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1) amortization of a premium increases bond interest expense, while amortization of a discount decreases bond interest expense. 2) present value is the value now of a future sum or sums discounted assuming compound interest. Answer: t 3) the transaction […]

1) kern company purchased bonds with a face amount of $600,000 between interest payment dates. kern purchased the bonds at 102, paid brokerage costs of $9,000, and paid accrued interest for three months of $15,000. the amount to record as […]

1) ifrs and u.s. gaap a.are diametrically opposed in their accounting for impairments of assets held for disposal b.are similar in the accounting for impairments of assets held for disposal c.are moving toward common ground in their accounting for impairments […]

1) mott co. includes one coupon in each bag of dog food it sells. in return for eight coupons, customers receive a leash. the leashes cost mott $3 each. mott estimates that 40 percent of the coupons will be redeemed. […]

1) the units-of-production approach to depreciation is appropriate when depreciation is a function of time instead of activity. 2) under ifrs, the discount rate should reflect risks for which future cash flow estimates have been adjusted. Answer: f 3) the […]

1) in order to justify reguiring a particular measurement or disclosure, the benefits to be derived from it must equal the costs associated with it. 2) in a contingent issue agreement, the contingent shares are considered outstanding for computing diluted […]

1) companies should recognize the expense and related liability for compensated absences in the year earned by employees. 2) on the balance sheet, an adjunct account reduces either an asset, a liability, or an owners equity account. Answer: f 3) […]

1) revenues are realizable when assets received or held are readily convertible into cash or claims to cash. 2) the primary advantage of the multiple-step format lies in the simplicity of presentation and the absence of any implication that one […]

1) harper company commonly issues long-term notes payable to its various lenders. harper has had a pretty good credit rating such that its effective borrowing rate is quite low (less than 8% on an annual basis). harper has elected to […]

1) the income statement is useful for helping to assess the risk or uncertainty of achieving future cash flows. 2) financial reports in the early 21st century did not provide any information about a companys soft assets (intangibles). Answer: f […]

1) theoretically, the costs of issuing bonds could be a.expensed when incurred b.reported as a reduction of the bond liability c.debited to a deferred charge account and amortized over the life of the bonds d.any of these 2) on september […]

1) the deposit method of revenue recognition is used when a.the product can be marketed at quoted prices and units are interchangeable b.cash is received before the sales transaction is complete c.the contract is short-term or the percentage-of-completion method cant […]

1) part a.judd company has a beginning inventory in year one of $500,000 and an ending inventory of $605,000. the price level has increased from 100 at the beginning of the year to 110 at the end of year one. […]

1) when the conventional retail method includes both net markups and net markdowns in the cost-to-retail ratio, it approximates a lower-of-cost-or-market valuation. 2) the future value of an ordinary annuity table is used when payments are invested at the beginning […]

1) if an fasb standard creates a new principle, expresses preference for, or rejects a specific accounting principle, the change is considered clearly acceptable. 2) one of two assumptions made by the iasb conceptual framework is that the reporting entity […]

1) nominal (temporary) accounts are revenue, expense, and dividend accounts and are periodically closed. 2) the conceptual framework underlying u.s. gaap is similar to that underlying ifrs. Answer: t 3) if the difference between the construction in process and the […]

1) wilkinson corporation factored, with recourse, $400,000 of accounts receivable with huskie financing. the finance charge is 3%, and 5% was retained to cover sales discounts, sales returns, and sales allowances. wilkinson estimates the recourse obligation at $9,600. what amount […]

1) gorman construction co. began operations in 2013. construction activity for 2013 is shown below. gorman uses the completed-contract method. which of the following should be shown on the balance sheet at december 31, 2013 related to contract 3? a.inventory, […]

1) the passage of a new fasb standards statement requires the support of a.all board members b.three board members c.four board members d.five board members 2) which of the following is an acceptable method of presenting the income statement? a.a […]

1) composite or group depreciation is a depreciation system whereby a.the years of useful life of the various assets in the group are added together and the total divided by the number of items b.the cost of individual units within […]

1) in the united states, like many other countries, banks are major creditors as well as the largest investors. 2) gross profit and income from operations are reported on a multiple-step but not a single-step income statement. Answer: t 3) […]

1) at the end of the fiscal year, apha airlines has an outstanding non-cancellable purchase commitment for the purchase of 1 million gallons of jet fuel at a price of $4.10 per gallon for delivery during the coming summer. the […]

1) an item that should be classified as an extraordinary item is a.write-off of goodwill b.gains from transactions involving foreign currencies c.losses from moving a plant to another city d.gains from a company selling the only investment it has ever […]

1) with regard to recognizing stock-based compensation a.ifrs and u.s. gaap follow the same model b.ifrs and u.s. gaap standards are undergoing major reform on valuation issues c.it has been agreed that these standards will not be merged due to […]

1) which of the following statements is correct? a.a company may exclude a short-term obligation from current liabilities if the firm intends to refinance the obligation on a long-term basis b.a company may exclude a short-term obligation from current liabilities […]

1) on march 15, a fire destroyed interlock company’s entire retail inventory. the inventory on hand as of january 1 totaled $3,300,000. from january 1 through the time of the fire, the company made purchases of $1,366,000, incurred freight-in of […]

1) on january 1, 2013 reese company granted jack buchanan, an employee, an option to buy 200 shares of reese co. stock for $40 per share, the option exercisable for 5 years from date of grant. using a fair value […]

1) the financial accounting standards board a.has issued a series of pronouncements entitled statements on auditing standards b.was the forerunner of the current accounting principles board c.is the arm of the securities and exchange commission responsible for setting financial accounting […]

1) the pervasive criterion by which accounting information can be judged is that of a.decision usefulness b.freedom from bias c.timeliness d.comparability 2) the average days to sell inventory is computed by dividing a.365 days by the inventory turnover ratio b.the […]

1) lifo is inappropriate where unit costs tend to decrease as production increases. 2) bond issues that mature in installments are called serial bonds. Answer: t 3) both ifrs and u.s. gaap allow that if determining the effect of a […]

1) hudson, inc. is a calendar-year corporation. its financial statements for the years 2013 and 2012 contained errors as follows: assume that no correcting entries were made at december 31, 2012, or december 31, 2013 and that no additional errors […]

1) if preferred stock is cumulative and no dividends are declared, the company subtracts the current year preferred dividend in computing earnings per share. 2) magazine subscriptions and airline ticket sales both result in unearned revenues. Answer: t 3) users […]

1) financial information exhibits the characteristic of consistency when a.expenses are reported as charges against revenue in the period in which they are paid b.companies apply the same accounting treatment to similar events, from period to period c.extraordinary gains and […]

1) ebert inc. owns the following assets: what is the composite depreciation rate of ebert’s assets? a.14.0% b.10.3% c.12.9% d.11.1% 2) on march 1, 2012, newton company purchased land for an office site by paying $900,000 cash. newton began construction […]

1) both u.s. gaap and ifrs permit the use of the lifo method to account for inventories. 2) when numerous adjustments are necessary, companies often use a cash flow worksheet instead of preparing a statement of cash flows. Answer: f […]

1) a machine which cost $300,000 is acquired on october 1, 2012. its estimated salvage value is $30,000 and its expected life is eight years. instructions calculate depreciation expense for 2012 and 2013 by each of the following methods, showing […]

1) which of the following is a temporary difference classified as a revenue or gain that is taxable after it is recognized in financial income? a.subscriptions received in advance b.prepaid royalty received in advance c.an installment sale accounted for on […]

1) given below are the future value factors for 1 at 8% for one to five periods. each of the items 65 to 68 is based on 8% interest compounded annually. what amount will be in a bank account three […]

