Jupiter Company sells goods on January 1 that have a cost of $500,000 to Danone Inc. for $700,000, with payment due in 1 year. The cash price for these goods is $610,000, with payment due in 30 days. If Danone paid immediately upon delivery, it would receive a cash discount of $10,000. Instructions (a) Prepare the journal entry to record this transaction at the date of sale. (b) How much revenue should Jupiter report for the entire year?
> Arantxa Corporation made the following cash purchases of securities during 2014, which is the first year in which Arantxa invested in securities. 1. On January 15, purchased 10,000 shares of Sanchez Company’s common stock at $33.50 per share plus commiss
> The Simon Corporation issued 10-year, $5,000,000 par, 7% callable convertible subordinated debentures on January 2, 2014. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 14:1, and in 2 years it will i
> What is the purpose of the statement of cash flows? What information does it provide?
> Where can authoritative IFRS be found related to dilutive securities, stock-based compensation, and earnings per share?
> In recent years, the Wall Street Journal has indicated that many companies have changed their accounting principles. What are the major reasons why companies change accounting methods?
> Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions. Instructions (a) Prepare entries necessary to classify the amounts into prop
> What are the major lessor groups in the United States? What advantage does a captive have in a leasing arrangement?
> What is a private pension plan? How does a contributory pension plan differ from a noncontributory plan?
> Explain the current environment regarding revenue recognition.
> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marksand-Spencer-Annual-report-and-financial-statements-2012.pdf. Instr
> Your client, Cascade Company, is planning to invest some of its excess cash in 5-year revenue bonds issued by the county and in the shares of one of its suppliers, Teton Co. Teton’s shares trade on the over-the-counter market. Cascade plans to classify t
> Collinsworth Co. reported sales on an accrual basis of $100,000. If accounts receivable increased $30,000 and the allowance for doubtful accounts increased $9,000 after a write-off of $2,000, compute cash sales.
> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marks-and-Spencer-Annual-report-and-financial-statements-2012.pdf. Ins
> Komissarov Company has a debt investment in the bonds issued by Keune Inc. The bonds were purchased at par for $400,000 and, at the end of 2014, have a remaining life of 3 years with annual interest payments at 10%, paid at the end of each year. This deb
> Presented below is information related to the purchases of common stock by Lilly Company during 2014. Instructions (Assume a zero balance for any Fair Value Adjustment account.) (a) What entry would Lilly make at December 31, 2014, to record the investme
> For each of the following subsequent events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose. ________ 1. Settlement of a tax case at a cost cons
> Newton Inc. uses a calendar year for financial reporting. The company is authorized to issue 9,000,000 shares of $10 par common stock. At no time has Newton issued any potentially dilutive securities. Listed below is a summary of Newton’
> Assume that Amazon.com has a stock-option plan for top management. Each stock option represents the right to purchase a share of Amazon $1 par value common stock in the future at a price equal to the fair value of the stock at the date of the grant. Amaz
> On April 1, 2014, Dougherty Inc. entered into a cost plus fixed-fee contract to construct an electric generator for Altom Corporation. At the contract date, Dougherty estimated that it would take 2 years to complete the project at a cost of $2,000,000. T
> Employees at your company disagree about the accounting for sales returns. The sales manager believes that granting more generous return provisions and allowing customers to order items on a bill and hold basis can give the company a competitive edge and
> On December 21, 2014, Zurich Company provided you with the following information regarding its trading investments. During 2015, Carolina Company shares were sold for $9,500. The fair value of the shares on December 31, 2015, was Stargate Corp. shares&ac
> Hamilton Construction Company uses the percentage-of-completion method of accounting. In 2014, Hamilton began work under contract #E2-D2, which provided for a contract price of $2,200,000. Other details are as follows. Instructions (a) What portion of t
> Assume the same information as in IFRS17-12 except that Roosevelt has an active trading strategy for these bonds. The fair value of the bonds at December 31 of each year-end is as follows. Instructions (a) Prepare the journal entry at the date of the bon
