University of Phoenix Material ABC Company History The ABC Company is a mid-sized company that manufactures goods in the United States and has begun to expand the operation overseas. The company maintains a healthy balance sheet and has reported positive

ABC Company History
ACC/545 Version 6

University of Phoenix Material
ABC Company History
The ABC Company is a mid-sized company that manufactures goods in the United States and has begun
to expand the operation overseas. The company maintains a healthy balance sheet and has reported
positive net income since inception.
Currently, the organization utilizes the average cost inventory method and is exploring a change in
accounting principle to maximize net income and attract new stockholders. Also, the company utilizes the
straight-line method of depreciating fixed assets, which are primarily machinery/equipment and several
large production facilities.
The organization is a publicallytraded company that sells its stock on the open market. Demand for the
stock has caused an increase in the price per share, and if the trend continues, the organization is
considering splitting the stock to encourage investment. The company is having success selling preferred
stock on the open market as well.
ABC Company offers its employees a generous pension plan, but it is currently investigating pension plan
changes that will benefit both the employees and the stockholders. Also, the company offers a 401k and
an employee stock purchase plan to encourage employees to be owners of their company.
Finally, the company finances some of the major investments it has made, including warehouses and
land. To accomplish company goals, it has issued bonds in which the company is now considering
restructuring.
000s Omitted.

Trial Balance (Balance Sheet Accounts
Only)

2013

2012

Cash and Cash Equivalents

4,960.00

2,494.00

Receivables, net

1,398.00

1,413.00

Inventory

11,512.00

Other Current Assets

895.00

900.00

Property and Equipment, at cost

36,033.00

38,491.00

Accumulated Depreciation and Amortization

(15,684.00)

(17,473.00)

Goodwill

1,289.00

1,046.00

Deferred Tax Asset

88.00

473.00

Accounts Payable

(5,797.00)

(5,192.00)

Accrued Salaries and Related Expenses
Sales Taxes Payable

(1,428.00)

(1,200.00)

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ABC Company History
ACC/545 Version 6

(396.00)

(472.00)

Deferred Revenue

(1,337.00)

(1,262.00)

Income Taxes Payable

(12.00)

107.00

Current Installments of Long-Term Debt

(33.00)

783.00

Other Accrued Expenses
Long-Term Debt, excluding current
installments

(1,746.00)

(1,794.00)

(14,691.00)

(9,475.00)

Other Long-Term Liabilities

(2,042.00)

(2,029.00)

Deferred Tax Liability

(545.00)

Paid-In Capital

(8,402.00)

(7,948.00)

Retained Earnings

(23,180.00)

(20,038.00)

Accumulated Other Comprehensive Income

(46.00)

(397.00)

Treasury Stock

19,194.00

10,694.00

Common stock

(88.00)

(88.00)

Total

(11,025.00)

-

Data Needed For Preparation of Week 2 Income
Statement
Net Sales

78,812.00

Cost of Sales

74,754.00
48,912.00

Selling, General and Administrative

16,597.00

16,508.00

Depreciation and Amortization

1,595.00

1,568.00

Interest and Investment Income

(12.00)

(87.00)

Interest Expense

711.00

632.00

Provision for Income Taxes

(3,082.00)

(2,686.00)

Additional Data needed for week 3-6

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2

ABC Company History
ACC/545 Version 6

Foreign Currency Translation Adjustments

100.00

Cash Flow Hedges, net of tax

(12.00)

5.00

Other Comprehensive Income

(10.00)

(1.00)

Dividends
Tax rate
Shares Issued Under Employee Stock
Plans

(2,243.00)
(1,743.00)
40%
40%
103.00

678.00

Tax Effect of Stock-Based Compensation

123.00

82.00

Restricted Stock

228.00

222.00

Repurchases of Common Stock

(8,500.00)

(4,000.00)

Cash Sales

4,523.00

4,356.00

Collections on Receivables

6,739.00

6,038.00

Purchases

(1,332.00)

(1,276.00)

Wages

(987.00)

(905.00)

Payments to Suppliers

(1,028.00)

(1,121.00)

Tax Payments

(275.00)

(204.00)

Interest payments

(12.00)

(10.00)

Capital Expenditures

(1,389.00)

(1,312.00)

Payments for Businesses Acquired
Proceeds from Sales of Property and
Equipment

(206.00)

(170.00)

88.00

50.00

Proceeds from Long-Term Borrowings

5,222.00

-

Repayments of Long-Term Debt

(1,289.00)

(32.00)

Repurchases of Common Stock

(8,546.00)

(3,984.00)

Proceeds from Sales of Common Stock
Cash Dividends Paid to Stockholders

241.00

784.00

Additional Info:

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ABC Company History
ACC/545 Version 6

(2,243.00)
Other Financing Activities

(1,743.00)

(37.00)

(59.00)

Week 2 Assignment:
With the general data provided the following Financial Statements for ABC
Company:
-Balance Sheet
-Income Statement
-Calculate Cost of Goods Sold Using Average Cost Method
-Calculate Depreciation Expense using the straight-line method
-Calculate Deferred tax asset/liability
a.

