Text written in are additional study notes.

E1.1 (pg.28)
❒ The financial report of my choice belongs to PT. Jaya Konstruksi Manggala Pratama (JKON)

E1.8 (pg. 29)

a. The Chief Financial Officer is Okky Dharmosetio (Director of Finance HRD & General Affairs also as Vice President Director)
(pg. 22 fs)

b. The names of the directors (BOARD OF DIRECTORS) are as follow :

▪ President Director → Sutopo Kristanto
▪ Vice President Director → Okky Dharmosetio
▪ Vice President Director → Umar Ganda
▪ Director → Diaz Moreno
▪ Director → Zali Yahya
▪ Independent Director → Hardjanto Agus Priambodo
(pg. 22 fs)

c. The audit process were conducted by Amir Abadi Jusuf, Aryanto, Mawar & Rekan (Public Accountant)
It was not explicitly stated whether the auditor reviewed the entire report yet it was mentioned that the public accountant concerned
conducted their audit in accordance with Standard on Auditing established by the Indonesian Institute of Certified Public Accountants.
(pg. 108 fs)

d. The names of the financial statements provided are as follow :

▪ Consolidated Statements Of Financial Position (pg. 111 fs)
▪ Consolidated Statements Of Profit or Loss and Other Comprehensive Income (pg.112 fs)
▪ Consolidated Statements Of Changes in Equity (pg. 113fs)
▪ Consolidated Statements Of Cash Flows (pg.114 fs)
▪ Notes to Consolidated Financial Statements (pg. 115 - 236 fs)
e. Total number of pages of notes accompany the financial statements is 122 pages (115 - 236).
f. There are NO other reports provided in additions to the financial statements.
P2.20 (pg.67)
*information from textbooks (ACCOUNTING : What The Numbers Mean 10e) :

Merchandise Inventory $ 132,000 ~

Notes payable (long-term) 150,000 `
Sales 450,000 .
Buildings and equipment 252,000 ~
Selling, general and administrative expense 36,000 .
Accounts Receivable 60,000 ~
Common stock (21.000 shares) 105,000 ,
Income Tax Expense 42,000 .
Cash 96,000 ~
Retained Earnings, 1/1/13 64,500 ,
Accrued Liabilities 9,000 `
Cost of Good Sold 270,000 .
Accumulated Depreciation 108,000 ~
Interest Expense 24,000 .
Accounts Payable 45,000 `
Dividends declared and paid during 2013 19,500 ,

▪ all balances reflect account balaces at Dec 31, 2013 and all income statement items reflect activities that occurred during the
year ended Dec 31, 2013.
▪ no changes paid-in capital during the year.
Answers :
a. ▪ Income Statement :

Shae, Inc.
Income Statement
For the Year Ended December 31, 2013

Sales $ 450,000
Less :
Cost of Goods Sold 270,000
Gross Profit $ 180,000
Less :
Selling, general and administrative expense 36,000
Earnings before Interest and Taxes (EBIT/operating income) $ 144,000
Less :
Interest Expense 24,000
Earnings before taxes (EBT) $ 120,000
Less :
Income Tax Expense 42,000
NET INCOME $ 78,000
▪ Statement of changes in Stockholder's Equity :

Shae, Inc.
Statement of Changes in Stockholders' Equity
For the Year Ended December 31, 2013

Paid-in Capital :
Beginning Balance. :
Common stock (21.000 shares) $ 105,000
Additional paid-in capital 0
Balance, December 31, 2013 $ 105,000

Retained Earnings :
Beginning Balance (Retained Earnings, 1/1/13) $ 64,500
Net Income for the year (as calculated in income statement) 78,000
Less :
Dividends declared and paid during 2013 19,500
Balance, December 31, 2013 $ 123,000

TOTAL STOCKHOLDERS' EQUITY ((paid-in capital + retained earnings) or (paid-in capital - retained loss)) $ 228,000
▪ Balance Sheet :

Shae, Inc.
BALANCE SHEET
December 31, 2013

ASSETS
CURRENT ASSETS
Cash $ 96,000
Account Receivable 60,000
Merchandise Inventory 132,000
Total Current Assets $ 288,000

PLANT and EQUIPMENT

Building and Equipment $ 252,000
Less : Accumulated Depreciation 108,000
Total Plant and Equipment 144,000