> Use the information from IFRS18-6, but assume Turner uses the cost-recovery method. In IFRS18-6 Turner, Inc. began work on a $7,000,000 contract in 2014 to construct an office building. During 2014, Turner, Inc. incurred costs of $1,700,000, billed its
> Roosevelt Company purchased 12% bonds, having a maturity value of $500,000, for $537,907.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2014, and mature January 1, 2019, with interest receivable December 31 of each year
> Using the information in E20-13 about Erickson Company’s defined benefit pension plan, prepare a 2014 pension worksheet with supplementary schedules of computations. In E20-13 Prepare the journal entries at December 31, 2014, to record
> Presented below is summarized information for Johnston Co., which sells merchandise on the installment basis. Instructions (a) Compute the realized gross profit for each of the years 2014, 2015, and 2016. (b) Prepare all entries required in 2016, applyin
> Erickson Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. Instructions (a) Compute the actual return on the plan assets in 2014. (b) Compute the amount of the
> Teri Hatcher Inc., in its first year of operations, has the following differences between the book basis and tax basis of its assets and liabilities at the end of 2013. It is estimated that the warranty liability will be settled in 2014. The difference i
> Presented below are three revenue recognition situations. (a) Grupo sells goods to MTN for $1,000,000, payment due at delivery. (b) Grupo sells goods on account to Grifols for $800,000, payment due in 30 days. (c) Grupo sells goods to Magnus for $500,000
> Unlike the other major financial statements, the statement of cash flows is not prepared from the adjusted trial balance. From what sources does the information to prepare this statement come, and what information does each source provide?
> On December 21, 2013, Bucky Katt Company provided you with the following information regarding its trading securities. During 2014, Colorado Company stock was sold for $9,400. The fair value of the stock on December 31, 2014, was Clemson Corp. stock&acir
> On January 1, 2015, Titania Inc. granted stock options to officers and key employees for the purchase of 20,000 shares of the company’s $10 par common stock at $25 per share. The options were exercisable within a 5-year period beginning January 1, 2017,
> You are compiling the consolidated financial statements for Winsor Corporation International. The corporation’s accountant, Anthony Reese, has provided you with the segment information shown on the next page. Note 7: Major Segments of B
> Data for Anita Baker Company are presented in E23-18. Instructions Prepare entries in journal form for all adjustments that should be made on a worksheet for a statement of cash flows. E23-20 (Worksheet Analysis of Selected Transactions) The transactions
> The before-tax income for Lonnie Holdiman Co. for 2014 was $101,000 and $77,400 for 2015. However, the accountant noted that the following errors had been made: 1. Sales for 2014 included amounts of $38,200 which had been received in cash during 2014, bu
> Assume the same information as in P21-4. In P21-4 The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for a
> Ferreri Company received the following selected information from its pension plan trustee concerning the operation of the company’s defined benefit pension plan for the year ended December 31, 2014. The service cost component of pension
> Andy McDowell Co. establishes a $100 million liability at the end of 2014 for the estimated site-cleanup costs at two of its manufacturing facilities. All related closing costs will be paid and deducted on the tax return in 2015. Also, at the end of 2014
> Shaw Company sells goods that cost $300,000 to Ricard Company for $410,000 on January 2, 2014. The sales price includes an installation fee, which is valued at $40,000. The fair value of the goods is $370,000. The installation is expected to take 6 month
> The following information is available for Barkley Company at December 31, 2014, regarding its investments. Instructions (a) Prepare the adjusting entry (if any) for 2014, assuming the securities are classified as trading. (b) Prepare the adjusting entry
> Lenexa State Bank has followed the practice of capitalizing certain marketing costs and amortizing these costs over their expected life. In the current year, the bank determined that the future benefits from these costs were doubtful. Consequently, the b
> On November 1, 2014, Columbo Company adopted a stock-option plan that granted options to key executives to purchase 30,000 shares of the company’s $10 par value common stock. The options were granted on January 2, 2015, and were exercisable 2 years after
