AKUNTANSI KEUANGAN 2

2018

Financial Instrument Overview

Current Liabilities

Connel Company must make computations and adjusting entries for the following independent situations at December 31, 2015.

1. Its line of amplifiers carries a 3-year assurance-type warranty against defects. On the basis of past experience, the estimated warranty costs related to dollar sales are first year after sale-2% of sales; second year after sale-3% of sales; and third year after sale-5% of sales. Sales and actual warranty expenditures for the first 3 years of business were:

Sales Warranty Expenditures 2013 $ 800,000 $ 6,500 2014 1,100,000 17,200 2015 1,200,000 62,000

Instructions

Compute the amount that Connel Company should report as a liability in its December 31, 2017, statement of financial position. Assume that all sales are made evenly throughout each year with warranty expenses also evenly spaced relative to the rates above.

2. With some of its products, Connel Company includes coupons that are redeemable in merchandise. The coupons have no expiration date and, in the company’s experience, 40% of them are redeemed. The liability for unredeemed coupons at December 31, 2014, was $9,000. During 2015, coupons worth $30,000 were issued, and merchandise worth $8,000 was distributed in exchange for coupons redeemed.

Instructions Compute the amount of the liability that should appear on the December 31, 2015, statement of financial position

Answers 1. Estimated warranty costs:

On 2013 sales $ 800,000 X .10.................................................................... $ 80,000 On 2014 sales $1,100,000 X .10.................................................................. $ 110,000 On 2015 sales $1,200,000 X .10.................................................................. $ 120,000

Total estimated costs...................................................................... $ 310,000 Total warranty expenditures ........................................................ ($ 85,700)

Balance of liability, 12/31/15...................................................................... $ 224,300

The liability account has a balance of $224,300 at 12/31/15 based on the difference between the estimated warranty costs (totaling $310,000) for the three years’ sales and the actual warranty expenditures (totaling $85,700) during that same period.

2. Computation of liability for premium claims outstanding: Unredeemed coupons for 2015

($9,000 - $8,000)............................................................................................. $ 1,000

2015 coupons estimated to be redeemed

($30,000 X .40)............................................................................................... $ 12,000

Total ................................................................................................................. $ 13,000

Cash and Receivables

Braddock Inc. had the following long-term receivable account balances at December 31, 2014.

Note receivable from sale of division $1,500,000

Note receivable from of officer $400,000 Transactions during 2015 and other information relating to Braddock’s long-term receivables were as follows. 1. The $1,500,000 note receivable is dated May 1, 2014, bears interest at 9%, and represents

the balance of the consideration received from the sale of Braddock’s electronics division to New York Company. Principal payments of $500,000 plus appropriate interest are due on May 1, 2015, 2016, and 2017. The first principal and interest payment was made on May 1, 2015. Collection of the note installments is reasonably assured.

2. The $400,000 note receivable is dated December 31, 2014, bears interest at 8%, and is due on December 31, 2017. The note is due from Sean May, president of Braddock Inc. and is collateralized by 10,000 of Braddock’s ordinary shares. Interest is payable annually on December 31, and all interest payments were paid on their due dates through December 31, 2015. The quoted market price of Braddock’s ordinary shares was $45 per share on December 31, 2015.

3. On April 1, 2015, Braddock sold a patent to Pennsylvania Company in exchange for a

$100,000 zero- interest-bearing note due on April 1, 2017. There was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note of this type at April 1, 2015, was 12%. The present value of $1 for two periods at 12% is 0.797 (use this factor). The patent had a carrying value of $40,000 at January 1, 2015, and the amortization for the year ended December 31, 2015, would have been $8,000. The collection of the note receivable from Pennsylvania is reasonably assured.

4. On July 1, 2015, Braddock sold a parcel of land to Splinter Company for $200,000 under an

installment sale contract. Splinter made a $60,000 cash down payment on July 1, 2015, and signed a 4-year 11% note for the $140,000 balance. The equal annual payments of principal and interest on the note will be $45,125 payable on July 1, 2016, through July 1, 2019. The land could have been sold at an established cash price of $200,000. The cost of the land to Braddock was $150,000. Circumstances are such that the collection of the installments on the note is reasonably assured.

