Excercise 11 - 1 ACCOUNTING Exercise 11 Nike ECONOMIC...

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Unformatted text preview: 1 ACCOUNTING Exercise 11 Nike ECONOMIC EVENTS 2 1. The company pays $500,000,000 for land. 2. The company pays $3,000,000,000 to construct a headquarters campus with several buildings on it. 3. The company pays $20,000,000 to file patents. 4. The company pays $200,000,000 for Research & Development. 5. The company pays $300,000,000 for salaries. 6. The company pays $1,000,000,000 for advertising. 7. The company acquires $5,000,000,000 of inventory, on credit. 8. The company records sales of $4,000,000,000, on credit. 9. The company records Cost of Sales of $2,000,000,000. 10. The company accrues $10,000,000 for estimated bad debts. 11. The company accrues $6,000,000 for estimated product warranty costs (one year warranty period). 12. The company gives up on $3,000,000 of Accounts Receivable. 13. The company pays $1,000,000 for warranty costs. ECONOMIC EVENTS 3 14. The company records depreciation on the headquarters buildings (40 year lives) 15. The company records amortization on its patents (20 year lives) 16. The company declares a $2,000,000 dividend. 17. The company pays the dividend. 18. The company accrues $2,000,000 for unpaid salaries. 19. The company transfers 406,000,000 Net Income to Retained Earnings. JOURNAL ENTRIES 1. 2. 3. 4. 5. 4 JOURNAL ENTRIES 6. 7. 8. 9. 10. 5 JOURNAL ENTRIES 11. 12. 13. 14. 15. 6 JOURNAL ENTRIES 16. 17. 18. 19. 20. 7 8 Cash A/C Reference Transaction Debit Current Balance Credit Debit 40,000,000,000 Credit Common Stock A/C Reference Transaction Debit 9 Current Balance Credit Debit Credit 10,000,000,000 10 Paid in Capital Reference Transaction Debit Current Balance Credit Debit Credit 20,000,000,000 Retained Earnings Reference Transaction Debit 11 Current Balance Credit Debit Credit 10,000,000,000 12 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 13 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 14 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 15 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 16 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 17 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 18 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 19 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 20 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 21 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 22 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 23 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 24 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 25 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 26 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 27 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 28 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 29 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 30 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 31 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 32 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 33 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 34 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 35 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 36 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 37 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 38 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 39 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 40 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit TRIAL BALANCE…..page 1 Account Debit 41 Credit