> At December 31, 2014, Coburn Corp. has assets of $10,000,000, liabilities of $6,000,000, common stock of $2,000,000 (representing 2,000,000 shares of $1 par common stock), and retained earnings of $2,000,000. Net sales for the year 2014 were $18,000,000,
> The accounts below appear in the ledger of Anita Baker Company. Instructions From the postings in the accounts above, indicate how the information is reported on a statement of cash flows by preparing a partial statement of cash flows using the indirect
> A partial trial balance of Julie Hartsack Corporation is as follows on December 31, 2015. Additional adjusting data: 1. A physical count of supplies on hand on December 31, 2015, totaled $1,100. 2. Through oversight, the Salaries and Wages Payable accoun
> The following facts pertain to a noncancelable lease agreement between Alschuler Leasing Company and McKee Electronics, a lessee, for a computer system. The collectibility of the lease payments is reasonably predictable, and there are no important uncert
> Henning Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2014 in which no benefits were paid. 1. The actuarial present value of future benefits earned by employees for
> During 2014, Kate Holmes Co.’s first year of operations, the company reports pretax financial income at $250,000. Holmes’s enacted tax rate is 45% for 2014 and 40% for all later years. Holmes expects to have taxable in
> On January 1, 2013, Phantom Company acquires $200,000 of Spiderman Products, Inc., 9% bonds at a price of $185,589. The interest is payable each December 31, and the bonds mature December 31, 2015. The investment will provide Phantom Company a 12% yield.
> On May 1, 2014, Friendly Company issued 2,000 $1,000 bonds at 102. Each bond was issued with one detachable stock warrant. Shortly after issuance, the bonds were selling at 98, but the fair value of the warrants cannot be determined. Instructions (a) Pre
> Outline the accounting procedures involved in applying the operating method by a lessee.
> State how each of the following items is reflected in the financial statements. (a) Change from FIFO to LIFO method for inventory valuation purposes. (b) Charge for failure to record depreciation in a previous period. (c) Litigation won in current year,
> Presented below are three independent situations. Situation 1: A company offers a one-year warranty for the product that it manufactures. A history of warranty claims has been compiled, and the probable amounts of claims related to sales for a given peri
> Jobim Inc. had the following condensed balance sheet at the end of operations for 2013. During 2014, the following occurred. 1. A tract of land was purchased for $9,000. 2. Bonds payable in the amount of $15,000 were redeemed at par. 3. An additional $10
> Peter Henning Tool Company’s December 31 year-end financial statements contained the following errors. An insurance premium of $66,000 was prepaid in 2014 covering the years 2014, 2015, and 2016. The entire amount was charged to expense
> Winston Industries and Ewing Inc. enter into an agreement that requires Ewing Inc. to build three diesel-electric engines to Winston’s specifications. Upon completion of the engines, Winston has agreed to lease them for a period of 10 years and to assume
> Webb Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2014, the following balances relate to this plan. As a result of the operation of the plan during 2014, the following additional data are provided by the actuary. Instruc
> Taxable income and pretax financial income would be identical for Huber Co. except for its treatments of gross profit on installment sales and estimated costs of warranties. The income computations shown on page 1164 have been prepared. The tax rates in
> Frozen Delight, Inc. charges an initial franchise fee of $75,000 for the right to operate as a franchisee of Frozen Delight. Of this amount, $25,000 is collected immediately. The remainder is collected in 4 equal annual installments of $12,500 each. Thes
> Assume the same information as in E17-3 except that the securities are classified as available-for-sale. The fair value of the bonds at December 31 of each year-end is as follows. Instructions (a) Prepare the journal entry at the date of the bond purchas
> On September 1, 2014, Sands Company sold at 104 (plus accrued interest) 4,000 of its 9%, 10-year, $1,000 face value, nonconvertible bonds with detachable stock warrants. Each bond carried two detachable warrants. Each warrant was for one share of common
> Ace Inc. produces electronic components for sale to manufacturers of radios, television sets, and digital sound systems. In connection with her examination of Ace’s financial statements for the year ended December 31, 2015, Gloria Rodd, CPA, completed fi
> Name three approaches to measuring benefit obligations from a pension plan and explain how they differ.
