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The assignments are preparing those case study in journal entries and trial balance based on the attachments data and scenario. 1. Inventory valuation, Journal Entries

The assignments are preparing those case study in journal entries and trial balance based on the attachments data and scenario. 1. Inventory valuation, Journal Entries and Trial balance 2. Property, Plant and Equipment Valuation, Journal Entries and Trial Balance 3. Contingencies, Journal Entries and Trial Balance 4. Financial Statement Analysis and IFRS discussion image text in transcribed

ACC321 Intermediate Accounting II Term Project ABC Grocers, Inc. Case Study - A Comparison of IFRS and GAAP Case Summary ABC Grocers, Inc., a public company, has prepared their trial balance, balance sheet, and income statement for the calendar year-end December 31, 2011 based on U.S. GAAP and also based on IFRS. ABC's accountant has already recorded most of the adjustments at year end on the trial balance but needs your assistance in accounting for the following transactions and preparing the appropriate adjusting journal entries. Read through the following information, then using the provided Excel template, complete the missing information. When you completed all of the necessary calculations, journal entries, adjusting entries and the trial balance, conduct a short ratio analysis comparing the financial ratios and financial information generated under IFRS and under GAAP. Inventory ABC Grocers had the following inventory on hand at 12/31/11. Item Units Unit cost Replacement NRV NRV less cost normal profit Bread 177,000 .65 .70 .85 .60 Butter 250,000 1.00 1.10 1.30 .91 Milk 150,000 2.50 2.00 2.25 1.58 Hamburger 175,000 3.45 3.00 3.25 2.28 Hot Dogs 200,000 2.75 2.85 3.00 2.10 Property, Plant and Equipment The Company has the following Property, Plant & Equipment at the beginning of January, 2011: Vacant Land - Denver, Colorado: Purchased September 15, 2009. Cost = Carrying Value at 12/31/10 $1,610,000. Recoverable amount is greater than carrying value (book value). (Note: Throughout this case the term recoverable amount is the higher of the asset's value in use [present value of estimated future cash flows] and fair value less costs to sell.) Land and Building - location Golden, Colorado: The land and building were purchased January 1, 2010. The building is being depreciated using straight-line 15 year life, $0 residual value. For IFRS purposes, the building is revalued on an annual basis. Cost $1,280,000 Land Fair Value 12/31/10 $1,338,000 Building Before 12/31/10 After Revaluation (IFRS allowed 12/31/10 Revaluation only)** Cost 2,175,000 Cost -new after revaluation adjustment 2,218,000 Accum. Deprec. (145,000) Accum. Deprec. -new after revaluation (148,000) adjustment Net Carrying Value 2,030,000 Net Carrying Value 2,070,000 **Revaluation Surplus recorded 12/31/10 = $40,000 for IFRS only. The recoverable amount is greater than the carrying value at 12/31/10. This project has been adapted from the ABC Grocers, Inc. Case Study by Elizabeth C. Conner and Emily Vera of the University of Colorado Denver. The case study comes bundled with the selected text for this course, Intermediate Accounting, 7th edition by Spiceland, Sepe and Nelson. (2013). McGraw-Hill. Machinery & Equipment- location Houston, Texas: Purchased June 1, 2010, straight-line depreciation 5 year life, $0 residual value. The machinery & equipment are carried at cost under both U.S. GAAP and IFRS. 12/31/10 Cost 425,100 Accum. Deprec. (49,595) Net Carrying Value before impairment loss 375,505 Impairment loss -recorded to accumulated depreciation (31,005) Net Revised Carrying Value = Recoverable Amount= Fair Value 344,500 The remaining useful life is not revised even though an impairment loss was recorded. Note: the impairment loss is shown only for information purposes. Management recorded the impairment loss as an adjustment to accumulated depreciation. The Company engaged in the following transactions during 2011: (Note: these transactions have not yet been recorded) 1. Purchased land for $834,000 and constructed a building - location: Dallas, Texas. All costs were paid for in cash and construction was completed 8/31/11: a. Labor & materials $1,233,000 b. Architecture fees $18,250 c. Interest costs capitalized on construction $58,790 d. Prepaid annual insurance of $14,500 for period: 9/1/11 - 8/31/12 The building has a useful life of 18 years, straight-line depreciation, $0 Residual Value. For IFRS purposes, the building is revalued on an annual basis. 2. 9/30/11: Sold the land and building - Golden, Colorado for $3,157,000 cash. 3. 11/1/11: Exchanged the Vacant Land for land and a building in Denver, Colorado. The independent appraised fair value of the land and building were as follows: Land $325,000; Building $1,644,000. The Company paid cash to the other party of $260,000 and paid legal fees of $12,000 (assume the legal fees were attributed to the building) as part of the exchange. In addition, the Company prepaid the annual property tax of $30,000. Useful life of the building is 10 years, $0 residual value, and straight-line depreciation. For IFRS purposes, the building is revalued on an annual basis. This project has been adapted from the ABC Grocers, Inc. Case Study by Elizabeth C. Conner and Emily Vera of the University of Colorado Denver. The case study comes bundled with the selected text for this course, Intermediate Accounting, 7th edition by Spiceland, Sepe and Nelson. (2013). McGraw-Hill. 4. 11/30/11: Paid cash of $135,000 for new furniture and fixtures for the new building in Denver, Colorado. Paid sales tax $10,800 and installation costs of $7,500. Useful life is 7 years, $0 residual value, straight-line depreciation. Year-end information at 12/31/11: Depreciation Recoverable Method Amount Building - Dallas, Texas* Straight-line $1,320,000 Building - Denver, Colorado* Straight-line $1,605,000 Furniture & Fixtures - Denver, Colorado Straight-line $152,500 Machinery & Equipment - Houston, Texas Straight-line $320,000 *Assume the fair value of the land exceeded the cost at year end. Contingencies Loss Contingency 12/31/11 ABC Grocers is being sued by an employee who slipped on spilled milk and broke his back. ABC's lawyers expect to lose the lawsuit and estimate the loss to be between $200,000 and $500,000 with no one outcome being assessed as more likely than the other. Gain Contingency 12/31/11 ABC Grocers had a delivery truck drive through the side of one of their stores causing major damages. The delivery truck is owned by an independent party and ABC Grocers is suing the trucking company for the $1,000,000 in damages. ABC's lawyers are virtually certain they will win the lawsuit and receive the full amount of damages. This project has been adapted from the ABC Grocers, Inc. Case Study by Elizabeth C. Conner and Emily Vera of the University of Colorado Denver. The case study comes bundled with the selected text for this course, Intermediate Accounting, 7th edition by Spiceland, Sepe and Nelson. (2013). McGraw-Hill. ACC321 Term Project ABC Grocers, Inc. Case Study - Inventory Name: Date: Required: Calculate the value of inventory on hand under U.S. GAAP and compute necessary write-downs. Apply the LCM rule to each type of product. Record necessary adjusting journal entries in the template below. Then transfer the entries to the adjusting journal entry worksheet and the respective trial balance worksheet for 12/31/11. Finally, discuss how the inventory valuation would be different under IFRS. Part 1: U.S. GAAP Inventory Item Bread Butter Milk Hamburger Hot Dogs Units NRV less normal profit Middle Cost per unit Replacement cost NRV (Ceiling) (Floor) value LCM Units Value Original cost 0 Part 2: Journal Entries JE # Date JE #1 Debit Credit Note: JE #2 Note: Part 3: IFRS Discussion Part 4: Transfer the above Journal Entries to the Journal Worksheet and the Trial Balance. 