《会计学教程与案例》财务会计答案solutiontoAccoun

Chapter03-BasicAccountingConcepts:TheIncomeStatementPAGE3-PAGE47CHAPTER1THENATUREANDPURPOSEOFACCOUNTINGChangesfromTwelfthEditionThechapterhasbeenupdated.ApproachOnthefirstday,theusualobjectiveistocreateinterestinthesubject,tosetthescene,andtogiveanoverviewofthecourse.Thefirstpartofthechapterdoesthis.Thesecondpartofthechaptergivesafairlyspecificintroductiontothenatureoffinancialaccounting.Instructorsprobablymaywanttobringinmaterialfromtheirownreadingorexperiencetomaketheintroductorypoints.CasesThecasesareintendedtogetthestudenttostartthinkinglikeaccountantsandusersofaccountinginformation,withoutknowledgeofanyofthetechniques.Ribbonsan’Bowsgivesstudentsanopportunitytoconstructasimplesetoffinancialstatements.KimFullercanbeusedasaspringboardforanytypeofdiscussion:usesofinformationbyvariousparties,thecostofrecordkeeping,oreventhedevelopmentofacompleteaccountingsystem.BaronCoburgillustratespracticallyallofthebasicaccountingconcepts,withoutnamingthem.Itisadifficultcase,butenlightening,evenforthosewithsomeprioraccountingtraining.ProblemsProblem1-1CHARLESCOMPANYBALANCESHEETASOFDECEMBER31,----.AssetsLiabilitiesandOwners’EquityCash$12,000Bankloan$40,000Inventory95,000Owners’EquityOtherassets13,000Owners’equity80,000Totalassets$120,000Totalliabilitiesandowners’equity$120,000Thisproblemcanbeusedtoexplaincertainaccountingpresentationconventions.Forexample,theuseofdoublelinestounderscoreatotal,thepositionofthedollarsignatthetopofacolumnofnumbers,andthedatingofthebalancesheet.Thepurposeofthisproblemistoillustratetheequalityofthebasicaccountingequation:assetsequalliabilitiesplusowners’equity.Problem1-2Themissingnumbersare:Year1Noncurrentassets$410,976Noncurrentliabilities240,518Year2Currentassets$90,442Totalassets288,456Noncurrentliabilities78,585Year3Totalassets$247,135Currentliabilities15,583Totalliabilitiesandowners’equity247,135Year4Currentassets$69,090Currentliabilities17,539ThebasicaccountingequationisAssets=Liabilities+Owners’equityTheinstructormightwanttoexplainhowthisequationisused(asitisinthisproblem)tocalculate“plug”numberswhenmanagersconstructprojectedbalancesheets.Themanagerdoesnothavetocompleteeverybalancebecausethemanagercanplugcertainbalances.Theinstructormayalsodrawattentiontotheotherequationsillustratedintheproblem.Theseinclude:Currentassets+Noncurrentassets=TotalassetsCurrentliabilities+Noncurrentliabilities=TotalliabilitiesPaid-incapital+Retainedearnings=Owners’equity.Laterinthecoursetheinstructorshouldexplainthattheadditionalpaid-incapitalaccountisaspecialaccounttorecordtheexcessofcapitalreceivedoverparvalueincommonstockissuances.Atthisstageinthecourseitisbettertosimplyuseadescriptiveterm,likepaid-incapital,todescribecapitalreceivedfromstockholders.Alsoitavoidstheuseofthetermcommonstock,whichsomestudentsmanynotunderstand.Problem1-3Themissingnumbersare:Year1Grossmargin$9,000Taxexpense1,120Year2Sales$11,968Profitbeforetaxes2,547Year3Costofgoodssold$2,886Otherexpenses6,296Otheraccountingequationssuchasthefollowingarealsoillustratedbythisproblem:Grossmargin=Sales-CostofgoodssoldProfitbeforetaxes=Grossmargin-OtherexpensesNetincome=Profitbeforetaxes-TaxexpenseTheinstructormaywanttopointouttothestudentsthatratiosareoftenusedbymanagerstoconstructprojectedfinancialstatements.Year4isanexampleofthisapplication.InordertoestimateYear4,thekeyratiostocomputeare:Year1Year2Year3AverageSales100.0%100.0%100.0%100.0%Grossmargin75.075.075.075.0%Profitbeforetaxes23.321.320.521.7%Netincome14.012.812.213.0%Taxrate40.040.040.040.0Year4Sales$10,000Costofgoodssold2,500Grossmargin(75%ofsales)$7,500Otherexpenses5,330Profitbeforetaxes(21.7%ofsales)$2,170Taxexpense870Netincome(13%ofsales)$1,300Thebasicaccountingequationusedis:Netincome=Revenues–ExpensesProblem1-4Theexplanationofthese11transactionsis:Ownersinvest$20,000ofequitycapitalinAcmeConsulting.Equipmentcosting$7,000ispurchasedfor$5,000cashandanaccountpayableof$2,000.Suppliesinventorycosting$1,000isboughtforcash.Salariesof$4,500arepaidincash.Revenuesof$10,000areearned,ofwhich$5,000hasbeenrecoveredincash.Theremaining$5,000isowedtothecompanybyitscustomers.Accountspayableof$1,500arepaidincash.Customerspay$1,000ofthe$5,000theyowethecompany.RentExpenseof$750ispaidincash.Utilitiesof$500arepaidincash.A$200travelexpensehasbeenincurredbutnotyetpaid.Suppliesinventorycosting$200areconsumed.ACMECONSULTINGBALANCESHEETASOFJULY31,----.AssetsLiabilitiesandOwners’EquityCash$12,750Accountspayable$700Accountsreceivable4,000Suppliesinventory800______Currentassets17,550Currentliabilities700Equipment7,000Owners’equity23,850Totalassets$24,550Totalliabilitiesandowners’equity$24,550ACMECONSULTINGINCOMESTATEMENTJULY1-31,----.Revenues$10,000Expenses不包含costofgoodsales?Salaries4,500Rent750Utilities500Travel200Supplies2006,150Netincome$3,850ACMECONSULTINGCASHRECEIPTSANDDISBURSEMENTS,JULY1-31,----.ReceiptsOwners’investment$20,000Cashsales5,000Collectionofaccountsreceivable1,000Totalreceipts$26,000DisbursementsEquipmentpurchase$5,000Suppliespurchase1,000Salariespaid4,500Paymentstovendors1,500Rentpaid750Utilitiespaid500Totaldisbursements$13,250Increaseincash$12,750Thechangeinthiscashaccountincludestheowners’investment,whichisnotanincomestatementitem.Theincomestatementincludesrevenuesandexpensesthathavenotyetbeenreceivedincashorpaidincash.Thecashpaidtopurchasetheequipmentisnotreflectedintheincomestatement.(Itisprobablybestiftheinstructordoesnotdiscussdepreciationatthispointinthecourse.)Thisproblemillustratesseveralimportantpointsthatmanagersshouldunderstand.Theseare:Everytransactioninvolvesatleasttwoaccounts.Netincomeisnotequivalenttothenetchangeinthecashaccountduringanaccountingperiod.Cashisinfluencedbybothbalancesheetandincomestatementevents.Thebasicaccountingequation(Assets=Liabilities+Owners’equity)canbeusedtocapture,illustrate,andexplaintheaccountingconsequencesofmany(butnotall)transactionsandeventsthatinvolveacompany.Thecashreceipts-disbursementsdisplayisusedsinceitwouldbeprematuretointroducethecashflowstatementdisplayatthispointinthecourse.Problem1-5Cash+AccountsReceivable+SuppliesInventory+Equipment=AccountsPayable+Owners’Equity1.+$25,000+$25,000Investment2.-500-500Rent3.+$8,000+$8,0004.-500+$5005.-750-750Advertising6.-3,000-3,000Salaries7.+2,000+$8,000+10,000Commissions8.-5,000-5,0009.-100-10010.