1) during 2012, gordon company issued at 104 five hundred, $1,000 bonds due in ten years. one detachable stock warrant entitling the holder to purchase 15 shares of gordons common stock was attached to each bond. at the date of […]

1) ifrs, like u.s. gaap, capitalizes all direct costs in self-constructed assets. 2) in the retail inventory method, the term markup means a markup on the original cost of an inventory item. Answer: f 3) changes in the fair value […]

1) if management wishes to “capitalize” part of the earnings, it may issue a a.cash dividend b.stock dividend c.property dividend d.liquidating dividend 2) equipment that cost $240,000 and has accumulated depreciation of $189,000 is exchanged for equipment with a fair […]

1) on january 2, 2013, tylor co. issued a 4-year, $750,000 note at 6% fixed interest, interest payable semiannually. tylor now wants to change the note to a variable rate note. as a result, on january 2, 2013, tylor co. […]

1) a decrease in net assets arising from peripheral or incidental transactions is called a(n) a.capital expenditure b.cost c.loss d.expense 2) the conversion of bonds is most commonly recorded by the a.incremental method b.proportional method c.market value method d.book value […]

1) easton company and lofton company were combined in a purchase transaction. easton was able to acquire lofton at a bargain price. the sum of the fair values of identifiable assets acquired less the fair value of liabilities assumed exceeded […]

1) discontinued operations, extraordinary items, and unusual gains and losses are all reported net of tax in the income statement. 2) companies can recognize revenue prior to completion and delivery of the product under certain circumstances. Answer: t 3) simple […]

1) warranty4u provides extended service contracts on electronic equipment sold through major retailers. the standard contract is for three years. during the current year, warranty4u provided 42,000 such warranty contracts at an average price of $81 each. related to these […]

1) which of the following situations may give rise to unearned revenue? a.providing trade credit to customers b.selling inventory c.selling magazine subscriptions d.providing manufacturer warranties 2) a ‘secret reserve” will be created if a.inadequate depreciation is charged to income b.a […]

1) jamison company purchased the assets of booker company at an auction for $2,800,000. an independent appraisal of the fair value of the assets is listed below: assuming that specific identification costs are impracticable and that jamison allocates the purchase […]

1) which of the following legal fees should be capitalized? 2) green co. received merchandise on consignment. as of january 31, green included the goods in inventory, but did not record the transaction. the effect of this on its financial […]

1) a company should abandon the historical cost principle when the future utility of the inventory item falls below its original cost. 2) a strength of the income statement as compared to the balance sheet is that items that cannot […]

1) what is prudence or conservatism? a.understating assets and net income b.when in doubt, recognizing the option that is least likely to overstate assets and income c.recognizing the option that is least likely to overstate assets and income d.recognizing revenue […]

1) on january 1, 2012, sharp corp. granted an employee an option to purchase 9,000 shares of sharp’s $5 par value common stock at $20 per share. the black-scholes option pricing model determines total compensation expense to be $210,000. the […]

1) companies frequently describe the terms of all long-term liability agreements in notes to the financial statements. 2) equity security holdings between 20 and 50 percent indicates that the investor has a controlling interest over the investee. Answer: f 3) […]

1) many u.s. companies that have international operations use lifo for u.s. purposes but use fifo for their foreign subsidiaries. 2) the cost of an asset less its salvage value is its depreciation base. Answer: t 3) internally created intangibles […]

1) when preparing a statement of cash flows (indirect method), an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because a.cash was increased while cost of goods sold was decreased b.cost of […]

1) the times interest earned ratio is computed by dividing a.net income by interest expense b.income before taxes by interest expense c.income before income taxes and interest expense by interest expense d.net income and interest expense by interest expense 2) […]

1) glen inc. and armstrong co. have an exchange with no commercial substance. the asset given up by glen inc. has a book value of $48,000 and a fair value of $60,000. the asset given up by armstrong co. has […]

1) on january 1, 2008, goll corp. issued 4,000 of its 10%, $1,000 bonds for $4,160,000. these bonds were to mature on january 1, 2016 but were callable at 101 any time after december 31, 2011. interest was payable semiannually […]

1) which basic element of financial statements arises from peripheral or incidental transactions? a.assets b.liabilities c.gains d.expenses 2) which of these is not included in an employer’s payroll tax expense? a.f.i.c.a. (social security) taxes b.federal unemployment taxes c.state unemployment taxes […]

1) in accounting for investments in debt securities that are classified as trading securities, a.a discount is reported separately b.a premium is reported separately c.any discount or premium is not amortized d.none of these 2) at december 31, 2012, the […]

1) nondetachable warrants, as with detachable warrants, require an allocation of the proceeds between the bonds and the warrants. 2) when a company changes an accounting principle, it should report the change by reporting the cumulative effect of the change […]

1) farr co. adopted the dollar-value lifo inventory method on december 31, 2012. farr’s entire inventory constitutes a single pool. on december 31, 2012, the inventory was $480,000 under the dollar-value lifo method. inventory data for 2013 are as follows: […]

1) in computing diluted earnings per share, stock options are considered dilutive when their option price is greater than the market price. 2) u.s. companies that list overseas are required to use international financial reporting standards, issued by the international […]

1) which of the following statements is incorrect regarding the classification of accounts and notes receivable? a.segregation of the different types of receivables is required if they are material b.disclose any loss contingencies that exist on the receivables c.any discount […]

1) deductible amounts cause taxable income to be greater than pretax financial income in the future as a result of existing temporary differences. 2) if a company fails to post one of its journal entries to its general ledger, the […]

1) at a recent executive committee meeting, the controller for marino company remarked, with only a single key difference between u.s. gaap and ifrs for property, plant, and equipment, it should be smooth sailing for the fasb and iasb to […]

1) the payout ratio is determined by dividing cash dividends paid to common stockholders by net income available to common stockholders. 2) the economic entity assumption means that economic activity can be identified with a particular legal entity. Answer: f […]

1) on january 1, 2006, forbes company purchased equipment at a cost of $100,000. the equipment was estimated to have a salvage value of $10,000 and it is being depreciated over eight years under the sum-of-the-years’-digits method. what should be […]

1) balance sheet errors affect only the presentation of an asset or liability account. 2) if a decline in a securitys value is judged to be temporary, a company needs to write down the cost basis of the individual security […]

1) which table would show the largest factor for an interest rate of 8% for five periods? a.future value of an ordinary annuity of 1 b.present value of an ordinary annuity of 1 c.future value of an annuity due of […]

1) if a company plans to retire long-term debt from a bond retirement fund, it should report the debt as current. 2) the ifrs statement of recognized income and expenses is identical to the u.s. gaap statement of retained earnings […]

1) information about different companies and about different periods of the same company can be prepared and presented in a similar manner. comparability and consistency are related to which of these objectives? comparability consistency a. companies companies b. companies periods […]

1) u.s. gaap does not specifically address how companies should account for the indirect effects of changes in accounting principle. 2) accounting standards are now less likely to require the recording or disclosure of fair value information. Answer: f 3) […]

1) as with u.s. gaap, ifrs requires that both direct and indirect costs in self-constructed assets be capitalized. 2) when accounts receivable decrease during a period, cash-basis revenues are higher than revenues reported on an accrual basis. Answer: t 3) […]

1) peavys net cash provided by investing activities for 2013 was a.$316,000 b.$416,000 c.$476,000 d.$636,000 2) ermler corporation has $1,800,000 of short-term debt it expects to retire with proceeds from the sale of 50,000 shares of common stock. if the […]

1) haag corp.’s 2013 income statement showed pretax accounting income of $1,250,000. to compute the federal income tax liability, the following 2013 data are provided: what amount of current federal income tax liability should be included in hagg’s december 31, […]

