Bischoff`s Entries and Financial

Transcription

Consolidated Statements of Cash Flows
Three years ended December 25,1999
(in millions -except per share amounts)
1999
1998
Cash and cash equivalents, beginning of year
$2,038
$4,102
Cash flows provided by (used for) operations:
Net income
7,314
6,068
Adjustments to reconcile net income to net cash provided by (used for) operations
Depreciation
3,186
2,807
Amortization of goodwill and other acquisition-related intangibles
411
56
Purchased in-process research and development
392
165
Gains on sales of marketable strategic equity securities
(883)
(185)
Net loss on retirements of property, plant, and equipment
193
282
Deferred taxes
(219)
77
Change in assets and liabilities
Accounts receivable
153
(38)
Inventories
169
167
Accounts payable
79
(180)
Accrued compensation and benefits
127
17
Income taxes payable
726
(211)
Tax benefit from employee stock options
506
415
Other assets and liabilities
(819)
(378)
Total adjustments
4,021
2,994
Net cash provided by operating activities
11,335
9,062
Cash flows provided by (used for) investing activities:
Additions to property, plant, and equipment
(3,403)
(3,557)
Acquisitions, net of cash received
(2,979)
(906)
Purchases of available-for-sale investments
(7,055)
(10,925)
Sales of available for sale investments
831
201
Maturities and other changes in available-for-sale investments
7,156
8,681
Net cash (used for) investing activities
(5,450)
(6,506)
1997
$4,165
6,945
2,192
----(106)
130
6
285
(404)
438
140
179
224
(127)
2,957
9,902
(4,501)
--(9,224)
153
6,713
(6,859)
®
Bischoff’s Entries and
Financial-Statement Effects
Workbook
C O N T E N T S
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Basic Entries and Financial-Statement Effects . . . . . . . . . . . . . . . . . . . . . 5
E1 Issued share capital for cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
E2 Issued non-current debt for cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
E3 Purchased PP&E with cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
E4 Purchased merchandise on account . . . . . . . . . . . . . . . . . . . . . . . . . . 23
E5 Paid invoices due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
E6aRecognized revenue when goods were delivered . . . . . . . . . . . . . 35
E6bRecognize product cost when goods were delivered . . . . . . . . . . 41
E7 Collected amounts from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
1
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NAVIGATING ACCOUNTING® BISCHOFF ENTRIES AND FINANCIAL-STATEMENT EFFECTS WORKBOOK
2
E8 Paid previously accrued expenses not invoiced . . . . . . . . . . . . . . . 53
E9 Received invoices for previously accrued expenses . . . . . . . . . . . . 59
E10Recognized expenses when invoiced . . . . . . . . . . . . . . . . . . . . . . . . . 65
E11Paid expenses when recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
E12Prepaid future expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
E13Recognized expenses before invoiced . . . . . . . . . . . . . . . . . . . . . . . . 83
E14Recognized expenses previously prepaid . . . . . . . . . . . . . . . . . . . . . 89
E15Recognized depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
E16Sold PP&E for cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
E17Declared dividends on share capital . . . . . . . . . . . . . . . . . . . . . . . . . 107
E18Paid dividends on share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Revenue and Receivables Entries and Financial-Statement Effects119
E19a Deferred revenue when goods were delivered . . . . . . . . . . . . . 120
E19b Deferred cost of goods sold when goods were delivered . . . 126
E20a Recognized previously deferred revenue . . . . . . . . . . . . . . . . . . . 132
E20b Recognized previously deferred cost of good sold . . . . . . . . . . 138
E21Replenished doubtful receivables allowance . . . . . . . . . . . . . . . . . 144
E22Wrote off doubtful receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
E23Replenished product returns provision . . . . . . . . . . . . . . . . . . . . . . 156
E24Products were returned by customers . . . . . . . . . . . . . . . . . . . . . . . 162
© 1991–2013 NavAcc LLC, G. Peter & Carolyn R. Wilson
3
Cost of Sales and Inventory Entries and Financial-Statement Effects168
E25Purchased materials on account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
E26Used materials previously purchased . . . . . . . . . . . . . . . . . . . . . . . . 175
E27Used production inputs before invoiced . . . . . . . . . . . . . . . . . . . . . 181
E28Used production inputs when invoiced . . . . . . . . . . . . . . . . . . . . . . 187
E29Used production inputs previously prepaid . . . . . . . . . . . . . . . . . . 193
E30Used production inputs when paid . . . . . . . . . . . . . . . . . . . . . . . . . . 199
E31Recognized production-PP&E depreciation . . . . . . . . . . . . . . . . . . 205
E32Transfer costs from WIP to FGI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
Long-Lived Assets Entries and Financial-Statement Effects . . . . . . . 217
E33Recognized amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 218
Debt Entries and Financial-Statement Effects . . . . . . . . . . . . . . . . . . . 224
E34a Paid finance costs previously expensed . . . . . . . . . . . . . . . . . . . . 224
E34b Paid debt principal classified as current portion . . . . . . . . . . . . 230
E35Recognized finance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236
E36Anticipated paying non-current debt . . . . . . . . . . . . . . . . . . . . . . . . 242
E37Recognized lease classified as finance lease . . . . . . . . . . . . . . . . . . 248
4
Introduction
This Bischoff’s Entries and Financial-Statement Effects Workbook will help you review key record-keeping entries and identify their effects on
Bischoff’s financial statements. There are six pages for each entry that ask you to:
1. Record the entry: Each entry has a brief description of the business context and you are asked to record the entry using the provided chart
of accounts.
2. Identify the entry’s affects on Bischoff’s balance sheet line items and the direction of the effects.
3. Identify the entry’s affects on Bischoff’s income statement sheet line items and the direction of the effects.
4. Identify the entry’s affects on Bischoff’s statement of changes in owners’ equity line items and the direction of the effects.
5. Identify the entry’s affects on Bischoff’s cash flow statement line items and the direction of the effects.
6. Extend the exercise using a real company’s financial statements to identify line items directly affected by the entry and the direction of the
effects. Watch for effects on fewer line items if amounts are netted together or effects on more line items if the company discloses more
details. Also watch for synonyms and other differences like negative or positive reported numbers.
How should you use this workbook? Practice. For each of the above, complete the provided template and check you answers on the next page.
Knowing the entry is fundamental to identifying these effects.
These are the entries for Bischoff Global Sportswear (BGS). BGS is a fictitious manufacturing company we use throughout Navigating
Accounting to help you become more adept at interpreting real companies’ financial statements. BGS’s accounting policies comply with
International Financial Reporting Standards (IFRS). Like many real companies, when IFRS allows judgment or leeway in the implementation of
a standard, BGS elects to comply with the equivalent U.S. GAAP standard that may be more specific, but importantly still complies with IFRS.
In some cases, the difference between IFRS and U.S. GAAP results in different measures (numbers) for the entry; but the structure of the entry
is exactly the same. In other cases, the entries and measures are different. When the difference is significant, you will see a brief note describing
the key differences for the related entries.
As you study the entries, you may notice several common synonyms that differ for IFRS and U.S. GAAP. For example, IFRS companies typically disclose “share capital” which is equivalent to U.S. GAAP companies’ “common stock” or “finance expense” versus “interest expense”. The
key is to interpret these in the context of the entry.
IFRS
GAAP
IFRS GAAP
The entries presented here
comply with International
Financial Reporting Standards
(IFRS). When IFRS allows
judgment or leeway in the
implementation of a standard,
the entries also comply with the
equivalent U.S. GAAP standard
that may be more specific, but
importantly still complies with
IFRS.
To learn more about the
difference between IFRS and U.S.
GAAP, see the related chapter
videos. Typically, the last topic
in the videos describe the
differences, if any.
Caveat: Keep in mind these entries have a very brief description of the business context and don’t provide a substitute for learning the broader
concepts, including: how to apply the requisite judgments and accounting standards; how to determine or compute the measures (numbers);
how to create financial statements from the entries; how the entries affect footnote disclosures; how to search for information in real companies’
reports; and how to interpret or use the numbers. These are very important skills that build on the fundamental understanding of how to record
entries and identify their financial-statement effects. See the related chapter videos, text, and exercises.
5
Basic Entries and Financial-Statement Effects
BISCHOFF GLOBAL SPORTSWEAR
CHART OF ACCOUNTS
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
Cash and cash equivalents
Inventories
Prepaid expenses
Other current assets
Non-current
PPE
Property, plant, and equipment, net
PPEhc PP&E (historical cost)
AcDep Accumulated depreciation
ONCA Other non-current assets
Issued share capital for cash
During 2013, Bischoff Global Sportswear (BGS) issued common
stock to its owners in exchange for $10 million cash. [“Share
capital” is also call “common stock” in this context.]
Record the entry in the space below:
DepEx Depreciation expense
G/L
IncS
Gain/loss
PPEGL Gain/Loss on PP&E disposals
ONOGL Other non-operating gains/losses
Income summary
MSGA Miscellaneous SG&A expense
LIABILITIES
Current
AP
AcrL
DivP
OCL
RE
Retained earnings
SCap Share capital
OPOE Other permanent owners' equity
Net income
CGS
Cost of goods sold
E1
Rev
Accounts payable
Accrued liabilities
Dividend payable
Other current liabilities
Revenues, net
OSGA Other SG&A expense
OOI
Other operating income net of expenses
ONOI Other non-operating income net of expenses
Non-current
LTD
ONCL
Long-term debt
Other non-current liabilities
BGS’s policy is to accrue obligations in “Accrued liabilities” when it has NOT received an invoice and recognize obligations in “Accounts
payable” when it receives an invoice.
6
E1 Issued share capital for cash
STATEMENTS OF FINANCIAL POSITION
Assets
December 31, 2013 and December 31, 2012
(In Millions)
Assets
Current
Accounts receivable, net
Inventories
Prepaid expenses
Total current assets
Non-current
Property, plant, and equipment:
Historical cost of PP&E
Less accumulated depreciation
Net
Other non-current assets
Total non-current assets
Total assets
Liabilities and Stockholders' Equity
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Total current liabilities
Non-current
Long-term borrowings
Total non-current liabilities
Total liabilities
Stockholders' equity
Share capital
Retained earnings
Reserves
Total stockholders' equity
Total liabilities and stockholders' equity
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
= Owners' Eq.
+
C
= +
SCap
+
+ $10
= +
+ $10
Debit
Credit
$10
Share capital
$10
Identify the balance sheet line items directly affected by this entry, including the effect(s) of closing
entries, and the direction of the effects:
Guidance
(1) Determine the appropriate line item(s) affected using BGS’s statement. For example, list “cash and
cash equivalents” rather than “cash” because this is how it’s reported on BGS’s statement.
(2) Don’t list totals or subtotals indirectly affected by the entry. Be aware of totals and subtotals when
identifying ratio effects, but do not list them here.
(3) Three lines were included below, but you may need none or more than one. Write “NONE” if no
line item is affected on the statement.
(4) Put an X in the appropriate column if the entry increased or decreased the number reported for the
line item. For example, if the reported number is negative on BGS’s statement and it changes from
-2 to -3, it decreases; if it changes from - 2 to - 1, it increases.
(5) Check your answer on the next page.
Line Items
Increases
Decreases
7
STATEMENT OF COMPREHENSIVE INCOME
Assets
For years ended December 31, 2012 and 2013
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Selling, general, and administrative expenses:
Depreciation
Other selling, general, and administrative
Total
Other operating income and (expense):
Gain (loss) on sale of building
Other
Total
Operating profit
Other income and (expenses)
Profit before taxes
Income tax expense
Net profit (loss)
Other comprehensive income
Comprehensive income (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
= Owners' Eq.
+
C
= +
SCap
+
+ $10
= +
+ $10
Debit
Credit
$10
Share capital
$10
Identify the income statement line items directly affected by this entry, including the effect(s) of
closing entries, and the direction of the effects:
Guidance
(1) Determine the appropriate line item(s) affected using BGS’s statement. For example, list “net revenues” rather than “revenue” or “sales” because this is how it’s reported on BGS’s statement.
Line Items
Increases
x
Share capital
x
Decreases
Line Items
Increases
Decreases
8
STATEMENT OF CHANGES IN EQUITY
(In Millions)
Share
Capital
$180
December 31, 2011
Comprehensive income
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
= Owners' Eq.
+
C
= +
SCap
+
+ $10
= +
+ $10
Debit
Credit
$10
Share capital
$10
Identify the statement of changes in owners’ equity line items directly affected by this entry,
including the effect(s) of closing entries, and the direction of the effects:
Guidance
(1) Determine the appropriate line item(s) affected using BGS’s statement. For example, list “profit
(loss)” rather than “net income” because this is how it’s reported on BGS’s statement.
(2) Don’t list totals or subtotals indirectly affected by the entry. Note: “profit (loss)” not a total on the
statement of changes in owners’ equity. Be aware of totals and subtotals when identifying ratio
effects, but do not list them here.
