In 2021, the Marion Company purchased land containing a mineral mine for $1,600,000. Additional costs of $600,000 were incurred to develop the mine. Geologists estimated that 400,000 tons of ore would be extracted. After the ore is removed, the land will have a resale value of $100,000. To aid in the extraction, Marion built various structures and small storage buildings on the site at a cost of $150,000. These structures have a useful life of 10 years. The structures cannot be moved after the ore has been removed and will be left at the site. In addition, new equipment costing $80,000 was purchased and installed at the site. Marion does not plan to move the equipment to another site, but estimates that it can be sold at auction for $4,000 after the mining project is completed. In 2021, 50,000 tons of ore were extracted and sold. In 2022, the estimate of total tons of ore in the mine was revised from 400,000 to 487,500. During 2022, 80,000 tons were extracted. Required: 1. Compute depletion and depreciation of the mine and the mining facilities and equipment for 2021 and 2022. Marion uses the units-of-production method to determine depreciation on mining facilities and equipment. 2. Compute the book value of the mineral mine, structures, and equipment as of December 31, 2022.
> During its first year of operations, Nive.com reported a net operating loss of $15 million for financial reporting and tax purposes. The enacted tax rate is 25%. Prepare the journal entry to recognize the income tax benefit of the net operating loss.
> Superior Developers sells lots for residential development. When lots are sold, Superior recognizes income for financial reporting purposes in the year of the sale. For some lots, Superior recognizes income for tax purposes when the cash is collected. In
> J-Matt, Inc., had pretax accounting income of $291,000 and taxable income of $300,000 in 2021. The only difference between accounting and taxable income is estimated product warranty costs of $9,000 for sales in 2021. Warranty payments are expected to be
> At the end of 2021, Barker Corporation’s preliminary trial balance indicated a current ratio of 1.2. Management is contemplating paying some of its accounts payable balance before the end of the fiscal year. Determine whether the effect this transaction
> Shannon Polymers uses straight-line depreciation for financial reporting purposes for equipment costing $800,000 and with an expected useful life of four years and no residual value. Assume that, for tax purposes, the deduction is 40%, 30%, 20%, and 10%
> A company reports 2021 pretax accounting income of $10 million, but because of a single temporary difference, taxable income is only $7 million. No temporary differences existed at the beginning of the year, and the tax rate is 25%. Prepare the appropria
> On January 1, 2021, Jasperse Corporation leased equipment under a finance lease designed to earn the lessor a 12% rate of return for providing long-term financing. The lease agreement specified ten annual payments of $75,000 beginning January 1, and each
> Able Equipment entered into an arrangement to provide M. T. Bin Wholesale’s data center with Able’s newest server model. Due to security processes in place for its customer data, M. T. Bin requires access to the equipment and the ability to direct its us
> Financial Machinery entered into an arrangement to provide Viable Bank with equipment for the bank’s data center. The contract does not explicitly identify the equipment to be used to fulfill the contract. Financial Machinery has several data centers tha
> On January 1, 2021, Nantucket Ferry borrowed $14,000,000 cash from BankOne and issued a four-year, $14,000,000, 6% note. Interest was payable annually on December 31. Prepare the journal entries for both firms to record interest at December 31, 2021.
> AI Tool and Dye issued 8% bonds with a face amount of $160 million on January 1, 2021. The bonds sold for $150 million. For bonds of similar risk and maturity the market yield was 9%. Upon issuance, AI elected the option to report these bonds at their fa
> Consider the following liabilities of Future Brands, Inc., at December 31, 2021, the company’s fiscal year-end. Should they be reported as current liabilities or long-term liabilities? 1. $77 million of 8% notes are due on May 31, 2025. The notes are cal
> In Lizzie Shoes’ experience, gift cards that have not been redeemed within 12 months are not likely to be redeemed. Lizzie Shoes sold gift cards for $18,000 during August 2021. $4,000 of cards were redeemed in September 2021, $3,000 in October, $2,500 in
> On December 12, 2021, Pace Electronics received $24,000 from a customer toward a cash sale of $240,000 of diodes to be completed on January 16, 2022. What journal entries should Pace record on December 12 and January 16?