0 Adjusting Entry 0 0 0 0 0 0 ACC321 Term Project Name: Date: ABC Grocers, Inc. Case Study - Property, Plant & Equipment Required: Record journal entries for the PP&E transactions below and also in the respective trial balance worksheet even though they are actual transactions occurring prior to December 31. Then enter the year-end adjusting journal entries in Part 2 below. Finally, in Part 3, discuss the Fair Value revaluation option for the properties under GAAP and IFRS. PP&E Part 1: Journal Entries JE # Date JE# 3 Debit Credit Debit Credit Note: JE#4 Note: JE#5 Note: JE#6 Note: JE#7 Note: PP&E Part 2: Year-end Adjusting Entries Journal Entries JE # Date AJE#8 Year-end Adjusting Entries AJE#9 Notes: AJE# 10 Notes: AJE# 11 Notes: Part3: Revaluation - Building Denver, CO and Building Dallas, TX Required: Discuss the FV revaluation of the PP&E at year-end under GAAP and IFRS. Show the Carrying value, recoverable amount and revaluation adjustment if applicable for the buildings under GAAP. Denver Property Building - Denver, CO Accum. Deprec. Carrying Value Recoverable Amount Revaluation Adj Dallas Property Building - Dallas, TX Accum. Deprec. Carrying Value Recoverable Amount Revaluation Adj Part 4: Transfer the above Journal Entries to the Journal Worksheet and the Trial Balance. ACC321 Term Project ABC Grocers, Inc. Case Study - Contingencies Name: Date: Part 1: Discussion Required: Would ABC Grocers recognize a contingent liability or Gain under U.S. GAAP and IFRS? If so, how much? Record necessary adjusting journal entries in their own adjusting journal entry workpaper and also in the respective trial balance worksheet for 12/31/11. GAAP IFRS Part 2: Journal Entries JE # Date AJ# 12 Debit Credit Note: Part 3: Transfer the above Journal Entries to the Journal Worksheet and the Trial Balance. ACC321 Term Project ABC Grocers, Inc. Case Study - Adjusting Entires Name: Date: Required: Transfer the Journal entries from the Inventory, PP&E and Contingencies worksheets to the Journal below. Inventory Adjusting Entries: 1 Debit Credit 2 Property, Plant and Equipment Adjusting Entries: 3 4 5 6 7 8 9 10 11 Contingency Adjusting Entries: 12 0 0 check figures ACC321 Term Project ABC Grocers, Inc. Case Study - Trail Balance Name: Date: Required: Complete the shaded cells of the Trial Balance below. Your Ending Balance entries will automatically transfer to the Financial Statements. ***Note - ignore italicized Adjustments pertaining to current period investments. Unadjusted Balance 12/31/11 Debit Credit JE# Adjustments Debit Credit Ending Balance 12/31/11 Debit Credit BALANCE SHEET ACCOUNTS Cash and equivalents Cash used for Current Period Investment Account receivable Allowance for doubtful accounts Inventories x 523,842 515,100 515,100 24,500 24,500 Prepaid expenses and other Land Buildings Leasehold improvements Fixtures and equipment Property under capital leases Accumulated depreciation 3,835,200 3,835,200 711,500 711,500 Goodwill 2,390,200 Prepaid pension costs Provision for contingent gain Investments 903,636 Other assets 268,100 Current maturities of notes and debentures Current obligations under capital leases Accounts payable Accrued salaries and wages Deferred income taxes Other accrued liabilities Notes and debentures Capital Leases Deferred income taxes Pension and postretirement benefit obligations Accrued claims and other liabilities Provision for contingent liability Common stock Additional paid in capital Treasury stock 4,776,800 Accumulated OCI (loss) 286,904 Retained earnings Net Income subtotal ### INCOME STATEMENT ACCOUNTS Sales and other revenue Other income Investment Revenue COGS ### Depreciation expense 2,390,200 0 0 903,636 268,100 758,400 40,600 2,448,500 450,300 97,200 694,200 6,184,200 516,600 249,600 597,200 651,700 758,400 40,600 2,448,500 450,300 97,200 694,200 6,184,200 516,600 249,600 597,200 651,700 5,900 4,128,300 5,900 4,128,300 4,776,800 286,904 6,762,200 2,862,300 ### 6,762,200 2,883,198 ### ### ### 10,600 ### 10,600 17,298 x ### Bank charges 40,000 Salary expense 6,675,100 Insurance Office supplies 10,000 Office rent 360,000 Utilities 500,000 Advertising 1,000,000 Legal fees 100,000 Accounting expenses 80,000 Property tax and maintenance Interest expense 358,700 Gain on exchange Loss on disposal of building - Golden, CO Realized gain on Investments Loss on write-down of inventory Contingent loss Contingent gain Income taxes Net Income 17,298 40,000 6,675,100 10,000 360,000 500,000 1,000,000 100,000 80,000 358,700 x 3,600 539,300 Totals ### 3,600 539,300 ### ### 0 544,740 ### ### ### ABC GROCERS, INC. U.S. GAAP BALANCE SHEET 12/31/11 ASSETS CURRENT ASSETS Cash and cash equivalents Accounts receivable, net Inventories Prepaid expenses and other current assets TOTAL CURRENT ASSETS PROPERTY Land Building Leasehold improvements Fixtures and equipment Property under capital leases Less accumulated depreciation and amortization Total property, net Goodwill Investments Other assets Total Other Assets TOTAL ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of notes and debentures Current obligations under capital leases Accounts payable Accrued salaries and wages Deferred income taxes Other accrued liabilities TOTAL CURRENT LIABILITIES NONCURRENT LIABILITIES Notes and debentures Obligations under capital leases Deferred income taxes Pension and postretirement benefit obligations Provision for contingent liability Accrued claims and other liabilities TOTAL NONCURRENT LIABILITIES $0 490,600 0 0 490,600 0 0 3,835,200 0 711,500 4,546,700 0 4,546,700 2,390,200 903,636 268,100 3,561,936 $8,599,236 $758,400 40,600 2,448,500 450,300 97,200 694,200 4,489,200 6,184,200 516,600 249,600 597,200 0 651,700 8,199,300 TOTAL LIABILITIES STOCKHOLDERS' EQUITY Common stock Additional paid-in capital Treasury stock Accumulated OCI (loss) Retained earnings TOTAL STOCKHOLDERS' EQUITY TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 12,688,500 5,900 4,128,300 (4,776,800) (286,904) 9,645,398 8,715,894 $21,404,394 ABC GROCERS, INC. U.S. GAAP STATEMENT OF INCOME FOR THE YEAR ENDED 12/31/11 PERCENT OF REVENUE Sales and other revenue Cost of goods sold Gross profit on sales Operating and administrative expenses: Bank charges Salary expense Insurance Office supplies Office rent Utilities Advertising Legal fees Accounting expenses Property maintenance Depreciation Total operating and administrative expenses Operating profit Other income (expense): Other income Interest expense Investment Revenue Gain