Dividends payable 24000 19200 accrued interest

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Dividends payable 24,000 19,200 Accrued interest payable 11,400 16,800 Income taxes payable 19,200 13,200 Short-term loan payble 66,000 84,000 Bond payable 135,000 186,000 Discount on bond payable (15,000) (12,000) Deferred taxes 66,000 45,600 Common stock 108,000 108,000 Capital-in-excess of par 156,000 156,000 Retained earnings 582,000 606,000 Less: treasury stock (24,000) (6,000) Total liabilities and equity 1,324,200 1,395,60 0 The solution listed above is in agreement with the discussion paper issued by the FASB in October 2008. However, in a subsequent meeting (November 2009), the FASB changed some of the aspects of the draft. The following are the changes that the FASB proposed to the original discussion paper on October 2008. 1. Equity will no longer be a separate category, but will be included within the Financing Section. 2. Cash and short-term financial assets (or financial liabilities) used as a substitute for cash will be included in the business section (rather than reported in the financing section). 11 - 11
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See note at the end of the solutions manual regarding other changes made by the FASB. 11 - 12
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PROBLEM 11-5 Financial Statement Presentation –Statement of Comprehensive Income Statement of Comprehensive Income For the year ended 2011 BUSINESS Operating : Sales $800,00 0 Cost of Goods Sold $350,00 0 Total cost of goods sold 350,000 Gross margin 450,000 Selling Expenses: Bad debt expense 18,000 Total selling expense 18,000 General and administration Expenses: Wage expense 90,000 Depreciation expense 40,000 Other expense 12,000 Total general and administration expense 142,000 Other operating expense (income) Loss on sale of equipment 10,00 0 Gain on bond retirement (14,000) Total other operating expense (income) (4,000) Operating income 294,000 Investing : Equity income 7,000 Investment income 7,000 Business Income 301,000 FINANCING : Interest expense 36,000 Financing expenses 36,000 INCOME TAXES : Income Tax Expense 106,000 Net Income 159,000 OTHER COMPREHENSIVE INCOME : Unrealized loss on available for sale securities (11,000) 11 - 13
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Total Comprehensive Income $148,00 0 PROBLEM 11-6 Operating and Capital Leases LO4 1. Under existing U.S. GAAP, what is the amount of lease liability recorded on the balance sheet at January 1, 2011? In the U.S., only the present value of capital leases is recorded as a liability. Therefore, $18,954 is the amount of the lease liability reported on the balance sheet. In addition, the capitalized amount of the leased asset would also be recorded in property, plant, and equipment. (This amount cannot be determined in this problem.) 2. If the proposed changes in accounting for leases become authoritative, what would be the amount of lease liability recorded on the balance sheet at January 1, 2011? The present value of both the capital lease payments and the operating lease payments would be recorded as liabilities on the balance sheet under the proposed new rules. Assuming that the operating lease has a lease term equal to its useful life, the present value of the operating lease (with a zero salvage value) would be equal to its fair value.
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