Salen Company finances some of its current operations by assigning accounts receivable to a finance company. On July 1, 2017, it assigned, under guarantee, specific accounts amounting to $150,000. The finance company advanced to Salen 80% of the accounts assigned (20% of the total to be withheld until the finance company has made its full recovery), less a finance charge of ½% of the total accounts assigned. On July 31, Salen Company received a statement that the finance company had collected $80,000 of these accounts and had made an additional charge of ½% of the total accounts outstanding as of July 31. This charge is to be deducted at the time of the first remittance due Salen Company from the finance company. (Hint: Make entries at this time.) On August 31, 2017, Salen Company received a second statement from the finance company, together with a check for the amount due. The statement indicated that the finance company had collected an additional $50,000 and had made a further charge of ½% of the balance outstanding as of August 31. Instructions Make all entries on the books of Salen Company that are involved in the transactions above.
> Vandross Company has recorded bad debt expense in the past at a rate of 1½% of accounts receivable, based on an aging analysis. In 2017, Vandross decides to increase its estimate to 2%. If the new rate had been used in prior years, cumulative bad debt ex
> During 2017, Williamson Company changed from FIFO to weighted-average inventory pricing. Pretax income in 2016 and 2015 (Williamson’s first year of operations) under FIFO was $160,000 and $180,000, respectively. Pretax income using weighted-average prici
> Crane Corporation has the following accounts included in its December 31, 2017, trial balance: Equity Investments (trading) $21,000, Goodwill $150,000, Prepaid Insurance $12,000, Patents $220,000, and Franchises $130,000. Prepare the intangible assets se
> Harrisburg Company is considering changing its inventory valuation method from FIFO to LIFO because of the potential tax savings. However, management wishes to consider all of the effects on the company, including its reported performance, before making
> Using the data in BE3-3, journalize the entry on July 1 and the adjusting entry on December 31 for Zubin Insurance Co. Zubin uses the accounts Unearned Service Revenue and Service Revenue. From BE3-3: On July 1, 2017, Crowe Co. pays $15,000 to Zubin Ins
> On July 1, 2017, Crowe Co. pays $15,000 to Zubin Insurance Co. for a 3-year insurance policy. Both companies have fiscal years ending December 31. For Crowe Co., journalize the entry on July 1 and the adjusting entry on December 31.
> Koch Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2017: Cash $7,000, Land $40,000, Patents $12,500, Accounts Receivable $90,000, Prepaid Insurance $5,200, Inventory $30,000, Allowance for Doubtful Accounts $
> Harding Corporation has the following accounts included in its December 31, 2017, trial balance: Accounts Receivable $110,000, Inventory $290,000, Allowance for Doubtful Accounts $8,000, Patents $72,000, Prepaid Insurance $9,500, Accounts Payable $77,000
> The Kroger Company reported the following data in its annual report (in millions). Instructions a. Compute Kroger’s inventory turnovers for fiscal years ending January 31, 2015, and February 1, 2014, using: (1) Cost of sales and LIF
> Describe the estimation of the allowance, based on expected cash flows.
> Qualls Corporation reported 2017 earnings per share of $7.21. In 2018, Qualls reported earnings per share as follows. On income from continuing operations……………$6.40 On discontinued operations………………………………1.88 On net income………………………………………………. $8.28 Is the
> Distinguish among the following: (1) a general checking account, (2) an imprest bank account, and (3) a lockbox account.
> At the balance sheet date, Clarkson Company held title to goods in transit amounting to $214,000. This amount was omitted from the purchases figure for the year and also from the ending inventory. What is the effect of this omission on the net income for
> Explain the following terms. a. LIFO layer. b. LIFO reserve. c. LIFO effect.