$
TOTAL ASSETS (current assets + fixed assets or could be Plant, Property and Equip. (PPE) as shown in this case) 432,000
listed in order of LIQUIDITY
 LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES :
Accounts Payable $ 45,000
Accrued Liabilities 9,000
Total Current Liabilities $ 54,000

LONG-TERM LIABILITIES
Notes payable (long-term) $ 150,000
Other long-term liabilities -0-
e.g. : longterm lease, mortgage, bonds payable, bank loans, pension obligations, etc.
Total Long-term Liabilities $ 150,000

TOTAL LIABILITIES (current liabilities + long-term liabilities) $ 204,000

listed in order of LIQUIDATION

STOCKHOLDERS' EQUITY (as stated in statement of changes in stockholder equity)

Paid in capital $ 105,000
Retained Earnings (use the ending balance) 123,000
TOTAL STOCKHOLDERS' EQUITY 228,000

TOTAL LIABILITIES + STOCKOLDERS' EQUITY $ 432,000

*if these two numbers are matched (between A and L+E, it is able to consider the Balance Sheet as BALANCED)
b. Company's Average Income Tax Rate = Total Tax Expense Income Tax Expense 42,000
= x 100 =
Total Taxable Income Earnings Before Taxes 120,000

= 35% average tax rate

→ The average tax rate shows that Shae, Inc' spend 35% of their income for tax expense.
*higher tax rate means higher company's perfomance

c. Interest Rate that charged on long-term debt = Interest Expense 24,000

= = 16% interest rate
Notes Payable (long-term) 150,000
→ The Interest Rate shows that 16% of Shae, Inc's notes payable (long-term) are due.
*when interest rate rises, bank will charge more for business loans and considered the company as high risk borrower.
Thus, company will need more of their money to pay income which will bring profits to decreased.
* FORMULA :
Interest Expense
Interest Rate =
Principal Balance (… or debt instruments being asked)

d. Par Value PER Share of Common Stock = Par Value of Share 105,000
= = 5 par value
Number of Share Issued 21,000
→ The Common Stock price per shared issued in Shae, Inc. is $5
* FORMULA :
Common stock at par = Par Value of Share * Numbers of Share Issued
e. The Shae, Inc.'s dividend policy :
▪ Amount of dividends being declared and paid is $19.500
▪ Dividends Declared and Paid 19,500
Proportion of The Company's Earning is Used for Dividends = = x 100%
Net Income 78,000
*referred to as Dividend Payout Ratio dividend payout
$ = 25% ratio
$ / Shares
Shares

→ The dividend payout ratio shows that Shae, Inc. is paying out 25% of its net income to their shareholders.
Thus, their retention ratio (*FORMULA : Retention Ratio = 1 - DPR) is 75% which means the remaining 75% of
Shea, Inc. Net Income is kept by the company (Retained Earnings) for company growth opportunities .
* FORMULA :
Dividend Payout Ratio (DPR) = Dividends per Share (DPS)
Earnings per Share (EPS)
↓
or…
↓
Total Dividends Paid - any special dividends Net Income - Preferred Stock Dividends
divided by…
Outstanding Shares Outstanding Shares
↓
thus…
↓
Dividends
Net Income
P2.26 (pg.72)
*information from textbooks (ACCOUNTING : What The Numbers Mean 10e) :
▪ Time frame : September 25, 2010 - September 24, 2011

2011 2010
Net Sales $108,249 $65,225
Cost of sales 64,431 39,541
Research and development expenses 2,429 1,782
Selling, general, and administrative expenses 7,599 5,517
Operating income ? ?
Other income, net ? 155
Provision for income taxes 8,283 ?
Net Income $25,922 $14,013

a. Apple's Gross Profit for Each Year :

*FORMULA :
Gross Profit = Sales - Cost of Good Sold

2011 2010
Net Sales $108,249 $65,225
Less :
Cost of Good Sold 64,431 39,541
Gross Profit $43,818 $25,684
Apple's Gross Profit as a Percentage of Sales
The calculation are as folow :

