Lowell Corporation has used the accrual basis of accounting for several years. A review of the records, however, indicates that some expenses and revenues have been handled on a cash basis because of errors made by an inexperienced bookkeeper. Income statements prepared by the bookkeeper reported $29,000 net income for 2011 and $37,000 net income for 2012. Further examination of the records reveals that the following items were handled improperly. 1. Rent was received from a tenant in December 2011. The amount, $1,000, was recorded as revenue at that time even though the rental pertained to 2012. 2. Wages payable on December 31 have been consistently omitted from the records of that date and have been entered as expenses when paid in the following year. The amounts of the accruals recorded in this manner were: December 31, 2010 …………………………………. $1,100 December 31, 2011………………………..…………. 1,200 December 31, 2012 ……………………………………… 940 3. Invoices for office supplies purchased have been charged to expense accounts when received. Inventories of supplies on hand at the end of each year have been ignored, and no entry has been made for them. December 31, 2010 …………………………………. $1,300 December 31, 2011……………………..………………. 940 December 31, 2012 ……………………………………. 1,420 Instructions Prepare a schedule that will show the corrected net income for the years 2011 and 2012. All items listed should be labeled clearly. (Ignore income tax considerations.)
> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://corporate.marksandspencer.Com/documents/publications/2010/Annual_Report_2010. Instructions Refer to M&S’s financial statem
> A lease agreement between Lennox Leasing Company and Gill Company is described in IFRS21-10. Refer to the data in IFRS21-10 and do the following for the lessor. (Round all numbers to the nearest cent.) In IFRS21-10 The following facts pertain to a non-c
> Jack Kelly Company has grown rapidly since its founding in 2002. To instill loyalty in its employees, Kelly is contemplating establishment of a defined benefit plan. Kelly knows that lenders and potential investors will pay close attention to the impact
> The financial statements of P&G are presented in Appendix 5B or can be accessed at the book’s companion website, www.wiley.com/college/kieso. Instructions Refer to P&G’s financial statements and the accompanying notes to answer the following questions.
> Nancy Tercek, the financial vice president, and Margaret Lilly, the controller, of Romine Manufacturing Company are reviewing the financial ratios of the company for the years 2012 and 2013. The financial vice president notes that the profit margin on sa
> The following summarized information relates to the installment-sales activity of Phillips Stores, Inc. for the year 2012. Installment sales during 2012 ………………………………………. $500,000 Cost of goods sold on installment basis ……………………………. 350,000 Collections f
> The following data relate to the operation of Kramer Co.’s pension plan in 2013. The pension worksheet for 2012 is provided in P20-10. Service cost …………&aci
> On January 1, 2012, Millay Inc. paid $700,000 for 10,000 shares of Genso Company’s voting common stock, which was a 10% interest in Genso. At that date, the net assets of Genso totaled $6,000,000. The fair values of all of Genso’s identifiable assets and
> Assume the same data as in P21-10 with National Airlines Co. having an incremental borrowing rate of 10%. In P21-10 George Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period
> On December 31, 2012, Grando Company sells production equipment to Fargo Inc. for $50,000. Grando includes a 1-year warranty service with the sale of all its equipment. The customer receives and pays for the equipment on December 31, 2012. Grando estimat
> Thurber Co. purchased equipment for $710,000 which was estimated to have a useful life of 10 years with a salvage value of $10,000 at the end of that time. Depreciation has been entered for 7 years on a straight-line basis. In 2013, it is determined that
> Grady Leasing Company signs an agreement on January 1, 2012, to lease equipment to Azure Company. The following information relates to this agreement. 1. The term of the noncancelable lease is 5 years with no renewal option. The equipment has an estimate
> Henning Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2012 in which no benefits were paid. 1. The actuarial present value of future benefits earned by employees for
> At December 31, 2012, Cascade Company had a net deferred tax liability of $450,000. An explanation of the items that compose this balance is as follows. Temporary Differences _________________Resulting Balances in Deferred Taxes 1. Excess of tax depreci
> The financial statements of P&G are presented in Appendix 5B or can be accessed at the book’s companion website, www.wiley.com/college/kieso. Instructions Refer to P&G’s financial statements and the accompanying notes to answer the following questions.
