Question: Below are two unrelated situations relating to

> 1. Prepare the journal entry on January 1, 2021, for Truax Corporation’s sale of the lathe. Assume Truax spent $400,000 to construct the lathe. 2. Prepare an amortization schedule for the three-year term of the note. 3. Prepare the journal entries to rec

> Amber Mining and Milling, Inc., contracted with Truax Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2021. Amber paid for the lathe by issuing a $600,000, three-year note that specified 4% i

> Wilkins Food Products, Inc., acquired a packaging machine from Lawrence Specialists Corporation. Lawrence completed construction of the machine on January 1, 2019. In payment for the machine Wilkins issued a three-year installment note to be paid in thre

> At the end of 2020, Majors Furniture Company failed to accrue $61,000 of interest expense that accrued during the last five months of 2020 on bonds payable. The bonds mature in 2034. The discount on the bonds is amortized by the straight-line method. The

> When companies offer new debt security issues, they publicize the offerings in the financial press and on Internet sites. Assume the following were among the debt offerings reported in December 2021: New Securities Issues Corporate National Equipment Tra

> Federal Semiconductors issued 11% bonds, dated January 1, with a face amount of $800 million on January 1, 2021. The bonds sold for $739,814,813 and mature on December 31, 2040 (20 years). For bonds of similar risk and maturity the market yield was 12%.

> Roberson Corporation uses a periodic inventory system and the retail inventory method. Accounting records provided the following information for the 2021 fiscal year: The company records sales to employees net of discounts. These discounts totaled $15,00

> On March 1, 2021, Stratford Lighting issued 14% bonds, dated March 1, with a face amount of $300,000. The bonds sold for $294,000 and mature on February 28, 2041 (20 years). Interest is paid semiannually on August 31 and February 28. Stratford uses the s

> On February 1, 2021, Strauss-Lombardi issued 9% bonds, dated February 1, with a face amount of $800,000. The bonds sold for $731,364 and mature on January 31, 2041 (20 years). The market yield for bonds of similar risk and maturity was 10%. Interest is p

> National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 on January 1, 2021. The bonds mature on December 31, 2024 (4 years). For bonds of similar risk and maturity the market yield was 10%. Interest is paid semiannually

> Your investment department has researched possible investments in corporate debt securities. Among the available investments are the following $100 million bond issues, each dated January 1, 2021. Prices were determined by underwriters at different times

> CircuitTown commenced a gift card program in January 2021 and sold $10,000 of gift cards in January, $15,000 in February, and $16,000 in March 2021 before discontinuing further gift card sales. During 2021, gift card redemptions were $6,000 for the Janua

> The following selected transactions relate to liabilities of Interstate Farm Equipment Company for December 2021. Interstate’s fiscal year ends on December 31. Required: Prepare the appropriate journal entries for these transactions. 1. On December 15, r

> Diversified Semiconductors sells perishable electronic components. Some must be shipped and stored in reusable protective containers. Customers pay a deposit for each container received. The deposit is equal to the container’s cost. They receive a refund

> Bavarian Bar and Grill opened for business in November 2021. During its first two months of operation, the restaurant sold gift cards in various amounts totaling $5,200, mostly as Christmas presents. They are redeemable for meals within two years of the

> On January 1, 2021, Poplar Fabricators Corporation agreed to grant its employees two weeks of vacation each year, with the stipulation that vacations earned each year can be taken the following year. For the year ended December 31, 2021, Poplar Fabricato

> JWS Transport Company’s employees earn vacation time at the rate of 1 hour per 40-hour work period. The vacation pay vests immediately (that is, an employee is entitled to the pay even if employment terminates). During 2021, total salaries paid to employ

> Esquire Inc. uses the LIFO method to report its inventory. Inventory at January 1, 2021, was $500,000 (20,000 units at $25 each). During 2021, 80,000 units were purchased, all at the same price of $30 per unit. 85,000 units were sold during 2021. Calcula