on exchange Loss on disposal of building - Golden, CO Realized gain on Investments Loss on write-down of inventory Contingent loss Total other income (expense) Income before income taxes Income taxes Net income (loss) $44,104,000 (31,589,200) 12,514,800 100.00% 71.62% 28.38% 40,000 6,675,100 0 10,000 360,000 500,000 1,000,000 100,000 80,000 0 0 0.09% 15.13% 0.00% 0.02% 0.82% 1.13% 2.27% 0.23% 0.18% 0.00% 0.00% (8,765,100) 3,749,700 -19.87% 8.51% 10,600 (358,700) 17,298 0 0 3,600 0 0 (327,202) 3,422,498 (539,300) 0.02% -0.81% 0.04% 0.00% 0.00% 0.01% 0.00% 0.00% -0.74% 7.77% -1.22% $2,883,198 6.55% ABC GROCERS, INC. IFRS BALANCE SHEET 12/31/11 ASSETS NON CURRENT ASSETS PROPERTY Land Building Leasehold improvements Fixtures and equipment Property under capital leases Less accumulated depreciation and amortization Total property, net $1,857,600 6,475,209 3,835,200 7,982,200 711,500 20,861,709 (8,996,634) 11,865,075 Goodwill Investments Provision for contingent gain Other assets 2,390,200 933,636 1,000,000 268,100 TOTAL NONCURRENT ASSETS 16,457,011 CURRENT ASSETS Inventories Inventory valuation allowance Accounts receivable, net Prepaid expenses and other current assets Cash and cash equivalents 2,591,400 (72,500) 490,600 521,567 402,118 TOTAL CURRENT ASSETS 3,933,185 TOTAL ASSETS $20,390,196 LIABILITIES AND STOCKHOLDERS' EQUITY STOCKHOLDERS' EQUITY Common stock Additional paid-in capital Treasury stock Accumulated OCI (loss) Revaluation Surplus Retained earnings $5,900 4,128,300 (4,776,800) (268,700) 34,220 8,118,776 TOTAL STOCKHOLDERS' EQUITY NONCURRENT LIABILITIES Notes and debentures Obligations under capital leases Deferred income taxes Pension and postretirement benefit obligations Provision for contingent liability Accrued claims and other liabilities 7,241,696 6,184,200 516,600 249,600 597,200 350,000 651,700 TOTAL NONCURRENT LIABILITIES CURRENT LIABILITIES Current maturities of notes and debentures Current obligations under capital leases Accounts payable Accrued salaries and wages Deferred income taxes Other accrued liabilities TOTAL CURRENT LIABILITIES 8,549,300 758,400 40,600 2,448,500 450,300 207,200 694,200 4,599,200 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$20,390,196 ABC GROCERS, INC. IFRS STATEMENT OF INCOME FOR THE YEAR ENDED 12/31/11 PERCENT OF REVENUE Sales and other revenue Cost of goods sold Gross profit on sales Operating and administrative expenses: Bank charges Commission expense Salary expense Insurance Office supplies Office rent Utilities Advertising Legal fees Accounting expenses Property maintenance Depreciation Total operating and administrative expenses Operating profit Other income (expense): Other income Interest expense Investment Revenue Impairment loss recovery Gain on exchange Loss on disposal of Building - Golden, CO Revaluation expense - Building - Denver, CO Net Unralized gain (loss) Inventory write-down expense Contingent loss Contingent gain Total other income (expense) Income before income taxes Income taxes Net income (loss) $44,104,000 (31,589,200) 12,514,800 100.00% 71.62% 28.38% 40,000 1,400 6,675,000 1,404,833 10,000 360,000 500,000 1,000,000 100,000 80,000 255,000 489,578 0.09% 0.00% 15.13% 3.19% 0.02% 0.82% 1.13% 2.27% 0.23% 0.18% 0.58% 1.11% (10,915,811) 1,598,989 -24.75% 3.63% 10,600 (358,700) 17,298 30,000 99,000 (42,107) (23,400) (13,204) (72,500) (350,000) 1,000,000 296,987 1,895,976 (539,300) 0.02% -0.81% 0.04% 0.07% 0.22% -0.10% -0.05% -0.03% -0.16% -0.79% 2.27% 0.67% 4.30% -1.22% $1,356,676 3.08% ACC321 Term Project ABC Grocers, Inc. Case Study - Ratio Analysis 1. Compute the following ratios: a. Current b. Quick c. Debt to assets d. Return on assets GAAP Name: Date: IFRS 2. Discuss why the financial statements and ratios differ under the two standards of accounting. Part 2 - PP&E For the Journal Entries: 1. You need to get out a piece of scratch paper and make 4 sections. Title each section as follows: Dallas property, Golden property, Denver property, and finally Houston Machinery & Equipment. This is so that you can keep track of all the information for each property. 2. Now go through the information and put everything in the correct box. 3. Now make your journal entries for the four events that occurred during the year: a. Purchased Dallas property, b. Sold Golden property c. Exchanged land in Denver for another Denver property and constructed building. d. Bought furniture and fixtures for new Denver building. When making these entries remember to include any accumulated depreciation or prepaid expenses that were part of the transaction. You must also compute the gains or losses. Don't worry about any tax implications! This is not a test on if you remember about section 1231 and the recapture provisions. ;p Also - assume cash was paid for everything. For the Adjusting entries: These are all to record the depreciation expense and the used-up prepaid expenses for the year on the four property items: Dallas, Golden, Denver and Houston. Remember to prorate the annual amount of straight-line as necessary for any partial year's worth...hint! Hint! Also - since we are using GAAP, Depreciation is based on cost, not fair value...hint again! For the Revaluation and Carrying Values: For this part you need to discuss in the text box what would be done differently with respect to the previous parts (the journal entries and the adjusting entries), and with respect to computing the carrying value. You may want to compute the carrying value for the Denver and Dallas properties under GAAP first. All of the information needed to compute this comes from the journal entries. This will help you write your discussion. Here are some check figures: PP&E Part 1: J ournal E ntries J # E Date JE 3 # 8/ 31/ 11 Debit Land - Dallas, Texas Building - Dallas, Texas Prepaid E xpense (Insurance) Cash Note: JE #4 9/ 30/ 11 9/ 30/ 11 Cash Accum. Depreciation - Building Golden, CO Loss on Disposal Building - Golden, Colorado Land - Golden, Colorado Note: JE #6 11/ 1/ 11 Land - Denver, Colorado Building - Denver, Colorado Prepaid E xpense (Property Tax) Land (Vacant)- Denver, CO Gain on E xchange Cash Note: 2,158,540 Depreciation E xpense Accumulated Depreciation - Building Golden, CO Note: cost = 2,175,000 JE #5 Credit JE #7 11/ 30/ 11 Furniture & E quipment- Denver, Colorado Cash Note: 3,157,000 302,000 PP&E Part 2: Year-end Adjusting E ntries J ournal E ntries J # E Date AJE #8 Year-end Adjusting E ntries AJE #9 Depreciation E xpense Property Tax E xpense Prepaid Expense (Property Tax ) Accumulated Depreciation - Building Denver, CO Notes: AJE 10 # Depreciation E xpense Accumulated Depreciation - Furniture & Fix Denver, CO Notes: AJE 11 # Depreciation E xpense Accumulated Depreciation - Machinery & Equip - Houston, TX Notes: Debit Depreciation E xpense Insurance E xpense Prepaid Expense (Insurance) Accumulated Depreciation - Building Dallas, TX Notes: Credit ACC321 Term Project ABC Grocers, Inc. Case Study - Inventory Name: ABC Grocer Inc Date: 12/31/11 Required: Calculate the value of inventory on hand under U.S. GAAP and compute necessary write-downs. Apply the LCM rule to each type of product. Record necessary adjusting journal entries in the template below. Then transfer the entries to