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 2016 and $37,000 net income for 2017. Further examination of the records reveals that the following items were handled improperly. 1. Rent was received from a tenant in December 2016. The amount, $1,000, was recorded as revenue at that time even though the rental pertained to 2017. 2. Salaries and 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, 2015…….$1,100 December 31, 2016……..1,200 December 31, 2017………..940 3. Invoices for 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, 2015…………$1,300 December 31, 2016…………….940 December 31, 2017…………..1,420 Instructions Prepare a schedule that will show the corrected net income for the years 2016 and 2017. All items listed should be labeled clearly. (Ignore income tax considerations.)
> The financial statements of M&S are presented in Appendix E. The company’s complete annual report, including the notes to the financial statements, is available online. Instructions Refer to M&S’s financial statements and the accompanying notes to ans
> The financial statements of M&S are presented in Appendix E. The company’s complete annual report, including the notes to the financial statements, is available online. Instructions Refer to M&S’s financial statements and the accompanying notes to ans
> As part of the year-end accounting process and review of operating policies, Cullen Co. is considering a change in the accounting for its equipment from the straight-line method to an accelerated method. Your supervisor wonders how the company will repor
> As a certified public accountant, you have been contacted by Joe Davison, CEO of Sports-Pro Athletics, Inc., a manufacturer of a variety of athletic equipment. He has asked you how to account for the following changes. 1. Sports-Pro appropriately changed
> 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 following accounting changes in connection with Joblonsky Inc.’s 2017 financial stateme
> You have completed the field work in connection with your audit of Alexander Corporation for the year ended December 31, 2017. The balance sheet accounts at the beginning and end of the year are shown below. Your working papers from the audit contain
> Keystone Corporation’s financial statements for the year ended December 31, 2017, were authorized for issue on March 10, 2018. The following events took place early in 2018. a. On January 10, 10,000 ordinary shares of $5 par value were issued at $66 per
> Taveras Co. decides at the beginning of 2017 to adopt the FIFO method of inventory valuation. Taveras had used the LIFO method for financial reporting since its inception on January 1, 2015, and had maintained records adequate to apply the FIFO method re
> Pam Erickson Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2018. For tax purposes, the company employs the completed-contract method and will cont
> On January 1, 2017, Burke Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $8,668 at the beginning of each year, starting January 1, 2017. The machine has an estimated usefu
> Following are selected balance sheet accounts of Allman Bros. Corp. at December 31, 2017 and 2016, and the increases or decreases in each account from 2016 to 2017. Also presented is selected income statement information for the year ended December 31, 2
> Presented below are the comparative income and retained earnings statements for Denise Habbe Inc. for the years 2017 and 2018. The following additional information is provided: 1. In 2018, Denise Habbe Inc. decided to switch its depreciation method fr
> Kathleen Cole Inc. acquired the following assets in January of 2015. Equipment, estimated service life, 5 years; salvage value, $15,000………$525,000 Building, estimated service life, 30 years; no salvage value…………………$693,000 The equipment has been depreci
> Below is the net income of Anita Ferreri Instrument Co., a private corporation, computed under the three inventory methods using a periodic system. Instructions (Ignore tax considerations.) a. Assume that in 2018 Ferreri decided to change from the FI
> Gordon Company started operations on January 1, 2012, and has used the FIFO method of inventory valuation since its inception. In 2018, it decides to switch to the average-cost method. You are provided with the following information. Instructions a. W
> At January 1, 2017, Beidler Company reported retained earnings of $2,000,000. In 2017, Beidler discovered that 2016 depreciation expense was understated by $400,000. In 2017, net income was $900,000 and dividends declared were $250,000. The tax rate is 4
> Michaels Company had available at the end of 2017 the following information. Instructions Prepare a statement of cash flows for Michaels Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are de
> The first audit of the books of Bruce Gingrich Company was made for the year ended December 31, 2018. 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
> Dan Aykroyd Corp. was a 30% owner of Steve Martin Company, holding 210,000 shares of Martin’s common stock on December 31, 2016. The investment account had the following entries. On January 2, 2017, Aykroyd sold 126,000 shares of Mart
> On January 1, 2017, Beyonce Co. purchased 25,000 shares (a 10% interest) in Elton John Corp. for $1,400,000. At the time, the book value and the fair value of John’s net assets were $13,000,000. On July 1, 2018, Beyonce paid $3,040,000
