UOP ACC 291 Week 2, P8-3A, etc.

ACC/291 – Week 1, E8-4, E8-11, BYP8-1, BYP-8-2

P8-3A Bosworth Company Aging schedule for Bosworth Company.
Journal Entries
A. Date Account Debit Credit
Dec.31, 2013 Bad debt expense $34,400
Allowance for doubtful accounts $34,400
(Adjusting allowance account to total estimated uncollectible)
T-Accounts
Date Bad debts Expense Amount
Dec.31 Adjusted allowance account $34,400
Dec.31 Balance $34,400
Date Allowance for doubtful accounts Amount $
Dec.31 Unadjusted allowance balance $8,000
Dec.31 Adjusted allowance account $34,400
Dec.31 Balance  $42,400
B. Journal Entries
Date Account Debit Credit
1) 1-Mar Bad debt expense $600
Allowance for doubtful accounts $600
(To allowance account to total estimated uncollectible receivable in 2013)
2) 1-May Account Receivable $600
Allowance for doubtful accounts $600
(To reverse write-off account)
1-May cash $600
Account Receivable $600
(To record collection which is uncollectible)
T-Accounts
Allowance for doubtful accounts
Date Amount
1-Mar Bad debts expense $600
1-Mar Balance  $600
Allowance for doubtful accounts
Date Amount
1-May Account receivable $600
1-May Balance  $600
C.
Journal Entries
Date Account Debit Credit
Dec.31, 2014 Bad debt expense $38,100
Allowance for doubtful accounts $38,100
(To adjust unadjusted allowance debit balance for estimated bad debts)
Note: Allowance for Doubtful Accounts = Bad Debt Expense + Debit Balance in Unadjusted Allowance for Doubtful Accounts (36,700 + 1,400)

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BE9-11 Nike, Inc
Nike Inc
31-May-14
Fixed Assets
Tangible fixed assets
Property, Plant and Equipment
Land $2,216,000
Buildings $974,000
Machinery and Equipment 20,943,000
Other Plant Assets 9,658,000
Less, Accumulated Depreciation 2,298,000 10,428,300
Total Property, Plant and Equipment $12,644,300
Intangible fixed assets
Goodwill $1,935,000
Patents and Trade Marks $5,151,000
Less, Accumulated Amortization 477,000 4,674,000
Total Intangible Assets $6,609,000
DO IT! 9-5
According to the International Financial Reporting Standards, value-in-use is defined as (c) future cash flows from an asset that
are discounted to the present value.Net realizable value (a) is not the correct choice because it falls under GAAP’s method of finding assets worth.Fair value (b) is the market price of an asset, and cannot be the correct answer. Fair value needs to have the cost of selling deducted to determine recoverable value.Total future undiscounted cash flows (d) cannot be the correct answer because it is part of the GAAP’s method of determining
impairment loss.
E9-7 Wang, Co.
(a) It was scrapped as having no value.
(b) It was sold for $37,000.
(c) It was sold for $20,000.
Calculations
A. Account Cost
Equipment Cost 50,000
Less: Accumulated Deprecation 24,000
Book Value 26,000
Proceeds on sale 0
Loss on Disposal 26,000
Journal Entries
Date Account Debit Credit
Accumulated Depreciation 24,000
Loss on disposal – plant asset 26,000
Equipment 50,000
(record sale of equipment for cash)
B. Calculations
Account Cost
Equipment Cost 50,000
Less: Accumulated Deprecation 24,000
Book Value 26,000
Proceeds on sale 37,000
Gain on Disposal 11,000
Journal Entries
Date Account Debit Credit
Accumulated Depreciation 24,000
Cash 37,000
Gain on disposal – plant asset 11,000
Equipment 50,000
(record sale of equipment for cash)
C. Calculations
Account Cost
Equipment Cost 50,000
Less: Accumulated Deprecation 24,000
Book Value 26,000
Proceeds on sale 20,000
Loss on Disposal 6,000
Journal Entries
Date Account Debit Credit
Accumulated Depreciation 24,000
Cash 20,000
Loss on disposal – plant asset 6,000
Equipment 50,000
(record sale of equipment for cash)
E9-8 (to record sale of computer)
C. Sale of delivery truck for 9,000 cash
Date Account Debit Credit
31-Dec Depreciation Expense 4,200
Accumulated Depreciation 4,200
Accumulated Depreciation 16,800
Cash 9,000
Equipment 25,000
Gain on Disposal – plant asset 800
BYP9-1 Tootsie Roll Industries
A. Date Account Amount (in 000’s)
12/31/11 Total Cost of Property, Plant, and Equipment (PPE) 455,097
12/31/11 Book Value of Property, Plant, and Equipment 212,162
B. Depreciation was calculated using the straight line method over the useful life of the assets.
C. Date Account Amount
2009 Depreciation and Amortization Expense 17,862
2010 Depreciation and Amortization Expense 18,279
2011 Depreciation and Amortization Expense 19,229
D. Date Account Amount
2010 Capital Expenditure for PPE 12,813
2011 Capital Expenditure for PPE 16,351
E. Items in goodwill cannot be amortized per GAAP. Instead, they are tested for impariment on an annual basis. If the value changes, it must be adjusted on the books. The only reported impairment occurred in 2009.
BYP9-2 Tootsie Roll & Hershey
A. Ratios (2011) Tootsie Roll Hershey
Return on Assets 5.1% 14.5%
Asset Turnover 0.62 Times 1.40 Times
Profit Margin 8.3% 10.3%
B. Return on assets is a measure of operational efficiency. Overall, hershey does a much better job generating profits from their total assets.

