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private use only. No part of this book may be reproduced or
transmitted without publisher's prior permission. Violators will
be prosecuted.
ACC201
lO3.4
c. Would tbe choice of one depreciation method over aoother
produce a different amount of
cash Ilow for any year'! Why or why not?
d. Assume that Same Day Laundry Services sold the steam press
at the end of the third year
for S20,000. Compute the amount of gain or Joss using each
depreciation method.
Problem &·21 Computing ami ree~mli"l: units-of-prodtlction
depreciation
McNabb Corporation purchased a delivery van for 525,500 in
2012. The firm's financial condi-
tion inunL"diatcly prior to the purchase is sbown in the
following horizontal statements model:
fqully
NA
Net Inc. CashRow
+ +

+ Book Value !II Yan
CHECKAGUBES
a. Depreciation Expense. 2012:
81,500
c. Gain on Sale:$l,llOO
lO3
E·
a. COOIIaJ1y A. ~el (nc""",,,:
SZO.oro
c. ConpanV A. Hrghest Boot
Value: S17,750
lO7
CItE RGURES
a. Coal Mine Depletion, Z012:
S280,000
b. Total Natural Resources:
52.971,000
Com. SUe. + HeL Earn.
NA 50,000 NA NA
The van was expected to have a useful life of lSO,OOOmiles
and a salvage value of S3,000.
Actual mileage was as follows:
Z012 50,000

2013 70,000
2014 58,000
Req.ired
a. Compute the depttciation Cor each of the three years, ass
wninS the use of units-of-production
depreciation.
b. Assume thaI McNabb earns S21,000 of cash revenue during
2012. Record the purchase of
the van and the recognition of the •••.•""ue and the depreciation
expense for the lint year in a
financial statements model like the p",-""ding one.
eo Assume that McNabb sold the van at the end of the third year
for $4,000. Calculate the
amount of gain or lose from the sate.
Pr.w.. s.2B Determilling tire effect of tleprt!cUmon expeMt!
onjilJlUlCillJ statement1
TItn>odiJf eeetllcompanieseach putcbased. machine on January
I, 2012, forS54,OOO. Each machine
was expected 10 last Ii>., years or 200,000 ~ Salvage value was
estimated to be $4,000. All three
machines "'..., operated rot"50,000 hours in 2012, 55.000 hours
in 2013, 40,000 hours in 2014, 44,000
bours in 2015. and ll.OOObours in 2016. Each of the three
companies earned S30,OOOof cash revenue
during each of the fM ~ Company A uses straight·line
depreciation. company B uses double-
dedining-balanc:e depr!Ciation. and company C uses
wUts·oj'·production depreciation.
Rtq.ired

Ansv.-er eacb of the fobing que..tians. Ignore the effects of
income taxes.
a. Wbich compall)' will report the bighest amount of net income
for 2012?
b. Wbich compilll)' will report the 1~1 amount of net income
for 2014?
c. 'IV'hich compan>' will report the highest book value on the
December 31, 2014, balance sheet?
d. Which rompany ",ill repert tbe highesr amoum of retained
earnings on the December 31,
201 S. balance ~
c. W"hicb company will report the lowesl amount of cash 110w
from operating activities on the
2014 statement of cash fIoo,o,~1
Ptobl •• S,ZS A canurtiIIg for depletio"
Fa" re Explor.uion Corporation engages in the exploration and
development of many types of
natural resources, In thelatt two years, the company bas engaged
in the following activities:
Jan. 1,2012 Purchased a coal mine estimated 10 contain 200,000
tons of coal for S8OO,000.
July 1.2012 Purchased for SI,9$O,ooo a tract of timber
estimated to yicld l,OOO,OOOboard
feet of lumber and to have a residual land value of Sl $0,000.
private use only. No part or this book may be rcproducc:d or