TRIAL BALANCE…..page 2 Account Total Debit 42 Credit BALANCE SHEET Current Assets Current Liabilities Long Term Assets Long Term Liabilities Stockholders Equity Total Total 43 44 INCOME STATEMENT Revenue Expense Net Income (Loss) 45 JOURNAL ENTRY ANSWERS 1. Dr Land 500,000,000 Cr Cash 500,000,000 2. Buildings 3,000,000,000 Cr Cash 3,000,000,000 3. Dr Patents 20,000,000 Cr Cash 20,000,000 4. R&D Expense 200,000,000 Cr Cash 200,000,000 5. Dr Salaries Expense 300,000,000 Cr Cash 300,000,000 46 JOURNAL ENTRY ANSWERS 6. Dr Advertising Expense 1,000,000,000 Cr Cash 1,000,000,000 7. Dr Inventory 5,000,000,000 Cr Accounts Payable 5,000,000,000 8. Dr Accounts Receivable 4,000,000,000 Cr Sales 4,000,000,000 9. Dr Cost of Sales 2,000,000,000 Cr Inventory 2,000,000,000 10. Dr Bad Debt Expense 10,000,000 Cr Bad Debt Allowance 10,000,000 47 JOURNAL ENTRY ANSWERS 11. Dr Warranty Expense 6,000,000 Cr Warranty Liability 6,000,000 12. Dr Bad Debt Allowance 3,000,000 Cr Accounts Receivable 3,000,000 13. Dr Warranty Liability 1,000,000 Cr Cash 1,000,000 14. Depreciation Expense 75,000,000 Cr Accumulated Depreciation 75,000,000 (3,000,000,000 / 40 years) 15. Amortization Expense 1,000,000 Cr Accumulated Amortization 1,000,000 (20,000,000 / 20 years) 48 JOURNAL ENTRY ANSWERS 16. Dr Retained Earnings 2,000,000 Cr Dividends Payable 2,000,000 17. Dr Dividends Payable 2,000,000 Cr Cash 2,000,000 18. Dr Salaries Expense 2,000,000 Cr Salaries Payable 2,000,000 19. Dr Net Income 406,000,000 Cr Retained Earnings 406,000,000 49 Cash Reference Transaction Debit Current Balance Credit Debit 40,000,000,000 GJ1 500,000,000 39,500,000,000 GJ2 3,000,000,000 36,500,000,000 GJ3 20,000,000 36,480,000,000 GJ4 200,000,000 36,280,000,000 GJ5 300,000,000 35,980,000,000 GJ6 1,000,000,000 34,980,000,000 GJ13 1,000,000 34,979,000,000 GJ17 2,000,000 34,977,000,000 Credit 50 Common Stock Reference Transaction Debit Current Balance Credit Debit Credit 10,000,000,000 51 Paid In Capital Reference Transaction Debit Current Balance Credit Debit Credit 20,000,000,000 Retained Earnings Reference Transaction Debit 52 Current Balance Credit Debit Credit 10,000,000,000 GJ16 GJ19 2,000,000 9,998,000,000 406,000,000 10,404,000,000 53 Land Reference Transaction Debit GJ1 500,000,000 Current Balance Credit Debit 500,000,000 Credit 54 Buildings Reference Transaction Debit GJ2 3,000,000,000 Current Balance Credit Debit 3,000,000,000 Credit 55 Patents Reference Transaction Debit GJ3 20,000,000 Current Balance Credit Debit 20,000,000 Credit 56 R&D Expense Reference Transaction Debit GJ4 200,000,000 Current Balance Credit Debit 200,000,000 Credit 57 Salaries Expense Reference Transaction Debit Current Balance Credit Debit GJ5 300,000,000 300,000,000 GJ18 2,000,000 302,000,000 Credit Advertising Expense Reference Transaction Debit GJ6 1,000,000,000 58 Current Balance Credit Debit 1,000,000,000 Credit 59 Inventory Reference Transaction Debit GJ7 GJ9 Current Balance Credit 5,000,000,000 Debit 5,000,000,000 2,000,000,000 3,000,000,000 Credit 60 Accounts Payable Reference Transaction Debit GJ7 Current Balance Credit 5,000,000,000 Debit Credit 5,000,000,000 Accounts Receivable Reference Transaction Debit GJ8 GJ12 61 Current Balance Credit 4,000,000,000 Debit 4,000,000,000 3,000,000 3,997,000,000 Credit 62 Sales Reference Transaction Debit GJ8 Current Balance Credit 4,000,000,000 Debit Credit 4,000,000,000 63 Cost of Sales Reference Transaction Debit GJ9 2,000,000,000 Current Balance Credit Debit 2,000,000,000 Credit 64 Bad Debt Expense Reference Transaction Debit GJ10 10,000,000 Current Balance Credit Debit 10,000,000 