> Newman Consulting Company maintains its records on a cash basis. During 2021 the following cash flows were recorded: cash received for services rendered to clients, $420,000; and cash paid for salaries, utilities, and advertising, $240,000, $35,000, and
> At March 13, 2022, the Securities Exchange Commission is in the process of investigating a possible securities law violation by Now Chemical. The SEC has not yet proposed a penalty assessment. Now’s fiscal year ends on December 31, 2021, and its financia
> Fleener Company is in the process of refinancing some long-term debt. Its fiscal year ends on December 31, 2021, and its financial statements will be issued on March 15, 2022. Under current IFRS, how would the debt be classified if the refinancing is com
> Coulson Company is in the process of refinancing some long-term debt. Its fiscal year ends on December 31, 2021, and its financial statements will be issued on March 15, 2022. Under current U.S. GAAP, how would the debt be classified if the refinancing i
> Assume the same facts as in BE 12–8, but that Fowler intends to hold the bonds until maturity. How much unrealized gain or loss would Fowler include in 2021 net income with respect to the bonds? Data from BE 12-8: Fowler Inc. purchased $75,000 of bonds
> Fowler Inc. purchased $75,000 of bonds on January 1, 2021. The bonds pay interest semiannually and mature in 20 years, at which time the $75,000 principal will be paid. The bonds do not pay any amounts other than interest and principal. Fowler’s intentio
> For several years Fister Links Products has held Microsoft bonds, considered by the company to be securities available-for-sale. The bonds were acquired at a cost of $500,000. At the end of 2021, their fair value was $610,000 and their amortized cost was
> S&L Financial buys and sells securities that it typically classifies as available-for-sale. On December 27, 2021, S&L purchased Coca-Cola bonds at par for $875,000 and sold the bonds on January 3, 2022, for $880,000. At December 31, the bonds had a fair
> Refer to P 2–3 and complete the following steps: 1. Enter the unadjusted balances from the trial balance into T-accounts. 2. Post the adjusting entries prepared in P 2–3 to the accounts. 3. Prepare an adjusted trial ba
> On January 1, 2021, Labtech Circuits borrowed $100,000 from First Bank by issuing a three-year, 8% note, payable on December 31, 2023. Labtech wanted to hedge the risk that general interest rates will decline, causing the fair value of its debt to increa
> CMOS Chips is hedging a 20-year, $10 million, 7% bond payable with a 20-year interest rate swap and has designated the swap as a fair value hedge. The agreement called for CMOS to receive payment based on a 7% fixed interest rate on a notional amount of
> On January 1, 2021, Labtech Circuits borrowed $100,000 from First Bank by issuing a three-year, 8% note, payable on December 31, 2023. Labtech wanted to hedge the risk that general interest rates will decline, causing the fair value of its debt to increa
> Portions of the financial statements for Hawkeye Company are provided below. Required: 1. Prepare the cash flows from operating activities section of the statement of cash flows for Hawkeye Company using the direct method. 2. Prepare the cash flows from
> Portions of the financial statements for Parnell Company are provided below Required: 1. Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the direct method. 2. Prepare the cash flows from o
> For the Coca-Cola bonds described in BE 12–4, prepare journal entries to record (a) any unrealized gains or losses occurring in 2021 and (b) the sale of the bonds in 2022, including recognition of any unrealized gains in 2022 prior to sale and reclassifi
> The income statement and a schedule reconciling cash flows from operating activities to net income are provided below for Macrosoft Corporation. Required: Prepare the cash flows from operating activities section of the statement of cash flows (direct met
> The income statement and a schedule reconciling cash flows from operating activities to net income are provided below for Mike Roe Computers. Required: 1. Calculate each of the following amounts for Mike Roe Computers: a. Cash received from customers dur
> Comparative balance sheets for 2021 and 2020 and a statement of income for 2021 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided. Additional information from the accounting
> The comparative balance sheets for 2021 and 2020 and the statement of income for 2021 are given below for Dux Company. Additional information from Dux’s accounting records is provided also. Additional information from the accounting rec
> The comparative balance sheets for 2021 and 2020 and the statement of income for 2021 are given below for National Intercable Company. Additional information from NIC’s accounting records is provided also. Additional information from th
> Refer to the data provided in the P 21–11 for Arduous Company. Required: Prepare the statement of cash flows for Arduous Company. Use the T-account method to assist in your analysis. Data from P 21-11: The comparative balance sheets fo
> Refer to the data provided in the P 21–5 for Metagrobolize Industries. Required: Prepare the statement of cash flows for Metagrobolize Industries. Use the T-account method to assist in your analysis. Data from P 21-5: Comparative balan