Instructions

(a) Prepare the long-term receivables section of Braddock’s statement of financial position at December 31, 2015.

(b) Prepare a schedule showing interest revenue from the long-term receivables that would appear on Braddock’s income statement for the year ended December 31, 2015.

Answers:

(a) BRADDOCK INC.

Long-Term Receivables Section of Statement of Financial Position December 31, 2015

9% note receivable from sale of division, due

in annual installments of $500,000 toMay 1, 2017, less current installment................................................... $ 500,000 (1)

8% note receivable from officer, due Dec. 31, 2017, collateralized by 10,000 sharesof Braddock, Inc., common stockwith a fair value of $450,000................................................................. $ 400,000

Zero-interest-bearing note from sale of patent, net of 12% imputed interest, due April 1,2017 ........................................................................................................ $ 86,873 (2)

Installment contract receivable, due in annual installments of $45,125 to July 1, 2019,less current installment......................................................................... $ 110,275 (3)

Total long-term receivables.............................................................................. $ 1,097,148

(b) BRADDOCK INC.

Interest Revenue from Long-Term Receivables For the Year Ended December 31, 2015

Interest income:Note receivable from sale of division .............................................................. $ 105,000 (5) Note receivable from sale of patent ................................................................ $ 7,173 (2) Note receivable from officer .......................................................................... $ 32,000 (6) Installment contract receivable from sale of land ............................................ $ 7,700 (4) Total interest income for year ended 12/31/15 ................................................ $ 151,873

Explanation of Amounts: (1) Long-term Portion of 9% Note Receivable at 12/31/15

Face amount, 5/1/14 ........................................................................... $ 1,500,000 Less: Installment received 5/1/15 ....................................................... $ 500,000 Balance, 12/31/15 ............................................................................... $ 1,000,000 Less: Installment due 5/1/16 ............................................................... $ 500,000 Long-term portion, 12/31/15 .............................................................. $ 500,000

(2) Zero-interest-bearing Note, Net of Imputed Interest at 12/31/10 Face amount 4/1/10 ............................................................................ $ 100,000 Less: Imputed interest [$100,000 – ($100,000 X 0.797)] .................... $ 20,300 Balance, 4/1/14 .................................................................................. $ 79,700 Add: Interest earned to 12/31/15 ($79,700 X 12% X 9/12) .................. $ 7,173 Balance, 12/31/15 ............................................................................... $ 86,873

(3) Long-term Portion of Installment Contract Receivable at 12/31/15 Contract selling price, 7/1/15 .............................................................. $ 200,000 Less: Down payment, 7/1/15 ............................................................. $ 60,000 Balance, 12/31/15 ............................................................................... $ 140,000 Less: Installment due, 7/1/17 [$45,125 – ($140,000 X 11%)] ............. $ 29,725 Long-term portion, 12/31/16 .............................................................. $ 110,275

(4) Accrued Interest—Installment Contract at 12/31/15 Interest accrued from 7/1 to 12/31/15

($140,000 X 11% X 1/2) .................................................................. $ 7,700

(5) Interest Revenue—Note Receivable, Sale of Division, for 2015 Interest earned from 1/1 to 5/1/2015($1,500,000 X 9% X 4/12) ........ $ 45,000 Interest earned from 5/1 to 12/31/15($1,000,000 X 9% X 8/12) ........ $ 60,000 Interest income .................................................................................... $ 105,000

(6) Interest Revenue—Note Receivable, Officer, for 2015 Interest earned 1/1/ to 12/31/15 ($400,000 X 8%) ........................................................................... $ 32,000

Financial Liabilities: Long Term Liabilities

a) On January 1, 2015, Langley Co. issued 9% bonds with a face value of $700,000 for $656,992 to yield 10%. The bonds are dated January 1, 2015, and pay interest annually. What amount is reported for interest expense in 2015 related to these bonds?

