Question: The income statement of Vince Gill Company

> Picasso Company is a wholesale distributor of professional equipment and supplies. The company’s sales have averaged about $900,000 annually for the 3-year period 2012–2014. The firm’s total assets at

> Joy Cunningham Co. purchased a machine on January 1, 2012, for $550,000. At that time, it was estimated that the machine would have a 10-year life and no salvage value. On December 31, 2015, the firm’s accountant found that the entry for depreciation exp

> Morgan Leasing Company signs an agreement on January 1, 2014, 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 estimate

> Explain the distinction between a direct-financing lease and a sales-type lease for a lessor.

> Veldre Company provides the following information about its defined benefit pension plan for the year 2014. Instructions Compute the pension expense for the year 2014. $ 90,000 105,000 10,000 64,000 40,000 640,000 700,000 150,000 Service cost Contrib

> Button Company has the following two temporary differences between its income tax expense and income taxes payable. The income tax rate for all years is 40%. Instructions (a) Assuming there were no temporary differences prior to 2014, prepare the journal

> Turner, Inc. began work on a $7,000,000 contract in 2014 to construct an office building. During 2014, Turner, Inc. incurred costs of $1,700,000, billed its customers for $1,200,000, and collected $960,000. At December 31, 2014, the estimated future cost

> Fairbanks Corporation purchased 400 shares of Sherman Inc. common stock as an available for-sale investment for $13,200. During the year, Sherman paid a cash dividend of $3.25 per share. At yearend, Sherman stock was selling for $34.50 per share. Prepare

> The 2014 income statement of Wasmeier Corporation showed net income of $480,000 and an extraordinary loss of $120,000. Wasmeier had 100,000 shares of common stock outstanding all year. Prepare Wasmeier’s income statement presentation of earnings per shar

> As loan analyst for Utrillo Bank, you have been presented the following information. Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. Because your bank has reached its quota for loans of this type, only one

> 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, 2014. Accounts receivable and accounts payable at year-end were $71,000 and $29

> Listed below are various types of accounting changes and errors. ______ 1. Change in a plant asset’s salvage value. ______ 2. Change due to overstatement of inventory. ______ 3. Change from sum-of-the-years’-digits to straight-line method of depreciation

> A lease agreement between Mooney Leasing Company and Rode Company is described in E21-8. In E21-8 Instructions Refer to the data in E21-8 and do the following for the lessor. (a) Compute the amount of the lease receivable at the inception of the lease. (

> For 2014, Sampsell Inc. computed its annual postretirement expense as $240,900. Sampsell’s contribution to the plan during 2014 was $180,000. Prepare Sampsell’s 2014 entry to record postretirement expense.

> The book basis of depreciable assets for Erwin Co. is $900,000, and the tax basis is $700,000 at the end of 2015. 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 2015.

> Complete the following statements by filling in the blanks. (a) In a period in which a taxable temporary difference reverses, the reversal will cause taxable income to be _______ (less than, greater than) pretax financial income. (b) If a $76,000 balance

> Telephone Sellers Inc. sells prepaid telephone cards to customers. Telephone Sellers then pays the telecommunications company, TeleExpress, for the actual use of its telephone lines. Assume that Telephone Sellers sells $4,000 of prepaid cards in January

> Hendricks Corporation purchased trading investment bonds for $50,000 at par. At December 31, Hendricks received annual interest of $2,000, and the fair value of the bonds was $47,400. Prepare Hendricks’ journal entries for (a) The purchase of the invest

> Bedard Corporation reported net income of $300,000 in 2014 and had 200,000 shares of common stock outstanding throughout the year. Also outstanding all year were 45,000 options to purchase common stock at $10 per share. The average market price of the st

> Carlton Company is involved in four separate industries. The following information is available for each of the four industries. Instructions Determine which of the operating segments are reportable based on the: (a) Revenue test. (b) Operating profit (l

> Data for Krauss Company are presented in E23-5. In E23-5 Krauss’s balance sheet contained the following comparative data at December 31. Instructions Prepare the operating activities section of the statement of cash flows using the indi

> Presented below are the comparative income and retained earnings statements for Denise Habbe Inc. for the years 2014 and 2015. The following additional information is provided: 1. In 2015, Denise Habbe Inc. decided to switch its depreciation method from

> The following facts pertain to a noncancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee. The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs y

> Manno Corporation has the following information available concerning its postretirement benefit plan for 2014. Compute Manno’s 2014 postretirement expense. $40,000 47,400 26,900 Service cost Interest cost Actual and expected return

> Jansen Corporation shipped $20,000 of merchandise on consignment to Gooch Company. Jansen paid freight costs of $2,000. Gooch Company paid $500 for local advertising, which is reimbursable from Jansen. By year-end, 60% of the merchandise had been sold fo

> What are the three alternative accounting methods available to a seller that is exposed to continued risks of ownership through return of the product?

