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 the journal entry for purchase of the land.
> 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
> 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€
> 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
> Griffin purchased a bond on January 1, 2018, for $140,000. The bond has a face value of $140,000 and matures in 20 years. The bond pays interest on June 30 and December 31 at a 3% annual rate. Griffin plans on holding the investment until maturity. Requ
> 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
> 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
> Safe Parking, near an airport, incurred the following costs to acquire land, make land improvements, and construct and furnish a small building: Safe Parking depreciates land improvements over 15 years, buildings over 40 years, and furniture over 10 ye
> During 2018, Mora Corporation completed the following transactions: Record the transactions in the journal of Mora Corporation. Jan. 1 Traded in old office equipment with book value of $55,000 (cost of $127,000 and accumulated depreciation of $72,0
> Midland States Telecom provides communication services in Iowa, Nebraska, the Dakotas, and Montana. Midland States Telecom purchased goodwill as part of the acquisition of Sheldon Wireless Enterprises, which had the following figures: Requirements: 1.
> Conseco Oil, Inc. has an account titled Oil and Gas Properties. Conseco paid $6,600,000 for oil reserves holding an estimated 1,000,000 barrels of oil. Assume the company paid $570,000 for additional geological tests of the property and $450,000 to prepa
> Ellie Johnson 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 depreciable asset. During
> On January 3, 2018, Rapid Delivery Service purchased a truck at a cost of $100,000. Before placing the truck in service, Rapid spent $3,000 painting it, $600 replacing tires, and $10,400 overhauling the engine. The truck should remain in service for five
> Clarmont Resources, which uses the FIFO inventory costing method, has the following account balances at May 31, 2019, prior to releasing the financial statements for the year: Merchandise Inventory, ending …………………………………………………. $ 13,500 Cost of Goods Sol
> Discount parking, near an airport, incurred the following costs to acquire land, make land improvements, and construct and furnish a small building: Discount Parking depreciates land improvements over 15 years, buildings over 40 years, and furniture ov
> Jim Reed manages a fleet of utility trucks for a rural county government. He’s been in his job for 30 years, and he knows where the angles are. He makes sure that when new trucks are purchased, the residual value is set as low as possible. Then, when the
> View a link toTarget Corporation’s Fiscal 2015 annual report at http://www.pearsonhighered.com/Horngren. Refer to the Target Corporation financial statements, including Notes 14 and 15. Answer the following questions. Requirements: 1. Which depreciation
> Partner Bank recently traded in office fixtures. Here are the facts: Old fixtures: New fixtures: Cost, $91,000 …………..………..……………………………………………Cash paid, $110,000 Accumulated depreciation, $68,000 ………………………………..Market value, $133,000 Requirements: 1.
> Blacker by Photo reported the following figures on its December 31, 2018, income statement and balance sheet: Compute the asset turnover ratio for 2018 Round to two decimal places. Net sales $ 441,000 Dec. 31, 2018 Dec. 31, 2017 Cash $ 31,000 $ 30,
> Melbourn Printers (MP) manufactures printers. Assume that MP recently paid $200,000 for a patent on a new laser printer. Although it gives legal protection for 20 years, the patent is expected to provide a competitive advantage for only eight years. Req
> Cannon Mountain Mining paid $462,300 for the right to extract mineral assets from a 400,000-ton deposit. In addition to the purchase price, Cannon also paid a $900 filing fee, a $1,800 license fee to the state of Nevada, and $55,000 for a geological surv
> On January 2, 2016, Pet Spa purchased fixtures for $37,800 cash, expecting the fixtures to remain in service for six years. Pet Spa has depreciated the fixtures on a straight-line basis, with $9,000 residual value. On May 31, 2018, Pet Spa sold the fixtu
> On January 2, 2017, Comfy Clothing Consignments purchased showroom fixtures for $17,000 cash, expecting the fixtures to remain in service for five years. Comfy has depreciated the fixtures on a double-declining-balance basis, with zero residual value. On
> Salem Hardware Consultants purchased a building for $540,000 and depreciated it on a straight-line basis over a 40-year period. The estimated residual value is $100,000. After using the building for 15 years, Salem realized that wear and tear on the buil
> Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires: Requirements: 1. Compute cost of goods sold and gross profit using the FIFO inventory costing method. 2. Compute cost of goods sold and gross profit
> Suppose you manage Campbell Appliance. The store’s summarized financial statements for 2019, the most recent year, follow: Assume that you need to double net income. To accomplish your goal, it will be very difficult to raise the sale
