Clarification for Foreign Exchange Foreign Currency Translation- Date  Exchange Rate CA $ Cost of Land Conversion to US $ Comprehensive Income on Land 12/31/2010 1.00529               5,250                                      5,278                                      -   12/31/2011 0.978857               5,250                                      5,139                              (139) 12/31/2012 1.003179               5,250                                      5,267                               128 12/31/2013 0.940531               5,250                                      4,938                              (329) ABC Company acquired a Canadian Subsidiary whose only asset was land. ABC Company purchased the subsidiary on 12/31/10 for CA $5,250 and retaines 100% interest in the subsidiary. Go to www.x-rates.com and use the historic lookup feature to determine the exact exchange rates on 12/31/10, 12/31/11, 12/31/12 and 12/31/13.  Clarification for Comprehensive Income For the Year Ended December 31, 2013 Net Earnings                             5,385.00 Other Comprehensive (Loss) Income: Foreign Currency Translation Adjustments                              (329.00) Cash Flow Hedges, net of tax                                (12.00) Other Comprehensive Income                               (10.00) Total Other Comprehensive (Loss) Income                              (351.00) COMPREHENSIVE INCOME                             5,034.00 Clarification for statement of OE ABC Company Statement of Owners Equity For the Year Ended December 31, 2013 Capital Stock: Preferred Stock                                                   -   Common Stock                                            88.00                                            88.00 Additional Paid in Capital                                      8,402.00 Retained Earnings                                    23,048.00                                    31,538.00 Accumulated Other Comprehensive Income                                            46.00 Treasury Stock                                 (19,194.00) Total Shareholder's Equity                                    12,390.00 Clarification for Statement of Earnings ABC Company Statement of Retained Earnings For the Year Ended December 31, 2013 January 1, as Reported                         20,038.00 Correction of depreciation error                             (903.00) Cumulative increase in income   from inventory method change                               771.00 January 1, as adjusted                         19,906.00 Net Income                            5,385.00                         25,291.00 Dividends                         (2,243.00) Balance, December 31                         23,048.00 Title ABC/123 Version X 1 ABC Company History ACC/545 Version 6 1 University of Phoenix Material ABC Company History The ABC Company is a mid-sized company that manufact.

1. Clarification for Foreign Exchange
Foreign Currency Translation-
Date
Exchange Rate
CA $ Cost of Land
Conversion to US $
Comprehensive Income on Land
12/31/2010
1.00529
5,250
5,278
-
12/31/2011
0.978857
5,250
5,139
(139)
12/31/2012
1.003179
5,250
5,267
128

2. 12/31/2013
0.940531
5,250
4,938
(329)
ABC Company acquired a Canadian Subsidiary whose only
asset was land.
ABC Company purchased the subsidiary on 12/31/10 for CA
$5,250 and retaines 100% interest in the subsidiary.
Go to www.x-rates.com and use the historic lookup feature to
determine the exact exchange rates on 12/31/10, 12/31/11,
12/31/12 and 12/31/13.
Clarification for Comprehensive Income
For the Year Ended December 31, 2013
Net Earnings
5,385.00
Other Comprehensive (Loss) Income:
Foreign Currency Translation Adjustments
(329.00)
Cash Flow Hedges, net of tax
(12.00)
Other Comprehensive Income

3. (10.00)
Total Other Comprehensive (Loss) Income
(351.00)
COMPREHENSIVE INCOME
5,034.00
Clarification for statement of OE
ABC Company
Statement of Owners Equity
For the Year Ended December 31, 2013
Capital Stock:
Preferred Stock
-
Common Stock
88.00
88.00
Additional Paid in Capital
8,402.00
Retained Earnings

4. 23,048.00
31,538.00
Accumulated Other
Comprehensive Income
46.00
Treasury Stock
(19,194.00)
Total Shareholder's Equity
12,390.00
Clarification for Statement of Earnings
ABC Company
Statement of Retained Earnings
For the Year Ended December 31, 2013

5. January 1, as Reported
20,038.00
Correction of depreciation error
(903.00)
Cumulative increase in income
from inventory method change
771.00
January 1, as adjusted
19,906.00
Net Income
5,385.00
25,291.00
Dividends
(2,243.00)
Balance, December 31
23,048.00
Title
ABC/123 Version X
1
ABC Company History
ACC/545 Version 6
1

6. University of Phoenix Material
ABC Company History
The ABC Company is a mid-sized company that manufactures
goods in the United States and has begun to expand the
operation overseas. The company maintains a healthy balance
sheet and has reported positive net income since inception.
Currently, the organization utilizes the average cost inventory
method and is exploring a change in accounting principle to
maximize net income and attract new stockholders. Also, the
company utilizes the straight-line method of depreciating fixed
assets, which are primarily machinery/equipment and several
large production facilities.
The organization is a publically–traded company that sells its
stock on the open market. Demand for the stock has caused an
increase in the price per share, and if the trend continues, the
organization is considering splitting the stock to encourage
investment. The company is having success selling preferred
stock on the open market as well.
ABC Company offers its employees a generous pension plan,
but it is currently investigating pension plan changes that will
benefit both the employees and the stockholders. Also, the
company offers a 401k and an employee stock purchase plan to
encourage employees to be owners of their company.
Finally, the company finances some of the major investments it
has made, including warehouses and land. To accomplish
company goals, it has issued bonds in which the company is
now considering restructuring.
2013
2012