> The following selected transactions relate to liabilities of United Insulation Corporation. United’s fiscal year ends on December 31. Required: Prepare the appropriate journal entries through the maturity of each liability. 2021: Jan. 13 Negotiated a rev

> Lee Financial Services pays employees monthly. Payroll information is listed below for January 2021, the first month of Lee’s fiscal year. Assume that none of the employees exceeded any relevant base of pay, such that all benefit percen

> DowDuPont Inc. provides chemical, plastic, and agricultural products and services to various consumer markets. The following excerpt is taken from the disclosure notes of DowDuPont’s 2017 annual report: At December 31, 2017, the Company had accrued oblig

> The Commonwealth of Virginia filed suit in October 2019 against Northern Timber Corporation, seeking civil penalties and injunctive relief for violations of environmental laws regulating forest conservation. When the 2020 financial statements were issued

> Woodmier Lawn Products introduced a new line of commercial sprinklers in 2020 that carry a one-year warranty against manufacturer’s defects. Because this was the first product for which the company offered a warranty, trade publications

> Indicate (by letter) the way each of the items listed below should be reported in a balance sheet at December 31, 2021. Item: 1. Commercial paper 2. Noncommitted line of credit 3. Customer advances 4. Estimated quality-assurance warranty cost 5. Accounts

> Refer to the circumstances listed in E13–21, but assume that Erismus prepares its financial statements according to International Financial Reporting Standards. Required: For each circumstance, indicate the amount of asset or liability that Erismus would

> The following selected circumstances relate to pending lawsuits for Erismus, Inc. Erismus’s fiscal year ends on December 31. Financial statements are issued in March 2022. Erismus prepares its financial statements according to U.S. GAAP. Required: Indica

> The following selected transactions relate to contingencies of Classical Tool Makers, Inc., which began operations in July 2021. Classical’s fiscal year ends on December 31. Financial statements are issued in April 2022. Required: Prepare the year-end en

> On July 1, 2021, Ross-Livermore Industries issued nine-month notes in the amount of $400 million. Interest is payable at maturity. Required: Determine the amount of interest expense that should be recorded in a year-end adjusting entry under each of the

> Refer to the situation described in BE 8–6. SAM uses a periodic inventory system. Calculate ending inventory and cost of goods sold for January using (1) FIFO and (2) average cost. Data from BE 8-6: Samuelson and Messenger (SAM) began 2021 with 200 unit

> At April 1, 2022, the Food and Drug Administration is in the process of investigating allegations of false marketing claims by Hulkly Muscle Supplements. The FDA has not yet proposed a penalty assessment. Hulkly’s fiscal year ends on December 31, 2021. T

> The Manda Panda Company uses the allowance method to account for bad debts. At the beginning of 2021, the allowance account had a credit balance of $75,000. Credit sales for 2021 totaled $2,400,000 and the year-end accounts receivable balance was $490,00

> Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December 2021 of a circuit flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually

> Cupola Awning Corporation introduced a new line of commercial awnings in 2021 that carry a two-year warranty against manufacturer’s defects. Based on their experience with previous product introductions, warranty costs are expected to a

> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Required: 1. Obtain the relevant authoritative literature on recognition of contingent losses. What is the specific eight-digit Codification citation (XXX-XX-XX-X) that

> At December 31, 2021, Newman Engineering’s liabilities include the following: 1. $10 million of 9% bonds were issued for $10 million on May 31, 1999. The bonds mature on May 31, 2029, but bondholders have the option of calling (demanding payment on) the

> 1. How would Sprint report the debt in its balance sheet if it reported under IFRS? Why? 2. Would your answer to requirement 1 change if Sprint obtained its long-term credit facility after the balance sheet date? Why? Data from E13-11: An annual report

> An annual report of Sprint Corporation contained a rather lengthy narrative entitled “Review of Segmental Results of Operation.” The narrative noted that short-term notes payable and commercial paper outstanding at the end of the year aggregated $756 mil

> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Required: Determine the specific eight- or nine-digit Codification citation (XXX-XX-XX-XX) that describes the following items: 1. If it is only reasonably possible that

