Student Name: Instructor
Class: McGraw-Hill/Irwin
Problem 20-01
Requirement 1:
CECIL-BOOKER VENDING COMPANY
General Journal
Account Debit Credit
To record the change:
Inventory 35,000
Income tax payable 8,750
Retained earnings 26,250
Requirement 2:
CECIL-BOOKER VENDING COMPANY
Comparative Income Statements
2021 2020
Income from continuing operations $ 525,000 $ 399,000
Income tax expense (131,250) (99,750)
Net income $ 393,750 $ 299,250
Correct! Correct!
Earnings per share:
Earnings per common share $ 3.94 $ 2.99
Correct! Correct!
«- Correct!
Given P20-01:
CECIL-BOOKER VENDING COMPANY
Inventories (average cost basis), 12/31/20 $ 120,000
Inventories (average cost basis), 12/31/19 $ 124,000
Inventories (FIFO basis), 12/31/20 $ 155,000
Inventories (FIFO basis), 12/31/19 $ 160,000
Tax rate 25%
Common shares outstanding each year 100,000
Income from continuing operations, 2020 $ 400,000
Income from continuing operations, 2021 $ 525,000
Student Name: Instructor
Class: McGraw-Hill/Irwin
Problem 20-02
Requirement 1:
PYRAMID COMPANY
General Journal
Account Debit Credit
Inventory 39,000
Income tax payable 9,750
Retained earnings 29,250 «- Correct!
Requirement 2:
PYRAMID COMPANY
Comparative Income Statement
2021 2020
Income before income taxes $ 51,000 $ 45,000
Income tax expense (12,750) (11,250)
Net Income $ 38,250 $ 33,750
Correct! Correct!
Earnings per share $ 0.77 $ 0.68
50,000 Correct! Correct!
shares
Requirement 3:
PYRAMID COMPANY
Statement of Shareholders' Equity
For the Years Ended Dec. 31, 2021 and 2020
Additional Total
Common Paid-in Retained Shareholders'
Stock Capital Earnings Equity
Balance at Jan. 1, 2020 50,000 180,000 67,500 297,500
Correct! Correct! Correct! Correct!
Net income 33,750 33,750
Cash dividends (10,000) (10,000)
Balance at Dec. 31, 2020 50,000 180,000 91,250 321,250
Correct! Correct! Correct! Correct!
Net income 38,250 38,250
Cash dividends (10,000) (10,000)
Balance at Dec. 31, 2021 50,000 180,000 119,500 349,500
Correct! Correct! Correct! Correct!
Given Data P20-02:
PYRAMID COMPANY
Income tax rate 25%
Income Before Income Tax
Average Income Difference
Cost FIFO Tax After
Method Method Difference Effect Tax
2019 $ 90,000 $ 60,000 $ 30,000 $ 7,500 $ 22,500
2020 45,000 36,000 9,000 2,250 6,750
Total $ 135,000 $ 96,000 $ 39,000 $ 9,750 $ 29,250
2021 $ 51,000 $ 46,000 $ 5,000 $ 1,250 $ 3,750
$1 par Common shares issued 50,000
Common shares issued for $ 230,000
Dividends paid, 2020 and 2021 $ 10,000
Student Name: Instructor
Class: McGraw-Hill/Irwin
Problem 20-07
Requirement 1:
MARION COMPANY
Depletion and Depreciation
Cost of mineral mine:
Purchase price $ 1,600,000
Development costs 600,000
$ 2,200,000
Correct!
Depletion:
Land resale value $ 100,000
Estimated ore extracted (tons) 400,000
Depletion per ton $ 5.25
Correct!
2021
Ore extracted (tons) 50,000
Depletion $ 262,500
Correct!
2022
Ore extracted (tons) 80,000
Revised ore extraction (tons) 487,500
Revised depletion rate $ 4.20
Depletion $ 336,000
Correct!
Depreciation:
Structures:
Building cost $ 150,000
Depreciation per ton $ 0.375
Correct!
2021 depreciation $ 18,750
Correct!