the adjusting journal entry worksheet and the respective trial balance worksheet for 12/31/11. Finally, discuss how the inventory valuation would be different under IFRS. Part 1: U.S. GAAP Inventory Item Bread Butter Milk Hamburger Hot Dogs Units Cost per unit Replacement cost NRV (Ceiling) 177,000 0.65 0.70 0.85 250,000 1.00 1.10 1.30 150,000 2.50 2.00 2.25 175,000 3.45 3.00 3.25 200,000 2.75 2.85 3.00 Part 2: Journal Entries JE # Date JE #1 8/31/11 work in process material Note: JE #2 8/31/11 work in process Labour Note: Debit 616,500 NRV less normal profit Middle (Floor) value LCM 0.60 0.70 0.65 0.91 1.10 1.00 1.58 2.00 2.50 2.28 3.00 3.45 2.10 2.85 2.75 Units 177,000 250,000 150,000 175,000 200,000 Value Original cost 123,900 115,050 275,000 250,000 300,000 375,000 525,000 603,750 570,000 550,000 1,793,900 1,893,800 Adjusting Entry -8,850 0 -25,000 0 75,000 0 78,750 0 -20,000 0 99,900 Credit 616,500 616,500 616,500 Part 3: IFRS Discussion According to GAPP system company adopt LIFO and FIFO system to maintain the profit and provide valuation for company. inventory required the account types of inventory system. the standard required to measured cost at a lower rate and realistic value accpptable for determine cost. including specific identification FIFO and LIFO and weighted average method also specify rules. Part 4: Transfer the above Journal Entries to the Journal Worksheet and the Trial Balance. ACC321 Term Project Name: ABC Grocers, Inc Date: 31-Dec-11 ABC Grocers, Inc. Case Study - Property, Plant & Equipment Required: Record journal entries for the PP&E transactions below and also in the respective trial balance worksheet even though they are actual transactions occurring prior to December 31. Then enter the year-end adjusting journal entries in Part 2 below. Finally, in Part 3, discuss the Fair Value revaluation option for the properties under GAAP and IFRS. PP&E Part 1: Journal Entries JE # Date JE# 3 8/30/2011 land building prepaid expences cash Building and land JE#4 JE#5 JE#6 9/30/11 Debit 325,000 16,644,000 260,000 Credit 17,229,000 depriciation Accumulated depriciation Note: depriciation expense 310,715 Cash Accumulated depriciation loss on deposit building Colora land colora 317,500 45,358 2,000 11/31/11 building accumulated depriciation adjusting cost cash expense 217,500 145,000 0 9/30/11 310,715 320,000 4,488 217,500 145,000 Note: depriciation records JE#7 11/30/11 furniture cash Note: cash paid for furniture 135,000 135,000 PP&E Part 2: Year-end Adjusting Entries Journal Entries Year-end Adjusting Entries JE # Date AJE#8 11/30/11 depriciation insurance expence prepaid expense accumulated expense AJE#9 AJE# 10 9/30/11 depriciation expense insurance expense prepaid expense accumulated depriciation Notes: purchases record ### depriciation auumulated expence Notes: record depriciation AJE# 11 12/31/11 depriciation accumulated depriciation Notes: record loss Debit 1,233,000 12,500 Credit 1,233,000 12,500 325,000 2,000 2,000 325,000 21,900 21,900 32,000 32,000 Part3: Revaluation - Building Denver, CO and Building Dallas, TX Required: Discuss the FV revaluation of the PP&E at year-end under GAAP and IFRS. Show the Carrying value, recoverable amount and revaluation adjustment if applicable for the buildings under GAAP. According to GAPP system company adopt LIFO and FIFO system to maintain the profit and provide valuation for company. inventory required the account types of inventory system. the standard required to measured cost at a lower rate and realistic value accpptable for determine cost. including specific identification FIFO and LIFO and weighted average method also specify rules. GAPPS used specific inventory system and values are provided to all determinants. GAPP record the system cost and all other values are also been recorded. Denver Property Building - Denver, CO Accum. Deprec. Carrying Value ### 188,571 1,131,429 Recoverable Amount Revaluation Adj 157,933 2333,00 Dallas Property Building - Dallas, TX Accum. Deprec. Carrying Value 1,605,000 229,285 137,515 Recoverable Amount Revaluation Adj 157,933 2333,00 Part 4: Transfer the above Journal Entries to the Journal Worksheet and the Trial Balance. ACC321 Term Project ABC Grocers, Inc. Case Study - Contingencies Name: ABC Grocers, Inc Date: 12/31/2011 Part 1: Discussion Required: Would ABC Grocers recognize a contingent liability or Gain under U.S. GAAP and IFRS? If so, how much? Record necessary adjusting journal entries in their own adjusting journal entry workpaper and also in the respective trial balance worksheet for 12/31/11. GAAP GAAP basis provide costs and values requires to assessment for specific cost and valuation model straight line m odle used for items production and feel for actual production. Corporations use MACRE method of acceleration for tax purpose and depreciation method for preparation of financial statements that is balance sheet and income statement. This method is in best interest of company to provide favour in taxes. This method minimized taxable income so taxes are needed to be paid less. Company want to minimize depreciation on its income statement that needs results of higher income that is earning per share. Modified acceleration cost recovery method is designed only foe tax purpose which decreased the value of income reported for tax purpose. IFRS Modified acceleration cost recovery method is designed only foe tax purpose which decreased the value of income reported for tax purpose. Corporation normally used straight line depreciation method only for minimizing income statements. Modified acceleration cost recovery that provide advantages to switch from double declining balance method to straight line depreciation at some point in life of assets. Taxes cosy reduce by number of depreciation that remain balancing and amount of depreciation become cheaper. MACRS is shown in the percentage of depreciation for decreasing the value of deposited tax for a year. Part 2: Journal Entries JE # Date AJ# 12 12/31/11 truck cash Note: record truck Debit 100,000 Credit 100,000 Part 3: Transfer the above Journal Entries to the Journal Worksheet and the Trial Balance. ACC321 Term Project ABC Grocers, Inc. Case Study - Adjusting Entires Name: ABC Groces, Inc Date: 12/31/2011 Required: Transfer the Journal entries from the Inventory, PP&E and Contingencies worksheets to the Journal below. Inventory Adjusting Entries: 1 Building accumulated depriciation Depriciation Debit Credit 10,080 10,080 2 loss 300,000 cash 300,000 Property, Plant and Equipment Adjusting Entries: 3 PP& E Accumulated depriciation recovery cost cash 834,000 119,143 0 935,143 4 Depriciation expense building 31,200 31,200 5 11/30/11 land insurance cash expence 1,233,000 12,500 1,233,000 12,500 6 building land material cash accumulated depriciation recover cost 32,000 25,000 164,400 1,233 199,633 23,000 7 Truck cash 100,000 100,000 8 9/30/11 land building taxes cash 325,000 1,644,000 2,000 1,967,000 9 9/30/11 land building taxes cash Notes: purchases record 325,000 1,644,000 2,000 1,967,000 10 12/30/2011 depriciation expence 21,900 21,900 11 taxes cash 10,800 10,800 Contingency Adjusting Entries: 12 12/31/11 truck cash 100,000 100,000 6,933,256 6,915,256 check figures