28

CHAPTER 3
Problem 3-1 Problem 3-2
1. C 1. A
2. C 2. B
3. A 3. B
4. B 4. A
5. C 5. C

Problem 3-3 Answer D
Capital December 31
2,500,000
Add: Withdrawals merchandise at cst
200,000
!tal
2,"00,000
#ess: Capital $an%ar& 1 2,000,000
Additinal in'estment (1,000,000 ) 120,000* 1,120,000
3,120,000
+et lss
( 420,000*
Problem 3-4 Answer B
!tal assets $an%ar& 1
5,000,000
#ess: !tal liabilities 2,000,000
Cntrib%ted capital 2,000,000
4,000,000
,etained earnin-s $an%ar& 1
1,000,000
!tal assets December 31
",500,000
#ess: !tal liabilities 3,200,000
Cntrib%ted capital (2,000,000 ) 500,000 ) 300,000* 2,.00,000
/,000,000
,etained earnin-s December 31
1,500,000
Add: Di'idends paid
500,000
!tal
2,000,000
#ess: ,etained earnin-s $an%ar& 1
1,000,000
+et incme
1,000,000


29
Problem 3-5 Answer D
Effect on net
assets
ncrease
Decrease
Cash 450,000
Acc%nts recei'able
300,000
0erchandise in'entr& 200,000
Acc%nts pa&able
100,000
1repaid e2penses 20,000
Accr%ed e2penses
40,000
3nearned rental incme 30,000
+tes pa&able
200,000
Accr%ed interest pa&able
30,000
!tal "00,000
/"0,000
+et increase ("00,000 /"0,000*
30,000
Add: Withdrawals
100,000
!tal
130,000
#ess: Additinal in'estment
500,000
+et lss
(3"0,000*
Problem 3-! Answer B
Assets
3,000,000
#ess: #iabilities
200,000
4harehlders5 e6%it&
2,.00,000
#ess: Cntrib%ted capital (15,000 2 150* 2,250,000
7ncrease in cntrib%ted capital 2,000 shares 250,000
2,500,000
,etained earnin-s, December 31
300,000
Add: Di'idends
500,000
+et incme
.00,000
Problem 3-" Answer A
Be-innin- in'entr&
1,/00,000
1%rchases 5,300,000
1%rchase disc%nts ( 100,000*
5,200,000
8ds a'ailable 9r sale
/,.00,000
#ess: :ndin- in'entr&
2,150,000
Cst 9 -ds sld
4,/50,000

3#
Problem 3-8 Answer A
7n'entr& $an%ar& 1
4,500,000
1%rchases
/,000,000
8ds a'ailable 9r sale
10,500,000
#ess: 7n'entr& December 31
2,500,000
Cst 9 -ds sld be9re writedwn
.,000,000
#ss n in'entr& writedwn
1,500,000
Cst 9 -ds sld a9ter writedwn
;,500,000
Problem 3-9 Answer A
<inished -ds $an%ar& 1
1,000,000
Cst 9 -ds man%9act%red
5,000,000
8ds a'ailable 9r sale
/,000,000
<inished -ds December 31
(1,200,000*
Cst 9 -ds sld
4,.00,000
Problem 3-1# Answer A
Be-innin- raw materials
220,000
,aw materials p%rchases
3,000,000
,aw materials a'ailable 9r %se
3,220,000
:ndin- raw materials
300,000
,aw materials %sed
2,;20,000
Direct labr
1,200,000
<actr& 'erhead:
7ndirect labr /00,000
!a2es and depreciatin 9actr& 200,000
3tilities (/0= 2 500,000* 300,000
1,100,000
!tal man%9act%rin- cst
5,220,000
Be-innin- wr> in prcess
400,000
!tal cst 9 -d in prcess
5,/20,000
:ndin- wr> in prcess
( 4.0,000*
Cst 9 -ds man%9act%red
5,140,000
Be-innin- 9inished -ds
250,000
8ds a'ailable 9r sale
5,3;0,000
:ndin- 9inished -ds
( 1.0,000*
Cst 9 -ds sld
5,210,000