> Gerald Englehart Industries changed from the double-declining-balance to the straight-line method in 2018 on all its equipment. There was no change in the assets’ salvage values or useful lives. Plant assets, acquired on January 2, 2015, had an original
> The before-tax income for Lonnie Holdiman Co. for 2017 was $101,000 and $77,400 for 2018. However, the accountant noted that the following errors had been made: 1. Sales for 2017 included amounts of $38,200 which had been received in cash during 2017, b
> A partial trial balance of Julie Hartsack Corporation is as follows on December 31, 2018. Additional adjusting data: 1. A physical count of supplies on hand on December 31, 2018, totaled $1,100. 2. Through oversight, the Salaries and Wages Payable ac
> Peter Henning Tool Company’s December 31 year-end financial statements contained the following errors. An insurance premium of $66,000 was prepaid in 2017 covering the years 2017, 2018, and 2019. The entire amount was charged to expen
> The reported net incomes for the first 2 years of Sandra Gustafson Products, Inc., were as follows: 2017, $147,000; 2018, $185,000. Early in 2019, the following errors were discovered. 1. Depreciation of equipment for 2017 was overstated $17,000. 2. De
> The following are four independent situations. a. On December 31, 2017, 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 it
> Assume that on January 1, 2017, 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
> The following are Sullivan Corp.’s comparative balance sheet accounts at December 31, 2017 and 2016, with a column showing the increase (decrease) from 2016 to 2017. Additional information: 1. On December 31, 2016, Sullivan acquire
> Mathys Inc. has recently hired a new independent auditor, Karen Ogleby, who says she wants “to get everything straightened out.” Consequently, she has proposed the following accounting changes in connection with Mathys Inc.’s 2017 financial statements.
> On February 20, 2017, Barbara Brent Inc. purchased a machine for $1,500,000 for the purpose of leasing it. The machine is expected to have a 10-year life, no residual value, and will be depreciated on the straight-line basis. The machine was leased to Ru
> On January 1, 2014, Jackson 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, $800,000 cost Equipment, 12-year estimated useful lif
> On January 1, 2017, Doug Nelson Co. leased a building to Patrick Wise Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. 2. The leased building cost $4,500,000 and was purchased for cash on Janua
> Laura Leasing Company signs an agreement on January 1, 2017, to lease equipment to Plote 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 estimat
> Morgan Leasing Company signs an agreement on January 1, 2017, to lease equipment to Cole 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 estimat
> A lease agreement between Mooney Leasing Company and Rode Company is described in E21-8. Instructions (Round all numbers to the nearest cent.) Refer to the data in E21-8 and do the following for the lessor. a. Compute the amount of the lease receivab
> The following facts pertain to a noncancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee. Inception date…………………………………………………………….May 1, 2017 Annual lease payment due at the beginning of each year, beginning with May 1, 2
> On January 1, 2017, Bensen Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination
> Cullen Construction Company, which began operations in 2017, changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2018. For tax purposes, the company employs the completed-co
> Ashley Company is a young and growing producer of electronic measuring instruments and technical equipment. You have been retained by Ashley to advise it in the preparation of a statement of cash flows using the indirect method. For the fiscal year ended
> Presented below are income statements prepared on a LIFO and FIFO basis for Kenseth Company, which started operations on January 1, 2016. The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in
> Albertsen Corporation is considering proposals for either leasing or purchasing aircraft. The proposed lease agreement involves a twin-engine turboprop Viking that has a fair value of $1,000,000. This plane would be leased for a period of 10 years beginn
> Castle Leasing Company signs a lease agreement on January 1, 2017, to lease electronic equipment to Jan Way Company. The term of the noncancelable lease is 2 years, and payments are required at the end of each year. The following information relates to t
> Edna Millay Inc. is a manufacturer of electronic components and accessories with total assets of $20,000,000. Selected financial ratios for Millay and the industry averages for firms of similar size are presented below. Millay is being reviewed by seve
> Picasso Company is a wholesale distributor of packaging equipment and supplies. The company’s sales have averaged about $900,000 annually for the 3-year period 2015–2017. The firm’s total assets at th
> Madrasah Corporation issued its financial statements for the year ended December 31, 2017, on March 10, 2018. The following events took place early in 2018. a. On January 10, 10,000 shares of $5 par value common stock were issued at $66 per share. b. O
> Los Lobos Corp. uses the direct method to prepare its statement of cash flows. Los Lobos’s trial balances at December 31, 2017 and 2016, are as follows. Additional information: 1. Los Lobos purchased $5,000 in equipment during 2017.