> On November 1, 2021, Quantum Technology, a geothermal energy supplier, borrowed $16 million cash to fund a geological survey. The loan was made by Nevada BancCorp under a noncommitted short-term line of credit arrangement. Quantum issued a nine-month, 12

> Samuelson and Messenger (SAM) began 2021 with 200 units of its one product. These units were purchased near the end of 2020 for $25 each. During the month of January, 100 units were purchased on January 8 for $28 each and another 200 units were purchased

> Loreal-American Corporation purchased several marketable securities during 2021. At December 31, 2021, the company had the investments in bonds listed below. None was held at the last reporting date, December 31, 2020, and all are considered securities a

> Rantzow-Lear Company buys and sells debt securities expecting to earn profits on short-term differences in price, and holds these investments in its trading portfolio. The company’s fiscal year ends on December 31. The following selected transactions rel

> Mills Corporation acquired as an investment $240 million of 6% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 4% for bonds of similar risk and maturity. Mills p

> Tanner-UNF Corporation acquired as an investment $240 million of 6% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Ta

> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Required: 1. What is the specific eight-digit Codification citation (XXX-XX-XX-X) that describes examples of circumstances under which an investment in debt is availabl

> Rell Corporation reports under IFRS No. 9. Rell has an investment in Tirish, Inc. bonds that Rell accounts for at amortized cost, given that the bonds pay only interest and principal and Rell’s business purpose is to hold the bonds to maturity. Rell purc

> Assume all of the same facts and scenarios as E 12–30, except that Bloom Corporation classifies its Taylor investment as AFS. Required: 1. For each of the scenarios shown in E 12–30, prepare the appropriate entry(s) at December 31, 2021. Indicate how the

> Bloom Corporation purchased $1,000,000 of Taylor Company 5% bonds, at their face amount, with the intent and ability to hold the bonds until they matured in 2025, so Bloom classifies its investment as HTM. Unfortunately, a combination of problems at Tayl

> FF&T Corporation is a confectionery wholesaler that frequently buys and sells securities to meet various investment objectives. The following selected transactions relate to FF&T’s investment activities during the last two months of 2021. At November 1,

> Refer to the situation described in BE 8–4. Prepare the necessary journal entries assuming that VTC uses the net method to account for purchase discounts. Data from BE 8-4: On December 28, 2021, Videotech Corporation (VTC) purchased 10 units of a new sa

> Edible Chemicals Corporation owns a $4 million whole life insurance policy on the life of its CEO, naming Edible Chemicals as beneficiary. The annual premiums are $70,000 and are payable at the beginning of each year. The cash surrender value of the poli

> As a long-term investment at the beginning of the 2021 fiscal year, Florists International purchased 30% of Nursery Supplies Inc.’s 8 million shares of capital stock for $56 million. The fair value and book value of the shares were the same at that time.

> Colah Company purchased $1 million of Jackson, Inc., 5% bonds at their face amount on July 1, 2021, with interest paid semi-annually. The bonds mature in 20 years but Colah planned to keep them for less than 3 years, and classified them as available for

> Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity, but when the bonds were acquired Tanner-UNF decide

> On July 1, 2021, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $100 million cash, giving Gupta the ability to exercise significant influence over VB’s operations. At the date of acquisition of the stock, VB’s net assets h

> On January 1, 2021, Cameron Inc. bought 20% of the outstanding common stock of Lake Construction Company for $300 million cash, giving Cameron the ability to exercise significant influence over Lake’s operations. At the date of acquisition of the stock,

> Fizer Pharmaceutical paid $68 million on January 2, 2021, for 4 million shares of Carne Cosmetics common stock. The investment represents a 25% interest in the net assets of Carne and gave Fizer the ability to exercise significant influence over Carne’s

> On December 12, 2021, an equity investment costing $80,000 was sold for $100,000. The investment was carried in the balance sheet at $75,000, and was accounted for under the equity method. An error was made in which the total of the sale proceeds was cre