ACC321 Term Project ABC Grocers, Inc. Case Study - Trail Balance Name: ABC Grocers, Inc Date: 12/31/2011 Required: Complete the shaded cells of the Trial Balance below. Your Ending Balance entries will automatically transfer to the Financial Statements. ***Note - ignore italicized Adjustments pertaining to current period investments. Unadjusted Balance 12/31/11 Debit Credit JE# BALANCE SHEET ACCOUNTS Cash and equivalents 5,000 230,000 Cash used for Current Period Investment Account receivable Allowance for doubtful accounts Inventories 515,100 24,500 346,772 Prepaid expenses and other 56,060 Land Adjustments Debit Credit Ending Balance 12/31/11 Debit Credit 1 200,000 x 2 1,222 3 6 1,644,000 523,842 6,754 516,322 24,500 2,390 9 56,060 320,000 16,400 145,000 Buildings 303,600 2,030,000 2,175,000 Leasehold improvements Fixtures and equipment Property under capital leases Accumulated depreciation 3,835,200 128,000 711,500 3,835,200 128,000 711,500 32,000 164,000 196,000 Goodwill 2,390,200 Prepaid pension costs Provision for contingent gain Investments 903,636 Other assets 268,100 Current maturities of notes and debentures Current obligations under capital leases Accounts payable Accrued salaries and wages Deferred income taxes Other accrued liabilities Notes and debentures Capital Leases Deferred income taxes Pension and postretirement benefit obligations Accrued claims and other liabilities Provision for contingent liability 3,561,936 Common stock Additional paid in capital Treasury stock 4,776,800 Accumulated OCI (loss) 286,904 Retained earnings Net Income subtotal ### INCOME STATEMENT ACCOUNTS Sales and other revenue Other income Investment Revenue COGS ### Depreciation expense 123 2,390,200 0 0 903,636 268,100 758,400 40,600 2,448,500 450,300 97,200 694,200 6,184,200 516,600 249,600 597,200 651,700 ### 5,900 4,128,300 758,400 40,600 2,448,500 450,300 97,200 694,200 6,184,200 516,600 249,600 597,200 651,700 3,561,936 8,990,700 5,900 4,128,300 4,776,800 286,904 6,762,200 2,883,198 ### ### 6,762,200 2,485,665 ### ### 10,600 x ### 10,600 17,298 17,298 ### 344 Bank charges 40,000 Salary expense 6,675,100 Insurance Office supplies 10,000 Office rent 360,000 Utilities 500,000 Advertising 1,000,000 Legal fees 100,000 Accounting expenses 80,000 Property tax and maintenance Interest expense 358,700 Gain on exchange Loss on disposal of building - Golden, CO 100,000 Realized gain on Investments Loss on write-down of inventory 600,000 Contingent loss Contingent gain Income taxes Net Income 40,000 6,675,100 12,344 10,000 360,000 500,000 1,000,000 100,000 80,000 10,800 358,700 200,000 x 3,600 3,600 200,000 100,000 539,300 Totals ### 539,300 ### ### 1,845,222 544,740 ### ### ### ABC GROCERS, INC. U.S. GAAP BALANCE SHEET 12/31/11 ASSETS CURRENT ASSETS Cash and cash equivalents Accounts receivable, net Inventories Prepaid expenses and other current assets TOTAL CURRENT ASSETS PROPERTY Land Building Leasehold improvements Fixtures and equipment Property under capital leases Less accumulated depreciation and amortization Total property, net Goodwill Investments Other assets Total Other Assets TOTAL ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of notes and debentures Current obligations under capital leases Accounts payable Accrued salaries and wages Deferred income taxes Other accrued liabilities TOTAL CURRENT LIABILITIES NONCURRENT LIABILITIES Notes and debentures Obligations under capital leases Deferred income taxes Pension and postretirement benefit obligations Provision for contingent liability Accrued claims and other liabilities TOTAL NONCURRENT LIABILITIES $0 491,822 0 0 491,822 0 0 3,835,200 128,000 711,500 4,674,700 0 4,674,700 2,390,200 903,636 268,100 3,561,936 $8,728,458 $758,400 40,600 2,448,500 450,300 97,200 694,200 4,489,200 6,184,200 516,600 249,600 597,200 8,990,700 651,700 17,190,000 TOTAL LIABILITIES STOCKHOLDERS' EQUITY Common stock Additional paid-in capital Treasury stock Accumulated OCI (loss) Retained earnings TOTAL STOCKHOLDERS' EQUITY TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 21,679,200 5,900 4,128,300 (4,776,800) (286,904) 9,645,398 8,715,894 $30,395,094 ABC GROCERS, INC. U.S. GAAP STATEMENT OF INCOME FOR THE YEAR ENDED 12/31/11 PERCENT OF REVENUE Sales and other revenue Cost of goods sold Gross profit on sales Operating and administrative expenses: Bank charges Salary expense Insurance Office supplies Office rent Utilities Advertising Legal fees Accounting expenses Property maintenance Depreciation Total operating and administrative expenses Operating profit Other income (expense): Other income Interest expense Investment Revenue Gain on exchange Loss on disposal of building - Golden, CO Realized gain on Investments Loss on write-down of inventory Contingent loss Total other income (expense) Income before income taxes Income taxes Net income (loss) $44,104,000 (31,589,200) 12,514,800 100.00% 71.62% 28.38% 40,000 6,675,100 0 10,000 360,000 500,000 1,000,000 100,000 80,000 0 0 0.09% 15.13% 0.00% 0.02% 0.82% 1.13% 2.27% 0.23% 0.18% 0.00% 0.00% (8,765,100) 3,749,700 -19.87% 8.51% 10,600 (358,700) 17,298 0 0 3,600 0 0 (327,202) 3,422,498 (539,300) 0.02% -0.81% 0.04% 0.00% 0.00% 0.01% 0.00% 0.00% -0.74% 7.77% -1.22% $2,883,198 6.55% ABC GROCERS, INC. IFRS BALANCE SHEET 12/31/11 ASSETS NON CURRENT ASSETS PROPERTY Land Building Leasehold improvements Fixtures and equipment Property under capital leases Less accumulated depreciation and amortization Total property, net $1,857,600 6,475,209 3,835,200 7,982,200 711,500 20,861,709 (8,996,634) 11,865,075 Goodwill Investments Provision for contingent gain Other assets 2,390,200 933,636 1,000,000 268,100 TOTAL NONCURRENT ASSETS 16,457,011 CURRENT ASSETS Inventories Inventory valuation allowance Accounts receivable, net Prepaid expenses and other current assets Cash and cash equivalents 2,591,400 (72,500) 490,600 521,567 402,118 TOTAL CURRENT ASSETS 3,933,185 TOTAL ASSETS $20,390,196 LIABILITIES AND STOCKHOLDERS' EQUITY STOCKHOLDERS' EQUITY Common stock Additional paid-in capital Treasury stock Accumulated OCI (loss) Revaluation Surplus Retained earnings $5,900 4,128,300 (4,776,800) (268,700) 34,220 8,118,776 TOTAL STOCKHOLDERS' EQUITY NONCURRENT LIABILITIES Notes and debentures Obligations under capital leases Deferred income taxes Pension and postretirement benefit obligations Provision for contingent liability Accrued claims and other liabilities 7,241,696 6,184,200 516,600 249,600 597,200 350,000 651,700 TOTAL NONCURRENT LIABILITIES CURRENT LIABILITIES Current maturities of notes and debentures Current obligations under capital leases Accounts payable Accrued salaries and wages Deferred income taxes Other accrued liabilities TOTAL CURRENT LIABILITIES 8,549,300 758,400 40,600 2,448,500 450,300 207,200 694,200 4,599,200 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$20,390,196 ABC GROCERS, INC. IFRS STATEMENT OF INCOME FOR THE YEAR ENDED 12/31/11 PERCENT OF REVENUE Sales and other revenue Cost of goods sold Gross profit on sales Operating and administrative expenses: Bank charges Commission expense Salary expense Insurance Office supplies Office rent Utilities Advertising Legal fees Accounting expenses Property maintenance Depreciation Total operating