Describe the typical approach for recording inventory write-downs.
> Financial statements for Askew Industries for 2021 are shown below (in thousands): Required: Calculate the following ratios for 2021. 1. Inventory turnover ratio 2. Average days in inventory 3. Receivables turnover ratio 4. Average collection period 5. A
> Presented below are the 2021 income statement and comparative balance sheets for Santana Industries. Additional information for the 2021 fiscal year ($ in thousands): 1. Cash dividends of $1,000 were declared and paid. 2. Equipment costing $4,000 was pur
> The chief accountant for Grandview Corporation provides you with the company’s 2021 statement of cash flows and income statement. The accountant has asked for your help with some missing figures in the company’s compar
> Selected information about income statement accounts for the Reed Company is presented below (the company’s fiscal year ends on December 31). On July 1, 2021, the company adopted a plan to discontinue a division that qualifies as a comp
> Presented below is the balance sheet for HHD, Inc., at December 31, 2021. The captions shown in the summarized statement above include the following: a. Current assets: cash, $150,000; accounts receivable (net), $200,000; inventory, $225,000; and prepaid
> The following incomplete balance sheet for the Sanderson Manufacturing Company was prepared by the company’s controller. As accounting manager for Sanderson, you are attempting to reconstruct and revise the balance sheet. Additional Inf
> The following balance sheet for the Hubbard Corporation was prepared by the company: Additional Information: 1. The buildings, land, and machinery are all stated at cost except for a parcel of land that the company is holding for future sale. The land or
> The following is the ending balances of accounts at December 31, 2021, for the Vosburgh Electronics Corporation. Additional Information: 1. The common stock represents 1 million shares of no-par stock authorized, 500,000 shares issued and outstanding. 2.
> Huebert Corporation and Winslow Corporation reported the following information: Calculate each companies fixed-asset turnover ratio and determine which company utilizes its fixed assets most efficiently to generate sales.
> The following is the ending balances of accounts at June 30, 2021, for Excell Company. Additional Information: 1. The short-term investments account includes $18,000 in U.S. treasury bills purchased in May. The bills mature in July, 2021. 2. The accounts
> The following is the ending balances of accounts at December 31, 2021, for the Weismuller Publishing Company. Additional Information: 1. Prepaid expenses include $120,000 paid on December 31, 2021, for a two-year lease on the building that houses both th
> The following is a December 31, 2021, post-closing trial balance for Almway Corporation. Additional Information: 1. The investment in equity securities account includes an investment in common stock of another corporation of $30,000 which management inte
> The data listed below are taken from a balance sheet of Trident Corporation at December 31, 2021. Some amounts, indicated by question marks, have been intentionally omitted. Required: 1. Determine the missing amounts. 2. Prepare Trident’
> Melody Lane Music Company was started by John Ross early in 2021. Initial capital was acquired by issuing shares of common stock to various investors and by obtaining a bank loan. The company operates a retail store that sells records, tapes, and compact
> Pastina Company sells various types of pasta to grocery chains as private label brands. The company’s reporting year-end is December 31. The unadjusted trial balance as of December 31, 2021, appears below. Information necessary to prepa
> The following is the post-closing trial balance for the Whitlow Manufacturing Corporation as of December 31, 2020. The following transactions occurred during January 2021: Jan. 1 Sold merchandise for cash, $3,500. The cost of the merchandise was $2,000.
> Halogen Laminated Products Company began business on January 1, 2021. During January, the following transactions occurred: 1. Issued common stock in exchange for $100,000 cash. 2. Purchased inventory on account for $35,000 (the perpetual inventory system
> Using the information from P 2–8, prepare and complete a worksheet. Use the information in the worksheet to prepare an income statement and a statement of shareholders’ equity for 2021 and a balance sheet as of Decembe
> Zambrano Wholesale Corporation maintains its records on a cash basis. At the end of each year the company’s accountant obtains the necessary information to prepare accrual basis financial statements. The following cash flows occurred du
> On June 30, 2021, Kimberly Farms purchased custom-made harvesting equipment from a local producer. In payment, Kimberly signed a noninterest-bearing note requiring the payment of $60,000 in two years. The fair value of the equipment is not known, but an
> Selected balance sheet information for the Wolf Company at November 30, and December 31, 2021, is presented below. The company uses the perpetual inventory system and all sales to customers are made on credit. The following cash flow information also is
> McGuire Corporation began operations in 2021. The company purchases computer equipment from manufacturers and then sells to retail stores. During 2021, the bookkeeper used a check register to record all cash receipts and cash disbursements. No other jour
> The unadjusted trial balance as of December 31, 2021, for the Bagley Consulting Company appears below. December 31 is the company’s reporting year-end. Required: 1. Enter the account balances in T-accounts. 2. From the trial balance and
> Excalibur Corporation sells video games for personal computers. The unadjusted trial balance as of December 31, 2021, appears below. December 31 is the company’s reporting year-end. The company uses the perpetual inventory system. Infor
> The information necessary for preparing the December 31, 2021 year-end adjusting entries for Vito’s Pizza Parlor appears below. a. On July 1, 2021, purchased $10,000 of IBM Corporation bonds at face value. The bonds pay interest twice a year on January 1
> The general ledger of the Karlin Company, a consulting company, at January 1, 2021, contained the following account balances: The following is a summary of the transactions for the year: a. Service revenue, $100,000, of which $30,000 was on account and t
> Howarth Company’s reporting year-end is December 31. Below are the unadjusted and adjusted trial balances for December 31, 2021. Required: Prepare the adjusting journal entries that were recorded at December 31, 2021.