Line Items
Increases
x
Share capital
x
Decreases
Line Items
Increases
Decreases
NONE
Line Items
Increases
Decreases
9
STATEMENT OF CASH FLOWS
Assets
(In Millions)
Cash flows from operating activities
Net profit
Adjustments
(Gain) loss on sale of PP&E
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Net cash provided by (used in) operations
Cash flows from investing activities
Payments for property, plant, and equipment
Proceeds from disposal of property, plant, and equipment
Other investing cash flows
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Proceeds from borrowings
Payment of dividends
Other financing cash flows
Net cash provided by (used in) financing activities
Net increase (decrease) in cash during year
Other
Cash and Cash equivalents at start of year
Cash and Cash equivalents at end of year
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
= Owners' Eq.
+
C
= +
SCap
+
+ $10
= +
+ $10
Debit
Credit
$10
Share capital
$10
Identify the cash flow statement line items directly affected by this entry, including the effect(s) of
Guidance
(2) Don’t list totals or subtotals indirectly affected by the entry - with one exception. Identify the
subtotal “net cash provided by (used in) operations” if operating cash flows were affected by the
entry. This subtotal is conceptually different from other subtotals. Be aware of other totals and
subtotals when identifying ratio effects, but do not list them here.
(5) Check your answer with the solution on the next page.
Line Items
Increases
x
Share capital
x
Decreases
Common stock issued
Increases
Decreases
Increases
Decreases
NONE
Line Items
Line Items
Increases
Decreases
Line Items
x
10
Complete Solution:
During 2013, Bischoff Global Sportswear (BGS) issued common stock to its owners in
exchange for $10 million cash. [“Share capital” is also call “common stock” in this context.]
Record the entry:
Assets
= Owners' Eq.
+
C
= +
SCap
+
+ $10
= +
+ $10
Debit
Credit
$10
Share capital
$10
Identify the financial statement line items directly affected by this entry, including the effect(s)
of closing entries, and the direction of the effects:
Line Items
Increases
x
Share capital
x
Decreases
Common stock issued
Next step:
Increases
Decreases
Increases
Decreases
NONE
Line Items
Line Items
Increases
x
Decreases
Line Items
x
Extend this exercise using a real company’s financial statements to identify line items directly
affected by this entry, including the effect(s) of closing entries, and the direction of the effects.
Watch for effects on fewer line items if amounts are netted together or effects on more line items if
the company discloses more details. Also watch for synonyms and other differences like negative
or positive reported numbers.
11
E2
BISCHOFF GLOBAL SPORTSWEAR CHART OF ACCOUNTS
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Accounts receivable, gross
Allbd
Allowance for bad debts
Allprr
Allowance for product returns: revenue component
Inventories
FGI
Finished goods inventories
SIdr
Segregated inventories: deferred revenue
SIprc
Segregated inventories: product returns allowance cost component
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Depreciation expense
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Other permanent owners' equity
Issued non-current debt for cash
During 2013, BGS borrowed $10 million cash from several banks
and promised to repay this principal with interest over 5-10
years. Loan contracts specified that the borrower (BGS) issued
debt to the lender (banks).
Revenues, net
Grev
Gross revenue
PRCnR Product returns contra revenue
OOI
ONOI
Other non-operating income net of expenses
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
12
E2 Issued non-current debt for cash
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
=
Liabilities
Debit
+
C
= +
LTD
+
+ $10
= +
+ $10
Long-term debt
Credit
$10
$10
Guidance
Line Items
Increases
Decreases
13
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
Liabilities
Debit
+
C
= +
LTD
+
+ $10
= +
+ $10
Long-term debt
Credit
$10
$10
Guidance
Line Items
Increases
x
x
Decreases
Line Items
Increases
Decreases
14
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
Liabilities
Debit
+
C
= +
LTD
+
+ $10
= +
+ $10
Long-term debt
Credit
$10
$10
Guidance
Line Items
Increases
x
x
Decreases
Line Items
Increases
Decreases
NONE
Line Items
Increases
Decreases
15
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
Liabilities
Debit
+
C
= +
LTD
+
+ $10
= +
+ $10
Long-term debt
Credit
$10
$10
Guidance
Line Items
Increases
x
x
Decreases
Increases
Decreases
Increases
Decreases
NONE
Line Items
Line Items
Increases
Decreases
Line Items
NONE
16
Complete Solution:
During 2013, BGS borrowed $10 million cash from several banks and promised to repay this
principal with interest over 5-10 years. Loan contracts specified that the borrower (BGS) issued
debt to the lender (banks).
Record the entry:
Assets
=
Liabilities
Debit
+
C
= +
LTD
+
+ $10
= +
+ $10
Long-term debt
Credit
$10
$10
Line Items
Increases
x
x
Decreases
NONE
Next step:
Increases
Decreases
Increases
Decreases
NONE
Line Items
Line Items
Increases
Decreases
Line Items
x
17
E3
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
Purchased PP&E with cash
During 2013, BGS purchased $20 million of property, plant, and
equipment with cash. PP&E are tangible assets used to support
day-to-day business operations. Among other things, PP&E
includes buildings, manufacturing equipment, furniture, computers, and automobiles.
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
18
E3 Purchased PP&E with cash
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
=
+
C
+
PPEhc
=
+
-20
+
20
=
Debit
PP&E (historical cost)
Credit
$20
$20
Guidance
Line Items
Increases
Decreases
19
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
+
C
+
PPEhc
=
+
-20
+
20
=
Debit
Credit
$20
$20
Guidance
Line Items
Increases
Line Items
Increases
Decreases
x
Decreases
x
20
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
+
C
+
PPEhc
=
+
-20
+
20
=
Debit
Credit
$20
$20
Guidance
Line Items
Increases
x
Decreases
Line Items
Increases
Decreases
NONE
x
Line Items
Increases
Decreases
21
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
+
C
+
PPEhc
=
+
-20
+
20
=
Debit
Credit
$20
$20
Guidance
Line Items
Increases
x
Decreases
Increases
Decreases
Increases
Decreases
NONE
x
Line Items
Line Items
Increases
Decreases
Line Items
NONE
22
Complete Solution:
During 2013, BGS purchased $20 million of property, plant, and equipment with cash. PP&E
are tangible assets used to support day-to-day business operations. Among other things,
PP&E includes buildings, manufacturing equipment, furniture, computers, and automobiles.
Record the entry:
Assets
=
+
C
+
PPEhc
=
+
-20
+
20
=
Debit
Credit
$20
$20
Line Items
Increases
x
Decreases
NONE
Increases
Decreases
Increases
Decreases
NONE
x
Line Items
Line Items
Increases
Decreases
Line Items
x
(Reported negative number decreases.)
Next step:
23
E4
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
Grev
Gross revenue
OOI
ONOI
Purchased merchandise on account
During 2013, BGS purchased $80 million of merchandise from
other companies on account and was invoiced upon delivery. It
plans to resale this merchandise to customers for a profit. These
products complement the ones BGS manufactures and allows
BGS to meet customers’ needs, which reduces the customers’
transaction costs.
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
24
E4 Purchased merchandise on account for resale
Assets
=
Liabilities
Debit Credit
+
FGI
= +
AP
(In Millions)
+
80
= +
80
Accounts payable
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
$80
$80
Guidance
Line Items
Increases
Decreases
25
Assets
=
Liabilities
Debit Credit
+
FGI
= +
AP
(In Millions)
+
80
= +
80
Accounts payable
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
$80
$80
Guidance
Line Items
Increases
Inventories
x
Accounts payable
x
Decreases
Line Items
Increases
Decreases
26
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
Liabilities
Debit Credit
+
FGI
= +
AP
+
80
= +
80
Accounts payable
$80
$80
Guidance
Line Items
Increases
Inventories
x
Accounts payable
x
Decreases
Line Items
Increases
Decreases
NONE
Line Items
Increases
Decreases
27
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
Liabilities
Debit Credit
+
FGI
= +
AP
+
80
= +
80
Accounts payable
$80
$80
Guidance
Line Items
Increases
Inventories
x
Accounts payable
x
Decreases
Increases
Decreases
Increases
Decreases
NONE
Line Items
Line Items
Increases
Decreases
Line Items
NONE
28
Complete Solution:
During 2013, BGS purchased $80 million of merchandise from other companies on account
and was invoiced upon delivery. It plans to resale this merchandise to customers for a profit.
These products complement the ones BGS manufactures and allows BGS to meet customers’
needs, which reduces the customers’ transaction costs.
Record the entry:
Assets
=
Liabilities
Debit Credit
+
FGI
= +
AP
+
80
= +
80
Accounts payable
$80
$80
Line Items
Increases
Inventories
x
Accounts payable
x
Decreases
NONE
Increases
Decreases
Increases
Decreases
NONE
Line Items
Line Items
Increases
Decreases
Line Items
x
Inventories
Accounts payable
x
(Reported negative number increases.)
Next step:
29
E5
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
Grev
Gross revenue
OOI
ONOI
Paid invoices due
During 2013, BGS paid suppliers $225 million for goods and
services previously purchased on account. Among other things,
these include merchandise purchased for resale, materials purchased for manufacturing, advertising services, and utilities.
BGS’s policy is to pay invoices just in time to avoid penalties.
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
30
E5 Paid invoices due
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
=
Liabilities
+
C
= +
AP
+
- $225
= +
- $225
Debit
Accounts payable
Credit
$225
$225
Guidance
Line Items
Increases
Decreases
31
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
Liabilities
+
C
= +
AP
+
- $225
= +
- $225
Debit
Accounts payable
Credit
$225
$225
Guidance
Line Items
Increases
Decreases
Accounts payable
x
x
Line Items
Increases
Decreases
32
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
Liabilities
+
C
= +
AP
+
- $225
= +
- $225
Debit
Accounts payable
Credit
$225
$225
Guidance
Line Items
Increases
Decreases
Accounts payable
x
x
Line Items
Increases
Decreases
NONE
Line Items
Increases
Decreases
33
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
Liabilities
+
C
= +
AP
+
- $225
= +
- $225
Debit
Accounts payable
Credit
$225
$225
Guidance
Line Items
Increases
Decreases
Accounts payable
x
x
Line Items
Line Items
Increases
Decreases
Increases
Decreases
NONE
Increases
Decreases
Line Items
NONE
34
Complete Solution:
During 2013, BGS paid suppliers $225 million for goods and services previously purchased
on account. Among other things, these include merchandise purchased for resale, materials
purchased for manufacturing, advertising services, and utilities. BGS’s policy is to pay invoices
just in time to avoid penalties.
Record the entry:
Assets
=
Liabilities
+
C
= +
AP
+
- $225
= +
- $225
Debit
Accounts payable
Credit
$225
$225
Line Items
Increases
Decreases
Accounts payable
x
x
Line Items
NONE
Line Items
Increases
Decreases
Increases
Decreases
NONE
Increases
Decreases
Line Items
Accounts payable
x
Next step:
x
35
E6a Recognized revenue when goods were
delivered
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
During 2013, BGS recognized $415 million of revenues when
goods were delivered to customers, which was the same time
customers were billed for their purchases on account. For these
sales, BGS concluded it met all of the IFRS criteria for revenue
recognition when goods were delivered.
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
36
E6a Recognized revenue when goods were delivered
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
= Owners' Eq.
+
AR
= +
Rev
+
+ $415
= +
+ $415
Debit
Accounts receivable
Revenues, net
Credit
$415
$415
Guidance
Line Items
Increases
Decreases
37
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
= Owners' Eq.
+
AR
= +
Rev
+
+ $415
= +
+ $415
Debit
Accounts receivable
Credit
$415
Revenues, net
$415
Guidance
Line Items
Increases
x
Retained earnings
x
Decreases
Line Items
Increases
Decreases
38
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
Assets
= Owners' Eq.
+
AR
= +
Rev
+
+ $415
= +
+ $415
Debit
Accounts receivable
Credit
$415
Revenues, net
$415
Guidance
Line Items
Increases
x
Retained earnings
x
Decreases
Line Items
Increases
Net revenues
x
Decreases
Line Items
Increases
Decreases
39
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
= Owners' Eq.
+
AR
= +
Rev
+
+ $415
= +
+ $415
Debit
Accounts receivable
Credit
$415
Revenues, net
$415
Guidance
Line Items
Increases
x
Retained earnings
x
Decreases
Line Items
Profit (loss)
Line Items
Increases
Net revenues
x
Decreases
Increases
Decreases
Line Items
Increases
Decreases
x
40
Complete Solution:
During 2013, BGS recognized $415 million of revenues when goods were delivered to customers, which was the same time customers were billed for their purchases on account. For these
sales, BGS concluded it met all of the IFRS criteria for revenue recognition when goods were
delivered.
Record the entry:
Assets
= Owners' Eq.
+
AR
= +
Rev
+
+ $415
= +
+ $415
Debit
Accounts receivable
Credit
$415
Revenues, net
$415
Line Items
Increases
x
Retained earnings
x
Decreases
Line Items
Profit (loss)
Line Items
Increases
Net revenues
x
Decreases
Increases
x
Decreases
Line Items
Increases
Decreases
x
Net profit
Accounts receivable
x
Next step:
41
E6b Recognize product cost when goods
were delivered
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
During 2013, BGS recognized $208 million of cost of goods sold
when goods were delivered to customers. This occurred at the
same time revenues were recognized in entry E6a. Entries E6a
and E6b could have been combined.