1) if a supplier ships goods f.o.b. destination, title passes to the buyer when the supplier delivers the goods to the common carrier. 2) preferred dividends are subtracted from net income but not income before extraordinary items in computing earnings […]

1) members of the financial accounting standards board are a.employed by the american institute of certified public accountants ( b.part-time employees c.required to hold a cpa certificate d.independent of any other organization 2) belgium co. is constructing a tunnel for […]

1) lewis company traded machinery with a book value of $570,000 and a fair value of $540,000. it received in exchange from timmons company a machine with a fair value of $600,000. lewis also paid cash of $60,000 in the […]

1) companies frequently use the composite approach when the assets are similar in nature and have approximately the same useful lives. 2) when it is impossible to determine whether a change in principle or change in estimate has occurred, the […]

1) in 2012, esther corporation reported net income of $600,000. it declared and paid preferred stock dividends of $150,000 and common stock dividends of $60,000. during 2012, esther had a weighted average of 200,000 common shares outstanding. compute esther’s 2012 […]

1) under ifrs, companies are not required to prepare a statement of cash flows if the transactions are reported elsewhere in the financial statements. 2) users of financial reports provided by a company use that information to make their capital […]

1) the accrual basis recognizes revenue when earned and expenses in the period when cash is paid. 2) dollar-value lifo techniques help protect lifo layers from erosion. Answer: t 3) timeliness and neutrality are two ingredients of relevance. Answer: f […]

1) coaster manufactures and sells logging equipment. due to the nature of its business, coaster is unable to reliably predict bad debts. during 2012, coaster sold equipment costing $3,600,000 for $5,400,000. the terms of the sale were 20% down, with […]

1) which of the following is an example of managing earnings up? a.decreasing estimated salvage value of equipment b.writing off obsolete inventory c.underestimating warranty claims d.accruing a contingent liability for an ongoing lawsuit 2) on october 1, 2012 bartley corporation […]

1) weiser corp. on january 1, 2009, granted stock options for 40,000 shares of its $10 par value common stock to its key employees. the market price of the common stock on that date was $23 per share and the […]

1) under the fair value method, the investor reports as revenue its share of the net income reported by the investee. 2) companies usually make bond interest payments semiannually, although the interest rate is generally expressed as an annual rate. […]

1) the inventory turnover ratio is computed by dividing the cost of goods sold by the ending inventory on hand. 2) deferred gross profit is generally treated as an unearned revenue and classified as a current liability. Answer: f 3) […]

1) which of the following is never classified as an extraordinary item? a.losses from a major casualty b.losses from an expropriation of assets c.gain on a sale of the only security investment a company has ever owned d.losses from exchange […]

1) on january 2, 2012, indian river groves began construction of a new citrus processing plant. the automated plant was finished and ready for use on september 30, 2013. expenditures for the construction were as follows: indian river groves borrowed […]

1) the percentage-of-completion method must be used when certain conditions exist. which of the following is not one of those necessary conditions? a.estimates of progress toward completion, revenues, and costs are reasonably dependable b.the contractor can be expected to perform […]

1) depreciation is based on the decline in the fair market value of the asset. 2) ifrs differs from u.s. gaap in the development phase in that costs are capitalized once technological feasibility is achieved. Answer: t 3) users of […]

1) june corp. sells one product and uses a perpetual inventory system. the beginning inventory consisted of 20 units that cost $20 per unit. during the current month, the company purchased 120 units at $20 each. sales during the month […]

1) the stockholders’ equity section of benton corporation’s balance sheet as of december 31, 2012 is as follows: stockholders’ equity the following events occurred during 2013: 1>jan. 520,000 shares of authorized and unissued common stock were sold for $8 per […]

1) in general, debits refer to increases in account balances, and credits refer to decreases. 2) the intrinsic value of a stock option is the difference between the market price of the stock and the exercise price of the options […]

1) significant financing and investing activities that do not affect cash are not reported in the statement of cash flows or any other place. 2) under ifrs compliance requirements the revaluation surplus is not considered contributed capital. Answer: t 3) […]

1) if two annuities have the same number of rents with the same dollar amount, but one is an annuity due and one is an ordinary annuity, the present value of the annuity due will be greater than the present […]

1) which of the following methods of determining bad debt expense does not properly match expense and revenue? a.charging bad debts with a percentage of sales under the allowance method b.charging bad debts with an amount derived from a percentage […]

1) prepaid insurance should be included in the numerator when computing the acid-test (quick) ratio. 2) the recognition criteria for an asset retirement obligation (aro) are more stringent under ifrs. Answer: f 3) although the fasb has developed a conceptual […]

1) on october 31, a fire destroyed ph inc.’s entire retail inventory. the inventory on hand as of january 1 totaled $1,360,000. from january 1 through the time of the fire, the company made purchases of $330,000 and had sales […]

1) on january 3, 2011, munoz co. purchased machinery. the machinery has an estimated useful life of eight years and an estimated salvage value of $60,000. the depreciation applicable to this machinery was $130,000 for 2013, computed by the sum-of-the-years’-digits […]

1) vannoy corporation will invest $30,000 every january 1st for the next six years (2012 2017). if wagner will earn 12% on the investment, what amount will be in the investment fund on december 31, 2017? a.$123,342 b.$138,144 c.$243,456 d.$272,670 […]

1) comprehensive income includes all changes in equity during a period except those resulting from distributions to owners. 2) accumulated rights exist when an employer has an obligation to make payment to an employee even after terminating his employment. Answer: […]

1) deferred tax amounts that are related to specific assets or liabilities should be classified as current or noncurrent based on a.their expected reversal dates b.their debit or credit balance c.the length of time the deferred tax amounts will generate […]

1) each of the statements appearing below is descriptive of one or more of the following depreciation methods. in the spaces below, place the letter(s) belonging to the method(s) to which the statement best applies. a.declining-balancee.sum-of-the-years’-digits b.groupf.units of output c.compositeg.working […]

1) underwood company maintains its accounting records using ifrs. the company recently signed a lease for a new office building, for a lease period of 10 years. under the lease agreement, a security deposit of $20,000 is made, with the […]

1) hummel co. purchased a put option on olney common shares on july 7, 2012, for $100. the put option is for 200 shares, and the strike price is $30. the option expires on january 31, 2013. the following data […]

1) salvage values must be zero. a.1 is correct b.2 is correct c.1 and 2 are correct d.all are correct 2) under ifrs, sampson company, who has a non-current asset which has been classified as held-for-sale, should a.test the asset’s […]

1) note disclosures for long-term debt generally include all of the following except a.assets pledged as security b.call provisions and conversion privileges c.restrictions imposed by the creditor d.names of specific creditors 2) the assumption that a company will not be […]

1) john won a lottery that will pay him $150,000 at the end of each of the next twenty years. assuming an appropriate interest rate is 8% compounded annually, what is the present value of this amount? a.$1,590,540 b.$32,183 c.$1,472,723 […]

1) noncash investing and financing activities are disclosed either in a separate schedule or in a separate note to the financial statements. 2) one of the disclosure requirements for a change in accounting principle is to show the cumulative effect […]

1) terry corporation had 400,000 shares of common stock outstanding at december 31, 2012. in addition, it had 90,000 stock options outstanding, which had been granted to certain executives, and which gave them the right to purchase shares of terry’s […]

1) companies should assign no portion of fixed overhead to self-constructed assets. 2) the most popular input measure used to determine the progress toward completion is the cost-to-cost basis. Answer: t 3) companies should accrue an estimated loss from a […]

1) jim yount, m.d., keeps his accounting records on the cash basis. during 2013, dr. yount collected $300,000 from his patients. at december 31, 2012, dr. yount had accounts receivable of $40,000. at december 31, 2013, dr. yount had accounts […]

