Refer to the situation described in BE 7–6. Prepare the year-end adjusting journal entries to account for anticipated sales returns, assuming that all sales are made on credit and all accounts receivable are outstanding.
> On March 31, 2024, Chow Brothers, Inc., bought 10% of KT Manufacturing’s capital stock for $50 million. KT’s net income for the year ended December 31, 2024, was $80 million. The fair value of the shares held by Chow was $35 million at December 31, 2024.
> At December 31, 2024, Hull-Meyers Corp. had the following investments that were purchased during 2024, its first year of operations: // No investments were sold during 2024. All securities except Security D and Security F are considered short term invest
> On February 18, 2024, Union Corporation purchased 600 IBM bonds as a long-term investment at their face value for a total of $600,000. Union will hold the bonds indefinitely, and may sell them if their price increases sufficiently. On December 31, 2024,
> Colah Company purchased $1 million of Jackson, Inc., 5% bonds at par on July 1, 2024, with interest paid semi-annually. Colah determined that it should account for the bonds as an available-for-sale investment. At December 31, 2024, the Jackson bonds had
> Mills Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2024. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 4% for bonds of similar ri
> Refer to the situation described in BE 19–8. Suppose that Farmer initially estimates that it is not probable the goal will be achieved, but then after one year, Farmer estimates that it is probable that divisional revenue will increase by 5% by the end o
> Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2024. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 8% for bonds
> Dower Corporation prepares its financial statements according to IFRS. On March 31, 2024, the company purchased equipment for $240,000. The equipment is expected to have a six-year useful life with no residual value. Dower uses the straight-line deprecia
> On June 30, 2024, Rosetta Granite purchased equipment for $120,000. The estimated useful life of the equipment is eight years and no residual value is anticipated. An important component of the equipment is a specialized highspeed drill that will need to
> On March 31, 2024, Susquehanna Insurance purchased an office building for $12,000,000. Based on their relative fair values, one-third of the purchase price was allocated to the land and two-thirds to the building. Furniture and fixtures were purchased se
> For each of the following depreciable assets, determine the missing amount (?). Abbreviations for depreciation methods are SL for straight-line and DDB for double-declining-balance. Property, Plant, and Equipment and Intangible Assets: Utilization and Di
> Tristen Company purchased a five-story office building on January 1, 2022, at a cost of $5,000,000. The building has a residual value of $200,000 and a 30-year life. The straight-line depreciation method is used. On June 30, 2024, construction of a sixth
> On January 1, 2024, the Allegheny Corporation purchased equipment for $115,000. The estimated service life of the equipment is 10 years and the estimated residual value is $5,000. The equipment is expected to produce 220,000 units during its life. Requir
> On January 1, 2024, the general ledger of Parts Unlimited included the following account balances: From January 1 to December 31, the following summary transactions occurred: a. Purchased inventory on account, $325,800. b. Sold inventory on account, $567
> On January 1, 2024, the general ledger of TNT Fireworks included the following account balances: During January 2024, the following transactions occurred: Jan. 1 Purchased equipment for $19,500. The company estimates a residual value of $1,500 and a five
> Cadillac Construction Company uses the retirement method to determine depreciation on its small tools. During 2022, the first year of the company’s operations, tools were purchased at a cost of $8,000. In 2024, tools originally costing $2,000 were sold f
> Refer to the situation described in BE 19–8. Suppose that after one year, Farmer estimates that it is not probable that divisional revenue will increase by 5% in three years. What journal entry will be needed to account for the options in 2025?