31
Problem 3-11 Answer D
,aw materials p%rchased
4,300,000
7ncrease in raw materials
( 150,000*
,aw materials %sed
4,150,000
Direct labr
2,000,000
<actr& 'erhead
3,000,000
!tal man%9act%rin- cst
;,150,000
7ncrease in -ds in prcess
( 500,000*
Cst 9 -ds man%9act%red
.,/50,000
Decrease in 9inished -ds
350,000
Cst 9 -ds sld
;,000,000
Problem 3-12 Answer C
Be-innin- materials
200,000
1%rchases
2,500,000
1%rchase disc%nts
( 100,000*
!ransprtatin in
200,000
,aw materials a'ailable 9r %se
2,.00,000
:ndin- materials (/00,000 200,000*
( 400,000*
,aw materials %sed
2,400,000
Direct labr
3,000,000
0an%9act%rin- 'erhead
1,500,000
!tal man%9act%rin- cst
/,;00,000
Be-innin- -ds in prcess
300,000
!tal cst 9 -ds in prcess
",200,000
:ndin- -ds in prcess (500,000 300,000*
( 200,000*
Cst 9 -ds man%9act%red
",000,000
Be-innin- 9inished -ds
400,000
8ds a'ailable 9r sale
",400,000
:ndin- 9inished -ds ("00,000 400,000*
( 300,000*
Cst 9 -ds sld
",100,000
32
Problem 3-13 Answer A
Be-innin- raw materials
400,000
1%rchases 9 raw materials
2,300,000
,aw materials a'ailable 9r %se
2,"00,000
:ndin- raw materials (
340,000*
,aw materials %sed
2,3/0,000
Direct labr
1,;.0,000
<actr& 'erhead:
Depreciatin 9 9actr& b%ildin- 320,000
<actr& s%per'isr5s salar& 5/0,000
7ndirect labr 3/0,000
1,240,000
!tal man%9act%rin- cst
5,5.0,000
Be-innin- -ds in prcess
"/0,000
!tal -ds in prcess
/,340,000
:ndin- -ds in prcess
(1,000,000*
Cst 9 -ds man%9act%red
5,340,000
Problem 3-14 Answer C
Ad'ertisin-
1,500,000
<rei-ht %t
"50,000
,ent 9r 99ice space (1,.00,000 2 1?2*
;00,000 4ales salaries and cmmissin
1,400,000 !tal sellin- e2penses
4,550,000
Problem 3-15 Answer D
1rpert& ta2es
250,000
D%bt9%l acc%nts
1,/00,000
@99icers5 salaries
1,500,000
7ns%rance
.50,000
!tal administrati'e e2penses
4,200,000
33
Problem 3-1! Answer C
Cst 9 sales A 20=?40= A 50=

4ales 100=
2,000,000 Cst 9 sales
50= 1,000,000 8rss incme
50= 1,000,000 :2penses
20= 400,000 7nterest e2pense
5= 100,000
7ncme be9re incme ta2 25=
500,000
7ncme ta2 (35= 2 500,000*
1"5,000
+et incme
325,000

7ncme be9re incme ta2 (325,000?/5=*
500,000

4ales (500,000?25=*
2,000,000

Problem 3-1" Answer C
4ales
;,/00,000
Cst 9 sales (;,/00,000?1/0=*
/,000,000
8rss incme
3,/00,000
4ellin- and administrati'e e2penses (30= 2 ;,/00,000*
2,..0,000
+et incme
"20,000
Problem 3-18 Answer A
4ales
3,000,000 Cst 9 sales
1,200,000
8rss incme
1,.00,000
7nterest re'en%e
100,000
!tal
1,;00,000
:2penses:
Cmmissins 200,000
<rei-ht %t /0,000
Administrati'e e2penses 300,000
D%bt9%l acc%nts /0,000
#ss n sale 9 e6%ipment 1.0,000
( .00,000*
7ncme 9rm cntin%in- peratins be9re ta2
1,100,000