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
42
E6b Recognize product cost when goods were delivered
Assets
= Owners' Eq.
+
FGI
=
-
CGS
(In Millions)
+
- $208
=
-
+ $208
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Debit Credit
Cost of goods sold
$208
$208
Guidance
Line Items
Increases
Decreases
43
Assets
= Owners' Eq.
+
FGI
=
-
CGS
(In Millions)
+
- $208
=
-
+ $208
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
Debit Credit
Cost of goods sold
$208
$208
Guidance
Line Items
Increases
Decreases
Inventories
x
Retained earnings
x
Line Items
Increases
Decreases
44
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
= Owners' Eq.
+
FGI
=
-
CGS
+
- $208
=
-
+ $208
Debit Credit
Cost of goods sold
$208
$208
Guidance
Line Items
Increases
Decreases
x
Inventories
Line Items
Increases
Cost of goods sold
Decreases
x
x
Retained earnings
Line Items
Increases
Decreases
45
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
= Owners' Eq.
+
FGI
=
-
CGS
+
- $208
=
-
+ $208
Debit Credit
Cost of goods sold
$208
$208
Guidance
Line Items
Increases
Decreases
x
Inventories
Line Items
Increases
Decreases
x
Cost of goods sold
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
Line Items
Increases
Decreases
x
46
Complete Solution:
During 2013, BGS recognized $208 million of cost of goods sold when goods were delivered
to customers. This occurred at the same time revenues were recognized in entry E6a. Entries
E6a and E6b could have been combined.
Record the entry:
Assets
= Owners' Eq.
+
FGI
=
-
CGS
+
- $208
=
-
+ $208
Debit Credit
Cost of goods sold
$208
$208
Line Items
Increases
Decreases
x
Inventories
Line Items
Increases
Decreases
x
Cost of goods sold
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
x
Line Items
Increases
Decreases
x
Net profit
x
Inventories
Next step:
47
E7
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
Grev
Gross revenue
OOI
ONOI
Collected amounts from customers
During 2013, BGS collected $380 million from customers who
had been billed earlier when goods were delivered. BGS recognizes revenue when it concludes the IFRS revenue recognition
criteria are met, which can occur at times other than when cash
is collected. For this reason, revenue is recorded separately from
collections.
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
48
E7 Collected amounts due from customers
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
=
+
C
+
ARG
=
+
380
+
-380
=
Debit
Credit
$380
$380
Guidance
Line Items
Increases
Decreases
49
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
+
C
+
ARG
=
+
380
+
-380
=
Debit
Credit
$380
$380
Guidance
Line Items
Increases
Decreases
Line Items
Increases
Decreases
x
x
50
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
+
C
+
ARG
=
+
380
+
-380
=
Debit
Credit
$380
$380
Guidance
Line Items
Increases
Decreases
x
Line Items
Increases
Decreases
NONE
x
Line Items
Increases
Decreases
51
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
+
C
+
ARG
=
+
380
+
-380
=
Debit
Credit
$380
$380
Guidance
Line Items
Increases
Decreases
x
Increases
Decreases
Increases
Decreases
NONE
x
Line Items
Line Items
Increases
Decreases
Line Items
NONE
52
Complete Solution:
During 2013, BGS collected $380 million from customers who had been billed earlier when
goods were delivered. BGS recognizes revenue when it concludes the IFRS revenue recognition criteria are met, which can occur at times other than when cash is collected. For this reason, revenue is recorded separately from collections.
Record the entry:
Assets
=
+
C
+
ARG
=
+
380
+
-380
=
Debit
Credit
$380
$380
Line Items
Increases
Decreases
x
Decreases
Increases
Decreases
NONE
NONE
Increases
x
Line Items
Line Items
Increases
Decreases
Line Items
Accounts receivable
x
Next step:
x
53
E8 Paid previously accrued expenses not
invoiced
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
Grev
Gross revenue
OOI
ONOI
During 2013, BGS paid $10 million for previously accrued
expenses that are never invoiced. For example, BGS paid employees for work performed during the last few days of 2012. The
related expense and obligation had been accrued in a 2012 yearend adjusting entry.
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
54
E8 Paid previously accrued expenses not invoiced
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
=
Liabilities
+
C
= +
AcrL
+
- $10
= +
- $10
Debit Credit
Accrued liabilities
$10
$10
Guidance
Line Items
Increases
Decreases
55
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
Liabilities
+
C
= +
AcrL
+
- $10
= +
- $10
Debit Credit
Accrued liabilities
$10
$10
Guidance
Line Items
Increases
Decreases
x
Accrued liabilities
x
Line Items
Increases
Decreases
56
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
Liabilities
+
C
= +
AcrL
+
- $10
= +
- $10
Debit Credit
Accrued liabilities
$10
$10
Guidance
Line Items
Increases
Decreases
x
Accrued liabilities
x
Line Items
Increases
Decreases
NONE
Line Items
Increases
Decreases
57
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
Liabilities
+
C
= +
AcrL
+
- $10
= +
- $10
Debit Credit
Accrued liabilities
$10
$10
Guidance
Line Items
Increases
Decreases
x
Accrued liabilities
x
Line Items
Line Items
Increases
Decreases
Increases
Decreases
NONE
Increases
Decreases
Line Items
NONE
58
Complete Solution:
During 2013, BGS paid $10 million for previously accrued expenses that are never invoiced.
For example, BGS paid employees for work performed during the last few days of 2012. The
related expense and obligation had been accrued in a 2012 year-end adjusting entry.
Record the entry:
Assets
=
Liabilities
+
C
= +
AcrL
+
- $10
= +
- $10
Debit Credit
Accrued liabilities
$10
$10
Line Items
Increases
Decreases
x
Accrued liabilities
x
Line Items
NONE
Line Items
Increases
Decreases
Increases
Decreases
NONE
Increases
Decreases
Line Items
x
Accrued liabilities
Next step:
x
59
E9 Received invoices for previously
accrued expenses
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
Grev
Gross revenue
OOI
ONOI
During 2013, BGS received $7 million of invoices for services
received and previously expensed in 2012. For example, at the
end of 2012, BGS recorded an adjusting entry to expense advertisements that ran the last day of 2012. At that time, BGS was
obligated to pay the advertiser but had not been invoiced.
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
60
E9 Received invoices for previously accrued expenses
Liabilities
=
Debit Credit
= +
AP
+
AcrL
(In Millions)
= +
+ $7
+
- $7
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Accrued liabilities
$7
Accounts payable
$7
Guidance
Line Items
Increases
Decreases
61
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
Liabilities
=
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
Debit Credit
= +
AP
+
AcrL
= +
+ $7
+
- $7
Accrued liabilities
$7
Accounts payable
$7
Guidance
Line Items
Accounts payable
Accrued liabilities
Increases
Decreases
Line Items
Increases
Decreases
x
x
62
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Liabilities
=
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
Debit Credit
= +
AP
+
AcrL
= +
+ $7
+
- $7
Accrued liabilities
$7
Accounts payable
$7
Guidance
Line Items
Accounts payable
Increases
Decreases
x
Line Items
Increases
Decreases
NONE
x
Accrued liabilities
Line Items
Increases
Decreases
63
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
Liabilities
=
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
Debit Credit
= +
AP
+
AcrL
= +
+ $7
+
- $7
Accrued liabilities
$7
Accounts payable
$7
Guidance
Line Items
Accounts payable
Increases
Decreases
x
Increases
Decreases
Increases
Decreases
NONE
x
Accrued liabilities
Line Items
Line Items
Increases
Decreases
Line Items
NONE
64
Complete Solution:
During 2013, BGS received $7 million of invoices for services received and previously
expensed in 2012. For example, at the end of 2012, BGS recorded an adjusting entry to
expense advertisements that ran the last day of 2012. At that time, BGS was obligated to pay
the advertiser but had not been invoiced.
Record the entry:
Liabilities
=
Debit Credit
= +
AP
+
AcrL
= +
+ $7
+
- $7
Accrued liabilities
$7
Accounts payable
$7
Line Items
Accounts payable
Increases
Decreases
x
Decreases
Increases
Decreases
NONE
NONE
Increases
x
Accrued liabilities
Line Items
Line Items
Increases
Decreases
Line Items
Accounts payable
x
x
Accrued liabilities
Next step:
65
E10 Recognized expenses when invoiced
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
During 2013, BGS recognized $20 million of expenses for services
received and invoiced, but not paid during 2013. For example,
BGS recognized expense during 2013 when it received invoices
for advertising services received during 2013.
Revenues, net
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
66
=
Liabilities
Owners' Eq
= +
AP
-
MSGA
(In Millions)
= +
+ $20
-
+ $20
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Debit Credit
Miscellaneous SG&A expense
$20
Accounts payable
$20
Guidance
Line Items
Increases
Decreases
67
=
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
Liabilities
Owners' Eq
= +
AP
-
MSGA
= +
+ $20
-
+ $20
Debit Credit
$20
Accounts payable
$20
Guidance
Line Items
Accounts payable
Retained earnings
Increases
Decreases
Line Items
Increases
Decreases
x
x
68
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
=
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
Liabilities
Owners' Eq
= +
AP
-
MSGA
= +
+ $20
-
+ $20
Debit Credit
$20
Accounts payable
$20
Guidance
Line Items
Accounts payable
Increases
Decreases
x
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Increases
Decreases
69
=
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
Liabilities
Owners' Eq
= +
AP
-
MSGA
= +
+ $20
-
+ $20
Debit Credit
$20
Accounts payable
$20
Guidance
Line Items
Accounts payable
Increases
Decreases
x
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
Line Items
Increases
Decreases
x
70
Complete Solution:
During 2013, BGS recognized $20 million of expenses for services received and invoiced, but
not paid during 2013. For example, BGS recognized expense during 2013 when it received
invoices for advertising services received during 2013.
Record the entry:
=
Liabilities
Owners' Eq
= +
AP
-
MSGA
= +
+ $20
-
+ $20
Debit Credit
$20
Accounts payable
$20
Line Items
Accounts payable
Increases
Decreases
x
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
x
Line Items
Increases
Decreases
x
Net profit
Accounts payable
x
Next step:
71
E11 Paid expenses when recognized
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
During 2013, BGS recognized $30 million of expenses when
it paid for services received in 2013. For example, BGS recognized an expense when it paid employees in 2013 for services
performed during 2013. Office supplies purchased with cash is
another example of a non-invoiced expense recognized when
paid.
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
72
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
= Owners' Eq.
+
C
=
-
MSGA
+
- $30
=
-
+ $30
Debit Credit
$30
$30
Guidance
Line Items
Increases
Decreases
73
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
= Owners' Eq.
+
C
=
-
MSGA
+
- $30
=
-
+ $30
Debit Credit
$30
$30
Guidance
Line Items
Increases
Decreases
x
Retained earnings
x
Line Items
Increases
Decreases
74
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
= Owners' Eq.
+
C
=
-
MSGA
+
- $30
=
-
+ $30
Debit Credit
$30
$30
Guidance
Line Items
Increases
Decreases
x
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Increases
Decreases
75
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
= Owners' Eq.
+
C
=
-
MSGA
+
- $30
=
-
+ $30
Debit Credit
$30
$30
Guidance
Line Items
Increases
Decreases
x
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
Line Items
Increases
Decreases
x
76
Complete Solution:
During 2013, BGS recognized $30 million of expenses when it paid for services received in
2013. For example, BGS recognized an expense when it paid employees in 2013 for services
performed during 2013. Office supplies purchased with cash is another example of a noninvoiced expense recognized when paid.
Record the entry:
Assets
= Owners' Eq.
+
C
=
-
MSGA
+
- $30
=
-
+ $30
Debit Credit
$30
$30
Line Items
Increases
Decreases
x
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Profit (loss)
Next step:
Increases
Decreases
x
Line Items
Increases
Decreases
Net profit
x
x
77
E12 Prepaid future expenses
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
During 2013, BGS paid $20 million in advance for services it had
not yet received when the payments were made. For example,
BGS paid advertisers to create advertisements before the advertisements were created and BGS paid rent before benefiting from
the use of buildings.
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
78
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
=
+
C
+
PrEx
=
+
- $20
+
+ $20
=
Debit
Prepaid expenses
Credit
$20
$20
Guidance
Line Items
Increases
Decreases
79
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
+
C
+
PrEx
=
+
- $20
+
+ $20
=
Debit
Prepaid expenses
Credit
$20
$20
Guidance
Line Items
Increases
Line Items
Increases
Decreases
x
Prepaid expenses
Decreases
x
80
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
+
C
+
PrEx
=
+
- $20
+
+ $20
=
Debit
Prepaid expenses
Credit
$20
$20
Guidance
Line Items
Increases
x
Prepaid expenses
Decreases
Line Items
Increases
Decreases
NONE
x
Line Items
Increases
Decreases
81
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
+
C
+
PrEx
=
+
- $20
+
+ $20
=
Debit
Prepaid expenses
Credit
$20
$20
Guidance
Line Items
Increases
x
Prepaid expenses
Decreases
Increases
Decreases
Increases
Decreases
NONE
x
Line Items
Line Items
Increases
Decreases
Line Items
NONE
82
Complete Solution:
During 2013, BGS paid $20 million in advance for services it had not yet received when the
payments were made. For example, BGS paid advertisers to create advertisements before the
advertisements were created and BGS paid rent before benefiting from the use of buildings.