> Ballard Co. reported $145,000 of net income for 2017. The accountant, in preparing the statement of cash flows, noted the following items occurring during 2017 that might affect cash flows from operating activities. 1. Ballard purchased 100 shares of tr
> Presented below are two independent situations. Situation A: Annie Lennox Co. reports revenues of $200,000 and operating expenses of $110,000 in its first year of operations, 2017. Accounts receivable and accounts payable at year-end were $71,000 and $
> Data for Krauss Company are presented in E23-5. Instructions Prepare the operating activities section of the statement of cash flows using the indirect method. From E23-5: Krauss Company’s income statement for the year ended December
> Krauss Company’s income statement for the year ended December 31, 2017, contained the following condensed information. Krauss’s balance sheet contained the following comparative data at December 31. (Accounts payab
> Below is the comparative balance sheet for Stevie Wonder Corporation. Dividends in the amount of $15,000 were declared and paid in 2017. Instructions From this information, prepare a worksheet for a statement of cash flows. Make reasonable assumptions
> Tedesco Company changed depreciation methods in 2017 from double-declining-balance to straight-line. Depreciation prior to 2017 under double-declining-balance was $90,000, whereas straight-line depreciation prior to 2017 would have been $50,000. Tedesco’
> The transactions below took place during the year 2017. 1. Convertible bonds payable with a par value of $300,000 were exchanged for unissued common stock with a par value of $300,000. The market price of both types of securities was par. 2. The net in
> 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. From E23-18 The accounts below appear in the ledger of Anita Baker
> 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 indire
> Jobim Inc. had the following condensed balance sheet at the end of operations for 2016. During 2017, 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 additiona
> The balance sheet data of Brown Company at the end of 2017 and 2016 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; b
> The following data are taken from the records of Alee Company. Additional information: 1. Held-to-maturity securities carried at a cost of $43,000 on December 31, 2016, were sold in 2017 for $34,000. The loss (not unusual) was incorrectly charged dir
> Data for Brecker Inc. are presented in E23-13. Instructions Prepare a statement of cash flows using the indirect method. From E23-13: Brecker Inc., a greeting card company, had the following statements prepared as of December 31, 2017. Additional in
> On March 5, 2018, 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 2016 and 2017, you discover that no adjustments h
> Brecker Inc., a greeting card company, had the following statements prepared as of December 31, 2017. Additional information: 1. Dividends in the amount of $6,000 were declared and paid during 2017. 2. Depreciation expense and amortization expense ar
> Data for Pat Metheny Company are presented in E23-11. Instructions Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.) From E23-11: Condensed financial data of Pat Metheny Company for 2017 and 2016 a
> Condensed financial data of Pat Metheny Company for 2017 and 2016 are presented below. Additional information: During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2017. Instructions Prepare a sta
> Morlan Corporation is preparing its December 31, 2017, financial statements. Two events that occurred between December 31, 2017, and March 10, 2018, when the statements were issued, are described below. 1. A liability, estimated at $160,000 at December 3
> Various types of accounting changes can affect the financial statements of a business enterprise differently. Assume that the following list describes changes that have a material effect on the financial statements for the current year of your business e
> On January 1, 2017, Evans Company entered into a noncancelable lease for a machine to be used in its manufacturing operations. The lease transfers ownership of the machine to Evans by the end of the lease term. The term of the lease is 8 years. The minim
> Each of the following items must be considered in preparing a statement of cash flows for Cruz Fashions Inc. for the year ended December 31, 2017. 1. Fixed assets that had cost $20,000 6½ years before and were being depreciated on a 10-year basis, with
> Teresa Ramirez and Lenny Traylor are examining the following statement of cash flows for Pacific Clothing Store’s first year of operations. Teresa claims that Pacific’s statement of cash flows is an excellent portray
> The following statement was prepared by Maloney Corporation’s accountant. The following additional information relating to Maloney Corporation is available for the year ended September 30, 2017. 1. Salaries and wages expense attribut
> On January 1, 2017, 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
> You have been assigned to examine the financial statements of Zarle Company for the year ended December 31, 2017. You discover the following situations. 1. Depreciation of $3,200 for 2017 on delivery vehicles was not recorded. 2. The physical inventory
> In 2016, Grishell Trucking Company negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were erected to the company’s specifications on land owned by the co
> For each of the unrelated transactions described below, present the entry(ies) required to record each transaction. 1. Grand Corp. issued $20,000,000 par value 10% convertible bonds at 99. If the bonds had not been convertible, the company’s inves
> If the bonds in Question 8 are classified as available-forsale and they have a fair value at December 31, 2017, of $3,604,000, prepare the journal entry (if any) at December 31, 2017, to record this transaction.