Credit Bad Debt Allowance Reference Transaction Debit GJ10 GJ12 Current Balance Credit 10,000,000 3,000,000 65 Debit Credit 10,000,000 7,000,000 Warranty Expense Reference Transaction Debit GJ11 6,000,000 66 Current Balance Credit Debit 6,000,000 Credit 67 Warranty Liability Reference Transaction Debit GJ11 GJ13 Current Balance Credit 6,000,000 1,000,000 Debit Credit 6,000,000 5,000,000 Depreciation Expense Reference Transaction Debit GJ14 75,000,000 68 Current Balance Credit Debit 75,000,000 Credit Accum Depreciation Reference Transaction Debit GJ14 69 Current Balance Credit 75,000,000 Debit Credit 75,000,000 Amortization Expense Reference Transaction Debit GJ15 1,000,000 70 Current Balance Credit Debit 1,000,000 Credit Accum Amortization Reference Transaction Debit GJ15 71 Current Balance Credit 1,000,000 Debit Credit 1,000,000 Dividends Payable Reference Transaction Debit GJ16 GJ17 Current Balance Credit 2,000,000 2,000,000 72 Debit Credit 2,000,000 0 73 Salaries Payable Reference Transaction Debit GJ18 Current Balance Credit 2,000,000 Debit Credit 2,000,000 74 Net Income Reference Transaction Debit GJ19 406,000,000 Current Balance Credit Debit 406,000,000 Credit TRIAL BALANCE….page 1 Account Cash Debit 75 Credit 34,977,000,000 Common Stock 10,000,000,000 Paid in Capital 20,000,000,000 Retained Earnings 10,404,000,000 Land Buildings 500,000,000 3,000,000,000 Patents 20,000,000 R & D Expense 200,000,000 Salaries Expense 302,000,000 Advertising Expense 1,000,000,000 Inventory 3,000,000,000 Accounts Payable Accounts Receivable 5,000,000,000 3,997,000,000 Sales Cost of Sales Bad Debt Expense 4,000,000,000 2,000,000,000 10,000,000 Bad Debt Allowance Warranty Expense Warranty Liability 7,000,000 6,000,000 5,000,000 TRIAL BALANCE….page 2 Account Depreciation Expense Debit 75,000,000 1,000,000 Accumulated Amortization 1,000,000 Dividends Payable 0 Salaries Payable Net Income Total Credit 75,000,000 Accumulated Depreciation Amortization Expense 76 2,000,000 406,000,000 49,494,000,000 49,494,000,000 BALANCE SHEET Current Assets 77 Current Liabilities Cash 34,977,000,000 Accounts Payable Inventory 3,000,000,000 Salaries Payable 2,000,000 Accounts Receivable 4,000,000,000 Warranty Liability 5,000,000 Bad Debt Allowance (7,000,000) Long Term Assets Land Buildings Accumulated Depreciation Net Book Value 5,000,000,000 Long Term Liabilities 500,000,000 3,000,000,000 (75,000,000) 2,925,000,000 Stockholders Equity Patents 20,000,000 Common Stock 10,000,000,000 Accumulated Amortization (1,000,000) Paid in Capital 20,000,000,000 Net Book Value 19,000,000 Retained Earnings 10,404,000,000 Total 45,411,000,000 Total 45,411,000,000 78 INCOME STATEMENT Revenue Sales 4,000,000,000 Cost of Sales 2,000,000,000 Gross Profit 2,000,000,000 Expense R&D Expense 200,000,000 Salaries Expense 302,000,000 Advertising Expense 1,000,000,000 Bad Debt Expense 10,000,000 Depreciation Expense 75,000,000 Amortization Expense 1,000,000 Warranty Expense 6,000,000 Net Income (Loss) 406,000,000 79 15 0% 0% 0% $10,000 $100,000 $500,000 1. The Nike swoosh design cost 2. 3. 4. 5. 6. $10,000 $100,000 $500,000 $35 $535 $1,035 0% 0% 0% $35 $535 $1,035 80 15 0% On which does Nike depend more for financial success 1. 2. R& D It’s It’s pa ten ts an dt an dt ec rad ... hn ic a .. . 0% It’s patents and trademarks It’s R&D and technical innovation 81 15 How would Nike account for its R&D expenditures 1. 2. Asset Expense 0% Ex pe ns e As s et 0% 82 15 How would Nike account for its Patents & Trademarks 1. 2. 