intermediate accounting i course no. acc 211galilee.0catch.com/books/summeri2009/wjohnson...galilee...

40
Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate Centre Joe Farrington Road P.O. Box EE 16507 - Nassau, Bahamas Tel. (242)324-9466 Fax (242)324-9467 Email: [email protected] www.gcollege.org Dr. Willis L. Johnson, Ph.D Certified Public Accountant Master Financial Professional (MFP) Certified Counselor

Upload: hadiep

Post on 26-Apr-2018

308 views

Category:

Documents


3 download

TRANSCRIPT

Page 1: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College

Intermediate Accounting I Course No. ACC 211

SUPPLEMENTARY

GGaalliilleeee CCoorrppoorraattee CCeennttrree • JJooee FFaarrrriinnggttoonn RRooaadd PP..OO.. BBooxx EEEE 1166550077 -- NNaassssaauu,, BBaahhaammaass TTeell.. ((224422))332244--99446666 FFaaxx ((224422))332244--99446677

EEmmaaiill:: ggaalliilleeee@@ccoorraallwwaavvee..ccoomm wwwwww..ggccoolllleeggee..oorrgg

Dr. Willis L. Johnson, Ph.D Certified Public Accountant

Master Financial Professional (MFP) Certified Counselor

Page 2: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 2

Galilee College © 2013

Galilee College Course Outline

COURSE NUMBER: ACC 211 COURSE TITLE: Intermediate Accounting I DEPARTMENT: Accounting CREDIT VALUE: 3.0 COURSE DURATION: 1 SEMESTER DATE PREPARED: July 2013 PREREQUISITES ACC 112, Accounting Principles II

PROGRAM COORDINATOR _________________________________

REQUIRED TEXTS: INTERMEDIATE ACCOUNTING Notes I, Dr. Willis L. Johnson, Galilee College © 2013

SUPPLEMENTAL MATERIALS

Gleim Financial CPA Review

COURSE DESCRIPTION

Theories and problems involved in proper recording of transactions and preparation of financial statements. Review of the accounting cycle, discussion of financial statements, analysis of theory as applied to transactions relating to current assets, current liabilities, long-term investment and presentation on the Balance Sheet.

COURSE OBJECTIVES Students will be expected to understand the environment of accounting; basic accounting theory; the recording process; the income statement and statement of retained earnings; the balance sheet; the time value of money; cash and short-term investments; current receivables and liabilities; inventory valuation, cost flow assumptions and estimating techniques; property plant and equipment acquisitions, subsequent expenditures, disposals, depreciation and depletion; intangible assets, and current liabilities. Program Context:

This course is a second year course in the Accounting program.

Course Learning Outcomes: Learning outcomes identify the knowledge, skills and attitudes that successful students will have developed and reliably demonstrated as a result of the learning experiences and evaluations during this course.

Evaluation Strategies and Grading:

Page 3: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 3

Class Attendance Full participation and attendance is expected for this course. Students who miss a class are responsible for any information discussed, assigned or distributed in that class period. Four exams are scheduled during the semester. The lowest exam score will be dropped. If an exam is missed for ANY REASON, that will be the exam dropped. If a second exam is missed for ANY REASON, a ZERO will be assigned to the second missed exam. There will be no make-up exams. Everyone is required to take the final exam. Calculators may be used on all exams, but you may NOT share calculators. FINAL EXAM 30% QUIZ / TESTS 60% ASSIGNMENTS 10%

100% Note that violation of academic honesty can affect the course grade. "Cheating" on an exam (i.e., the giving or receiving of aid) will result in a course grade of "F." Note that classroom behavior (for example, talking to other students during lecture) can negatively affect course grades by as much as three letter grades, e.g., an "A" can become a "D."

GRADING SYSTEM: A 94% - 100% Excellent 4.00 D 68% - 74% Passed 1.00 B 87% - 93% Good 3.00 F 0% - 67% Failed 0.00 C 75% - 86% Average 2.00

COVERAGE Chapter 1: Concepts and Standards Chapter 2: Revenue Recognition Chapter 3: Financial Statements Chapter 4: Other Income Statement Items Chapter 5: Financial Statement Disclosure Chapter 6: Statement of Cash Flows Chapter 7: Cash and Investments Chapter 8: Receivables and Accruals Chapter 9: Inventories

Appendix 1: Accounting Terms Appendix 2: Associate Degree Program (Accounting) Appendix 3: Bachelor’s Degree in Accounting Appendix 4: Accounting Courses Description Appendix 5: Accounting News Additional Information: 1. MISSED TESTS WILL RESULT IN A ZERO GRADE; SEE YOUR INSTRUCTOR TO

DISCUSS THIS. 2. Texts, working papers and calculators are to be brought to every class. 3. Some details of your course schedule may vary by section/teacher or change as a

result of unforeseen circumstances, such as weather, cancellations, College and student activities and class timetabling.

Page 4: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 4

Galilee College © 2013 Chapter 1 – Concepts and Standards

Page 5: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 5

Chapter I – Class & Home Work 1. Match the concepts with the selected term Concepts and Standards Answer Selected Term 1. Probable Future Economic Benefits A. Liabilities 2. Residual Interest In Assets B. Revenues 3. Enhancements Of Assets Or Settlements Of Liabilities From An Entity’s Major Or Central Operations

C. Gains

4. The Accounting Process Reducing An Amount By Periodic Payments Or Write-Downs

D. Realization

5. Formal recording of an item E. Assets 6. The change in equity during a period from transactions and other events and circumstances from nonowner sources

F. Losses

7. Probable future sacrifices of economic benefits G. Accrual 8. Using assets or incurring liabilities by an entity’s major or central operations

H. Financial Statement

9. An accounting process concerned with matching future expected cash receipts and payments

I. Recognition

10. Assigning an amount according to a plan or formula J. Deferrals 11. Increases in equity form incidental transactions of an entity, except form investments by owners.

K. Amortization

12. An accounting process concerned with matching past cash receipts and payments

L. Earnings M. Allocation

13. Conversion of noncash resources into money N. Comprehensive Income

14. Decreases in equity resulting from transfers by the enterprise ot owners

O. Dividends P. Capital

Page 6: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 6

Contributions 15. Increases in Equity resulting from transfers to the enterprise for the purpose of increasing an ownership interest

Q. Equity R.. Expenses

2. Match the Concepts with the answer from the “Choices” Concept Answer Choices 1. The relevant attribute for plant assets and most inventories. It is the cash or equivalent actually paid for an asset and is ordinarily adjusted subsequently for amortization (which includes depreciation) or other allocations.

A) Current Market Value

2. The relevant attributes for liabilities incurred to provide goods or services to customers. It is a cash or equivalent actually received when the obligation was created and may be subsequently amortized.

B) Net Realization Value

3. Used to measure certain inventories and is the cash or the equivalent that would be paid for a current acquisition of the same or an equivalent asset.

C) Historical Cost

4. Used to measure some marketable securities e.g., those held by investment companies, or assets expected to be sold at below their carrying amount.

D) Historical Proceeds

5. Used to measure short-term receivables and some inventories. It is the cash or equivalent expected to be received for an asset in the due course of business, minus the costs of completion and sale.

E) Replacement Cost

6. Used to measure items such as trade payables and warranty obligations. It is the cash or equivalent equivalents that the entity expects to pay to satisfy the obligation in the due course of business.

