CASE 7-1

STERN CORPORATION (B)

Accounting For Managers F141 MMUI

Presented by GROUP 1:

Afif Saipudin | 140-651-3104 Agung | 140-658-3110 Ahmad Purbaya | 140-658-8534 Ariston Tjendra | 140-651-3306 Camelia Indah Murniwati | 140-651-3376

Exhibit 1

Current assets:

Cash 671,344$

Accounts receivable 988,257$

Less: Allowance for doubtful accounts 29,648 958,609

U.S. Treasury securities at cost 274,060

Inventories 1,734,405

Total current assets 3,638,418$

Other assets:

Investments 412,294

Land 186,563

Building 2,405,259

Less: Accumulated depreciation 663,379 1,741,880

Factory machinery 3,425,585

Less: Accumulated depreciation 1,642,358 1,783,227

Furniture and fixtures 56,484

Less: Accumulated depreciation 40,400 16,084

Automotive equipment 58,298

Less: Accumulated depreciation 37,156 21,142

Office machines 42,534

Less: Accumulated depreciation 28,005 14,529

Tools 61,294

Patent 56,250

Prepaid Expense 100,190

Total assets 8,031,871$

AssetsCurrent liabilities:

Accounts payable 510,000$

Taxes payable 709,354

Accrued salaries, wages, and interest 141,478

Long-term debt, due within one year 69,300

Total current liabilities 1,430,132

Noncurrent liabilities:

Long-term debt 1,247,368

Shareholders' equity:

Common stock 2,503,275

Retained earnings 2,851,096

Total shareholders' equity 5,354,371

Total liabilities and shareholder's equity 8,031,871$

Liabilities and Shareholders' Equity

STERN CORPORATION

Balance Sheet

As of December 31, 2009

Company Transaction

1. On January 2, 2010, one of the factory machines was sold for its book value, $3,866. This

machine was recorded on the books at $31,233 with accumulated depreciation of $27,367.

Factory Machines, at cost 31,233

Acc. Depreciation 27,367

Factory Machines, net 3,866

Sold 3,866

Loss/gain on sales -

2. Tools were carried on the books at cost, and at the end of each year a physical inventory was

taken to determine what tools still remained. The account was written down to the extent

of the decrease in tools as ascertained by the year-end inventory. At the end of 2010, it was

determined that there had been a decrease in the tool inventory amounting to $7,850.

Tools Acc. depreciation 7,850

Journal 1 - 2

Company Transaction

3. On March 1, 2010, the company sold for $2,336 cash an automobile that was recorded on the

books at a cost of $8,354 and had an accumulated depreciation of $5,180, giving a net book

value of $3,174 as of January 1, 2010. In this and other cases of the sale of long-lived assets

during the year, the accumulated depreciation and depreciation expense items were both

increased by an amount that reflected the depreciation chargeable for the months in 2010 in

which the asset was held prior to the sale, at rates listed in item 7 below.

Automobile, at cost 8,354

Acc. Depreciation (Jan 1,2010) 5,180

Automobile, net (Jan 1, 2010) 3,174

Acc. Depreciation (March 1,2010) 5,458

Automobile, net (March 1, 2010) 2,896

Sold 2,336

Loss/gain on sales (560)

Journal 3

Depreciation Expense for 2 months (Jan-Feb)

= 2/12 * (depreciation rate*cost)

= 2/12 * (20%*8354)

= 278

Accumulated Depreciation (March 1, 2010)

= Accumulated Depreciation (Jan 1, 2010) + Depreciation Expense for 2 months

= 3174 + 278

= 5458

Automobile, net (March 1, 2010)

= Automobile at cost - Accumulated Depreciation (March 1, 2010)

= 8354 - 5458

= 2896

Company Transaction

4. The patent listed on the balance sheet had been purchased by the Stern Corporation. The

cost of the patent was written off as an expense over the remainder of its legal life as of

December 31, 2009, the patent's remaining legal life was five years.

Amortization 1 year 11,250

5. On July 1, 2010, a typewriter that had cost $1,027 and had been fully depreciated on

December 31, 2009, was sold for $75.

Office Machines, at cost 1,027

Acc. Depreciation (Dec 31, 2009) 1,027

Office Machines, net -

Sold 75

Loss/gain on sales 75

Journal 4-5

Company Transaction

6. On October 1, 2010, the company sold a desk for $80. This piece of furniture was recorded on

the books at a cost of $490 with an accumulated depreciation of $395 as of January 1, 2010.

