Question: Petrenko Corporation has outstanding 2,000 $1,

> Youngman Corporation has temporary differences at December 31, 2014, that result in the following deferred taxes. Indicate how these balances would be presented in Youngman’s December 31, 2014, balance sheet. $38,000 $62,000 $96,000

> How should a franchisor account for continuing franchise fees and routine sales of equipment and supplies to franchisees?

> Refer to the data for Barwood Corporation in BE16-6. In BE16-6 On January 1, 2014, Barwood Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share of Barwood’s $5 par value common stock at $50 per share at

> Foley Corporation has seven industry segments with total revenues as follows. Based only on the revenues test, which industry segments are reportable? Penley $600 Cheng $225 Konami 650 Takuhi 200 KSC 250 Molina 700 Red Moon 275

> In 2014, Leppard Inc. issued 1,000 shares of $10 par value common stock for land worth $40,000. (a) Prepare Leppard’s journal entry to record the transaction. (b) Indicate the effect the transaction has on cash. (c) Indicate how the transaction is report

> Oliver Corporation has owned stock of Conrad Corporation since 2011. At December 31, 2014, its balances related to this investment were: On January 1, 2015, Oliver purchased additional stock of Conrad Company for $475,000 and now has significant influenc

> On January 1, 2014, 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, 2014. The machine has an estimated usefu

> For 2012, Campbell Soup Company had pension expense of $73 million and contributed $71 million to the pension fund. Prepare Campbell Soup Company’s journal entry to record pension expense and funding.

> BE19-14 Use the information for Rode Inc. given in BE19-13. In BE19-13 Rode Inc. incurred a net operating loss of $500,000 in 2014. Combined income for 2012 and 2013 was $350,000. The tax rate for all years is 40%. Rode elects the carryback option. Assu

> How does the concept of “substantial performance” apply to accounting for franchise sales?

> What is the role of an actuary relative to pension plans? What are actuarial assumptions?

> What is the purpose of a cash flow hedge?

> On January 1, 2014, Barwood Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share of Barwood’s $5 par value common stock at $50 per share at any time during the next 5 years. The market price of the stock

> Tina Bailey, a student of intermediate accounting, was heard to remark after a class discussion on segment reporting, “All this is very confusing to me. First we are told that there is merit in presenting the consolidated results, and now we are told tha

> In 2014, Wild Corporation reported a net loss of $70,000. Wild’s only net income adjustments were depreciation expense $81,000, and increase in accounts receivable $8,100. Compute Wild’s net cash provided (used) by operating activities.

> Simmons Corporation owns stock of Armstrong, Inc. Prior to 2014, the investment was accounted for using the equity method. In early 2014, Simmons sold part of its investment in Armstrong, and began using the fair value method. In 2014, Armstrong earned n

> On January 1, 2014, Irwin Animation sold a truck to Peete Finance for $33,000 and immediately leased it back. The truck was carried on Irwin’s books at $28,000. The term of the lease is 5 years, and title transfers to Irwin at lease-end. The lease requir

> At January 1, 2014, Hennein Company had plan assets of $280,000 and a projected benefit obligation of the same amount. During 2014, service cost was $27,500, the settlement rate was 10%, actual and expected return on plan assets were $25,000, contributio

> Rode Inc. incurred a net operating loss of $500,000 in 2014. Combined income for 2012 and 2013 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

> Why might a company become involved in an interest rate swap contract to receive fixed interest payments and pay variable?

> McIntyre Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling separately at 98. The market price of the warrants without the bonds cannot be determined. Use the incre

> Bridgewater Corp. offered holders of its 1,000 convertible bonds a premium of $160 per bond to induce conversion into shares of its common stock. Upon conversion of all the bonds, Bridgewater Corp. recorded the $160,000 premium as a reduction of paid-in

> Morlan Corporation is preparing its December 31, 2014, financial statements. Two events that occurred between December 31, 2014, and March 10, 2015, when the statements were issued, are described below. 1. A liability, estimated at $160,000 at Decembe

> Geiberger Corporation manufactures replicators. On January 1, 2014, it leased to Althaus Company a replicator that had cost $110,000 to manufacture. The lease agreement covers the 5-year useful life of the replicator and requires 5 equal annual rentals o

> Eisler Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 98, and the warrants had a market price of $40. Use the proportional method to record t

> An annual report of Ford Motor Corporation states, “Net income a share is computed based upon the average number of shares of capital stock of all classes outstanding. Additional shares of common stock may be issued or delivered in the future on

> Pechstein Corporation issued 2,000 shares of $10 par value common stock upon conversion of1,000 shares of $50 par value preferred stock. The preferred stock was originally issued at $60 per share. The common stock is trading at $26 per share at the time

> Indiana Jones Corporation enters into a 6-year lease of equipment on January 1, 2014, which requires 6 annual payments of $40,000 each, beginning January 1, 2014. In addition, Indiana Jones guarantees the lessor a residual value of $20,000 at lease-end.

