If none of the adjusting journal entries prepared in BE 2–7 was recorded, would assets, liabilities, and shareholders’ equity on the 12/31/2021 balance sheet be higher or lower and by how much? Data from BE 2-7: Prepare the necessary adjusting entries at its year-end of December 31, 2021, for the Jamesway Corporation for each of the following situations. No adjusting entries were recorded during the year. 1. On December 10, 2021, Jamesway received a $4,000 payment from a customer for services begun on that date and which were completed by December 31, 2021. Deferred service revenue was credited. 2. On December 1, 2021, the company paid a local radio station $2,000 for 40 radio ads that were to be aired, 20 per month, throughout December and January. Prepaid advertising was debited. 3. Employee salaries for the month of December totaling $16,000 will be paid on January 7, 2022. 4. On August 31, 2021, Jamesway borrowed $60,000 from a local bank. A note was signed with principal and 8% interest to be paid on August 31, 2022.
> On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from Builders, Inc. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year lease term (also the asset’s useful life), payable each
> To raise operating funds, National Distribution Center sold its office building to an insurance company on January 1, 2021, for $800,000 and immediately leased the building back. The operating lease is for the final 12 years of the building’s estimated 2
> To raise operating funds, Signal Aviation sold an airplane on January 1, 2021, to a finance company for $770,000. Signal immediately leased the plane back for a 13-year period, at which time ownership of the airplane will transfer to Signal. The airplane
> On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year lease term (also the asset’s useful life), pay
> In 2021, Winslow International, Inc.’s controller discovered that ending inventories for 2019 and 2020 were overstated by $200,000 and $500,000, respectively. Determine the effect of the errors on retained earnings at January 1, 2021. (Ignore income taxe
> The following relate to an operating lease agreement: a. The lease term is 3 years, beginning January 1, 2021. b. The leased asset cost the lessor $800,000 and had a useful life of eight years with no residual value. The lessor uses straight-line depreci
> The lease agreement and related facts indicate the following: a. Leased equipment had a retail cash selling price of $300,000. Its useful life was five years with no residual value. b. The lease term was five years and the lessor paid $265,000 to acquire
> Terms of a lease agreement and related facts were as follows: a. Incremental costs of commissions for brokering the lease and consummating the completed lease transaction incurred by the lessor were $4,242. b. The retail cash selling price of the leased
> On January 1, 2021, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 12% rate of return for providing long-term financing. The lease agreement specified the following: a. Ten annual payment
> Warren Marina owns a large marina that contains numerous boat slips of various sizes. Warren contracts with boat owners to provide slips to house the customers’ boats. Lucky Fisherman Fleet contracted with Warren to provide space for four of its fishing
> Warren Marina owns a large marina that contains numerous boat slips of various sizes. Warren contracts with boat owners to provide slips to house the customers’ boats. Lucky Fisherman Fleet contracted with Warren to provide space for four of its fishing
> Universal Leasing leases electronic equipment to a variety of businesses. The company’s primary service is providing alternate financing by acquiring equipment and leasing it to customers under long-term sales-type leases. Universal earns interest under
> On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year lease term, payable each June 30 and December
> Federated Fabrications leased a tooling machine on January 1, 2021, for a three-year period ending December 31, 2023. The lease agreement specified annual payments of $36,000 beginning with the first payment at the beginning of the lease, and each Decemb
> For each of the three independent situations below determine the amount of the annual lease payments. Each describes a finance lease in which annual lease payments are payable at the beginning of each year. Each lease agreement contains an option that pe
> In 2021, Wade Window and Glass changed its inventory method from FIFO to LIFO. Inventory at the end of 2020 is $150,000. Describe the steps Wade Window and Glass should take to report this change.
> On January 1, 2021, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2024, at which time possession of the leased asset will revert back to Aqua. The equipment cost Aqua $412,184 and has an expecte
> Each of the four independent situations below describes a sales-type lease in which annual lease payments of $100,000 are payable at the beginning of each year. Each is a finance lease for the lessee. Determine the following amounts at the beginning of t
> At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $25,000 beginning January 1, 2021, the beginning of the lease, and at each December 31
> American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2021. The lease agreement for the $4 million (fair value and present value of the lease paym
> Natick Industries leased high-tech instruments from Framingham Leasing on January 1, 2021. Natick has the option to renew the lease at the end of two years for an additional three years. Natick is subject to a $45,000 penalty after two years if it fails
> Chance Enterprises leased equipment from Third Bank Leasing on January 1, 2021. Third Bank Leasing purchased the equipment at a cost of $1,000,000. Chance elected the short-term lease option. Related Information: Lease term 1 year (12 monthly periods) Mo
> On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest
> Baillie Power leased high-tech electronic equipment from Courtney Leasing on January 1, 2021. Courtney purchased the equipment from Doane Machines at a cost of $250,000, its fair value. Related Information: Lease term 2 years (8 quarterly periods) Quarte
> Eye Deal Optometry leased vision-testing equipment from Insight Machines on January 1, 2021. Insight Machines manufactured the equipment at a cost of $200,000 and lists a cash selling price of $250,177. Appropriate adjusting entries are made quarterly. R