The following data is available for your computation of the cost of goods sold and the ending
inventory.

A physical inventory on December 31, 2013, shows 810 units on
hand.
Calculate Cost of Goods Sold (COGS) using
average cost.
Purchases
Beginning Inventory

Units
800

Cost
14.39

January 5, 2014

950

13.46

March 25, 2014

950

12.81

June 8, 2014

745

13.65

September 15, 2014

625

13.25

December 15, 2014

505

14.97

Purchas
e
Purchas
e
Purchas
e
Purchas
e
Purchas
e

Note your computation from the above data should yield your ending inventory (which you will insert in the
trial balance in the appropriated category) and the cost of goods sold which you will use in the income
statement develop from the data given. Dont forget to post your Journal Entry for this one booking your
cost of goods and your ending inventory.
b.

The following data will be used for your computation of depreciation expense using the straight
line method.

ABC Company has the following assets acquired on January 1, 2013 requiring depreciation
calculation:

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ABC Company History
ACC/545 Version 6

Asset
Plant with 30 year life at a cost of $660,000
Land at a cost of $2,250,000
Machinery and Equipment with 20 year life at a cost
of 79,000.
Truck with a life of 7 years at a cost of $42,000

Cost
660
2,250
79
42

5

Life
30

20
7

From the above data you are given the information required the depreciation expense for the assets
acquired on January 1, 2013. Please compute the above depreciation expense and add this to the
depreciation expense given in the data above at 1595. Your depreciation expense computed plus the
1595 will be inserted into the Income Statement you develop.
c.

The following data is available showing error corrections and change in inventory method
needed for the 12/31/2013 statements to be booked against retained earnings since these errors
were just discovered and occurred in prior years. The change in accounting method should be
booked against Retained Earnings per GAAP.

(C ) Error Corrections and change in
accounting method(1) An error was discovered during 2013 relating to the understatement of depreciation expense in
2011
resulting in a Prior Period Adjustment of $1,505 before taxes.
Guidance: See our Intermediate Text Chapter 22,
Illustration 20.
(2) ABC Company changed its method of valuing inventory during 2013. The cumulative increase in
income
from the change in inventory methods was $1,285 before
taxes.
Guidance: someone in our class should attempt EX 22-2
from our Intermediate text Chapter 22. Post this in the week
2 forum.
Requirement: Please provide the Journal Entry for the above 2 items and insert your results in the
appropriate accounts in the balance sheet provided above and in the excel sheet.
Overall assignment guidance: this assignment in the attached excel sheet. Please create a tab in the
excel sheet and name it week 2. Please insert the required assignment from the above data in the week
2 tab and submit your completed assignment.

Week 3 Assignment:

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ABC Company History
ACC/545 Version 6

6

Resource: ABC Company History and ABC Financial Data Excel spreadsheet, and the values
from the Week 2 Individual Assignment
Prepare a

statement of Retained Earnings and Comprehensive Income using the values from

Week 2.




Apply error corrections to the retained earnings statement.
Calculate foreign currency translation.
Apply hedging or derivative transaction into statement.

Prepare a

Statement of Owner's Equity, referring to the balance sheet results as well as the
statements prepared for the Week 2 Individual Assignment.
Statement of Retained Earnings in a Microsoft Excel spreadsheet and the Statement
of Owner's Equity and Comprehensive Income.
Submit the

The following should be on your excel sheet to properly respond to the above questions:
With the general data provided the following Financial Statements for ABC Company:
-Statement of Retained Earnings
-Statement of Owners Equity
-Apply error corrections to appropriate statement
-Calculate foreign currency translation and apply to appropriate statement
-Apply Hedging/Derivative transaction to appropriate statement
Fact situation for calculate foreign currency translation:

ABC Company acquired a Canadian Subsidiary whose only asset was land.
ABC Company purchased the subsidiary on 12/31/10 for CA $5,250 and retaines 100% interest in the
subsidiary.
Go to www.x-rates.com and use the historic lookup feature to determine the exact exchange rates on 12/31/1
12/31/13.

Required:
1. Build a schedule showing the foreign currency translation by year showing the amount to
be booked to other comprehensive income which is part of stockholders equity.

Overall assignment guidance:
To build the Statement of Retained Earnings and the Statement of Owners Equity use the trial
balance you built in week 2. You should not have to do any caluclations for the week 3
requirements with the exception of the foreign currency translation above.

Copyright 2014 by University of Phoenix. All rights reserved.

ABC Company History
ACC/545 Version 6

Copyright 2014 by University of Phoenix. All rights reserved.

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