b) Tweedie Building Co. has a number of long-term bonds outstanding at December 31, 2015. These long-term bonds have the following sinking fund requirements and maturities for the next 6 years. Sinking Fund Maturities 2016 $300,000 $100,000 2017 100,000 250,000 2018 100,000 100,000 2019 200,000 - 2020 200,000 150,000 2021 200,000 100,000

Indicate how this information should be reported in the financial statements at December 31,2015.

c) In the long-term debt structure of Beckford Inc., the following three bonds were reported: mortgage bonds payable $10,000,000; collateral trust bonds $5,000,000; bonds maturing in installments, secured by plant equipment $4,000,000. Determine the total amount, if any, of debenture bonds outstanding

Answers

a. Carrying amount of the bonds on January 1, 2015 $656,992 Effective-interest rate (10%) x 0.10 Interest expense to be reported for 2015 $65,699

b. Maturities and sinking fund requirements on long-term debt for the next five years are as follows: 2011: $400,000 2012: 350,000 2013: 200,000 2014: 200,000 2015: 350,000

c. Since the three bonds reported by Beckford Inc. are secured by either real estate, securities of other corporations, or plant equipment, none of the bonds are classified as debenture bonds.

Stockholder’s Equity Penzi Company was formed on July 1, 2013. It was authorized to issue 300,000 shares of $10 par value ordinary shares and 100,000 shares of 8% $25 par value, cumulative and non-participating preference shares. Penzi Company has a July 1-June 30 fiscal year. The following information relates to the equity accounts of Penzi Company. Ordinary Shares Prior to the 2015-2016 fiscal year, Penzi Company had 110,000 ordinary shares outstanding issued as follows.

1. 85,000 shares were issued for cash on July 1, 2013, at $31 per share. 2. On July 24, 2013, 5.000 shares were exchanged for a plot of land which cost the seller

$70,000 in 2007 and had an estimated FV $220,000 on July 24, 2013. 3. 20,000 shares were issued on March 1, 2014, for $42 per share.

During the 2015-2016 fiscal year, the following transactions regarding ordinary shares took place.

Nov 30, 2015: Penzi purchased 2,000 of its own shares on the open market at $39 per share. Penzi uses the cost method for treasury shares. Dec 15, 2015: Penzi declared a 5% share dividend for shareholders of record on January 15, 2016, to be issued on January 31, 2016. Penzi was having a liquidity problem and could not afford a cash dividend at the time. Penzi’s ordinary shares were selling at $52 per share on December 15, 2015. June 20, 2016: Penzi sold 500 of its own ordinary shares that it had purchased on November 30, 2015, for $21,000.

Preference Shares Penzi issued 40,000 preference shares at $44 per share on July 1, 2014. Cash Dividends Penzi has followed a schedule of declaring cash dividends in December and June, with payment being made to shareholders of record in the following month. The cash dividends which have been declared since inception of the company through June 30, 2016, are shown below.

Declaration Date Ordinary Shares Preference Shares Dec 15, 2014 $ 0.30 per share $ 1.00 per share Jun 15, 2015 $ 0.30 per share $ 1.00 per share Dec 15, 2015 - $ 1.00 per share

No cash dividens were declared during June 2016 due to company’s liquidity problems. Retained Earnings As of June 30, 2015, Penzi’s retained earnings account had a balance of $690,000. For the fiscal year ending June 30, 2016, Penzi reported net income of $40,000. Prepare the equity section of the statement of financial position, including appropriate notes, for Penzi Company as of June 30, 2016, as it should appear in its annual report to the shareholders.