> When Patey Pontoons issued 6% bonds on January 1, 2021, with a face amount of $600,000, the market yield for bonds of similar risk and maturity was 7%. The bonds mature December 31, 2024 (4 years). Interest is paid semiannually on June 30 and December 31
> In 2021, Hopyard Lumber changed its inventory method from LIFO to FIFO. Inventory at the end of 2020 of $127,000 would have been $145,000 if FIFO had been used. Inventory at the end of 2021 is $162,000 using the new FIFO method but would have been $151,0
> Universal Foods sold the entire bond issue described in the previous exercise to Wang Communications. Required: 1. Prepare the journal entry to record the purchase of the bonds by Wang Communications on January 1, 2021. 2. Prepare the journal entry to re
> Universal Foods issued 10% bonds, dated January 1, with a face amount of $150 million on January 1, 2021. The bonds mature on December 31, 2035 (15 years). The market rate of interest for similar issues was 12%. Interest is paid semiannually on June 30 a
> The Gorman Group issued $900,000 of 13% bonds on June 30, 2021, for $967,707. The bonds were dated on June 30 and mature on June 30, 2041 (20 years). The market yield for bonds of similar risk and maturity is 12%. Interest is paid semiannually on Decembe
> Myriad Solutions, Inc. issued 10% bonds, dated January 1, with a face amount of $320 million on January 1, 2021, for $283,294,720. The bonds mature on December 31, 2030 (10 years). For bonds of similar risk and maturity the market yield is 12%. Interest
> The Bradford Company sold the entire bond issue described in the previous exercise to Saxton-Bose Corporation. Required: 1. Prepare the journal entry to record the purchase of the bonds by Saxton-Bose on January 1, 2021. 2. Prepare the journal entry to r
> On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances: During January 2021, the following transactions occurred: January 1: Borrowed $100,000 from Captive Credit Corporation. The installment notes bear intere
> At January 1, 2021, NCI Industries, Inc. was indebted to First Federal Bank under a $240,000, 10% unsecured note. The note was signed January 1, 2014, and was due December 31, 2022. Annual interest was last paid on December 31, 2019. NCI was experiencing
> At January 1, 2021, Brainard Industries, Inc., owed Second BancCorp $12 million under a 10% note due December 31, 2023. Interest was paid last on December 31, 2019. Brainard was experiencing severe financial difficulties and asked Second BancCorp to modi
> At January 1, 2021, Transit Developments owed First City Bank Group $600,000, under an 11% note with three years remaining to maturity. Due to financial difficulties, Transit was unable to pay the previous year’s interest. First City Bank Group agreed to
> On March 1, 2021, Brown-Ferring Corporation issued $100 million of 12% bonds, dated January 1, 2021, for $99 million (plus accrued interest). The bonds mature on December 31, 2040, and pay interest semiannually on June 30 and December 31. Brown-Ferring’s
> This exercise is a continuation of BE 9–11. During 2022, purchases at cost and retail were $168,000 and $301,000, respectively. Net markups, net markdowns, and net sales for the year were $3,000, $4,000, and $280,000, respectively. The
> On January 1, 2021, Essence Communications issued $800,000 of its 10-year, 8% bonds for $700,302. The bonds were priced to yield 10%. Interest is payable semiannually on June 30 and December 31. Essence Communications records interest at the effective ra
> On January 1, 2021, Rapid Airlines issued $200 million of its 8% bonds for $184 million. The bonds were priced to yield 10%. Interest is payable semiannually on June 30 and December 31. Rapid Airlines records interest at the effective rate and elected th
> The Bradford Company issued 10% bonds, dated January 1, with a face amount of $80 million on January 1, 2021. The bonds mature on December 31, 2030 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually
> 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%.
> On August 1, 2021, Limbaugh Communications issued $30 million of 10% nonconvertible bonds at 104. The bonds are due on July 31, 2041. Each $1,000 bond was issued with 20 detachable stock warrants, each of which entitled the bondholder to purchase, for $6
> How might your solution for the issuer of the bonds differ if Madison Products prepares its financial statements according to International Financial Reporting Standards? Include any appropriate journal entries in your response. Data from E 14-26: On Ja
> On January 1, 2021, Madison Products issued $40 million of 6%, 10-year convertible bonds at a net price of $40.8 million. Madison recently issued similar, but nonconvertible, bonds at 99 (that is, 99% of face amount). The bonds pay interest on June 30 an
> Refer to the situation described in E 14–24. Required: How might your solution to requirement 1 for the issuer of the bonds differ if Gless Textiles prepares its financial statements according to International Financial Reporting Standards? Include any a
> On January 1, 2021, Gless Textiles issued $12 million of 9%, 10-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Gless’s no par common stock. Bonds that are similar in all
> The balance sheet of Indian River Electronics Corporation as of December 31, 2020, included 12.25% bonds having a face amount of $90 million. The bonds had been issued in 2013 and had a remaining discount of $3 million at December 31, 2020. On January 1,
> On January 1, 2021, Sanderson Variety Store adopted the dollar-value LIFO retail inventory method. Accounting records provided the following information: Estimate ending inventory using the dollar-value LIFO retail method and the information provided.
> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Determine the specific eight- or nine-digit Codification citation (XXX-XX-XX-XX) for accounting for each of the following items: 1. Disclosure requirements for maturiti
> LCD Industries purchased a supply of electronic components from Entel Corporation on November 1, 2021. In payment for the $24 million purchase, LCD issued a 1-year installment note to be paid in equal monthly payments at the end of each month. The paymen
> American Food Services, Inc., acquired a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2021. In payment for the $4 million machine, American Food Services issued a four-year in
> FinanceCo lent $8 million to Corbin Construction on January 1, 2021, to construct a playground. Corbin signed a three-year, 6% installment note to be paid in three equal payments at the end of each year. Required: 1. Prepare the journal entry for Finance
> 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