> What is the effect on interest of an interest rate swap?
> What transactions are included in income from continuing operations? Briefly explain why it is important to segregate income from continuing operations from other transactions affecting net income.
> Hines Moving Company held a fixed-rate debt of $2 million. The company wanted to hedge its fair value exposure with an interest rate swap. However, the only notional available at the time, on the type of swap it desired, was $2.5 million. What will be th
> Maltese Laboratories incurred the following research and developments costs related to its pharmaceutical business: Internal projects (salaries, supplies, overhead for R&D facilities) = $620,000 Payment to acquire R&D from a third party related to a spec
> Should gains and losses on a fair value hedge be recorded as they occur, or should they be recorded to coincide with losses and gains on the item being hedged?
> One of the advantages of leasing rather than purchasing an asset is that leasing offers flexibility and a lower cost when disposing of the asset. Explain.
> The issuance of stock and the issuance of bonds are reported as financing activities. Are payments of dividends to shareholders and payments of interest to bondholders also reported as financing activities? Explain.
> Southeast Steel, Inc., changed from the FIFO inventory costing method to the LIFO method during 2020. How would this change likely be reported in the 2021 comparative financial statements?
> Sugarbaker Designs Inc. changed from the FIFO inventory costing method to the average cost method during 2021. Which items from the 2020 financial statements should be restated on the basis of the average cost method when reported in the 2021 comparative
> If merchandise inventory is understated at the end of 2020, and the error is not discovered, how will net income be affected in 2021?
> Describe the process of correcting an error when it’s discovered in a subsequent reporting period.
> How does IFRS differ from current U.S. GAAP with respect to accounting for Impairments?
> Answer Q12–26 but assume that the investment is classified as AFS. Data from Q12-26: When market rates of interest rise after a fixed-rate security is purchased, the value of the now below-market, fixed-interest payments decline, so the market value of
> Suppose the Environmental Protection Agency is in the process of investigating Ozone Ruination Limited for possible environmental damage but has not proposed a penalty as of December 31, 2020, the company’s fiscal year-end. Describe the two-step process
> Garrett Corporation began operations in 2021. To maintain its accounting records, Garrett entered into a two-year agreement with Accurite Company. The agreement specifies that Garrett will pay $35,000 to Accurite immediately, and in return, Accurite will
> The EPBO for Branch Industries at the end of 2021 was determined by the actuary to be $20,000 as it relates to employee Will Lawson. Lawson was hired at the beginning of 2007. He will be fully eligible to retire with health care benefits after 15 more ye
> Northwest Carburetor Company established a fund in 2018 to accumulate money for a new plant scheduled for construction in 2021. How should this special purpose fund be reported in Northwest’s balance sheet?
> At December 31, the end of the reporting period, the analysis of a loss contingency indicates that an obligation is only reasonably possible, though its dollar amount is readily estimable. During February, before the financial statements are issued, new
> Marshall Companies, Inc., holds a note receivable from a former subsidiary. Due to financial difficulties, the former subsidiary has been unable to pay the previous year’s interest on the note. Marshall agreed to restructure the debt by both delaying and
> In late 2017 the federal tax rate for subsequent years was decreased from 35% to 21%. How would this affect an existing deferred tax liability? How would the change be reflected in net income?
> On January 1, 2021, Brandon Electronics issued $85 million of 11.5% bonds, dated January 1. The market yield for bonds of maturity issued by similar firms in terms of riskiness is 12.25%. How can Brandon sell debt paying only 11.5% in a 12.25% market?
> Superior Company owns 40% of the outstanding stock of Bernard Company. During 2021, Bernard paid a $100,000 cash dividend on its common shares. What effect did this dividend have on Superior’s 2021 financial statements?
