Practical Accounting Problems 1

CPAR HO#5765

1 Total coupons expense (600,000 x 70% x 1.10)

Less: Payments to retailers
Liability for unredeemed coupons
2 Total warranty expense (30,000 x 80)
Less: Actual expenditures
Estimated warranty liability
3 Beginning balance
Receipts from sale (100,000 x 5)
Payments for redemptions (110,000 x 5)
Dec. 31 Liability for Deposits

462,000
220,000
242,000 C
2,400,000
700,000
1,700,000 C
150,000
500,000
(550,000)
100,000 C

4 Unearned service contracts 1/1

Cash receipts
Service contract recognized
Unearned service contracts 12/31

1,200,000
2,000,000
(1,700,000)
1,500,000 A

5 Advances 1/1
Advances received
Orders shipped
Cancelled advances
Advances 12/31

2,400,000
3,700,000
(3,200,000)
(600,000)
2,300,000 B

6 Deferred revenue from Plan A (50,000 x 15 x 8/12)

Deferred revenue from Plan B (20,000 x 12 x 8/12)
Total

500,000
160,000
660,000 C

7 B = 25% x (1,500,000 - B)

300,000 C

8 Escrow liability 1/1

Payments received
Taxes paid
Interest net of service fee (50,000 x 90%)
Escrow liability 12/31
9 Best estimate of the provision
10 Litigation award not subject to appeal
11 Estimated payments:
At 200k (200,000 x 70% x 20%)
At 100k (100,000 x 70% x 80%)
Total
Risk adjustment (84,000 x 7%)
Total payment
PV factor
PV of provision
12 Interest expense (2,550,000 x 12%)

700,000
1,580,000
(1,720,000)
45,000
605,000 C
500,000 A
1,500,000 A

28,000
56,000
84,000
5,880
89,880
0.95
85,386 A
306,000 C

13 Current liability

1,500,000 A

14 Loan principal and accrued interest

Less: Cash payment
Gain from extinguishment of debt

5,750,000
4,000,000
1,750,000 A

15 Interest payable (8M x 8% x 3/12)

160,000 B

16 June 30 Interest (886,000 x 12% x 6/12)

Dec. 31 Interest (886,000 + 3,160) x 12% x 6/12
Total interest expense

53,160
53,350
106,510 A

Practical Accounting Problems 1

CPAR HO#5765

17 12/31/13 Carrying amount (5,250,000 x 1.06 - 350,000)

Less: Face value
Unamortized premium

5,215,000
5,000,000
215,000 C

18 Carrying amount 1/1

FV 12/31
Gain on fair value adjustment

5,385,000
5,125,000
260,000 A

19 Issue price
Less: FV of bonds ex-warrants (5M x 96%)
Increase in SHE / Share warrants outstanding

5,400,000
4,800,000
600,000 A

20 Face value of bonds converted

Discount (500,000 x 50%)
Carrying amount of BP
Share premium from conversion option (2M x 50%)
Total
Less: PV (5,000 x 40 x 20)
Share premium from issuance

5,000,000
(250,000)
4,750,000
1,000,000
5,750,000
4,000,000
1,750,000

21 Security deposit (refundable if silent)

Last month advance payment
Balance of nonrefundable reimbursement (900,000 - (900,000 / 5 x .5)
Payments to be deferred

350,000
150,000
810,000
1,310,000 B

22 First year rent net of free period (800,000 - 400,000)

Rent for year 2 to 5 (1,250,000 x 4)
Total
Divide by leaseterm
Annual rental income

400,000
5,000,000
5,400,000
5
1,080,000 C

23 Gross rental income

Lease bonus amortization (300,000 / 3)
Depreciation (4.8M / 12)
Insurance
Net profit
24 Total PV of MLP
Less: Advance payment
Lease liability 1/1/13 and 12/31/13
Less: 1/1/14 Payment applied to lease liability
Payment
Interest
December 31, 2014 Lease Liability
25 Depreciation expense (1,080,000 / 12)
26 Cash selling price
Less: Cost
Profit from sale
Interest revenue (3.5M - 600k) x 10% x 6/12

850,000
100,000
(400,000)
(50,000)
500,000 A
6,330,000
1,000,000
5,330,000
1,000,000
533,000

467,000
4,863,000 B
90,000 C
3,500,000
2,900,000
600,000 D
145,000 D

27 Annual rental (3,234,000 / 4.312)

Leaseterm
Gross investment
Less: Cost of equipment and net investment
Financial revenue