> Access the glossary (“Master Glossary”) to answer the following. (a) What is a bargain-purchase option? (b) What is the definition of “incremental borrowing rate”? (c) What is the definition of “estimated residual value”? (d) What is an unguaranteed
> Condensed financial data of Fairchild Company for 2012 and 2011 are presented below. FAIRCHILD COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2012 Sales …………&acir
> Archer Construction Company began work on a $420,000 construction contract in 2012. During 2012, Archer incurred costs of $278,000, billed its customer for $215,000, and collected $175,000. At December 31, 2012, the estimated future costs to complete the
> Simmons Corporation owns stock of Armstrong, Inc. Prior to 2012, the investment was accounted for using the equity method. In early 2012, Simmons sold part of its investment in Armstrong, and began using the fair value method. In 2012, Armstrong earned n
> At December 31, 2012, Fell Corporation had a deferred tax liability of $680,000, resulting from future taxable amounts of $2,000,000 and an enacted tax rate of 34%. In May 2013, a new income tax act is signed into law that raises the tax rate to 40% for
> Parsons Inc. wishes to change from the completed-contract to the percentage-of-completion method for financial reporting purposes. The auditor indicates that a change would be permitted only if it is to a preferable method. What difficulties develop in a
> At December 31, 2012, Cascade Company had a net deferred tax liability of $450,000. An explanation of the items that compose this balance is as follows. Temporary Differences in Deferred Taxes _________________Resulting Balances 1. Excess of tax depreci
> The financial statements of Marks and Spencer plc Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http:/corporate.marksandspencer.com/documents/publications/2010/Annual_Report_2010. Instructions Refer to M
> The following facts pertain to a non-cancelable lease agreement between Lennox Leasing Company and Gill Company, a lessee. (Round all numbers to the nearest cent.) Inception date: May 1, 2012 Annual lease payment due at the beginning of each year, beginn
> Linda Berstler Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. The average remaining service life per employee is 20 years. The average time to vesting past
> Kramer Co. has prepared the following pension worksheet. Unfortunately, several entries in the worksheet are not decipherable. The company has asked your assistance in completing the worksheet and completing the accounting tasks related to the pension pl
> Peterson Industries has three operating divisions— Farber Mining, Glesen Paperbacks, and Enyart Protection Devices. Each division maintains its own accounting system and method of revenue recognition. Farber Mining Farber Mining specializes in the extrac
> You have been asked by a client to review the records of Roberts Company, a small manufacturer of precision tools and machines. Your client is interested in buying the business, and arrangements have been made for you to review the accounting records. Yo
> George Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $278,072, and its unguaranteed residual value at the end of
> Appliance Center is an experienced home appliance dealer. Appliance Center also offers a number of services together with the home appliances that it sells. Assume that Appliance Center sells ovens on a standalone basis. Appliance Center also sells insta
> On January 1, 2008, McElroy Company purchased a building and equipment that have the following useful lives, salvage values, and costs. Building, 40-year estimated useful life, $50,000 salvage value, $1,200,000 cost Equipment, 12-year estimated useful li
> Fieval Leasing Company signs an agreement on January 1, 2012, to lease equipment to Reid Company. The following information relates to this agreement. 1. The term of the noncancelable lease is 6 years with no renewal option. The equipment has an estimate
> Webb Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2012, the following balances relate to this plan. Plan assets …………………………………………….. $480,000 Projected benefit obligation ……………………….. 600,000 Pension asset/liability ………………
> Lanier Corporation has pretax financial income (or loss) equal to taxable income (or loss) from 2005 through 2013 as follows. Pretax financial income (loss) and taxable income (loss) were the same for all years since Lanier has been in business. Assume
> Following are selected balance sheet accounts of Sander Bros. Corp. at December 31, 2012 and 2011, and the increases or decreases in each account from 2011 to 2012. Also presented is selected income statement information for the year ended December 31, 2
> Guillen, Inc. began work on a $7,000,000 contract in 2012 to construct an office building. Guillen uses the completed-contract method. At December 31, 2012, the balances in certain accounts were Construction in Process $1,715,000; Accounts Receivable $24
> Palmer Co. is evaluating the appropriate accounting for the following items. 1. Management has decided to switch from the FIFO inventory valuation method to the LIFO inventory valuation method for all inventories. 2. When the year-end physical inventory
> Koch Corporation is in the process of preparing its annual financial statements for the fiscal year ended April 30, 2013. Because all of Koch’s shares are traded intrastate, the company does not have to file any reports with the Securities and Exchange C
> Clydesdale Corporation has a cumulative temporary difference related to depreciation of $580,000 at December 31, 2012. This difference will reverse as follows: 2013, $42,000; 2014, $244,000; and 2015, $294,000. Enacted tax rates are 34% for 2013 and 2014
> Explain a principal-agent relationship and its significance to revenue recognition.