1) among the short-term obligations of lance company as of december 31, the balance sheet date, are notes payable totaling $250,000 with the madison national bank. these are 90-day notes, renewable for another 90-day period. these notes should be classified […]

1) bell inc. took a physical inventory at the end of the year and determined that $780,000 of goods were on hand. in addition, bell, inc. determined that $60,000 of goods that were in transit that were shipped f.o.b. shipping […]

1) types of franchising arrangements include all of the following except a.service sponsor-retailer b.wholesaler-service sponsor c.manufacturer-wholesaler d.wholesaler-retailer 2) if kiner uses the completed-contract method, the gross profit to be recognized in 2013 is a.$2,040,000 b.$4,200,000 c.$2,100,000 d.$8,400,000 Answer: b 3) […]

1) which of the following is a fundamental characteristic of useful accounting information? a.comparability b.relevance c.neutrality d.materiality 2) what is the rationale behind the ceiling when applying the lower-of-cost-or-market method to inventory? a.prevents understatement of the inventory value b.allows for […]

1) ifrs does not permit the lifo method to account for inventories. 2) companies report the cash flows from purchases and sales of trading securities as cash flows from operating activities. Answer: t 3) it is not necessary to post […]

1) compound interest uses the accumulated balance at each year end to compute interest in the succeeding year. 2) true no-par stock should be carried in the accounts at issue price without any additional paid-in capital reported. Answer: t 3) […]

1) glaus corp. signed a three-month, zero-interest-bearing note on november 1, 2012 for the purchase of $250,000 of inventory. the face value of the note was $253,675. assuming glaus used a discount on note payable account to initially record the […]

1) the balance in retained earnings at december 31, 2012 was $720,000 and at december 31, 2013 was $582,000. net income for 2013 was $500,000. a stock dividend was declared and distributed which increased common stock $250,000 and paid-in capital […]

1) techtronics, a technology company that uses ifrs for its financial reporting, has been found to have polluted the property surrounding its plant. the property is leaded for 12 years and techtronics has agreed that when the lease expires, the […]

1) the most significant current source of generally accepted accounting principles is the a.aicpa b.sec c.apb d.fasb 2) elton industries, a company who uses ifrs reporting standards, has assets and liabilities of a disposal group classified as held-for-sale shown on […]

1) an accountant wishes to find the present value of an annuity of $1 payable at the beginning of each period at 10% for eight periods. the accountant has only one present value table which shows the present value of […]

1) factors that shape an accounting information system include the a.nature of the business b.size of the firm c.volume of data to be handled d.all of these 2) oslo corporation has two products in its ending inventory, each accounted for […]

1) a company buys an oil rig for $2,000,000 on january 1, 2012. the life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is $400,000 (present value at […]

1-1 CHAPTER 1 Financial Accounting and Accounting Standards ASSIGNMENT CLASSIFICATION TABLE Topics Questions Cases 1. Subject matter of accounting. 1 4 2. Environment of accounting. 2, 3, 29 6, 7 3. Role of principles, objectives, standards, and accounting theory. 4, […]

CA 1-12 (a) AICPA. American Institute of Certified Public Accountants. The national organization of practicing certified public accountants. (b) CAP. Committee on Accounting Procedure. A committee of practicing CPAs which issued 51 Accounting Research Bulletins between 1939 and 1959 and […]

10–72 CA 10-5 (Continued) (d) Client B Treatment if the exchange has commercial substance In this situation, the full $30,000 gain would be recognized on this year’s income statement. The new asset would go on the books at its fair […]

TIME AND PURPOSE OF PROBLEMS Problem 10-1 (Time 35–40 minutes) Purpose—to provide a problem involving the proper classification of costs related to property, plant, and equipment. Property, plant, and equipment must be segregated into land, buildings, leasehold improvements, and machinery […]

10-1 CHAPTER 10 Acquisition and Disposition of Property, Plant, and Equipment ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Valuation and classification of land, buildings, and equipment. 1, 2, 3, 4, 6, 7, […]

10–21 EXERCISE 10-6 (Continued) 2. Equipment ………………………………………………………. 25,000 Cash ………………………………………………………. 2,000 Notes Payable ……………………………………………….. 23,000 EXERCISE 10-7 (20–25 minutes) (a) Avoidable Interest Weighted-Average Accumulated Expenditures X Interest Rate = Avoidable Interest $2,000,000 12% $240,000 1,800,000 10.38% 186,840 $3,800,000 $426,840 Weighted-average […]

10–61 PROBLEM 10-10 (Continued) (c) Has Commercial Substance Marshall Construction 1. Equipment ($98,000 + $102,000)…………………. 200,000 Accumulated Depreciation—Equipment …….. 50,000 Equipment………………………………………… 140,000 Brigham Manufacturing 2. Cash ……………………………………………………….. 102,000 Inventory …………………………………………………. 98,000 Sales Revenue …………………………………. 200,000 Cost of Goods Sold ………………………………….. […]

11–61 CA 11-1 (Continued) If Burnitz is not profitable now, it would not benefit from higher deductions now and should CA 11-2 (a) (1) The unit method of recording depreciation involves the treatment of plant assets or substantial additions thereto […]

11-1 CHAPTER 11 Depreciation, Impairments, and Depletion ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Depreciation methods; meaning of depreciation; choice of depreciation methods. 1, 2, 3, 4, 5, 6, 10, 14, 20, […]

11–41 PROBLEM 11-3 (a) Depreciation Expense …………………………………………….. 3,900 Accumulated Depreciation—Machinery (A) (5/55 X [$46,000 – $3,100]) ………………………….. 3,900 Accumulated Depreciation—Machinery (A) ……………… 35,100 Machinery (A) ($46,000 – $13,000) …………………… 33,000 Gain on Disposal of Machinery ……………………….. 2,100 (b) Depreciation Expense […]

11–21 EXERCISE 11-5 (20–25 minutes) (a) ($150,000 – $24,000) = $25,200/yr. = $25,200 X 5/12 = $10,500 5 2012 Depreciation—Straight line = $10,500 (c) Machine Allocated to Year Total 2012 2013 1 5/15 X $126,000 = $42,000 $17,500* $24,500** 2 […]

12–21 EXERCISE 12-10 (Continued) (b) 2011 Patents ………………………………………………………. 12,400 Cash ………………………………………………………. 12,400 Amortization Expense …………………………………………….. 2,575 Patents ($1,000 + $1,575) ………………………….. 2,575 2012 Amortization Expense …………………………………………….. 2,700 Patents ($32,400 ÷ 12) ………………………….. 2,700 (c) 2013 and 2014 Amortization Expense …………………………………………….. […]

12–41 CA 12-2 (Continued) The amount of interest cost for the first nine months of 2012 is the measure of the 2012 loss resulting from the tornado. The extension of the construction period to October 2012 because of the tornado […]

12-1 CHAPTER 12 Intangible Assets ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Intangible assets; concepts, definitions; items comprising intangible assets. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, […]

13–74 PROFESSIONAL SIMULATION Journal Entries (a) Unearned Sales Revenue ……………………………………….. 400,000 Sales Revenue ……………………………………………….. 400,000 (To record subscriptions earned during 2012) (b) No entry should be made to accrue for an expense, because the absence of insurance coverage does not […]

13-1 CHAPTER 13 Current Liabilities and Contingencies ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Concept of liabilities; definition and classification of current liabilities. 1, 2, 3, 4, 6, 8 1, 16 1, […]

13–21 EXERCISE 13-7 (5–7 minutes) June 30 EXERCISE 13-8 (10–15 minutes) Salaries and Wages Expense ………………………………….. 480,000 Withholding Taxes Payable …………………………….. 80,000 FICA Taxes Payable* ………………………………………. 28,040 Union Dues Payable ……………………………………….. 9,000 Cash ……………………………………………………………… 362,960 *[($480,000 – $140,000) X 7.65% […]