+1,000-1,000ExpensesBONVOYAGETRAVELBALANCESHEETASOFJUNE30,----.AssetsLiabilitiesandOwners’EquityCash$17,250Accountspayable$4,000Accountsreceivable8,000Currentliabilities4,000Suppliesinventory400Owners’equity29,650Currentassets25,650Equipment$8,000______TotalAssets$33,650Totalliabilitiesandowners’equity$33,650BONVOYAGETRAVELINCOMESTATEMENTJUNE1-30,----.Commissions$10,000ExpensesRent$500Advertising750Salaries3,000Supplies100Misc.Expenses1,0005,350NetIncome$4,650BONVOYAGETRAVELCASHRECEIPTSANDDISBURSEMENTSJUNE1-30,----.ReceiptsOwners’investment$25,000Collectionofcommissions2,000Totalreceipts$27,000DisbursementsPaidrent$500Boughtsupplies500Boughtadvertising750Paidsalaries3,000Paidvendors5,000Totaldisbursements$9,750Increaseincash$17,250SeeProblem1-4forwhychangeincashaccountandthemonth’sincomearenotthesame.Theproblem’spurposeandlessonsformanagersaresimilartothoseinProblem1-4.Case1-1:Ribbonsan’Bows,Inc.Note:ThiscaseisunchangedfromtheTwelfthEdition.ApproachThisisanintroductorycaseanditshouldbetaughtasanintroductorycase.Therewillbeplentyoftimeinthecourseforthestudentstolearnthecorrectformoffinancialstatementsanddetailsofaccountingstandards.Inshort,theinstructorshouldbepreparedtoallowavarietyofformatsforthefinancialstatementsandtoleratesome“notquitecorrect”accounting.TheinstructormaywanttohavestudentsdiscussCarmen’sMarch31statement,butthebulkoftheclassshouldfocusonthethreecasequestions.AnydiscussionoftheMarch31statementshoulddealwiththenatureofthevariousaccounts(i.e.prepaidrentisrentpaidinadvanceofusingthepropertyanditisanassetbecauseithasfutureeconomicbenefitsforthecompany,etc),ratherthantheformatofthestatement.Itisbettertoleavethebeginningofthecourse’sinstructioninfinancialstatementformatstotheassignedcasequestiondiscussions.CommentsonInformationGatheredandCarmen’sConcernsThethreemonthsalestotalisthesumofthecashsales($7,400)andcreditsales($320).CostofsalesisderivedfromthefollowingequationBeginningmerchandiseinventory$3,300PlusPurchases2,900EqualsTotalavailablemerchandise$6,200LessEndingmerchandiseinventory4,100EqualsCostofsales$2,100Rentexpenseis$1,800of$600permonthtimesthreemonths.Paidincash.Part-timeemployeeexpenses($1600)isthesumofcashpaid($1510)plusamountowed($90).Suppliesexpense($80)isbeginningsuppliesinventory($100)lesssuppliesinventoryonhandonMarch31($20).Theprepaidadvertising($150)wasrunbythelocalpaperonApril2.Thebenefitoftheassetexpiredsotheassetbecameanexpense.Thecommercialsewingmachinepurchaseledtoan$1800assetbeingrecorded(afuturebenefit).Theasset’sbenefitwaspartlyconsumedduringMayandJuneresultingina$60depreciationcharge($1800/5years/12monthsx2months–straightlinedepreciation.)Someofthefuturebenefitsofthecomputerandrelatedsoftwareassetwereconsumedduringthethreemonthperiod.A$250depreciationchargemustberecognized($2000/2/12/x3–straightlinedepreciation.)Cashbalanceattheendofperiodlowerthanbeginningbalance.SeeQuestion1discussion.Fourmonth’sinterestmustberecordedonthecousins’$10,000loan.($10,000x.06x4/12).Carmenhas“rented”thecousins’moneyforfourmonths.