Gross Profit $43,818 $25,684

Apple's Gross Profit as a percentage of sales = x 100% =
Net Sales $108,249 $65,225
*referred to as Gross Profit Margin
*FORMULA : = 40.48% 39.38%
Gross Profit Margin = Gross Profit
Revenue difference = 40.48% - 39.38%
= 1.10% INCREASED

Apple's gross profit as a percentage of sales has INCREASED during the past year.
The beginning percentage (September 25, 2010) was 39,4 % which ended up in the percentage of
40,5 % (September 24, 2011) that shows an INCREASING Gross Profit percentage for 1,10%.
The 1,10% increasing Gross Profit Margin rate can't be considered as significant.
According to https://corporatefinanceinstitute.com/resources/knowledge/accounting/profit-margin/ :
5% margin is low, 10% margin is average, and 20% margin is HIGH or GOOD.
Since the number as calculated above (1,10%) is below 5%,
it is able to conclude that the Gross Profit Margin as percentage of sales has NOT changed SIGNIFICANTLY.
b. Apple's Operating Income for each year
*same formula as Net INCOME but specifically for activities that are related to the operating activities.
From the data calculated in question a, we can use Gross Profit as Revenue for the Operating Income calculation using Net Income formula.
*FORMULA :
Net Income = Revenue - Expenses
2011 2010
Revenue
Gross Profit $43,818 $25,684
Less :
Expenses
Research and development expenses $2,429 $1,782
Selling, general, and administrative expenses $7,599 $5,517
Net Income (for Operating Activities) / Operating Income $33,790 $18,385

Apple's Operating Income as Operating Income 33,790 18,385

x 100% =
Percentage of Sales = Net Sales 108,249 65,225
*referred as Operating Profit Margin
*FORMULA :
= 31.22% = 28.19%
Operating Profit
Operating Profit Margin =
Net Sales
difference = 31.22% - 28.19%
= 3.03% INCREASED

Apple's Operating Income as Percentage of Sales has INCREASED during the period.
As calculated, the number calculated shown 3,03% INCREASING point from the previous percentage.
Referring to the margin standard from answer provided to question A (above), it is able to assume that Apple's Operating Income as
Percentage of Sales (Operating Profit Margin) can be categorized as INSIGNIFICANT because the number showing is below 5% (LOW).
c. Missing amounts for each year :
2011 2010
Net Sales $108,249 $65,225
Cost of sales 64,431 39,541
Research and development expenses 2,429 1,782
Selling, general, and administrative expenses 7,599 5,517
Operating income ? ?
Other income, net ? 155
Provision for income taxes 8,283 ?
Net Income $25,922 $14,013

2011 2010
▪ Operating Income (already calculated in question B above) = $33,790 $18,385

▪ Other Income, net (2011) :

*references : Income Statement (IFRS SUPPLEMENTS)
 COMPANY NAME
Income Statement
For the Year Ended _______________
Sales Revenue
Sales $ xxxxx
Less :
Sales Discounts $ xxxxx
Sales Return and Allowance xxxxx (xxxxx)
Net Sales Revenue xxxxx
Cost of Goods Sold (xxxxx)
Gross Profit xxxxx
Less :
Selling Expenses
________ expenses $ xxxxx
________ expenses xxxxx
________ expenses xxxxx
Total Selling Expenses xxxxx

Administrative Expenses
________ expenses xxxxx
________ expenses xxxxx
________ expenses xxxxx
Total Administrative Expenses xxxxx
Total Expenses (xxxxx)
Other Income and expenses
________ Revenue xxxxx
________ Revenue xxxxx
Total other Income
 Less :
_______ expenses xxxxx
_______ expenses xxxxx
Total Other Expenses (xxxxx)
Other Income → profit or loss xxxxx
Income From Operation xxxxx
Less :
Interest on bonds and notes / Intereset Expenses (xxxxx)
Income Before Income Tax xxxxx
Less :
Income Tax Expense (xxxxx)
NET INCOME FOR THE YEAR XXXXX

attributable to :
Shareholders of (company name) xxxxx
Non-controlling Interes xxxxx
Earning per share ((shareholders + NCI) divided by unit of share outstanding) x.xx