F) Present Value

7. In the theory, the most relevant method of measurement because it incorporates time value of the money concepts. In practice, it is currently used for only long-tern receivables and payables.

G) Net Settlement Value

3. Prepare a Memorandum to the bookkeeper explaining what a comprehensive basis of accounting other than GAAP may be and the required disclosures for OCBOA reports. REMINDER: Your response will be graded for both technical content and writing skills. You should demonstrate your ability to develop, organize, and express your ideas. Do not convey information in the form of a table, bullet point list, or other abbreviated presentation. TO: Staff Member FROM: New CPA REFERENCE: OCBOA Use and Disclosures

Page 7: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 7

BONUS QUESTION Financial Reporting Case (Adopted from Intermediate Accounting by Kieso, Weygandt and Warfield) The following comments were made at an Annual Conference of Financial Executives Institute (FEI)

Page 8: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 8

Galilee College © 2013 Chapter 2 – Revenue Recognition A. Recognition at the Point of Sale CLASS: Tip Tippy sold $250,000 of merchandise to Win Winny on January 1, 2013, under each of the following situation record the transactions for Tip Tippy:-

1. The shipping terms were FOB Shipping point (The goods were still in Tip Tippy Warehouse) 2. The shipping terms were FOB Destination – Miami (The goods were still in Tip Tippy Warehouse) 3. The shipping terms were FOB Shipping point (The goods were already shipped) 4. The shipping terms were FOB Destination – Miami (The goods were already shipped, but did not reach

Miami) 5. The shipping terms were FOB Destination – Miami (The goods had just arrived in Miami)

HOME: Smith Smithy sold $100,000 of merchandise to Get Getty on January 1, 2014, under each of the following situation record the transactions for Smith Smithy on January 1st) Note: only record transactions on January 1st.

6. The shipping terms were FOB Shipping point (The goods were shipped the same day) 7. The shipping terms were FOB Destination – Nassau (The goods were shipped on January 13th) 8. The shipping terms were FOB Shipping point (The goods were shipped on January 2nd) 9. The shipping terms were FOB Destination – Nassau (The goods reached Nassau on January 1st)

B. Recognition at Completion of Production CLASS: Cin Cinny Manufactured some fungible/perishable/special goods for In Inny at a sales value of $50,000. Record the following transactions for Cin Cinny:-

(1) The goods were manufactured on January 2, 2013, (2) The goods were paid for on February 10, 2013 HOME: Joe Joey Manufactured some chairs for Zed Zeddy at a sales value of $20,000. These chairs are used in the neighborhood schools. Record the following transactions:

(2) The goods were manufactured on January 3, 2013, (2) The goods were paid for on January 9, 2013 C. Cash vs Accrual Basis CLASS: Record the following transactions for Min Minny:-

1. Received a telephone bill from Batelco for $4,000 on December 12, 2012 2. The telephone bill was paid for on the due date of January 19, 2013 3. Min Minny paid 2 years of insurance on December 1, 2012, $36,000

a. What is the entry on December 1, 2012? b. What is the entry at December 31, 2012? c. What is the balance in the prepaid insurance on May 31, 2014?

HOME: Record the following transactions for Milk Milky on December 31st 2012:-

4. Received a BEC from bill for $10,000 on December 31, 2012 5. 60% The Electricity bill was paid for on the due date of January 31, 2013 6. Milk Milky paid 2 years of insurance on September 1, 2012 $48,000

a. What is the entry on September 1, 2012? b. What is the entry at December 31, 2012 to record the insurance expense for the year? c. What is the balance in the prepaid insurance on at December 31, 2013?

D. Installment Method CLASS: Gin Ginny had installment sales of $2,000,000 on January 1, 2012, The cost of sales were $1,500,000. The first payment of $900,000 was made on March 2, 2012, and the second payment was made on November 9, 2012 for $700,000.

Page 9: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 9

1. Record the entry on January 1, 2012 2. Record the entry for the March payment?

a. How much of the gross profit is recognized? b. How much of the gross profit is deferred? c. What is the installment receivable balance after the payment?

HOME: Pick Picky had installment sales of $3,500,000 on January 1, 2013, The cost of sales were $2,100,000. The first payment of $1,000,000 was made on September 1, 2013,

3. Record the entry on January 1, 2013 4. Record the entry on September 1, 2013t?

a. How much of the gross profit is recognized at September 1, 2013? b. How much of the gross profit is deferred at September 1, 2013? c. What is the installment receivable balance as of September 1, 2013?

E. Cost-Recovery Method CLASS: As the Financial Controller for Lil Lilly, you advised your accounting staff to use the cost-recovery method to recognized revenues. In a memo, explain why you suggest the used of the cost-recovery method. You should be explicit. Please referenced to applicable standard that would support your augment. HOME: Bet Betty used the Cost Recovery method and had sales of $1,000,000. Cost of sales were 75%. If Bet Betty collected $800,000, how much profit can be recognized? F. Long-Term Construction Contracts CLASS: As the Accounts manager for Good Goody, you received a 3 year long-term construction contract on July 1, 2003 from Pen Penny. The following were the details as of December 31, 2012: Contract price $3,000,000, cost incurred to date $900,000, Cost to complete $600,000, revenue recognized at December 31, 2003 $300,000. How much revenue should be recognized at December 31, 2012 under (1) the percentage of completion method? and (2) the completed contract method? HOME: As the Accounts manager for Hint Hinty, you received a long-term construction contract on January 1, 2013 from Sue Suey. The contract price was $6,000,000. At December 31, 2013, $100,000 profit was recognized, and at that time the cost to date was $600,000. In 2014, additional cost incurred was $2,500,000 and the estimated cost to complete was $1,200,000. Using the percentage of completion method, how much profit can be recorded in 2014? G. Consignment Accounting CLASS: 1. Did Diddy accounts showed the following information: Purchases $3,000,000, Freight-in $300,000, Freight-Out $200,000, Purchase Returns $500,000, Purchase Discount $100,000, Beginning Inventory $7,500,000, Cost of goods sold $3,500,000. What is Ending Inventory? HOME: Stub Stubby consigned $3,000,000 worth of merchandise to Sell Selly on January 1, 2013. Stub Stubby paid the transportaion charges and agreed to pay commission to Sell Selly at a rate of 10%, and the mark up s 50%. If Sell Selly returned 20% of the inventory to Stub Stubby and sold the balance, how much should be remitted to Stub Stubby? CLASS: 2. Tin Tinny consigned $2,000,000 worth of merchandise to Nin Ninny on February 2, 2013. Nin Ninny paid the transportation cost of $200.00. At December 31, 2013 only 30% of the inventory remained in Nin Ninny’s warehouse. If Nin Ninny receives a commission of 25%, and the mark up is 40%, what amount must be submitted to Tin Tinny at December 31, 2013?