13–41 PROBLEM 13-7 (Continued) Expense warranty accrual method: As of 12/31/12 the balance sheet would disclose a current liability in the amount of $117,000 for Warranty Liability. (d) In the case of Alvarado Company, the expense warranty accrual method reflects […]

13–61 FINANCIAL REPORTING PROBLEM (Continued) Purchase Commitments We have purchase commitments for materials, supplies, services and property, plant and equipment as part of the normal course of business. Commitments made under take-or-pay obligations are as Operating Leases We lease certain […]

EXERCISE 14-8 (Continued) (c) Carrying amount of bonds on June 30, 2012 ………………. $562,500 Effective-interest rate for the period from June 30 to October 31, 2012 (.10 X 4/12) ……………………………….. X.033333 Interest expense to be recorded on October 31, 2012 […]

14–41 Time and Purpose of Problems (Continued) Problem 14-9 (Time 20–25 minutes) Purpose—to provide the student with an opportunity to become familiar with the application of GAAP, involving the exchange of a note, which is payable in equal installments, for […]

14–61 *PROBLEM 14-12 (a) It is a troubled debt restructuring. (b) 1. No entry. 2. Bad Debt Expense …………………………………………. 237,311* Allowance for Doubtful Accounts …………….. 237,311 *Calculation of loss. (c) Losses are calculated based upon the discounted present value of […]

14-1 CHAPTER 14 Long-Term Liabilities ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Long-term liability; classification; definitions. 1, 10, 14, 22 1, 2 10, 11 1, 2 4. Retirement and refunding of debt. […]

14–77 FINANCIAL STATEMENT ANALYSIS CASE COMMONWEALTH EDISON CO. (a) Due to the markdown from 99.803 to 99.25, Commonwealth Edison would record a slightly larger discount and, of course, receive and (b) In the same Wall Street Journal article, the following […]

15–74 FINANCIAL STATEMENT ANALYSIS CASES CASE 1 (a) Management might purchase treasury stock to provide to stockholders a tax-efficient method for receiving cash from the corporation. In (b) Earnings per share is calculated by dividing net income by the weighted […]

15-1 CHAPTER 15 Stockholders’ Equity ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 3. Issuance of shares. 7, 10 1, 2, 6 1, 2, 4, 6, 9 1, 3, 4 4. Noncash stock trans– […]

EXERCISE 15-6 (25–30 minutes) (a) Cash [(5,000 X $45) – $7,000] ………………………………. 218,000 Common Stock (5,000 X $10) ……………………….. 50,000 Paid-in Capital in Excess of Par— Common Stock ………………………………………… 168,000 (b) Land (1,000 X $46) ……………………………………………… 46,000 Common Stock (1,000 […]

15–41 SOLUTIONS TO PROBLEMS PROBLEM 15-1 (a) January 11 Cash (20,000 X $16) …………………………………………. 320,000 Common Stock (20,000 X $10) ………………….. 200,000 Paid-in Capital in Excess of Par—Common Stock …………………………………………………….. 120,000 February 1 Equipment ………………………………………………………. 50,000 Buildings ………………………………………………………… 160,000 Land […]

15–61 PROBLEM 15-12 PENN COMPANY Stockholders’ Equity June 30, 2013 Capital stock 8% preferred stock, $25 par value, cumulative and nonparticipating, 100,000 shares authorized, 40,000 shares issued and outstanding—Note A ……………. $1,000,000 Additional paid-in capital In excess of par-preferred stock […]

Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Solutions Manual (For Instructor Use Only) 16–61 FINANCIAL REPORTING PROBLEM (a) (1) Under P&G’s stock-based compensation plan (Note 7), 37,623,000 options were granted during 2009. (2) At June […]

16–21 EXERCISE 16-8 (10–15 minutes) September 1, 2012 Cash ($3,120,000 + $60,000 – $30,000) ……………….. 3,150,000 Unamortized Bond Issue Costs…………………………. 30,000 (To record the issuance of the bonds) Schedule 1 Premium on Bonds Payable and Value of Stock Warrants Sales […]

PROBLEM 16-1 (Continued) Calculations: Common Stock Paid-in Capital in Excess of Par At beginning of year ………………….. 300,000 shares $ 600,000 From stock rights (entry #3) ………. 9,500 shares 209,000 From stock warrants (entry #4) ….. 1,600 shares 44,800 From […]

PROFESSIONAL SIMULATION (Continued) Schedule A *Computation of weighted-average number of shares adjusted for dilutive securities Average number of shares under options outstanding …………… 140,000 Option price per share …………………………………………………………. X $10 Proceeds upon exercise of options ………………………………………. $1,400,000 Market price […]

16-1 CHAPTER 16 Dilutive Securities and Earnings Per Share ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Convertible debt and preferred stock. 1, 2, 3, 4, 5, 6, 7 1, 2, 3 1, […]

17–41 PROBLEM 17-3 (Continued) Fair Value Adjustment (Available-for-Sale) ….. 15,751 Unrealized Holding Gain or Loss— Equity ……………………………………………… 15,751 (d) July 1, 2013 Cash ($119,200 + $3,025) ……………………………. 122,225 Debt Investments (Available-for-Sale) ….. 110,000 Interest Revenue ($110,000 X .11 X 3/12) […]

17–80 COMPARATIVE ANALYSIS CASE THE COCA-COLA COMPANY and PEPSICO, INC. (a) Coca-Cola PepsiCo (1) Cash used in investing activities $(4,149) $(2,401) (2) Cash used for acquisitions and investments $ (300) $ (500) (b) (1) Coca-Cola reported the $6,217 million of […]

17–61 *PROBLEM 17-15 (a) January 7, 2012 Put Option ……………………………………………………… 360 Cash ………………………………………………………… 360 (b) March 31, 2012 (d) July 6, 2012 Put Option ($5 X $400) …………………………………….. 2,000 Unrealized Holding Gain or Loss—Income …. 2,000 Unrealized Holding Gain or […]

EXERCISE 17-9 (Continued) (b) The unrealized holding gain of $1,500 (including the previous balance of $200) should be reported as an addition to stockholders’ equity and the Fair Value Adjustment (Available-for-Sale) account balance of $1,500 should be added to the […]

17-1 CHAPTER 17 Investments ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Debt securities. 1, 2, 3, 13 1 4, 7 (a) Held-to-maturity. 4, 5, 7, 8, 10, 13, 21 1, 3 2, […]

18–94 ACCOUNTING, ANALYSIS, AND PRINCIPLES Accounting Sales revenue ………………………………………………………………….. $9,500,000 Expenses ………………………………………………………………………… 7,750,000 * Gross profit from long-term contract Contract price ……………………………………….. $1,000,000 Costs: Costs to date (2011 and 2012)………….. $400,000 Estimated additional costs ……………… 400,000 800,000 Total estimated profit […]

18–41 PROBLEM 18-1 (Continued) Dement Publishing Division Sales—fiscal 2012 …………………………………………………. $7,000,000 Less: Sales returns and allowances (20%) ……………… 1,400,000 Net sales—revenue to be recognized in fiscal 2012 …. $5,600,000 Ankiel Securities Division Revenue for fiscal 2012 = $5,200,000. The revenue […]

18–61 PROBLEM 18-13 (Continued) Balance at repossession ………….. $360* Gross profit (40% X $360) ………… (144) Book value ……………………………… 216 Value of repossessed merchandise ……………………….. (100) Loss on repossession ……………… $116 *$30 X (20 payments – 8 payments) = $360 […]

18–81 CA 18-4 (a) Income results from economic activity in which one entity furnishes goods or services to another. To warrant revenue recognition, the earnings process must be substantially complete and there must be a change in net assets that […]