3. Intangible assets Tangible assets Expense pe ns e 0% Ex as se ts 0% ibl e ng Ta In tan gib le as se ts 0% 83 15 0% ns e pe Ex As se t 0% How would Nike account for its Advertising 1. 2. Asset Expense 84 15 0% When would Nike record inventory 1. 2. .. si t f. eiv e it r ec Wh en Wh en it m an uf a ct u res it 0% When it manufactures it When it receives it from contract suppliers 85 1. The company pays $500,000,000 for land. 15 0% h5 Ca s Dr d5 00 00 ,0 ,00 0 00 ,00 ,00 0 0 0% La n 2. Dr Land 500,000,000 Cr Cash 500,000,000 Dr Cash 500,000,000 Cr Land 500,000,000 Dr 1. 86 2. The company pays $3,000,000,000 to construct a headquarters campus with several buildings on it. 15 0% 3,0 00 3, 0 00 ,00 0 ,00 0 0% Dr Bu il din gs Ca sh 2. Dr Cash 3,000,000 Cr Buildings 3,000,000 Dr Buildings 3,000,000 Cr Cash 3,000,000 Dr 1. 87 3. The company pays $20,000,000 to file patents. 0 0,0 00 0,0 0 Dr Ca s h2 0,0 0 t2 ,00 0 0 ,00 0,0 00 Dr Pa t en 0.. . h2 e2 Ca s Dr 4. 0% 0% 0% 0% xp en s 3. Pa ten tE 2. Dr Patent Expense 20,000,000 Cr Cash 20,000,000 Dr Cash 20,000,000 Cr Patent Expense 20,000,000 Dr Patent 20,000,000 Cr Cash 20,000,000 Dr Cash 20,000,000 Cr Patent 20,000,000 Dr 15 1. 88 4. The company pays $200,000,000 for Research & Development. 0% Ex pe ns 00 ,0 e2 00 ... 00 ,00 0 0% h2 R& D Dr 2. Dr Cash 200,000,000 Cr R&D Expense 200,000,000 Dr R&D Expense 200,000,000 Cr Cash 200,000,000 Ca s 1. Dr 15 89 5. The company pays $300,000,000 for salaries. 0% xp e 00 ,0 ns e 00 ... ,00 0 0% Dr Sa lar ie sE h3 2. Dr Cash 300,000,000 Cr Salaries Expense 300,000,000 Dr Salaries Expense 300,000,000 Cr Cash 300,000,000 Ca s 1. Dr 15 90 6. The company pays $1,000,000,000 for advertising. 0% Dr Ad ve rti sin g Ex 0,0 00 pe n.. ,00 0 0% ,00 2. Dr Cash 1,000,000,000 Cr Advertising Expense 1,000,000,000 Dr Advertising Expense 1,000,000,000 Cr Cash 1,000,000,000 Ca sh 1 1. Dr 15 91 7. The company acquires $5,000,000,000 of inventory, on credit. 15 0% nt s Ac co u Dr en to ry 5,0 00 Pa ya ,00 ... ble ... 0% Inv 2. Dr Inventory 5,000,000,000 Cr Accounts Payable 5,000,000,000 Dr Accounts Payable 5,000,000,000 Cr Inventory 5,000,000,000 Dr 1. 92 8. The company records sales of $4,000,000,000, on credit. 15 0% Dr Ac c ou es 4 nt s ,00 0,0 Re ce i 00 va b ,00 .. 0 0% Sa l 2. Dr Sales 4,000,000,000 Cr Accounts Receivable 4,000,000,000 Dr Accounts Receivable 4,000,000,000 Cr Sales 4,000,000,000 Dr 1. 93 9. The company records Cost of Sales of $2,000,000,000. 00 ,00 ... ... 2,0 en to ry Dr In v Dr Inv en to ry Ex pe n ,0 se 0.. . ... ale s2 00 ,00 to fS 2,0 Co s 4. 0% 0% 0% 0% Dr 3. en to ry 2. Dr Inventory 2,000,000,000 Cr Cost of Sales 2,000,000,000 Dr Cost of Sales 2,000,000,000 Cr Inventory 2,000,000,000 Dr Inventory Expense 2,000,000,000 Cr Inventory 2,000,000,000 Dr Inventory 2,000,000,000 Cr Inventory Expense 2,000,000,000 Inv 1. Dr 15 94 10. The company accrues $10,000,000 for estimated bad debts. 4. 5. 6. 0% 0% 0% 0% 0% 0% D r D eb t Ba Ex d p Dr Deb ense Ba tL . d D iab .. ilit D r e bt y Ba Exp ... d D en Dr Ba ebt A se... d ll Dr Debt owa Ac Ex n.. co p un ens ts e Re ... ce iva ... 3. Ba d 2. Dr Bad Debt Expense 10,000,000 Cr Bad Debt Liability 10,000,000 Dr Bad Debt Liability 10,000,000 Cr Bad Debt Expense 10,000,000 Dr Bad Debt Expense 10,000,000 Cr Bad Debt Allowance 10,000,000 Dr Bad Debt Allowance 10,000,000 Cr Bad Debt Expense 10,000,000 Dr Bad Debt Expense 10,000,000 Cr Accounts Receivable 10,000,000 Dr Accounts Receivable 10,000,000 Cr Bad Debt Expense 10,000,000 Dr 15 1. 95 11. The company accrues $6,000,000 for estimated product warranty costs (one year warranty period). 0% Li ty W ar ra n Dr ty Ex pe ab ili ns e. .. ty ... 