Geiberger Corporation manufactures replicators. On January 1, 2014, it leased to Althaus Company a replicator that had cost $110,000 to manufacture. The lease agreement covers the 5-year useful life of the replicator and requires 5 equal annual rentals of $40,800 payable each January 1, beginning January 1, 2014. An interest rate of 12% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs. Prepare Geiberger’s January 1, 2014, journal entries.
> Each of the following items must be considered in preparing a statement of cash flows (indirect method) for Turbulent Indigo Inc. for the year ended December 31, 2014. (a) Plant assets that had cost $20,000 6 years before and were being depreciated on a
> Identify and explain the major steps involved in preparing the statement of cash flows.
> Taveras Co. decides at the beginning of 2014 to adopt the FIFO method of inventory valuation. Taveras had used the LIFO method for financial reporting since its inception on January 1, 2012, and had maintained records adequate to apply the FIFO method re
> Castle Leasing Company signs a lease agreement on January 1, 2014, to lease electronic equipment to Jan Way Company. The term of the noncancelable lease is 2 years, and payments are required at the end of each year. The following information relates to t
> Shin Corporation had a projected benefit obligation of $3,100,000 and plan assets of $3,300,000 at January 1, 2014. Shin also had a net actuarial loss of $465,000 in accumulated OCI at January 1, 2014. The average remaining service period of Shin’s emplo
> The following information is available for Wenger Corporation for 2013 (its first year of operations). 1. Excess of tax depreciation over book depreciation, $40,000. This $40,000 difference will reverse equally over the years 2014–2017. 2. Deferral, for
> Manual Company sells goods to Nolan Company during 2014. It offers Nolan the following rebates based on total sales to Nolan. If total sales to Nolan are 10,000 units, it will grant a rebate of 2%. If it sells up to 20,000 units, it will grant a rebate o
> Kalin Corporation had 2014 net income of $1,000,000. During 2014, Kalin paid a dividend of $2 per share on 100,000 shares of preferred stock. During 2014, Kalin had outstanding 250,000 shares of common stock. Compute Kalin’s 2014 earnings per share.
> Identifiable assets for the seven industry segments of Foley Corporation are: Based only on the identifiable assets test, which industry segments are reportable? Penley $500 Cheng $200 Konami 550 Takuhi 150 KSC 250 Molina 475 Red Moon 400
> Red Hot Chili Peppers Co. had the following activity in its most recent year of operations. (a) Purchase of equipment. (b) Redemption of bonds payable. (c) Sale of building. (d) Depreciation. (e) Exchange of equipment for furniture. (f) Issuance of capit
> Holder-Webb Company began operations on January 1, 2012, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2015. The following information is available for the years 2012â€
> Assume that on January 1, 2014, Kimberly-Clark Corp. signs a 10-year noncancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal ren
> What is the indirect effect of a change in accounting principle? Briefly describe the reporting of the indirect effects of a change in accounting principle.
> At December 31, 2014, Besler Corporation had a projected benefit obligation of $560,000, plan assets of $322,000, and prior service cost of $127,000 in accumulated other comprehensive income. Determine the pension asset/liability at December 31, 2014.
> E19-1 (One Temporary Difference, Future Taxable Amounts, One Rate, No Beginning Deferred Taxes) South Carolina Corporation has one temporary difference at the end of 2014 that will reverse and cause taxable amounts of $55,000 in 2015, $60,000 in 2016, an
> What changes are made in the franchisor’s recording of the initial franchise fee when the franchise agreement: (a) Contains an option allowing the franchisor to purchase the franchised outlet, and it is likely that the option will be exercised? (b) Allow
> What are hybrid securities? Give an example of a hybrid security.