> As a long-term investment at the beginning of the 2021 fiscal year, Florists International purchased 30% of Nursery Supplies Inc.’s 8 million shares for $56 million. The fair value and book value of the shares were the same at that time. During the year,

> Mills Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 4% for bonds of si

> On December 28, 2021, Videotech Corporation (VTC) purchased 10 units of a new satellite uplink system from Tristar Communications for $25,000 each. The terms of each sale were 1/10, n/30. VTC uses the gross method to account for purchase discounts and a

> The investments of Harlon Enterprises included the following cost and fair value amounts ($ in millions): Harlon accounts for its equity investment portfolio at fair value through net income. Harlon sold its holdings of A Corporation shares on June 1, 20

> The accounting records of Jamaican Importers, Inc., at January 1, 2021, included the following: No changes occurred during 2021 in the investment portfolio. Required: Prepare appropriate adjusting entry(s) at December 31, 2021, assuming the fair value of

> On January 2, 2021, Sanborn Tobacco Inc. bought 5% of Jackson Industry’s capital stock for $90 million. Jackson Industry’s net income for the year ended December 31, 2021, was $120 million. The fair value of the shares held by Sanborn was $98 million at

> On March 31, 2021, Chow Brothers, Inc., bought 10% of KT Manufacturing’s capital stock for $50 million. KT’s net income for the year ended December 31, 2021, was $80 million. The fair value of the shares held by Chow was $35 million at December 31, 2021.

> At December 31, 2021, Hull-Meyers Corp. had the following investments that were purchased during 2021, its first year of operations: No investments were sold during 2021. All securities except Security D and Security F are considered short-term investmen

> On February 18, 2021, Union Corporation purchased 600 IBM bonds as a long-term investment at their face value for a total of $600,000. Union will hold the bonds indefinitely, and may sell them if their price increases sufficiently. On December 31, 2021,

> Colah Company purchased $1 million of Jackson, Inc., 5% bonds at par on July 1, 2021, with interest paid semi-annually. Colah determined that it should account for the bonds as an available-for-sale investment. At December 31, 2021, the Jackson bonds had

> Mills Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2021. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 4% for bonds of similar ri

> Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2021. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 8% for bonds of simil

> Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 8% for bonds

> Kelly Corporation shipped goods to a customer f.o.b. destination on December 29, 2021. The goods arrived at the customer’s location in January. In addition, one of Kelly’s major suppliers shipped goods to Kelly f.o.b. shipping point on December 30. The m

> Dower Corporation prepares its financial statements according to IFRS. On March 31, 2021, the company purchased equipment for $240,000. The equipment is expected to have a six-year useful life with no residual value. Dower uses the straight-line deprecia

> On June 30, 2021, Rosetta Granite purchased equipment for $120,000. The estimated useful life of the equipment is eight years and no residual value is anticipated. An important component of the equipment is a specialized highspeed drill that will need to

> On March 31, 2021, Susquehanna Insurance purchased an office building for $12,000,000. Based on their relative fair values, one-third of the purchase price was allocated to the land and two-thirds to the building. Furniture and fixtures were purchased se

> Tristen Company purchased a five-story office building on January 1, 2019, at a cost of $5,000,000. The building has a residual value of $200,000 and a 30-year life. The straight-line depreciation method is used. On June 30, 2021, construction of a sixth

> On January 1, 2021, the general ledger of Parts Unlimited included the following account balances: From January 1 to December 31, the following summary transactions occurred: a. Purchased inventory on account, $325,800. b. Sold inventory on account, $567

> On January 1, 2021, the general ledger of TNT Fireworks included the following account balances: During January 2021, the following transactions occurred: Jan. 1: Purchased equipment for $19,500. The company estimates a residual value of $1,500 and a fiv

> On January 1, 2021, the Allegheny Corporation purchased equipment for $115,000. The estimated service life of the equipment is 10 years and the estimated residual value is $5,000. The equipment is expected to produce 220,000 units during its life. Requir