> On September 30, 2022, Leeds LTD. acquired a patent in conjunction with the purchase of another company. The patent, valued at $6 million, was estimated to have a 10-year life and no residual value. Leeds uses the straight-line method of amortization for
> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org) and select Basic View for free access. Determine each of the following: 1. The specific eight-digit Codification citation (XXX-XX-XX-X) that discusses depreciation as a
> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org) and select Basic View for free access. Determine each of the following: Required: 1. The topic number (Topic XXX) that provides guidance on accounting for the impairment
> On May 28, 2024, Pesky Corporation acquired all of the outstanding common stock of Harman, Inc., for $420 million. The fair value of Harman’s identifiable tangible and intangible assets totaled $512 million, and the fair value of liabil
> Refer to the situation described in E 11–31, requirement 1. Alliant prepares its financial statements according to IFRS, and Center point is considered a cash-generating unit. Assume that Center point’s fair value of $220 million approximates fair value
> In 2022, Alliant Corporation acquired Center point Inc. for $300 million, of which $50 million was allocated to goodwill. At the end of 2024, management has provided the following information for a required goodwill impairment test: Required: 1. Determin
> General Optic Corporation operates a manufacturing plant in Arizona. Due to a significant decline in demand for the product manufactured at the Arizona site, an impairment test is deemed appropriate. Management has acquired the following information for
> On October 1, 2024, the Allegheny Corporation purchased equipment for $115,000. The estimated service life of the equipment is 10 years and the estimated residual value is $5,000. The equipment is expected to produce 220,000 units during its life. Requir
> Collinsworth LTD, a U.K. company, prepares its financial statements according to International Financial Reporting Standards. Late in its 2024 fiscal year, a significant adverse change in business climate indicated to management that the assets of its ap
> Refer to the situation described in E 11–27. Required: How might your solution differ if Chadwick Enterprises, Inc., prepares its financial statements according to International Financial Reporting Standards? Assume that the fair value amount given in th
> On January 1, 2024, Farmer Fabrication issued stock options for 100,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless
> Chadwick Enterprises, Inc., operates several restaurants throughout the Midwest. Three of its restaurants located in the center of a large urban area have experienced declining profits due to declining population. The company’s manageme
> In 2024, internal auditors discovered that PKE Displays, Inc., had debited an expense account for the $350,000 cost of equipment purchased on January 1, 2021. The equipment’s life was expected to be five years with no residual value. Straight-line deprec
> For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2021 for $2,560,000. Its useful life was estimated to be six years, with a $160,000 residual value. A
> Alteran Corporation purchased office equipment for $1.5 million at the beginning of 2022. The equipment is being depreciated over a 10-year life using the double-declining-balance method. The residual value is expected to be $300,000. At the beginning of
> Wardell Company purchased a minicomputer on January 1, 2022, at a cost of $40,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $4,000. On January 1, 2024, the estimate o
> Saint John Corporation prepares its financial statements according to IFRS. On June 30, 2024, the company purchased a franchise for $1,200,000. The franchise is expected to have a 10-year useful life with no residual value. Saint John uses the straight-l
> Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the patent on a straight-line basis since 2020, when it was acquired at a cost of $9 million at the beginning of that year. Due to rapid technological
> On January 2, 2024, David Corporation purchased a patent for $500,000. The remaining legal life is 12 years, but the company estimated that the patent will be useful only for eight years. In January 2026, the company incurred legal fees of $45,000 in suc
> On January 1, 2024, the Allegheny Corporation purchased equipment for $115,000. The estimated service life of the equipment is 10 years and the estimated residual value is $5,000. The equipment is expected to produce 220,000 units during its life. Requi
> Janes Company provided the following information on intangible assets: a. A patent was purchased from the Lou Company for $700,000 on January 1, 2022. Janes estimated the remaining useful life of the patent to be 10 years. The patent was carried on Lou&
> At the end of the first year of operations, Gaur Manufacturing had gross accounts receivable of $300,000. Gaur’s management estimates that 6% of the accounts will prove uncollectible. What journal entry should Gaur record to establish an allowance for un
> Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,000,000 in 2024 for the mining site and spent an additional $600,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately fo
> At the beginning of 2024, Terra Lumber Company purchased a timber tract from Boise Cantor for $3,200,000. After the timber is cleared, the land will have a residual value of $600,000. Roads to enable logging operations were constructed and completed on M
> On April 17, 2024, the Loadstone Mining Company purchased the rights to a copper mine. The purchase price plus additional costs necessary to prepare the mine for extraction of the copper totaled $4,500,000. The company expects to extract 900,000 tons of
> On January 2, 2024, the Jackson Company purchased equipment to be used in its manufacturing process. The equipment has an estimated life of eight years and an estimated residual value of $30,625. The expenditures made to acquire the asset were as follows
> Highsmith Rental Company purchased an apartment building early in 2024. There are 20 apartments in the building and each is furnished with major kitchen appliances. The company has decided to use the group depreciation method for the appliances. The foll
> On March 31, 2024, management of Quality Appliances committed to a plan to sell equipment. The equipment was available for immediate sale, and an active plan to locate a buyer was initiated. The equipment had been purchased on January 1, 2022, for $260,0