Record the entry:
Assets
=
+
C
+
PrEx
=
+
- $20
+
+ $20
=
Debit
Prepaid expenses
Credit
$20
$20
Line Items
Increases
x
Prepaid expenses
Decreases
NONE
Next step:
Increases
Decreases
Increases
Decreases
NONE
x
Line Items
Line Items
Increases
Decreases
Line Items
Prepaid expenses
x
x
83
E13 Recognized expenses before invoiced
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
At the end of interim reporting periods during 2013, BGS recognized a total of $3 million of expense for services performed
during the periods for which BGS had not yet received invoices
by the end of the periods and the timing and amount to be paid
in the future was known. For example, advertisements ran on
the last day of an interim period for which the fees were known.
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
84
=
Liabilities
Owners' Eq
= +
AcrL
-
MSGA
(In Millions)
= +
+ $3
-
+ $3
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Debit Credit
$3
Accrued liabilities
$3
Guidance
Line Items
Increases
Decreases
85
=
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
Liabilities
Owners' Eq
= +
AcrL
-
MSGA
= +
+ $3
-
+ $3
Debit Credit
$3
Accrued liabilities
$3
Guidance
Line Items
Accrued liabilities
Retained earnings
Increases
Decreases
Line Items
Increases
Decreases
x
x
86
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
=
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
Liabilities
Owners' Eq
= +
AcrL
-
MSGA
= +
+ $3
-
+ $3
Debit Credit
$3
Accrued liabilities
$3
Guidance
Line Items
Accrued liabilities
Increases
Decreases
x
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Increases
Decreases
87
=
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
Liabilities
Owners' Eq
= +
AcrL
-
MSGA
= +
+ $3
-
+ $3
Debit Credit
$3
Accrued liabilities
$3
Guidance
Line Items
Accrued liabilities
Increases
Decreases
x
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
Line Items
Increases
Decreases
x
88
Complete Solution:
At the end of interim reporting periods during 2013, BGS recognized a total of $3 million of
expense for services performed during the periods for which BGS had not yet received invoices by the end of the periods and the timing and amount to be paid in the future was known.
For example, advertisements ran on the last day of an interim period for which the fees were
known.
Record the entry:
=
Liabilities
Owners' Eq
= +
AcrL
-
MSGA
= +
+ $3
-
+ $3
Debit Credit
$3
Accrued liabilities
$3
Line Items
Accrued liabilities
Increases
Decreases
x
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
x
Line Items
Increases
Decreases
x
Net profit
x
Accrued liabilities
Next step:
89
E14 Recognized expenses previously prepaid
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
At the end of interim reporting periods during 2013, BGS recognized a total of $25 million of expense for services performed
during the interim periods that were prepaid prior to receiving the services. For example, BGS recognized rent expense at
month-end, when the monthly rent was prepaid at the start of
the month.
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
90
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
= Owners' Eq.
+
PrEx
=
-
MSGA
+
- $25
=
-
+ $25
Debit Credit
$25
Prepaid expenses
$25
Guidance
Line Items
Increases
Decreases
91
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
= Owners' Eq.
+
PrEx
=
-
MSGA
+
- $25
=
-
+ $25
Debit Credit
$25
Prepaid expenses
$25
Guidance
Line Items
Increases
Decreases
Prepaid expenses
x
Retained earnings
x
Line Items
Increases
Decreases
92
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
= Owners' Eq.
+
PrEx
=
-
MSGA
+
- $25
=
-
+ $25
Debit Credit
$25
Prepaid expenses
$25
Guidance
Line Items
Increases
Decreases
x
Prepaid expenses
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Increases
Decreases
93
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
= Owners' Eq.
+
PrEx
=
-
MSGA
+
- $25
=
-
+ $25
Debit Credit
$25
Prepaid expenses
$25
Guidance
Line Items
Increases
Decreases
x
Prepaid expenses
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
Line Items
Increases
Decreases
x
94
Complete Solution:
expense for services performed during the interim periods that were prepaid prior to receiving
the services. For example, BGS recognized rent expense at month-end, when the monthly rent
was prepaid at the start of the month.
Record the entry:
Assets
= Owners' Eq.
+
PrEx
=
-
MSGA
+
- $25
=
-
+ $25
Debit Credit
$25
Prepaid expenses
$25
Line Items
Increases
Decreases
x
Prepaid expenses
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
x
Line Items
Increases
x
Net profit
Prepaid expenses
Next step:
Decreases
x
95
E15 Recognized depreciation expense
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
At the end of interim reporting periods during 2013, BGS recognized a total of $7 million of expense that represented the portion
of the historical cost of PP&E used up during the interim periods.
Revenues, net
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
96
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
= Owners' Eq.
-
AcDep
=
-
DepEx
-
+ $7
=
-
+ $7
Debit
Credit
$7
Accumulated depreciation
$7
Guidance
Line Items
Increases
Decreases
97
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
= Owners' Eq.
-
AcDep
=
-
DepEx
-
+ $7
=
-
+ $7
Debit
Credit
$7
$7
Guidance
Line Items
Increases
Decreases
Line Items
Increases
Decreases
x
Retained earnings
x
98
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
= Owners' Eq.
-
AcDep
=
-
DepEx
-
+ $7
=
-
+ $7
Debit
Credit
$7
$7
Guidance
Line Items
Increases
Decreases
x
Line Items
Increases
Decreases
x
Depreciation
x
Retained earnings
Line Items
Increases
Decreases
99
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
= Owners' Eq.
-
AcDep
=
-
DepEx
-
+ $7
=
-
+ $7
Debit
Credit
$7
$7
Guidance
Line Items
Increases
Decreases
x
Line Items
Increases
Decreases
x
Depreciation
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
Line Items
Increases
Decreases
x
100
Complete Solution:
expense that represented the portion of the historical cost of PP&E used up during the interim
periods.
Record the entry:
Assets
= Owners' Eq.
-
AcDep
=
-
DepEx
-
+ $7
=
-
+ $7
Debit
Credit
$7
$7
Line Items
Increases
Decreases
x
x
Depreciation
Increases
Decreases
x
Line Items
Increases
Decreases
x
Net profit
Depreciation
Next step:
Decreases
x
Profit (loss)
Increases
Retained earnings
Line Items
Line Items
x
101
E16 Sold PP&E for cash
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
During 2013, BGS received $15 million cash when it sold a building with $20 million of historical cost and $8 of accumulated
depreciation. Consistent with an IFRS option, BGS does not
recognize unrealized gains associated with PP&E.
Revenues, net
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
102
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
=
Owners' Eq
Debit
+
C
+
PPEhc
-
AcDep
= +
PPEGL
$15
+
+ $15
+
- $20
-
- $8
= +
+ $3
$8
$20
Gain on PP&E disposals
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Credit
$3
Guidance
(3) Four lines were included below, but you may need none or more than one. Write “NONE” if no line
item is affected on the statement.
Line Items
Increases
Decreases
103
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
=
Owners' Eq
Debit
+
C
+
PPEhc
-
AcDep
= +
PPEGL
$15
+
+ $15
+
- $20
-
- $8
= +
+ $3
$8
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
Credit
$20
$3
Guidance
(3) Four lines were included below, but you may need none or more than one. Write “NONE” if no line
item is affected on the statement.
Line Items
Increases
Line Items
Increases
Decreases
x
x
Decreases
x
Retained earnings
x
104
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
Owners' Eq
Debit
+
C
+
PPEhc
-
AcDep
= +
PPEGL
$15
+
+ $15
+
- $20
-
- $8
= +
+ $3
$8
Credit
$20
$3
Guidance
Line Items
Increases
x
Line Items
Increases
Decreases
x
x
Decreases
x
Retained earnings
x
Line Items
Increases
Decreases
105
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
Owners' Eq
Debit
+
C
+
PPEhc
-
AcDep
= +
PPEGL
$15
+
+ $15
+
- $20
-
- $8
= +
+ $3
$8
Credit
$20
$3
Guidance
Line Items
Increases
x
Line Items
Increases
Decreases
x
x
Decreases
x
Retained earnings
x
Line Items
Profit (loss)
Increases
Decreases
Line Items
Increases
Decreases
x
106
Complete Solution:
During 2013, BGS received $15 million cash when it sold a building with $20 million of historical cost and $8 of accumulated depreciation. Consistent with an IFRS option, BGS does not
recognize unrealized gains associated with PP&E.
Record the entry:
Assets
=
Owners' Eq
Debit
+
C
+
PPEhc
-
AcDep
= +
PPEGL
$15
+
+ $15
+
- $20
-
- $8
= +
+ $3
$8
Credit
$20
$3
Line Items
Increases
x
Line Items
Increases
Decreases
x
x
Decreases
x
Retained earnings
x
Line Items
Profit (loss)
Increases
x
Decreases
Line Items
Increases
Decreases
x
Net profit
x
Next step:
x
107
E17 Declared dividends on share capital
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
During 2013, BGS declared $25 million of common stock dividends. When dividends are declared by a company’s board of
directors, the company is obligated to pay shareholders the
declared amount at a future date. [“Share capital” is also call
“common stock” in this context.]
Revenues, net
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
108
=
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Liabilities
Owners' Eq
= +
DivP
+
RE
= +
+ $25
+
- $25
Debit
Retained earnings
Credit
$25
Dividend payable
$25
Guidance
Line Items
Increases
Decreases
109
=
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
Liabilities
Owners' Eq
= +
DivP
+
RE
= +
+ $25
+
- $25
Debit
Retained earnings
Credit
$25
Dividend payable
$25
Guidance
Line Items
Dividends payable
Retained earnings
Increases
Decreases
Line Items
Increases
Decreases
x
x
110
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
=
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
Liabilities
Owners' Eq
= +
DivP
+
RE
= +
+ $25
+
- $25
Debit
Retained earnings
Credit
$25
Dividend payable
$25
Guidance
Line Items
Dividends payable
Increases
Decreases
x
Line Items
Increases
Decreases
NONE
x
Retained earnings
Line Items
Increases
Decreases
111
=
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
Liabilities
Owners' Eq
= +
DivP
+
RE
= +
+ $25
+
- $25
Debit
Retained earnings
Credit
$25
Dividend payable
$25
Guidance
Line Items
Dividends payable
Increases
Decreases
x
Decreases
Increases
Decreases
NONE
Dividends declared
Increases
x
Retained earnings
Line Items
Line Items
Increases
Decreases
Line Items
x
(Negatively reported number decreases.)
112
Complete Solution:
During 2013, BGS declared $25 million of common stock dividends. When dividends are
declared by a company’s board of directors, the company is obligated to pay shareholders the
declared amount at a future date. [“Share capital” is also call “common stock” in this context.]
Record the entry:
=
Liabilities
Owners' Eq
= +
DivP
+
RE
= +
+ $25
+
- $25
Debit
Retained earnings
Credit
$25
Dividend payable
$25
Line Items
Dividends payable
Increases
Decreases
x
Decreases
Increases
Decreases
NONE
Dividends declared
Increases
x
Retained earnings
Line Items
Line Items
Increases
Decreases
x
Line Items
NONE
(Negatively reported number decreases.)
Next step:
113
E18 Paid dividends on share capital
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
During 2013, BGS paid $20 million of previously declared common stock dividends. [“Share capital” is also call “common
stock” in this context.]
Revenues, net
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
114
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
=
Liabilities
+
C
= +
DivP
+
- $20
= +
- $20
Debit
Dividend payable
Credit
$20
$20
Guidance
Line Items
Increases
Decreases
115
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
Liabilities
+
C
= +
DivP
+
- $20
= +
- $20
Debit
Dividend payable
Credit
$20
$20
Guidance
Line Items
Increases
Decreases
x
Dividends payable
x
Line Items
Increases
Decreases
116
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
Liabilities
+
C
= +
DivP
+
- $20
= +
- $20
Debit
Dividend payable
Credit
$20
$20
Guidance
Line Items
Increases
Decreases
x
Dividends payable
x
Line Items
Increases
Decreases
NONE
Line Items
Increases
Decreases
117
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
Liabilities
+
C
= +
DivP
+
- $20
= +
- $20
Debit
Dividend payable
Credit
$20
$20
Guidance
Line Items
Increases
Decreases
x
Dividends payable
x
Line Items
Line Items
Increases
Decreases
Increases
Decreases
NONE
Increases
Decreases
Line Items
NONE
118
Complete Solution:
During 2013, BGS paid $20 million of previously declared common stock dividends. [“Share
capital” is also call “common stock” in this context.]