and administrative expenses Operating profit Other income (expense): Other income Interest expense Investment Revenue Impairment loss recovery Gain on exchange Loss on disposal of Building - Golden, CO Revaluation expense - Building - Denver, CO Net Unralized gain (loss) Inventory write-down expense Contingent loss Contingent gain Total other income (expense) Income before income taxes Income taxes Net income (loss) $44,104,000 (31,589,200) 12,514,800 100.00% 71.62% 28.38% 40,000 1,400 6,675,000 1,404,833 10,000 360,000 500,000 1,000,000 100,000 80,000 255,000 489,578 0.09% 0.00% 15.13% 3.19% 0.02% 0.82% 1.13% 2.27% 0.23% 0.18% 0.58% 1.11% (10,915,811) 1,598,989 -24.75% 3.63% 10,600 (358,700) 17,298 30,000 99,000 (42,107) (23,400) (13,204) (72,500) (350,000) 1,000,000 296,987 1,895,976 (539,300) 0.02% -0.81% 0.04% 0.07% 0.22% -0.10% -0.05% -0.03% -0.16% -0.79% 2.27% 0.67% 4.30% -1.22% $1,356,676 3.08% ACC321 Term Project ABC Grocers, Inc. Case Study - Ratio Analysis 1. Compute the following ratios: a. Current b. Quick c. Debt to assets d. Return on assets GAAP 0.02 0.02 2.48 0.33 Name: ABC Grocers, Inc Date: 12/31/2011 IFRS 0.47 1.00 0.64 0.07 2. Discuss why the financial statements and ratios differ under the two standards of accounting. GAPP system has standard value that is implemented in all organizations but sometimes its not gave final and accurate result according to performance of company. Corporation normally used straight line depreciation method only for minimizing income statements. Modified acceleration cost recovery that provide advantages to switch from double declining balance method to straight line depreciation at some point in life of assets. Taxes cosy reduce by number of depreciation that remain balancing and amount of depreciation become cheaper. MACRS is shown in the percentage of depreciation for decreasing the value of deposited tax for a year. Part 2 - PP&E For the Journal Entries: 1. You need to get out a piece of scratch paper and make 4 sections. Title each section as follows: Dallas property, Golden property, Denver property, and finally Houston Machinery & Equipment. This is so that you can keep track of all the information for each property. 2. Now go through the information and put everything in the correct box. 3. Now make your journal entries for the four events that occurred during the year: a. Purchased Dallas property, b. Sold Golden property c. Exchanged land in Denver for another Denver property and constructed building. d. Bought furniture and fixtures for new Denver building. When making these entries remember to include any accumulated depreciation or prepaid expenses that were part of the transaction. You must also compute the gains or losses. Don't worry about any tax implications! This is not a test on if you remember about section 1231 and the recapture provisions. ;p Also - assume cash was paid for everything. For the Adjusting entries: These are all to record the depreciation expense and the used-up prepaid expenses for the year on the four property items: Dallas, Golden, Denver and Houston. Remember to prorate the annual amount of straight-line as necessary for any partial year's worth...hint! Hint! Also - since we are using GAAP, Depreciation is based on cost, not fair value...hint again! For the Revaluation and Carrying Values: For this part you need to discuss in the text box what would be done differently with respect to the previous parts (the journal entries and the adjusting entries), and with respect to computing the carrying value. You may want to compute the carrying value for the Denver and Dallas properties under GAAP first. All of the information needed to compute this comes from the journal entries. This will help you write your discussion. Here are some check figures: PP&E Part 1: J ournal E ntries J # E Date JE 3 # 8/ 31/ 11 Debit Land - Dallas, Texas Building - Dallas, Texas Prepaid E xpense (Insurance) Cash Note: JE #4 9/ 30/ 11 9/ 30/ 11 Cash Accum. Depreciation - Building Golden, CO Loss on Disposal Building - Golden, Colorado Land - Golden, Colorado Note: JE #6 11/ 1/ 11 Land - Denver, Colorado Building - Denver, Colorado Prepaid E xpense (Property Tax) Land (Vacant)- Denver, CO Gain on E xchange Cash Note: 2,158,540 Depreciation E xpense Accumulated Depreciation - Building Golden, CO Note: cost = 2,175,000 JE #5 Credit JE #7 11/ 30/ 11 Furniture & E quipment- Denver, Colorado Cash Note: 3,157,000 302,000 PP&E Part 2: Year-end Adjusting E ntries J ournal E ntries J # E Date AJE #8 Year-end Adjusting E ntries AJE #9 Depreciation E xpense Property Tax E xpense Prepaid Expense (Property Tax ) Accumulated Depreciation - Building Denver, CO Notes: AJE 10 # Depreciation E xpense Accumulated Depreciation - Furniture & Fix Denver, CO Notes: AJE 11 # Depreciation E xpense Accumulated Depreciation - Machinery & Equip - Houston, TX Notes: Debit Depreciation E xpense Insurance E xpense Prepaid Expense (Insurance) Accumulated Depreciation - Building Dallas, TX Notes: Credit ACC321 Term Project ABC Grocers, Inc. Case Study - Inventory Name: ABC Grocer Inc Date: 12/31/11 Required: Calculate the value of inventory on hand under U.S. GAAP and compute necessary write-downs. Apply the LCM rule to each type of product. Record necessary adjusting journal entries in the template below. Then transfer the entries to the adjusting journal entry worksheet and the respective trial balance worksheet for 12/31/11. Finally, discuss how the inventory valuation would be different under IFRS. Part 1: U.S. GAAP Inventory Item Bread Butter Milk Hamburger Hot Dogs Units Cost per unit Replacement cost NRV (Ceiling) 177,000 0.65 0.70 0.85 250,000 1.00 1.10 1.30 150,000 2.50 2.00 2.25 175,000 3.45 3.00 3.25 200,000 2.75 2.85 3.00 Part 2: Journal Entries JE # Date JE #1 8/31/11 work in process material Note: JE #2 8/31/11 work in process Labour Note: Debit 616,500 NRV less normal profit Middle (Floor) value LCM 0.60 0.70 0.65 0.91 1.10 1.00 1.58 2.00 2.50 2.28 3.00 3.45 2.10 2.85 2.75 Units 177,000 250,000 150,000 175,000 200,000 Value Original cost 123,900 115,050 275,000 250,000 300,000 375,000 525,000 603,750 570,000 550,000 1,793,900 1,893,800 Adjusting Entry -8,850 0 -25,000 0 75,000 0 78,750 0 -20,000 0 99,900 Credit 616,500 616,500 616,500 Part 3: IFRS Discussion According to GAPP system company adopt LIFO and FIFO system to maintain the profit and provide valuation for company. inventory required the account types of inventory system. the standard required to measured cost at a lower rate and realistic value accpptable for determine cost. including specific identification FIFO and LIFO and weighted average method also specify rules. Part 4: Transfer the above Journal Entries to the Journal Worksheet and the Trial Balance. ACC321 Term Project Name: ABC Grocers, Inc Date: 31-Dec-11 ABC Grocers, Inc. Case Study - Property, Plant & Equipment Required: Record journal entries for the PP&E transactions below and also in the respective trial balance worksheet even though they are actual transactions occurring prior to December 31. Then enter the year-end adjusting journal entries in Part 2 below. Finally, in Part 3, discuss the Fair Value revaluation option for the properties under GAAP and