> It is discovered in 2021 that ending inventory in 2019 was understated. What is the effect of the understatement on the following? 2019: Cost of goods sold Net income Ending retained earnings 2020: Net purchases Cost of goods sold Net income Ending retai
> Identify any differences between U.S. GAAP and International Financial Reporting Standards in the methods allowed to value inventory
> In March 2021, Price Company began developing a new software system to be used internally for managing its inventory. The software integrates customer orders with inventory on hand to automatically place orders for additional inventory when needed. The s
> Prepare the necessary adjusting entries for Johnstone Controls at the end of its December 31, 2021, fiscal yearend for each of the following situations. No adjusting entries were recorded during the year. 1. On March 31, 2021, the company lent $50,000 to
> Deferred revenues represent liabilities recorded when cash is received from customers in advance of providing a good or service. What adjusting journal entry is required at the end of a period to recognize the amount of deferred revenues that were recogn
> Compute the required annual payment in Question 5–13. Data from Question 5-13: Assume that you borrowed $500 from a friend and promised to repay the loan in five equal annual installments beginning one year from today. Your friend wants to be reimbursed
> Briefly explain the difference between the income statement approach and the balance sheet approach to estimating bad debts.
> Define the ECL model for accounts receivable. How does it differ from the CECL model?
> Define the CECL model for accounts receivable. On what does it base the estimate of the allowance for uncollectible accounts?
> The Bockner Company shipped merchandise to Laetner Corporation on December 28, 2021. Laetner received the shipment on January 3, 2022. December 31 is the fiscal year-end for both companies. The merchandise was shipped f.o.b. shipping point. Explain the d
> What is the main difference between a perpetual inventory system and a periodic inventory system? Which system is used more often by major companies?
> Is restricted cash included in the reconciliation of cash balances on a statement of cash flows? Explain.
> When is a gain or a loss from a cash flow hedge reported in earnings?
> How are derivatives reported on the balance sheet? Why?
> In February 2021, Culverson Company began developing a new software package to be sold to customers. The software allows people to enter health information and daily eating and exercise habits to track their health status. The project was completed in No
> On January 1, 2021, S&S Corporation invested in LLB Industries’ negotiable two-year, 10% notes, with interest receivable quarterly. The company classified the investment as available-for-sale. S&S entered into a two-year interes
> On January 1, 2021, LLB Industries borrowed $200,000 from Trust Bank by issuing a two-year, 10% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value he
> Indicate (by abbreviation) the type of hedge each activity described below would represent. Hedge Type: FV. Fair value hedge CF. Cash flow hedge FC. Foreign currency hedge N. Would not qualify as a hedge Activity: 1. An options contract to hedge possible
> Classified Electronics has an unfunded retiree health care plan. Each of the company’s three employees has been with the firm since its inception at the beginning of 2020. As of the end of 2021, the actuary estimates the total net cost of providing healt
> How might your solution differ if Lacy Construction prepares its financial statements according to International Financial Reporting Standards (IFRS)? Assume the actuary’s discount rate is the rate on high quality corporate bonds. Inclu
> Lacy Construction has a noncontributory, defined benefit pension plan. At December 31, 2021, Lacy received the following information: The expected long-term rate of return on plan assets was 10%. There were no AOCI balances related to pensions on January
> Prepare a pension spreadsheet to show the relationship among the PBO, plan assets, prior service cost, the net gain, pension expense, and the net pension asset. Data from E 17-19: Beale Management has a noncontributory, defined benefit pension plan. On
> On January 1, 2021, Ravetch Corporation’s projected benefit obligation was $30 million. During 2021, pension benefits paid by the trustee were $4 million. Service cost for 2021 is $12 million. Pension plan assets (at fair value) increased during 2021 by
> Beale Management has a noncontributory, defined benefit pension plan. On December 31, 2021 (the end of Beale’s fiscal year), the following pension-related data were available: Required: 1. Prepare the 2021 journal entry to record pensio
> Patel Industries has a noncontributory, defined benefit pension plan. Since the inception of the plan, the actuary has used as the discount rate the rate on high-quality corporate bonds, which recently has been 7%. During 2021, changing economic conditio
> Refer to the situation described in BE 9–7. Estimate ending inventory and cost of goods sold using the conventional method and the information provided. Data from BE 9-7: Kiddie World uses a periodic inventory system and the retail inv
> Actuary and trustee reports indicate the following changes in the PBO and plan assets of Douglas Roberts Industries during 2021: Required: 1. Determine Douglas-Roberts’s pension expense for 2021, and prepare the appropriate journal entr