Page 10: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 10

H. Interest CLASS: 1. On January 1, 2012, Mil Milly Co. exchanged equipment for a $200,000, noninterest-bearing note due on January 1, 2007. The prevailing rate of interest for the note of this type at January 1, 2012 was 10%. The present value of $1 at 10% for three periods is .75. What amount of interest revenue should be included in Mil Milly’s 2013 income statement? CLASS: 2. On January 1, 2013, Ott Otty Company sold goods to Fox Foxy Co. Fox Foxy signed a noninterest-bearing note requiring payment of $60,000 annually for 7 years. The first payment was made on January 1, 2013. The prevailing rate of interest for this type of note at date of issuance was 10% . If the present value factor was 4.36, what should Ott Otty record as revenues in January 2013? HOME: On January 1, 2013, Poke Pokey Company sold goods to Nod Noddy. If the present value of this note was 5.4 over a 8 year period, and 100,000 was paid by Nod Noddy on January 1st. What is the total revenue of this noninterest-bearing note can Poke Pokey recognized as of January 1, 2013. BONUS QUESTION (Adopted from Intermediate Accounting by Kieso, Weygandt and Warfield)

Page 11: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 11

Galilee College © 2013 Chapter 3 – Financial Statements

Flip Flippy Additional Information Income Tax Rate 30% Discontinued Continued Operations Flip Flippy made a decision to discontinue it Bottling Division. This year, the Bottling Division had losses of $50,000 Extraordinary Items Flip Flippy benefited from a gain as a result of a hurricane damage. The amount of gain was $100,000. This was the first hurricane in Flip Flippy’s country.

Page 12: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 12

Instructions: Complete the Financial Statements using the additional information.

Page 13: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 13

Charle Charley Additional Information Income Tax Rate 25%

1. During the year, Charle Charley discontinued its Packing Department and incurred additional income of $150,000 and additional expenses of $30,000.

2. A major Snow storm that never happened before caused a severe damage to Charle Charley’s building. The damage of $90,000 was uninsured.

Instructions: Complete the Financial Statements using the additional information.

Page 14: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 14

Galilee College © 2013 Chapter 4 – Other Income Statement Items A. Discontinued Operations (D) Cla+ : * On December 31, 2013 Glen Glenny decided to discontinue its bleaching division. The income for the ble*aching plant less the relevant expenditures for 2013 was $200,000. In 2012 the plant had income of $250,000. The income tax rate for both years was 30%. Show the comparative income statement for 2013. Home: 1. On December 31, 2012 Glen Glenny’s Board of Directors made a decision to cease its packing division which had income of $300,000 in 2003. With a consistent rate of 25%, the division had losses of $175,000 in 2012. Show the comparative income statement for 2012. 2. On December 31, 2013, Glen Glenny made a decision to place the packing division back in normal operations. i. How would this effect discontinued operations, and ii. What is the impact on depreciation for 2013? B. Extraordinary Items (E) Home: Write a one page memo to the board of directors explaining the following:- i. What is an extraordinary item, ii. What is the treatment when an item is unusual and frequent iii. Why a strike generally is not extraordinary and iv. Why a strike by the Police Force is extraordinary. C. Accounting Changes and Error Corrections (C) Class Accounting Estimates) 1. Sal Sally purchased a new equipment on January 1, 2003 for $500,000. At that time there was no salvage value and the equipment had an estimated life of 6 years. Sal Sally used the Straight-line depreciation method. On December 31, 2013 Sal Sally’s accountant estimated that there is a salvage value of $50,000 and the equipment has a useful life of 5 years from time of purchase. In 2013, what is the depreciation xpense, accumulated depreciation and Book Value respectively. Class (Errors): 2. On December 31, 2013 Flex Flexy realized that it failed to record certain depreciation expenses of $30,000 per year in 2011, 2012 and 2013. In 2012, the income was $200,000 and 2013 income was $220,000. Show comparative income statement in 2013 and 2012, as well a retained earnings section showing the effect of the above. Home (Accounting Estimates) 1. Slip Slippy purchased a building on January 1, 2000 for $4,000,000. At that time there was no salvage value and the building had an estimated life of 40 years. Sal Sally used the Straight-line depreciation method. On December 31, 2013 Slip Slippy’s Board of Directors estimated that there is a salvage value of $400,000 and the building has a useful life of 30 years from time of purchase. In 2013, what is the depreciation expense, accumulated depreciaiton and Book Value respectively. Home (Errors): 2. On December 31, 2013 Grip Grippy realized that it failed to record losses of $20,000 in 2011, $10,000 in 2012 and gains of $25,000 in 2013. In 2012, the income was $250,000 and 2013 income was $300,000. Show comparative income statement in 2013 and 2012, as well a retained earnings section showing the effect of the above.

Page 15: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 15

D. Earnings Per Share (EPS) Class: On December 31, 2013, Cool Cooly had net income of $1,500,000. During the year Common Stock were outstanding as follows: (Jan 1, Beginning 500,000, Issued on April 1st 300,000 and on October 1st issued 200,000). 10% $2,000,000 bonds were outstanding. The bonds had a denomination of $1,000 each convertible into 10 shares of common stock. No bonds were converted. Of the 130,000 share of Preferred Stock outstanding on Jan 1st, 50% were converted on April 1st. Preferred Stock received dividends of .10 each on Dec. 31st. The Income tax rate is 30%. Find the following for Cool Cooly:- i. The weighted-average number of shares used to calculate BEPS ii. Earnings per share (BEPS) iii. The control number iv. The weighted-average number of shares used to calculate DEPS. v. The effects of the assumed conversions on the numerator of the DEPS vi. The Earning per share DEPS Home: On December 31, 2013, Cheap Cheapy had net income of $2,000,000. During the year Common Stock were outstanding as follows: (Jan 1, Beginning 600,000, Issued on July 1st, 400,000 and on November 1st issued 300,000). 8% $1,000,000 bonds were outstanding. The bonds had a denomination of $1,000 each convertible into 15 shares of common stock. No bonds were converted. Of the 200,000 shares so Preferred Stock outstanding on Jan 1st, 60% were converted on July 1st. Preferred Stock received dividends of .13 each on Dec. 31st. The Income tax rate is 30%. Find the following for Cheap Cheapy:- i. The weighted-average number of shares used to calculate BEPS ii. Earnings per share (BEPS) iii. The control number iv. The weighted-average number of shares used to calculate DEPS. v. The effects of the assumed conversions on the numerator of the DEPS vi. The Earnings per share DEPS BONUS QUESTION (Adopted from Intermediate Accounting by Kieso, Weygandt and Warfield)

Page 16: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 16

Galilee College © 2013

A. Significant Accounting Policies Home: You have been asked by Welt Welty Corporation to explain “Significant Accounting Policies”. What should be disclosed in the summary of significant accounting policies? 1. List at least six items that should be disclosed and why? B. Segment Reporting CLASS: Trod Troddy Corp. and its divisions are engaged solely in manufacturing operations. The following data (consistent with prior years' data) pertain to the industries in which operations were conducted for the year ended December 31, 2013: Operating Total Assets Segment Revenue Profit at 12/31/05 --------- ----------- ---------- ----------- A $10,000,000 $1,750,000 $20,000,000 B 8,000,000 1,400,000 17,500,000 C 6,000,000 1,200,000 12,500,000 D 3,000,000 550,000 7,500,000 E 4,250,000 675,000 7,000,000 F 1,500,000 225,000 3,000,000 ----------- ---------- ----------- $32,750,000 $5,800,000 $67,500,000 =========== ========== =========== In its segment information for 2013, how many reportable segments does Trod Troddy have? HOME: Crod Croddy Corp. and its divisions are engaged solely in manufacturing operations. The following data (consistent with prior years' data) pertain to the industries in which operations were conducted for the year ended December 31, 2014:

Operating Total Assets at Segment Revenue Profit 12/31/2014

A 8,350,000 4,175,000 6,262,500 B 3,100,000 1,550,000 2,325,000 C 2,555,000 8,230,000 5,392,500 D 7,940,000 3,970,000 5,955,000 E 1,230,000 615,000 1,590,000 F 9,350,000 1,450,000 5,400,000

$ 32,525,000 $ 19,990,000 $ 26,925,000

In its segment information for 2014, how many reportable segments does Crod Croddy have?