Furniture & Fixtures, at cost 490

Acc. Depreciation (Jan 1, 2010) 395

Furniture & Fixtures, net (Jan 1, 2010) 95

Acc. Depreciation (Oct 1,2010) 432

Furniture & Fixture, net (Oct 1, 2010) 58

Sold 80

Loss/gain on sales 22

Journal 6

Depreciation Expense for 9 months (Jan-Sept)

= 9/12 * (depreciation rate*cost)

= 9/12 * (10%*490)

= 37

Accumulated Depreciation (October 1, 2010)

= Accumulated Depreciation (Jan 1, 2010) + Depreciation Expense for 9 months

= 395 + 37

= 432

Furniture & Fixtures, net (October 1, 2010)

= Furniture & Fixtures at cost - Accumulated Depreciation (March 1, 2010)

= 490 - 432

= 58

Company Transaction

7. Depreciation was calculated at the following rates:

Buildings 2%

Factory machinery 10% *

Furniture & fixtures 10%

Automotive equipment 20%

Office machines 10%

* Included in the factory machinery cost of $3,425,585 was a machine costing $85,000 that

had been fully depreciated on December 31, 2009, and that was stll in use.

Depreciation ExpenseBuilding

= Depreciation Rate * Building at cost

= 2% * 2.405.259 = 48.105

Factory Machinery

= Depreciation Rate * (Factory Machinery at cost - fully depreciated machine Office machine sold at cost)

= 10% * (3.425.585 85.000 31.233)

= 330.935

Furniture & Fixtures

= Depreciation Rate * (Furniture & Fixtures at cost Desk sold at cost)

= 10% * (56.484 490)

= 5.599

Automotive Equipment

= Depreciation Rate * (Automotive Equipment at cost automobile sold at cost)

= 20% * (58.298 8.354)

= 9.989

Office Machines

= Depreciation Rate * (Office Machines at cost typewriter sold at cost)

= 10% * (42.534 1.027)

= 4.1516/13/2015Journal 7

Answer No. 1: Journal Entries

1. Cash 3,866

Accumulated Depreciation 27,367

Factory Machinery 31,233

2. Tools expense 7,850

Tools 7,850

3. Depreciation Expense 278

Acc. Depreciation - Automobile 278

Cash 2,336

Accumulated Depreciation 5,458

Loss on sale 560

Automotive Equipment 8,354

JOURNAL ENTRIES

Transaction 1-2Transaction 3Transaction 4-5

Journal Entries

4. Amortization Expense 11,250

Patent 11,250

5. Cash 75

Accumulated Depreciation 1,027

Office Machines 1,027

Gain on sales 75

6. Depreciation Expense 37

Acc. Furniture & Fixture 37

Cash 80

Accumulated Depreciation 432

Gain on sale 22

Furniture & Fixture 490

Transaction 4-5

Transaction 6

Transaction 7

Journal Entries

7. Depreciation Expense 48,105

Acc. Depreciation - Buildings 48,105

Depreciation Expense 330,935

Acc. Depreciation - Factory Machinery 330,935

Depreciation Expense 5,599

Acc. Depreciation - Furniture & Fixtures 5,599

Depreciation Expense 9,989

Acc. Depreciation - Automotive Equipment 9,989

Depreciation Expense 4,151

Acc. Depreciation - Office machines 4,151

Answer No. 2

The correct totals for Property, Plant, and Equipment and the amount of accumulated

depreciation as of December 31, 2010

Gross Accumulated depreciation Net

Land 186,563 0 186,563

Building 2,405,259 711,484 1,693,775

(data exhibit 1+jurnal no 7)

Factory machinery 3,394,352 1,945,926 1,448,426

(data exhibit 1-jurnal no 1) (data exhibit 1+jurnal no 7-jurnal no 1)

Furniture and fixtures 55,994 45,604 10,390

(data exhibit 1-jurnal no 6) (data exhibit 1+jurnal no 7-jurnal no 6)

Automotive equipment 49,944 41,965 7,979

(data exhibit 1-jurnal no 3) (data exhibit 1+jurnal no 7-jurnal no 3)

Office machines 41,507 31,129 10,378

(data exhibit 1-jurnal no 5) (data exhibit 1+jurnal no 7-jurnal no 5)

Tools 53,444 53,444

(data exhibit 1-jurnal no 2)

Patent 45,000 45,000

(data exhibit 1- jurnal no 4)

Total 6,232,063 2,776,108 3,455,955