> Shetland Inc. had pretax financial income of $154,000 in 2014. 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

> Sesame Company purchased a computer system for $74,000 on January 1, 2013. It was depreciated based on a 7-year life and an $18,000 salvage value. On January 1, 2015, Sesame revised these estimates to a total useful life of 4 years and a salvage value

> Marjorie sold her condominium for $500,000 on September 14, 2014; she had paid $330,000 for it in 2006. Marjorie collected the selling price as follows: 2014, $80,000; 2015, $320,000; and 2016, $100,000. Marjorie appropriately uses the installment-sales

> At December 31, 2014, Suffolk Corporation had an estimated warranty liability of $105,000 for accounting purposes and $0 for tax purposes. (The warranty costs are not deductible until paid.) The effective tax rate is 40%. Compute the amount Suffolk shoul

> Stansfield Corporation had the following activities in 2014. 1. Payment of accounts payable $770,000. 4. Collection of note receivable $100,000. 2. Issuance of common stock $250,000. 5. Issuance of bonds payable $510,000. 3. Payment of dividends $350,000

> Waterworld Company leased equipment from Costner Company. The lease term is 4 years and requires equal rental payments of $43,019 at the beginning of each year. The equipment has a fair value at the inception of the lease of $150,000, an estimated useful

> Boey Company reported net income of $25,000 in 2015. It had the following amounts related to its pension plan in 2015: Actuarial liability gain $10,000; Unexpected asset loss $14,000; Accumulated other comprehensive income (G/L) (beginning balance), zero

> Where on the asset side of the balance sheet are trading securities, available-for-sale securities, and held-to-maturity securities reported? Explain.  

> Jane Ellerby and Sam Callison are discussing the recent fraud that occurred at LowRental Leasing, Inc. The fraud involved the improper reporting of revenue to ensure that the company would have income in excess of $1 million. What is fraudulent financial

> Equipment was purchased on January 2, 2014, for $24,000, but no portion of the cost has been charged to depreciation. The corporation wishes to use the straight-line method for these assets, which have been estimated to have a life of 10 years and no sal

> Callaway Golf Co. leases telecommunication equipment. Assume the following data for equipment leased from Photon Company. The lease term is 5 years and requires equal rental payments of $31,000 at the beginning of each year. The equipment has a fair valu

> Describe the accounting for actuarial gains and losses.

> Oxford Corporation began operations in 2014 and reported pretax financial income of $225,000 for the year. Oxford’s tax depreciation exceeded its book depreciation by $40,000. Oxford’s tax rate for 2014 and years thereafter is 30%. In its December 31, 20

> Identify and briefly describe the two methods generally employed to account for the cash received in situations where the collection of the sales price is not reasonably assured.  

> Discuss why options and warrants may be considered potentially dilutive common shares for the computation of diluted earnings per share.

> What is the difference between a CPA’s unqualified opinion or “clean” opinion and a qualified one?

> Discuss the similarities and the differences between convertible debt and debt issued with stock warrants.

> What are some of the arguments in favor of using the indirect (reconciliation) method as opposed to the direct method for reporting a statement of cash flows?

> An entry to record Purchases and related Accounts Payable of $13,000 for merchandise purchased on December 23, 2015, was recorded in January 2016. This merchandise was not included in inventory at December 31, 2015. What effect does this error have on

> What is the nature of a “sale-leaseback” transaction?  

> At the end of the current year, Pociek Co. has prior service cost of $9,150,000. Where should the prior service cost be reported on the balance sheet?  

> In 2014, Amirante Corporation had pretax financial income of $168,000 and taxable income of $120,000. The difference is due to the use of different depreciation methods for tax and accounting purposes. The effective tax rate is 40%. Compute the amount to

> Explain the differences between the installment-sales method and the cost-recovery method.  

> Raleigh Corp. has an investment with a carrying value (equity method) on its books of $170,000 representing a 30% interest in Borg Company, which suffered a $620,000 loss this year. How should Raleigh Corp. handle its proportionate share of Borg’

> Under the percentage-of-completion method, how are the Construction in Process and the Billings on Construction in Process accounts reported in the balance sheet?  

> What approaches have been suggested to overcome the seasonality problem related to interim reporting?

> During 2014, Simms Company redeemed $2,000,000 of bonds payable for $1,880,000 cash. Indicate how this transaction would be reported on a statement of cash flows, if at all.

> The FASB requires a reconciliation between the effective tax rate and the federal government’s statutory rate. Of what benefit is such a disclosure requirement?

> On January 2, 2014, $100,000 of 11%, 10-year bonds were issued for $97,000. The $3,000 discount was charged to Interest Expense. The bookkeeper, Mark Landis, records interest only on the interest payment dates of January 1 and July 1. What is the effect

> What disclosures should be made by lessees and lessors related to future lease payments?

> At the end of the current period, Agler Inc. had a projected benefit obligation of $400,000 and pension plan assets (at fair value) of $350,000. What are the accounts and amounts that will be reported on the company’s balance sheet as pension assets or p

> What is an uncertain tax position, and what are the general guidelines for accounting for uncertain tax positions?

> Define the following terms. (a) Basic earnings per share. (b) Potentially dilutive security. (c) Diluted earnings per share. (d) Complex capital structure. (e) Potential common stock.  

