Question: On September 1, 2014, Winans Corporation acquired

> What is the normal procedure for handling the collection of accounts receivable previously written off using the direct write-off method? The allowance method?  

> Recent financial statements of General Mills, Inc. report net sales of $12,442,000,000. Accounts receivable are $912,000,000 at the beginning of the year and $953,000,000 at the end of the year. Compute General Mills’ accounts receivable turnover

> Use the information presented in BE7-11 for Arness Woodcrafters but assume that the recourse liability has a fair value of $4,000, instead of $8,000. Prepare the journal entry and discuss the effects of this change in the value of the recourse liabilit

> Arness Woodcrafters sells $250,000 of receivables to Commercial Factors, Inc. on a with recourse basis. Commercial assesses a finance charge of 5% and retains an amount equal to 4% of accounts receivable. Arness estimates the fair value of the recourse

> Use the information in BE7-9 for Wood. Assume that the receivables are sold with recourse. Prepare the journal entry for Wood to record the sale, assuming that the recourse liability has a fair value of $7,500. In BE7-9 Wood Incorporated factored $15

> Wood Incorporated factored $150,000 of accounts receivable with Engram Factors Inc. on a without recourse basis. Engram assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possi

> On October 1, 2014, Chung, Inc. assigns $1,000,000 of its accounts receivable to Seneca National Bank as collateral for a $750,000 note. The bank assesses a finance charge of 2% of the receivables assigned and interest on the note of 9%. Prepare the Oc

> Kraft Enterprises owns the following assets at December 31, 2014. What amount should be reported as cash?  

> What are the general rules for measuring and recognizing gain or loss by both the debtor and the creditor in an impairment?  

> Distinguish among the following: (1) A general checking account, (2) An imprest bank account, and (3) A lockbox account.  

> You are evaluating Woodlawn Racetrack for a potential loan. An examination of the notes to the financial statements indicates restricted cash at year-end amounts to $100,000. Explain how you would use this information in evaluating Woodlawn’s liq

> What is the accounts receivable turnover, and what type of information does it provide?  

> In what accounts should the following items be classified? (a) Coins and currency. (b) U.S. Treasury (government) bonds. (c) Certificate of deposit. (d) Cash in a bank that is in receivership. (e) NSF check (returned with bank statement). (f) Dep

> Explain how the accounting for bad debts can be used for earnings management.  

> What may be included under the heading of “cash”?

> During 2010, George Winston Corporation spent $170,000 in research and development costs. As a result, a new product called the New Age Piano was patented. The patent was obtained on October 1, 2010, and had a legal life of 20 years and a useful life o

> Horace Greeley Corporation was organized in 2013 and began operations at the beginning of 2014. The company is involved in interior design consulting services. The following costs were incurred prior to the start of operations. Instructions (a) C

> In early January 2013, Outkast Corporation applied for a trade name, incurring legal costs of $16,000. In January 2014, Outkast incurred $7,800 of legal fees in a successful defense of its trade name. Instructions (a) Compute 2013 amortization, 12/31

> Rolanda Marshall Company, organized in 2013, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2014. Instructions Prepare the necessary entries to clear the Int

> Presented below is selected information for Alatorre Company. 1. Alatorre purchased a patent from Vania Co. for $1,000,000 on January 1, 2012. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2022. During

> Joni Hyde Inc. has the following amounts reported in its general ledger at the end of the current year. Instructions (a) On the basis of the information above, compute the total amount to be reported by Hyde for intangible assets on its balance s

> Presented below is selected information related to Martin Burke Inc. at year-end. All these accounts have debit balances. Instructions Identify which items should be classified as an intangible asset. For those items not classified as an intangib

> Why does the accounting profession make a distinction between internally created intangibles and purchased intangibles?  

> Presented below is a list of items that could be included in the intangible assets section of the balance sheet. 1. Investment in a subsidiary company. 2. Timberland. 3. Cost of engineering activity required to advance the design of a product to the

> Sinise Industries acquired two copyrights during 2014. One copyright related to a textbook that was developed internally at a cost of $9,900. This textbook is estimated to have a useful life of 3 years from September 1, 2014, the date it was published.

> Nieland Industries had one patent recorded on its books as of January 1, 2014. This patent had a book value of $288,000 and a remaining useful life of 8 years. During 2014, Nieland incurred research and development costs of $96,000 and brought a patent

> Indicate whether the following items are capitalized or expensed in the current year. (a) Purchase cost of a patent from a competitor. (b) Research and development costs. (c) Organizational costs. (d) Costs incurred internally to create goodwill.