> Cadillac Construction Company uses the retirement method to determine depreciation on its small tools. During 2019, the first year of the company’s operations, tools were purchased at a cost of $8,000. In 2021, tools originally costing $2,000 were sold f

> On September 30, 2019, Leeds LTD. acquired a patent in conjunction with the purchase of another company. The patent, valued at $6 million, was estimated to have a 10-year life and no residual value. Leeds uses the straight-line method of amortization for

> On May 28, 2021, Pesky Corporation acquired all of the outstanding common stock of Harman, Inc., for $420 million. The fair value of Harman’s identifiable tangible and intangible assets totaled $512 million, and the fair value of liabilities assumed by P

> At the beginning of 2021, a company adopts the dollar-value LIFO inventory method for its one inventory pool. The pool’s value on that date was $1,400,000. The 2021 ending inventory valued at year-end costs was $1,664,000 and the year-end cost index was

> Refer to the situation described in E 11–31, requirement 1. Alliant prepares its financial statements according to IFRS, and Centerpoint is considered a cash-generating unit. Assume that Centerpoint’s fair value of $220 million approximates fair value le

> In 2019, Alliant Corporation acquired Centerpoint Inc. for $300 million, of which $50 million was allocated to goodwill. Fair value of Centerpoint Inc. = $220 million Book value of Centerpoint’s net assets (excluding goodwill) = 200 million Book value o

> On October 1, 2021, the Allegheny Corporation purchased equipment for $115,000. The estimated service life of the equipment is 10 years and the estimated residual value is $5,000. The equipment is expected to produce 220,000 units during its life. Requir

> Collinsworth LTD., a U.K. company, prepares its financial statements according to International Financial Reporting Standards. Late in its 2021 fiscal year, a significant adverse change in business climate indicated to management that the assets of its a

> Refer to the situation described in Exercise 11–27. Required: How might your solution differ if Chadwick Enterprises, Inc., prepares its financial statements according to International Financial Reporting Standards? Assume that the fair value amount give

> In 2021, internal auditors discovered that PKE Displays, Inc. had debited an expense account for the $350,000 cost of equipment purchased on January 1, 2018. The equipment’s life was expected to be five years with no residual value. Straight-line depreci

> For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2018 for $2,560,000. Its useful life was estimated to be six years, with a $160,000 residual value. A

> Alteran Corporation purchased office equipment for $1.5 million at the beginning of 2019. The equipment is being depreciated over a 10-year life using the double-declining-balance method. The residual value is expected to be $300,000. At the beginning of

> Wardell Company purchased a minicomputer on January 1, 2019, at a cost of $40,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $4,000. On January 1, 2021, the estimate o

> Saint John Corporation prepares its financial statements according to IFRS. On June 30, 2021, the company purchased a franchise for $1,200,000. The franchise is expected to have a 10-year useful life with no residual value. Saint John uses the straight-l

> Selected financial statement data for Schmitzer Inc. is shown below: What was the amount of net sales for 2021?

> Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the patent on a straight-line basis since 2017, when it was acquired at a cost of $9 million at the beginning of that year. Due to rapid technological

> On January 2, 2021, David Corporation purchased a patent for $500,000. The remaining legal life is 12 years, but the company estimated that the patent will be useful only for eight years. In January 2023, the company incurred legal fees of $45,000 in suc

> On January 1, 2021, the Allegheny Corporation purchased equipment for $115,000. The estimated service life of the equipment is 10 years and the estimated residual value is $5,000. The equipment is expected to produce 220,000 units during its life. Requir

> Janes Company provided the following information on intangible assets: a. A patent was purchased from the Lou Company for $700,000 on January 1, 2019. Janes estimated the remaining useful life of the patent to be 10 years. The patent was carried on Lou&a

> Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,000,000 in 2021 for the mining site and spent an additional $600,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately fo

> At the beginning of 2021, Terra Lumber Company purchased a timber tract from Boise Cantor for $3,200,000. After the timber is cleared, the land will have a residual value of $600,000. Roads to enable logging operations were constructed and completed on M