34
Problem 3-19 Answer C
4ales
50,000,000
Cst 9 -ds sld
(30,000,000*
8rss incme
20,000,000
8ain n e2prpriatin
2,000,000
7n'estment incme
3,000,000
!tal incme
25,000,000
:2penses:
4ellin- e2penses 5,000,000
8eneral and administrati'e 4,000,000
<inance cst 1,500,000
10,500,000
7ncme be9re ta2
14,500,000
7ncme ta2 e2pense
( 5,000,000*
+et incme
;,500,000
7nterest e2pense
2,000,000
8ain n earl& e2tin-%ishment ( 500,000*
<inance cst 1,500,000
Problem 3-2# Answer A
4ales
5,000,000
Cst 9 -ds sld
(2,.00,000*
8rss incme
2,200,000
@ther incme (400,000 ) 50,000*
450,000
!tal incme
2,/50,000
:2penses:
4ellin- e2penses "00,000
8eneral and administrati'e /00,000
1,300,000
7ncme be9re incme ta2
1,350,000
7ncme ta2 e2pense
( 150,000*
7ncme 9rm cntin%in- peratins
1,200,000
!he credit balance in the 9rei-n translatin adB%stment acc%nt is an additin t
sharehlders5 e6%it&.
Problem 3-21 Answer D
+et incme per b>
",410,000
Add: 3nrealiCed lss 540,000
AdB%stment 9 pr9it 9 prir &ear "50,000
1,2;0,000
AdB%sted net incme
.,"00,000
!he %nrealiCed lss n a'ailable 9r sale sec%rities is a ded%ctin 9rm ttal
sharehlders5 e6%it&.
35
!he adB%stment 9 pr9it 9 prir &ear is shwn in the statement 9 retained
earnin-s.
Problem 3-22 Answer D
,eprted incme be9re ta2
5,000,000
Add: AdB%stment 9 pr9it 9 prir &ear
1,400,000
!tal
/,400,000
#ess: Di'idend recei'ed 9rm Cinn
320,000
Crrected incme be9re ta2
/,0.0,000
Problem 3-23 Answer D
Problem 3-24 Answer A
Problem 3-25 Answer C
,eplacement cst
5,500,000
Ded%ctible cla%se
250,000
1rceeds 9 ins%rance plic&
5,250,000
#ess: Carr&in- am%nt 1,500,000
Cst 9 dismantlin- 100,000
1,/00,000
8ain n in'l%ntar& cn'ersin
3,/50,000
Problem 3-2! $%&nct'onal met(o)*
+arla Com,an-
ncome .tatement
/ear en)e) December 310 2##8

1ote
+et sales re'en%e (1* ","00,000
Cst 9 sales (2* (5,000,000*
8rss incme 2,"00,000
@ther incme (3* 400,000
!tal incme 3,100,000
:2penses:
4ellin- e2penses (4* ;50,000
Administrati'e e2penses (5* .00,000
@ther e2penses (/* 100,000 1,.50,000
7ncme be9re ta2 1,250,000
7ncme ta2 ( 250,000*
+et incme 1,000,000
3!
1ote 1 2 1et sales re3en&e
8rss sales
",.50,000
4ales ret%rns and allwances
( 140,000*
4ales disc%nts
( 10,000*
+et sales re'en%e
","00,000
1ote 2 2 Cost of sales
7n'entr&, $an%ar& 1
1,000,000
1%rchases 5,250,000
<rei-ht in 500,000
1%rchase ret%rns and allwances ( 150,000*
1%rchase disc%nts ( 100,000*
+et p%rchases
5,500,000
8ds a'ailable 9r sale
/,500,000
7n'entr&, December 31
(1,500,000*
Cst 9 sales
5,000,000
1ote 3 2 4t(er 'ncome
,ental incme
250,000
Di'idend re'en%e
150,000
!tal ther incme
400,000
1ote 4 2 .ell'n5 e6,enses
<rei-ht %t
1"5,000
4alesmen5s cmmissin
/50,000
Depreciatin stre e6%ipment
125,000
!tal sellin- e2penses
;50,000