(SheforgottoincludetheMarchrentinherMarch31balancesheet.)Nodepreciationisrecordedonthecashregisterloanedbythelocalcredit-cardchargeprocessorandthefurnitureleftbytheformertenant.These“assets”werenotrecognizedonthefinancialstatementbecausetheywereneitherdonatednoracquiredinbusinesstransactions.Theuncle’slegalworkisneitheranassetnoranexpenseofthebusiness.Itdidnotresultinabusinesstransaction.Carmen’spotentialsalarypaymentinJulyisneitheranexpensenoraliabilityasofMarch31.ThecompanydoesnothaveanobligationonMarch31topayheranycompensation.Question1Exhibit1presentsthecompany’sinitialthreemonthincomestatement.Itdoesnotcontainaprovisionfortaxes,sinceCarmenatthisearlydatedidnotknowifincometaxeswouldbedueontheannualresults.Theprincipalreasonswhythecashbalancedeclinedduringthethreemonthprofitableoperatingperiodare:Thecommercialsewingmachinepurchasereducedcashby$1,800whiletherelateddepreciationchargeonlyreducedincomeby$90.Endinginventorywashigherthanbeginninginventoryandtheincreasewaspaidforwithcash.Thatis,moreinventorywasboughtforcash($2,900)thanthecostofgoodssold($2,100).Exhibit2presentacashflowanalysisforthethreemonthoperatingperiod.Question2Exhibit3presentsthecompany’sJune30balancesheet.Question3Carmen’sbusinessisofftoagoodstart,butitwillhavetodobetterovertherestoftheyearifCarmenplanstopayherselfanymeaningfulcompensationsandrepaythecousins’loanattheendoftheyear.WhendiscussingQuestion3somestudentsbelievethatCarmenshouldincludeaconsiderationofanimputedcompensationexpenseindecidinghowwellshehasdone.Studentsacceptthenonrecognitionofhercompensationintheincomestatement,butbelievesheshouldrecognizethatpersonallyshehasincurredanopportunitycostforlostwages(atleastfourmonthsx$1300).Inaddition,studentsbelieveCarmen’snonrecognitionofanycostassociatedwithusingtheabandonedcountersanddisplayequipmentoverstateshowwellsheisdoingfromaneconomicpointofview.Thesestudentswouldincludesomedepreciationcostbasedontheasset’sfairvalueintheirevaluationofhow“successful”thebusinesshasbeentodate.Somestudentsadvocateincludingthefreelegaladvice’svalue($600)intheirassessmentofthecompany’ssuccesstodate.Theinstructormaychallengetheclasstoconsiderwhytheseitems(freelegaladvice,imputedsalaryanddepreciation)arenotincludedinthecompany’sincomestatement.Exhibit1Ribbonsan’BowsIncomeStatementforthePeriodApril1toJune30,2010Sales$7,720CostofSales(2,100)GrossMargin$5,620Employeewages(1,600)Rent(1,800)OfficeSupplies(80)Depreciation–Computer(250)Depreciation–SewingMachine(60)Interest(200)Advertising(150)ProfitbeforeTaxes$1,480Exhibit2Ribbonsan’BowsAnalysisofCashFlowsforthePeriodApril1toJune30,2010BeginningCash$4,000Sales7,400Wages(1,510)Rent(1,800)MerchandiseInventory(2,900)SewingMachine(1,800)EndingCash$3,390Exhibit3Ribbonsan’BowsBalanceSheetasofJune30,2010AssetsLiabilitiesCash$3,390Wagesowed$90Accountsreceivable320Interestowed200MerchandiseInventory4,100Cousins’loan10,000Supplies20$10,290Prepaidrent1,200Owner’sEquityComputer(net)1,750Carmen’sequity$1,000Sewingmachine(net)1,740Earnings1,480Cashregisterdeposit250$2,480Total$12,770Total$12,770Case1-2:KimFullerNote1:ThiscaseisupdatedfromtheKimFullercaseintheTwelfthEdition.Note2:Theinstructorshouldbeawarethatthename,KimFuller,couldrefereithertoamaleorafemale.ThecaseusesnopronounsthatindicategendertorefertoKimFuller;thegenderofKimFullerhasbeenleftopentointerpretationbythestudentsand/ortheinstructor.ApproachThiscaseisnot,asitmayappeartobe,an“armchair”case.Itisarealsituation-thecasewriterisoneof“KimFuller’s”(disguisedname)sisterswhoinvestedinthebusiness.Theintentofthecaseistogetstudentstobeginthinkingaboutthefinancialinformationneedsofabusinessandwhatkindsofunderlyingrecordsmustbemaintainedinordertosupportthoseneeds.Someinstructorsmayevenwishtodiscussthenatureoftherequiredsourcedocuments,sinceweoftentendtoignorethatimportantmatterinaccountingcourses.Finally,thecasecanbeusedtobeginintroducingatanintuitivelevelsomeofthe11basicconceptsthatwillbepresentedinChapters2and3.CommentsonQuestionsAnopeningquestionmightbe,“WhatinformationdoesKimFullerneedtomaintaininordertooperatethisbusiness?”Then,asstudentsbegintoidentifyinformationneeded,theinstructorcanpressfor,“Whoneedsthatinformation?Whatdotheyneeditfor?”Theinformationneeded,aswellastheusersandusescanberecordedontheblackboard.ThediagraminIllustration11ofthetextcanbeusedtosummarizeforstudentsthevarietyofinformationandpurposestheyhaveidentified.Assuggestedinthetext,thisinformationincludessuchthingsasdetailedpayrollrecordsforFuller’semployees,recordsofdeliveries(whicharesales)toFuller’scustomerandformeremployer,thechemicalfirm,andtheamountsowedforthesesales,recordsconcerningpurchasesofusedplasticbottlesandtheamountsowedtothesourcesofthesebottles,checkbookrecords,recordsofthecostsoftheitemsofplantandequipmentownedbythebusiness,recordsofthebusiness’smortgagepaymentsandbalance,andrecordsofwhothefirm’sownersareandtheamountofeachone’sownershipinterests.Bythispointinthediscussion,youwilllikelyhavedevelopedalonglistofinformationitemsthatarerequired.Iliketopointoutthatweneedsomewayoforganizingthismassiveamountofinformation.Thefinancialframeworkespeciallythebalancesheetandtheincomestatementprovidesaconvenientwaytoorganizemuch,butnotall,ofthisinformation.Asstudentslistthecompany’sinformationneeds,theyshouldclassifyitaseitheraccountingornon-accountinginformation.Thisleadsnaturallytoadiscussionofwhichinformationwouldappearinbalancesheetaccounts(Question2),whichinturnprovidesanopportunitytointroducetheentity,moneymeasurement,cost,goingconcern,anddualaspectconcepts(alldescribedformallyinChapter2).Theamountoftimespentonthisdiscussioncanbevariedgreatlyatthediscretionoftheinstructor:ifassignedforafirstsession,theusualfirstday“housekeeping”announcementswillnecessarilycausethisdiscussiontobebrief;ifusedonDay2ofthecourse,thecasecanreadilygenerate6080minutesofdiscussion,ifstudentsarepressedtobespecificintheirrecommendations.ThebalancesheetcalledforinQuestion2mightlooklikethis:AssetsLiabilitiesandOwners’EquityCash$50,000Mortgage$112,000Equipment65,000Totalpaid-incapital165,000Building162,000_______$277,000$277,000Question3providestheopportunitytointroducethetimeperiod,matching,andmaterialityconcepts,althoughsomeofthebasicconceptsinChapter3maybetoodifficulttointroduceatthispoint(e.g.,conservatism).Itmayalsobepossibletointroducethedistinctionbetweenproductcostsandperiodcosts.Question3togetherwithQuestion4alsonaturallyleadstothedistinctionbetweenfinancialaccountingandmanagementaccounting.Withonlyafewfamilymembersasowners,andwiththebank’smortgageonthebuildingwellsecured(bydefinition),thecompany’sfinancialreportingrequirementsareratherminimal.Indeedfamilyownedbusinessesofthissmallsizeandsimplicityoftenprepareannualfinancialstatementsfortaxpurposes,andthendistributethesesamestatementstothefamilyownersandbank.However,Fullerwouldbewelladvisedtohaveincomestatements—andprobablyalsocashflowstatements—preparedatleastquarterly,andperhapsmonthly,tohelpensurethatthebusinessisnotslippingintoanyfinancialholes.Thesewouldbemanagementaccountingreports,buttheymay,ofcourse,besharedwiththeinvestors.