Answers

PENN COMPANY Partial Statement of Financial Position

June 30, 2011

Equity 8% Share capital—preference, $25 par value,

cumulative and non-participating, 100,000 shares authorized, 40,000 shares issued and outstanding—Note A .......................... $1,000,000 Share capital—ordinary shares, $10 par value, 300,000 shares authorized, 115,400 shares

issued with 1,500 shares held in the treasury .................. 1,154,000 $2,154,000 Share premium—preference .............................................. 760,000 Share premium—ordinary ................................................. 2,821,800* Share premium—treasury.................................................. 1,500 3,583,300

Retained earnings ............................................................................. 409,200 Less: Treasury shares, (1,500 shares) .............................................. 58,500 Total equity ............................................................................. $6,088,000

Note A: Penn Company is in arrears on the preference shares in the amount of $40,000. *Share Premium—Ordinary: Issue of 85,000 shares X ($31 – $10) $1,785,000 Plot of land 170,000 Issue of 20,000 shares (3/1/09) 640,000 [20,000 X ($42 – $10)] 5,400 shares as dividend [5,400 X ($52 – $10)] 226,800 $2,821,800

Account Balances Share Capital-Ordinary= 850,000 + 50,000 + 200,000 + 54,000 = 1,154,000 Share Premium-Ordinary= Issue 85000 x (31-10) = 1,785,000 Plot of land 170,000 Issue 20000 x (42-10) = 640,000 Share dividend 5400 x (52-10) = 226,800 2,821,800 Share Capital-Preference= 1,000,000 Share Premium-Preference= 760,000 Treasury Shares= 78,000 (Dr) - 19,500 (Cr) = 58,500 (Dr) Share Premium-Treasury Stock= 1,500 Retained Earnings= 690,000 (Cr) – 280,000 (Dr) + 40,000 (Cr) - 40,000 (Dr) = 409,200 (Cr) *Issues 300,000 shares of $10 par value ordinary shares and 100,000 shares of $25 par value, cumulative and nonparticipating preference shares.

Ordinary Shares

1) Cash 2,635,000 Share Capital-Ordinary 850,000 Share Premium-Ordinary 1,785,000

2) Land 220,000 Share Capital-Ordinary 50,000 Share Premium-Ordinary 170,000

3) Cash 840,000 Share Capital-Ordinary 200,000 Share Premium-Ordinary 640,000

Preference Shares

1) Cash 1,760,000 Share Capital-Preference 1,000,000 Share Premium-Preference 760,000

Treasury Shares

1) Treasury Shares 78,000 Cash 78,000

2) Cash 21,000 Treasury Shares 19,500 Share Premium-Treasury 1,500

Share Dividend Shares Outstanding 110,000 Treasury Shares (2,000) 108,000 108,000 x 5% = 5,400 shares 5,400 x $10 = $54,000 Retained Earnings 5400 shares x $52 = $280,800 Retained Earnings 280,800 Share Capital-Ordinary 54,000 Share Premium-Ordinary 226,800

Dilutive Securities On January 1, 2015, Lin Company issued a convertible bond with a par value of £50,000 in the market for £60,000. The bonds are convertible into 6,000 ordinary shares of £1 per share par value. The bond has a 5-year life and has a stated interest rate of 10% payable annually. The market interest rate for a similar non-convertible bond at January 1, 2015, is 8%. The liability component of the bond is computed to be £53,993. The following bond amortization schedule is provided for this bond.

Effective-Interest Method 10% Bond Discounted at 8%

Date Cash Paid Interest Expense Premium Amortized

Carrying Amount of Bonds

Jan 1, 2015 £53,993 Dec 31,

2015 £5,000 £4,319 £681 53,312

Dec 31, 2016

5,000 4,265 735 52,577

Dec 31, 2017

5,000 4,206 794 51,783

Dec 31, 2018

5,000 4,143 857 50,926

Dec 31, 2019

5,000 4,074 926 50,000

a) Prepare the journal entry to record issuance of the convertible bond on January 1, 2015. b) Prepare the journal entry to record the payment of interest on December 31, 2016. c) Assume that the bonds were converted on December 31, 2017. The fair value of the

liability component of the bond is determined to be £54,000 on December 31, 2017. Prepare the journal entry to record the conversion on December 31, 2017. Assume that the accrual of interest related to 2017 has been recorded.

d) Assume that the convertible bonds were repurchased on December 31, 2017, for £55,500 instead of being converted. As indicated, the liability component of the bond is determined to be £54,000 on December 31, 2017. Assume that the accrual of interest related to 2017 has been recorded.

e) Assume that the bonds matured on December 31, 2019, and Lin repurchased the bonds. Prepare the entry(ies) to record this transaction.