1ote 5 2 A)m'n'strat'3e e6,enses
@99icers5 salaries
500,000
Depreciatin 99ice e6%ipment
300,000
!tal administrati'e e2penses
.00,000
1ote ! 2 4t(er e6,enses
#ss n sale 9 e6%ipment
50,000
#ss n sale 9 in'estment
50,000
!tal ther e2penses
100,000
3"
1at&ral met(o)
+arla Com,an-
ncome .tatement
/ear en)e) December 310 2##8
1ote
+et sales re'en%e (1* ","00,000
@ther incme (2* 400,000
7ncrease in in'entr& (3* 500,000
!tal .,/00,000
:2penses:
+et p%rchases (4* 5,500,000
<rei-ht %t 1"5,000
4alesmen5s cmmissin /50,000
Depreciatin (5* 425,000
@99icers5 salaries 500,000
@ther e2penses (/* 100,000
",350,000
7ncme be9re ta2 1,250,000
7ncme ta2
( 250,000*
+et incme 1,000,000
1ote 1 2 1et sales re3en&e
8rss sales ",.50,000
4ales ret%rns and allwances ( 140,000*
4ales disc%nts ( 10,000*
+et sales re'en%e ","00,000
1ote 2 2 4t(er 'ncome
,ental incme 250,000
Di'idend re'en%e 150,000
!tal ther incme 400,000
1ote 3 2 ncrease 'n 'n3entor-
7n'entr&, December 31 1,500,000
7n'entr&, $an%ar& 1
1,000,000
7ncrease in in'entr& 500,000
1ote 4 2 1et ,&rc(ases
1%rchases 5,250,000
<rei-ht in 500,000
1%rchase ret%rns and allwances
( 150,000*
1%rchase disc%nts ( 100,000*
+et p%rchases 5,500,000
38
1ote 5 2 De,rec'at'on
Depreciatin stre e6%ipment
125,000
Depreciatin 99ice e6%ipment
300,000
!tal
425,000
1ote ! 2 4t(er e6,enses
#ss n sale 9 e6%ipment
50,000
#ss n sale 9 in'estment
50,000
!tal
100,000
Problem 3-2"
7asa- Com,an-
.tatement of Cost of 8oo)s 7an&fact&re)
/ear En)e) December 310 2##8
,aw materials $an%ar& 1 200,000
1%rchases 3,000,000
,aw materials a'ailable 9r %se 3,200,000
#ess: ,aw materials December 31 2.0,000
,aw materials %sed 2,;20,000
Direct labr
;50,000
<actr& 'erhead:
7ndirect labr 250,000
4%perintendence 210,000
#i-ht, heat and pwer 320,000
,ent 9actr& b%ildin- 120,000
,epair and maintenance machiner& 50,000
<actr& s%pplies %sed 110,000
Depreciatin machiner& /0,000 1,120,000
!tal man%9act%rin- cst 4,;;0,000
8ds in prcess $an%ar& 1
240,000
!tal Cst 9 -ds in prcess 5,230,000
#ess: 8ds in prcess December 31 1"0,000
Cst 9 -ds man%9act%red 5,0/0,000

39
Cost of sales met(o)
7asa- Com,an-
ncome .tatement
/ear en)e) December 310 2##8
1ote
+et sales re'en%e (1* ",450,000
Cst 9 -ds sld (2*
(5,120,000*
8rss incme 2,330,000
@ther incme (3* 210,000
!tal incme 2,540,000
:2penses:
4ellin- e2penses (4* .30,000
Administrati'e e2penses (5* 5;0,000
@ther e2pense (/* 300,000 1,"20,000
7ncme be9re ta2 .20,000
7ncme ta2 e2pense
( 320,000*
+et incme 500,000
1ote 1 2 1et sales re3en&e
4ales ",500,000
4ales ret%rns and allwances ( 50,000*
+et sales re'en%e ",450,000
1ote 2 2 Cost of 5oo)s sol)
<inished -ds $an%ar& 1
3/0,000
Cst 9 -ds man%9act%red 5,0/0,000
8ds a'ailable 9r sale 5,420,000
<inished -ds December 31
( 300,000*
Cst 9 -ds sld 5,120,000
1ote 3 2 4t(er 'ncome
8ain 9rm e2prpriatin 100,000
7nterest incme 10,000
8ain n sale 9 e6%ipment
100,000
210,000
1ote 4 2 .ell'n5 e6,enses
4ales salaries
400,000
Ad'ertisin- 1/0,000
Depreciatin stre e6%ipment "0,000
Deli'er& e2penses 200,000
!tal .30,000
4#
1ote 5 2 A)m'n'strat'3e e6,enses

@99ice salaries
150,000
Depreciatin 99ice e6%ipment
40,000
Acc%ntin- and le-al 9ees
150,000
@99ice e2penses
250,000
!tal
5;0,000
1ote ! 2 4t(er e6,ense
:arth6%a>e lss
300,000
1at&re of e6,ense met(o)
7asa- Com,an-
ncome .tatement
/ear En)e) December 310 2##8
1ote
+et sales re'en%e (1* ",450,000
@ther incme (2* 210,000
!tal incme ",//0,000
:2penses:
Decrease in 9inished -ds
and -ds in prcess (3* 130,000
,aw materials %sed (4* 2,;20,000
Direct labr ;50,000
<actr& 'erhead (5* 1,120,000
4alaries (/* 550,000
Ad'ertisin- 1/0,000
Depreciatin ("* 110,000
Deli'er& e2penses 200,000
Acc%ntin- and le-al 9ees 150,000
@99ice e2penses 250,000
@ther e2pense (.* 300,000 /,.40,000
7ncme be9re ta2 .20,000
7ncme ta2 e2pense
( D320,000*
+et incme 500,000
1ote 1 2 1et sales re3en&e
4ales
",500,000
4ales ret%rns and allwances
( 50,000*
+et sales re'en%e
",450,000
41
1ote 2 2 4t(er 'ncome
8ain 9rm e2prpriatin
100,000
7nterest incme
10,000
8ain n sale 9 e6%ipment
100,000