> As the manager of the accounts receivable department for Beavis Leather Goods, Ltd., you recently noticed that Kelly Collins, your accounts receivable clerk who is paid $1,200 per month, has been wearing unusually tasteful and expensive clothing. (This i
> On December 31, 2016, the inventory of Powhattan Company amounts to $800,000. During 2017, the company decides to use the dollar-value LIFO method of costing inventories. On December 31, 2017, the inventory is $1,053,000 at December 31, 2017, prices. Usi
> According to generally accepted accounting principles, what is the balance sheet valuation of each of the following assets? a. Trade accounts receivable. b. Land. c. Inventories. d. Trading securities (common stock of other companies). e. Prepaid ex
> Indicate where the following items would ordinarily appear on the financial statements of Boleyn, Inc. for the year 2017. a. The service life of certain equipment was changed from 8 to 5 years. If a 5-year life had been used previously, additional depre
> Discuss the appropriate treatment in the financial statements of each of the following. a. Gain on sale of investment securities. b. A profit-sharing bonus to employees computed as a percentage of net income. c. Additional depreciation on factory mach
> Describe the LIFO double-extension method. Using the following information, compute the index at December 31, 2017, applying the double-extension method to a LIFO pool consisting of 25,500 units of product A and 10,350 units of product B. The base-year c
> Indicate how the percentage-of-receivables method, based on an aging schedule, accomplishes the objectives of the allowance method of accounting for bad debts. What other methods, besides an aging analysis, can be used for estimating uncollectible accoun
> What are the advantages and disadvantages of the single-step income statement?
> Distinguish between Opinions of the Accounting Principles Board and Accounting Standards Updates.
> For what purposes did the AICPA create the Accounting Principles Board?
> Discuss the accounting for sales allowances and how they relate to the concept of variable consideration.
> On July 1, 2017, Moresan Company sold special-order merchandise on credit and received in return an interest-bearing note receivable from the customer. Moresan will receive interest at the prevailing rate for a note of this type. Both the principal and i
> How can earnings management affect the quality of earnings?
> What is a repurchase agreement (product financing) arrangement? How should a product repurchase agreement be reported in the financial statements?
> In what accounts should the following items be classified? a. Coins and currency. b. U.S. Treasury (government) bonds. c. Certificate of deposit (matures in 5 months). d. Cash in a bank that is in receivership. e. NSF check (returned with bank s
> On January 1, 2017, Bonanza Wholesalers Inc. adopted the dollar-value LIFO inventory method for income tax and external financial reporting purposes. However, Bonanza continued to use the FIFO inventory method for internal accounting and management purpo
> Norman’s Televisions produces television sets in three categories: portable, midsize, and flat-screen. On January 1, 2017, Norman adopted dollar-value LIFO and decided to use a single inventory pool. The company’s Janu
> The management of Tritt Company has asked its accounting department to describe the effect upon the company’s financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2017
> Dimitri Company, a manufacturer of small tools, provided the following information from its accounting records for the year ended December 31, 2017. Inventory at December 31, 2017 (based on physical count of goods in Dimitri’s plant,
> Richardson Company cans a variety of vegetable-type soups. Recently, the company decided to value its inventories using dollar-value LIFO pools. The clerk who accounts for inventories does not understand how to value the inventory pools using this new me
> Presented below is information related to Kaisson Corporation for the last 3 years. Instructions Compute the ending inventories under the dollar-value LIFO method for 2016, 2017, and 2018. The base period is January 1, 2016, and the beginning inventor
> The following independent situations relate to inventory accounting. 1. Kim Co. purchased goods with a list price of $175,000, subject to trade discounts of 20% and 10%, with no cash discounts allowable. How much should Kim Co. record as the cost of thes
> In light of the full disclosure principle, investors and creditors need to know the balances for assets, liabilities, and equity as well as the accounting policies adopted by management to measure the items reported in the balance sheet. Instructions
> Braddock Inc. had the following long-term receivable account balances at December 31, 2016. Note receivable from sale of division…………$1,500,000 Note receivable from officer…………………………. 400,000 Transactions during 2017 and other information relating to
> On December 31, 2017, Oakbrook Inc. rendered services to Beghun Corporation at an agreed price of $102,049, accepting $40,000 down and agreeing to accept the balance in four equal installments of $20,000 receivable each December 31. An assumed interest r
> On October 1, 2017, Arden Farm Equipment Company sold a pecan-harvesting machine to Valco Brothers Farm, Inc. In lieu of a cash payment Valco Brothers Farm gave Arden a 2-year, $120,000, 8% note (a realistic rate of interest for a note of this type). The
> The balance sheet of Starsky Company at December 31, 2016, includes the following. Transactions in 2017 include the following. 1. Accounts receivable of $138,000 were collected including accounts of $60,000 on which 2% sales discounts were allowed. 2
> Presented below is information related to the Accounts Receivable accounts of Gulistan Inc. during the current year 2017. 1. An aging schedule of the accounts receivable as of December 31, 2017, is as follows. 2. The Accounts Receivable control accoun
> From inception of operations to December 31, 2017, Fortner Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts w
> The following are a series of unrelated situations. 1. Halen Company’s unadjusted trial balance at December 31, 2017, included the following accounts. Halen Company estimates its bad debt expense to be 7% of gross accounts receivable.