> Treasure Land Corporation incurred the following costs in 2014. Prepare the necessary 2014 journal entry or entries for Treasure Land.  

> Capriati Corporation commenced operations in early 2014. The corporation incurred $60,000 of costs such as fees to underwriters, legal fees, state fees, and promotional expenditures during its formation. Prepare journal entries to record the $60,000 ex

> Use the information provided in BE12-7. In BE12-7 Waters Corporation purchased Johnson Company 3 years ago and at that time recorded goodwill of $400,000. The Johnson Division’s net assets, including the goodwill, have a carrying amount of $800

> Kenoly Corporation owns a patent that has a carrying amount of $300,000. Kenoly expects future net cash flows from this patent to total $210,000. The fair value of the patent is $110,000. Prepare Kenoly’s journal entry, if necessary, to record th

> Gershwin Corporation obtained a franchise from Sonic Hedgehog Inc. for a cash payment of $120,000 on April 1, 2014. The franchise grants Gershwin the right to sell certain products and services for a period of 8 years. Prepare Gershwin’s April 1

> Larry Byrd, Inc., spent $68,000 in attorney fees while developing the trade name of its new product, the Mean Bean Machine. Prepare the journal entries to record the $68,000 expenditure and the first year’s amortization, using an 8-year life. &n

> Use the information provided in BE12-1. Assume that at January 1, 2016, the carrying amount of the patent on Celine Dion’s books is $43,200. In January, Celine Dion spends $24,000 successfully defending a patent suit. Celine Dion still feels the

> Celine Dion Corporation purchases a patent from Salmon Company on January 1, 2014, for $54,000. The patent has a remaining legal life of 16 years. Celine Dion feels the patent will be useful for 10 years. Prepare Celine Dion’s journal entries to

> An intangible asset with an estimated useful life of 30 years was acquired on January 1, 2004, for $540,000. On January 1, 2014, a review was made of intangible assets and their expected service lives, and it was determined that this asset had an estim

> Recently, a group of university students decided to incorporate for the purposes of selling a process to recycle the waste product from manufacturing cheese. Some of the initial costs involved were legal fees and office expenses incurred in starting th

> In 2013, Austin Powers Corporation developed a new product that will be marketed in 2014. In connection with the development of this product, the following costs were incurred in 2013: research and development costs $400,000; materials and supplies con

> Research and development activities may include (a) personnel costs, (b) materials and equipment costs, and (c) indirect costs. What is the recommended accounting treatment for these three types of R&D costs?  

> What is the nature of research and development costs?  

> Simon Company determines that its goodwill is impaired. It finds that its implied goodwill is $360,000 and its recorded goodwill is $400,000. The fair value of its identifiable assets is $1,450,000. What is the amount of goodwill impaired?  

> Explain how losses on impaired intangible assets should be reported in income.

> Braxton Inc. is considering the write-off of a limited-life intangible because of its lack of profitability. Explain to the management of Braxton how to determine whether a write-off is permitted.  

> In examining financial statements, financial analysts often write off goodwill immediately. Comment on this procedure.  

> What is goodwill? What is a bargain purchase?  

> Explain the difference between artistic-related intangible assets and contract-related intangible assets.  

> Izzy Inc. purchased a patent for $350,000 which has an estimated useful life of 10 years. Its pattern of use or consumption cannot be reliably determined. Prepare the entry to record the amortization of the patent in its first year of use.  

> 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.

> Matt Holmes recently joined Klax Company as a staff accountant in the controller’s office.Klax Company provides warehousing services for companies in several European cities. The location inKoblenz, Germany, has not been performing well due to incr

> Companies following international accounting standards are permitted to revalue fixed assets above the assets’ historical costs. Such revaluations are allowed under various countries’ standards and the standards issued by the IASB. Liberty In

> Falcetto Company acquired equipment on January 1, 2013, for $12,000. Falcetto elects to valuethis class of equipment using revaluation accounting. This equipment is being depreciated on a straightline basis over its 6-year useful life. There is no r

> Assume the same information as in IFRS11-11, except that Pujols intends to dispose of theequipment in the coming year. In IFRS11-11 Instructions (a) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014. (b) Prepar

> Assume the same information as in IFRS11-11, except that Pujols intends to dispose of the equipment in the coming year. In IFRS11-11 Instructions (a) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014.(b) Prepa

> Jurassic Company owns machinery that cost $900,000 and has accumulated depreciation of $380,000. The present value of expected future net cash flows from the use of the asset are expected to be $500,000. The fair value less cost of disposal of the equipm