> The balance sheet data of Brown Company at the end of 2014 and 2013 follow. Land was acquired for $30,000 in exchange for common stock, par $30,000, during the year; all equipment purchased was for cash. Equipment costing $10,000 was sold for $3,000; boo
> The reported net incomes for the first 2 years of Sandra Gustafson Products, Inc., were as follows: 2014, $147,000; 2015, $185,000. Early in 2016, the following errors were discovered. 1. Depreciation of equipment for 2014 was overstated $17,000. 2. Depr
> Cleveland Inc. leased a new crane to Abriendo Construction under a 5-year noncancelable contract starting January 1, 2014. Terms of the lease require payments of $33,000 each January 1, starting January 1, 2014. Cleveland will pay insurance, taxes, and m
> Taveras Enterprises provides the following information relative to its defined benefit pension plan. Instructions (a) Prepare the note disclosing the components of pension expense for the year 2014. (b) Determine the amounts of other comprehensive income
> Novotna Inc.’s only temporary difference at the beginning and end of 2013 is caused by a $3 million deferred gain for tax purposes for an installment sale of a plant asset, and the related receivable (only one-half of which is classified as a current ass
> Schuss Corporation sold equipment to Potsdam Company for $20,000. The equipment is on Schuss’s books at a net amount of $13,000. Schuss collected $10,000 in 2014, $5,000 in 2015, and $5,000 in 2016. If Schuss uses the cost-recovery method, what amount of
> On January 1, 2013, Hi and Lois Company purchased 12% bonds having a maturity value of $300,000 for $322,744.44. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2013, and mature January 1, 2018, with interest receivable Dece
> Illiad Inc. has decided to raise additional capital by issuing $170,000 face value of bonds with a coupon rate of 10%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issue
> Koch Corporation is in the process of preparing its annual financial statements for the fiscal year ended April 30, 2015. Because all of Koch’s shares are traded intrastate, the company does not have to file any reports with the Securit
> Presented below are data taken from the records of Alee Company. Additional information: 1. Held-to-maturity securities carried at a cost of $43,000 on December 31, 2013, were sold in 2014 for $34,000. The loss (not extraordinary) was incorrectly charged
> Roth Inc. has a deferred tax liability of $68,000 at the beginning of 2015. At the end of 2015, it reports accounts receivable on the books at $90,000 and the tax basis at zero (its only temporary difference). If the enacted tax rate is 34% for all perio
> You have been engaged to review the financial statements of Gottschalk Corporation. In the course of your examination, you conclude that the bookkeeper hired during the current year is not doing a good job. You notice a number of irregularities as follow
> Glaus Leasing Company agrees to lease machinery to Jensen Corporation on January 1, 2014. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic li
> Assume the same information as E19-14, except that at the end of 2013, Jennifer Capriati Corp. had a valuation account related to its deferred tax asset of $45,000. In E19-14 Jennifer Capriati Corp. has a deferred tax asset account with a balance of $150
> At December 31, 2014, Grinkov Corporation had the following account balances. Most of Grinkov’s sales are made on a 2-year installment basis. Indicate how these accounts would be reported in Grinkov’s December 31, 201
> On January 1, 2013, Dagwood Company purchased at par 12% bonds having a maturity value of $300,000. They are dated January 1, 2013, and mature January 1, 2018, with interest receivable December 31 of each year. The bonds are classified in the held-to-mat
> On January 1, 2014, Gottlieb Corporation issued $4,000,000 of 10-year, 8% convertible debentures at 102. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into eight shares of Gottlieb Corporation $100
> Matheny Inc. went public 3 years ago. The board of directors will be meeting shortly after the end of the year to decide on a dividend policy. In the past, growth has been financed primarily through the retention of earnings. A stock or a cash dividend h
> You have been engaged to review the financial statements of Gottschalk Corporation. In the course of your examination, you conclude that the bookkeeper hired during the current year is not doing a good job. You notice a number of irregularities as follow
> Presented below are four independent situations. (a) On December 31, 2014, Zarle Inc. sold computer equipment to Daniell Co. and immediately leased it back for 10 years. The sales price of the equipment was $520,000, its carrying amount is $400,000, and
> Under what conditions may a seller who is exposed to continued risks of a high rate of return of the product sold recognize sales transactions as current revenue?