> On July 1, 2017, Wheeler Company purchased $4,000,000 of Duggen Company’s 8% bonds, due on July 1, 2024. The bonds, which pay interest semiannually on January 1 and July 1, were purchased for $3,500,000 to yield 10%. Determine the amount of interest reve
> Kalin Corporation had 2017 net income of $1,000,000. During 2017, Kalin paid a dividend of $2 per share on 100,000 shares of preferred stock. During 2017, Kalin had outstanding 250,000 shares of common stock. Compute Kalin’s 2017 earnings per share.
> The book basis of depreciable assets for Erwin Co. is $900,000, and the tax basis is $700,000 at the end of 2018. The enacted tax rate is 34% for all periods. Determine the amount of deferred taxes to be reported on the balance sheet at the end of 2018.
> Explain how trading debt securities are accounted for and reported.
> When should a debt security be classified as held-to-maturity?
> A headline in the Wall Street Journal stated, “Firms Increasingly Tap Their Pension Funds to Use Excess Assets.” What is the accounting issue related to the use of these “excess assets” through plan terminations?
> Boey Company reported net income of $25,000 in 2018. It had the following amounts related to its pension plan in 2018: Actuarial liability gain $10,000; Unexpected asset loss $14,000; Accumulated other comprehensive income (G/L) (beginning balance), zero
> Addison Co. has one temporary difference at the beginning of 2017 of $500,000. The deferred tax liability established for this amount is $150,000, based on a tax rate of 30%. The temporary difference will provide the following taxable amounts: $100,000 i
> Feagler Company’s current income taxes payable related to its taxable income for 2017 is $460,000. In addition, Feagler’s deferred tax asset decreased $20,000 during 2017. What is Feagler’s income tax expense for 2017?
> Lee Company’s current income taxes payable related to its taxable income for 2017 is $320,000. In addition, Lee’s deferred tax liability increased $40,000 and its deferred tax asset increased $10,000 during 2017. What is Lee’s income tax expense for 2017
> Hanson Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2017, the following balances related to this plan. Plan assets (market-related value)………….$520,000 Projected benefit obligation………………………700,000 Pension asset/liability
> Hollenbeck Foods Inc. sponsors a postretirement medical and dental benefit plan for its employees. The following balances relate to this plan on January 1, 2017. Plan assets……………………………………………………………$200,000 Expected postretirement benefit obligation………………8
> On January 1, 2017 (the date of grant), Lutz Corporation issues 2,000 shares of restricted stock to its executives. The fair value of these shares is $75,000, and their par value is $10,000. The stock is forfeited if the executives do not complete 3 year
> 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
> Youngman Corporation has temporary differences at December 31, 2017, 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 December 31, 20
> Ramirez Company has a held-for-collection investment in the 6%, 20-year bonds of Soto Company. The investment was originally purchased for $1,200,000 in 2016. Early in 2017, Ramirez recorded an impairment of $300,000 on the Soto investment, due to Soto’s
> Rode Inc. incurred a net operating loss of $500,000 in 2017. Combined income for 2015 and 2016 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
> At December 31, 2017, Hillyard Corporation has a deferred tax asset of $200,000. After a careful review of all available evidence, it is determined that it is probable that $60,000 of this deferred tax asset will not be realized. Prepare the necessary jo
> Buhl Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2017, the following balances relate to this plan. Plan assets……………………….$480,000 Defined benefit obligation…..600,000 Pension asset/liability…………..120,000 As a result of
> The following defined pension data of Doreen Corp. apply to the year 2017. Defined benefit obligation, 1/1/17 (before amendment)……….$560,000 Plan assets, 1/1/17………………………………………………………………..546,200 Pension asset/liability………………………………………………………..13,800 Cr. On
> Tevez Company experienced an actuarial loss of $750 in its defined benefit plan in 2017. For 2017, Tevez’s revenues are $125,000, and expenses (excluding pension expense of $14,000, which does not include the actuarial loss) are $85,000. Prepare Tevez’s
> Villa Company has experienced tough competition, leading it to seek concessions from its employees in the company’s pension plan. In exchange for promises to avoid layoffs and wage cuts, the employees agreed to receive lower pension benefits in the futur
> 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 2017. From IFRS19-7: Rode Inc. i
> Refer to the data for Barwood Corporation in BE16-6. Repeat the requirements assuming that instead of options, Barwood granted 2,000 shares of restricted stock. From BE16-6: On January 1, 2017, Barwood Corporation granted 5,000 options to executives. Ea
> At December 31, 2017, 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 depreciation over b
> Petrenko Corporation has outstanding 2,000 $1,000 bonds, each convertible into 50 shares of $10 par value ordinary shares. The bonds are converted on December 31, 2017. The bonds payable has a carrying value of $1,950,000 and conversion equity of $20,000