210,000
1ote 3 2 Decrease 'n f'n's(e) 5oo)s an) 5oo)s 'n ,rocess
9an&ar- 1 December 31
Decrease
<inished -ds 3/0,000 300,000
/0,000
8ds in prcess 240,000 1"0,000
"0,000
!tal /00,000 4"0,000
130,000
1ote 4 2 Raw mater'als &se)

,aw materials $an%ar& 1
200,000
1%rchases
3,000,000
,aw materials a'ailable 9r %se
3,200,000
,aw materials December 31
2.0,000
,aw materials %sed
2,;20,000
1ote 5 2 %actor- o3er(ea)
7ndirect labr
250,000
4%perintendence
210,000
#i-ht, heat and pwer
320,000
,ent 9actr& b%ildin-
120,000
,epair and maintenance machiner&
50,000
<actr& s%pplies %sed
110,000
Depreciatin machiner&
/0,000
!tal
1,120,000
1ote ! 2 .alar'es
4ales salaries
400,000
@99ice salaries
150,000
!tal
550,000
1ote " 2 De,rec'at'on
Depreciatin stre e6%ipment
"0,000
Depreciatin 99ice e6%ipment
40,000
!tal
110,000
42
1ote 8 2 4t(er e6,ense
:arth6%a>e lss
300,000
Problem 3-28
/o&t( Com,an-
ncome .tatement
/ear en)e) December 310 2##8
1ote
+et sales re'en%e (1* .,."0,000
Cst 9 -ds sld (2*
(5,;00,000*
8rss incme 2,;"0,000
:2penses:
4ellin- e2penses (3* /;0,000
Administrati'e e2penses (4* 5.0,000
@ther e2pense (5* 340,000 1,/10,000
7ncme be9re ta2 1,3/0,000
7ncme ta2 e2pense
( 3/0,000*
+et incme 1,000,000
1ote 1 2 1et sales re3en&e
4ales
;,0"0,000
4ales ret%rns and allwances
( 200,000*
+et sales re'en%e
.,."0,000
1ote 2 2 Cost of 5oo)s sol)
Be-innin- in'entr&
1,500,000
1%rchases 5,"50,000
!ransprtatin in 150,000
1%rchase disc%nts ( 100,000*
5,.00,000
8ds a'ailable 9r sale
",300,000
:ndin- in'entr&
(1,400,000*
Cst 9 -ds sld
5,;00,000
1ote 3 2 .ell'n5 e6,enses
Depreciatin stre e6%ipment 110,000
4tre s%pplies
.0,000
4ales salaries
500,000
!tal /;0,000