> Brazil Group purchases a vehicle at a cost of $50,000 on January 2, 2014. Individual components of the vehicle and useful lives are as follows. Instructions (a) Compute depreciation expense for 2014, assuming Brazil depreciates the vehicle as a single u

> Tan Chin Company purchases a building for $11,300,000 on January 2, 2014. An engineer’s report shows that of the total purchase price, $11,000,000 should be allocated to the building (with a 40-year life), $150,000 to 15-year property, and $150,000

> Workman Company purchased a machine on January 2, 2014, for $800,000. The machine has an estimated useful life of 5 years and a salvage value of $100,000. Depreciation was computed by the 150% declining-balance method. What is the amount of accumulated d

> Ortiz purchased a piece of equipment that cost $202,000 on January 1, 2014. The equipment has the following components. Compute the depreciation expense for this equipment at December 31, 2014.

> Why might a company choose not to use revaluation accounting?

> Toro Co. has equipment with a carrying amount of $700,000. The value-in-use of the equipment is $705,000, and its fair value less costs of disposal is $590,000. The equipment is expected to be used in operations in the future. What amount (if any) should

> Walkin Inc. is considering the write-down of its long-term plant because of a lack of profitability. Explain to the management of Walkin how to determine whether a write-down is permitted.

> Jerry Prior, Beeler Corporation’s controller, is concerned that net income may be lower this year. He is afraid upper-level management might recommend cost reductions by laying off accounting staff, including him. Prior knows that depreciation is a

> As a cost accountant for San Francisco Cannery, you have been approached by Phil Perriman, canning room supervisor, about the 2014 costs charged to his department. In particular, he is concerned about the line item “depreciation.” Perriman is

> Presented on page 634 are three different and unrelated situations involving depreciation accounting. Answer the question(s) at the end of each situation. Situation I: Recently, Broderick Company experienced a strike that affected a number of its operati

> The certified public accountant is frequently called upon by management for advice regarding methods of computing depreciation. Of comparable importance, although it arises less frequently, is the question of whether the depreciation method should be bas

> Burnitz Manufacturing Company was organized on January 1, 2014. During 2014, it has used in its reports to management the straight-line method of depreciating its plant assets. On November 8, you are having a conference with Burnitz’s officers to d

> On January 1, 2013, Locke Company, asmall machine-tool manufacturer, acquired for $1,260,000 a piece of new industrial equipment. Thenew equipment had a useful life of 5 years, and the salvage value was estimated to be $60,000.Locke estimates that the ne

> For what reasons are plant assets retired? Define inadequacy, supersession, and obsolescence.

> A depreciation schedule for semi-trucks of Ichiro Manufacturing Company was requested by your auditor soon after December 31, 2015, showing the additions, retirements, depreciation, and other data affecting the income of the company in the 4-year period

> The following data relate to the Machinery account of Eshkol, Inc. at December 31, 2014. The following transactions occurred during 2015.(a) On May 5, Machine A was sold for $13,000 cash. The company’s bookkeeper recorded this retirement in the

> The cost of equipment purchased by Charleston, Inc., on June 1, 2014, is $89,000. It is estimated that the machine will have a $5,000 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are esti

> The plant manager of a manufacturing firm suggested in a conference of the company’s executives that accountants should speed up depreciation on the machinery in the finishing department because improvements were rapidly making those machines obsol

> Alladin Company purchased Machine #201 on May 1, 2014. The following information relating to Machine #201 was gathered at the end of May. It is expected that the machine could be used for 10 years, after which the salvage value would be zero. Alladin

> On January 1, 2013, Locke Company, a small machine-tool manufacturer, acquired for $1,260,000 a piece of new industrial equipment. The new equipment had a useful life of 5 years, and the salvage value was estimated to be $60,000. Locke estimates that the

> On January 1, 2012, a machine was purchased for $90,000. The machine has an estimated salvage value of $6,000 and an estimated useful life of 5 years. The machine can operate for 100,000 hours before it needs to be replaced. The company closed its books

> Kohlbeck Corporation, a manufacturer of steel products, began operations on October 1, 2013. The accounting department of Kohlbeck has started the fixed-asset and depreciation schedule presented on page 632. You have been asked to assist in completing th

> Roland Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2013 for $10,000,000 and had an estimated useful life of 8 years with no salvage value. At December 31, 2014, new technology was introduced