7. Cash
$ 35,000
$ 32,000
Accounts receivable
33,000
30,000
Allowance for doubtful accounts
(1,300)
(1,100)
Inventory
31,000
47,000
Property, plant, & equipment
100,000
95,000
Accumulated depreciation
(16,500)
(15,000)
Trade accounts payable
(25,000)
(15,500)
Income taxes payable
(21,000)
(29,100)
Deferred income taxes
(5,300)
(4,600)
8% callable bonds payable
(45,000)
(20,000)
Unamortized bond discount
4,500
5,000
Common stock
(50,000)
(40,000)

8. Additional paid-in capital
(9,100)
(7,500)
Retained earnings
(25,200)
(64,600)
Sales
(558,300)
(778,700)
Cost of goods sold
250,000
380,000
Selling expenses
141,500
172,000
General and administrative expenses
137,000
151,300
Interest expense
4,300
2,600
Income tax expense
20,400
61,200
Additional information:
1. Los Lobos purchased $5,000 in equipment during 2007.
2. Los Lobos allocated one-third of its depreciation expense to
selling expenses and the remainder to general and
administrative expenses.
3. Bad debt expense for 2007 was $5,000, and write-offs of
uncollectible accounts totaled $4,800.
4. $12,000 of the debt is current portion.

9. Cash Sales
$72,600
Collections on Receivables
477,900
Purchases
(219,500)
Purchase of Equipment
(5,000)
Wages
(150,700)
Payments to Suppliers
(126,300)
Tax Payments
(27,800)
Borrowing
30,000
Repayment of Debt
(5,000)
Interest Payments
(3,800)
Sale of Stock
11,600
Dividends
(51,000)
On January 1, 2006, Jamona Corp. purchased 12% bonds,
having a maturity value of $300,000, for $322,744.44. The
bonds provide the bondholders with a 10% yield. They are dated
January 1, 2006, and mature January 1, 2011, with interest
receivable December 31 of each year. The company uses the
effective-interest method to allocate unamortized discount or
premium. The bonds are classified as available-for-sale. The
fair value of the bonds at December 31 of each year is as
follows:

10. · 2006 – $320,500
· 2007 – $309,000
· 2008 – $308,000
· 2009 – $310,000
· 2010 – $300,000
The following information is available from Jamona’s inventory
records:
Units
Unit Cost
January 1, 2007 (beginning inventory)
600
$ 8.00
Purchases:
January 5, 2007
1,200
9.00
January 25, 2007
1,300
10.00
February 16, 2007
800
11.00
March 26, 2007
600
12.00
A physical inventory on March 31, 2007, shows 1,600 units on
hand. Select any one of the inventory methods (LIFO, FIFO,

11. Average Cost, or others).
On July 6, Jamona Corp. acquired the plant assets of Berry
Company, which had discontinued operations. The appraised
value of the property is:
Land
$ 400,000
Building
1,200,000
Machinery and equipment
800,000
Total
$2,400,000
Jamona Corp. gave 12,500 shares of its $100 per value common
stock in exchange. The stock had a market value of $168 per
share on the date of the purchase of the property.
Jamona Corp. expended the following amounts in cash between
July 6 and December 15, the date when it first occupied the
building.
Repairs to building
$105,000
Construction of bases for machinery to be installed later
135,000
Driveways and parking lots
122,000
Remodeling of office space in building
161,000
Special assessment by city on land
18,000

12. On December 20, the company paid cash for machinery,
$260,000, subject to a 2% cash discount, and freight on
machinery of $10,500.
On January 1, 2007, Jamona Corp. signed a 5-year,
noncancelable lease for a machine. The terms of the lease called
for Jamona to make annual payments of $8,668 at the beginning
of each year, starting January 1, 2007. The machine has an
estimated useful life of 6 years and a $5,000 unguaranteed
residual value. The machine reverts to the lessor at the end of
the lease term. Jamona uses the straight-line method of
depreciation for all of its plant assets. Jamona’s incremental
borrowing rate is 10%, and the lessor’s implicit rate is
unknown.
Restructuring Debt Data
Your company is in financial trouble and is in the process of
reorganizing. Your manager wants to know how you will report
on restructuring the debt. Use the following information to help
with this assignment.
Part A
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$ 108,340
Trade accounts receivable, net of allowances
2,866,260
Other receivables
62,150
Operating supplies, at lower of average

13. cost or market
58,630
Prepaid expenses
446,050
Total Current Assets
3,541,430
PROPERTY, PLANT, AND EQUIPMENT (at cost)
Land
1,950,000
Buildings and improvements
2,327,410
Equipment
5,015,660
Other equipment and leasehold improvements
1,645,580
total