> A partially completed pension spreadsheet showing the relationships among the elements that comprise the defined benefit pension plan of Universal Products is given below. The actuary’s discount rate is 5%. At the end of 2019, the pensi
> Warrick Boards calculated pension expense for its underfunded pension plan as follows: Required: Which elements of Warrick’s balance sheet are affected by the components of pension expense? What are the specific changes in these account
> Hicks Cable Company has a defined benefit pension plan. Three alternative possibilities for pension-related data at January 1, 2021, are shown below: Required: 1. For each independent case, calculate any amortization of the net loss or gain that should b
> Clark Industries has a defined benefit pension plan that specifies annual, year-end retirement benefits equal to 1.2% × Service years × Final year’s salary Stanley Mills was hired by Clark at the beginning of 2002. Mills is expected to retire at the end
> Pension data for Barry Financial Services Inc., include the following: Required: 1. Determine pension expense for 2021. 2. Prepare the journal entries to record (a) pension expense, (b) gains and losses (if any), (c) funding, and (d) retiree benefits for
> Abbott and Abbott has a noncontributory, defined benefit pension plan. At December 31, 2021, Abbott and Abbott received the following information: The expected long-term rate of return on plan assets was 10%. There was no prior service cost and a negligi
> Ayres Services acquired an asset for $80 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100% of the asset’s cost for income tax rep
> Ayres Services acquired an asset for $80 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset’s cost is depreciated by MACRS.
> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). What is the specific eight-digit Codification citation (XXX-XX-XX-X) that applies to each of the following items: 1. The specific items to which income tax expense is a
> Refer to the situation described in BE 9–7. Estimate ending inventory and cost of goods sold (LIFO) using the information provided. Data from BE 9-7: Kiddie World uses a periodic inventory system and the retail inventory method to esti
> The following income statement does not reflect intraperiod tax allocation. Required: Recast the income statement to reflect intraperiod tax allocation. The company’s tax rate is 25%.
> Delta Catfish Company has taken a position in its tax return to claim a tax credit of $10 million (direct reduction in taxes payable) and has determined that its sustainability is “more likely than not,” based on its t
> As of December 31, 2021, Lange Company has the following deferred tax assets and liabilities: Deferred tax assets: Pension plans = $300,000 Inventory = 200,000 Total deferred tax assets = $500,000 Deferred tax liabilities: Property, plant and equipment
> On January 1, 2018, Ameen Company purchased major pieces of manufacturing equipment for a total of $36 million. Ameen uses straight-line depreciation for financial statement reporting and deducted 100% of the equipment’s cost for income tax reporting in
> Case Development began operations in December 2021. When property is sold on an installment basis, Case recognizes installment income for financial reporting purposes in the year of the sale. For tax purposes, installment income is reported by the instal
> Case Development began operations in December 2021. When property is sold on an installment basis, Case recognizes installment income for financial reporting purposes in the year of the sale. For tax purposes, installment income is reported by the instal
> At December 31, DePaul Corporation had the following cumulative temporary differences associated with its operations: 1. Estimated warranty expense, $16 million temporary difference: expense recorded in the year of the sale; tax-deductible when paid (one
> Wynn Farms reported a net operating loss of $160,000 for financial reporting and tax purposes in 2021. The enacted tax rate is 25%. Taxable income, tax rates, and income taxes paid in Wynn’s first four years of operation were as follows
> Wynn Farms reported a net operating loss of $100,000 for financial reporting and tax purposes in 2021. The enacted tax rate is 25%. Taxable income, tax rates, and income taxes paid in Wynn’s first four years of operation were as follows
> During 2021, its first year of operations, Baginski Steel Corporation reported a net operating loss of $360,000 for financial reporting and tax purposes. The enacted tax rate is 25%. Required: 1. Prepare the journal entry to recognize the income tax bene
> Kiddie World uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available for the quarter ending September 30, 2021: Estimate ending inventory and cost of goods sol
> The information that follows pertains to Richards Refrigeration, Inc.: a. At December 31, 2021, temporary differences existed between the financial statement book values and the tax bases of the following ($ in millions): b. No temporary differences exis
> The information that follows pertains to Esther Food Products: a. At December 31, 2021, temporary differences were associated with the following future taxable (deductible) amounts: Depreciation $60,000 Prepaid expenses 17,000 Warranty expenses (12,000)
> Shwonson Industries reported a deferred tax asset of $5 million for the year ended December 31, 2020, related to a temporary difference of $20 million. The tax rate was 25%. The temporary difference is expected to reverse in 2022, at which time the defer
