EXERCISE 13-11 (15–20 minutes)
(a) Cash ..........................................................................3,000,000 Sales Revenue ................................................. 3,000,000 (500 X $6,000) Warranty Expense ....................................................20,000 Cash ................................................................. 20,000 Warranty Expense ....................................................100,000 Warranty Liability ............................................ 100,000 ($120,000 – $20,000) (b) Cash ..........................................................................3,000,000 Sales Revenue ................................................. 2,850,000 Unearned Warranty Revenue ......................... 150,000 Warranty Expense ....................................................20,000 Cash ................................................................. 20,000 Unearned Warranty Revenue ..................................25,000 Warranty Revenue .......................................... 25,000 [$150,000 X ($20,000/$120,000)]
EXERCISE 13-12 (15–20 minutes)
Inventory of Premiums (8,800 X $.80) ............................ 7,040 Cash ........................................................................ 7,040 Cash (110,000 X $3.30) .................................................... 363,000 Sales Revenue ........................................................ 363,000 Premium Expense ........................................................... 3,520 Inventory of Premiums [(44,000 ÷ 10) X $.80] ....... 3,520 Premium Expense ........................................................... 1,760* Premium Liability ................................................... 1,760 *[(110,000 X 60%) – 44,000] ÷ 10 X $.80 = 1,760
Copyright ? 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)
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EXERCISE 13-13 (20–30 minutes)
1. The FASB requires that, when some amount within the range of
expected loss appears at the time to be a better estimate than any other amount within the range, that amount is accrued. When no amount within the range is a better estimate than any other amount, the dollar amount at the low end of the range is accrued and the dollar amount at the high end of the range is disclosed. In this case, therefore, Salt-n-Pepa Inc. would report a liability of $900,000 at December 31, 2014.
2. The loss should be accrued for $5,000,000. The potential insurance
recovery is a gain contingency—it is not recorded until received.
3. This is a gain contingency because the amount to be received will be
in excess of the book value of the plant. Gain contingencies are not recorded and are disclosed only when the probabilities are high that a gain contingency will become reality.
EXERCISE 13-14 (25–30 minutes)
(a) Plant Assets ...................................................................600,000 Cash ...................................................................... 600,000 Plant Assets ...................................................................41,879 Asset Retirement Obligation ............................... 41,879
(b) Depreciation Expense ...................................................60,000 Accumulated Depreciation – Plant Assets ......... 60,000 Depreciation Expense ...................................................4,188 Accumulated Depreciation – Plant Assets ......... 4,188* Interest Expense ...........................................................2,513 Asset Retirement Obligation ............................... 2,513**
*$41,879/10. **$41,879 X .06.
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Copyright ? 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)
EXERCISE 13-14 (Continued)
(c) Asset Retirement Obligation ................................... Loss on ARO Settlement ......................................... Cash .................................................................
EXERCISE 13-15 (25–35 minutes)
1. Liability for stamp redemptions, 12/31/13 Cost of redemptions redeemed in 2014
Cost of redemptions to be redeemed in 2015
(5,200,000 X 80%)
Liability for stamp redemptions, 12/31/14
2. Total coupons issued Redemption rate To be redeemed
Handling charges ($480,000 X 10%) Total cost
Total cost
Total payments to retailers
Liability for unredeemed coupons
3. Boxes
Redemption rate Total redeemable
Coupons to be redeemed (490,000 – 250,000) Cost ($6.50 – $4.00)
Liability for unredeemed coupons
75,000 5,000
80,000
$13,000,000 (6,000,000) 7,000,000
4,160,000 $11,160,000
$800,000 60% 480,000 48,000 $528,000
$528,000 330,000 $198,000
700,000 70% 490,000
240,000 $2.50 $600,000 Copyright ? 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only) 13-27
EXERCISE 13-16 (30–35 minutes) # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Assets
I NE NE I NE I D NE NE I NE NE NE D I D NE NE
Liabilities
I NE I I I I I I I I I I I D I NE D I
Owners’ Equity
NE NE D NE D I D D D NE D D D NE I D I D
Net Income
NE NE D NE D I D D D NE D D D NE I D I D
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Copyright ? 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)