> On January 1, 2017, Botosan Company issued a $1,200,000, 5-year, zero-interestbearing note to National Organization Bank. The note was issued to yield 8% annual interest. Unfortunately, during 2018 Botosan fell into financial trouble due to increased com
> The cash account of Aguilar Co. showed a ledger balance of $3,969.85 on June 30, 2017. The bank statement as of that date showed a balance of $4,150. Upon comparing the statement with the cash records, the following facts were determined. 1. There were
> Bill Jovi is reviewing the cash accounting for Nottleman, Inc., a local mailing service. Jovi’s review will focus on the petty cash account and the bank reconciliation for the month ended May 31, 2017. He has collected the following inf
> Access the glossary (“Master Glossary”) to answer the following. a. What is the definition provided for inventory? b. What is a customer? c. Under what conditions is a distributor considered a customer? d. What is a product financing arrangement?
> Sandburg Company requires additional cash for its business. Sandburg has decided to use its accounts receivable to raise the additional cash and has asked you to determine the income statement effects of the following contemplated transactions. 1. On Ju
> James Kirk is a financial executive with McDowell Enterprises. Although James Kirk has not had any formal training in finance or accounting, he has a “good sense” for numbers and has helped the company grow from a very small company ($500,000 sales) to a
> Answer the following questions related to Dubois Inc. a. Dubois Inc. has $600,000 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides $80,000 at the end of each year for 12 years, and the other i
> At the end of 2017, Sawyer Company is conducting an impairment test and needs to develop a fair value estimate for machinery used in its manufacturing operations. Given the nature of Sawyer’s production process, the equipment is for spe
> Danny’s Lawn Equipment sells high-quality lawn mowers and offers a 3-year warranty on all new lawn mowers sold. In 2017, Danny sold $300,000 of new specialty mowers for golf greens for which Danny’s service department
> You have been hired as a benefit consultant by Jean Honore, the owner of Attic Angels. She wants to establish a retirement plan for herself and her three employees. Jean has provided the following information. The retirement plan is to be based upon annu
> Aero Inc. had the following balance sheet at December 31, 2016. During 2017, the following occurred. 1. Aero liquidated its available-for-sale debt investment portfolio at a loss of $5,000. 2. A tract of land was purchased for $38,000. 3. An additio
> Lansbury Inc. had the following balance sheet at December 31, 2016. During 2017, the following occurred. 1. Lansbury Inc. sold part of its debt investment portfolio for $15,000. This transaction resulted in a gain of $3,400 for the firm. The company c
> Presented below is the balance sheet of Sargent Corporation for the current year, 2017. The following information is presented. 1. The current assets section includes cash $150,000, accounts receivable $170,000 less $10,000 for allowance for doubtful
> In addition to the list of topics identified in footnote 1 on page 268, identify the specific Codification guidance related to the use of present value in goodwill impairment.