14. 10,938,650
Accumulated depreciation and amortization
(7,644,430)
Net Property, Plant, and Equipment
3,294,220
OTHER ASSETS
Deposits and other assets
1,000,080
TOTAL ASSETS
$ 7,835,730
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

15. CURRENT LIABILITIES
Accounts payable
$ 972,160
Accrued liabilities
2,071,270
Accrued claims costs
793,620
Federal and other income taxes
19,710
Deferred income taxes
500
Current maturities of long-term debt and
capital lease obligations
50,610
Short-term borrowings
249,250
Total Current Liabilities
4,157,120
LONG-TERM LIABILITIES

16. Capital lease obligation
54,580
Note outstanding
3,000,000
Mortgage outstanding
608,030
Other liabilities
95,860
Total long-term liabilities
3,758,470
Total Liabilities
7,915,590
SHAREHOLDERS’ EQUITY (DEFICIT)
Common stock, $.01 par value; authorized
500,000 shares; issued 231,000 shares
2,310
Additional paid-in capital

17. 731,090
Accumulated other comprehensive loss
(113,500)
Retained earnings (deficit)
(639,180)
Treasury stock
(60,580)
Total Shareholders’ Equity (Deficit)
(79,860)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$ 7,835,730
Part B
As stipulated, your company is having financial difficulty and
has asked the bank to restructure its $3 million note
outstanding. The present note has 3 years remaining and pays a
current interest rate of 10%. The present market rate for a loan
of this nature is 12%. The note was issued at its face value. The
bank agrees to accept land in exchange for relinquishing its
claim on this note. The land has a book value of $1,950,000 and
a fair value of $2,400,000.
The company provides the following information related to its
postemployment benefits for the year 2007:
· Accumulated postretirement benefit obligation at January 1,

18. 2007: $810,000
· Actual and expected return on plan assets: $34,000
· Unrecognized prior service cost amortization: $21,000
· Discount rate: 10%
· Service cost: $88,000
Lee Corporation Equity Scenario
Lee Corporation is an American company that began operations
on January 1, 2004. It has just completed its fourth full year of
operations on December 31, 2007. Ending Year Balances for
the prior year that ended on December 2006 were as follows:
Retained Earnings: $225,000
Common Stock at par: $500,000
Additional Paid-in Capital: $1,000,000
Treasury Stock: $200,000
Income before taxes for 2007 totaled $240,000.
Effective Tax Rate was 40% for all years of operation including
2007.
The following information relates to 2007:
1. An error was discovered during 2007. Specifically,
depreciation expense was understated in 2005, resulting in the
need for a Prior Period Adjustment of $25,000 before taxes.
2. Lee Corporation changed its method of valuing inventory
during 2007. The cumulative decrease in income from the
change in inventory methods was $35,000 before taxes.
3. Lee Corporation declared cash dividends of $100,000 in late
2007 to be paid out in 2008.
4. Lee acquired a Canadian subsidiary whose sole asset is a
piece of land. Lee acquired the subsidiary on 12/31/04 for the
exact value of the land, CA $100,000. Lee owns 100% of the

19. subsidiary. Go to www.x-rates.com and use the historic lookup
feature to determine the exact exchange rates on 12/31/04,
12/31/05, and 12/31/06.
Requirements:
1. Prepare journal entries for items 1 to 3 above.
2. Calculate and journalize the foreign exchange adjustments for
2005, 2006, and 2007 for the Canadian subsidiary.
3. Prepare a Retained Earnings Statement for the year ended
December 31, 2007.
4. Prepare a Statement of Changes in Stockholders’ Equity for
the year ended December 31,
2007.
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Week #2 Supplemental Material(A) Depreciation Expense Using
Straight-Line Method-ABC Company has the following assets
acquired on January 1, 2013 requiring depreciation
calculation:AssetCostLifeAnnual Dep. ExpensePlant with 30
year life at a cost of $660,00066030Land at a cost of
$2,250,0002,250Machinery and Equipment with 20 year life at a
costof 79,000.7920Truck with a life of 7 years at a cost of

20. $42,0004273,031-(B) Inventory Calculation-A physical
inventory on December 31, 2013, shows 810 units on
hand.Calculate Cost of Goods Sold (COGS) using average
cost.PurchasesUnitsCostTotalBeginning
Inventory80014.3911,512January 5,
201395013.4612,787PurchaseMarch 25,
201395012.8112,170PurchaseJune 8,
201374513.6510,169PurchaseSeptember 15,
201362513.258,281PurchaseDecember 15,
201350514.977,560Purchase4,57550,967Total Purchases(C )
Error Corrections-(1) An error was discovered during 2013
relating to the understatement of depreciation expense in
2011resulting in a Prior Period Adjustment of $1,505 before
taxes.(2) ABC Company changed its method of valuing
inventory during 2013. The cumulative increase in incomefrom
the change in inventory methods was $1,285 before taxes.