Question: Griffin purchased a bond on January 1,

> Many small businesses have to squeeze down costs any way they can just to survive. One way many businesses do this is by hiring workers as “independent contractors” rather than as regular employees. Unlike rules for regular employees, a business does not

> Sell-Soft is the defendant in numerous lawsuits claiming unfair trade practices. Sell- Soft has strong incentives not to disclose these contingent liabilities. However, GAAP requires that companies report their contingent liabilities. Requirements: 1. W

> Golden Bear Construction operates throughout California. The owner, Gaylan Beavers, employs 15 work crews. Construction supervisors report directly to Beavers, and the supervisors are trusted employees. The home office staff consists of an accountant and

> Amberand Zack Wilson are continuing their analysis of the company’s position and believe the company will need to borrow $15,000 in order to expand operations. They consult Rivers Nation Bank and secure a 6%, one-year note on September 1, 2019, with inte

> In 150 words or fewer, explain how contingent liabilities are accounted for.

> Berkshire Hathaway, Inc. is a holding company owning subsidiaries that engage in a variety of different business activities including insurance, freight rail transportation, utilities and energy, manufacturing, services and retail. Requirements: With a

> Barot’s 2018 financial statements reported the following items—with 2017 figures given for comparison: Net income for 2018 was $3,910, and interest expense was $240. Compute Barot’s rate of return o

> Some of M and C Electronics’s merchandise is gathering dust. It is now December 31, 2018, and the current replacement cost of the ending merchandise inventory is $24,000 below the business’s cost of the goods, which was $97,000. Before any adjustments at

> The notes are an important part of a company’s financial statements, giving valuable details that would clutter the tabular data presented in the statements. This case will help you learn to use a company’s inventory notes. Visit http://www.pearsonhigher

> On June 1, 2018, Josh’s Restaurant decides to invest excess cash of $54,400 from the tourist season by purchasing a Jackrabbit, Inc. bond at face value. At year- end, December 31, 2018, Jackrabbit’s bond had a market value of $51,200. The investment is c

> On February 1, 2018, Bell Co. decides to invest excess cash of $16,800 by purchasing a Grant, Inc. bond at face value. At year-end, December 31, 2018, the fair value of the Grant bond was $19,600. The investment is categorized as a trading debt investmen

> On January 1, 2018, Bryant, Inc. decides to invest in 3,750 shares of Farrier stock when the stock is selling for $16 per share. On August 1, 2018, Farrier paid a $0.70 per share cash dividend to stockholders. On December 31, 2018, Farrier reports net in

> On January 1, 2018, Bark Company invests $10,000 in Roots, Inc. stock. Roots pays bark a $400 dividend on August 1, 2018. Bark sells the Roots’s stock on August 31, 2018, for $10,450. Assume the investment is categorized as a short-term equity investment

> On January 1, 2018, the Chaucer’s Restaurant decides to invest in Lake Turner bonds. The bonds mature on December 31, 2023, and pay interest on June 30 and December 31 at 4% annually. The market rate of interest was 4% on January 1, 2018, so the $90,000

> Garden Haven has excess cash of $15,000 at the end of the harvesting season. Garden Haven will need this cash in four months for normal operations. Requirements: 1. What are some reasons why Garden Haven may choose to invest in debt or equity securities

> What is comprehensive income, and what does it include?

> Where on the financial statements is an unrealized holding gain or loss on available for- sale debt investments reported?

> What method is used for investments in equity securities with more than 50% ownership? Briefly describe this method.

> What method is used for investments in equity securities when the investor has significant influence and typically 20% to 50% ownership? Briefly describe how dividends declared and received and share of net income are reported.

> Steel Mill began August with 50 units of iron inventory that cost $35 each. During August, the company completed the following inventory transactions: Requirements: 1. Prepare a perpetual inventory record for the merchandise inventory using the FIFO in

> Briefly describe the specific types of debt and equity securities.

> Why would a company invest in debt or equity securities?

> What does the rate of return on total assets measure, and how is it calculated?

> How are held-to-maturity debt investments reported on the financial statements?

> Where on the financial statements is an unrealized holding gain or loss on trading debt investments reported?

> What adjustment must be made at the end of the period for trading debt investments and available-for-sale debt investments?

> When disposing of an available-for-sale debt investment, where is the gain or loss on disposal reported in the financial statements?