be prosecutc:d
Survey of Accounting, Third EditiOn
Require"
a. Determine the amount of depleticn expense that would be
recognized on the 2012 income
statement for each of the four reserves, assuming 70,000 tons of
coal, 1,000,000 board feet
of lumber, 9,000 tons of silver, and SO,OOObarrels of oil are
extracted.
b. Prepare the portion of the December 31, lOU, balance sbeet
that reports natural resources.
Ac"""",,,i1gfod.Ol'll"Te,'m OperatiOflljlAs""ts 235
July 5, 2012 Purchased a sih'er mine estimated to contain
:10,000 tons of silver for 5750,000.
Aug. 1,2012 Purchased for S7:16,OOO oil reserves estimated to
contain 250,000 barrels of oil,
of which 20,000 would be unprofitable to pump.
Problem 6-30 Recordillg COlltimtiRJ:expelldittmtJfor plant
auets
Big Sky Ine, recorded the following transaetions over the life of
a piece of equipment purchased
in 2011:
Jan.I,201l
Doc. 31, zon
May S, 2011
Doc. 31, 2012

Jan. 1,2013
Doc. 31, 2013
Mat. 1,2014
Doc. 31, 2014
Jan. 1,2015
Doc. 31,2015
July 1,2016
Purchased the equipment for 836,000 cash. The equipment is
estimated to have
a five-year life and $6,000 salvage value and was to be
depreciated using the
straight-line method.
Recorded depreciation expense for 2011.
Undertook routine repairs costing S750.
Recorded depreciation expense Icr 20 12.
Made an adjuSlOIellt costing S3,OOO to the equipment. It
improved the quality
of the output Out did not affect the life estimate.
Incurred 5320 cost to oil and clean tile equipment.
Had the equipment completely overhauled at a cost of S7,500.
The overhaul
was estimated to extend tbe total life to S<>'e!l years and
revised the salvage
value to S4,000.
Sold the equipment for <;9,000 cash.
Required
8. Use a horizontal statements model like the foUowing one 10
show the effects of these tran •..

actions 00 the elements of the financial statements. Use + for
increase, - for decrease, and
NA for nor affected. The first event is recorded as an example.
D~e 1~~ u_._,_~_a + ~__~__i~Ne__ t_IK_·~r_~_·_m_Ro__W-i
Jan. 1. 2011 + _ NA NA NA _ lA
b. Determine the amount of depreciation expense Big Sit)· "ill
repon on tbe inco= statements
fot the years 2011 through 2015.
Co Determine the book value (cost - accumulated depreciation)
Big SIt) ••ill repon on th< bal-
ance sheets a! the end of the years 2011 through 201S.
d. Determine the amount of the gain or Iou B;~ Sky will report
on the disposal of the equip-
ment on July 1,2016.
Problem 6-31 AcCOIDItUwfor contiJUlUg eqetu6trtns
Vemon Manufa.cturing paid Sj8,OOO to putchase a computetiud
assembly machine on January I,
2012. The machine had an estimated life of eight }'taI'S and a
52,000 salvage value, Vernon's
Iinancial condition as of January I. 201 S, is shown in the
following financial statements model.
Vernon uses the straight-line method for deptttiation.
Rev.
LO 3. 4. 5, 6
CHECK RGURES
b. 2013 Depreciation Expense:
$7.000

d. Loss on Sale: 53.250
LO 5. a. 7
CHECK RGIJRE
Depreciation Expense: saooo
Exp. Noline. Cash Flow
CasII + Mach.
NA15,000 + 58.000
C- SIll. + Ret Elm.
21.DOO NA NA NA
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traos:mitted without, publisher's prior pe:nnission. Violators
will be prosecuted.
ACC201
LOa
CHECK fiGURE
Goodwill Purchased: $1311,000
L08
eHE FIGURE
Impairment loss:S40.000
LOS
Vernon Manufacturing made the following expenditures on the
computerized assembly