> The following defined pension data of Rydell Corp. apply to the year 2014. Instructions For 2014, prepare a pension worksheet for Rydell Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.
> Jennifer Capriati Corp. has a deferred tax asset account with a balance of $150,000 at the end of 2013 due to a single cumulative temporary difference of $375,000. At the end of 2014, this same temporary difference has increased to a cumulative amount of
> Lazaro Inc. sells goods on the installment basis and uses the installment-sales method. Due to a customer default, Lazaro repossessed merchandise that was originally sold for $800, resulting in a gross profit rate of 40%. At the time of repossession, the
> For the following investments identify whether they are: 1. Trading Securities 2. Available-for-Sale Securities 3. Held-to-Maturity Securities Each case is independent of the other. (a) A bond that will mature in 4 years was bought 1 month ago when the p
> The December 31, 2014, balance sheet of Kepler Corp. is as follows. On March 5, 2015, Kepler Corp. called all of the bonds as of April 30 for the principal plus interest through April 30. By April 30, all bondholders had exercised their conversion to com
> Presented below is the comparative balance sheet for Gilmour Company. Instructions (a) Prepare a comparative balance sheet of Gilmour Company showing the percent each item is of the total assets or total liabilities and stockholders’ eq
> Presented below are data taken from the records of Alee Company. Additional information: 1. Held-to-maturity securities carried at a cost of $43,000 on December 31, 2013, were sold in 2014 for $34,000. The loss (not extraordinary) was incorrectly charged
> The first audit of the books of Bruce Gingrich Company was made for the year ended December 31, 2015. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are: 1. At the
> Assume that on January 1, 2014, Elmer’s Restaurants sells a computer system to Liquidity Finance Co. for $680,000 and immediately leases the computer system back. The relevant information is as follows. 1. The computer was carried on Elmer’s books at a v
> Gingrich Importers provides the following pension plan information. Instructions From the data above, compute the actual return on the plan assets for 2014. Fair value of pension plan assets, January 1, 2014 Fair value of pension plan assets, Decembe
> What are the arguments for giving separate accounting recognition to the conversion feature of debentures?
> At the end of 2013, Lucretia McEvil Company has $180,000 of cumulative temporary differences that will result in reporting future taxable amounts as shown on the next page. Tax rates enacted as of the beginning of 2012 are: McEvil’s tax
> Gordeeva Corporation began selling goods on the installment basis on January 1, 2014. During 2014, Gordeeva had installment sales of $150,000; cash collections of $54,000; cost of installment sales of $102,000. Prepare the company’s entries to record ins
> Hillsborough Co. has an available-for-sale investment in the bonds of Schuyler Corp. with a carrying (and fair) value of $70,000. Hillsborough determined that due to poor economic prospects for Schuyler, the bonds have decreased in value to $60,000. It i
> On January 1, 2013, when its $30 par value common stock was selling for $80 per share, Plato Corp. issued $10,000,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five