18-1 CHAPTER 18 Revenue Recognition ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis *1. Realization and recognition; sales transactions; high rates of return. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 12, […]

EXERCISE 18-7 (Continued) 2. 6/3 Accounts Receivable (Ann Mount) ………… 7,840 Sales Revenue [$8,000 – (2% X $8,000)] ………………. 7,840 6/5 Sales Returns and Allowances ……………… 588 Accounts Receivable (Ann Mount) [$600 – (2% X $600)] ……………………. 588 6/7 Freight-Out […]

19–41 EXERCISE 19-22 (Continued) Deferred tax liability at the end of 2012 ……………………… $ 17,000 Deferred tax liability at the beginning of 2012 ……………. 0 Deferred tax expense for 2012 (increase required in deferred tax liability) …………………………… $ 17,000 (b) […]

19-1 CHAPTER 19 Accounting for Income Taxes ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Reconcile pretax financial income with taxable income. 1, 13 1, 2, 3, 4, 5, 12, 18, 20, 21 […]

PROBLEM 19-6 1. Temporary Difference Future Taxable (Deductible) Amounts Tax Rate Deferred Tax (Asset) Liability 2013 $ 300 30%a $ 90 2014 300 30%b 90 2015 300 30%c 90 2016 300 35%d 105 2016 (1,600) 35%d $(560) 2017 300 35%e […]

19–79 FINANCIAL REPORTING PROBLEM (a) 1. Per P&G’s 2009 income statement: Provision for income taxes ………………………. $ 4,032 million 2. Per P&G’s June 30, 2009 balance sheet: In current assets: 3. Per P&G’s 2009 statement of cash flows: In cash […]

19–21 EXERCISE 19-8 (10–15 minutes) (a) 2012 Income Tax Expense ……………………………………… 336,000 Deferred Tax Asset ($20,000 X 40%) ……………….. 8,000 Deferred Tax Liability ($30,000 X 40%) ……….. 12,000 Income Taxes Payable ($830,000 X 40%) ……. 332,000 (b) Current assets Deferred […]

CHAPTER 2 Conceptual Framework for Financial Reporting ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Concepts for Analysis 1. Conceptual framework– general. 1, 7 1, 2 2. Objectives of financial reporting. 2 1, 2 3 6. Basic principles: […]

EXERCISE 2-9 (Continued) (d) At the present time, accountants do not recognize price-level adjust- ments in the accounts. Hence, it is misleading to deviate from the historical cost principle because conjecture or opinion can take place. It should also be […]

COMPARATIVE ANALYSIS CASE (Continued) Because PepsiCo uses LIFO for part of its inventory, if material, it would be necessary to adjust as best as possible to FIFO. An additional problem is that both use the average cost for some of […]

FINANCIAL REPORTING PROBLEM (Continued) Asset Allocation at June 30 Pension Benefits Other Retiree Benefits Asset Category 2009 2009 Equity securities 42% 93% Debt securities 51% 7% Cash 6% —% Real estate 1% —% Total 100% 100% These allocations appear in-line […]

20-1 CHAPTER 20 Accounting for Pensions and Postretirement Benefits ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Basic definitions and concepts related to pension plans. 1, 2, 3, 4, 5, 6, 7, 8, […]

EXERCISE 20-9 (Continued) (c) Accumulated OCI at December 31, 2012 is $255,680; this amount is comprised of the following: PSC Gain/Loss Balance Jan. 1, 2012* $252,000 Dr. $ 0 Amortization of PSC 42,000 Cr. — Actuarial loss 45,680 Dr. Balance […]

PROBLEM 20-9 (a) See worksheet on next page. (b) December 31, 2012 Other Comprehensive Income (G/L) …………………. 24,000 Pension Expense ……………………………………………. 334,000 Cash ……………………………………………………….. 200,000 Pension Asset /Liability …………………………….. 158,000 (c) See worksheet on next page. The entry is below. […]

Time and Purpose of Problems (Continued) Problem 20-12 (Time 35–45 minutes) Purpose—to provide a problem that requires preparation of a worksheet, journal entries, and indicates financial statement presentation. *Problem 20-13 (Time 30–35 minutes) Purpose—to provide a problem that requires preparation […]

21–61 PROBLEM 21-12 (Continued) Partial Amortization Schedule (Annuity Due Basis) Date Lease Payment Executory Costs Interest (6%) on Lease Liability Reduction of Lease Liability Lease Liability (2) (12/31/14) Depreciation Expense …………………………………….. 190,000 Accumulated Depreciation—Capital Leases …………………………………………………. 190,000 (To record annual […]

21–41 PROBLEM 21-3 (Continued) (e) WINSTON INDUSTRIES Lease Amortization Schedule Date Annual Lease Receipt/ Payment Interest on Receivable/ Liability at 8% Reduction in Receivable/ Liability Lease Receivable/ Liability Lessor (December 31, 2012) Interest Receivable ……………………………………. 206,882 Interest Revenue …………………………………. 206,882 […]

EXERCISE 21-7 (Continued) (d) 1/1/12 Lease Receivable ……………………….. 200,000* Cost of Goods Sold…………………….. 144,654** Sales Revenue …………………….. 194,654*** Inventory …………………………….. 150,000 * *($41,452 X 4.6959) + ($10,000 X .53464) **$150,000 – ($10,000 X .53464) ***$41,452 X 4.6959 Cash …………………………………………… 41,452 […]

21–80 FINANCIAL STATEMENT ANALYSIS CASE (a) The total obligations under capital leases at 12/26/2009 for Tasty Baking Company is $2,306,000 (the present value of the future lease payments). 1. The estimated life of the asset and the lease term may […]

21-1 CHAPTER 21 Accounting for Leases ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis *3. Disclosure of leases. 19 2, 4, 5, 7, 8 2, 3, 5 *4. Lessors; classification of leases; accounting by […]

EXERCISE 22-7 (Continued) 5. Another acceptable presentation for the retained earnings statement for 2012 is: Retained earnings, January 1, as reported …………….. $125,000 Prior period adjustment—inventory error ………………. (20,000) Retained earnings, January 1, as adjusted …………….. 105,000 Add: Net Income […]

Copyright © 2011 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 14/e, Solutions Manual (For Instructor Use Only) 22–61 FINANCIAL REPORTING PROBLEM (a) New Pronouncements and Reclassifications P&G reported the following changes in accounting principles: FAIR VALUE MEASUREMENTS On July […]

22–41 PROBLEM 22-5 (Continued) In 2012, the Company changed its method of pricing inventory from the last-in, first out (LIFO) to the average cost method in order to more fairly present the financial operations of the company. The financial statements […]

22-1 CHAPTER 22 Accounting Changes and Error Analysis ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Differences between change in 2, 4, 6, 7, 8 3 1, 2, 3, 4 2. Accounting changes: […]

23-1 CHAPTER 23 Statement of Cash Flows ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Format, objectives purpose, and source of statement. 1, 2, 7, 8, 12 1, 2, 5, 6 4. Statement […]

23–21 EXERCISE 23-9 (20–30 minutes) (a) Sales …………………………………………………………………… $538,800 Deduct: Increase in accounts receivable, net of write-offs [$33,000 – ($30,000 – $3,800)] …………………… 6,800 Cash collected from customers …………………………….. $532,000 (c) Interest expense …………………………………………………… $ 4,300 Deduct: Decrease in unamortized […]

23–61 SOLUTIONS TO CONCEPTS FOR ANALYSIS CA 23-1 (a) The main purpose of the statement of cash flows is to show the change in cash from one period to the next. Another objective of a statement of the type shown […]

24-1 CHAPTER 24 Full Disclosure in Financial Reporting ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis * 1. The disclosure principle; type of disclosure. 2, 3 1, 2, 3 * 5. Discussion and analysis. […]