Asset turnover shows how quickly a company sells all of its inventory. In this case study, Hershey sells its inventory more than twice as fast as tootsie roll.

Lastly, profit margin shows how well a company turns its revenues into earnings for shareholders. Hershey is once again the superior firm in this area.

P9-2A Navaro Corporation Navaro Corporation reported the following plant assets.
A. Journal Entries
Date Account Debit Credit
1-Apr-15 Land 2,200,000
Cash 2,200,000
(record purchase of land for cash)
1-May-15 Cash 170,000
Accumulated Depreciation 440,000
Equipment 600,000
Gain on Disposal 10,000
(to record dispoasl and gain on disposal)
Note: Accumulated Depreciation = (600,000 x (1/10) x 7) + 20,000 = 440,000
1-Jun-15 Cash 1,600,000
Land 1,000,000
Gain on Disposal – Land 600,000
(to record gain on sale of land)
1-Jul-15 Equipment 1,100,000
Cash 1,100,000
(to record purchase of equipment)
31-Dec-15 Depreciation Expense 50,000
Accumulated Depreciation – Equipment 50,000
(to record depreciation)
Note: Depreciation Expense = 500,000 x (1/10) = 50,000
31-Dec-15 Accumulated Depreciation – Equipment 500,000
Equipment 500,000
(to record depreciation)
Note: Accumulated Depreciation = (500,000 x (1/10) x 10) = 500,000
B. Journal Entries
Date Account Debit Credit
31-Dec-15 Depreciation Expense 662,500
Accumulated Depreciation – Building 662,500
(to record depreciation)
TIP: Depreciation Expense = 26,500,000 x (1/40) = 662,500
31-Dec-15 Depreciation Expense 3,970,000
Accumulated Depreciation – Equipment 3,970,000
(to record depreciation)
C. Partial Balance Sheet
Plant Assets
Land 4,200,000
Buildings 26,500,000
Less: Accumulated Depreciation 12,762,500 13,737,500
Equipment 40,200,000
Less: Accumulated Depreciation 8,100,000 32,100,000
Total Plant Assets 50,037,500
1 Intangible Assets Rights, privileges, and competitive advantages that result from the ownership of long-lived assets that do not possess physical substance.
2 Amortization The allocation of the cost of an intangible asset to expense in a rational and systematic manner.
3 Franchise A right to sell certain products or services, or use certain trademarks or trade names within a designated geographic area.
4 Research and Development Costs Costs incurred by a company that often lead to patents or new products. These costs must be expensed as incurred.
5 Goodwill The excess of the cost of a company over the fair value of the net assets required.

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ACC 291 Week 2, P8-3A, BE9-11, DI9-5, E9-7, E9-8, BYP9-1, BYP 9-2, P9-2A

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