 Cash .............................................................. Notes Payable ...............................................

May 1 Cash ........................................................................ 83,000 Discount on Notes Payable ................................... 9,000 Notes Payable ...............................................

August 1 Retained Earnings (Dividends) .............................. 300,000 Dividends Payable ........................................

September 10 Dividends Payable .................................................. 300,000 Cash .............................................................. (b) December 31 1. No adjustment necessary 2. Interest Expense ($46,000 X 12% X 9/12) ......... 4,140 Interest Payable ............................................ 3. Interest Expense ($9,000 X 8/12) ...................... 6,000 Discount on Notes Payable ......................... 4. No adjustment necessary

13-34

68,600

70,000 4,000 46,000

92,000

300,000

300,000

4,140

6,000

Copyright ? 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)

1. 2. 3. 4.

PROBLEM 13-2

Dec. 5

Dec. 1-31

Dec. 10

Dec. 31 Cash .............................................................500 Due to Customer ................................ Cash .............................................................798,000 Sales Revenue ($798,000 ÷ 1.05) ............................. Sales Taxes Payable ($760,000 X .05) ............................... Trucks ($120,000 X 1.05) .............................126,000 Cash .................................................... Land Improvements ....................................84,000 Asset Retirement Obligation .............

500

760,000

38,000

126,000

84,000

Copyright ? 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only) 13-35

PROBLEM 13-3

Entries for Payroll 1 Salaries and Wages Expense ......................................... 1,040.00* Withholding Taxes Payable (10% X $1,040)* ........ FICA Taxes Payable (7.65% X $1,040) ................... Union Dues Payable (2% X $1,040) ....................... Cash ........................................................................ *$200 + $150 + $110 + $250 + $330 = $1,040 Payroll Tax Expense ........................................................ 94.74 FICA Taxes Payable (7.65% X $1,040) ................... FUTA Taxes Payable [0.8% X ($200 + $150 + $110)] ............................. SUTA Taxes Payable (2.5% X $460) ......................

Entries for Payroll 2 and 3 Salaries and Wages Payable (Vacation) ........................ 590.00* Salaries and Wages Expense ......................................... 450.00 Withholding Taxes Payable (10% X $1,040) .......... FICA Taxes Payable (7.65% X $1,040) ................... Union Dues Payable (2% X $1,040) ....................... Cash ........................................................................ *($300 + $220 + $660) ÷ 2 Payroll Tax Expense ........................................................ 94.74 FICA Taxes Payable (7.65% X $1,040) ................... FUTA Taxes Payable (0.8% X $460)....................... SUTA Taxes Payable (2.5% X $460) ......................

Entries for Payroll 4 Salaries and Wages Expense ......................................... 1,040.00 Withholding Taxes Payable (10% X $1,040) .......... FICA Taxes Payable (7.65% X $1,040) ................... Union Dues Payable (2% X $1,040) ....................... Cash ........................................................................

13-36

104.00 79.56 20.80 835.64

79.56

3.68 11.50

104.00 79.56 20.80 835.64

79.56 3.68 11.50

104.00 79.56 20.80 835.64

Copyright ? 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)