> On January 1, 2014 (the date of grant), Lutz Corporation issues 2,000 shares of restricted stock to its executives. The fair value of these shares is $75,000, and their par value is $10,000. The stock is forfeited if the executives do not complete 3 year
> Pam Erickson Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2015. For tax purposes, the company employs the completed-contract method and will cont
> Operating profits and losses for the seven industry segments of Foley Corporation are: Based only on the operating profit (loss) test, which industry segments are reportable? $ (20) $ 90 (40) Penley Cheng Takuhi Konami 34 KSC Red Moon 25 Molina 150 5
> Indicate in general journal form how the items below would be entered in a worksheet for the preparation of the statement of cash flows. (a) Net income is $317,000. (b) Cash dividends declared and paid totaled $120,000. (c) Equipment was purchased for $1
> Pat Delaney Company leases an automobile with a fair value of $8,725 from John Simon Motors, Inc., on the following terms: 1. Noncancelable term of 50 months. 2. Rental of $200 per month (at end of each month). (The present value at 1% per month is $7,84
> Mancuso Corporation amended its pension plan on January 1, 2014, and granted $160,000 of prior service costs to its employees. The employees are expected to provide 2,000 service years in the future, with 350 service years in 2014. Compute prior service
> Distinguish between minimum rental payments and minimum lease payments, and indicate what is included in minimum lease payments.
> Youngman Corporation has temporary differences at December 31, 2014, that result in the following deferred taxes. Indicate how these balances would be presented in Youngman’s December 31, 2014, balance sheet. $38,000 $62,000 $96,000
> How should a franchisor account for continuing franchise fees and routine sales of equipment and supplies to franchisees?
> Refer to the data for Barwood Corporation in BE16-6. In BE16-6 On January 1, 2014, Barwood Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share of Barwood’s $5 par value common stock at $50 per share at
> Foley Corporation has seven industry segments with total revenues as follows. Based only on the revenues test, which industry segments are reportable? Penley $600 Cheng $225 Konami 650 Takuhi 200 KSC 250 Molina 700 Red Moon 275
> In 2014, Leppard Inc. issued 1,000 shares of $10 par value common stock for land worth $40,000. (a) Prepare Leppard’s journal entry to record the transaction. (b) Indicate the effect the transaction has on cash. (c) Indicate how the transaction is report
> Oliver Corporation has owned stock of Conrad Corporation since 2011. At December 31, 2014, its balances related to this investment were: On January 1, 2015, Oliver purchased additional stock of Conrad Company for $475,000 and now has significant influenc
> On January 1, 2014, Burke Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $8,668 at the beginning of each year, starting January 1, 2014. The machine has an estimated usefu
> For 2012, Campbell Soup Company had pension expense of $73 million and contributed $71 million to the pension fund. Prepare Campbell Soup Company’s journal entry to record pension expense and funding.
> BE19-14 Use the information for Rode Inc. given in BE19-13. In BE19-13 Rode Inc. incurred a net operating loss of $500,000 in 2014. Combined income for 2012 and 2013 was $350,000. The tax rate for all years is 40%. Rode elects the carryback option. Assu
> How does the concept of “substantial performance” apply to accounting for franchise sales?
> What is the role of an actuary relative to pension plans? What are actuarial assumptions?
> What is the purpose of a cash flow hedge?
> On January 1, 2014, Barwood Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share of Barwood’s $5 par value common stock at $50 per share at any time during the next 5 years. The market price of the stock
> Tina Bailey, a student of intermediate accounting, was heard to remark after a class discussion on segment reporting, “All this is very confusing to me. First we are told that there is merit in presenting the consolidated results, and now we are told tha
> In 2014, Wild Corporation reported a net loss of $70,000. Wild’s only net income adjustments were depreciation expense $81,000, and increase in accounts receivable $8,100. Compute Wild’s net cash provided (used) by operating activities.
> Simmons Corporation owns stock of Armstrong, Inc. Prior to 2014, the investment was accounted for using the equity method. In early 2014, Simmons sold part of its investment in Armstrong, and began using the fair value method. In 2014, Armstrong earned n
> On January 1, 2014, Irwin Animation sold a truck to Peete Finance for $33,000 and immediately leased it back. The truck was carried on Irwin’s books at $28,000. The term of the lease is 5 years, and title transfers to Irwin at lease-end. The lease requir
> At January 1, 2014, Hennein Company had plan assets of $280,000 and a projected benefit obligation of the same amount. During 2014, service cost was $27,500, the settlement rate was 10%, actual and expected return on plan assets were $25,000, contributio
> Rode Inc. incurred a net operating loss of $500,000 in 2014. Combined income for 2012 and 2013 was $350,000. The tax rate for all years is 40%. Rode elects the carryback option. Prepare the journal entries to record the benefits of the loss carryback and
> Why might a company become involved in an interest rate swap contract to receive fixed interest payments and pay variable?