> Broussard Company reported net income of $3.5 million in 2012. Depreciation for the year was $520,000; accounts receivable increased $500,000; and accounts payable increased $300,000. Compute net cash flow from operating activities using the indirect met
> Identify the five components that comprise pension expense. Briefly explain the nature of each component.
> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://corporate.marksandspencer.Com/documents/publications/2010/Annual_ Report_2010. Instructions Refer to M&S’s financial state
> Youngman Corporation has temporary differences at December 31, 2012, that result in the following deferred taxes. Deferred tax asset …………….. $24,000 Deferred tax liability ………….. $69,000 Indicate how these balances would be presented in Youngman’s Decem
> Buhl Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2012, the following balances relate to this plan. Plan assets …………………………………………………….. $480,000 Defined benefit obligation ……………………………….... 625,000 Pension asset/liability
> Brecker Company leases an automobile with a fair value of $10,906 from Emporia Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months. 2. Rental of $250 per month (at end of each month). (The present value at 1% per month is $9,800.) 3
> Hobbs Co. has the following defined benefit pension plan balances on January 1, 2012. Projected benefit obligation ………………â€
> Dingel Corporation has contracted with you to prepare a statement of cash flows. The controller has provided the following information. Additional data related to 2012 are as follows. 1. Equipment that had cost $11,000 and was 30% depreciated at time o
> The following statement was prepared by Maloney Corporation’s accountant. MALONEY CORPORATION STATEMENT OF SOURCES AND APPLICATION OF CASH FOR THE YEAR ENDED SEPTEMBER 30, 2012 Sources of cash Net income ………………………………………………………………………………………………………. $111,000
> Shapiro Inc. was incorporated in 2011 to operate as a computer software service firm with an accounting fiscal year ending August 31. Shapiro’s primary product is a sophisticated online inventory-control system; its customers pay a fixed fee plus a usage
> Wise Company began operations at the beginning of 2013. The following information pertains to this company. 1. Pretax financial income for 2013 is $100,000. 2. The tax rate enacted for 2013 and future years is 40%. 3. Differences between the 2013 income
> On May 3, 2012, Eisler Company consigned 80 freezers, costing $500 each, to Remmers Company. The cost of shipping the freezers amounted to $840 and was paid by Eisler Company. On December 30, 2012, a report was received from the consignee, indicating tha
> Tarkington Co. purchased a machine on January 1, 2009, for $440,000. At that time it was estimated that the machine would have a 10-year life and no salvage value. On December 31, 2012, the firm’s accountant found that the entry for depreciation expense
> A lease agreement between Lennox Leasing Company and Gill Company is described in E21-8. In E21-8 The following facts pertain to a noncancelable lease agreement between Lennox Leasing Company and Gill Company, a lessee. Inception date: ……………………………………………
> The pretax financial income (or loss) figures for Synergetics Company are as follows. 2008 …………………….. $160,000 2009 ………………………. 250,000 2010 ………………………… 90,000 2011 ……………………… (160,000) 2012 ……………………. (350,000) 2013 ………………………. 120,000 2014 ………………………. 100,00
> Waubansee Corp. uses the direct method to prepare its statement of cash flows. Relevant balances for Waubansee at December 31, 2012 and 2011, are as follows. Additional information: 1. Waubansee purchased $5,000 in equipment during 2012. 2. Waubansee a
> Use the information from BE18-7, but assume Turner uses the completed-contract method. Prepare the company’s 2012 journal entries. In BE18-7 Turner, Inc. began work on a $7,000,000 contract in 2012 to construct an office building. During 2012, Turner, I
> Norton Co. had the following amounts related to its pension plan in 2012. Actuarial liability loss for 2012 ………………………………………………………………….. $28,000 Unexpected asset gain for 2012 ……………………………………………………………….…. 18,000 Accumulated other comprehensive income (G/L)
> Joblonsky Inc. has recently hired a new independent auditor, Karen Ogleby, who says she wants “to get everything straightened out.” Consequently, she has proposed the accounting changes shown below and on the next page in connection with Joblonsky Inc.’s
> Loveless Corporation had the following 2012 income statement. Revenues ….………… $100,000 Expenses ……â€&br
> Roundtree Manufacturing Co. is preparing its year-end financial statements and is considering the accounting for the following items. 1. The vice president of sales had indicated that one product line has lost its customer appeal and will be phased out o
> Shetland Inc. had pretax financial income of $154,000 in 2012. Included in the computation of that amount is insurance expense of $4,000 which is not deductible for tax purposes. In addition, depreciation for tax purposes exceeds accounting depreciation
> Mitchell Corporation had income before income taxes of $195,000 in 2012. Mitchell’s current income tax expense is $48,000, and deferred income tax expense is $30,000. Prepare Mitchell’s 2012 income statement, beginning with Income before income taxes.