750,000
5
3,750,000
3,234,000
516,000

28 PBO 1/1
Current service cost (SQUEEZE)
Past service cost
Interest cost
Benefits paid
PBO 12/31

3,500,000
900,000 C
500,000
350,000
(250,000)
5,000,000

Practical Accounting Problems 1

CPAR HO#5765
29 FVPA 1/1
Pensions paid
Contributions to the plan
Actual return on plan assets
FVPA 12/31

8,750,000
(600,000)
700,000
950,000
9,800,000 B

30 Current service cost

Past service cost
Net interest (9M x 10%) - (8M x 10%)
Benefit expense
Remeasurement gain on plan assets (1.1M - (8M x 10%)
Net Benefit cost

1,500,000
500,000
100,000
2,100,000
(300,000)
1,800,000 B

31 12/31 Liability for compensated absences (1,500 x 1,000)

1,500,000 D

32 Termination benefits (20,000 x 120)

2,400,000 A

Short term benefits (60,000 - 20,000) x 100

4,000,000

33 Highest lifetime salary (600,000 x 1.48)

888,000

Annual retirement benefit (888,000 x 2% x 15 years)

266,400

PV of 8 payments of retirement benefits

1,421,244

PV on 12/31/13 of PV of 8 payments of retirement benefits

34 Deferred tax liability (800 - 500) x 40%
Deferred tax asset (250 - 200) x 40%
Deferred tax expense

548,600 B
120,000
(20,000)
100,000 D

35 FV of shares
Less: PV
Share premium

1,400,000
1,000,000
400,000 B

36 Share outstanding (100,000 + 13,000) x 3 - 5,000

334,000 C

37 Share options ar granted for past services and exercisable immediately

Compensations expense (100,000 x 8)
38

800,000 A
Cumulative

2013 (60 - 50) x 30,000 / 3

2014 (80 - 50) x 30,000 / 3 x 2

600,000

Total liability for SAR

39 Total share premium (1.5M + (25 x 100,000))
Less: Deficit
Share premium after quasi reorganization
40 Dividends declared
Preference dividends (30,000 x 100 x 5% x 2)
Ordinary dividends (200,000 x 10 x 5%)
Balance for participation

CY Expense
100,000
500,000
600,000

4,000,000
2,100,000
1,900,000

3,000,000
(300,000)
(100,000)
2,600,000

Balance to preference (2.6M x (3M/(3M+2M))

Balance to ordinary (2.6M x (2M/(3M+2M))

1,560,000
1,040,000

Dividends to ordinary sharesholders (100,000 + 1,040,000)

1,140,000 B

41 Net income
Less: Preferred dividends
NI to Ordinary shareholders
Divide by:
BEPS
42 Accrual service revenue (2M + 200k - 50,000)

5,000,000
100,000
4,900,000
200,000
24.50 B
2,150,000 C

Practical Accounting Problems 1

CPAR HO#5765
43 Salaries payable begining
Salaries expense
Total amount to be paid
Less: Salaries paid
Dec. 31, salaries payable

40,000
420,000
460,000
390,000
70,000 C

44 Rental revenue - cash basis

Rent receivabe 11/30/10
Rent receivable 11/30/11
Write off
Rental revenue - accrual basis

2,210,000
(800,000)
1,060,000
30,000
2,500,000 D

45 Net checking account (1.75M - 100)

Time deposit
Commercial paper
90 day T-bill
Total cash and cash equivalents

1,650,000
250,000
1,000,000
500,000
3,400,000 A

46 Net income
Increase in AR
Doubtful accounts expense
Decrease in prepaid rent expense
Increase in AP
Cash provided by operating activities

7,500,000
(300,000)
10,000
210,000
150,000
7,570,000 D

47 Net income
Depreciation expense (400 + 150)
Gain on sale
Cash provided by operating activities

3,000,000
550,000
(50,000)
3,500,000 B

48 Taxes and interest to be disclosed

49 Average current cost (1,150 + 1,250) / 2
Divide by
Depreciation expense on average current cost
50 Cost
Amortization (3M / 10 x 3)
Carrying amount
2013 Amortization
12/31/13 Carrying amount
Recoverable amount
Impairment loss

545,000 A
1,200,000
5
240,000 C
3,000,000
(900,000)
2,100,000
(700,000)
1,400,000
500,000
900,000 C