0% ar ra n 2. Dr Warranty Expense 6,000,000 Cr Warranty Liability 6,000,000 Dr Warranty Liability 6,000,000 Cr Warranty Expense 6,000,000 W 1. Dr 15 96 12. The company gives up on $3,000,000 of Accounts Receivable. ei v ab .. Re c llo w an .. .. nt s Ac co u Dr Dr Ba dD eb tA . ou nt s Re ce iva b e.. en s xp tE Ac c 4. 0% 0% 0% 0% eb 3. Dr 2. Dr Bad Debt Expense 3,000,000 Cr Accounts Receivable 3,000,000 Dr Accounts Receivable 3,000,000 Cr Bad Debt Expense 3,000,000 Dr Bad Debt Allowance 3,000,000 Cr Accounts Receivable 3,000,000 Dr Accounts Receivable 3,000,000 Cr Bad Debt Allowance 3,000,000 Ba dD 1. Dr 15 97 13. The company pays $1,000,000 for warranty costs. 15 xp en se . .. Ca sh 1, 0 Dr 00 Wa ,00 rra 0 nty Li a bil ity Dr ... Ca sh 1 ,0 00 ,00 0 4. 0% 0% 0% 0% Dr 3. Wa rra nty E 2. Dr Warranty Expense 1,000,000 Cr Cash 1,000,000 Dr Cash 1,000,000 Cr Warranty Expense 1,000,000 Dr Warranty Liability 1,000,000 Cr Cash 1,000,000 Dr Cash 1,000,000 Cr Warranty Liability 1,000,000 Dr 1. 98 14. The company records depreciation on the headquarters buildings…..3,000,000,000 / 40 years = 75,000,000 15 ion Dr re cia t De p Dr Ac Ex p. cu .. mu lat ed De pr ... 00 ,00 0,0 .. gs 75 Ex p. din ion Bu il Dr 4. 0% 0% 0% 0% re cia t 3. De p 2. Dr Depreciation Expense 75,000,000 Cr Buildings 75,000,000 Dr Buildings 75,000,000 Cr Depreciation Expense 75,000,000 Dr Depreciation Expense 75,000,000 Cr Accumulated Depreciation 75,000,000 Dr Accumulated Depreciation 75,000,000 Cr Depreciation Expense 75,000,000 Dr 1. 99 15. The company records amortization on its patents 20,000,000 / 20 years = 1,000,000 15 Ac Ex cu p. . mu . lat ed Am or ... 00 tio n 0,0 s1 ,00 Dr Dr Am or tiz a Ex p. . . Pa ten t tio n 4. 0% 0% 0% 0% Dr 3. Am or tiz a 2. Dr Amortization Expense 1,000,000 Cr Patents 1,000,000 Dr Patents 1,000,000 Cr Amortization Expense 1,000,000 Dr Amortization Expense 1,000,000 Cr Accumulated Amortization 1,000,000 Dr Accumulated Amortization 1,000,000 Cr Amortization Expense 1,000,000 Dr 1. 100 16. The company declares a $2,000,000 dividend. ble ... .. Di vid e nd Pa ya Ex pe nd Di vid e Di vid e ns e. .. ... Pa ya bl e. ng s Ea rn i ed nd Dr Dr 4. in 3. 0% 0% 0% 0% Dr 2. Dr Retained Earnings 2,000,000 Cr Dividend Payable 2,000,000 Dr Dividend Payable 2,000,000 Cr Retained Earnings 2,000,000 Dr Dividend Expense 2,000,000 Cr Dividend Payable 2,000,000 Dr Dividend Payable 2,000,000 Re ta 1. Dr 15 101 17. The company pays the 2,000,000 dividend. ,00 0, .. le . Ca s h2 ab Dr Pa y nd Di vid e Dr 00 0 0 ,00 2, 0 00 se ... en Ca sh Dr 4. 0% 0% 0% 0% Ex p 3. nd 2. Dr Dividend Expense 2,000,000 Cr Cash 2,000,000 Dr Cash 2,000,000 Cr Dividend Expense 2,000,000 Dr Dividend Payable 2,000,000 Cr Cash 2,000,000 Dr Cash 2,000,000 Cr Dividend Payable 2,000,000 Di vid e 1. Dr 15 102 18. The company accrues $2,000,000 for unpaid salaries. 0% Ex Pa pe ya ns e bl e. ... .. 0% Dr Sa l ar ies ar ies 2. Dr Salaries Payable 2,000,000 Cr Salaries Expense 2,000,000 Dr Salaries Expense 2,000,000 Cr Salaries Payable 2,000,000 Sa l 1. Dr 15 103 19. The company transfers 406,000,000 Net Income to Retained Earnings. 0% ed om e4 Ea rn i ng . .. 06 ,00 0 0% Dr Re ta in Inc 2. Dr Net Income 406,000 Cr Retained Earnings 406,000 Dr Retained Earnings 406,000 Cr Net Income 406,000 Ne t 1. Dr 15 NIKE 104 105 FORGING RELATIONSHIPS 106 SAVING PRIVATE RYAN 107 ...
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This note was uploaded on 11/03/2010 for the course ACCT 325 taught by Professor Anderson,p during the Winter '09 term at Azusa Pacific.

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