Page 17: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 17

C. Interim Financial Statements CLASS 1: Said Saidy Corp. experienced a $50,000 decline in the market value of its inventory in the first quarter of its fiscal year. Said Saidy had expected this decline to reverse in the third quarter, and in fact, the third quarter recovery exceeded the previous decline by $10,000. Said Saidy's inventory did not experience any other declines in market value during the fiscal year. What amounts of loss or gain should Said Saidy report in its interim financial statements for the first and third quarters? HOME 1: Paid Paidy Corp. experienced a $90,000 decline in the market value of its inventory in the first quarter of its fiscal year. Paid Paidy had expected this decline to reverse in the second quarter, and in fact, the second quarter recovery was $110,000. Paid Paidy's inventory did not experience any other declines in market value during the fiscal year. What amounts of loss or gain should Paid Paidy report in its interim financial statements for the first and second quarters? CLASS 2: On June 30, 2014, Mill Milly Corp. incurred a $100,000 net loss from disposal of a component. Also, on June 30, 2014, Mill paid $40,000 for property taxes assessed for the calendar year 2014. What amount of the foregoing items should be included in the determination of Mill Milly's net income or loss for the 6-month interim period ended June 30, 2014? HOME 2: On September 30, 2013, Pill Pilly Corp. incurred a $300,000 net loss from disposal of it’s water making plant. Also, on September 30, 2013, Pill paid $100,000 for property taxes assessed for the calendar year 2013. What amount of the foregoing items should be included in the determination of Pill Pilly's net income or loss for the 9-month interim period ended September 30, 2013? D. Related Party Transactions HOME: SFAS 57 requires disclosure regarding “Related Party” transactions. Summarize SFAS 57 in a half page report to the Controller of Pleck Plecky Corporation. E. Derivatives and Hedging CLASS: On October 1, 2013, Hedge Hedgey, Inc., a calendar year-end firm, invested in a derivative designed to hedge the risk of changes in fair value of certain assets, currently valued at $1.5 million. The derivative is structured to result in an effective hedge. However, some ineffectiveness may result. On December 31, 2013, the fair value of the hedged assets has decreased by $350,000, and the fair value of the derivative has increased by $325,000. How Hedge Hedgey should recognize as the net effect on 2013 earnings? HOME: On September 30, 2014, Pledge Pledgey, Inc., invested in a derivative designed to Hedge the risk of changes in fair value of certain assets, currently valued at $2.1 million. The derivative is structured to result in an effective Hedge. However, some ineffectiveness may result. On December 31, 2014, the fair value of the Hedged assets has decreased by $500,000, and the fair value of the derivative has increased by $550,000. How Pledge Pledgey should recognize as the net effect on 2014 earnings? BONUS QUESTION Adopted Galilee CPA Review -Task Based Simulation 23: Interim Financial Statements 2 On January 5, Said Saidy Corp received $1,000,000 of income to benefit the four

quarters.

Page 18: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 18

On February 28, 2010, Said Saidy Corp paid $100,000 for property taxes assessed for the 2010 calendar year.

On June 30, 2010, Said Saidy Corp. incurred a $100,000 loss from disposal of a component.

On August 8, 2010 Said Saidy experienced a loss of $75,000 resulting from a hurricane that never happened before.

Other interim expenses totaled $300,000 (60% is allocated for the first two quarters, and 40% for the remaining two quarters)

The enacted tax rate is 30% for 2010 and 35% for 2011. Requirements Prepare the interim Income Statement for Said Saidy for the 2010 Calendar year.

Page 19: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 19

Galilee College © 2013 Chapter 6 – Statement of Cash Flows Quick Quicky (December 31, 2013) Cash at beginning of year 26,000 Cash from sale of common stock 48,000 Cash from sale of land 72,000 Cash paid for dividends 24,000 Cash paid for purchase of building 60,000 Cash paid to purchase land 15,000 Cash paid to retire bonds payable 50,000 Cash payment for income taxes 83,500 Cash payment for interest 8,000 Cash Payments for Merchandise 785,200 Cash payments for operating expenses 193,800 Cash received from customers 1,171,000 Increased in Accounts Payable 21,000 Increased in Accounts Receivables 11,000 Prepare a statement of cash flow (Direct Method) Pick Picky (December 31, 2013) Cash at beginning of year 35,000 Cash from sale of common stock 72,000 Cash from sale of land 50,000 Cash paid for dividends 19,000 Cash paid for mortgage loan 15,000 Cash paid for purchase of land 35,000 Cash paid for supplies 23,000 Cash paid for treasury stock 10,000 Cash paid to purchase land 30,000 Cash paid to retire bonds payable 45,999 Cash payment for income taxes 3,800 Cash payment for interest 6,500 Cash Payments for Merchandise 340,000 Cash payments for operating expenses 142,000 Cash received from customers 900,140 Decreased in Accounts Payable 13,000 Increased in Accounts Receivables 12,000 Prepare a statement of cash flow (Direct Method) BONUS QUESTION Adopted Galilee CPA Review -Task Based Simulation 12: Cash Flows Operating Activities

Page 20: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 20

Note: The firm payout ratio for the year is 20%. Instructions:

1. Prepare the Operating Activities section of the Statement of Cash Flow using the Indirect Method. 2. What is the net cash provided by operations?

Page 21: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 21

Galilee College © 2013 Chapter 7 – Cash and Investments SECURITIES - Class Work On January 1, 2012 Saint Sainty purchased some Securities for $20,000. At December 31, 2012 and 2013, the securities were valued at $10,000 and $30,000 respectively. What are the entries to record purchase and values at the end of each year under each situation:-

A. Trading Securities C. Held to Maturity B. Available For Sale Securities

SECURITIES -Home Work On January 1, 2012 Jake Jakey purchased some Securities for $50,000. At December 31, 2012 and 2013, the securities were valued at $60,000 and $55,000 respectively. What are the entries to record purchase and values at the end of each year under each situation:-

C. Trading Securities D. Available For Sale Securities E. Held to Maturity

INVESTMENTS (EQUITY METHOD) Class Work On January 1, 2012 Smith Smithy purchased 20% of the shares of ABC Co for $500,000. At December 31, 2012 ABC Co. has earnings of $200,000 and paid dividends of $80,000. Instructions: On the Books of Smith Smithy, Record the following entries:-

a. January 1, 2012 b. December 31, 2012 c. Prepare a T Account to show the balance in the investment account at Dec. 31, 2012

INVESTMENTS (EQUITY METHOD) - Home Work On January 1, 2013 Yard Yardy purchase 25% of the shares of DEF Co for $300,000. At December 31, 2013 DEF Co. has earnings of $100,000 and paid dividends of $50,000. On the Books of Yard Yardy, Record the following entries:-

a. January 1, 2012 b. December 31, 2012 c. Prepare a T Account to show the balance in the investment account at Dec. 31, 04

