(Chapter 1) Sol Man Intermediate Accounting 2 by Zeus Millan
(Chapter 1) Sol Man Intermediate Accounting 2 by Zeus Millan
(Chapter 1) Sol Man Intermediate Accounting 2 by Zeus Millan
Chapter 1
Current Liabilities
2. D
Trade accounts payable (600K + 10K + 8K) 618,000
Interest payable on 10%, 4-year note (240K x 10% x 5/12) 10,000
Current portion of bonds payable 400,000
Held for trading financial liabilities 100,000
Income tax payable 100,000
Accrued expenses 10,000
1,238,00
Total current liabilities 0
3. C
2,000,00
Trade and other payables 0
6,000,00
Note payable (issued 3 yrs. ago, maturing on Dec. 31, 20x2) 0
Current portion of serial bonds 800,000
8,800,00
Total current liabilities
0
6. A
Accounts payable 750,000
Interest payable 120,000
4,000,00
Long-term bank loan (maturing April 1, 20x9)
0
Total current liabilities 4,870,000
7. B
Unadjusted accounts payable 2,300,000
(a) Goods in transit purchased FOB destination (23,000)
(b) Unreleased checks 32,000
(c) Freight accommodation on behalf of supplier (5,000)
(d) Consigned goods (90,000)
Adjusted accounts payable 2,214,000
8. C
Inventor Accounts payable
Page |4
y
Unadjusted balances 800,000 960,000
(c) Purchase return (20,000)
(d) Post-dated check drawn 60,000
Adjusted accounts payable 800,000 1,000,000
9. A
Subscriptions expirations:
20x3 (250K + 400K) 650,000
20x4 280,000
Unearned subscription revenue - 12/31/2003 930,000
10. C
Initial payment per No. of
Plan child children Total
#1 500 15 7,500
#2 200 12 2,400
#3 - 9 -
9,900
Multiply by: Unexpired portion 8/12
Unearned revenue 6,600
11. C
20x1 20x2 20x3 Total
Percentage earned 40% 60%
Percentage earned 40% 60%
First half (2M ÷ 2) 1M 400,000 600,000
Second half (2M ÷
2) 1M 400,000 600,000
Earned portions 400,000 1,000,000 600,000 2,000,000
Page |5
12. D
Redemption 108,000
Breakage (200,000 x 10% x 60%*) 12,000
Total revenue in 20x1 120,000
13. C
Redemption & expiration(a) of prior yr. GCs 120,000
Redemption of current yr. GCs 760,000
Breakage (1M x 5% x 80% (b)) 40,000
Total revenue in 20x1 920,000
has expired during 20x1 because the problem states that the gift
certificates sold expire within one year. Accordingly, this amount is
recognized as breakage revenue (and as reduction in liability) in 20x1.
(b)
760,000 ÷ (1M x 95%) = 80%
14. D
15. B
Total tax for the year (72,000 x 2) 144,000
Page |6
April 1, 20x1
Land xxx
Cash xxx
Real property tax payable (12K x 3 mos.) 36,000
May 1, 20x1
Real property tax payable 48,000
Prepaid real property tax 24,000
Cash 72,000
1. Solution:
Accounts payable 15,000
Preference shares issued with mandatory redemption 100,000
Utilities payable 16,000
Rent payable 9,000
Total financial liabilities 140,000
2. Solution:
Accounts payable 500,000
Held for trading financial liabilities 1,000,000
Current portion of Note payable 1,000,000
Unearned revenue 300,000
Dividends payable 800,000
Current liabilities 3,600,000
3. Solution:
Currently maturing long-term debt (a) 10,000,000
Page |7
(a)
“An entity classifies its financial liabilities as current when they are
due to be settled within twelve months after the reporting period,
even if:
a) the original term was for a period longer than twelve months,
and
b) an agreement to refinance, or to reschedule payments, on a long-
term basis is completed after the reporting period and before the
financial statements are authorised for issue.” (PAS 1.72)
(b)
“When an entity breaches a provision of a long-term loan
arrangement on or before the end of the reporting period with the
effect that the liability becomes payable on demand, it classifies the
liability as current, even if the lender agreed, after the reporting
period and before the authorisation of the financial statements for
issue, not to demand payment as a consequence of the breach. An
entity classifies the liability as current because, at the end of the
reporting period, it does not have a right to defer its settlement for at
least twelve months after that date.” (PAS 1.74)
4. Solution:
Unadjusted accounts payable 1,200,000
70,00
Goods in transit shipped FOB shipping point 0
(80,000
Goods in transit shipped FOB destination )
Adjusted accounts payable 1,190,000
5. Solution:
Subscriptions revenue in 20x2: (160,000 + 2,690,000) = 2,850,000
Unearned subscriptions as of 12/31/x2 = 110,000
6. Solution:
Page |8
7. Solution:
5,480,00
Unadjusted balance
0
50,00
Unpaid utilities
0
20,00
Understatement in withholding taxes
0
5,550,00
Adjusted total current liabilities
0