> Darby Sporting Goods Inc. has been experiencing growth in the demand for its products over the last several years. The last two Olympic Games greatly increased the popularity of basketball around the world. As a result, a European sports retailing consor

> Bronson Paper Products purchased 10,000 acres of forested timberland in March 2014. The company paid $1,700 per acre for this land, which was above the $800 per acre most farmers were paying for cleared land. During April, May, June, and July 2014, Brons

> Conan O’Brien Logging and Lumber Company owns 3,000 acres of timberland on the north side of Mount Leno, which was purchased in 2002 at a cost of $550 per acre. In 2014, O’Brien began selectively logging this timber tract. In May 2014, Mount

> Khamsah Mining Company has purchased a tract of mineral land for $900,000. It is estimated that this tract will yield 120,000 tons of ore with sufficient mineral content to make mining and processing profitable. It is further estimated that 6,000 tons of

> A depreciation schedule for semi-trucks of Ichiro Manufacturing Company was requested by your auditor soon after December 31, 2015, showing the additions, retirements, depreciation, and other data affecting the income of the company in the 4-year period

> Explain how estimation of service lives can result in unrealistically high carrying values for fixed assets.

> The following data relate to the Machinery account of Eshkol, Inc. at December 31, 2014. The following transactions occurred during 2015.(a) On May 5, Machine A was sold for $13,000 cash. The company’s bookkeeper recorded this retirement in the

> The cost of equipment purchased by Charleston, Inc., on June 1, 2014, is $89,000. It is estimated that the machine will have a $5,000 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are esti

> Alladin Company purchased Machine #201 on May 1, 2014. The following information relating to Machine #201 was gathered at the end of May. It is expected that the machine could be used for 10 years, after which the salvage value would be zero. Alladin

> Francis Corporation purchased an asset at a cost of $50,000 on March 1, 2014. The asset has a useful life of 8 years and a salvage value of $4,000. For tax purposes, the MACRS class life is 5 years. Compute tax depreciation for each year 2014–2019.

> In its 2011 annual report, Campbell Soup Company reports beginning-of-the-year total assets of $6,276 million, end-of-the-year total assets of $6,862 million, total sales of $7,719 million, and net income of $805 million. (a) Compute Campbell’s ass

> Everly Corporation acquires a coal mine at a cost of $400,000. Intangible development costs total $100,000. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $80,000), after which it can be sold fo

> Jurassic Company owns equipment that cost $900,000 and has accumulated depreciation of $380,000. The expected future net cash flows from the use of the asset are expected to be $500,000. The fair value of the equipment is $400,000. Prepare the journal en

> Holt Company purchased a computer for $8,000 on January 1, 2013. Straight-line depreciation is used, based on a 5-year life and a $1,000 salvage value. In 2015, the estimates are revised. Holt now feels the computer will be used until December 31, 2016,

> Dickinson Inc. owns the following assets. Compute the composite depreciation rate and the composite life of Dickinson’s assets.

> Cominsky Company purchased a machine on July 1, 2015, for $28,000. Cominsky paid $200 in title fees and county property tax of $125 on the machine. In addition, Cominsky paid $500 shipping charges for delivery, and $475 was paid to a local contractor to

> Some believe that accounting depreciation measures the decline in the value of fixed assets. Do you agree? Explain.

> Use the information for Lockard Company given in BE11-2. In BE11-2 Lockard Company purchased machinery on January 1, 2014, for $80,000. The machinery is estimated to have a salvage value of $8,000 after a useful life of 8 years (a) Compute 2014 depreciat

> Use the information for Lockard Company given in BE11-2. In BE11-2 Lockard Company purchased machinery on January 1, 2014, for $80,000. The machinery is estimated to have a salvage value of $8,000 after a useful life of 8 years (a) Compute 2014 depreciat

> Lockard Company purchased machinery on January 1, 2014, for $80,000. The machinery is estimated to have a salvage value of $8,000 after a useful life of 8 years. (a) Compute 2014 depreciation expense using the straight-line method. (b) Compute 2014 depre

> Fernandez Corporation purchased a truck at the beginning of 2014 for $50,000. The truck is estimated to have a salvage value of $2,000 and a useful life of 160,000 miles. It was driven 23,000 miles in 2014and 31,000 miles in 2015. Compute depreciation ex

> What is a modified accelerated cost recovery system (MACRS)? Speculate as to why this system is now required for tax purposes.

> Target in 2012 reported net income of $2.9 billion, net sales of $69.8 billion, and average total assets of $45.2 billion. What is Target’s asset turnover? What is Target’s return on assets?