> The comparative balance sheets for 2021 and 2020 and the statement of income for 2021 are given below for Wright Company. Additional information from Wright’s accounting records is provided also. Additional information from the accounti
> Refer to the data provided in the P 21–4 for Dux Company. Required: Prepare the statement of cash flows for Dux Company. Use the T-account method to assist in your analysis. Data from P 21-4: The comparative balance sheets for 2021 and
> Refer to the data provided in the P 21–11 for Arduous Company. Required: Prepare the statement of cash flows for Arduous Company using the indirect method. Data from P 21-11: The comparative balance sheets for 2021 and 2020 and the inc
> S&L Financial buys and sells securities which it classifies as available-for-sale. On December 27, 2021, S&L purchased Coca-Cola bonds at par for $875,000 and sold the bonds on January 3, 2022, for $880,000. At December 31, the bonds had a fair value of
> Refer to the data provided in the P 21–5 for Metagrobolize Industries. Required: Prepare the statement of cash flows for Metagrobolize Industries using the indirect method. Data from P 21-5: Comparative balance sheets for 2021 and 2020
> Refer to the data provided in the P 21–4 for Dux Company. Required: Prepare the statement of cash flows for Dux Company using the indirect method. Data from P 21-4: The comparative balance sheets for 2021 and 2020 and the statement of
> Digital Telephony issued 10% bonds, dated January 1, with a face amount of $32 million on January 1, 2021. The bonds mature in 2031 (10 years). For bonds of similar risk and maturity the market yield is 12%. Interest is paid semiannually on June 30 and D
> The comparative balance sheets for 2021 and 2020 are given below for Surmise Company. Net income for 2021 was $50 million. Required: Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2021. Use the indirect method to p
> Following are selected balance sheet accounts of Del Conte Corp. at December 31, 2021 and 2020, and the increases or decreases in each account from 2020 to 2021. Also presented is selected income statement information for the year ended December 31, 2021
> Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2021. At January 1, 2021, the corporation had outstanding 105 million common shares, $1 par per share. Required: 1. From the information pr
> The comparative balance sheets for 2021 and 2020 and the income statement for 2021 are given below for Arduous Company. Additional information from Arduous’s accounting records is provided also. Additional information from the accountin
> At the beginning of 2021, Wagner Implements undertook a variety of changes in accounting methods, corrected several errors, and instituted new accounting policies. Required: Indicate for each item 1 to 10 below the type of change and the reporting approa
> Described below are six independent and unrelated situations involving accounting changes. Each change occurs during 2021 before any adjusting entries or closing entries were prepared. Assume the tax rate for each company is 25% in all years. Any tax eff
> For the Coca-Cola bonds described in BE 12–2, prepare journal entries to record (a) any unrealized gains or losses occurring in 2021 and (b) the sale of the bonds in 2022. Data from BE 12-2: S&L Financial buys and sells securities expecting to earn prof
> The year-end adjusted trial balance of the Timmons Tool and Die Corporation included the following account balances: retained earnings, $220,000; dividends, $12,000; sales revenue, $850,000; cost of goods sold, $580,000; salaries expense, $180,000; rent
> During 2019 and 2020, Faulkner Manufacturing used the sum-of-the-years’-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2021, Faulkner decided to change
> Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2021 decided to change to the FIFO method. The inventory as reported at the end of 2020 using LIFO would have been $20 million higher using FIFO. Retained earnings
> The Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1982. In 2021, the company decided to change to the average cost method. Data for 2021 are as follows: Additional Information: 1
> Shown below are net income amounts as they would be determined by Weihrich Steel Company by each of three different inventory costing methods ($ in thousands). Required: 1. Assume that Weihrich used FIFO before 2021, and then in 2021 decided to switch to
> The Pyramid Company has used the LIFO method of accounting for inventory during its first two years of operation, 2019 and 2020. At the beginning of 2021, Pyramid decided to change to the average cost method for both tax and financial reporting purposes.
> George Young Industries (GYI) acquired industrial robots at the beginning of 2018 and added them to the company’s assembly process. During 2021, management became aware that the $1 million cost of the equipment was inadvertently recorde
> You are internal auditor for Shannon Supplies, Inc., and are reviewing the company’s preliminary financial statements. The statements, prepared after making the adjusting entries, but before closing entries for the year ended December 3
> Conrad Playground Supply underwent a restructuring in 2021. The company conducted a thorough internal audit, during which the following facts were discovered. The audit occurred during 2021 before any adjusting entries or closing entries are prepared. a.