Record the entry:
Assets
=
Liabilities
+
C
= +
DivP
+
- $20
= +
- $20
Debit
Dividend payable
Credit
$20
$20
Line Items
Increases
Decreases
x
Dividends payable
x
Line Items
NONE
Line Items
Increases
Decreases
Increases
Decreases
NONE
Increases
Decreases
Line Items
x
Next step:
119
Revenue and Receivables Entries and
Related entries:
In addition to the entries in this section, you may want to review the following entries related to this chapter that were covered earlier in this workbook:
E6aRecognized revenue when goods were delivered
page 35
E6bRecognize product cost when goods were delivered page 41
E7Collected amounts due from customers
page 47
120
E19a Deferred revenue when goods were
delivered
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
Grev
Gross revenue
OOI
ONOI
During 2013, BGS deferred recognizing $100 million of revenues
when goods were delivered to customers, which was the same
time cash was collected from customers. For these sales, BGS
concluded it had not yet met all of the IFRS criteria for revenue
recognition when goods were delivered. For example, BGS defers
revenue when it can’t reliably estimate product returns.
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
121
E19a Deferred revenue when goods were delivered
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
=
Liabilities
+
C
= +
Drev
+
+ $100
= +
+ $100
Debit
Credit
$100
Deferred revenue
$100
Guidance
Line Items
Increases
Decreases
122
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
Liabilities
+
C
= +
Drev
+
+ $100
= +
+ $100
Debit
Credit
$100
Deferred revenue
$100
Guidance
Line Items
Increases
x
x
Decreases
Line Items
Increases
Decreases
(Deferred revenue liability)
123
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
Liabilities
+
C
= +
Drev
+
+ $100
= +
+ $100
Debit
Credit
$100
Deferred revenue
$100
Guidance
Line Items
Increases
x
x
Decreases
Line Items
Increases
Decreases
NONE
Line Items
Increases
Decreases
124
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
Liabilities
+
C
= +
Drev
+
+ $100
= +
+ $100
Debit
Credit
$100
Deferred revenue
$100
Guidance
Line Items
Increases
x
x
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Line Items
Increases
Decreases
Line Items
NONE
125
Complete Solution:
During 2013, BGS deferred recognizing $100 million of revenues when goods were delivered
to customers, which was the same time cash was collected from customers. For these sales,
BGS concluded it had not yet met all of the IFRS criteria for revenue recognition when goods
were delivered. For example, BGS defers revenue when it can’t reliably estimate product
returns.
Record the entry:
Assets
=
Liabilities
+
C
= +
Drev
+
+ $100
= +
+ $100
Debit
Credit
$100
Deferred revenue
$100
Line Items
Increases
x
x
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Line Items
NONE
Increases
Decreases
Line Items
x
Other
Next step:
x
126
E19b Deferred cost of goods sold when
goods were delivered
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
During 2013, BGS deferred recognizing $50 million of cost
of goods sold when goods were delivered to customers. This
occurred at the same time revenues were deferred in entry E19a.
BGS’s policy is to segregate the cost of delivered inventories from
other inventories when revenues are deferred.
Revenues, net
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
127
E19b Deferred CGS when goods were delivered
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
=
+
FGI
+
SIdr
=
+
- $50
+
+ $50
=
Debit
Credit
$50
$50
Guidance
Line Items
Increases
Decreases
128
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
+
FGI
+
SIdr
=
+
- $50
+
+ $50
=
Debit
Credit
$50
$50
Guidance
Line Items
Inventories
Increases
Decreases
x
x
Line Items
Increases
Decreases
(Net zero effect. NONE is also acceptable.)
129
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
+
FGI
+
SIdr
=
+
- $50
+
+ $50
=
Debit
Credit
$50
$50
Guidance
Line Items
Inventories
Increases
Decreases
x
x
Increases
Decreases
Line Items
Increases
Decreases
NONE
Line Items
130
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
+
FGI
+
SIdr
=
+
- $50
+
+ $50
=
Debit
Credit
$50
$50
Guidance
Line Items
Inventories
Increases
Decreases
x
x
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Line Items
Line Items
NONE
131
Complete Solution:
E19b Deferred cost of goods sold when goods were delivered
During 2013, BGS deferred recognizing $50 million of cost of goods sold when goods were
delivered to customers. This occurred at the same time revenues were deferred in entry E19a.
BGS’s policy is to segregate the cost of delivered inventories from other inventories when revenues are deferred.
Record the entry:
Assets
=
+
FGI
+
SIdr
=
+
- $50
+
+ $50
=
Debit
Credit
$50
$50
Line Items
Inventories
Increases
Decreases
x
x
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
x
x
NONE
Line Items
NONE
Line Items
Inventories
Next step:
132
E20a Recognized previously deferred
revenue
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
During 2013, BGS recognized $110 million of previously deferred
revenues when it concluded it had met all of the IFRS criteria for
revenue recognition.
Revenues, net
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
133
E20a Recognized previously deferred revenue
=
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Liabilities
Owners' Eq
= +
Drev
+
Grev
= +
- $110
+
+ $110
Debit Credit
Deferred revenue
$110
Gross revenue
$110
Guidance
Line Items
Increases
Decreases
134
=
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
Liabilities
Owners' Eq
= +
Drev
+
Grev
= +
- $110
+
+ $110
Debit Credit
Deferred revenue
$110
Gross revenue
$110
Guidance
Line Items
Increases
Decreases
Line Items
Increases
Decreases
x
Retained earnings
x
135
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
=
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
Liabilities
Owners' Eq
= +
Drev
+
Grev
= +
- $110
+
+ $110
Debit Credit
Deferred revenue
$110
Gross revenue
$110
Guidance
Line Items
Increases
Decreases
Line Items
Increases
x
Net revenues
x
Decreases
Retained earnings
Line Items
x
Increases
Decreases
136
=
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
Liabilities
Owners' Eq
= +
Drev
+
Grev
= +
- $110
+
+ $110
Debit Credit
Deferred revenue
$110
Gross revenue
$110
Guidance
Line Items
Increases
Decreases
Line Items
Increases
x
Net revenues
x
Decreases
Retained earnings
Line Items
Profit (loss)
x
Increases
Decreases
Line Items
Increases
Decreases
x
137
Complete Solution:
During 2013, BGS recognized $110 million of previously deferred revenues when it concluded
it had met all of the IFRS criteria for revenue recognition.
Record the entry:
=
Liabilities
Owners' Eq
= +
Drev
+
Grev
= +
- $110
+
+ $110
Debit Credit
Deferred revenue
$110
Gross revenue
$110
Line Items
Increases
Decreases
Line Items
Increases
x
Net revenues
x
Decreases
Retained earnings
Line Items
Profit (loss)
x
Increases
x
Decreases
Line Items
Increases
Decreases
x
Net profit
x
Other
Next step:
138
E20b Recognized previously deferred cost of
good sold
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
During 2013, BGS recognized $55 million of previously deferred
cost of goods sold. This occurred at the same time revenues were
recognized in E20a. Entries E20a and E20b could have been
combined. Some companies record these entries at the end of
the period, rather than during the period as revenue recognition
criteria are met.
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
139
E20b Recognized previously deferred CGS
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
= Owners' Eq.
+
SIdr
=
-
CGS
+
- $55
=
-
+ $55
Debit Credit
Cost of goods sold
$55
$55
Guidance
Line Items
Increases
Decreases
140
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
= Owners' Eq.
+
SIdr
=
-
CGS
+
- $55
=
-
+ $55
Debit Credit
Cost of goods sold
$55
$55
Guidance
Line Items
Increases
Decreases
Inventories
x
Retained earnings
x
Line Items
Increases
Decreases
141
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
= Owners' Eq.
+
SIdr
=
-
CGS
+
- $55
=
-
+ $55
Debit Credit
Cost of goods sold
$55
$55
Guidance
Line Items
Increases
Decreases
x
Inventories
Line Items
Increases
Cost of goods sold
Decreases
x
x
Retained earnings
Line Items
Increases
Decreases
142
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
= Owners' Eq.
+
SIdr
=
-
CGS
+
- $55
=
-
+ $55
Debit Credit
Cost of goods sold
$55
$55
Guidance
Line Items
Increases
Decreases
x
Inventories
Line Items
Increases
Decreases
x
Cost of goods sold
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
Line Items
Increases
Decreases
x
143
Complete Solution:
E20b Recognized previously deferred cost of good sold
During 2013, BGS recognized $55 million of previously deferred cost of goods sold. This
occurred at the same time revenues were recognized in E20a. Entries E20a and E20b could
have been combined. Some companies record these entries at the end of the period, rather
than during the period as revenue recognition criteria are met.
Record the entry:
Assets
= Owners' Eq.
+
SIdr
=
-
CGS
+
- $55
=
-
+ $55
Debit Credit
Cost of goods sold
$55
$55
Line Items
Increases
Decreases
x
Inventories
Line Items
Increases
Decreases
x
Cost of goods sold
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
x
Line Items
Increases
Decreases
x
Net profit
x
Inventories
Next step:
144
E21 Replenished doubtful receivables
allowance
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
At the end of each interim reporting period during 2013, BGS
estimated the outstanding receivables that would probably not
be collected in the future and adjusted the bad debts allowance
by the amount necessary to ensure its balance equalled this baddebts estimate. There were a total of $6 million of these adjustments during 2013.
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
145
E21 Replenished bad debts allowance
Assets
= Owners' Eq.
-
Allbd
=
-
MSGA
(In Millions)
-
+ $6
=
-
+ $6
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Debit Credit
$6
$6
Guidance
Line Items
Increases
Decreases
146
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
= Owners' Eq.
-
Allbd
=
-
MSGA
-
+ $6
=
-
+ $6
Debit Credit
$6
$6
Guidance
Line Items
Increases
Decreases
x
Retained earnings
x
Line Items
Increases
Decreases
147
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
= Owners' Eq.
-
Allbd
=
-
MSGA
-
+ $6
=
-
+ $6
Debit Credit
$6
$6
Guidance
Line Items
Increases
Decreases
x
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Increases
Decreases
148
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
= Owners' Eq.
-
Allbd
=
-
MSGA
-
+ $6
=
-
+ $6
Debit Credit
$6
$6
Guidance
Line Items
Increases
Decreases
x
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
Line Items
Increases
Decreases
x
149
Complete Solution:
E21 Replenished doubtful receivables allowance
At the end of each interim reporting period during 2013, BGS estimated the outstanding receivables that would probably not be collected in the future and adjusted the bad debts allowance
by the amount necessary to ensure its balance equalled this bad-debts estimate. There were a
total of $6 million of these adjustments during 2013.
Record the entry:
Assets
= Owners' Eq.
-
Allbd
=
-
MSGA
-
+ $6
=
-
+ $6
Debit Credit
$6
$6
Line Items
Increases
Decreases
x
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
x
Line Items
Increases
Decreases
x
Net profit
Accounts receivable
x
Next step:
150
E22 Wrote off doubtful receivables
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
During 2013, BGS wrote off $5 million of accounts receivable.
BGS’s policy is to write off receivables when they are 180 days
past due.
Revenues, net
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
151
E22 Wrote off bad debts
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
=
+
ARG
-
Allbd
=
+
- $5
-
- $5
=
Debit
Credit
$5
$5
Guidance
Line Items
Increases
Decreases
152
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
+
ARG
-
Allbd
=
+
- $5
-
- $5
=
Debit
Credit
$5
$5
Guidance
Line Items
Increases
Decreases
x
x
Line Items
Increases
Decreases
153
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
+
ARG
-
Allbd
=
+
- $5
-
- $5
=
Debit
Credit
$5
$5
Guidance
Line Items
Increases
Decreases
x
x
Increases
Decreases
Line Items
Increases
Decreases
NONE
Line Items
154
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
+
ARG
-
Allbd
=
+
- $5
-
- $5
=
Debit
Credit
$5
$5
Guidance
Line Items
Increases
Decreases
x
x
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Line Items
Line Items
NONE
155
Complete Solution:
E22 Wrote off doubtful receivables
During 2013, BGS wrote off $5 million of accounts receivable. BGS’s policy is to write off
receivables when they are 180 days past due.
Record the entry:
Assets
=
+
ARG
-
Allbd
=
+
- $5
-
- $5
=
Debit
Credit
$5
$5
Line Items
Increases
Decreases
x
x
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
x
x
NONE
Line Items
NONE
Line Items
Accounts receivable
Next step:
156
E23 Replenished product returns
provision
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
At the end of each interim period during 2013, BGS estimated
the products that would probably be returned in the future and
adjusted the revenue and cost components of the allowance to
ensure they would cover the expected returns’ gross margins.
The combined gross margin adjustments for the year were $20
million of revenues less $10 million of cost of sales.
Bischoff’s accounting policy for product returns is to maintain
separate accounts for two allowance components: the revenue
component, which is a contra asset to accounts receivable and the
cost of sales component, which is an adjunct to finished goods
inventories. Neither sales commissions nor royalties are associated with Bischoff’s product returns.