INVESTMENTS (COST METHOD) Class Work On January 1, 2012 Benn Benny purchased 10% of the shares of ABC Co for $500,000. At December 31, 2012 ABC Co. has earnings of $200,000 and paid dividends of $80,000. Instructions: On the Books of Benn Benny, Record the following entries:-

b. January 1, 2012 b. December 31, 2012 c. Prepare a T Account to show the balance in the investment account at Dec. 31, 2012

INVESTMENTS (COST METHOD) - Home Work On January 1, 2012 Will Willy purchase 15% of the shares of DEF Co for $300,000. At December 31, 2012 DEF Co. has earnings of $100,000 and paid dividends of $50,000. On the Books of Will Willy, Record the following entries:-

b. January 1, 2012 b. December 31, 2012 c. Prepare a T Account to show the balance in the investment account at Dec. 31, 2012

Page 22: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 22

BONUS QUESTION Adopted Galilee CPA Review -Task Based Simulation 15: Securities

All changes in fair value are considered temporary. Security A is a trading security, and the other securities are available-for-sale securities. Instructions:-

1. Prepare journal entries to record the change to fair value. 2. Post all entries to the T Accounts 3. What amounts should be charged to earnings

Page 23: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 23

Galilee College © 2013 Chapter 8 – Receivables and Accruals A. Fundamentals CLASS 1: In 2013 Blick Blicky had the following balances: Trade Accounts Receivable $93,000, Allow. For Uncollectible accounts $2,000, Claim against shipper for damaged goods $3,000. What is the value of net current accounts receivables? HOME 1: In 2013 Snick Snicky had the following: Accounts Receivable $60,000, Allow. For Uncollectible accounts 10% of A/R, Charges from shipper for shipping FOB Destination $4,000. What is the value of net current accounts receivables? HOME 2: Plick Plicky guarantied a loan for Drick Dricky in the amount of $100,000. Further, Drick Dricky had receivable of $90,000 and wrote of $20,000 in March 2013.

a. What is the off balance sheet risk at December 31, 2013 for Plick Plicky? b. How much accounting loss can recognized by Plick Plicky at December 31, 2013?

B. Uncollectible Accounts Class 1: At December 31, 2012 Sand Sandy had a balance of $3,000 in the allowance for doubtful accounts. At December 31, 2013 the balance of accounts receivable was $100,000. Credit Sales was $150,000. Sand Sandy estimated that 7% of its receivable will not be collected or 4.5% of its Credit Sales will not be collected.

1. What is the entry to record doubtful accounts expense at December 31, 2013 using the Asset Valuation Method

2. What is the entry to record doubtful accounts expense at December 31, 2013 using the Income Statement Method?

3. Explain the Direct Method approach. 4. $10,000 of receivables were written off on March 1, 2013, and customers paid $6,000 of the

written-off account on September 30, 2013. What are the entries on March 1, 2013 and September 30, 2013?

HOME: At December 31, 2013, Land Landy had accounts receivable valued at $150,000. Credit Sales was 20% higher than the Accounts receivable balance. Land Landy estimated that 6% of its receivable will not be collected or 4% of its Credit Sales will not be collected. The balance in the allowance account at the close of last year was $4,000.

5. What is the entry to record doubtful accounts expense at December 31, 2013 using the Asset Valuation Method

6. What is the entry to record doubtful accounts expense at December 31, 2013 using the Income Statement Method?

7. Explain the Direct Method approach. 8. $15,000 of receivables were written off on June 30, 2013, and customers paid 60% of the written-

off account on November 30, 2013. What are the entries on June 30, 2013 and November 30, 2013?

Page 24: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 24

C. Other Measurement Issues CLASS: Bled Bledy recorded sales on March 1, 2013 of $100,000 under the credit terms of 3/10, n/30 to Fit Fitty. Fit Fitty paid the invoice on March 9, 2013. 1. Record all transactions during march under both the gross method and the net method. 2. How much would Bled Bledy receive if the payment from Fit Fitty was made on March 12, 2013? HOME: Cled Cledy recorded sales on January 1, 2013 of $250,000 under the credit terms of 2/15, n/30 to Sit Sitty. Sit Sitty paid the invoice on Jauary 15, 2013. 1. Record all transactions during march under both the gross method and the net method. 2. How much would Bled Bledy receive if the payment from Sit Sitty was made on January 17, 2013?

D. Accounts Receivable – Disposition CLASS: Spent Spenty was in serious financial trouble. He needed $300,000 pay to his suppliers. His A/R balance was $500,000.

1. What is the entry if Spent Spenty assigned $300,000 to Bank of Nova Scotia on December 31, 2013 at a finance charge of 10%?

a. What is the entry if customers paid the bank $50,000. 2. What is the entry if Spent Spenty factored the Entire A/R for $300,000 to Bank of Nova Scotia on

December 31, 2013? (without recourse) HOME: Blent Blenty needed additional cash to finance a new factory building valued at $250,000. In using his A/R of $300,000.

1. What are the entry if Blent Blenty assigned A/R valued at 50% and gave a promissory note for the balance to the Royal Bank of Canada at November 15, 2013? The finance charge is 8%.

a. What is the entry if customers paid the 40% of the note. 2. What is the entry if Blent Blenty factored A/R valued at 50% and gave a promissory note for the

balance to the Royal Bank of Canada at November 15, 2013? E. Notes Receivable - Discounting CLASS: Rot Rotty received from a customer a 1 year, $500,000 note bearing annual interest of 8%. After holding the note for 6 months, Rot Rotty discounted the note at Commonwealth Bank at an effective interest rate of 10%. What amount of cash did Rot Rotty receive from the bank? HOME: Mot Motty received from a customer a 1 year, $400,000 note bearing annual interest of 6%. After holding the note for 4 months, Mot Motty discounted the note at British American Bank at an effective interest rate of 8%. What amount of cash did Mot Motty receive from the bank? BONUS QUESTION Adopted Galilee CPA Review -Task Based Simulation 19: Factoring A/R

Page 25: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 25

Page 26: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 26

Galilee College ©2013 Chapter 9 – Inventories A. Inventory Fundamentals CLASS: Glen Glenny purchased $20,000 inventory on February 1, 2013, Sold $15,000 at a mark up of 130% on March 1. All transactions were on account. The year end inventory showed a balance of $4,000, and Beginning inventory was $17,000. show all entries during the year, as well as the entry to balance the inventory account. Useing both the perpetual and weighted average methods. HOME: Clen Clenny had beginning inventory of $30,000 and ending inventory of $50,000.00. He purchased $60,000 on July 2 and sold $45,000 at a mark up of 150% during the year. show all entries during the year, as well as the entry to balance the inventory account. Use both the perpetual and weighted average methods. B. Cost Flows – FIFO, Average Cost, and LIFO

Comparably, for both CC and HH, calculate the following: Ending Inventory, Cost of Goods Sold, Gross Profit using the following methods: Weighted Average, Moving Average, First-In, First Out and Last-in, First Out. C. Dollar-Value LIFO On January 1, 2012, Life Lifey and Wife Wifey adopted the Dollar-Value Inventory method. Life Lifey and Wife Wifey entire inventory constitutes a single pool. Inventory Data for 2012 and 2013 are as follows:- CLASS: Life Lifey HOME: Wife Wifey Date Inv. At Current Inv. At Based Date Inv. At Current Inv. At Based Year Cost Year Cost Year Cost Year Cost 1/01/12 $150,000 $150,000 1/01/12` $200,000 $200,000 12/31/13 $220,000 $200,000 12/31/13 $287,000 $250,000 12/31/14 $276.000 $230,000 12/31/14 $357,500 $275,000 1. What is Price Index for each year, 2. What is the LIFO inventory value at Dec. 31, 2014? D. Lower of Cost or Market (LCM) CLASS: On December 31, 2013, Chew Chewey determined its chocolate inventory was valued at $26,000 with a replacement cost of $20,000. Chew Chewey estimated that after further processing cost of $12,000, the chocolate can be sold for $40,000. Chew Chewey normal profit margin is 10% of sales. Under the