Revised depreciation rate $ 0.300
2022 depreciation $ 24,000
Correct!
Equipment:
Equipment cost $ 80,000
Estimated equipment sale $ 4,000
Depreciation per ton $ 0.19
Correct!
2021 depreciation $ 9,500
Correct!
Revised depreciation rate $ 0.152
2022 depreciation $ 12,160
Correct!
Requirement 2:
MARION COMPANY
Book Value
Mineral mine:
Cost $ 2,200,000
Less accumulated depletion:
2021 depletion $ 262,500
2022 depletion 336,000 598,500
Book value, 12/31/2022 $ 1,601,500
Correct!
Structures:
Cost $ 150,000
Less accumulated depreciation:
2021 depreciation $ 18,750
2022 depreciation 24,000 42,750
Book value, 12/31/2022 $ 107,250
Correct!
Equipment:
Cost $ 80,000
Less accumulated depreciation:
2021 depreciation $ 9,500
2022 depreciation 12,160 21,660
Book value, 12/31/2022 $ 58,340
Correct!
Given Data P20-07:
MARION COMPANY
Land purchase $ 1,600,000
Additional development costs $ 600,000
Estimated tons extracted 400,000
Land resale value $ 100,000
Building costs $ 150,000
Useful life of buildings 10 years
New equipment cost $ 80,000
Auction price of equipment $ 4,000
2021 ore extracted and sold 50,000 tons
Revised estimated tons extracted 487,500
2022 ore extracted 80,000 tons
Student Name: Instructor
Class: McGraw-Hill/Irwin
Problem 20-14
Requirement 1:
WHALEY DISTRIBUTORS
General Journal
($ in millions)
Account Debit Credit
a.
Inventory 10
Retained earnings 10 «- Correct!
b.
Liability - litigation 7
Gain - litigation 3 «- Correct!
Cash 4
c.
Retained earnings 6
Patent 6 «- Correct!
2021 adjusting entry:
Amortization expense 3
Patent 3 «- Correct!
d.
No entry to record the change
2021 adjusting entry:
Depreciation expense 4
Accumulated depreciation 4 «- Correct!
Calculation of annual depreciation after the change:
Cost $ 30
Previous depreciation (calculated below) (18)
Undepreciated cost $ 12
Estimated residual value -
To be depreciated $ 12
Estimated remaining life 3 years
New annual depreciation $ 4
Correct!
*Cumulative effect of the change:
SYD
2019 depreciation $ 10
2020 depreciation 8
Accumulated depreciation $ 18
Correct!
Requirement 2:
WHALEY DISTRIBUTORS
Financial Statements
Shareholders' Net
Assets Liabilities Equity Income Expenses
2019 $ 740 $ 330 $ 410 $ 210 $ 150
2019 inventory (12) (12) (12) 12
Loss contingency no adjustments to prior years
Patent amortization (3) (3) (3) 3
Depreciation no adjustments to prior years
$ 725 $ 330 $ 395 $ 195 $ 165
Correct! Correct! Correct! Correct! Correct!
2020 $ 820 $ 400 $ 420 $ 230 $ 175
2019 inventory 12 (12)
2020 inventory 10 10 10 (10)
Loss contingency no adjustments to prior years
Patent amortization (6) (6) (3) 3
Depreciation no adjustments to prior years
$ 824 $ 400 $ 424 $ 249 $ 156
Correct! Correct! Correct! Correct! Correct!
Given Data P20-14:
WHALEY DISTRIBUTORS
Financial Statements
December 31
(in millions)
Shareholders' Net
Assets Liabilities Equity Income Expenses
2019 $ 740 $ 330 $ 410 $ 210 $ 150
2020 820 400 420 230 175
Additional information:
(a) Errors in inventory (in millions)
2019 $ 12 overstated
2020 $ 10 understated
(b) Liability accrued $ 7 million
Lawsuit settlement $ 4 million
(c) Patent cost $ 18 million
Patent benefit to operations 6 years
(d) Conveyor equipment cost $ 30 million
Conveyor equip. useful life 5 years