(TheSmallBusinessAdministrationperiodicallyreportsthatpoormanagementaccountingrecords,particularlyinadequaterecordsofproduct/productioncosts,areamajorcauseofsmallbusinessfailures).Ultimately,Fullerwillhavetojudgetheextentoftheneed(andcostjustification)forpreparationofformalmanagementaccountingreportstosupplementFuller’spersonalobservationofthebusiness.Ofcourse,theproblemencounteredbymanybusinessesisthatreportsarenotintroducedasthebusinessgrowsandbecomestoocomplextobemanagedprimarilybythepersonalobservationofitsownerfoundergeneralmanager,andthispersonslowly—often,unwittingly—losescontrolofthebusiness.Insum,studentsshouldgleanfromtheirdiscussionofthiscasetheideathattherearesomeaccounting“universals”;butatthesametime,theaccountingrecordsofafirmshouldfititsparticularsituation,notviceversa.Thisistruewhetherthefirmisstartingwithanentirelymanualaccountingsystem,orwhetheritispurchasingsome“offtheshelf”accountingsoftwareforuseonapersonalorsmallbusinesscomputer.Case13:BaronCoburgNote:ThiscaseisunchangedfromtheTwelfthEdition.Itisadaptedfroman“academicnote,”writtenbyW.T.AndrewsofGuilfordCollege,whichappearedintheApril1974AccountingReview.PartsofthiscommentaryareadaptedfromProfessorAndrews’snote.ApproachThiscaseenablesastudenttodiscoveranumberofimportantaccountingconceptsthataredescribedindetailinChapters2and3.Thestudentsalsodiscoverintuitively—andofnecessity—therelationshipbetweentwobalancesheet“snapshots”andtheincomestatementfortheinterveningperiod.Ingeneral,thecaseillustratestheusefulnessoftheaccountingfunction:Itwouldbealmostimpossibletocomparethetwoperformanceswithoutthelogicalstructureofaccounting.Someinstructorswillprefertohavestudentsreadandbrieflydiscussthiscaseneartheendofoneclass,identifyingthebasicproblemsofthecase—whatmeasurementunitistobeused,whattheentitiesareandwhotheirowner(s)is(are),whatabalancesheetshows,whatanincomestatementshows,andhowrelativeperformancemightbemeasured.Thenthenextclasscanbedevotedtodiscussingproposedstatements.Otherinstructorswillprefertoassignthecasewithoutanysuggestionsastohowastudentshouldattacktheproblem.(Ipersonallyfavorthelatterapproach,whereasProfessorAndrewssuggeststheformer.)Ifindthatthecaseworkswellnotonlywithbeginningstudents,butalsoinmanagementdevelopmentprogramswherethereareseveralexperiencedaccountantsinthegroup.CommentsonQuestionsThefirstissueconfrontedbythestudentsisthedefinitionoftheentity.AsQuestion1implies,eachplotcanberegardedasanentity,eventhoughbothplotsareownedbytheBaron.(StudentsshouldrealizethisearlierbecausetheBaronisreferredtoasa“landlord,”orbecausetheyrecallsomethingaboutfeudalismfromamedievalhistorycourse.)Thedefinitionofseparateentitiesisneededinordertocomparetheireconomicresults.Thesecondmatterstudentsmustresolveisthebasisofmeasurement.AlthoughthisisreferredtoasthemoneymeasurementconceptinChapter2,thiscaseillustratesthatabarterequivalentmeasurementunit—here,bushelsofwheat—couldalsobeusedasacommondenominatortovalueunlikethings;amonetaryunitissimplyeasiertouseinmostinstances.Third,studentsmustdecidethebasisofvaluation.Thisissuearisesmostclearlyinthecaseoftheland,whichissaidtobe“worth”fivebushelsofwheatperacre.Atthisearlystage,moststudentswillvaluethelandatthisamountperacre;