> Howarth Manufacturing Company purchased equipment on June 30, 2020, at a cost of $800,000. The residual value of the equipment was estimated to be $50,000 at the end of a five-year life. The equipment was sold on March 31, 2024, for $170,000. Howarth use
> On July 1, 2019, Farm Fresh Industries purchased a specialized delivery truck for $126,000. At the time, Farm Fresh estimated the truck to have a useful life of eight years and a residual value of $30,000. On March 1, 2024, the truck was sold for $58,000
> Mercury Inc. purchased equipment in 2022 at a cost of $400,000. The equipment was expected to produce 700,000 units over the next five years and have a residual value of $50,000. The equipment was sold for $210,000 part way through 2024. Actual productio
> On January 1, 2024, the Excel Delivery Company purchased a delivery van for $33,000. At the end of its five-year service life, it is estimated that the van will be worth $3,000. During the five-year period, the company expects to drive the van 100,000 mi
> The income statement and the cash flows from operating activities section of the statement of cash flows are provided below for Synergic Company. The merchandise inventory account balance neither increased nor decreased during the reporting period. Syner
> The statement of retained earnings of Gary Larson Publishers is presented below. Required: For the transactions that affected Larson’s retained earnings, reconstruct the journal entries that can be used to determine cash flows to be re
> On January 1, 2024, Corporal Enterprises bought 20% of the outstanding common stock of Chen Construction Company for $600 million cash. Chen’s net income for the year ended December 31, 2024, was $300 million. During 2024, Chen declared
> Nery Foods Corporation leased a commercial food processor on September 30, 2024. The five-year finance lease agreement calls for Nery to make quarterly lease payments of $195,774, payable each September 30, December 31, March 31, June 30, with the first
> In preparation for developing its statement of cash flows for the year ended December 31, 2024, D-Krug Solutions, Inc. collected the following information: Required: 1. In D-Krug’s statement of cash flows, what were net cash inflows (o
> In preparation for developing its statement of cash flows for the year ended December 31, 2024, Rapid Pac, Inc., collected the following information: Required: 1. In Rapid Pac’s statement of cash flows, what were net cash inflows (or o
> National Food Services, Inc., borrowed $4 million from its local bank on January 1, 2024, and issued a four-year installment note to be paid in four equal payments at the end of each year. The payments include interest at the rate of 10%. Installment pay
> Refer to the data provided in E 21–27 for Red, Inc. Required: Prepare the statement of cash flows (direct method) for Red, Inc. Use the T-account method to assist in your analysis.
> Refer to the data provided in E 21–27 for Red, Inc. Required: Prepare the statement of cash flows for Red, Inc., using the indirect method to report operating activities.
> Most Solutions, Inc., issued 10% bonds, dated January 1, with a face amount of $640 million on January 1, 2024. The bonds mature in 2034 (10 years). For bonds of similar risk and maturity the market yield is 12%. Interest expense is recorded at the effec
> During 2024, its first year of operations, Hollis Industries recorded sales of $10,600,000 and experienced returns of $720,000. Cost of goods sold totaled $6,360,000 (60% of sales). The company estimates that 8% of all sales will be returned. Prepare the
> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org) and select Basic View for free access. Determine the specific eight-digit Codification citation (XXX-XX-XX-X) for accounting for each of the following items: 1. Disclosu
> The statement of cash flows (as well as the balance sheet) includes within cash the notion of cash equivalents. The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally accepted accounting principles. Requi
> Hutchison-Sun Corporation has a defined benefit pension plan. Hutchison-Sun’s policy is to fund the plan annually, cash payments being made at the end of each year. Data relating to the pension plan for 2024 are as follows: Required: R
> Comparative balance sheets for 2024 and 2023, a statement of income for 2024, and additional information from the accounting records of Red, Inc., are provided below. Additional information from the accounting records: a. During 2024, $230 million of equ
> Refer to the data provided in E 21–25 for Clear Transmissions Company. Required: Prepare the cash flows from operating activities section of the statement of cash flows for Clear Transmissions Company using the indirect method.
> Portions of the financial statements for Clear Transmissions Company are provided on the next page. Required: Prepare the cash flows from operating activities section of the statement of cash flows for Clear Transmissions Company using the direct method
> Refer to the data provided in E 21–23 for Myriad Products Company. Required: Prepare the cash flows from the operating activities section of the statement of cash flows for Myriad Products Company using the indirect method.
> Portions of the financial statements for Myriad Products are provided below. Required: Prepare the cash flows from operating activities section of the statement of cash flows for Myriad Products Company using the direct method.
> The accounting records of Bad dour Company provided the data below. Prepare a reconciliation of net income to net cash flows from operating activities.
> The income statement and a schedule reconciling cash flows from operating activities to net income are provided below ($ in thousands) for Peach Computers. Required: 1. Calculate each of the following amounts for Peach Computers: a. Cash received from c
> Refer to the situation described in BE 7–4. Answer the questions assuming that Tri star uses the net method to account for sales discounts.
> Air France–KLM (AF), a Franco-Dutch company, prepares its financial statements according to International Financial Reporting Standards. AF’s financial statements and disclosure notes for the year ended December 31, 2019, are available in Connect. This m
> Determine the amount of cash received from customers for each of the three independent situations below. All dollars are in millions.