> McIntyre Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling separately at 98. The market price of the warrants without the bonds cannot be determined. Use the incre
> Bridgewater Corp. offered holders of its 1,000 convertible bonds a premium of $160 per bond to induce conversion into shares of its common stock. Upon conversion of all the bonds, Bridgewater Corp. recorded the $160,000 premium as a reduction of paid-in
> Morlan Corporation is preparing its December 31, 2014, financial statements. Two events that occurred between December 31, 2014, and March 10, 2015, when the statements were issued, are described below. 1. A liability, estimated at $160,000 at Decembe
> Eisler Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 98, and the warrants had a market price of $40. Use the proportional method to record t
> An annual report of Ford Motor Corporation states, “Net income a share is computed based upon the average number of shares of capital stock of all classes outstanding. Additional shares of common stock may be issued or delivered in the future on
> Pechstein Corporation issued 2,000 shares of $10 par value common stock upon conversion of1,000 shares of $50 par value preferred stock. The preferred stock was originally issued at $60 per share. The common stock is trading at $26 per share at the time
> Indiana Jones Corporation enters into a 6-year lease of equipment on January 1, 2014, which requires 6 annual payments of $40,000 each, beginning January 1, 2014. In addition, Indiana Jones guarantees the lessor a residual value of $20,000 at lease-end.
> Petrenko Corporation has outstanding 2,000 $1,000 bonds, each convertible into 50 shares of $10par value common stock. The bonds are converted on December 31, 2014, when the unamortized discount is $30,000 and the market price of the stock is $21 per s
> Shetland Inc. had pretax financial income of $154,000 in 2014. Included in the computation of that amount is insurance expense of $4,000 which is not deductible for tax purposes. In addition, depreciation for tax purposes exceeds accounting depreciation
> Sesame Company purchased a computer system for $74,000 on January 1, 2013. It was depreciated based on a 7-year life and an $18,000 salvage value. On January 1, 2015, Sesame revised these estimates to a total useful life of 4 years and a salvage value
> Marjorie sold her condominium for $500,000 on September 14, 2014; she had paid $330,000 for it in 2006. Marjorie collected the selling price as follows: 2014, $80,000; 2015, $320,000; and 2016, $100,000. Marjorie appropriately uses the installment-sales
> At December 31, 2014, Suffolk Corporation had an estimated warranty liability of $105,000 for accounting purposes and $0 for tax purposes. (The warranty costs are not deductible until paid.) The effective tax rate is 40%. Compute the amount Suffolk shoul
> Stansfield Corporation had the following activities in 2014. 1. Payment of accounts payable $770,000. 4. Collection of note receivable $100,000. 2. Issuance of common stock $250,000. 5. Issuance of bonds payable $510,000. 3. Payment of dividends $350,000
> Waterworld Company leased equipment from Costner Company. The lease term is 4 years and requires equal rental payments of $43,019 at the beginning of each year. The equipment has a fair value at the inception of the lease of $150,000, an estimated useful
> Boey Company reported net income of $25,000 in 2015. It had the following amounts related to its pension plan in 2015: Actuarial liability gain $10,000; Unexpected asset loss $14,000; Accumulated other comprehensive income (G/L) (beginning balance), zero
> Where on the asset side of the balance sheet are trading securities, available-for-sale securities, and held-to-maturity securities reported? Explain.
> Jane Ellerby and Sam Callison are discussing the recent fraud that occurred at LowRental Leasing, Inc. The fraud involved the improper reporting of revenue to ensure that the company would have income in excess of $1 million. What is fraudulent financial
> Equipment was purchased on January 2, 2014, for $24,000, but no portion of the cost has been charged to depreciation. The corporation wishes to use the straight-line method for these assets, which have been estimated to have a life of 10 years and no sal
> Callaway Golf Co. leases telecommunication equipment. Assume the following data for equipment leased from Photon Company. The lease term is 5 years and requires equal rental payments of $31,000 at the beginning of each year. The equipment has a fair valu
> Describe the accounting for actuarial gains and losses.
> Oxford Corporation began operations in 2014 and reported pretax financial income of $225,000 for the year. Oxford’s tax depreciation exceeded its book depreciation by $40,000. Oxford’s tax rate for 2014 and years thereafter is 30%. In its December 31, 20
> Identify and briefly describe the two methods generally employed to account for the cash received in situations where the collection of the sales price is not reasonably assured.