43
1ote 4 2 A)m'n'strat'3e e6,enses
@99icers5 salaries 400,000
Depreciatin b%ildin- 120,000
@99ice s%pplies /0,000
!tal 5.0,000
1ote 5 2 4t(er e6,ense
3nins%red 9ld lss
340,000
Problem 3-29
C(r'st'an Com,an-
.tatement of Cost of 8oo)s 7an&fact&re)
/ear En)e) December 310 2##8
1%rchases 1,/00,000
<rei-ht in .0,000
!tal 1,/.0,000
7ncrease in raw materials ( 100,000*
,aw materials %sed 1,5.0,000
Direct labr 1,4.0,000
<actr& 'erhead:
7ndirect labr /00,000
Depreciatin machiner& 50,000
<actr& ta2es 130,000
<actr& s%pplies e2pense 120,000
<actr& s%perintendence 4.0,000
<actr& maintenance 150,000
<actr& heat, li-ht and pwer 220,000 1,"50,000
!tal man%9act%rin- cst 4,.10,000
Decrease in -ds in prcess
;0,000
Cst 9 -ds man%9act%red 4,;00,000
C(r'st'an Com,an-
ncome .tatement
/ear En)e) December 310 2##8
1ote
4ales re'en%e .,000,000
Cst 9 -ds sld (1* (5,100,000*
8rss incme 2,;00,000
:2penses:
4ellin- e2penses (2* .00,000
Administrati'e e2penses (3* ;30,000 1,"30,000
7ncme be9re ta2 1,1"0,000
7ncme ta2 e2pense ( 1"0,000*
+et incme 1,000,000
44
1ote 1 2 Cost of 5oo)s sol)
Cst 9 -ds man%9act%red
4,;00,000
Decrease in 9inished -ds
200,000
Cst 9 -ds sld
5,100,000
1ote 2 2 .ell'n5 e6,enses
4ales salaries
520,000
Ad'ertisin-
120,000
Deli'er& e2pense
1/0,000
!tal
.00,000
1ote 3 2 A)m'n'strat'3e e6,enses
@99ice s%pplies e2pense
30,000
@99ice salaries
.00,000
D%bt9%l acc%nts
100,000
!tal
;30,000
Problem 3-3#
Ronal) Com,an-
.tatement of Cost of 8oo)s 7an&fact&re)
/ear En)e) December 310 2##8
0aterials $an%ar& 1 1,120,000
1%rchases 1,/00,000
<rei-ht n p%rchases 220,000
1%rchase disc%nts ( 20,000* 1,.00,000
0aterials a'ailable 9r %se 2,;20,000
#ess: 0aterials December 31 1,5/0,000
0aterials %sed
1,3/0,000
Direct labr 2,000,000
<actr& 'erhead:
Eeat, li-ht and pwer /00,000
,epairs and maintenance 100,000
7ndirect labr 3/0,000
@ther 9actr& 'erhead 340,000
<actr& s%pplies %sed (300,000 ) //0,000 540,000* 420,000
Depreciatin 9actr& b%ildin- 2.0,000 2,100,000
!tal man%9act%rin- cst 5,4/0,000
8ds in prcess $an%ar& 1
3/0,000
!tal cst 9 -ds in prcess
5,.20,000
#ess: 8ds in prcess December 31 320,000
Cst 9 -ds man%9act%red 5,500,000
45
Ronal) Com,an-
ncome .tatement
/ear En)e) December 310 2##8
1ote

+et sales re'en%e (1* /,;.0,000
Cst 9 -ds sld (2*
(5,400,000*
8rss incme 1,5.0,000
@ther incme (3* 1/0,000
!tal incme 1,"40,000
:2penses:
4ellin- e2penses 200,000
Administrati'e e2penses 340,000 540,000
7ncme be9re ta2 1,200,000
7ncme ta2 e2pense
( 200,000*
+et incme 1,000,000
1ote 1 2 1et sales re3en&e
4ales
",120,000
4ales ret%rns and allwances
( 140,000*
+et sales re'en%e
/,;.0,000
1ote 2 2 Cost of 5oo)s sol)
<inished -ds $an%ar& 1
420,000
Cst 9 -ds man%9act%red
5,500,000
8ds a'ailable 9r sale
5,;20,000
<inished -ds December 31
( 520,000*
Cst 9 -ds sld
5,400,000
1ote 3 2 4t(er 'ncome
7nterest re'en%e
1/0,000
4!
Problem 3-31
En)less Com,an-
ncome .tatement
/ear En)e) December 310 2##8
1ote
+et sales re'en%e (1* .,/00,000
Cst 9 -ds sld (2*
(4,;50,000*
8rss incme 3,/50,000
@ther incme (3* .0,000
!tal incme 3,"30,000
:2penses:
4ellin- e2penses (4* 1,2/0,000
Administrati'e e2penses (5* 1,140,000
@ther e2penses (/* 50,000 2,450,000
7ncme be9re ta2 1,2.0,000
7ncme ta2
( 2.0,000*
+et incme 1,000,000
1ote 1 2 1et sales re3en&e
4ales .,"50,000
4ales ret%rns and allwances ( 150,000*
+et sales re'en%e
.,/00,000