machine in 2015.
Jan. 2 Added an overdrive mechanism tbr 56,000 that would
impro." the overall quality of
1M performance of the machine but would not extend its life.
The salvage value was
revised to S3,OOO.
Performed routine main te nanoe, SI,I30.
Replaced some eomputer dllps (considered routine), 5950.
Recognized 2015 depreeiattcn expense.
Aug. I
Oct. 2
Dec. 31
Required
Record the 20151ramactions in a statements model like the
preceding one.
Problem 6-32 A.ccounting for hrI"ngibIe /lnm
Mia-Tora Company purchased a fast-food restaurant for
SI.400,Ooo. The fait market values of
tbe assets purchased were as follows. 'K" liabilities were
assumed,
Equipment
land
Buidlng
Franchise (5·voar 11'01
8320.000
200.000
650.000
100.000
Req.ired

Calculate the amount of goodwill purchased.
Problem 6-33 A. a!Oruttiltg for goot/tlliR
Springhill Co. purchased the assets of Canyon Co. for
51,000,000 in 2012. The estimated fait
market value of the assets at the pure~ date was 5920.000.
Goodwill of Sso,ooo was recorded
at purchase. In 2013, because of oegati,.., publicity, one-half of
the goodwill purchased from
Canyon Co. was judged to be permanently impaired.
Reqaired
Explain bow the recognition of the impairment of the goodwill
will affect the 2013 balance
sheet, income statemetlt, and statement of cash flows,
Problem 6-34 Poftw",u,g T/llio tIIIIIlpsis ruUrg reaJ-
WOI"IdUta
Coop.. Ii L c:Iaims to be tbe fOurth largest tire manufacturer in
~ottb America.<:....,..... T. _ is the lal¥CSItire manufacturer in
~orth America. The follow-
ing information was t.aken from tbese companks' December 31,
2007, annual reports. All dollar
amounts are in thousands.
Sales
Depreciation costs
Bulldin~s. mathinery. an~ e~"ip/llllnt
(net of accllJ1IIllatad depreciation;
Total.ssm
Depreciation mell"ie d
Cooper Tira
S2.932.575

131.007
Goodyear Tire
S19.l144.000
610.000
!l49.458
2.296.8611
"Straight-line or
accoletatad"
4.383.000
11.028.000
Slraigllt·line
Estimated lite of assets:
BUildIngs
Machinery and eqLlpmenl
10 to 40 years
Ho 14 years
810 Eyears
J 1030vears
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be prosecuted.

194 ACC201
LD2
LD3
CHECICRGURfS
b. Net Income: 562.520
TotaIAssets: $157.520
5. Paid 54&,SOO c•.•b for opereting expen=
6. Adjusted accounts to recogniu uoeollectible accouatsexpense
for 2012. Sharp estimates that
uncclleetible accounts expense will be I percent of sales on
account.
Heq.ired
Complete all the following requiremeots for 2012 and 2013.
Complete all requirements for 2012
prior to beginning the requirements for 201 3.
a. Identify the type of each rransaetion (asser source, asset use,
asset exchange, or claim.
exchange).
b. Show the ~iJ'ect of each uan.actiOIl on the elements of tbe
financial statements, using a hori-
zontal statements model like the one shown bere. Use + for
increase, - for decrease, and NA
Cor not alTecred. Also, in the Cash Flow column, indicate
whether the item is an operating
acti>ity (OA). investing activity (lA). or financing activity
(FA). The first transaction IS
entered 3$ an example.

Un. + Equity Rev. ElqI. Hetlnc. Cash Row
NA NA NA++ +
e, Organize the transaction data in acecunts under an accounting
equation.
d. Prepare the income statement, statement of changes in
stockholde rs• equity, balance meet.
aod statement of cash flows.
Problem 5-24 Dnomining accOIUIllHdturar. perrelli of "'Fe""e
aJIoWflllte "",rltod
of accolllltinl{ for lIIIcoIIectibk IltCOlIlID
The following information pertains to Leslie'S Root Store sales
on account and accounts receivable.
Accounts receiVable balance. January 1. 2012
Allowance for doUbtful accounts. January 1. 2012
Sales 00 account 2012 .
Cost of goods sold. 71112
Collectfons of accounts rec.Nabla, 2012
$52.500
4.125
925.000
615.000
835.000
After several collection attempts, Leslie's wrote otT 53,100 of
accounts that could not be
collected. Leslie's estimates that bad debts expense will be 05
percent of sales on account.