> Discuss why options and warrants may be considered potentially dilutive common shares for the computation of diluted earnings per share.
> What is the difference between a CPA’s unqualified opinion or “clean” opinion and a qualified one?
> Discuss the similarities and the differences between convertible debt and debt issued with stock warrants.
> What are some of the arguments in favor of using the indirect (reconciliation) method as opposed to the direct method for reporting a statement of cash flows?
> An entry to record Purchases and related Accounts Payable of $13,000 for merchandise purchased on December 23, 2015, was recorded in January 2016. This merchandise was not included in inventory at December 31, 2015. What effect does this error have on
> What is the nature of a “sale-leaseback” transaction?
> At the end of the current year, Pociek Co. has prior service cost of $9,150,000. Where should the prior service cost be reported on the balance sheet?
> In 2014, Amirante Corporation had pretax financial income of $168,000 and taxable income of $120,000. The difference is due to the use of different depreciation methods for tax and accounting purposes. The effective tax rate is 40%. Compute the amount to
> Explain the differences between the installment-sales method and the cost-recovery method.
> Raleigh Corp. has an investment with a carrying value (equity method) on its books of $170,000 representing a 30% interest in Borg Company, which suffered a $620,000 loss this year. How should Raleigh Corp. handle its proportionate share of Borg’
> Under the percentage-of-completion method, how are the Construction in Process and the Billings on Construction in Process accounts reported in the balance sheet?
> What approaches have been suggested to overcome the seasonality problem related to interim reporting?
> During 2014, Simms Company redeemed $2,000,000 of bonds payable for $1,880,000 cash. Indicate how this transaction would be reported on a statement of cash flows, if at all.
> The FASB requires a reconciliation between the effective tax rate and the federal government’s statutory rate. Of what benefit is such a disclosure requirement?
> On January 2, 2014, $100,000 of 11%, 10-year bonds were issued for $97,000. The $3,000 discount was charged to Interest Expense. The bookkeeper, Mark Landis, records interest only on the interest payment dates of January 1 and July 1. What is the effect
> What disclosures should be made by lessees and lessors related to future lease payments?
> At the end of the current period, Agler Inc. had a projected benefit obligation of $400,000 and pension plan assets (at fair value) of $350,000. What are the accounts and amounts that will be reported on the company’s balance sheet as pension assets or p
> What is an uncertain tax position, and what are the general guidelines for accounting for uncertain tax positions?
> Define the following terms. (a) Basic earnings per share. (b) Potentially dilutive security. (c) Diluted earnings per share. (d) Complex capital structure. (e) Potential common stock.
> Dierdorf Inc., a closely held corporation, has decided to go public. The controller, Ed Floyd, is concerned with presenting interim data when a LIFO inventory valuation is used. What problems are encountered with LIFO inventories when quarterly data are
> In January 2014, installation costs of $6,000 on new machinery were charged to Maintenance and Repairs Expense. Other costs of this machinery of $30,000 were correctly recorded and have been depreciated using the straight-line method with an estimated li
> What are “initial direct costs” and how are they accounted for?
> What is the meaning of “corridor amortization”?
> What controversy relates to the accounting for net operating loss carry forwards?
> Differentiate between investing activities, financing activities, and operating activities.
> What are the two types of losses that can become evident in accounting for long-term contracts? What is the nature of each type of loss? How is each type accounted for?
> Your classmate Kate believes that the equity method is applied with a strict application of the “20%” rule. Do you agree? Explain.
> What effect do stock dividends or stock splits have on the computation of the weighted-average number of shares outstanding?
> What are the accounting problems related to the presentation of interim data?
> Classify the following items as (1) Operating, (2) Investing, (3) Financing, or (4) significant non-cash investing and financing activities, using the direct method. (a) Cash payments to employees. (b) Redemption of bonds payable. (c) Sale of
> Describe the effect of a “bargain-purchase option” on accounting for a capital lease transaction by a lessee.
> How does an “asset gain or loss” develop in pension accounting? How does a “liability gain or loss” develop in pension accounting?
> What are the possible treatments for tax purposes of a net operating loss? What are the circumstances that determine the option to be applied? What is the proper treatment of a net operating loss for financial reporting purposes?
> Explain how the investment account is affected by investee activities under the equity method.