Page 27: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 27

lower of cost or market rule, what amount should Chew Chewey report as chocolate inventory in its December 31, 2013 Balance Sheet. HOME: On December 31, 2013, Taste Tastey determined its Now-and-Later inventory using the FIFO method valued at $30,000 with a replacement cost of $25,000. Taste Tastey estimated that after further processing cost of $15,000, the Now-and-Later can be sold for $50,000. Taste Tastey normal profit margin is 15% of sales. Under the lower of cost or market rule, what amount should Taste Tastey report as Now-and-Later inventory in its December 31, 2013 Balance Sheet. E. Gross Profit Method CLASS: The following information was obtained from Coke Cokey’s Sales $275,000, Beg. Inv. $30,000, End. Inv. $18,000. Coke Cokey’s gross margin is 20%. What amount represents Coke Cokey’s purchases? HOME: The following information was obtained from Pep Pepsi’s Sales $350,000, Beg. Inv. $40,000, purchases. $90,000. Pep Pepsi’s gross margin is 20%. What amount represents Pep Pepsi’s cost of goods sold? F. Retail Method Explain the advantages and disadvantages of using the Retail Method to cost inventory. G. Purchase Commitments CLASS: On January 1, 2011, Price Pricey signed a purchase commitment for three years supplies of floppy disk. The agreement was: 100,000 per year at the price of $10.00 each. During the second year, the floppy disks to Price Pricey became worthless and can be sold for only $2.00 each. What is the entry at December 31, 2012 to record the purchase commitment loss? HOME: On January 1, 2012, Best Besty signed a purchase commitment for two years supplies of ink pens. The agreement was: 1,000,000 per year at the price of 20 cents each. Immediately after signing, the ink pens became worthless and can be sold for only 2 cents. What is the entry at December 31, 2012 to record the purchase commitment loss? BONUS QUESTION Adopted Galilee CPA Review -Task Based Simulation 26: Dollar Value Lifo

Page 28: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 28

Instructions:-

1. What is Brock’s Price Index at 12/31/Y6 2. What is Brock’s Price Index at 12/31/Y7 3. What was Brock’s Dollar-Value LIFO inventory at 12/31/Y6 4. What was Brock’s Dollar-Value LIFO inventory at 12/31/Y7

Page 29: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 29

GGaalliilleeee CCoorrppoorraattee CCeennttrree • JJooee FFaarrrriinnggttoonn RRooaadd PP..OO.. BBooxx EEEE 1166550077 -- NNaassssaauu,, BBaahhaammaass

TTeell.. ((224422))336644--88220022 oorr 332244--99446666 EEmmaaiill:: ggaalliilleeee..wwlljj@@ggmmaall..ccoomm wwwwww..ggccoolllleeggee..oorrgg

IInntteerrmmeeddiiaattee AAccccoouunnttiinngg II -- FFiinnaall PPrroojjeecctt Grade Distribution A. Recognition at the Point of Sale H. Interest B. Recognition at Completion of Production I. Financial Statements C. Cash vs Accrual Basis J. Earnings Per Share (EPS) D. Installment Method K. Statement of Cash Flows) E. Cost-Recovery Method L. Concepts and Standards F. Long-Term Construction Contracts M. Accounts Receivable G. Consignment Accounting N. Inventory

__________________________________________________________________

1. Please follow all instruction 2. Remember to label each page that you use properly:

1. Part 2. Name 3. Please work alone 4. All work should be placed in a folder with a clear plastic covering addressed as follows:-

Galilee College

Nassau, Bahamas

Intermediate Accounting I

Final Project/Examination ____________ Semester 20__

Dr. Willis L. Johnson, Professor

Your Name_______________________ Date____________________________

Note: Your final project will not be accepted without a CD or Flash Drivee with all work in Excel or Word where applicable.

Page 30: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 30

Galilee College © 2013 - Intermediate Accounting I - Final Project A. Recognition at the Point of Sale Bit Bitty sold $250,000 of merchandise to Pit Pitty on March 4, 2013, shipping term F.O.B Shipping Point. The goods were shipped on March 6, 2013. In good form, answer the following:-

1. If a fire destroys the goods on March 5th, who will bear the risk of loss? 2. If the goods were destroyed on March 6th, midway to Dallas, who will bear the risk of loss?

B. Recognition at Completion of Production When is it possible to recognize revenue prior to delivery but immediately upon production? C. Cash vs Accrual Basis Glad Gladdy neglected to record a utility receipt on December 3, 2012in the amount of $3,500.

1. How would that affect the 2013 income of $60,000? 2. If the error was corrected in 2013 would affect it would have on the previous income of $50,000 in 2012?

D. Installment Method In 2013, Slip Slippy received $300,000 and $400,000 from an installment sale of $3,500,000. If the cost of Sale was 40% of sales, answer the following:-

1. What is the installment receivables balance? 2. What is the deferred gross profit? 3. What is recognized gross profit?

E. Cost-Recovery Method Dip Dippy paid $200,000 for merchandise he sold in 2013 for $500,000. However customers returned 20% of the goods sold, which were subsequently written-off.

1. If Dip Dippy received $250,000 from customers in 2013, how much revenue should be recognized? F. Long-Term Construction Contracts White Whitey received a 5 year long-term construction contract on January 1, 2012 at a contract price of $5,000,000. In 2012, after incurring expenditures of $1,000,000 he recognized revenue of $200,000. In 2013, he incurred expenditures of $1,000,000 and estimated that he would spend another $2,200,000 in the future. 1. Using the percentage of completion method, how much revenue should White Whitey record in 2013? G. Consignment Accounting For a commission of 10%, Sted Steddy consigned $3,000,000 worth of merchandise to Sell Selly on January 1, 2013. Sell Selly paid the transportation of $2,000. During 2013 20% of the goods were returned to Sted Steddy and Sell Selly sold 80% of the balance. 1. What amount should be remitted to Sted Steddy in 2013? H. Interest 1. On January 1, 2013, Bent Benty Company sold goods to Pick Picky, who signed a noninterest-bearing note requiring payment of $70,000 annually for 10 years. The first payment was made on January 1, 2013. The prevailing rate of interest for this type of note at date of issuance was 8% . 1. If the present value factor was 3.91, what should Bent Benty record as revenues in 2013? I. Financial Statements (The Worksheet for Final Finally is attached) Additional Information Income Tax Rate 30% 3. During the year, Final Finally discontinued its Bottling Division and incurred additional expenditures of $100,000. 4. A first time hurricane damaged a building at a lost of $200,000. The building was eventually sold to an explorer

for $350,000. Instructions:

Page 31: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 31

Prepare the following financial statements for Final Finally 1. Income Statement 2. Retained Earnings Statement 3. Balance Sheet). J. Earnings Per Share (EPS) On December 31, 2013, Stock Stocky had net income of $2,000,000. During the year Common Stock were outstanding as follows: (Jan 1, Beginning 300,000, Issued on March 1st 500,000 and on September 1st issued3200,000).