> Whaley Distributors is a wholesale distributor of electronic components. Financial statements for the years ended December 31, 2019 and 2020, reported the following amounts and subtotals ($ in millions): In 2021, the following situations occurred or came
> Williams-Santana Inc. is a manufacturer of high-tech industrial parts that was started in 2009 by two talented engineers with little business training. In 2021, the company was acquired by one of its major customers. As part of an internal audit, the fol
> S&L Financial buys and sells securities expecting to earn profits on short-term differences in price. On December 27, 2021, S&L purchased Coca-Cola bonds at par for $875,000 and sold the bonds on January 3, 2022, for $880,000. At December 31, the bonds h
> Williams-Santana Inc. is a manufacturer of high-tech industrial parts that was started in 2009 by two talented engineers with little business training. In 2021, the company was acquired by one of its major customers. As part of an internal audit, the fol
> The Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of $2,000,000. This cost included the following expenditures: The company estimated an eight-year useful life for the equipment. No residual value is antic
> You have been hired as the new controller for the Ralston Company. Shortly after joining the company in 2021, you discover the following errors related to the 2019 and 2020 financial statements: a. Inventory at 12/31/2019 was understated by $6,000. b. In
> The Cecil-Booker Vending Company changed its method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 2021. At December 31, 2020, inventories were $120,000 (average cost basis) and were $124,000 a year earlier.
> Comparative Statements of Retained Earnings for Renn-Dever Corporation were reported as follows for the fiscal years ending December 31, 2019, 2020, and 2021. At December 31, 2018, paid-in capital consisted of the following: Common stock, 1,855,000 share
> On December 31, 2020, Ainsworth, Inc., had 600 million shares of common stock outstanding. Twenty million shares of 8%, $100 par value cumulative, nonconvertible preferred stock were sold on January 2, 2021. On April 30, 2021, Ainsworth purchased 30 mill
> LCI Cable Company grants 1 million performance stock options to key executives at January 1, 2021. The options entitle executives to receive 1 million of LCI $1 par common shares, subject to the achievement of specific financial goals over the next four
> JBL Aircraft manufactures and distributes aircraft parts and supplies. Employees are offered a variety of share-based compensation plans. Under its nonqualified stock option plan, JBL granted options to key officers on January 1, 2021. The options permit
> Walters Audio Visual, Inc., offers a stock option plan to its regional managers. On January 1, 2021, 40 million options were granted for 40 million $1 par common shares. The exercise price is the market price on the grant date, $8 per share. Options cann
> Refer to the situation described in P 19–2. Assume Pastner prepares its financial statements using International Financial Reporting Standards (IFRS). Required: Would your responses to requirement 1 and requirement 2 be the same using I
> Assume the same facts as in BE 12–18, but that LED does not plan to sell the investment and does not think it is more likely than not that it will have to sell the investment before fair value recovers. What journal entries should LED record to account f
> Refer to the situation described in P 19–2. Assume Pastner measures the fair value of all options on January 1, 2021, to be $4.50 per option using a single weighted-average expected life of the options assumption. Required: 1. Determine
> Pastner Brands is a calendar-year firm with operations in several countries. As part of its executive compensation plan, at January 1, 2021, the company issued 400,000 executive stock options permitting executives to buy 400,000 shares of Pastner stock f
> Witter House is a calendar-year firm with 300 million common shares outstanding throughout 2021 and 2022. As part of its executive compensation plan, at January 1, 2020, the company had issued 30 million executive stock options permitting executives to b
> At January 1, 2021, Canaday Corporation had outstanding the following securities: 600 million common shares 20 million 6% cumulative preferred shares, $50 par 6.4% convertible bonds, $2,000 million face amount, convertible into 80 million common shares T
> On January 1, 2021, Tonge Industries had outstanding 440,000 common shares ($l par) that originally sold for $20 per share, and 4,000 shares of 10% cumulative preferred stock ($100 par), convertible into 40,000 common shares. On October 1, 2021, Tonge so
> At December 31, 2021, the financial statements of Hollingsworth Industries included the following: Net income for 2021 = $560 million Bonds payable, 8%, convertible into 36 million shares of common stock = $300 million Common stock: Shares outstanding on