> Use the information for Rode Inc. given in IFRS19-7. Assume that it is probable that the entire net operating loss carryforward will not be realized in future years. Prepare the journal entry(ies) necessary at the end of 2012. In IFRS19-7 Rode Inc. incu
> The following defined pension data of Doreen Corp. apply to the year 2012. Defined benefit obligation, 1/1/12 (before amendment) ……………………………… $560,000 Plan assets, 1/1/12 ……………………………………………………………………………..………. 546,200 Pension asset/liability…………………………………………
> Bill Novak is working on an audit of an IFRS client. In his review of the client’s interim reports, he notes that the reports are prepared on a discrete basis. That is, each interim report is viewed as a distinct period. Is this acceptable under IFRS? If
> Use the information for Rick Kleckner Corporation from IFRS21-7. Assume that at December 31, 2012, Kleckner made an adjusting entry to accrue interest expense of $29,530 on the lease. Prepare Kleckner’s January 1, 2013, journal entry to record the second
> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://corporate.marksandspencer.com/documents/publications/2010/Annual_Report_2010. Instructions Refer to M&S’s financial statem
> Nimble Health and Racquet Club (NHRC), which operates eight clubs in the Chicago metropolitan area, offers one-year memberships. The members may use any of the eight facilities but must reserve racquetball court time and pay a separate fee before using t
> On December 31, 2012, Shellhammer Co. sold 6-month-old equipment at fair value and leased it back. There was a loss on the sale. Shellhammer pays all insurance, maintenance, and taxes on the equipment. The lease provides for eight equal annual payments,
> Lemke Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the years 2012 and 2013. Instructions (a) Prepare a pension worksheet presenting both years 2012 and 2013 and accompanyi
> Comparative balance sheet accounts of Sharpe Company are presented below. Additional data: 1. Equipment that cost $10,000 and was 60% depreciated was sold in 2012. 2. Cash dividends were declared and paid during the year. 3. Common stock was issued in
> On March 5, 2013, you were hired by Hemingway Inc., a closely held company, as a staff member of its newly created internal auditing department. While reviewing the company’s records for 2011 and 2012, you discover that no adjustments h
> On January 1, 2012, Cage Company contracts to lease equipment for 5 years, agreeing to make a payment of $137,899 (including the executory costs of $6,000) at the beginning of each year, starting January 1, 2012. The taxes, the insurance, and the mainten
> The information below was disclosed during the audit of Elbert Inc. 1. Year _____Amount Due per Tax Return 2012 ……………………………………….……… $130,000 2013 …………………………………………………. 104,000 2. On January 1, 2012, equipment costing $600,000 is purchased. For financial
> Gordon Company has two temporary differences between its pretax financial income and taxable income. The information is shown below. The income tax rate for all years is 40%. Instructions (a) Prepare the journal entry to record income tax expense, def
> Listed below are various types of accounting changes and errors. ______ 1. Change from FIFO to average cost inventory method. ______ 2. Change due to overstatement of inventory. ______ 3. Change from sum-of-the-years’-digits to straight-line method of de
> The following facts pertain to a noncancelable lease agreement between Lennox Leasing Company and Gill Company, a lessee. Inception date: ………………………………………………………………………………. May 1, 2012 Annual lease payment due at the beginning of each year, beginning with M
> Kenseth Corp. has the following beginning-of-the-year present values for its projected benefit obligation and market-related values for its pension plan assets. The average remaining service life per employee in 2011 and 2012 is 10 years and in 2013 an
> Many business organizations have been concerned with providing for the retirement of employees since the late 1800s. During recent decades, a marked increase in this concern has resulted in the establishment of private pension plans in most large compani
> Messner Co. reported $145,000 of net income for 2012. The accountant, in preparing the statement of cash flows, noted several items occurring during 2012 that might affect cash flows from operating activities. These items are listed below and on page 148