9% $2,000,000 bonds were outstanding. The bonds had a denomination of $1,000 each convertible into 20 shares of common stock. No bonds were converted.

Of the 200,000 share of Preferred Stock outstanding on Jan 1st, 40% were converted on June 1st. Preferred Stock received dividends of .15 each on Dec. 31st. The Income tax rate is 30%.

Find the following for Stock Stocky:- 1. The weighted-average number of shares used to calculate BEPS 2. Earnings per share (BEPS) 3. The control number 4. The weighted-average number of shares used to calculate DEPS. 5. The effects of the assumed conversions on the numerator of the DEPS 6. The Earns per share DEPS

K. Statement of Cash Flows) Scott Scotty (March 31, 2013) Cash received from customers 1,756,500 Cash payments for operating expenses 339,150 Cash Payments for Inventory 1,374,100 Cash payment for interest 12,000 Cash payment for income taxes 125,250 Cash paid to retire bonds payable 75,000 Cash paid to purchase land 22,500 Cash paid for purchase of building 90,000 Cash paid for dividends 50,000 Cash from sale of land 108,000 Cash from sale of common stock 72,000 Cash from purchase of AFS Securities 150,000 Cash at beginning of year 75,000 Prepare a statement of cash flow (Direct Method)

L. Concepts and Standards Prepare a Memorandum to the bookkeeper explaining the qualitative characteristics of accounting information. Conclude with a table outlining the various elements. Your response will be graded for both technical content and writing skills. You should demonstrate your ability to develop, organize, and express your ideas. Do not convey information in bullet point list or other abbreviated presentation. TO: Staff Member FROM: Your Name REFERENCE: Qualitative Characteristics of Accounting Information M. Accounts Receivable

Page 32: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 32

A. At December 31, 2012 Push Pushy had a balance of in the allowance for doubtful accounts equal to 5% of Accounts Receivable. At that time, Accounts Receivable had a balance of $200,000. At December 31, 2013 the balance of accounts receivable was $225,000. Credit Sales was $250,000. Push Pushy estimated that its doubtful accounts would remain at 5% of Receivables.

9. What is the entry to record doubtful accounts expense at December 31, 2013 using the Asset Valuation Method

10. What is the entry to record doubtful accounts expense at December 31, 2013 using the Income Statement Method if 4% of credit sales is estimated as uncollectible?

11. $12,000 of receivables were written off on January 10, 2014, and customers paid $10,000 of the written-off account on February 2, 2014. What are the entries on January 10, 20113 and February 2, 3014?

12. For number “3” above, what would are the entries if Push Pushy used the Direct Method for Uncollectible Accounts?

B. On January 1, 2013 Push Pushy received from a customer a 1 year, $500,000 note bearing annual interest of 8%. After holding the note for seven months, Push Pushy discounted the note at Galilee National Bank at an effective interest rate of 10%. What amount of cash did Push Pushy receive from the bank? N. Inventory Accounting Stoke Stokey Inventory Information

Date Particulars Quantity Unit Cost Total 1-Feb Beginning 14,000 3 $ 42,000 9-Feb Purchase 8,000 5 $ 40,000

12-Feb Sold 6,000 13 $ 78,000 15-Feb Purchase 5,000 7 $ 35,000 21-Feb Sold 8,000 14 $ 112,000 25-Feb Purchase 6,000 8 $ 48,000

1. Prepare Schedules showing (i) Ending Inventory (ii) Cost of Goods Sold (iii) Gross Profit 2. Prepare a comparison schedule using the four methods: a. Weighted Average b. Moving Average c. FIFO d. LIFO

Page 33: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 33

Appendix 1 – Accounting Terms

Accounts Payable: Accounts of money you owe. A liability that is usually created when you've made a purchase on credit. Accounts Receivable: Accounts of money owed to you for the sale of goods or services. Accrual basis: A method of accounting where transactions are recorded as they occur regardless of when payment for that transaction is made or received Accrued Assets: Assets from revenues earned but not yet received. Accrued Expenses: A liability incurred during the accounting period for which payment has not been made. Accrued Income: Income earned during an accounting period but not received/recorded by the end of the period. Aging: The grouping of like transactions by date. Example - sorting invoices by due date. Adjusting Entries: Special accounting entries that are made when you close the books at the end of an accounting period to bring the ledger up to date. Asset: Items that a business or individual owns or are owed. Audit: The scrutinizing of accounting records and supporting documents for accuracy and completeness. Audit trail: The information within the accounting system that reveals the effects of a transaction. Bad Debt: An account or receivable that has been deemed unrecoverable and written-off. Balance Sheet: A statement listing the total assets and liabilities; indicating the net worth of the company for the given time period. Capital: The right to assets of the owner of a business.. Cash basis: An accounting method where transactions are recorded when the actual change of payment occurs, regardless of when the goods or services are delivered. Certified Financial Statements: Financial statements that have been audited and certified by a CPA. Chart of accounts: A numerical listing of a business’s accounts. Closing Entries: Journal entries made at the end of the period to return the balance in all accounts to zero and ready the account for the next reporting period.. Credit: An entry on the right side of an account - decreases assets or increases liabilities. Debit: An entry on the left side of an account - increases assets or decreases liabilities. Depreciation: The allocation of the cost of a tangible, long-term asset over its useful life. Expenses: The daily costs incurred in running a business. Fiscal: A 12 month accounting period. Not necessarily a calendar year. General Ledger: The master record of all the balance sheet and income statement account balances. Gross profit: The amount of net sales minus the amount of cost of sales Income statement: A statement that summarizes revenues and expenses. Invoice: A form, sent from the seller to the buyer, listing the items bought, price, terms etc..

Page 34: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 34

Journal: A chronological record of transactions, also known as the book of original entry. Ledger: A book containing accounts to which debits and credits are posted from books of original entry. Liability: A debt or obligation. Net sales: The amount left when returns, discounts, and allowances are deducted from sales revenue. Operating Expenses: The expenses that are incurred from the daily operation of the business. Owners' equity: The owners' right to the assets of an entity. Prepaid Expenses: Amounts that are paid in advance for product is not used up during the accounting period. Post: The process of transferring amounts from a journal to the appropriate ledger accounts. Purchase order: Written instructions to a vendor to ship and bill for the listed items. Reversing Entry: An entry made to reverse a prior entry.. Trial Balance: A work sheet showing the balances in each account; used to prove the equality of debits and credits.