> How is the purchase of a held-to-maturity debt security at face value recorded?

> What is an equity security?

> What is a debt security?

> Fit Gym began January with merchandise inventory of 78 crates of vitamins that cost a total of $4,290. During the month, Fit Gym purchased and sold merchandise on account as follows: Requirements: 1. Prepare a perpetual inventory record, using the FIFO

> The beginning balance sheet of Text Source Co. included a $700,000 investment in Taylor stock (20% ownership). During the year, Text Source completed the following investment transactions: Requirements: 1. Journalize the transactions for the year of Te

> Captain Transfer Corporation generated excess cash and invested in securities as follows: Requirements: 1. Classify each of the investments made during 2018. (Assume the equity investments represent less than 20% of ownership of outstanding voting stoc

> Suppose Hale and Sons purchases $800,000 of 3.5% annual bonds of Tyson Way Corporation at face value on January 1, 2018. These bonds pay interest on June 30 and December 31 each year. They mature on December 31, 2022. Hale and Sons intends to hold the Ty

> The beginning balance sheet of Waterfall Source Co. included a $400,000 investment in Evan stock (20% ownership, Waterfall has significant influence over Evan). During the year, Waterfall Source completed the following investment transactions: Requirem

> Jet way Corporation generated excess cash and invested in securities as follows: Requirements: 1. Classify each of the investments made during 2018. (Assume the equity investments represent less than 20% of ownership of outstanding voting stock.) 2. Jo

> Suppose Solomon Brothers purchases $500,000 of 6% annual bonds of Morin Corporation at face value on January 1, 2018. These bonds pay interest on June 30 and December 31 each year. They mature on December 31, 2022. Solomon intends to hold the Morin bond

> Wild Adventure conducts tours of wildlife reserves around the world. The company recently purchased a lodge in Adelaide, Australia, securing a 4% mortgage from First Bank. In addition to monthly payments, Wild Adventure must provide annual reports to the

> Details about a company’s investments appear in a number of places in the annual report. Use Target Corporation’s Fiscal 2015 annual report to answer the following questions. Visit http://www.pearsonhighered.com/Horngren to view a link to Target Corporat

> Montane Exploration Company reported these figures for 2018 and 2017: Compute the rate of return on total assets for 2018. (Round to two decimals.) Income Statement-partial: 2018 2017 Interest Expense $ 16,700,000 $ 16,500,000 Net Income 16,900,000

> Boston Today Publishers completed the following investment transactions during 2018 and 2019: Requirements: 1. Journalize Boston Today’s investment transactions. Explanations are not required. 2. On December 31, 2018, how would the Lo

> Consider the data of the following companies which use the periodic inventory system: Requirements: 1. Supply the missing amounts in the preceding table. 2. Prepare the income statement for the year ended December 31, 2019, for Large Company, which use

> Suppose that on January 6, 2018, East Coast Motors paid $280,000,000 for its 35% investment in Boxcar Motors. East Coast has significant influence over Boxcar after the purchase. Assume Boxcar earned net income of $90,000,000 and paid cash dividends of $

> Money Man Investments completed the following transactions during 2018: Requirements: 1. Journalize Money Man’s transactions. Explanations are not required. 2. Classify and prepare partial financial statements for Money Manâ&#12

> Captain Investments completed the following investment transactions during 2018: Requirements: 1. Journalize the entries for 2018. Explanations are not required. 2. What account(s) and amount(s), if any, would be reported on Captain’s

> Strategic Investments completed the following investment transactions during 2018: Requirements: 1. Journalize Strategic’s investment transactions. Explanations are not required. 2. Classify and prepare a partial balance sheet for Str

> Peyton Investments completed the following investment transactions during 2018: Requirements: 1. Journalize Peyton’s investment transactions. Explanations are not required. 2. Prepare a partial balance sheet for Peytonâ€&#1

> League Up & Co. owns vast amounts of corporate bonds. Suppose League Up buys $900,000 of Coco Corp bonds at face value on January 2, 2018. The Coco Corp bonds pay interest at the annual rate of 8% on June 30 and December 31 and mature on December 31, 202

> Advance & Co. owns vast amounts of corporate bonds. Suppose Advance buys $1,100,000 of FermaCo bonds at face value on January 2, 2018. The FermaCo bonds pay interest at the annual rate of 3% on June 30 and December 31 and mature on December 31, 2037. Adv