24–21 SOLUTIONS TO PROBLEMS PROBLEM 24-1 ALMADEN CORPORATION Balance Sheet December 31, 2012 Assets Long-term investments Investments in land …………….. 185,000 Cash surrender value of life insurance policy …………. 84,000 Cash restricted for plant expansion ……………………….. 300,000 569,000 Property, plant, […]

CA 24-8 (Continued) 2. The company’s revenue and expenses would be reported as follows on its quarterly report prepared for the first quarter of the 2012–2013 fiscal year: Sales revenue ………………………………………………………………………………. $60,000,000 Cost of goods sold ………………………………………………………………………… 36,000,000 Variable selling […]

3-1 CHAPTER 3 The Accounting Information System ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems 1. Transaction identification. 1, 2, 3, 5, 6, 7, 8 1, 2 1, 2, 3, 4, 17 1 6. Closing. 12 11 […]

3-61 *PROBLEM 3-10 (a), (b), (c) Cash Accounts Receivable Allow. for Doubtful Accts. Bal. 18,500 Bal. 32,000 Bal. 700 Adj. 1,400 2,100 Inventory Equipment Accum. Depr.—Equipment Bal. 80,000 Bal. 84,000 Bal. 35,000 Adj. 12,000 47,000 Prepaid Insurance Notes Payable Interest […]

3-21 EXERCISE 3-11 (20–25 Minutes) (a) CAVAMANLIS CO. Income Statement For the Year Ended December 31, 2012 Revenues Service revenue ………………………………………. $12,590 (b) CAVAMANLIS CO. Statement of Retained Earnings For the Year Ended December 31, 2012 Retained earnings, January 1 […]

PROBLEM 3-3 1. Dec. 31 Salaries and Wages Expense ………………………….. 2,120 Salaries and Wages Payable ………………………….. 2,120 (5 X $700 X 2/5) = $1,400 (3 X $600 X 2/5) = 720 Total accrued salaries $2,120 2. 31 Unearned Rent Revenue […]

3-73 COMPARATIVE ANALYSIS CASE (Continued) PepsiCo has substantially more property, plant, and equipment than does Coca-Cola. PepsiCo is engaged in three different types of businesses: soft drinks, snack-food, and juices. As a result, it has more tangible fixed assets. While […]

4-60 COMPARATIVE ANALYSIS CASE (a) Both companies are using the multiple-step format in presenting income statement information. Companies use the multiple-step in– come statement to recognize additional relationships related to revenues and expenses. Both companies distinguish between operating and (b) […]

4-21 EXERCISE 4-3 (20–25 minutes) DUNBAR INC. Income Statement For Year Ended December 31, 2012 Revenues Net sales ($1,125,000(b) – $17,000) …………………… $1,108,000 Expenses Earnings per share (d) …………………………………………….. $3.22* *Rounded Determination of amounts (a) Administrative expenses = 18% of […]

4-41 PROBLEM 4-2 THOMPSON CORPORATION Income Statement For the Year Ended December 31, 2012 Revenues Net sales ($1,100,000 – $14,500 – $17,500) ….. $1,068,000 Gain on sale of land ………………………………….. 30,000 Rent revenue ……………………………………………. 18,000 Total revenues …………………………………. 1,116,000 Income […]

4-1 CHAPTER 4 Income Statement and Related Information ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Income measurement concepts. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 18, 28, 31, 32, […]

5-73 ACCOUNTING, ANALYSIS, AND PRINCIPLES (Continued) Analysis The classified balance sheet provides subtotals for current assets and Principles The primary objection that the bank is likely to raise about this supple– mental information is the subjectivity (which reduces faithful representation) […]

5-41 SOLUTIONS TO PROBLEMS PROBLEM 5-1 COMPANY NAME Balance Sheet December 31, 20XX Assets Prepaid rent …………………………………………….. XXX Total current assets ……………………………. $XXX Long-term investments Bond sinking fund ……………………………………. XXX Cash surrender value of life insurance ………. XXX Land for […]

5-21 EXERCISE 5-4 (Continued) Liabilities and Shareholders’ Equity Current liabilities Salaries and wages payable ……………………….. $XXX Notes payable, short-term ………………………….. XXX Additional paid-in capital: Paid in capital in excess of par—common stock ………………………….. XXX Total paid-in capital …………………………. XXX Retained […]

5-1 CHAPTER 5 Balance Sheet and Statement of Cash Flows ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Disclosure principles, uses of the balance sheet, financial flexibility. 1, 2, 3, 4, 5, 6, […]

5-61 CA 5-5 (Continued) Because of the significant impact on the financial statements of the depreciation method(s) used, the following disclosures should be made. CA 5-6 Date President Kappeler, CEO Kappeler Corporation 125 Wall Street Middleton, Kansas 67458 Dear Mr. […]

6-1 CHAPTER 6 Accounting and the Time Value of Money ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems 1. Present value concepts. 1, 2, 3, 4, 5, 9, 17 15, 17 c. Unknown number of periods. 4, […]

PROBLEM 6-10 1. Purchase. Time diagrams: Installments i = 10% PV – OA = ? R = $350,000 $350,000 $350,000 $350,000 $350,000 0 1 2 3 4 5 n = 5 Property taxes and other costs i = 10% PV […]

SOLUTIONS TO EXERCISES EXERCISE 6-1 (5–10 minutes) (a) (b) Rate of Interest Number of Periods 1. a. 9% 9 b. 2% 20 c. 5% 30 2. a. 9% 25 b. 4% 30 c. 3% 28 EXERCISE 6-2 (5–10 minutes) (a) […]

6-41 PROBLEM 6-2 (a) Time diagram: i = 8% FV – OA = $90,000 R R R R R R R R R = ? ? ? ? ? ? ? ? 0 1 2 3 4 5 6 7 […]

EXERCISE 7-3 (Continued) Investments Advance to subsidiary company ……………………… 91,000 *This classification assumes that these receivables are collectible within the operating cycle of the business. **These items could be separately classified, if considered material. EXERCISE 7-4 (10–15 minutes) Computation of […]

7-41 PROBLEM 7-3 (a) The Allowance for Doubtful Accounts should have a balance of $45,000 at year-end. The supporting calculations are shown below: Days Account Outstanding Amount Expected Percentage Uncollectible Estimated Uncollectible 0–15 days $300,000 .02 $ 6,000 The accounts […]

7-73 FINANCIAL STATEMENT ANALYSIS CASE 2 Part 1 (a) Cash equivalents are short-term, highly liquid investments that can be (b) (in millions) Microsoft Oracle (1) Current ratio $49,280 = 1.82 $18,581 = 2.03 $27,034 $9,149 (2) Working capital $49,280 – […]

7-1 CHAPTER 7 Cash and Receivables ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Accounting for cash. 1, 2, 3, 4, 22 1 1, 2 1 4. Assignment and factoring of accounts receivable. […]

7-61 SOLUTIONS TO CONCEPTS FOR ANALYSIS CA 7-1 (a) The direct write-off method overstates the trade accounts receivable on the balance sheet by reporting them at more than their net realizable value. Furthermore, because the write-off often occurs in a […]

8-1 CHAPTER 8 Valuation of Inventories: A Cost-Basis Approach ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Inventory accounts; determining quantities, costs, and items to be included in inventory; the inventory equation; balance […]

8-41 PROBLEM 8-4 (a) Purchases Total Units Sales Total Units April 1 (balance on hand) 100 April 5 300 April 4 400 April 12 200 Assuming costs are not computed for each withdrawal: 1. First-in, first-out. Date of Invoice No. […]