> For financial reporting, Kumis Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2021 for $2,560,000. Its useful life was estimated to be six years with a $160,000 residual value. At t
> Wolfgang Kitchens has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2024, Wolfgang decided to change to the LIFO method. Net income in 2024 was correctly stated as $90 million. If the com
> Flay Foods has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2024, Flay decided to change to the LIFO method. As a result of the change, net income in 2024 was $80 million. If the company
> Millington Materials is a leading supplier of building equipment, building products, materials, and timber for sale, with over 200 branches across the Mid-South. On January 1, 2024, management decided to change from the average inventory costing method t
> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org and select Basic View for free access). Determine the specific eight-digit Codification citation (XXX-XX-XX-X) for accounting for each of the following items: 1. Reportin
> The Hoyle Companies, Inc. has ownership interests in several public companies. At the beginning of 2024, the company’s ownership interest in the common stock of Paik Properties increased to the point that it became appropriate to begin using the equity m
> In keeping with a modernization of corporate statutes in its home state, UMC Corporation decided in 2024 to discontinue accounting for reacquired shares as treasury stock. Instead, shares repurchased will be viewed as having been retired, reassuming the
> Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning of 2024. The inventory as reported at the end of 2023 using LIFO would have been $60,000 higher using FIFO. Retained earnings
> For each of the following inventory errors occurring in 2024, determine the effect of the error on 2024’s cost of goods sold, net income, and retained earnings. Assume that the error is not discovered until 2025 and that a periodic inve
> On December 28, 2024, Tristar Communications sold 10 units of its new satellite uplink system to various customers for $25,000 each. The terms of each sale were 1/10, n/30. Tristar uses the gross method to account for sales discounts. In what year will i
> Below are three independent and unrelated errors. a. On December 31, 2023, Wolfe-Bache Corporation failed to accrue salaries expense of $1,800. In January 2024, when it paid employees for the December 27–January 2 workweek, Wolfe-Bache
> At the end of 2023, Martinez Furniture Company failed to accrue $61,000 of interest expense that accrued during the last five months of 2023 on bonds payable. The bonds mature in 2035. The discount on the bonds is amortized by the straight-line method. T
> Wilkins Food Products Inc. acquired a packaging machine from Lawrence Specialists Corporation. Lawrence completed construction of the machine on January 1, 2022. In payment for the machine Wilkins issued a three year installment note to be paid in three
> On December 12, 2024, an investment in equity securities costing $80,000 was sold for $100,000. The total of the sale proceeds was credited to the investment in equity securities account. Required: 1. Prepare the journal entry to correct the error, assu
> During 2024, Lope and Lope Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts: Lope and Lope uses the periodic inventory system and the FIFO cost method. Required: 1. Determine
> The Commonwealth of Virginia filed suit in October 2022 against Northern Timber Corporation, seeking civil penalties and injunctive relief for violations of environmental laws regulating forest conservation. When the financial statements were issued in 2
> S. J. Byland Engineering Group receives royalties on a technical manual written by two of its engineers and sold to William B. Irving Publishing, Inc. Royalties are 10% of net sales, receivable on October 1 for sales in January through June and on April
> The Canlas Milling Company purchased machinery on January 2, 2022, for $800,000. A five-year life was estimated and no residual value was anticipated. Canlas decided to use the straight-line depreciation method and recorded $160,000 in depreciation in 20
> During 2022 (its first year of operations) and 2023, Fiery Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2024, Fiery decided to change to the average method for both financial reporting an
> SSG Cycles manufactures and distributes motorcycle parts and supplies. Employees are offered a variety of share based compensation plans. Under its nonqualified stock option plan, SSG granted options to key officers on January 1, 2024. The options permit
> What is the main difference between a perpetual inventory system and a periodic inventory system? Which system is used more often by major companies?
> Martinez Audio Visual Inc. offers an incentive stock option plan to its regional managers. On January 1, 2024, options were granted for 40 million $1 par common shares. The exercise price is the market price on the grant date—$8 per share. Options cannot
> On January 1, 2024, Adams-Men eke Corporation granted 25 million incentive stock options to division managers, each permitting holders to purchase one share of the company’s $1 par common shares within the next six years, but not before December 31, 2026
> Heidi Software Corporation provides a variety of share-based compensation plans to its employees. Under its executive stock option plan, the company granted options on January 1, 2024, that permit executives to acquire 4 million of the company’s $1 par c
> On January 1, 2024, Vijay Communications granted restricted stock units (RSUs) representing 30 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within three years. After the recipients of the RSUs satis
> Magnetic-Optical Corporation offers a variety of share-based compensation plans to employees. Under its restricted stock unit plan, the company on January 1, 2024, granted restricted stock units (RSUs) representing 4 million of its $1 par common shares t
> FedEx Corporation included the following disclosure note in an annual report: Required: 1. Assuming a four-year vesting period, how much compensation expense did FedEx report in the year ended May 31, 2021, for the restricted stock granted during the y
