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SOLUTIONS Chapter 13 - SOLUTIONS Chapter 13 BRIEF EXERCISE...

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SOLUTIONS Chapter 13 BRIEF EXERCISE 13-1 July 1 Purchases ................................................................................ 60,000 Accounts Payable ......................................................... 60,000 Freight-in .................................................................................. 1,200 Cash ............................................................................. 1,200 July 3 Accounts Payable .................................................................... 6,000 Purchase Returns and Allowances ............................... 6,000 July 10 Accounts Payable .................................................................... 54,000 Cash ($54,000 X 98%) ................................................. 52,920 Purchase Discounts ...................................................... 1,080 BRIEF EXERCISE 13-2 11/1/10 Cash .................................................................................. 40,000 Notes Payable ........................................................ 40,000 12/31/10 Interest Expense ................................................................ 600 Interest Payable ($40,000 X 9% X 2/12) ........................................ 600 2/1/11 Notes Payable .................................................................... 40,000 Interest Payable ................................................................. 600 Interest Expense ................................................................ 300 Cash [($40,000 X 9% X 3/12) + $40,000] ..................... 40,900 BRIEF EXERCISE 13-3 11/1/10 Cash ..................................................................................... 60,000 Discount on Notes Payable ................................................... 1,350 Notes Payable ........................................................... 61,350 12/31/10 Interest Expense ................................................................... 900 Discount on Notes Payable ($1,350 X 2/3) ......................................................... 900
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BRIEF EXERCISE 13-3 (Continued) 2/1/11 Interest Expense .................................................................... 450 Discount on Notes Payable ........................................ 450 Notes Payable ....................................................................... 61,350 Cash ........................................................................... 61,350 BRIEF EXERCISE 13-4 (a) Since both criteria are met (intent and ability ), none of the $500,000 would be reported as a current liability. The entire amount would be reported as a long-term liability. (b) Because repayment of the note payable required the use of existing 12/31/10 current assets, the entire $500,000 liability must be reported as current. (This assumes Burr had not entered into a long-term agreement prior to issuance.) BRIEF EXERCISE 13-5 8/1/10 Cash ................................................................................... 216,000 Unearned Subscription Revenue (12,000 X $18) ...................................................... 216,000 12/31/10 Unearned Subscription Revenue ......................................... 90,000 Subscription Revenue ($216,000 X 5/12 = $90,000) ................................ 90,000 BRIEF EXERCISE 13-6 (a) Accounts Receivable ...................................................................... 31,800 Sales ................................................................................... 30,000 Sales Taxes Payable ($30,000 X 6% = $1,800) ................................................. 1,800 (b) Cash ............................................................................................... 20,670 Sales ................................................................................... 19,500 Sales Taxes Payable ($20,670 ÷ 1.06 = $19,500) .............................................. 1,170
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BRIEF EXERCISE 13-7 Wages Expense ........................................................................................ 24,000 FICA Taxes Payable ...................................................................... 1,836 Federal Withholding Taxes Payable .............................................. 2,990 State Withholding Taxes Payable .................................................. 920 Insurance Premiums Payable ........................................................ 250 Cash .............................................................................................. 18,004 BRIEF EXERCISE 13-8 Wages Expense ........................................................................................ 30,000 Vacation Wages Payable (30 X 2 X $500) .......................................................................... 30,000 BRIEF EXERCISE 13-9 12/31/10 Bonus Expense ................................................................... 350,000 Bonus Payable ........................................................ 350,000 2/15/11 Bonus Payable .................................................................... 350,000 Cash ........................................................................ 350,000 BRIEF EXERCISE 13-10 (a) Lawsuit Loss ................................................................................... 900,000 Lawsuit Liability ................................................................... 900,000 (b) No entry is necessary. The loss is not accrued because it is not probable that a liability has been incurred at 12/31/10.
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BRIEF EXERCISE 13-11 Buchanan should record a litigation accrual on the patent case, since the amount is both estimable and probable. This entry will reduce income by $300,000 and Buchanan will report a litigation liability of $300,000. The $100,000 self-insurance allowance has no impact on income or liabilities. BRIEF EXERCISE 13-12 Oil Platform .............................................................................................. 450,000 Asset Retirement Obligation ......................................................... 450,000 BRIEF EXERCISE 13-13 2010 Warranty Expense .............................................................. 70,000 Cash, Inventory, etc. ................................................... 70,000 12/31/10 Warranty Expense .............................................................. 400,000 Liability Under Warranties ................................................ 400,000 BRIEF EXERCISE 13-14 (a) Cash .............................................................................................. 1,980,000 Unearned Warranty Revenue (20,000 X $99) ................................................................ 1,980,000 (b) Warranty Expense ......................................................................... 180,000 Cash, Inventory, etc. .......................................................... 180,000 (c) Unearned Warranty Revenue ........................................................ 330,000 Warranty Revenue ($1,980,000 X 180/1,080*) .............................................. 330,000 *180,000 + 900,000
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BRIEF EXERCISE 13-15 Premium Expense ........................................................................................ 96,000 Liability for Premiums ....................................................................... 96,000* *UPC codes expected to be sent in (30% X 1,200,000) ............................... 360,000 UPC codes already redeemed .................................................................... Estimated future redemptions ..................................................................... 120,000 240,000 Cost of estimated claims outstanding (240,000 ÷ 3) X ($1.10 + $0.60 – $0.50) .................................................. $ 96,000 EXERCISE 13-1 (a) Current liability. (b) Current liability.
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