Long-term debt
157
E23 Replenished product returns provision
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
Owners' Equity
=
-
Allprr
+
SIprc
=
-
PRCnR
-
CGS
-
+ $20
+
+ $10
=
-
+ $20
-
- $10
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
Debit
$10
Product returns contra revenue
$20
Credit
$20
Cost of goods sold
$10
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
158
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
Owners' Equity
=
-
Allprr
+
SIprc
=
-
PRCnR
-
CGS
-
+ $20
+
+ $10
=
-
+ $20
-
- $10
Debit
$10
$20
Credit
$20
Cost of goods sold
$10
Guidance
Line Items
Increases
Retained earnings
Line Items
Increases
Decreases
x
Inventories
Decreases
x
x
159
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
Owners' Equity
=
-
Allprr
+
SIprc
=
-
PRCnR
-
CGS
-
+ $20
+
+ $10
=
-
+ $20
-
- $10
Debit
$10
$20
Credit
$20
Cost of goods sold
$10
Guidance
Line Items
Increases
Inventories
Decreases
Line Items
x
Net revenues
x
Increases
Decreases
x
Cost of goods sold
x
x
Retained earnings
Line Items
Increases
Decreases
160
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
Owners' Equity
=
-
Allprr
+
SIprc
=
-
PRCnR
-
CGS
-
+ $20
+
+ $10
=
-
+ $20
-
- $10
Debit
$10
$20
Credit
$20
Cost of goods sold
$10
Guidance
Line Items
Increases
Inventories
Decreases
Line Items
x
Net revenues
x
Increases
Decreases
x
Cost of goods sold
x
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
Line Items
Increases
Decreases
x
161
Complete Solution:
At the end of each interim period during 2013, BGS estimated the products that would probably be returned in the future and adjusted the revenue and cost components of the allowance
to ensure they would cover the expected returns’ gross margins. The combined gross margin
adjustments for the year were $20 million of revenues less $10 million of cost of sales.
Record the entry:
Assets
Owners' Equity
=
-
Allprr
+
SIprc
=
-
PRCnR
-
CGS
-
+ $20
+
+ $10
=
-
+ $20
-
- $10
Debit
$10
$20
Credit
$20
Cost of goods sold
$10
Line Items
Increases
Inventories
Decreases
Line Items
x
Net revenues
x
Increases
Decreases
x
Cost of goods sold
x
x
Retained earnings
Line Items
Profit (loss)
Increases
Decreases
x
Line Items
Inventories
Decreases
x
Net profit
Accounts receivable
Next step:
Increases
x
x
162
E24 Products were returned by customers
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
PPE
LIABILITIES
Retained earnings
Share capital
Revenues, net
During 2013, BGS’s customers returned products with $18 million of previously recognized revenues and $9 million of previously recognized cost of sales. Customers had not yet paid for the
returned products. The cost to acquire or produce these products
had not changed since they were sold. (See E23 for discussion of
Bischoff’s accounting policy for product returns.)
Grev
Gross revenue
OOI
ONOI
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
163
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
=
+
ARG
-
Allprr
+
FGI
+
SIprc
=
+
- $18
-
- $18
+
+ $9
+
- $9
=
Debit
$18
$9
Credit
$18
$9
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
164
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
+
ARG
-
Allprr
+
FGI
+
SIprc
=
+
- $18
-
- $18
+
+ $9
+
- $9
=
Debit
$18
$9
Credit
$18
$9
Guidance
Line Items
Increases
Decreases
x
x
x
x
Line Items
Increases
Decreases
Inventories
165
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
+
ARG
-
Allprr
+
FGI
+
SIprc
=
+
- $18
-
- $18
+
+ $9
+
- $9
=
Debit
$18
$9
Credit
$18
$9
Guidance
Line Items
Increases
Decreases
x
x
x
x
Increases
Decreases
Line Items
Increases
Decreases
NONE
Inventories
Line Items
166
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
=
+
ARG
-
Allprr
+
FGI
+
SIprc
=
2013
2012
+
- $18
-
- $18
+
+ $9
+
- $9
=
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
Debit
$18
$9
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
Credit
$18
$9
Guidance
Line Items
Increases
Decreases
x
x
x
x
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Inventories
Line Items
Line Items
NONE
167
Complete Solution:
During 2013, BGS’s customers returned products with $18 million of previously recognized
revenues and $9 million of previously recognized cost of sales. Customers had not yet paid for
the returned products. The cost to acquire or produce these products had not changed since
they were sold. (See E23 for discussion of Bischoff’s accounting policy for product returns.)
Record the entry:
Assets
=
+
ARG
-
Allprr
+
FGI
+
SIprc
=
+
- $18
-
- $18
+
+ $9
+
- $9
=
Debit
$18
$9
Credit
$18
$9
Line Items
Increases
Decreases
x
x
x
x
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
x
x
x
x
NONE
Inventories
Line Items
NONE
Line Items
Accounts receivable
Inventories
Next step:
168
Cost of Sales and Inventory Entries and
Related entries:
E4 Purchased merchandise on account for resale page 23
page 41
E19b Deferred cost of goods sold when goods were delivered
page 126
E20b Recognized previously deferred cost of goods sold
page 138
E23 Replenish product returns provision
page 156
page 162
169
E25 Purchased materials on account
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
Minv
Materials inventories
WIP
Work in process
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Retained earnings
Share capital
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
Revenues, net
Grev
Gross revenue
During 2013, BGS purchased $83 million of materials and parts
on account from suppliers and was invoiced upon delivery. It
planned to use these items to produce products to sell to customers.
PPE
OOI
LIABILITIES
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
170
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
=
Liabilities
+
Minv
= +
AP
+
+ $83
= +
+ $83
Debit Credit
$83
Accounts payable
$83
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
171
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
Liabilities
+
Minv
= +
AP
+
+ $83
= +
+ $83
Debit Credit
$83
Accounts payable
$83
Guidance
Line Items
Increases
Inventories
x
Accounts payable
x
Decreases
Line Items
Increases
Decreases
172
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
Liabilities
+
Minv
= +
AP
+
+ $83
= +
+ $83
Debit Credit
$83
Accounts payable
$83
Guidance
Line Items
Increases
Inventories
x
Accounts payable
x
Line Items
Increases
Decreases
Line Items
Increases
Decreases
NONE
Decreases
173
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
Liabilities
+
Minv
= +
AP
+
+ $83
= +
+ $83
Debit Credit
$83
Accounts payable
$83
Guidance
Line Items
Increases
Inventories
x
Accounts payable
x
Line Items
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Decreases
Line Items
NONE
174
Complete Solution:
During 2013, BGS purchased $83 million of materials and parts on account from suppliers and
was invoiced upon delivery. It planned to use these items to produce products to sell to customers.
Assets
=
Liabilities
+
Minv
= +
AP
+
+ $83
= +
+ $83
Debit Credit
$83
Accounts payable
$83
Line Items
Increases
Inventories
x
Accounts payable
x
Line Items
NONE
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Decreases
Line Items
x
Inventories
Accounts payable
x
Next step:
175
E26 Used materials previously purchased
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
Minv
WIP
Work in process
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Retained earnings
Share capital
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
Revenues, net
Grev
Gross revenue
During 2013, BGS used $80 million of previously purchased
materials and parts while producing products to sell to customers.
PPE
OOI
LIABILITIES
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
176
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
=
+
Minv
+
WIP
=
+
- $80
+
+ $80
=
Debit
Work in process
Credit
$80
$80
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
177
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
+
Minv
+
WIP
=
+
- $80
+
+ $80
=
Debit
Work in process
Credit
$80
$80
Guidance
Line Items
Inventories
Increases
Decreases
x
x
Line Items
Increases
Decreases
178
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
+
Minv
+
WIP
=
+
- $80
+
+ $80
=
Debit
Work in process
Credit
$80
$80
Guidance
Line Items
Inventories
Increases
Decreases
x
x
Increases
Decreases
Line Items
Increases
Decreases
NONE
Line Items
179
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
+
Minv
+
WIP
=
+
- $80
+
+ $80
=
Debit
Work in process
Credit
$80
$80
Guidance
Line Items
Inventories
Increases
Decreases
x
x
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Line Items
Line Items
NONE
180
Complete Solution:
During 2013, BGS used $80 million of previously purchased materials and parts while producing products to sell to customers.
Assets
=
+
Minv
+
WIP
=
+
- $80
+
+ $80
=
Debit
Work in process
Credit
$80
$80
Line Items
Inventories
Increases
Decreases
x
x
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
x
x
NONE
Line Items
NONE
Line Items
Inventories
Next step:
181
E27 Used production inputs before
invoiced
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
Minv
WIP
Work in process
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Retained earnings
Share capital
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
Revenues, net
Grev
Gross revenue
At the end of interim periods during 2013, BGS identified a total
of $2 million of costs for production-related services performed
during the periods for which BGS had not yet received invoices
by the end of the periods. For example, BGS reconized janitorial
costs for services rendered but not yet invoiced by its janitorial
service.
PPE
OOI
LIABILITIES
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
182
E27 Used production inputs before invoiced
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
=
Liabilities
+
WIP
= +
AcrL
+
+ $2
= +
+ $2
Debit Credit
Work in process
$2
Accrued liabilities
$2
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
183
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
Liabilities
+
WIP
= +
AcrL
+
+ $2
= +
+ $2
Debit Credit
Work in process
$2
Accrued liabilities
$2
Guidance
Line Items
Increases
Inventories
x
Accrued liabilities
x
Decreases
Line Items
Increases
Decreases
184
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
Liabilities
+
WIP
= +
AcrL
+
+ $2
= +
+ $2
Debit Credit
Work in process
$2
Accrued liabilities
$2
Guidance
Line Items
Increases
Inventories
x
Accrued liabilities
x
Line Items
Increases
Decreases
Line Items
Increases
Decreases
NONE
Decreases
185
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
Liabilities
+
WIP
= +
AcrL
+
+ $2
= +
+ $2
Debit Credit
Work in process
$2
Accrued liabilities
$2
Guidance
Line Items
Increases
Inventories
x
Accrued liabilities
x
Line Items
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Decreases
Line Items
NONE
186
Complete Solution:
At the end of interim periods during 2013, BGS identified a total of $2 million of costs for
production-related services performed during the periods for which BGS had not yet received
invoices by the end of the periods. For example, BGS reconized production-related janitorial
costs for services rendered but not yet invoiced by its janitorial service.
Assets
=
Liabilities
+
WIP
= +
AcrL
+
+ $2
= +
+ $2
Debit Credit
Work in process
$2
Accrued liabilities
$2
Line Items
Increases
Inventories
x
Accrued liabilities
x
Line Items
NONE
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Decreases
Line Items
x
Inventories
x
Accrued liabilities
Next step:
187
E28 Used production inputs when
invoiced
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
Minv
WIP
Work in process
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Retained earnings
Share capital
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
Revenues, net
Grev
Gross revenue
During 2013, BGS received $17 million of invoices for production-related goods it received and used during 2013 for production-related services rendered in 2013. BGS had not previously
accrued for these services. For example, BGS received invoices in
2013 from utilities companies for servicing production facilities
during 2013.
PPE
OOI
LIABILITIES
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
188
E28 Used production inputs when invoiced
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
=
Liabilities
+
WIP
= +
AP
+
+ $17
= +
+ $17
Debit Credit
Work in process
$17
Accounts payable
$17
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
189
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
Liabilities
+
WIP
= +
AP
+
+ $17
= +
+ $17
Debit Credit
Work in process
$17
Accounts payable
$17
Guidance
Line Items
Increases
Inventories
x
Accounts payable
x
Decreases
Line Items
Increases
Decreases
190
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
Liabilities
+
WIP
= +
AP
+
+ $17
= +
+ $17
Debit Credit
Work in process
$17
Accounts payable
$17
Guidance
Line Items
Increases
Inventories
x
Accounts payable
x
Line Items
Increases
Decreases
Line Items
Increases
Decreases
NONE
Decreases
191
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
Liabilities
+
WIP
= +
AP
+
+ $17
= +
+ $17
Debit Credit
Work in process
$17
Accounts payable
$17
Guidance
Line Items
Increases
Inventories
x
Accounts payable
x
Line Items
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Decreases
Line Items
NONE
192
Complete Solution:
During 2013, BGS received $17 million of invoices for production-related goods it received and
used during 2013 for production-related services rendered in 2013. BGS had not previously
accrued for these services. For example, BGS received invoices in 2013 from utilities companies for servicing production facilities during 2013.
Assets
=
Liabilities
+
WIP
= +
AP
+
+ $17
= +
+ $17
Debit Credit
Work in process
$17
Accounts payable
$17
Line Items
Increases
Inventories
x
Accounts payable
x
Line Items
NONE
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Decreases
Line Items
x
Inventories
Accounts payable
x
Next step:
193
E29 Used production inputs previously
prepaid
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
Minv
WIP
Work in process
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Retained earnings
Share capital
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
Revenues, net
Grev
Gross revenue
At the end of interim periods during 2013, BGS identified a total
of $10 million of costs for production-related services performed
during the periods that were prepaid prior to receiving the services, but not yet charged to production. For example, at month
end, BGS recognized the cost of using a production facility that
had been prepaid in a prior month.