Hell·ired
a. Compute the following amounts.
(I) Using the allowance method, the amount of uncollectible
accounts expense for2012.
(!) Net reaJizah~ value of receivables at the end of 2012.
b. Explain why the uncollectible accounts expense amount is
diiJ'erent from tbe amount that
was written of!' 3$ uneoll ecctible,
Problem 5-2S AccolllIIiIIg fo, IlIIcoIhctibk IlCCOIIW: perr:elll
of receirtW/es
a/lowtIIICII metItod
Hammond Inc. experienced the following transactions Cor 2012,
its first year of operations:
I. Issued common stock forS80,OOO;:asb.
2. Purchased S225,OOO of ~rdandise Ill! account.
3. Sold merchandise that cost 5148,000 for S294,OOO on
account.
4. Collected 5142,000 cash from accouots receivable.
S. Paid S110,000 00 accounts payable.
6. Paid 546,000 of salaries expense fot the year,
transmitted _ pobIisbcr's pOOr peonissioo. Vi~ ••i11 be ~
Surveyor Amlt.nting. Third Erlition t--'==---
1. Paid other operating expenses of S35,OOO.

8. Hammond adjusted the aCCOUDI5using the foUowing
information from an accounts reoeiv-
able aging schedule.
Hoa!Ibet ., Illtys Percltlt l.ikely 10 AllowllJlce
PutOue Amoullt Se UneollfHItible 11I1_8
Current S33.000 .01
~ 12.000 .n5
31-60 3,000 .10
61-90 2.500 10
Ovet90days 1.500 .5D
Required
a. Organize the transaction data in accounts under an accounting
equation.
b. Prepare the income statement, sunement of changes in
stockbolders' equity, balance sheet,
and statement of cash 110"''' for Hammond Inc. for 2012.
c. v,'hat is the net realizable value of the accounts receivable at
December 31, 20121
ProbJem 5-26 De.termiNztion of IU't:DIIIfIlHZltmcu-pen:eRt of
naiYabks LO 2
alIoWGIICf!. _tJrOd of fACCOtDIMt: for IUfCOlkctibk
IZCCOIDlt'J
During the first year of operation, 2012, ~artin's Appliance
recognized $192.000 of service CHECk FlGU E
revenue on account. At the end of 2012, the accounts receivable
balance was S57.400. Even c. Net Realizable Value 555.104
though this is his first year in business, the owner believes be
will collect all but about 4 percent

of tbe ending balance,
Required
a. 'hat amount of cash was collected by :'>lattin's during
201Z?
b. Assuming the use of an allowance syst.!m [0 account ror
uncollectible accounts, what amount
should Martin record as uncnll<clible accounts expense in
2012?
c. What is the net real.ttable '-alut of reor:i>-al>L!sat the end of
20 I Z?
d. Shaw the effect of tbe above transaetions on the financial
staiemems by reeording the
appropriate amounts in a horizontal statements model like the
one shown here. When you
record amounts in the Cash Flow column. indicate whether the
item is an operating activity
(OA), investing activity (1A), or financing acti.;ty (FA). The
!ttters :-IA indicate that an ele-
ment is not affected by the event.
UIII. .p Equity 1ItV. e.p. Net •••c. Cash flowAssets
Cash .p Ace ••• Rec. Allow.
Problem 5·21 Accounting for note» nceiPllble IIJIIi
IUICOIlectibie IICctHUlt. lUiRg tile
percetrt of SfJ/es tdIowtUlt:e metAod
The following transactions apply to Bialis Co. for 2012, iu fmt
year of operations.
I. Issued SIOO,OOOof common stock fot cash,
Z. Provided S86,OOO of services on account.
3. Collected 575,000 cash from accounts receivable.