We can use the references above to calculate the missing amounts asked.
2011
Gross Profit (we can use Operating Income as stated in information above) $33,790
Other Income ?
Income from Operation (equal as Income Before Income Taxes because $34,205
there is no interest exepense mentioned in this case)
Less :
Interest Expense (0)
Income Before Taxes* $34,205 *
 Other Income = Income from
- Gross Profit (or Operating Income)
Operation
= $34,205 - $33,790
= $415
*from information that we have, we can calculate Income before Taxes by deducting Net income with Income Tax expense
or adding Provision for Income Tax Expense to Net Income
Income Before Taxes = Net Income + Provision fo Income Taxes

= $25,922 + $8,283
= $34,205 *

▪ Provision for Income Taxes (2010)

2010
Gross Profit (we can use Operating Income) $18,385
Other Income 155
Income from Operation $18,540
Less :
Interest Expense (in this case referred as Provision for Income taxes) (0)
Income Before Taxes (equals as Income Before Income Taxes because $18,540
there is no interest exepense mentioned in this case)
Less :
Income Tax Expense
*in this case,instead of deducting Income Tax Expense we ADD Provision for Income Taxes to Net Income
Add :
Provision for Income Taxes ?
Net Income $14,013

Provision for Income

Taxes =
Provision for Income
Taxes = Net Income - Income Before Taxes

= $14,013 - $18,540

= -$4,527 → NEGATIVE Provision for Income Taxes

l study notes.
,
"

"
*
*
d in Shae, Inc. is $5.
 P4.27

a. Filling the Balance Sheet for Campbell Soup Company for Accounts Receivable, Inventories, and Payable to Suppliers and Others.

EQUITIES
ASSETS = LIABILITIES +
Revenues - Expenses
Payable to Marketing,
Cash and Cash + Accounts Cost of Selling and
+ Inventories = Suppliers and + Net Sales - Products
Equivalents Receivable Sold + Administrative balance
Others Expenses check
$512 a + $724 a = $545 a $691
Beginning Balance
$7,719 b1 = $7,719 b1 $0
Net Sales
-$4,616 b2 = - $4,616 b2 $0
Cost of Products Sold

Marketing, Selling, and b3 b3

= $1,619 - + $1,619 $0
Administrative Expense
$4,659 c1 = $4,659 c1 $0
Purchases on Account

Collections of Accounts c2 c2
$7,671 + -$7,671 = $0
Receivable

Payment To Suppliers
-$6,238 c3 = -$6,238 c3 $0
and Others
$1,433 + $560 a + $767 a = $585 a + $7,719 - $4,616 + $1,619
Ending Balance
balance check : $1,433 + $560 + $767 = $585 + $7,719 - $4,616 - $1,619
$2,760 = $2,069 selisih → $691
 b. Record the following transaction in the model :
1. Net Sales assuming that all sales were made on account
→ Mentioned in Campbell Soup Company's Consolidated Statement of Earnings (pg.711) that net Sales (year 2011) were
$7,719
Account affected :
▪ Revenue (Net Sales) increased.
▪ There is assumption that all Net Sales were made ON ACCOUNT so this affected the Accounts Receivable to increase.
2. Cost of Products Sold, assuming that all cost were transferred from inventories
→ Mentioned in Campbell Soup Company's Consolidated Statement of Earnings (pg.711) that Cost of Products Sold (2011)
? were $4,616

Account affected :

▪ Cost of Product Sold increased.

▪ There is assumption that all all cost were made transferred from invetories so this affected the Inventories to decrease.

3. Marketing, Selling and Administrative Expenses, assuming al of these expenses were accrued in the Payable to Suppliers and
Others liability category as they were incurred.

Hint : ▪ Campbell's General, Selling and Administrative Expenses are contained in TWO separate captions.

▪ Payable to Suppliers and Others is another term for Accounts Payable.

→ Mentioned in Campbell Soup Company's Consolidated Statement of Earnings (pg.711) that Marketing and Selling expenses

were $1.007 and Administrative expenses were $612.