Answers (a) Cash ...................................................................................... 60,000 Bonds Payable ......................................................................... 53,993 Share Premium—Conversion Equity ....................................... 6,007 (b) Interest Expense ....................................................................... 4,265 Bonds Payable ............................................................................ 735 Cash ........................................................................................ 5,000 (c) Share Premium—Conversion Equity ........................................ 6,007 Bonds Payable ....................................................................... 51,783 Share Capital—Ordinary (6,000 X $1) .................................... 6,000 Share Premium—Ordinary ...................................................... 51,790 (d) Computation of gain or loss: Present value of liability component at 12/31/13 ........................................................................... $54,000 Less: Carrying value (from above).......................................... 51,783 Loss ........................................................................................ $ 2,217 Adjustment to equity: Fair value of convertible bonds (with both liability and equity) .............................................. $55,500 Less: Liability component ...................................................... 54,000 Adjustment to Share Premium—Conversion Equity................................................................................... $ 1,500 Share Premium—Conversion Equity ........................................ 1,500 Bonds Payable ....................................................................... 51,783 Loss on Repurchase ................................................................. 2,217 Cash ........................................................................................ 55,500 (e) Interest Expense ....................................................................... 4,074 Bonds Payable ............................................................................ 926 Cash ........................................................................................ 5,000 Bonds Payable ....................................................................... 50,000 Cash ........................................................................................ 50,000

Earnings per Share The information below pertains to Barkley Company for 2015.

Net income for the year £1,200,000 (8% convertible bonds issued at par (£1,000 per bond); each bond is convertible) into 30 shares of ordinary shares; the liability component of the bonds is £1,800,000 based on a market rate of 9% 2,000,000 6% convertible, cumulative preference shares, £100 par value; each share is convertible into 3 shares of ordinary shares 4,000,000 Ordinary shares, £10 par value 6,000,000 Tax rate for 2015 40% Average market price of ordinary shares £25 per share

There were no changes during 2015 in the number of ordinary shares, preference shares, or convertible bonds outstanding. There are no treasury shares. The company also has ordinary share options (granted in a prior year) to purchase 75,000 ordinary shares at £20 per share. a) Compute basic earnings per share for 2015. b) Compute diluted earnings per share for 2015.

Answers

(a) Basic EPS =

$1,200,000 – ($4,000,000 X .06)

Net income – Preference dividends Average ordinary shares outstanding

*$6,000,000 ÷ $10 = $1.60 per share

(b) Diluted EPS =

(Net income – Preference dividends) + Interest savings (net of tax)

Average ordinary shares + Potentially dilutive ordinary shares

= $1,200,000 – $240,000a + $97,200b

600,000 + 15,000c + 60,000d

= $1,057,200 675,000

= $1.57 per share

a. Preference shares are not assumed converted since conversion would be antidilutive.

That is, conversion of the preference shares increases the numerator $240,000 ($4,000,000 X .06) and the denominator 120,000 shares [(4,000,000 ÷ 100) X 3]

b. $1,800,000 X .09 X (1 – .40)

c.

$25 – $20 X 75,000 = 15,000 $25

d. ($2,000,000 ÷ $1,000) X 30 shares/bond

Market price – Option price X Number of options = incremental shares Market price

Sumber: https://www.pwc.com/gx/en/audit-services/ifrs/publications/ifrs-9/ifrs-9-understanding-the-basics.pdf Kieso, Donald E, dan Jerry Weygandt, Warfield, Terry., Intermediate Accounting, IFRS

Edition, 2nd edition, John Wiley and Sons, 2014