> The balance sheet of Kishwaukee Corporation as of December 31, 2017, is as follows. Note 1: Buildings are stated at cost, except for one building that was recorded at appraised value. The excess of appraisal value over cost was $570,000. Depreciation ha
> The adjusted trial balance of Eastwood Company and other related information for the year 2017 are presented as follows. Additional information: 1. The LIFO method of inventory value is used. 2. The cost and fair value of the long-term investments th
> Wade Corp. has 150,000 shares of common stock outstanding. In 2017, the company reports income from continuing operations before income tax of $1,210,000. Additional transactions not considered in the $1,210,000 are as follows. 1. In 2017, Wade Corp. so
> Cooke Company has a fiscal year ending on September 30. Selected data from the September 30 worksheet are presented below. Instructions a. Prepare a complete worksheet. b. Prepare a classified balance sheet. (Note: $10,000 of the mortgage payable is d
> On January 1, 2017, Norma Smith and Grant Wood formed a computer sales and service company in Soapsville, Arkansas, by investing $90,000 cash. The new company, Arkansas Sales and Service, has the following transactions during January. 1. Pays $6,000 in a
> Below is the Retained Earnings account for the year 2017 for Acadian Corp. Instructions a. Prepare a corrected retained earnings statement. Acadian Corp. normally sells investments of the type mentioned above. FIFO inventory was used in 2017 to comput
> The following account balances were included in the trial balance of Twain Corporation at June 30, 2017. The Retained Earnings account had a balance of $337,000 at July 1, 2016. There are 80,000 shares of common stock outstanding. Instructions a. Usi
> Vedula Advertising was founded by Murali Vedula in January 2015. On the next page are both the adjusted and unadjusted trial balances as of December 31, 2017. Instructions a. Journalize the annual adjusting entries that were made. b. Prepare an incom
> Rolling Hills Golf Inc. was organized on July 1, 2017. Quarterly financial statements are prepared. The unadjusted trial balance and adjusted trial balance on September 30 are shown below. Instructions a. Journalize the adjusting entries that were mad
> The following are the trial balance and the other information related to Yorkis Perez, a consulting engineer. 1. Fees received in advance from clients $6,000, which were recorded as revenue. 2. Services performed for clients that were not recorded by
> Access the glossary (“Master Glossary”) to answer the following. a. What is the definition of present value? b. Briefly describe the term “discount rate adjustment technique.”
> Presented below is a combined single-step income and retained earnings statement for Nerwin Company for 2017. Additional facts are as follows. 1. “Selling, general, and administrative expenses” for 2017 included a ch
> The trial balance of Bellemy Fashion Center contained the following accounts at November 30, the end of the company’s fiscal year. Adjustment data: 1. Supplies on hand totaled $1,500. 2. Depreciation is $15,000 on the equipment. 3.
> A review of the ledger of Baylor Company at December 31, 2017, produces the following data pertaining to the preparation of annual adjusting entries. 1. Salaries and Wages Payable $0. There are eight employees. Salaries and wages are paid every Friday f
> Answer each of these unrelated questions. a. On January 1, 2017, Fishbone Corporation sold a building that cost $250,000 and that had accumulated depreciation of $100,000 on the date of sale. Fishbone received as consideration a $240,000 non-interest-be
> The following information is related to Dickinson Company for 2017. Retained earnings balance, January 1, 2017………………………………...$ 980,000 Sales revenue……………………………………………………………………………..25,000,000 Cost of goods sold………………………………………………………………………..16,000,000 Inte
> 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 answ
> 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 answ
> Rainmaker Company prepares its financial statements in accordance with IFRS. In 2017, Rainmaker recorded the following revaluation adjustments related to its buildings and land: The company’s building increased in value by $200,000; its land declined by$
> 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 answ
> Your client took accounting a number of years ago and was unaware of comprehensive income reporting. He is not convinced that any accounting standards exist for comprehensive income. Access the IFRS authoritative literature at the IASB website (http:/
> Enyart Company has a noncontrolling interest in a subsidiary. Enyart’s controller is unsure how to report losses in the subsidiary that exceed the value of Enyart’s interest in the subsidiary. Advise the controller.