> As a result of the recent mortgage crisis, many banks reported record losses to their mortgage receivables and other assets based on the decline in these assets’ fair values. Requirements: 1. What would the effect be to stakeholders if such losses were

> Rock Designs, Inc. is a jewelry store located in Miramar Beach, Florida. After Valentine’s Day, the store often has excess cash to get it through the three-month slow season. The primary stockholder, Hardy Rock, wants to make this seasonal cash work for

> Assume that Jump Coffee Shop completed the following periodic inventory transactions for a line of merchandise inventory: Requirements: 1. Compute ending merchandise inventory, cost of goods sold, and gross profit using the FIFO inventory costing metho

> Amber and Zack Wilson are pleased with the growth of their business and have decided to invest its temporary excess cash in a brokerage account. The company had the following securities transactions in 2019. Requirements: 1. Journalize the transactions

> In 150 words or fewer, explain the difference between trading debt investments and available-for-sale debt investments.

> McDonald’s Corporation is the world’s leading global food service retailer with more than 36,000 locations worldwide in more than 100 countries. The corporation operates and franchises McDonald’s restaurants, which serve menu items such as the Big Mac, C

> Micron Precision, Inc. purchased a computer for $2,500, debiting Computer Equipment. During 2016 and 2017, Micron Precision, Inc. recorded total depreciation of $1,600 on the computer. On January 1, 2018, Micron Precision, Inc. traded in the computer for

> Decca Publishing paid $230,000 to acquire Thrifty Nickel, a weekly advertising paper. At the time of the acquisition, Thrifty Nickel’s balance sheet reported total assets of $130,000 and liabilities of $70,000. The fair market value of Thrifty Nickel’s a

> On October 1, 2018, Modern Company purchased a patent for $153,600 cash. Although the patent gives legal protection for 20 years, the patent is expected to be used for only eight years. Requirements: 1. Journalize the purchase of the patent. 2. Journali

> Ajax Petroleum holds huge reserves of oil assets. Assume that at the end of 2018, Ajax Petroleum’s cost of oil reserves totaled $27,000,000, representing 3,000,000 barrels of oil. Requirements: 1. Which method does Ajax Petroleum use to compute depletio

> Peter Company purchased equipment on January 1, 2018, for $28,000. Suppose Peter Company sold the equipment for $4,000 on December 31, 2019. Accumulated Depreciation as of December 31, 2019, was $11,000. Journalize the sale of the equipment, assuming str

> Alpha Communication purchased equipment on January 1, 2018, for $27,500. Suppose Alpha Communication sold the equipment for $20,000 on December 31, 2020. Accumulated Depreciation as of December 31, 2020, was $10,000. Journalize the sale of the equipment,

> On October 31, 2018, Alternative Landscapes discarded equipment that had a cost of $26,920. Accumulated Depreciation as of December 31, 2017, was $25,000. Assume annual depreciation on the equipment is $1,920. Journalize the partial-year depreciation exp

> Calm Day reported the following income statement for the year ended December 31, 2019: Requirements: 1. Compute Calm Day’s inventory turnover rate for the year. (Round to two decimal places.) 2. Compute Calm Day’s da

> Assume that Smith’s Auto Sales paid $45,000 for equipment with a 15-year life and zero expected residual value. After using the equipment for six years, the company determines that the asset will remain useful for only five more years. Requirements: 1.

> On January 1, 2018, Advanced Airline purchased a used airplane at a cost of $60,500,000. Advanced Airline expects the plane to remain useful for eight years (5,000,000 miles) and to have a residual value of $5,500,000. Advanced Airline expects the plane

> On January 1, 2018, Air Canadians purchased a used airplane for $37,000,000. Air Canadians expects the plane to remain useful for five years (4,000,000 miles) and to have a residual value of $5,000,000. The company expects the plane to be flown 1,400,000

> Concord Pet Care Clinic paid $210,000 for a group purchase of land, building, and equipment. At the time of the acquisition, the land had a market value of $110,000, the building $88,000, and the equipment $22,000. Journalize the lump-sum purchase of the

> Highland Clothing purchased land, paying $96,000 cash and signing a $300,000 note payable. In addition, Highland paid delinquent property tax of $1,100, title insurance costing $600, and $4,600 to level the land and remove an unwanted building. Record th

> White Corporation purchased equipment for $22,000. White recorded total depreciation of $19,000 on the equipment. On January 1, 2018, White traded in the equipment for new equipment, paying $23,200 cash. The fair market value of the new equipment is $25,

> Biagas, Inc. had net sales of $55,600,000 for the year ended May 31, 2018. Its beginning and ending total assets were $52,800,000 and $98,500,000, respectively. Determine Biagas’s asset turnover ratio for year ended May 31, 2018.