1ote 2 2 Cost of 5oo)s sol)
0erchandise in'entr&, $an%ar& 1
1,100,000
1%rchases 4,/00,000
<rei-ht in 145,000
1%rchase disc%nts ( 45,000*
4,"00,000
8ds a'ailable 9r sale 5,.00,000
0erchandise in'entr&, December 31 1,000,000
Cst 9 -ds sld be9re writedwn 4,.00,000
#ss 9rm in'entr& writedwn 150,000
Cst 9 -ds sld a9ter in'entr& writedwn 4,;50,000
1ote 3 2 4t(er 'ncome
Di'idend re'en%e 50,000
8ain n sale 9 e6%ipment
10,000
7nterest re'en%e 20,000
!tal .0,000
4"
1ote 4 2 .ell'n5 e6,enses
Deli'er& e2pense 425,000
Depreciatin deli'er& tr%c> /0,000
Depreciatin stre e6%ipment 25,000
4ales salaries
/00,000
4tre s%pplies
150,000
!tal 1,2/0,000
1ote 5 2 A)m'n'strat'3e e6,enses
Cntrib%tin 125,000
Depreciatin 99ice 35,000
D%bt9%l acc%nts 30,000
@99ice salaries ;50,000
!tal 1,140,000
1ote ! 2 4t(er e6,enses
#ss n sale 9 tradin- sec%rities
50,000
En)less Com,an-
.tatement of Reta'ne) Earn'n5s
/ear En)e) December 310 2##8
,etained earnin-s $an%ar& 1 550,000
1rir perid errr %nderdepreciatin in 200/ ( 200,000*
Crrected be-innin- balance 350,000
+et incme 1,000,000
!tal 1,350,000
Di'idends paid ( 450,000*
,etained earnin-s December 31 ;00,000
Problem 3-32
Berna Com,an-
ncome .tatement
/ear En)e) December 310 2##8
4ales (1,000,000?25=*
4,000,000
Cst 9 -ds sld (45= 2 4,000,000*
(1,.00,000*
8rss incme 2,200,000
:2penses (30= 2 4,000,000* (1,200,000*
+et incme 1,000,000
Cst 9 -ds sld (150= 2 30=* 45=
+et incme (100= F 45= F 30=* 25=
48
Com,&tat'on:
1%rchases (1,500,000?"5=* 2,000,000
,aw materials December 31 500,000
,aw materials %sed (50= 2 3,000,000*
1,500,000
Direct labr (30= 2 3,000,000*
;00,000
<actr& 'erhead (20= 2 3,000,000*
/00,000
!tal man%9act%rin- cst 3,000,000
8ds in prcess December 31 (1?3 2 2,250,000*
"50,000
Cst 9 -ds man%9act%red 2,250,000
<inished -ds December 31 (25= 2 1,.00,000* 450,000
Cst 9 -ds sld 1,.00,000
Cash receipts:
Cash in'estment 1,000,000
Cllectins (;0= 2 4,000,000* 3,/00,000 4,/00,000
Cash disb%rsements:
1%rchases ("5= 2 2,000,000* 1,500,000
Direct labr ;00,000
<actr& 'erhead (/00,000 100,000* 500,000
@peratin- e2penses 1,200,000 4,100,000
Cash balance December 31 500,000
Berna Com,an-
Balance .(eet
December 310 2##8
A..ET.
1ote
C%rrent assets:
Cash 500,000
Acc%nts recei'able (10= 2 4,000,000* 400,000
7n'entries (1* 1,"00,000
!tal c%rrent assets 2,/00,000
+nc%rrent assets:
1rpert&, plant and e6%ipment (2* 2,;00,000
!tal assets 5,500,000
;AB;TE. A1D E<=T/
C%rrent liabilit&:
Acc%nts pa&able (25= 2 2,000,000* 500,000
:6%it&:
Cmmn stc>, 1100 par 2,500,000
Additinal paid in capital 1,500,000
,etained earnin-s 1,000,000
!tal e6%it& 5,000,000
!tal liabilities and e6%it& 5,500,000
49
1ote 1 2 n3entor'es
,aw materials December 31
500,000
8ds in prcess December 31 (1?3 2 2,250,000*
"50,000
<inished -ds December 31 (25= 2 1,.00,000*
450,000
!tal
1,"00,000
1ote 2 2 Pro,ert-0 ,lant an) e>&',ment
!tal cst
3,000,000
Acc%m%lated depreciatin
( 100,000*
B> 'al%e
2,;00,000
5#
CHAPTER 4
Problem 4-1 Problem 4-2
1. D 1. B
2. C 2. C
3. C 3. B
4. B 4. C
5. D 5. C
Problem 4-3 Answer A
!tal re'en%es
2,200,000 !tal e2penses
(2,;00,000*
7mpairment lss (2,000,000 1,.00,000*
( 200,000*
:mpl&ee terminatin cst
( 100,000*
#ss 9rm discntin%ed peratins
(1,000,000*
Problem 4-4 Answer C
7ncme
3,000,000
7mpairment lss
( 500,000*
7ncme be9re ta2
2,500,000
7ncme ta2 35=
( ."5,000*
+et incme
1,/25,000
Problem 4-5 Answer D
,e'en%e
50,000,000
:2penses
(32,000,000*
7mpairment lss
(20,000,000*
#ss 9rm discntin%ed peratin
( 2,000,000*
Carr&in- am%nt 9 net assets
;0,000,000
,ec'erable am%nt
"0,000,000
7mpairment lss
20,000,000
Problem 4-! Answer D
,e'en%e $an%ar& 1 t December 31
50,000,000
:2penses $an%ar& 1 t December 31
(3",000,000*
!erminatin cst
( 4,000,000*
7ncme be9re ta2 ;,000,000
7ncme ta2 (35= 2 ;,000,000* 3,150,000
7ncme 9rm discntin%ed peratin 5,.50,000
51
,ec'erable am%nt 5/,500,000
Carr&in- am%nt 9 net assets 5/,000,000
:2pected -ain nt rec-niCed 500,000
Problem 4-" Answer D
4ales 4%th
3,500,000
:2penses 4%th 3,;00,000
@peratin- lss ( 400,000*
#ss n dispsal ( 2,000,000*
!tal lss ( 2,400,000*
!a2 sa'in- (35= 2 2,400,000* .40,000
#ss 9rm discntin%ed peratins (1,5/0,000*
Problem 4-8 Answer D
4ales Da>a> 23,000
Cst 9 -ds sld Da>a> (14,000*
@ther e2penses Da>a> (1",000*
8ain n dispsal 15,000
7ncme be9re ta2 ",000
7ncme ta2 (35= 2 ",000* ( 2,450*
7ncme 9rm discntin%ed peratins 4,550
Problem 4-9 Answer B
@peratin- lss 9r the &ear
.,000,000
#ss n dispsal in 200. 500,000
1reta2 lss 9rm discntin%ed peratins
.,500,000
!he e2pected peratin- lss in 200; and e2pected -ain n dispsal in 200; are
not reco5n'?e) 'n 2##8@
Problem 4-1# Answer D
Carr&in- 'al%e 15,000,000
<air 'al%e ;,000,000
Cst t sell ( 500,000*
<air 'al%e less cst t sell .,500,000
1<,4 5, para-raph 15, pr'ides that an entit& shall meas%re a nnc%rrent asset
r dispsal -r%p classi9ied as held 9r sale at the lower of carr-'n5 amo&nt
an) fa'r 3al&e less cost to sell@