> Dierdorf Inc., a closely held corporation, has decided to go public. The controller, Ed Floyd, is concerned with presenting interim data when a LIFO inventory valuation is used. What problems are encountered with LIFO inventories when quarterly data are

> In January 2014, installation costs of $6,000 on new machinery were charged to Maintenance and Repairs Expense. Other costs of this machinery of $30,000 were correctly recorded and have been depreciated using the straight-line method with an estimated li

> What are “initial direct costs” and how are they accounted for?

> What is the meaning of “corridor amortization”?  

> What controversy relates to the accounting for net operating loss carry forwards?

> Differentiate between investing activities, financing activities, and operating activities.

> What are the two types of losses that can become evident in accounting for long-term contracts? What is the nature of each type of loss? How is each type accounted for?

> Your classmate Kate believes that the equity method is applied with a strict application of the “20%” rule. Do you agree? Explain.

> What effect do stock dividends or stock splits have on the computation of the weighted-average number of shares outstanding?

> What are the accounting problems related to the presentation of interim data?

> Classify the following items as (1) Operating, (2) Investing, (3) Financing, or (4) significant non-cash investing and financing activities, using the direct method. (a) Cash payments to employees. (b) Redemption of bonds payable. (c) Sale of

> Describe the effect of a “bargain-purchase option” on accounting for a capital lease transaction by a lessee.

> How does an “asset gain or loss” develop in pension accounting? How does a “liability gain or loss” develop in pension accounting?

> What are the possible treatments for tax purposes of a net operating loss? What are the circumstances that determine the option to be applied? What is the proper treatment of a net operating loss for financial reporting purposes?

> Explain how the investment account is affected by investee activities under the equity method.

> At December 31, 2014, Reid Company had 600,000 shares of common stock issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 200,000 of which were issued on October 1, 2014. Net income for 2014 was $2,000,000, an

> Discuss briefly the three approaches that have been suggested for reporting changes in accounting principles.

> Each of the following items must be considered in preparing a statement of cash flows for Blackwell Inc. for the year ended December 31, 2014. State where each item is to be shown in the statement, if at all. (a) Plant assets that had cost $18,000 6½ yea

> Prior to 2014, Heberling Inc. excluded manufacturing overhead costs from work in process and finished goods inventory. These costs have been expensed as incurred. In 2014, the company decided to change its accounting methods for manufacturing inventories

> How should changes in the estimated unguaranteed residual value be handled by the lessor?

> Given the following items and amounts, compute the actual return on plan assets: fair value of plan assets at the beginning of the period $9,500,000; benefits paid during the period $1,400,000; contributions made during the period $1,000,000; and fair va

> Differentiate between “loss carryback” and “loss carry forward.” Which can be accounted for with the greater certainty when it arises? Why?

> For what reasons should the percentage-of-completion method be used over the completed-contract method whenever possible?

> What constitutes “significant influence” when an investor’s financial interest is below the 50% level?  

> Hawkins Construction Co. has a $60 million contract to construct a highway overpass and cloverleaf. The total estimated cost for the project is $50 million. Costs incurred in the first year of the project are $8 million. Hawkins Construction Co. approp

> The following comment appeared in the financial press: “Inadequate financial disclosure, particularly with respect to how management views the future and its role in the marketplace, has always been a stone in the shoe. After all, if you don&rsq

> The net income for Letterman Company for 2014 was $320,000. During 2014, depreciation on plant assets was$124,000, amortization of patent was $40,000, and the company incurred a loss on sale of plant assets of $21,000. Compute net cash flow from operat

> Identify the two recognized lease accounting methods for lessees and distinguish between them.

> What are the major advantages of notes to the financial statements? What types of items are usually reported in notes?

> Aubrey Inc. issued $4,000,000 of 10%, 10-year convertible bonds on June 1, 2014, at 98 plus accrued interest. The bonds were dated April 1, 2014, with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line ba

> Assume that Sarazan Company has a share-option plan for top management. Each share option represents the right to purchase a $1 par value ordinary share in the future at a price equal to the fair value of the shares at the date of the grant. Sarazan ha

> 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 iss

> What type of earnings per share presentation is required in a complex capital structure?  

> On June 1, 2012, Andre Company and Agassi Company merged to form Lancaster Inc. A total of 800,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis. On April 1, 2014, the company issued an additional 400,

> Flagstad Inc. presented the following data. Instructions Compute earnings per share.  

> The following two items appeared on the Internet concerning the GAAP requirement to expense stock options. WASHINGTON, D.C.—February 17, 2005 Congressman David Dreier (R–CA), Chairman of the House Rules Committee, and Congresswoman Anna Es

> Agassi Corporation is preparing the comparative financial statements to be included in the annual report to stockholders. Agassi employs a fiscal year ending May 31. Income from operations before income taxes for Agassi was $1,400,000 and $660,000, re

> Winsor Inc. recently purchased Holiday Corp., a large midwestern home painting corporation. One of the terms of the merger was that if Holiday’s income for 2014 was $110,000 or more, 10,000 additional shares would be issued to Holiday’s sto

> Discuss the similarities and the differences between convertible debt and debt issued with stock warrants.