> Presented below is information related to Viel Company at December 31, 2017, the end of its first year of operations. Sales revenue………………………………………………………...$310,000 Cost of goods sold……………………………………………………. 140,000 Selling and administrative expenses………………
> 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 an
> 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 answ
> As a newly enrolled accounting major, you are anxious to better understand accounting institutions and sources of accounting literature. As a first step, you decide to explore the IASB’s The Conceptual Framework for Financial Reporting. Instructions: A
> As discussed in Chapter 1, the International Accounting Standards Board (IASB) develops accounting standards for many international companies. The IASB also has developed a conceptual framework to help guide the setting of accounting standards. While the
> What are some of the challenges to the IASB in developing a conceptual framework?
> On December 31, 2017, Firth Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest-rate note. The note was issued to yield 10% interest. Unfortunately, during 2019, Firth began to experience financial difficulty. As a result,
> What organizations are the two key international players in the development of international accounting standards? Explain their role.
> The comparative balance sheets of Madrasah Corporation at the beginning and end of the year 2017 appear below. Net income of $44,000 was reported, and dividends of $33,000 were paid in 2017. New equipment was purchased and none was sold. Instructions
> Grant Wood Corporation’s balance sheet at the end of 2016 included the following items. The following information is available for 2017. 1. Net income was $55,000. 2. Equipment (cost $20,000 and accumulated depreciation $8,000) was
> On January 1, 2017, Richards Inc. had cash and common stock of $60,000. At that date, the company had no other asset, liability, or equity balances. On January 2, 2017, it purchased for cash $20,000 of debt securities that it classified as available-for-
> A comparative balance sheet for Shabbona Corporation is presented below. Additional information: 1. Net income for 2017 was $125,000. No gains or losses were recorded in 2017. 2. Cash dividends of $60,000 were declared and paid. 3. Bonds payable amo
> Presented below is a condensed version of the comparative balance sheets for Zubin Mehta Corporation for the last two years at December 31. Additional information: Investments were sold at a loss of $10,000; no equipment was sold; cash dividends paid w
> The comparative balance sheets of Constantine Cavamanlis Inc. at the beginning and the end of the year 2017 are as follows. Net income of $44,000 was reported, and dividends of $23,000 were paid in 2017. New equipment was purchased and none was sold.
> Presented below is the trial balance of Scott Butler Corporation at December 31, 2017. Instructions Prepare a balance sheet at December 31, 2017, for Scott Butler Corporation. (Ignore income taxes.) Debit Credit Cash $ 197,000 Sales Revenue $ 8,100
> Norma Smith is the controller of Baylor Corporation and is responsible for the preparation of the year-end financial statements. The following transactions occurred during the year. a. On December 20, 2017, a former employee filed a legal action against
> Presented below are a number of balance sheet accounts of Deep Blue Something, Inc. a. Debt Investments. b. Treasury Stock. c. Common Stock. d. Dividends Payable. e. Accumulated Depreciation—Equipment. f. Construction in Process. g. Petty Cash. h
> Presented below is information related to Ivan Calderon Corp. for the year 2017. Instructions a. Prepare a multiple-step income statement for 2017. Assume that 60,000 shares of common stock are outstanding for the entire year. b. Prepare a separate r
> Presented below are selected ledger accounts of Tucker Corporation as of December 31, 2017. Cash……………………………………………………………………………. $ 50,000 Administrative expenses………………………………………………..100,000 Selling expenses……………………………………………………………..80,000 Net sales……………………
> The accountant of Latifa Shoe Co. has piled the following information from the company’s records as a basis for an income statement for the year ended December 31, 2017. Rent revenue………………………………………………………………………. $ 29,000 Interest expense…………………………………………