52
Problem 4-11 Answer D
Cst
1,000,000
Acc%m%lated depreciatin
"50,000
B> 'al%e 4?1?200.
250,000
<air 'al%e less cst t sell 4?1?200. (100,000 10,000*
;0,000
7mpairment lss 4?1?200.
/0,000
7mpairment lss /0,000
Acc%m%lated depreciatin /0,000
<air 'al%e less cst t sell 12?31?200. (150,000 20,000*
130,000
<air 'al%e less cst t sell 4?1?200. ;0,000
8ain n impairment rec'er& 40,000
Acc%m%lated depreciatin 40,000
8ain n impairment rec'er&
40,000
1<,4 5, para-raph 25, pr'ides that an entit& shall not )e,rec'ate a
nnc%rrent asset while it is classi9ied as held 9r sale r while it is part 9 a
dispsal -r%p classi9ied as held 9r sale.
Problem 4-12 Answer C
Carr&in- am%nt
30,000,000
<air 'al%e less cst t sell
22,000,000
7mpairment lss
.,000,000
Allcated t -dwill
5,000,000
Balance allcated t nonc&rrent assets
3,000,000
Carr-'n5 amo&nt %ract'on
;oss
11: 1/,000,000 1/?20
2,400,000
1atent 4,000,000 4?20
/00,000
20,000,000
3,000,000
@bser'e that the impairment lss is allcated 9irst t -dwill and the remainder
t the Gnnc%rrent assetsH in the dispsal -r%p. 1<,4 5, para-raph 23, pr'ides
that the impairment lss 9r a dispsal -r%p classi9ied as held 9r sale shall
red%ce the carr&in- am%nt 9 the nonc&rrent assets nl&. !h%s, n lss is
allcated t acc%nts recei'able and in'entr&.