Illustrative Problems:

Problem 4-13
Parker Company reported operating expenses as distribution and general or administrative.

The adjusted trial balance at the end of the current year included the following expense accounts:

Accounting and legal fees 1,450,000

Advertising 1,500,000
Freight out 750,000
Interest 600,000
Loss on sale of long-term investment 300,000
Officers’ salaries 2,250,000
Property taxes and insurance 300,000
Rent for office space 1,800,000
Sales salaries and commissions 1,400,000

One-half of the rented premises is occupied by the sales department.

What total amount should be included in distribution?

 Problem 4-13
What total amount should be included in distribution? C. 4,550,000

Advertising 1,500,000
Freight out 750,000
Rent for office space (1,800,000 X ½) 1,800,000
Sales salaries and commissions 1,400,000
Total distribution costs 4,550,000
Problem 4-14
Grim Company incurred the following costs during the current year:

Property taxes 250,000

Freight in 1,750,000
Doubtful accounts 1,600,000
Office salaries 1,500,000
Insurance 850,000
Sales representative salaries 2,150,000
Interest on inventory loan 500,000
Research and development expense 1,000,000

What amount of these costs should be reported as administrative expense?

Problem 4-14
What amount of these costs should be reported as administrative expense? D. 4,200,000

Property taxes 250,000

Doubtful accounts 1,600,000
Office salaries 1,500,000
Insurance 850,000
Total administrative expenses 4,200,000
Problem 4-15
Hiligaynon Company provided the following information for the current year:

Beginning Inventory 400,000

Freight in 300,000
Purchase returns 900,000
Ending inventory 500,000
Distribution costs 1,250,000
Sales discount 250,000

What amount should be reported as gross purchases?

Problem 4-15
What amount should be reported as gross purchases? D. 8,200,000

Beginning Inventory 400,000

Gross purchases (SQUEEZE) 8,200,000
Freight in 300,000
Purchase returns (900,000)
Goods available for sale 8,000,000
Ending inventory (500,000)
Cost of goods sold (1,250,00X6) 7,500,000
Problem 4-19
Divine company provided the following information for the current year:

Income from continuing operations 4,000,000

Income from discontinued operation 500,000
Unrealized gain on financial asset – FVPL 800,000
Unrealized loss on equity investment – FVOCI 1,000,000
Unrealized gain on debt investment – FVOCI 1,200,000
Unrealized gain on future contract designated as a cash flow hedge 400,000
Translation loss on foreign corporation 200,000
Net remeasurement gain on defined benefit plan 600,000
Loss on credit risk of a financial liability at FVPL 300,000
Revaluation surplus during the year 2,500,000
Problem 4-19
1. What amount should be reported as OCI for the current year? ANSWER: C. 3,200,000

Unrealized loss on equity investment – FVOCI (1,000,000)

Unrealized gain on debt investment – FVOCI 1,200,000
Unrealized gain on future contract designated as a cash flow hedge 400,000
Translation loss on foreign corporation (200,000)
Net remeasurement gain on defined benefit plan 600,000
Loss on credit risk of a financial liability at FVPL (300,000)
Revaluation surplus during the year 2,500,000
Net Income of OCI – gain 3,200,000
Problem 4-19
2. What net amount in OCI should be reclassified to retained earnings? ANSWER: A. 1,800,000

Unrealized loss on equity investment – FVOCI (1,000,000)

Net remeasurement gain on defined benefit plan 600,000
Loss on credit risk of a financial liability at FVPL (300,000)
Revaluation surplus during the year 2,500,000
OCI reclassified to Retained Earnings 1,800,000

3. What amount should be reported as comprehensive income for the current year? ANSWER: B. 7,700,000

Income from continuing operations 4,000,000

Income from discontinued operation 500,000
Net income 4,500,000

Net Income 4,500,000

Other Comprehensive Income 3,200,000
Comprehensive Income 7,700,000
Problem 4-22
Sheraton Company reported the following information for the current year:
Ending goods in process 1,000,000
Depreciation on factory building 320,000
Beginning raw materials 400,000
Direct labor 1,980,000
Factory supervisor salary 560,000
Depreciation on headquarters building 210,000
Beginning goods in process 760,000
Ending raw materials 340,000
Indirect Labor 360,000
Purchase raw materials 2,300,000
Problem 4-22
1, What amount should be reported as cost of goods sold manufactured for the current year?

Beginning raw materials 400,000

Purchases of raw materials 2,300,000
Raw materials available for use 2,700,000
Ending raw materials (340,000)
Raw materials used 2,360,000
Direct labor 1,980,000
Factory overhead:
Depreciation on factory building 320,000
Factory supervisor’s salary 560,000
Indirect labor 360,000 1,240,000
Total Manufacturing cost 5,580,000
Beginning goods in process 760,000
Total goods in process 6,340,000
Ending goods in process (1,000,000)
Cost of goods manufactured 5,340,000
Thank you