> On June 15, 2017, Family Furniture discarded equipment that had a cost of $27,000, a residual value of $0, and was fully depreciated. Journalize the disposal of the equipment.

> On February 28, 2017, Rural Tech Support purchased a copy machine for $53,400. Rural Tech Support expects the machine to last for six years and have a residual value of $3,000. Compute depreciation expense on the machine for the year ended December 31, 2

> What is goodwill? Is goodwill amortized? What happens if the value of goodwill has decreased at the end of the year?

> Nature Foods Grocery reported the following comparative income statements for the years ended June 30, 2019 and 2018: During 2019, Nature Foods Grocery discovered that ending 2018 merchandise inventory was overstated by $5,500. Requirements: 1. Prepar

> How is gain or loss determined when disposing of plant assets? What situation constitutes a gain? What situation constitutes a loss?

> What financial statement are property, plant, and equipment reported on, and how?

> If a business changes the estimated useful life or estimated residual value of a plant asset, what must the business do in regard to depreciation expense?

> What is the depreciation method that is used for tax accounting purposes? How is it different than the methods that are required by GAAP to be used for financial accounting purposes?

> How does a business decide which depreciation method is best to use?

> What is depreciation? Define useful life, residual value, and depreciable cost.

> What is the difference between a capital expenditure and a revenue expenditure? Give an example of each.

> What does it mean if an exchange of plant assets has commercial substance? Are gains and losses recorded on the books because of the exchange?

> What does the asset turnover ratio measure, and how is it calculated?

> What is the process by which businesses spread the allocation of an intangible asset’s cost over its useful life?

> Hot Bread Bakery reported Net sales revenue of $44,000 and cost of goods sold of $33,000. Compute Hot Bread’s correct gross profit if the company made either of the following independent accounting errors. Show your work. a. Ending merchandise inventory

> What is an intangible asset? Provide some examples.

> What is a natural resource? What is the process by which businesses spread the allocation of a natural resource’s cost over its usage?

> How is discarding of a plant asset different from selling a plant asset?

> Which depreciation method ignores residual value until the last year of depreciation? Why?

> What is a lump-sum purchase, and how is it accounted for?

> What does the word capitalize mean?

> How do land improvements differ from land?

> Plant assets are recorded at historical cost. What does the historical cost of a plant asset include?

> Define property, plant, and equipment. Provide some examples.

> During 2018, Lora Company completed the following transactions: Record the transactions in the journal of Lora Company. Jan. 1 Traded in old office equipment with book value of $55,000 (cost of $129,000 and accumulated depreciation of $74,000) for

> Nutriset Foods reports merchandise inventory at the lower-of-cost-or-market. Prior to releasing its financial statements for the year ended March 31, 2019, Nutriset’s preliminary income statement, before the year-end adjustments, appear

> Core Telecom provides communication services in Iowa, Nebraska, the Dakotas, and Montana. Core purchased goodwill as part of the acquisition of Surety Wireless Company, which had the following figures: Requirements: 1. Journalize the entry to record Co

> Donahue Oil Incorporated has an account titled Oil and Gas Properties. Donahue paid $6,400,000 for oil reserves holding an estimated 400,000 barrels of oil. Assume the company paid $510,000 for additional geological tests of the property and $470,000 to

> Whitney Plumb Associates surveys American eating habits. The company’s accounts include Land, Buildings, Office Equipment, and Communication Equipment, with a separate Accumulated Depreciation account for each asset. During 2018, Whitne

> On January 3, 2018, Speedy Delivery Service purchased a truck at a cost of $67,000. Before placing the truck in service, Speedy spent $3,000 painting it, $1,200 replacing tires, and $3,500 overhauling the engine. The truck should remain in service for fi