8-60 Time and Purposes of Concepts for Analysis (Continued) CA 8-10 (Time 30–35 minutes) Purpose—to provide the student with an opportunity to analyze the effect of changing from the FIFO method to the LIFO method on items such as ending […]

EXERCISE 8-10 (10–15 minutes) Current Year Subsequent Year 1. Working capital No effect No effect Current ratio Overstated* No effect Retained earnings No effect No effect Net income No effect No effect 2. Working capital Overstated No effect Current ratio […]

9-21 EXERCISE 9-5 (Continued) * Jan. 31 Feb. 28 Mar. 31 Apr. 30 Inventory at cost $15,000 $15,100 $17,000 $14,000 Inventory at the lower-of-cost- or-market 14,500 12,600 15,600 13,300 Allowance amount needed to $1,400 – $700 = $700 (b) Jan. […]

9-61 *PROBLEM 9-13 (a) Cost Retail Inventory (beginning) …………………. $ 15,800 $ 24,000 Purchases …………………………………. 116,200 184,000 Markups ……………………………………. 12,000 Totals ……………………………….. $132,000 220,000 Cost-to-retail ratio = $132,000 = 60% $220,000 Ending inventory at cost (60% X $39,500) $ 23,700 […]

9-1 CHAPTER 9 Inventories: Additional Valuation Issues ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Lower-of-cost-or-market. 1, 2, 3, 4, 5, 6 1, 2, 3 1, 2, 3, 4, 5, 6 1, 2, […]

9-74 FINANCIAL STATEMENT ANALYSIS CASE 2 (a) There are probably no finished goods because gold is a highly liquid commodity, and so it can be sold as soon as processing is complete. (b) Sales are recorded as follows: Accounts Receivable […]

1) nolte co. has 4,800,000 shares of common stock outstanding on december 31, 2012. an additional 200,000 shares are issued on april 1, 2013, and 480,000 more on september 1. on october 1, nolte issued $6,000,000 of 9% convertible bonds. […]

1) armstrong inc. is a calendar-year corporation. its financial statements for the years ended 12/31/12 and 12/31/13 contained the following errors: assume that the 2012 errors were not corrected and that no errors occurred in 2011. by what amount will […]

1) bella requires $120,000 in four years to purchase a new home. what amount must be invested today in an investment that earns 6% interest, compounded annually? a.$95,051 b.$98,724 c.$145,337 d.$151,497 2) in computations of weighted average of shares outstanding, […]

1) a company should add back bond premium amortization to net income to arrive at net cash flow from operating activities. 2) companies include postdated checks and petty cash funds as cash. Answer: f 3) the future value of a […]

1) when a stock dividend is less than 20-25 percent of the common stock outstanding, a company is required to transfer the fair value of the stock issued from retained earnings. 2) the net amount reported for short-term receivables is […]

1) the worksheet for sharko co. consisted of five pairs of debit and credit columns. the dollar amount of one item appeared in both the credit column of the income statement section and the debit column of the balance sheet […]

1) the accounting profession has recommended that companies use the word reserve only to describe amounts deducted from assets. 2) normally, companies compute depletion on a straight-line basis. Answer: f 3) most purchase commitments must be recorded as a liability. […]

1) the fasbs codification integrates existing gaap, and creates new gaap. 2) use of lifo provides a tax benefit in an industry where unit costs tend to decrease as production increases. Answer: f 3) income from an investment in common […]

1) stemway requires a new manufacturing facility. management found three locations; all of which would provide needed capacity, the only difference is the price. location a may be purchased for $500,000. location b may be acquired with a down payment […]

1) under the installment-sales method, companies defer revenue and income recognition until the period of cash collection. 2) under ifrs, all tax effects are charged or credited to income. Answer: f 3) companies may use parenthetical explanations, notes, cross references, […]

1) in the retail inventory method, abnormal shortages are deducted from both the cost and retail amounts and reported as a loss. 2) the fasb states that when an issuer makes an additional payment to encourage conversion, the payment should […]

1) timmons company traded machinery with a book value of $240,000 and a fair value of $400,000. it received in exchange from lewis company a machine with a fair value of $360,000 and cash of $40,000. lewiss machine has a […]

1) a change in accounting principle is a change that occurs as the result of new information or additional experience. 2) companies frequently report income tax expense as the last item before net income on a single-step income statement. Answer: […]

1) both revenues and gains increase both net income and owners equity. 2) earnings management generally makes income statement information more useful for predicting future earnings and cash flows. Answer: f 3) the accounting profession has concluded that an investment […]

1) depreciation is normally computed on the basis of the nearest a.full month and to the nearest cent b.full month and to the nearest dollar c.day and to the nearest cent d.day and to the nearest dollar 2) one of […]

1) a contingency can be accrued when a.it is certain that funds are available to settle the disputed amount b.an asset may have been impaired c.the amount of the loss can be reasonably estimated and it is probable that an […]

1) the difference between the accounting process and the accounting cycle is a.the accounting process results in the preparation of financial statements, whereas the accounting cycle is concerned with recording business transactions b.the accounting cycle represents the steps taken to […]

1) plank co. uses the retail inventory method. the following information is available for the current year. assuming that the lifo inventory method is used, that the beginning inventory is the base inventory when the index was 100, and that […]

1) u.s. gaap, per sfas no. 153, now requires that gains on exchanges of nonmonetary assets be recognized if the exchange lacks commercial substance. 2) companies classify some cash flows relating to investing or financing activities as operating activities. Answer: […]

1) lerner co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,500,000 of 10% convertible bonds outstanding during 2013. the preferred stock is convertible into 40,000 shares of common stock. during 2013, lerner paid dividends […]

1) the acquisition cost of a certain raw material changes frequently. the book value of the inventory of this material at year end will be the same if perpetual records are kept as it would be under a periodic inventory […]

1) the asset turnover ratio is computed by dividing a.net income by ending total assets b.net income by average total assets c.net sales by ending total assets d.net sales by average total assets 2) which of the following is a […]

1) users of financial reports include all of the following except a.creditors b.government agencies c.unions d.all of these are users 2) on january 1, 2004, mill corporation purchased for $304,000, equipment having a useful life of ten years and an […]

1) counterbalancing errors are those that will be offset and that take longer than two periods to correct themselves. 2) under ifrs, if an estimate is being developed for a large number of items with varied outcomes, then the expected […]

1) daily, inc. appropriately used the installment method of accounting to recognize income in its financial statement. some pertinent data relating to this method of accounting include: what amount to be realized gross profit should be reported on dailys income […]

1) colaw co. pays all salaried employees on a biweekly basis. overtime pay, however, is paid in the next biweekly period. colaw accrues salaries expense only at its december 31 year end. data relating to salaries earned in december 2012 […]

1) the advantage of relating a company’s bad debt expense to its outstanding accounts receivable is that this approach a.gives a reasonably correct statement of receivables in the balance sheet b.best relates bad debt expense to the period of sale […]

1) what is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a balance sheet? a.as offsets to capital b.by means of footnotes only c.as assets but separately from other receivables d.as trade notes and accounts […]

1) miles company, a wholesaler, budgeted the following sales for the indicated months: all merchandise is marked up to sell at its invoice cost plus 20%. merchandise inventories at the beginning of each month are at 30% of that month’s […]

1) which of the following is a change in accounting principle? a.a change in the estimated service life of machinery b.a change from fifo to lifo c.a change from straight-line to double-declining-balance d.a change from fifo to lifo and a […]

1) when developing computer software to be sold, which of the following costs should be capitalized? a.designing b.coding c.testing d.none of the above 2) of the following costs related to the development of natural resources, which one is not a […]

1) which of the following is an advantage for u.s. companies with international operations to use lifo for u.s. purposes, as opposed to using fifo for foreign subsidiaries? a.lifo creates paper profits b.lifo generally approximates the physical flow of items […]