4. Loaned StO,OOO 10 Horne Co. on October 1.2012. The note
bad a one-year term to maturity
and an 8 percent interest 00"-
5. Paid $32,000 of salaries expense for the year.
6. Paid a S2,OOOdividend to the stockholders.
7. Recorded the accrued interest on December 31,20.12 (see
ilenl4}.
8. Uncollectible accounts expense is estimated 10 be 1 percent
of service revenue on account.
L02,4
CHECKRGUR£
b. Net Ineome 553,340
....._-------_.._----------------------------------------------------------
----"""!
transmitted without. publisher's prior permission. Violators win
be prosecuted.
ACC201
Rtoquired
a, Show the eJrecu of the above transactions in a horizontal
statements model like the one
shown below.
Evem

EvOtlt CosIo... Ace1$. Reo. ••. Notes Reo. ••. Inl Ree. = Cell.
StIc. ••. Rei. Earn.
-Allow.'" ~
Doabtlul A.CIS.
1-- ----------11---- --]1
Assets Rev. - Exp. = Nellno. Cash Flews
L03,5
b. Prepare the income statement, balance sheet, and statement of
cash flows for 2012.
Problem 5·28 Acco""tiRg for credit ctmI sales tUUI
"ncoUectiJJle /lCCOUflts:
percem of re.ceilliU>m a/lUl4'tl1Jce method
Bishop Supply Company had the following transactions in 2012:
l. Acquired S60,1lOOcash from the issue of common stock.
2. Purcha se d SI80,1lOO of merchandise for cash in 2012.
3. Sold merchandise that cost SI 10.000 fur 5200,000 during the
year under the following terms:
~e
CHECK AGUIIES
b_ Net Income: SlS.700
Total Assets: $!r.I.760
S 50,000
140.000
10.000
CaSh sales

Credit card salas iThe credit card company charges a 3 percent
service fee_!
Sales on account
4. Collected all of the aceounu receivable from tbt credit card
company_
S. Collected 59.200 of a<XOW1l5 receivable.
6. Paid selling and aCministrati1le~ofS46.000_
7. DettrmiDed that 5 percent of tbe ending accounts receivable.
balance would be uncollectible,
Rc •••.•••
a. Record the abo>-t evtnts in a horizontal st.ateJnetIts model
like the rollov.ing one. -ben you
record amounts in the Cash Flov.· column. indicate ,,1Iether the
item is an operating activity
lOA}. III m.titingacti>ity (l'&'). or a financing acthity (FA)_
The lttkrs NA indicate thai an
el<meot is oot affecteC by tbt ~L -~.
kcts.
Cash ••. Rec. •••••AlloW ••. •••
••••. - ElIp. = Nollie.
b. Prepare an income statement. a $tatement of changes in
stockholders' equity, a balance sheet,
and a sta1eIIlez1tof cuII~ .•for 2012_
L01, 4. 5 Probl m 5-ZS Effect of trtDuactio/U 04 rite ekmem of
jiMulcial st~ts
Rtoqaifed
Identify each of tbe following independent transactioas as asset
source (AS), asset use (AU). asset

exchange CAE). or claims e:<cllange (eE). Also explain how
each event affects assets, liaeilities,
stockholders' equity, ""I income, and cash now by placing a -
for increase, - for decrease, or NA
for nOI alJ'e<!ted Utlder eaca of tbe caregodes The ftrSt t'eIl1
is recorded as an example,
Type of
bent Evem
AE
Assets
=I-:
Common
UllbilillH Stock
NA NA
Retained
Earnln,s
NA
Net
Incom.
NA
Casll
Flow
+