PPE
OOI
LIABILITIES
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
194
E29 Used production inputs previously prepaid
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
=
+
WIP
+
PrEx
=
+
+ $10
+
- $10
=
Debit
Work in process
Credit
$10
Prepaid expenses
$10
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
195
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
+
WIP
+
PrEx
=
+
+ $10
+
- $10
=
Debit
Work in process
Credit
$10
Prepaid expenses
$10
Guidance
Line Items
Inventories
Prepaid expenses
Increases
Decreases
Line Items
Increases
Decreases
x
x
196
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
+
WIP
+
PrEx
=
+
+ $10
+
- $10
=
Debit
Work in process
Credit
$10
Prepaid expenses
$10
Guidance
Line Items
Inventories
Increases
x
Line Items
Increases
Decreases
NONE
x
Prepaid expenses
Line Items
Decreases
Increases
Decreases
197
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
+
WIP
+
PrEx
=
+
+ $10
+
- $10
=
Debit
Work in process
Credit
$10
Prepaid expenses
$10
Guidance
Line Items
Inventories
Increases
x
Line Items
Increases
Decreases
Increases
Decreases
NONE
x
Prepaid expenses
Line Items
Decreases
Increases
Decreases
Line Items
NONE
198
Complete Solution:
At the end of interim periods during 2013, BGS identified a total of $10 million of costs for production-related services performed during the periods that were prepaid prior to receiving the
services, but not yet charged to production. For example, at month end, BGS recognized the
cost of using a production facility that had been prepaid in a prior month.
Assets
=
+
WIP
+
PrEx
=
+
+ $10
+
- $10
=
Debit
Work in process
Credit
$10
Prepaid expenses
$10
Line Items
Inventories
Increases
x
NONE
Line Items
Increases
Decreases
Increases
Decreases
NONE
x
Prepaid expenses
Line Items
Decreases
Increases
Decreases
Line Items
x
Inventories
Prepaid expenses
Next step:
x
199
E30 Used production inputs when paid
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
Minv
WIP
Work in process
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Retained earnings
Share capital
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
Revenues, net
Grev
Gross revenue
During 2013, BGS charged $60 million of costs to production
for non-invoiced goods and services received, used, and paid
for during 2013. For example, this includes salaries paid to
assembly-line employees in 2013 for services performed in 2013.
It also includes supplies purchased with cash in 2013 and used in
production during 2013.
PPE
OOI
LIABILITIES
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
200
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
=
+
C
+
WIP
=
+
- $60
+
+ $60
=
Debit
Work in process
Credit
$60
$60
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
201
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
+
C
+
WIP
=
+
- $60
+
+ $60
=
Debit
Work in process
Credit
$60
$60
Guidance
Line Items
Increases
Line Items
Increases
Decreases
x
Inventories
Decreases
x
202
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
+
C
+
WIP
=
+
- $60
+
+ $60
=
Debit
Work in process
Credit
$60
$60
Guidance
Line Items
Increases
x
Inventories
Line Items
Decreases
Line Items
Increases
Decreases
NONE
x
Increases
Decreases
203
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
+
C
+
WIP
=
+
- $60
+
+ $60
=
Debit
Work in process
Credit
$60
$60
Guidance
Line Items
Increases
x
Inventories
Line Items
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
x
Increases
Decreases
Line Items
NONE
204
Complete Solution:
During 2013, BGS charged $60 million of costs to production for non-invoiced goods and
services received, used, and paid for during 2013. For example, this includes salaries paid to
assembly-line employees in 2013 for services performed in 2013. It also includes supplies purchased with cash in 2013 and used in production during 2013.
Assets
=
+
C
+
WIP
=
+
- $60
+
+ $60
=
Debit
Work in process
Credit
$60
$60
Line Items
Increases
x
Inventories
Line Items
NONE
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
x
Increases
Decreases
Line Items
x
Inventories
Next step:
x
205
E31 Recognized production-PP&E depreciation
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
Minv
WIP
Work in process
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Retained earnings
Share capital
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
Revenues, net
Grev
Gross revenue
At the end of interim periods during 2013, BGS capitalized a total
of $25 million of production-related depreciation into inventory,
representing the portion of the historical cost of PP&E that had
been used up during production.
PPE
OOI
LIABILITIES
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
206
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
=
+
WIP
-
AcDep
=
+
+ $25
-
+ $25
=
Debit
Work in process
Credit
$25
$25
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
207
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
+
WIP
-
AcDep
=
+
+ $25
-
+ $25
=
Debit
Work in process
Credit
$25
$25
Guidance
Line Items
Inventories
Increases
Decreases
Line Items
Increases
Decreases
x
x
208
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
+
WIP
-
AcDep
=
+
+ $25
-
+ $25
=
Debit
Work in process
Credit
$25
$25
Guidance
Line Items
Inventories
Increases
x
Line Items
Increases
Decreases
NONE
x
Line Items
Decreases
Increases
Decreases
209
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
+
WIP
-
AcDep
=
+
+ $25
-
+ $25
=
Debit
Work in process
Credit
$25
$25
Guidance
Line Items
Inventories
Increases
x
Line Items
Increases
Decreases
Increases
Decreases
NONE
x
Line Items
Decreases
Increases
Decreases
Line Items
NONE
210
Complete Solution:
At the end of interim periods during 2013, BGS capitalized a total of $25 million of productionrelated depreciation into inventory, representing the portion of the historical cost of PP&E that
had been used up during production.
Assets
=
+
WIP
-
AcDep
=
+
+ $25
-
+ $25
=
Debit
Work in process
Credit
$25
$25
Line Items
Inventories
Increases
Decreases
x
Line Items
Increases
Decreases
Increases
Decreases
NONE
x
Line Items
NONE
Increases
Decreases
Line Items
x
Inventories
Depreciation
Next step:
x
211
E32 Transfer costs from WIP to FGI
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
Minv
WIP
Work in process
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
CGS
DepEx
G/L
Retained earnings
Share capital
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
Revenues, net
Grev
Gross revenue
During 2013, BGS transferred $190 million of costs from workin-process to finished goods. This occurred when production was
completed and the finished goods had arrived at BGS’s regional
distribution centers around the world. Thus, related shipping
and handling costs had already been charged to WIP.
PPE
OOI
LIABILITIES
Current
AP
AcrL
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
212
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
=
+
WIP
+
FGINS
=
+
- $190
+
+ $190
=
Debit
Finished goods inventories (not segregated)
Credit
$190
Work in process
$190
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
213
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
+
WIP
+
FGINS
=
+
- $190
+
+ $190
=
Debit
Credit
$190
Work in process
$190
Guidance
Line Items
Inventories
Increases
Decreases
x
x
Line Items
Increases
Decreases
214
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
+
WIP
+
FGINS
=
+
- $190
+
+ $190
=
Debit
Credit
$190
Work in process
$190
Guidance
Line Items
Inventories
Increases
Decreases
x
x
Increases
Decreases
Line Items
Increases
Decreases
NONE
Line Items
215
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
+
WIP
+
FGINS
=
+
- $190
+
+ $190
=
Debit
Credit
$190
Work in process
$190
Guidance
Line Items
Inventories
Increases
Decreases
x
x
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Line Items
Line Items
NONE
216
Complete Solution:
During 2013, BGS transferred $190 million of costs from work-in-process to finished goods.
This occurred when production was completed and the finished goods had arrived at BGS’s
regional distribution centers around the world. Thus, related shipping and handling costs had
already been charged to WIP.
Assets
=
+
WIP
+
FGINS
=
+
- $190
+
+ $190
=
Debit
Credit
$190
Work in process
$190
Line Items
Inventories
Increases
Decreases
x
x
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
x
x
NONE
Line Items
NONE
Line Items
Inventories
Next step:
217
Long-Lived Assets Entries and FinancialStatement Effects
Related entries:
page 17
page 95
page 101
page 205
218
E33 Recognized amortization expense
ASSETS
OWNERS' EQUITY
Current
AR
C
Inven
PrEx
OCA
Permanent
Accounts receivable
ARG
Allbd
Allprr
Inventories
Minv
WIP
Work in process
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
SCap
OPOE
Net income
AmtEx
CGS
DepEx
G/L
Retained earnings
Share capital
Amortization expense
Cost of goods sold
Gain/loss
IncS
Income summary
Rev
Revenues, net
Grev
PPE
Intan Acquired intangibles
Inthc
Intangibles (historical cost)
AcAmt Accumulated amortization
At the end of interim periods during 2013, BGS recognized a
total of $12 million of amortization expense that represented the
portion of the historical cost of acquired intangible assets used up
during the periods. All of BGS’s intangibles were acquired when
BGS purchased businesses and none are related to production.
Gross revenue
OOI
LIABILITIES
Current
AcrL
DivP
Drev
OCL
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
219
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
= Owners' Eq.
-
AcAmt
=
-
AmtEx
-
+ $12
=
-
+ $12
Debit Credit
$12
Accumulated amortization
$12
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
220
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
= Owners' Eq.
-
AcAmt
=
-
AmtEx
-
+ $12
=
-
+ $12
Debit Credit
$12
$12
Guidance
Line Items
Increases
Decreases
Line Items
Increases
Decreases
x
(Intangible assets less accumulated amortization)
Retained earnings
x
221
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
= Owners' Eq.
-
AcAmt
=
-
AmtEx
-
+ $12
=
-
+ $12
Debit Credit
$12
$12
Guidance
Line Items
Increases
Decreases
x
Increases
Decreases
x
x
Retained earnings
Line Items
Line Items
Increases
Decreases
222
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
= Owners' Eq.
-
AcAmt
=
-
AmtEx
-
+ $12
=
-
+ $12
Debit Credit
$12
$12
Guidance
Line Items
Increases
Decreases
x
Profit (loss)
Increases
Decreases
x
x
Retained earnings
Line Items
Line Items
Increases
Decreases
Line Items
Increases
Decreases
x
223
Complete Solution:
At the end of interim periods during 2013, BGS recognized a total of $12 million of amortization expense that represented the portion of the historical cost of acquired intangible assets
used up during the periods. All of BGS’s intangible assets were acquired when BGS purchased businesses and none are related to production.
Assets
= Owners' Eq.
-
AcAmt
=
-
AmtEx
-
+ $12
=
-
+ $12
Debit Credit
$12
$12
Line Items
Increases
Decreases
x
Profit (loss)
Decreases
x
x
Increases
Decreases
x
Line Items
Increases
Decreases
x
Net profit
Other
Next step:
Increases
Retained earnings
Line Items
Line Items
x
224
Debt Entries and Financial-Statement Effects
E34a Paid finance costs previously expensed
ASSETS
OWNERS' EQUITY
Current
Permanent
AR
C
Inven
PrEx
OCA
Accounts receivable
ARG
Allbd
Allprr
Inventories
Minv
WIP
Work in process
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
Retained earnings
SCap Share capital
Net income
AmtEx
CGS
DepEx
FinEx
G/L
Cost of goods sold
Finance expense
Gain/loss
IncS
Income summary
Rev
PPE
Inthc
Revenues, net
During 2013, BGS paid a total of $7 million of interest previously recognized as finance expense. These interest payments
could have been combined with the principal payments in E34b.
BGS’s policy is to classify interest payments as operating activities. Under IFRS, they could have been classified as financing
activities. [“Finance expense” is also call “interest expense” in
this context.]
Grev
Gross revenue
OOI
LIABILITIES
Current
AP
AcrL
CPLTD
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Current portion of long-term debt
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
225
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
=
Liabilities
+
C
= +
AcrL
+
- $7
= +
- $7
Debit Credit
Accrued liabilities
$7
$7
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
226
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
Liabilities
+
C
= +
AcrL
+
- $7
= +
- $7
Debit Credit
Accrued liabilities
$7
$7
Guidance
Line Items
Increases
Decreases
x
Accrued liabilities
x
Line Items
Increases
Decreases
227
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
Liabilities
+
C
= +
AcrL
+
- $7
= +
- $7
Debit Credit
Accrued liabilities
$7
$7
Guidance
Line Items
Increases
Decreases
x
Accrued liabilities
x
Line Items
Increases
Line Items
Increases
Decreases
NONE
Decreases
228
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
Liabilities
+
C
= +
AcrL
+
- $7
= +
- $7
Debit Credit
Accrued liabilities
$7
$7
Guidance
Line Items
Increases
Decreases
x
Accrued liabilities
x
Line Items
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Line Items
NONE
229
Complete Solution:
“During 2013, BGS paid a total of $7 million of interest previously recognized as finance
expense. These interest payments could have been combined with the principal payments in
E34b. BGS’s policy is to classify interest payments as operating activities. Under IFRS, they
could have been classified as financing activities. [“Finance expense” is also call “interest
expense” in this context.]