Page 35: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 35

Appendix 2 Associate Degree Program (Accounting)

Page 36: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 36

Appendix 3 Bachelor’s Program (Accounting)

Page 37: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 37

Appendix 4

Accounting Courses Description

COURSE DESCRIPTION

ACCOUNTING ACC 111 ACCOUNTING PRINCIPLES I Introduction to the fundamental Principles of Accounting and its relationship to business. Includes the basic accounting procedures from the business transaction through the journals and ledgers to the financial statements. Emphasis is placed on principles and procedures in accounting for receivables, payables, inventories, plant assets and payroll. 3 Semester Hours ACC 112 ACCOUNTING PRINCIPLES II Major emphasis is placed on the procedures involved in accounting for capital structure of corporations. Includes accounting principles for partnerships, departmental operations, home and branch activities and bond issues. Also introduced is basic Accounting procedures, fundamentals of Financial Statement Analysis and Tax Accounting. Prerequisite: ACC 111 3 Semester Hours ACC 211 INTERMEDIATE ACCOUNTING I Theories and problems involved in proper recording of transactions and preparation of financial statements. Review of the accounting cycle, discussion of financial statements, analysis of theory as applied to transactions relating to current assets, current liabilities, long-term investment and presentation on the Balance Sheet. Prerequisite: ACC 112 3 Semester Hours ACC 212 INTERMEDIATE ACCOUNTING II Detailed presentation of theory applied to plant and equipment, intangible assets, long-term debt, capital stock and surplus; correction of errors of prior periods; analysis of financial statements and statement of application of funds. Prerequisite: ACC 211 3 Semester Hours ACC 214 COST ACCOUNTING I A Comprehensive study of the Manufacturing Business using a job order Cost Accounting system. Prerequisite: ACC 112 3 Semester Hours ACC 215 COST ACCOUNTING II A Comprehensive study of the Manufacturing Business using a process Cost Accounting system and a standard Cost Accounting system. Also studied is cost data for planning, control and decision making. Prerequisite: ACC 214 3 Semester Hours ACC 221 QUICKBOOKS ACCOUNTING This course will familiarize students with the basic concepts from in QuickBooks. First time users of QuickBooks will be introduced to the various features this accounting software has to offer. Using a Windows environment, students will receive hands-on instruction as they work through scenarios of entering data and setting up accounts. 3 Semester Hours ACC 311 MANAGERIAL ACCOUNTING

Page 38: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 38

This course stresses the use of accounting for Managerial planning and control. Emphasis is placed on the role of accounting in decision making. It covers retailing, wholesaling, manufacturing and administrative operations. Prerequisite: ACC 112 3 Semester Hours ACC 312 ADVANCED ACCOUNTING I Property Acquisition, Revaluation and Retirement, Depreciation Principles and practices are studied in greater depth. Intangible Assets, Current and long-term Debt, Pension Plans, Corporation formation and Capital Stock transactions are covered. Financial Statement analysis, Funds flow and related statements are given thorough treatment. Frequent reference is made to pronouncements by the Securities and Exchange Commission and the American Institute of Certified Public Accountants (AICPA). Prerequisite: ACC 212 3 Semester Hours ACC 313 ADVANCED ACCOUNTING II Accounting theory and current practices are studied in depth with emphasis on the concepts and standards prevailing in the accounting profession. Coverage is afforded such topics as Partnerships formation, Dissolution and Liquidation, Installment and Consignment Sales, Home Office and Branch Accounting Consolidations. Prerequisite: ACC 312 3 Semester Hours ACC 314 GOVERNMENTAL ACCOUNTING Study of accounting for governmental entities including: budgets, general funds, capital project funds, debt service funds, trust and agency funds, fixed assets, capital expenditures, property tax accounting, and interfund relationships. Also includes accounting standards for voluntary health and welfare organizations, colleges, hospitals, and other types of not-for-profit organizations. Prerequisite: ACC 212 3 Semester Hours ACC 315 PRINCIPLES OF AUDITING A practical presentation of modern audit practices, emphasizing the principles and objectives of an audit. Analysis of the audit basis, the best standards, objective reporting, the adoption of improved accounting standards, business controls, professional ethics, and legal liability. Prerequisite: ACC 212 3 Semester Hours ACC 321 INDIVIDUAL INCOME TAXES The Internal Revenue Code, the various income tax acts, and problems of the preparation of U.S. tax returns are studied as they relate to the individual. Emphasis is placed on the determination of income and statutory deductions in order to arrive at the net taxable income. Prerequisite: ACC 212 3 Semester Hours ACC 322 CORPORATE INCOME TAXES The U.S. Internal Revenue Code and the various income tax acts are studied as they relate to partnerships, estates, trusts, and corporations. Federal estate tax return problems are considered. Methods of tax research are integrated into each of the areas studied. Prerequisite: ACC 321 3 Semester Hours

Page 39: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 39

Appendix 5 Accounting News

On December 6, 2012, the American Institute of Certified Public Accountants held a significant joint meeting at the Harbor Side Financial Centre in Jersey City, New Jersey. At this joint session which included the National Association of State Boards of Accountancy and the Prometric Testing Center, certain CPA Review Providers were invited, which included, Dr. Irvin Gleim of Gliem Publication, Dr. Willis L. Johnson, of the Galilee CPA Review, and other leaders in the provisioning of CPA education. Both Dr. Gleim and Dr. Johnson attended the original meeting for the new Computer Based Examination on December 15, 2003 a the AICPA headquarters in New York.

Dr. Johnson called for local CPA testing in the Bahamas and other countries outside the U.S. Supported by Dr. Gleim and other review providers, Dr. Johnson substantiated his plea by referring to charges for hotel, airline, meals, transportation and excessive time in the U.S. He indicated that although the exams can now be taken in Miami, CPA candidates have experienced numerous difficulties that are financially and emotionally burdensome. Dr. Johnson presented cases where the Prometric system either crashed, malfunctioned or encountered other administrative difficulties. Further he said, that the state boards take an unusual long time before a candidate can receive his or her Notice to Schedule. Some time at least four month. While he said that these problems might exist if testing is locally done, at least, candidates will be at home and the cost of rescheduling will not be difficult to bear. During the session it was reported that some 308 Bahamian candidates sat the CPA exam in 2003. While the 2012 statistics were not completed, Dr. Johnson indicated that there will be an increase in numbers due to the increase in his volume of candidates engaged in the Galilee CPA Review Program. As a result of the widespread support for local testing outside the U.S. , a task force was appointed to present a white paper to the AICPA by mid January 2013. This white paper will address the following issues:- International volume Disadvantages if the Exam is not administered outside the U.S. Additional testing administrative fee Internationally security issues Examination Frequency David Ginsburg, President and CEO of Prometric, who supports local testing in the Bahamas and other countries outside the U.S will address security issues. Gleim CPA Publications Irvin N. Gleim, Ph.D., CIA, CMA, CFM, CPA, CFII, is Professor Emeritus, at the Fisher School of Accounting, University of Florida. He has been active in both pilot and accountant training for over 30 years. His knowledge transfer systems make learning and understanding an intuitively appealing process. Dr. Gleim is helping individuals attain higher levels of knowledge (analysis, synthesis, and evaluation) while they learn concepts and problem solving techniques. Dr. Gleim’s mission is to maximize knowledge transfer while minimizing time, frustration, and cost.

Page 40: Intermediate Accounting I Course No. ACC 211galilee.0catch.com/books/SummerI2009/Wjohnson...Galilee College Intermediate Accounting I Course No. ACC 211 SUPPLEMENTARY Galilee Corporate

Galilee College – Intermediate Accounting I © Dr. Willis L. Johnson 40

Galilee CPA Review Willis L. Johnson, Ph.D., CPA, MFP, Certified Marriage and Family Counselor serves as president of Galilee College and Galilee Professional Institute. Dr. Johnson is a veteran lecturer. For the past five years he has been engaged in directing the Galilee CPA Review program. He is known for his profound academic theatrics as he delivers the CPA curriculum. His success rate is phenomenal and measures alongside other giants in the region. The Galilee CPA Review is newly fueled and well prepared to provide quality instruction by way of a sophisticated approach that will catapult candidates to the levels of success that they aspire to.