Account affected :
▪ Marketing, Selling and Administrative Expenses (Hint 1) = $1,007 + $612
= $1,619 increased.
▪ There is assumption that all all these expenses were accrued in Payable to Suppliers and Others so this affected the
Payable to Suppliers and Others to increase.
c. Calculate the amount of each transaction :
1. Purchases of inventories on account
→ To find the amount of Purchas of Inventories on Account, we deduct (Beginning Balance + cost of Products
Solds) with Ending Balance
Account affected :
Purchase
Cost of
Inventorie = Beginning Ending
▪ + Porducts -
s on Balance Balance
Sold
Account

= $724 + -$4,616 - $767

= -$4,659 ...meaning there is -$4,659 to purchases being made during period.
Thus, Purchases on Account are increased.
▪ Since inventories are being purchased on account, this affected Payable to Suppliers and Others Account (Accounts
Payable) to increase at the same amount calculated above.

2. Collections of accounts Receivable

→ To find the amount of Accounts receivable collected, we deduct (Beginning Balance + Net Sales) with Ending Balance
Account affected :
Accounts
Receivabl = Beginning Ending
▪ + Net Sales -
e Balance Balance
Collected

= $512 + $7,719 - $560

= $7,671 decreased. (because there is Accounts Receivable that being collected it
caused a negative effect)
▪ Since Accounts Receivable are being collected, it is able to say that we received cash from the collection.
This affected Cash to increase at the same amount calculated above.
3. Payments to Suppliers and Others
→ To find the amount of Payment to Suppliers and Others, we deduct (Beginning Balance + Marketing, Selling, and
Administrative Expenses + Purchases on Account) with Ending Balance
Payment
to Marketing
= Beginning Selling and Purchases Ending
▪ Suppliers + + -
Balance Administrative on Account Balance
and Expenses
Others
= $545 + $1,619 + $4,659 - $585
= $6,238 decreased. (because there is a payment being made it caused a negative effect to
Liabilities account)
▪ Since there is Payment to Suppliers and Others, we have to spend Cash to pay this activities
which affected Cash to decreased at the same amount calculated above.
P4.28
A. Make corrections and adjustments to income statement and balance sheet
a. Rental commisions of $500 had been earned in August but had not yet been received from
or biiled to building owners
b. When supplies are purchased, their cost is recorded as an asset. As supplies are used,
a record of those used is kept. The record sheet shows that $360 of supplies were used in
August.
c. Interest on the note payable is to be paid on May 31 and November 30. Interest for August
has not been accrued—that is, it has not yet been recorded. (The Interest Payable of $80 on
the balance sheet is the amount of the accrued liability at July 31.) The interest rate on this
note is 10%.
d. Wages of $260 for the last week of August have not been recorded.
e. The Rent Expense of $1,020 represents rent for August, September, and October, which
was paid early in August.
f. Interest of $280 has been earned on notes receivable but has not yet been received.
Late in August, the board of directors met and declared a cash dividend of $2,800, payable
September 10. Once declared, the dividend is a liability of the corporation until it is paid.

BIG BLUE RENTAL CORP

Income Statement
August 31, 2013
Adjustments/Corections
Preliminary Debit Credit Final
 Cr $9,000 $500 a $9,500
Commisions Revenue
Cr $1,700 $280 f. $1,980
Interest revenue $11,480
Total Revenue $10,700 $0 $780 $11,480
Dr $1,020 $340 e $680
Rent Expense
Dr $2,380 $260 d $2,640
Wages Expense
Dr $0 $360 b $360
Supplies Expense
Dr $0 $40 c -$40
Interest Expense
Total Expense Dr $3,400 $620 $380 $3,640
Net Income $7,300 -$620 $400 $7,840

BIG BLUE RENTAL CORP

Balance Sheet
August 31, 2013
Adjustments/Corections
Preliminary Debit Credit Final
ASSETS
Cash Dr $800 $800

Accounts Receivable Dr $26,000 $26,000

Dr $500 a $500
Commisions Receivable
Dr $280 f $280
Interest Receivable
Dr $340 e $340
Prepaid Rent
Dr $1,300 $360 b $940
Supplies $28,860
 Total Assets $28,100 $1,120 $360 $28,860

LIABILITIES and STOCKHOLDER'S EQUITY

Accounts Payable Cr $240 $240

Notes Payable Cr $4,800 $4,800

c
Interest Payable Cr $80 $40 $40
d
Wages payable Cr $0 $260 $260
g
Dividends Payable Cr $0 $2,800 $2,800 $8,140
Total Liabilities $5,120 $40 $3,060 $8,140

