Section A: External Financial Reporting Decisions Topic 1: Financial Statements Page: 29 Figure 1A-3: +/- Extraordinary items +/- Changes in accounting principle Net income Page: 31
Trang 1ERRATA
Added text is underlined Deleted text is struck out Modified text is in bold In some cases, additional
text, before and/or after the change, may be included to clarify the context or specific location Italicized
text is FYI
Section A: External Financial Reporting Decisions
Topic 1: Financial Statements
Page: 29
Figure 1A-3:
+/- Extraordinary items
+/- Changes in accounting principle
Net income
Page: 31
Order revised as appropriate for balance sheet presentation:
Shareholders’ Equity
Capital stock Additional paid-in capital Retained earnings
Treasury stock Accumulated other comprehensive income
Page: 36
Figure 1A-9 change as follows:
Increase (decrease) Decrease (increase) in merchandise inventory
Topic 2: Recognition, Measurement, Valuation, and Disclosure
Page 46:
Level 1 inputs: The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
Level 2 inputs: The fair value hierarchy gives intermediate priority to inputs other than quoted prices included in Level 1, that can be determined indirectly from the values of related assets with quoted prices in active markets are observable either directly or indirectly for assets or liabilities, such as quoted prices for similar assets or liabilities in active markets
Level 3 inputs: The fair value hierarchy gives the lowest priority to unobservable inputs and should be used only if observable inputs are not available
Page: 48
Figure 1A-11
On July 10, $50,000 $49,500 is received
Page: 49
Debit alignment of “cost of goods” is modified
Dr Sales returns and allowances selling price
Cr Accounts receivable selling price
Trang 2Dr Merchandise inventory cost of goods
(or Loss on damaged goods)
Cr Cost of goods sold cost of goods
Page: 50-51
Similarly, if the allowance for doubtful accounts had a $6,000 $1,000 debit balance, then the amount needed to adjust the balance in the allowance account to the desired level would be a debit credit of
$2,000 $5,000
Allowance for Doubtful Accounts
Page: 52
If an amount previously written off using the direct write-off method is later collected, the amount is debited to cash and credited to a revenue account, such as uncollectible accounts recovered the
amount is debited to accounts receivable and credited to a revenue account such as bad debts
recovered and then another entry debits cash and credits accounts receivable
The first entry re-establishes the receivable
The second journal entry records the cash received
Page: 69
Income Statement (partial
Other revenues and gains
Interest revenue
$ xxx Other expenses and losses
Loss on sale of securities
xxx Net income
Other comprehensive income
Unrealized holding gain (loss) on
available-for-sale securities
Total other comprehensive income
Comprehensive income
$ xxx
(12,000) xxx
$ xxx
Page: 73
Trang 3Page: 88
Alignment modified
Dr Income tax expense GAAP amount
Dr Deferred tax liability Difference
Cr Income tax payable IRS amount
Page: 98
If the remaining 6,000 shares are reissued for $8 per share:
Dr Cash 44,000 48,000
Dr Additional paid-in capital –treasury stock 4,000
Dr Retained earnings 6,000 2,000
Cr Treasury stock (6,000 × $9/share) 54,000
Par (or stated value) method In this method, treasury stock is recorded at par
value and additional paid-in capital is debited for the amount in proportion to the original issue price
Page: 99
The journal entry for the reacquisition of 10,000 $1 par shares (originally sold for $8 per share) for treasury stock at $9 per share would be:
Dr Treasury stock 10,000
If 4,000 treasury shares are reissued at $10 per share:
Dr Cash 40,000
Cr Treasury stock (4,000 × $9 $1/share) 4,000
Cr Additional paid-in capital—treasury stock in excess of par 36,000
Page: 101
Dr Cash ($20/share × 1,000 shares) 20,000
Dr Paid-in capital—stock options 4,000 6,000
Cr Common stock ($8 × 1,000 shares) 8,000
Cr Additional paid-in capital—common stock 16,000 18,000
([$20 – $4] 1,000 shares)
Page: 104
Journal entry for the 30% stock dividend (large stock dividend):
Dr Retained earnings 10,000 30,000
Cr Common stock dividend distributable 10,000 30,000
(100,000 shares × 10% 30% × $1 par/share)
Dr Common stock dividend distributable 10,000 30,000
Cr Common stock 10,000 30,000
Trang 4Page: 109
Total estimated gross profit on the contract would be ($11,250,000 – $10,000,000) = $1,250,000, so 25% of this amount, or $312,500, is recognized as gross profit the first year Also, during the year the company billed the customer $2,250,000 and received $1,875,000 in payments
Page: 111
The current-period loss (based on the example above) is calculated in Figure 1A-42, continuing from the long-term construction contract illustration previously discussed
Figure 1A-42 Computation of Recognizable Loss in Current Period
Cost to date (12/31/Year 2, assuming $2,500,000 was incurred in Year 2)
Estimated costs to complete (revised)
Estimated total costs
Percentage complete: ($4,315,680 / $7,547,396) (5,000,000/11,000,000)
Revenue recognized in Year 2: ($6,660,000* × 57.2%) – $1,665,000†
($11,250,000* × 45.45%) – $2,812,500†
Costs incurred in Year 2
Loss recognized in Year 2
$4,315,680 3,231,716
$7,547,396 57.2%
2,144,520 2,797,360
$(652,840)
$5,000,000 6,000,000
$11,000,000 45.45% 2,300,625 2,500,000
$(199,375)
*(Contract price × 45.45%) - revenue recognized in Year 1 Revenue recognized in Year 2 on project
† Cumulative revenue recognized up to Year 1 on project (computed in prior discussion)
Page: 112
Dr Construction expense 2,797,360 2,500,000
Cr Construction in progress 652,840 199,375
Cr Revenue from long-term contracts 2,144,520 2,300,625
Section C: Performance Management
Topic 3: Performance Measures
Page: 371
Question 1C1-CQ2216
Page: 372
Question 1C1-CQ18
The financial statements show a $3,000 loss for a job that was budgeted to show a $6,000 profit
d The flexible budget variance was $900 unfavorable favorable
Section D: Cost Management
Topic 5: Business Process Improvement
Page: 504
1 Please remove “product testing” from inclusion as a prevention costs
2 Please make note that product testing is an appraisal cost
Trang 5Essay Exam Support Materials
Page: 527
Correction to LO s Should be No 5 not No 55:
“…as outlined in Auditing Standard No 55.”
Page: 648
Question 1D-ES03
The last sentence on the page beginning “Without this planning and…” should be “Without this planing and…”
Note: Planing is a manufacturing process applicable to the scenario
Page: 681
Under Answer B: occurrences of “gross margin” need to be replaced with “gross profit”
Page: 691
Answer to Question 1D-ES03
Table A.1
Split-Off Value Total should be $1,300,000 $1,350,000
Page: 692
Answer to Question 1D-ES03
Table A.2
Split-Off Value Total should be $1,350,000 $1,300,000
Answers to Section Practice Questions
Page: 739
The other available answer choices are incorrect Note that the flexible budget variance includes all variable costs variances (material, direct labor, and variable overhead) as well as the fixed overhead budget variance is the variance between the actual results and flexible budget amount, which equals
$900 unfavorable