Assets
=
Liabilities
+
C
= +
AcrL
+
- $7
= +
- $7
Debit Credit
Accrued liabilities
$7
$7
Line Items
Increases
Decreases
x
Accrued liabilities
x
Line Items
NONE
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Line Items
x
Accrued liabilities
Next step:
x
230
E34b Paid debt principal classified as current portion
ASSETS
OWNERS' EQUITY
Current
Permanent
AR
C
Inven
PrEx
OCA
Accounts receivable
ARG
Allbd
Allprr
Inventories
Minv
WIP
Work in process
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
Retained earnings
SCap Share capital
Net income
AmtEx
CGS
DepEx
FinEx
G/L
Cost of goods sold
Finance expense
Gain/loss
IncS
Income summary
Rev
PPE
Inthc
During 2013, BGS repaid a total of $5 million of long-term debt
principal. In anticipation of these payments, BGS had reclassified
the principal from non-current to current liabilities on December
31, 2012: the end of the prior year. This entry could have been
combined with the interest payments in entry E34a.
Revenues, net
Grev
Gross revenue
OOI
LIABILITIES
Current
AP
AcrL
CPLTD
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
231
E34b Paid debt principal classified as CPLTD
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
=
Liabilities
+
C
= +
CPLTD
+
- $5
= +
- $5
Debit Credit
Current portion of long-term
$5
$5
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
232
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
Liabilities
+
C
= +
CPLTD
+
- $5
= +
- $5
Debit Credit
$5
$5
Guidance
Line Items
Increases
Decreases
x
x
Line Items
Increases
Decreases
(Current portion of long-term debt)
233
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
Liabilities
+
C
= +
CPLTD
+
- $5
= +
- $5
Debit Credit
$5
$5
Guidance
Line Items
Increases
Decreases
x
x
Line Items
Increases
Decreases
NONE
Line Items
Increases
Decreases
234
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
Liabilities
+
C
= +
CPLTD
+
- $5
= +
- $5
Debit Credit
$5
$5
Guidance
Line Items
Increases
Decreases
x
x
Line Items
Increases
Decreases
Increases
Decreases
NONE
Line Items
Increases
Decreases
Line Items
NONE
235
Complete Solution:
E34b Paid debt principal classified as current-portion of long-term debt
During 2013, BGS repaid a total of $5 million of long-term debt principal. In anticipation of
these payments, BGS had reclassified the principal from non-current to current liabilities on
December 31, 2012: the end of the prior year. This entry could have been combined with the
interest payments in entry E34a.
Assets
=
Liabilities
+
C
= +
CPLTD
+
- $5
= +
- $5
Debit Credit
$5
$5
Line Items
Increases
Decreases
x
x
Line Items
Increases
Decreases
Increases
Decreases
NONE
Line Items
NONE
Increases
Decreases
Line Items
x
(Repayment of borrowings)
Next step:
236
E35 Recognized finance expense
ASSETS
OWNERS' EQUITY
Current
Permanent
AR
C
Inven
PrEx
OCA
Accounts receivable
ARG
Allbd
Allprr
Inventories
Minv
WIP
Work in process
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
Retained earnings
SCap Share capital
Net income
AmtEx
CGS
DepEx
FinEx
G/L
Cost of goods sold
Finance expense
Gain/loss
IncS
Income summary
Rev
PPE
Inthc
At the end of interim periods during 2013, BGS recognized a
total of $7 million of finance expense that represented the interest costs associated with long-term debt for the periods. BGS’s
policy is to classify interest as operating activities. Under IFRS,
they could have been classified as financing activities. [“Finance
expense” is also call “interest expense” in this context.]
Revenues, net
Grev
Gross revenue
OOI
LIABILITIES
Current
AP
AcrL
CPLTD
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
237
=
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
Liabilities
Owners' Eq
= +
AcrL
-
FinEx
= +
+ $7
-
+ $7
Debit
Finance expense
Credit
$7
Accrued liabilities
$7
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
238
=
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
Liabilities
Owners' Eq
= +
AcrL
-
FinEx
= +
+ $7
-
+ $7
Debit
Finance expense
Credit
$7
Accrued liabilities
$7
Guidance
Line Items
Accrued liabilities
Retained earnings
Increases
Decreases
Line Items
Increases
Decreases
x
x
239
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
=
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
Liabilities
Owners' Eq
= +
AcrL
-
FinEx
= +
+ $7
-
+ $7
Debit
Finance expense
Credit
$7
Accrued liabilities
$7
Guidance
Line Items
Accrued liabilities
Increases
x
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Decreases
Increases
Decreases
240
=
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
Liabilities
Owners' Eq
= +
AcrL
-
FinEx
= +
+ $7
-
+ $7
Debit
Finance expense
Credit
$7
Accrued liabilities
$7
Guidance
Line Items
Accrued liabilities
Increases
x
Profit (loss)
Line Items
Increases
Decreases
x
x
Retained earnings
Line Items
Decreases
Increases
Decreases
Line Items
Increases
Decreases
x
241
Complete Solution:
“At the end of interim periods during 2013, BGS recognized a total of $7 million of finance
expense that represented the interest costs associated with long-term debt for the periods.
BGS’s policy is to classify interest as operating activities. Under IFRS, they could have been
classified as financing activities. [“Finance expense” is also call “interest expense” in this context.]
=
Liabilities
Owners' Eq
= +
AcrL
-
FinEx
= +
+ $7
-
+ $7
Debit
Finance expense
Credit
$7
Accrued liabilities
$7
Line Items
Accrued liabilities
Increases
x
Profit (loss)
Line Items
Decreases
x
Increases
Decreases
x
Line Items
Increases
Decreases
x
Net profit
Accrued liabilities
Next step:
Increases
x
Retained earnings
Line Items
Decreases
x
242
E36 Anticipated paying non-current debt
ASSETS
OWNERS' EQUITY
Current
Permanent
AR
C
Inven
PrEx
OCA
Accounts receivable
ARG
Allbd
Allprr
Inventories
Minv
WIP
Work in process
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
Retained earnings
SCap Share capital
Net income
AmtEx
CGS
DepEx
FinEx
G/L
Cost of goods sold
Finance expense
Gain/loss
IncS
Income summary
Rev
PPE
Inthc
At the end of interim periods during 2013, BGS reclassified a
total of $5 million of long-term debt principal from non-current
to current liabilities. These transfers ensured that the current
liability reported at the end of each period anticipated principal
payments for the subsequent 12 months.
Revenues, net
Grev
Gross revenue
OOI
LIABILITIES
Current
AP
AcrL
CPLTD
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
243
Liabilities
=
Debit
= +
CPLTD
+
LTD
(In Millions)
= +
+ $5
+
- $5
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
Long-term debt
Credit
$5
$5
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
244
Liabilities
=
Debit
= +
CPLTD
+
LTD
(In Millions)
= +
+ $5
+
- $5
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
Long-term debt
Credit
$5
$5
Guidance
Line Items
Increases
Decreases
Line Items
Increases
Decreases
x
x
245
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Liabilities
=
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
Debit
= +
CPLTD
+
LTD
= +
+ $5
+
- $5
Long-term debt
Credit
$5
$5
Guidance
Line Items
Increases
Decreases
x
Line Items
Increases
Decreases
NONE
x
Line Items
Increases
Decreases
246
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
Liabilities
=
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
Debit
= +
CPLTD
+
LTD
= +
+ $5
+
- $5
Long-term debt
Credit
$5
$5
Guidance
Line Items
Increases
Decreases
x
Line Items
Increases
Decreases
Increases
Decreases
NONE
x
Line Items
Increases
Decreases
Line Items
NONE
247
Complete Solution:
At the end of interim periods during 2013, BGS reclassified a total of $5 million of long-term
debt principal from non-current to current liabilities. These transfers ensured that the current
liability reported at the end of each period anticipated principal payments for the subsequent
12 months.
Liabilities
=
Debit
= +
CPLTD
+
LTD
= +
+ $5
+
- $5
Long-term debt
Credit
$5
$5
Line Items
Increases
Decreases
x
Line Items
Increases
Decreases
Increases
Decreases
NONE
x
Line Items
NONE
Next step:
Increases
Decreases
Line Items
NONE
x
E37 Recognized lease classified as finance
lease
ASSETS
OWNERS' EQUITY
Current
Permanent
AR
C
Inven
PrEx
OCA
Accounts receivable
ARG
Allbd
Allprr
Inventories
Minv
WIP
Work in process
FGI
SIdr
SIprc
Prepaid expenses
Non-current
RE
Retained earnings
SCap Share capital
Net income
AmtEx
CGS
DepEx
FinEx
G/L
Cost of goods sold
Finance expense
Gain/loss
IncS
Income summary
Rev
PPE
Inthc
248
Revenues, net
On December 20, 2013, equipment leased by BGS was installed
and ready to use. BGS chose not to put it into service until
January 10, 2014. BGS concluded the lease met the IFRS criteria
for a finance lease and estimated its present value to be $20 million. Finance leases are recorded under IFRS when the lessee has
the right to use property. [“Finance lease” is also call “capital
lease” in this context.]
Grev
Gross revenue
OOI
LIABILITIES
Current
AP
AcrL
CPLTD
DivP
Drev
OCL
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
ONCL
Long-term debt
249
E37 Recognized lease classified as finance lease
Assets
(In Millions)
Assets
Current
Inventories
Prepaid expenses
Non-current
Net
Total assets
Liabilities
Current
Accounts payable
Accrued liabilities
Dividends payable
Non-current
Total liabilities
Share capital
Retained earnings
Reserves
2013
2012
$31
84
158
10
219
502
$13
66
109
20
158
366
264
(70)
194
233
427
$929
220
(45)
175
199
374
$740
=
Liabilities
+
PPEhc
= +
LTD
+
+ $20
= +
+ $20
Debit Credit
$20
Long-term debt
$20
Guidance
25
14
12
58
109
35
20
7
61
123
105
102
207
316
60
71
131
254
253
310
50
613
$929
214
239
33
486
$740
Line Items
Increases
Decreases
250
Assets
(In Millions)
Net revenues
Cost of goods sold
Gross profit
Depreciation
Total
Other
Total
Operating profit
Profit before taxes
Income tax expense
Net profit (loss)
2013
2012
$505
(253)
252
$440
(220)
220
(7)
(117)
(124)
(6)
(105)
(111)
3
(3)
0
128
1
129
(40)
89
24
$113
3
(3)
0
109
1
110
(34)
76
24
$100
=
Liabilities
+
PPEhc
= +
LTD
+
+ $20
= +
+ $20
Debit Credit
$20
Long-term debt
$20
Guidance
Line Items
Increases
x
x
Decreases
Line Items
Increases
Decreases
251
(In Millions)
Share
Capital
$180
December 31, 2011
Profit (loss)
Total
7
Common stock issued
Dividends declared
Other
27
December 31, 2012
$214
Profit (loss)
Total
Common stock issued
10
Dividends declared
Other
29
$253
December 31, 2013
Retained
Earnings
$179
76
76
(23)
7
$239
89
89
(25)
7
$310
Assets
Reserves
$16
24
24
(7)
$33
24
24
(7)
$50
Total
$375
76
24
100
7
(23)
34
$486
89
24
113
10
(25)
29
$613
=
Liabilities
+
PPEhc
= +
LTD
+
+ $20
= +
+ $20
Debit Credit
$20
Long-term debt
$20
Guidance
Line Items
Increases
x
x
Line Items
Increases
Decreases
Line Items
Increases
Decreases
NONE
Decreases
252
Assets
(In Millions)
Net profit
Adjustments
Depreciation
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other
Other
2013
2012
$89
$76
(3)
32
0
(32)
15
(22)
(12)
29
96
(3)
28
(38)
(36)
13
(21)
(10)
16
25
(20)
15
(80)
(85)
(17)
14
(37)
(40)
10
10
(20)
5
5
16
2
13
$31
7
9
(18)
4
2
(13)
2
24
$13
=
Liabilities
+
PPEhc
= +
LTD
+
+ $20
= +
+ $20
Debit Credit
$20
Long-term debt
$20
Guidance
Line Items
Increases
x
x
Line Items
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Decreases
Line Items
NONE
253
Complete Solution:
Related entries:
You may want to review the following entries in the
context of a finance (capital) lease:
•
•
“On December 20, 2013, equipment leased by BGS was installed and ready to use. BGS
chose not to put it into service until January 10, 2014. BGS concluded the lease met the IFRS
criteria for a finance lease and estimated its present value to be $20 million. Finance leases
are recorded under IFRS when the lessee has the right to use property. [“Finance lease” is
also call “capital lease” in this context.]”
Assets
=
Liabilities
Long-Lived Assets Entries
page 217
+
PPEhc
= +
LTD
Debt Entries
page 224
+
+ $20
= +
+ $20
Because PP&E and long-term debt are recorded at the commencement of a finance (capital) lease, all the accounting
entries thereafter are structurally identical to those that
would have been recorded if the company had purchased the
PP&E with debt financing. However, “depreciation” may be
referred to as “amortization” by some companies.
Debit Credit
$20
Long-term debt
$20
This means that if you understand how to account for PP&E
and long-term debt, you know how to account for finance
(capital) leases during the lease term.
Line Items
x
x
Line Items
NONE
Next step:
Increases
Increases
Decreases
Line Items
Increases
Decreases
Increases
Decreases
NONE
Decreases
Line Items
NONE

Bischoff`s Entries and Financial

Transcription

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