Paid-in Capital $4,800 $4,800

Retained Earnings :
Balance, August 1 $10,880 $10,880

Net Income $7,300 $7,300

$0 $2,800 g -$2,800
Dividends $15,380
Balance August,31 $18,180 $2,800 $0 $15,380 $20,180
Total Stockholder's Equity $22,980 $2,800 $0 $20,180 $28,320
Total Liabilities and Stockholder's $28,100 $2,840 $3,060 $28,320
Equity
Required :
a. Make appropriate adjustments/corrections to the statements/corrections to the statements
and enter the correct ammount in the Final Column.
Hint : Use the five questions of transaction analysis. What is the relationship between the
Net Income and the Balance Sheet?
Answer :
a. Rental commission had not yet beec received or billed
Accounts Affected :
DEBIT CREDIT

Commisions Receivable $ 500

Commision Revenue $ 500

b. Asjusting supplies expense that was recorded as asset

Accounts Affected :
DEBIT CREDIT

Supplies Expense $ 360

Supplies $ 360

*when Supplies recorded as ASSET the amount of adjustment will be the amount of Supplies
BEING USED. In contrary, when Supplies recorded as Expense the amount of
adjustment will be the amount of Supplies on Hand.
c. Interest that are accrued.
Accounts Affected :
 DEBIT CREDIT

Interest Payable $ 40

Interest Expense $ 40

Accrued Liability at July 31 was $80. This amount is the amount of interest that are accrued
from latest payment which is May 31. So, $80 amount of interest accrued are for 2 months.
Interest Payable per month = $80 / 2
= $40

d. Wages Expense have not been recorded

Accounts Affected :
DEBIT CREDIT

Wages Expense $ 260

Wages Payable $ 260

e. Rent expense incurred (Expense Method)

Accounts Affected :
DEBIT CREDIT

Prepaid Rent $ 340

Rent Expense $ 340

 Rent Expense incurred was only for August (1 month). But the amount represents for 3 months.
Rent Expense incurred = 1/3 $1,020

= $340

*when Rent Recorded as Expenses the amount adjusted are the amount of rent expense
incurred for that period.
f. Interest Receivable that has not been received.
Accounts Affected :
DEBIT CREDIT

Interest Receivable $ 280

Interest Revenue $ 280

g. Dividends are being declared.

Accounts Affected :
DEBIT CREDIT

Retained Earnings $ 2,800

Dividends Payable $ 2,800

B. Why adjusting entries normally have ffect on both the balance sheet and income statement :
→ The reason is because there is a different recognition method in every account. For example, as
Mentioned in part A. (above) there is a Supplise that recorded as ASSET.
This affected the account Supplies Expense which are elements of Income Statement
C. ▪ The reason why Cash account on the balance sheet is not usually affected by adjutments :
 Accounting teach us that there is Accrual-Basis Method twhere transaction are recognized
when they are incurred ALSO there is a Cash-Basis Mehod that recognized transaction when
there is cash in or out. Therefore, we need to make Adjustments Entry at the end of the period
to find out which account that are really INCURRED during the period.
That is why Cash account is not usually affected by Adjustments.
▪ Activities or events that normally cause the needs for adjustments to be recorded :
1. Accrued Revenues

→ Revenues have been earned, but payment was not made.

2. Accrued Expenses

→ Expenses were incured, but concerned party/vendor hasnot complete their responsibility.
3. Deffered Revenues

→ We received the payments, but have not perform the services or deliver the product.
4. Deferred Expenses

→ Future expense (in advance payment to the concerned party/vendor)

5. Depreciation Expense

→ After acquiring a fixed asset , we have to recognzied the cost for its depreciation during its
useful life.
▪ One example :

At December 31, 2017 DM82 Inc. acquired a Laser Printing Machine (recorded in Machine
account) for Rp 100.000.000. It is predicted to have 10 years useful life, and its salvage value is
Rp 20.000.000. DM82 Inc. board of directors decided that the company will use straight line
depreciation method.
 → Adjustment Entry on December 31, 2018
DEBIT CREDIT
Depreciation Expense 00
8,000,000
Accumulated Depreciation of Machine $ 8,000,000 00

= IDR100,000,000 -
IDR20,000,000
Calculation of Depreciation Expense
10 years
= $ 8,000,000 / year