> O’Neil, Inc. began work on a $7,000,000 contract in 2012 to construct an office building. O’Neil uses the percentage-of-completion method. At December 31, 2012, the balances in certain accounts were Construction in Process $2,450,000; Accounts Receivable
> Indicate the effect—Understate, Overstate, No Effect—that each of the following errors has on 2012 net income and 2013 net income. 2012 2013 (a) Equipment purchased in 2010 was expensed. (b) Wages payable were not
> Roth Inc. has a deferred tax liability of $68,000 at the beginning of 2013. At the end of 2013, 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 is34% for all period
> Dingel Corporation has contracted with you to prepare a statement of cash flows. The controller has provided the following information. Additional data related to 2012 are as follows. 1. Equipment that had cost $11,000 and was 40% depreciated at time o
> Use the information from IFRS18-6, but assume Turner uses the cost-recovery method. Prepare the company’s 2012 journal entries. In IFRS18-6 Turner, Inc. began work on a $7,000,000 contract in 2012 to construct an office building. During 2012, Turner, In
> Rick Kleckner Corporation recorded a finance lease at $300,000 on January 1, 2012. The interest rate is 12%. Kleckner Corporation made the first lease payment of $53,920 on January 1, 2012. The lease requires eight annual payments. The equipment has a us
> Tevez Company experienced an actuarial loss of $750 in its defined benefit plan in 2012. Tevez has elected to recognize these losses immediately. For 2012, Tevez’s revenues are $125,000, and expenses (excluding pension expense of $14,000, which does not
> Rode Inc. incurred a net operating loss of $500,000 in 2012. Combined income for 2010 and 2011 was $350,000. The tax rate for all years is 40%. Rode elects the carryback option. Prepare the journal entries to record the benefits of the loss carryback and
> Lillehammer Lakes is a new recreational real estate development which consists of 500 lake-front and lake-view lots. As a special incentive to the first 100 buyers of lake-view lots, the developer is offering 3 years of free financing on 10-year, 12% not
> The amount of income taxes due to the government for a period of time is rarely the amount reported on the income statement for that period as income tax expense. Instructions (a) Explain the objectives of accounting for income taxes in general-purpose
> On January 1, 2012, Perriman Company sold equipment for cash and leased it back. As seller-lessee, Perriman retained the right to substantially all of the remaining use of the equipment. The term of the lease is 8 years. There is a gain on the sale porti
> On July 1, 2012, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000. On July 1, Torvill estimated that it would take between 2 and 3 years to complete the building. On Decemb
> Hanson Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2012, the following balances related to this plan. Plan assets (market-related value) ……………………………… $520,000 Projected benefit obligation ……………………………………..….. 700,000 Pen
> Chapman Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative balance sheet and income statement for Chapman as of May 31, 2012, are shown on the next page. The company is prepari
> You have been assigned to examine the financial statements of Zarle Company for the year ended December 31, 2012. You discover the following situations. 1. Depreciation of $3,200 for 2012 on delivery vehicles was not recorded. 2. The physical inventory c
> Ludwick Steel Company as lessee signed a lease agreement for equipment for 5 years, beginning December 31, 2012. Annual rental payments of $40,000 are to be made at the beginning of each lease year (December 31). The taxes, insurance, and the maintenance
> Crosley Corp. sold an investment on an installment basis. The total gain of $60,000 was reported for financial reporting purposes in the period of sale. The company qualifies to use the installment-sales method for tax purposes. The installment period is
> The following defined pension data of Rydell Corp. apply to the year 2012. Projected benefit obligation, 1/1/12 (before amendment) ……………………… $560,000 Plan assets, 1/1/12 …………………………………………………………………………………. 546,200 Pension liability ………………………………………………………………
> Presented below are the comparative income statements for Pannebecker Inc. for the years 2011 and 2012. The following additional information is provided. 1. In 2012, Pannebecker Inc. decided to switch its depreciation method from sum-of-the-yearsâ