> Alciatore Company reported a net income of $150,000 in 2021. The weighted-average number of common shares outstanding for 2021 was 40,000. The average stock price for 2021 was $33. Assume an income tax rate of 25%. Required: For each of the following ind
> Information from the financial statements of Henderson-Niles Industries included the following at December 31, 2021: Common shares outstanding throughout the year 100 million Convertible preferred shares (convertible into 32 million shares of common) 60
> On December 31, 2020, Dow Steel Corporation had 600,000 shares of common stock and 300,000 shares of 8%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 4% common stock dividend on May 15 and paid cash dividends of $400
> On December 31, 2020, Dow Steel Corporation had 600,000 shares of common stock and 300,000 shares of 8%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 4% common stock dividend on May 15 and paid cash dividends of $400
> Turner Company purchased 40% of the outstanding stock of ICA Company for $10,000,000 on January 2, 2021. Turner elects the fair value option to account for the investment. During 2021, ICA reports $750,000 of net income and on December 30 pays a dividend
> On December 31, 2020, Dow Steel Corporation had 600,000 shares of common stock and 300,000 shares of 8%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 4% common stock dividend on May 15 and paid cash dividends of $400
> Comparative Statements of Shareholders’ Equity for Locke Intertechnology Corporation were reported as follows for the fiscal years ending December 31, 2019, 2020, and 2021. Required: Infer from the statements the events and transactions
> On October 15, 2020, the board of directors of Ensor Materials Corporation approved a stock option plan for key executives. On January 1, 2021, 20 million stock options were granted, exercisable for 20 million shares of Ensor’s $1 par common stock. The o
> The shareholders’ equity of Kramer Industries includes the data shown below. During 2022, cash dividends of $150 million were declared. Dividends were not declared in 2020 or 2021. Common stock: $200 Paid-in capital—excess of par, common: 800 Preferred s
> During its first year of operations, Cupola Fan Corporation issued 30,000 of $1 par Class B shares for $385,000 on June 30, 2021. Share issue costs were $1,500. One year from the issue date (July 1, 2022), the corporation retired 10% of the shares for $3
> The following is a portion of the Statement of Shareholders’ Equity from Cisco Systems’ July 29, 2017 annual report. Required: 1. How does Cisco account for its share buybacks? Treasury stock or retired shares? 2. For
> Comparative statements of shareholders’ equity for Anaconda International Corporation were reported as follows for the fiscal years ending December 31, 2021, 2022, and 2023. Required: 1. Infer from the statements the events and transact
> Listed below are the transactions that affected the shareholders’ equity of Branch-Rickie Corporation during the period 2021–2023. At December 31, 2020, the corporation’s accounts included: a. Novembe
> Comparative statements of retained earnings for Renn-Dever Corporation were reported in its 2021 annual report as follows. At December 31, 2018, common shares consisted of the following: Common stock, 1,855,000 shares at $1 par: $1,855,000 Paid-in capita
> National Supply’s shareholders’ equity included the following accounts at December 31, 2020: Shareholders’ Equity Common stock, 6 million shares at $1 par $ 6,000,000 Paid-in capital—excess of par 30,000,000 Retained earnings 86,500,000 Required: 1. Nati
> At the beginning of 2021, Pioneer Products’ ownership interest in the common stock of LLB Co. increased to the point that it became appropriate to begin using the equity method of accounting for the investment. The balance in the investment account was $
> The shareholders’ equity section of the balance sheet of TNL Systems Inc. included the following accounts at December 31, 2020: Shareholders’ Equity ($ in millions) Common stock, 240 million shares at $1 par $ 240 Paid-in capital—excess of par 1,680 Paid
> A new CEO was hired to revive the floundering Champion Chemical Corporation. The company had endured operating losses for several years, but confidence was emerging that better times were ahead. The board of directors and shareholders approved a quasi-re
> In late 2020, the Nicklaus Corporation was formed. The corporate charter authorizes the issuance of 5,000,000 shares of common stock carrying a $1 par value, and 1,000,000 shares of $5 par value, noncumulative, nonparticipating preferred stock. On Januar
> During its first year of operations, the McCollum Corporation entered into the following transactions relating to shareholders’ equity. The corporation was authorized to issue 100 million common shares, $1 par per share. Required: Prepa
> U.S. Metallurgical Inc., reported the following balances in its financial statements and disclosure notes at December 31, 2020. Plan assets $400,000 Projected benefit obligation 320,000 U.S.M.’s actuary determined that 2021 service cost is $60,000. Both