IFRS. PP&E Part 1: Journal Entries JE # Date JE# 3 8/30/2011 land building prepaid expences cash Building and land JE#4 JE#5 JE#6 9/30/11 Debit 325,000 16,644,000 260,000 Credit 17,229,000 depriciation Accumulated depriciation Note: depriciation expense 310,715 Cash Accumulated depriciation loss on deposit building Colora land colora 317,500 45,358 2,000 11/31/11 building accumulated depriciation adjusting cost cash expense 217,500 145,000 0 9/30/11 310,715 320,000 4,488 217,500 145,000 Note: depriciation records JE#7 11/30/11 furniture cash Note: cash paid for furniture 135,000 135,000 PP&E Part 2: Year-end Adjusting Entries Journal Entries Year-end Adjusting Entries JE # Date AJE#8 11/30/11 depriciation insurance expence prepaid expense accumulated expense AJE#9 AJE# 10 9/30/11 depriciation expense insurance expense prepaid expense accumulated depriciation Notes: purchases record ### depriciation auumulated expence Notes: record depriciation AJE# 11 12/31/11 depriciation accumulated depriciation Notes: record loss Debit 1,233,000 12,500 Credit 1,233,000 12,500 325,000 2,000 2,000 325,000 21,900 21,900 32,000 32,000 Part3: Revaluation - Building Denver, CO and Building Dallas, TX Required: Discuss the FV revaluation of the PP&E at year-end under GAAP and IFRS. Show the Carrying value, recoverable amount and revaluation adjustment if applicable for the buildings under GAAP. According to GAPP system company adopt LIFO and FIFO system to maintain the profit and provide valuation for company. inventory required the account types of inventory system. the standard required to measured cost at a lower rate and realistic value accpptable for determine cost. including specific identification FIFO and LIFO and weighted average method also specify rules. GAPPS used specific inventory system and values are provided to all determinants. GAPP record the system cost and all other values are also been recorded. Denver Property Building - Denver, CO Accum. Deprec. Carrying Value ### 188,571 1,131,429 Recoverable Amount Revaluation Adj 157,933 2333,00 Dallas Property Building - Dallas, TX Accum. Deprec. Carrying Value 1,605,000 229,285 137,515 Recoverable Amount Revaluation Adj 157,933 2333,00 Part 4: Transfer the above Journal Entries to the Journal Worksheet and the Trial Balance. ACC321 Term Project ABC Grocers, Inc. Case Study - Contingencies Name: ABC Grocers, Inc Date: 12/31/2011 Part 1: Discussion Required: Would ABC Grocers recognize a contingent liability or Gain under U.S. GAAP and IFRS? If so, how much? Record necessary adjusting journal entries in their own adjusting journal entry workpaper and also in the respective trial balance worksheet for 12/31/11. GAAP GAAP basis provide costs and values requires to assessment for specific cost and valuation model straight line m odle used for items production and feel for actual production. Corporations use MACRE method of acceleration for tax purpose and depreciation method for preparation of financial statements that is balance sheet and income statement. This method is in best interest of company to provide favour in taxes. This method minimized taxable income so taxes are needed to be paid less. Company want to minimize depreciation on its income statement that needs results of higher income that is earning per share. Modified acceleration cost recovery method is designed only foe tax purpose which decreased the value of income reported for tax purpose. IFRS Modified acceleration cost recovery method is designed only foe tax purpose which decreased the value of income reported for tax purpose. Corporation normally used straight line depreciation method only for minimizing income statements. Modified acceleration cost recovery that provide advantages to switch from double declining balance method to straight line depreciation at some point in life of assets. Taxes cosy reduce by number of depreciation that remain balancing and amount of depreciation become cheaper. MACRS is shown in the percentage of depreciation for decreasing the value of deposited tax for a year. Part 2: Journal Entries JE # Date AJ# 12 12/31/11 truck cash Note: record truck Debit 100,000 Credit 100,000 Part 3: Transfer the above Journal Entries to the Journal Worksheet and the Trial Balance. ACC321 Term Project ABC Grocers, Inc. Case Study - Adjusting Entires Name: ABC Groces, Inc Date: 12/31/2011 Required: Transfer the Journal entries from the Inventory, PP&E and Contingencies worksheets to the Journal below. Inventory Adjusting Entries: 1 Building accumulated depriciation Depriciation Debit Credit 10,080 10,080 2 loss 300,000 cash 300,000 Property, Plant and Equipment Adjusting Entries: 3 PP& E Accumulated depriciation recovery cost cash 834,000 119,143 0 935,143 4 Depriciation expense building 31,200 31,200 5 11/30/11 land insurance cash expence 1,233,000 12,500 1,233,000 12,500 6 building land material cash accumulated depriciation recover cost 32,000 25,000 164,400 1,233 199,633 23,000 7 Truck cash 100,000 100,000 8 9/30/11 land building taxes cash 325,000 1,644,000 2,000 1,967,000 9 9/30/11 land building taxes cash Notes: purchases record 325,000 1,644,000 2,000 1,967,000 10 12/30/2011 depriciation expence 21,900 21,900 11 taxes cash 10,800 10,800 Contingency Adjusting Entries: 12 12/31/11 truck cash 100,000 100,000 6,933,256 6,915,256 check figures ACC321 Term Project ABC Grocers, Inc. Case Study - Trail Balance Name: ABC Grocers, Inc Date: 12/31/2011 Required: Complete the shaded cells of the Trial Balance below. Your Ending Balance entries will automatically transfer to the Financial Statements. ***Note - ignore italicized Adjustments pertaining to current period investments. Unadjusted Balance 12/31/11 Debit Credit JE# BALANCE SHEET ACCOUNTS Cash and equivalents 5,000 230,000 Cash used for Current Period Investment Account receivable Allowance for doubtful accounts Inventories 515,100 24,500 346,772 Prepaid expenses and other 56,060 Land Adjustments Debit Credit Ending Balance 12/31/11 Debit Credit 1 200,000 x 2 1,222 3 6 1,644,000 523,842 6,754 516,322 24,500 2,390 9 56,060 320,000 16,400 145,000 Buildings 303,600 2,030,000 2,175,000 Leasehold improvements Fixtures and equipment Property under capital leases Accumulated depreciation 3,835,200 128,000 711,500 3,835,200 128,000 711,500 32,000 164,000 196,000 Goodwill 2,390,200 Prepaid pension costs Provision for contingent gain Investments 903,636 Other assets 268,100 Current maturities of notes and debentures Current obligations under capital leases Accounts payable Accrued salaries and wages Deferred income taxes Other accrued liabilities Notes and debentures Capital Leases Deferred income taxes Pension and postretirement benefit obligations Accrued claims and other liabilities Provision for contingent liability 3,561,936 Common stock Additional paid in capital Treasury stock 4,776,800 Accumulated OCI (loss) 286,904 Retained earnings Net Income subtotal ### INCOME STATEMENT ACCOUNTS Sales and other revenue Other income Investment Revenue COGS ### Depreciation expense 123 2,390,200 0 0 903,636 268,100 758,400 40,600 2,448,500 450,300 97,200 694,200 6,184,200 516,600 249,600 597,200 651,700 ### 5,900 4,128,300 758,400 40,600 2,448,500 450,300 97,200 694,200 