This week you have 3 assignments to complete and submit. The
first two assignments are calculation based, and will be graded
for accuracy. The third assignment is your written work, and
will be evaluated based upon its respective grading rubric.
In order to assist your work, I’ve provided some commentary,
guidance and templates below (my suggestions are highlighted
in orange). As with last week, you must copy and paste these
templates to a Word (*.doc) file, complete them, annotate the
file name with your name, and submit. Answers received in any
format other than these templates will receive a 10% reduction
in score.
PROBLEM 5-24:
a. (1): Show the numerical components and make the
appropriate calculation.
a. (2): Fill in the worksheet with the appropriate values;
Accounts Receivable
Allowance for Doubtful Accounts
Beg. Bal.
Beg. Bal.
Sales on account.
Uncoll. Acct. expense
Collections on account
Write off of bad accts
Write off of bad accts
Bal.
Bal.
a. (2): continued, provide the values and calculation;

Accounts Receivable Balance, 12/31/12
$
Less: Allowance for Doubtful Accounts, 12/31/12
( )
Net Realizable Value
$
b. provide a written explanation.
PROBLEM 5-26:
a. Show the numerical components and make the appropriate
calculation.
b. Show the numerical components and make the appropriate
calculation.
c. Show the numerical components and make the appropriate
calculation.
d. Fill in the worksheet with the appropriate values;
Assets
=
Liab.
+
Equity
Rev.
-
Exp.
=
Net Inc.

Event
Cash
+
Acc.Rec.
-
Allow.
=
Cash Flow
1

- - -
PROBLEM 6-27:
a. Use formula shown pp. 223-224, show all numerical
components and make appropriate calculations for 2012, 2013

and 2014.
b. Use the table below (and as seen in the problem), and fill in
the values for purchase, recognition of revenue, depreciation
and balance for the van. Use 'na' if not applicable. Indicate cash
flow impact with either 'OA', 'IA', 'FA', 'na', or 'NC' (net
change).
McNabb Corporation
Horizontal Statements Model
Balance Sheet
Income Statement
Statement of
Assets
=
Stockholders’ Equity
Rev.
-
Exp.
=
Net Inc.
Cash Flows
Event
Cash
+
Bk Value of Van
=
C. Stock
+
Ret. Ear.

=
Rev.
+
=
+
-
=
Depr.
+
=
+
-
=

Bal.
+
=
+
-
=
c. Show the values and perform the calculations in the format
below;

Sales Price $
Book Value ( )
(depreciated to salvage value; see a. above)
Gain on Sale $
PROBLEM 6-28:
Calculate the depreciation for each company according to the
method specified.
a. Show the values and calculations for each company, using the
following format, (three calculations required), and state which
company has the highest net income for 2012;
Company x (A, B, or C) - 2012 Revenue
$
Depreciation Expense ( )
Net Income
$
b. Using the format in (a), complete three calculations and
identify which company has the lowest net income in 2014.
c. Using the table below, show accumulated depreciation for
each company (three calculations required), years 2012-2014,
with corresponding calculations, and determine (identify) which
company has the highest book value at the end of 2014;
Company x (A, B or C) Accumulated
Depreciation
2012 $
2013
2014
Total $
Cost
$
Accumulated Depreciation

( )
Book Value
$
d. Using the table below, calculate retained earnings for each
company (three calculations required) and determine which
company (identify) has the highest amount of retained earnings
on the 2015 balance sheet.
Company x (A, B or C)
Sales (four years)
$
Depreciation (four years)
( )
Retained Earnings - 2015
$
e. Provide the answer with a descriptive comment.
PROBLEM 6-32:
a. Using the table below, provide all numerical entries and
perform the calculations to determine the amount of goodwill
purchased;
Purchase Price
$
Less: FMV of Assets Acquired
Equipment
$
Land
Building
Franchise
_________ ( )
Goodwill Purchased
$

ATC 6-5:
This requires a written response (essay format) to all three
components of the question. Review the grading rubric for
further guidance.
Additional Resources (web links, videos, and articles):

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