6,184,200 516,600 249,600 597,200 651,700 3,561,936 8,990,700 5,900 4,128,300 4,776,800 286,904 6,762,200 2,883,198 ### ### 6,762,200 2,485,665 ### ### 10,600 x ### 10,600 17,298 17,298 ### 344 Bank charges 40,000 Salary expense 6,675,100 Insurance Office supplies 10,000 Office rent 360,000 Utilities 500,000 Advertising 1,000,000 Legal fees 100,000 Accounting expenses 80,000 Property tax and maintenance Interest expense 358,700 Gain on exchange Loss on disposal of building - Golden, CO 100,000 Realized gain on Investments Loss on write-down of inventory 600,000 Contingent loss Contingent gain Income taxes Net Income 40,000 6,675,100 12,344 10,000 360,000 500,000 1,000,000 100,000 80,000 10,800 358,700 200,000 x 3,600 3,600 200,000 100,000 539,300 Totals ### 539,300 ### ### 1,845,222 544,740 ### ### ### ABC GROCERS, INC. U.S. GAAP BALANCE SHEET 12/31/11 ASSETS CURRENT ASSETS Cash and cash equivalents Accounts receivable, net Inventories Prepaid expenses and other current assets TOTAL CURRENT ASSETS PROPERTY Land Building Leasehold improvements Fixtures and equipment Property under capital leases Less accumulated depreciation and amortization Total property, net Goodwill Investments Other assets Total Other Assets TOTAL ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of notes and debentures Current obligations under capital leases Accounts payable Accrued salaries and wages Deferred income taxes Other accrued liabilities TOTAL CURRENT LIABILITIES NONCURRENT LIABILITIES Notes and debentures Obligations under capital leases Deferred income taxes Pension and postretirement benefit obligations Provision for contingent liability Accrued claims and other liabilities TOTAL NONCURRENT LIABILITIES $0 491,822 0 0 491,822 0 0 3,835,200 128,000 711,500 4,674,700 0 4,674,700 2,390,200 903,636 268,100 3,561,936 $8,728,458 $758,400 40,600 2,448,500 450,300 97,200 694,200 4,489,200 6,184,200 516,600 249,600 597,200 8,990,700 651,700 17,190,000 TOTAL LIABILITIES STOCKHOLDERS' EQUITY Common stock Additional paid-in capital Treasury stock Accumulated OCI (loss) Retained earnings TOTAL STOCKHOLDERS' EQUITY TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 21,679,200 5,900 4,128,300 (4,776,800) (286,904) 9,645,398 8,715,894 $30,395,094 ABC GROCERS, INC. U.S. GAAP STATEMENT OF INCOME FOR THE YEAR ENDED 12/31/11 PERCENT OF REVENUE Sales and other revenue Cost of goods sold Gross profit on sales Operating and administrative expenses: Bank charges Salary expense Insurance Office supplies Office rent Utilities Advertising Legal fees Accounting expenses Property maintenance Depreciation Total operating and administrative expenses Operating profit Other income (expense): Other income Interest expense Investment Revenue Gain on exchange Loss on disposal of building - Golden, CO Realized gain on Investments Loss on write-down of inventory Contingent loss Total other income (expense) Income before income taxes Income taxes Net income (loss) $44,104,000 (31,589,200) 12,514,800 100.00% 71.62% 28.38% 40,000 6,675,100 0 10,000 360,000 500,000 1,000,000 100,000 80,000 0 0 0.09% 15.13% 0.00% 0.02% 0.82% 1.13% 2.27% 0.23% 0.18% 0.00% 0.00% (8,765,100) 3,749,700 -19.87% 8.51% 10,600 (358,700) 17,298 0 0 3,600 0 0 (327,202) 3,422,498 (539,300) 0.02% -0.81% 0.04% 0.00% 0.00% 0.01% 0.00% 0.00% -0.74% 7.77% -1.22% $2,883,198 6.55% ABC GROCERS, INC. IFRS BALANCE SHEET 12/31/11 ASSETS NON CURRENT ASSETS PROPERTY Land Building Leasehold improvements Fixtures and equipment Property under capital leases Less accumulated depreciation and amortization Total property, net $1,857,600 6,475,209 3,835,200 7,982,200 711,500 20,861,709 (8,996,634) 11,865,075 Goodwill Investments Provision for contingent gain Other assets 2,390,200 933,636 1,000,000 268,100 TOTAL NONCURRENT ASSETS 16,457,011 CURRENT ASSETS Inventories Inventory valuation allowance Accounts receivable, net Prepaid expenses and other current assets Cash and cash equivalents 2,591,400 (72,500) 490,600 521,567 402,118 TOTAL CURRENT ASSETS 3,933,185 TOTAL ASSETS $20,390,196 LIABILITIES AND STOCKHOLDERS' EQUITY STOCKHOLDERS' EQUITY Common stock Additional paid-in capital Treasury stock Accumulated OCI (loss) Revaluation Surplus Retained earnings $5,900 4,128,300 (4,776,800) (268,700) 34,220 8,118,776 TOTAL STOCKHOLDERS' EQUITY NONCURRENT LIABILITIES Notes and debentures Obligations under capital leases Deferred income taxes Pension and postretirement benefit obligations Provision for contingent liability Accrued claims and other liabilities 7,241,696 6,184,200 516,600 249,600 597,200 350,000 651,700 TOTAL NONCURRENT LIABILITIES CURRENT LIABILITIES Current maturities of notes and debentures Current obligations under capital leases Accounts payable Accrued salaries and wages Deferred income taxes Other accrued liabilities TOTAL CURRENT LIABILITIES 8,549,300 758,400 40,600 2,448,500 450,300 207,200 694,200 4,599,200 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$20,390,196 ABC GROCERS, INC. IFRS STATEMENT OF INCOME FOR THE YEAR ENDED 12/31/11 PERCENT OF REVENUE Sales and other revenue Cost of goods sold Gross profit on sales Operating and administrative expenses: Bank charges Commission expense Salary expense Insurance Office supplies Office rent Utilities Advertising Legal fees Accounting expenses Property maintenance Depreciation Total operating and administrative expenses Operating profit Other income (expense): Other income Interest expense Investment Revenue Impairment loss recovery Gain on exchange Loss on disposal of Building - Golden, CO Revaluation expense - Building - Denver, CO Net Unralized gain (loss) Inventory write-down expense Contingent loss Contingent gain Total other income (expense) Income before income taxes Income taxes Net income (loss) $44,104,000 (31,589,200) 12,514,800 100.00% 71.62% 28.38% 40,000 1,400 6,675,000 1,404,833 10,000 360,000 500,000 1,000,000 100,000 80,000 255,000 489,578 0.09% 0.00% 15.13% 3.19% 0.02% 0.82% 1.13% 2.27% 0.23% 0.18% 0.58% 1.11% (10,915,811) 1,598,989 -24.75% 3.63% 10,600 (358,700) 17,298 30,000 99,000 (42,107) (23,400) (13,204) (72,500) (350,000) 1,000,000 296,987 1,895,976 (539,300) 0.02% -0.81% 0.04% 0.07% 0.22% -0.10% -0.05% -0.03% -0.16% -0.79% 2.27% 0.67% 4.30% -1.22% $1,356,676 3.08% ACC321 Term Project ABC Grocers, Inc. Case Study - Ratio Analysis 1. Compute the following ratios: a. Current b. Quick c. Debt to assets d. Return on assets GAAP 0.02 0.02 2.48 0.33 Name: ABC Grocers, Inc Date: 12/31/2011 IFRS 0.47 1.00 0.64 0.07 2. Discuss why the financial statements and ratios differ under the two standards of accounting. GAPP system has standard value that is implemented in all organizations but sometimes its not gave final and accurate result according to performance of company. Corporation normally used straight line depreciation method only for minimizing income statements. Modified acceleration cost recovery that provide advantages to switch from double declining balance method to straight line depreciation at some point in life of assets. Taxes cosy reduce by number of depreciation that remain balancing and amount of depreciation become cheaper. MACRS is shown in the percentage of depreciation for decreasing the value of deposited tax for a year