> Bradley Co. is expanding its operations and is in the process of selecting the method of financing this program. After some investigation, the company determines that it may (1) issue bonds and with the proceeds purchase the needed assets or (2) lease th

> Carow Corporation purchased, as a held-to-maturity investment, $60,000 of the 8%, 5-year bonds of Harrison, Inc. for $65,118, which provides a 6% return. The bonds pay interest semiannually. Prepare Carow’s journal entries for (a) The purchase of the in

> DiCenta Corporation reported net income of $270,000 in 2014 and had 50,000 shares of common stock outstanding throughout the year. Also outstanding all year were 5,000 shares of cumulative preferred stock, each convertible into 2 shares of common. The pr

> For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose. ______ 1. Settlement of federa

> Krauss Company’s income statement for the year ended December 31, 2014, contained the following condensed information. Krauss’s balance sheet contained the following comparative data at December 31. Instructions Prepar

> Kathleen Cole Inc. acquired the following assets in January of 2012. The equipment has been depreciated using the sum-of-the-years’-digits method for the first 3 years for financial reporting purposes. In 2015, the company decided to ch

> On January 1, 2014, 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

> Lahey Corp. has three defined benefit pension plans as follows. How will Lahey report these multiple plans in its financial statements? Projected Benefit Obligation Pension Assets (at Fair Value) Plan X Plan Y Plan Z $600,000 900,000 550,000 $500,000

> Aamodt Music sold CDs to retailers and recorded sales revenue of $700,000. During 2014, retailers returned CDs to Aamodt and were granted credit of $78,000. Past experience indicates that the normal return rate is 15%. Prepare Aamodt’s entries to record

> Use the information from BE17-1 but assume the bonds are purchased as an available-for-sale security. In BE17-2 Garfield Company purchased, as a held-to-maturity investment, $80,000 of the 9%, 5-year bonds of Chester Corporation for $74,086, which provi

> Rockland Corporation earned net income of $300,000 in 2014 and had 100,000 shares of common stock outstanding throughout the year. Also outstanding all year was $800,000 of 10% bonds, which are convertible into 16,000 shares of common. Rockland’s tax rat

> Explain how the conversion feature of convertible debt has a value (a) to the issuer and (b) to the purchaser.

> Madrasah Corporation issued its financial statements for the year ended December 31, 2014, on March 10, 2015. The following events took place early in 2015. (a) On January 10, 10,000 shares of $5 par value common stock were issued at $66 per share. (b) O

> Data for the Vince Gill Company are presented in E23-3. In E23-3 Instructions Prepare the operating activities section of the statement of cash flows using the direct method. VINCE GILL COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2014 Sa

> Presented below are income statements prepared on a LIFO and FIFO basis for Kenseth Company, which started operations on January 1, 2013. The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in

> Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2014. The lease is for an 8-year period and requires equal annual payments of $35,013 at the beginning of each year. The first payment is received on January 1, 201

> Norton Co. had the following amounts related to its pension plan in 2014. Determine for 2014: (a) Norton’s other comprehensive income (loss), and (b) Comprehensive income. Net income for 2014 is $26,000; no amortization of gain or los

> Zurich Company reports pretax financial income of $70,000 for 2014. The following items cause taxable income to be different than pretax financial income. 1. Depreciation on the tax return is greater than depreciation on the income statement by $16,000.

> Travel Inc. sells tickets for a Caribbean cruise to Carmel Company employees. The total cruise package costs Carmel $70,000 from ShipAway cruise liner. Travel Inc. receives a commission of 6% of the total price. Travel Inc. therefore remits $65,800 to Sh

> Garfield Company purchased, as a held-to-maturity investment, $80,000 of the 9%, 5-year bonds of Chester Corporation for $74,086, which provides an 11% return. Prepare Garfield’s journal entries for (a) The purchase of the investment, and (b) The recei

> Tomba Corporation had 300,000 shares of common stock outstanding on January 1, 2014. On May 1, Tomba issued 30,000 shares. (a) Compute the weighted-average number of shares outstanding if the30,000 shares were issued for cash. (b) Compute the weighted-

> Heartland Company’s budgeted sales and budgeted cost of goods sold for the coming year are $144,000,000 and $99,000,000, respectively. Short-term interest rates are expected to average 10%. If Heartland can increase inventory turnover from its present le

> The following information was described in a note of Canon Packing Co. “During August, Holland Products Corporation purchased 311,003 shares of the Company’s common stock which constitutes approximately 35% of the stock outstanding. Holland has since obt

> Gordon Company started operations on January 1, 2009, and has used the FIFO method of inventory valuation since its inception. In 2015, it decides to switch to the average-cost method. You are provided with the following information. Instructions (a) Wha

> Mike Macinski Leasing Company leases a new machine that has a cost and fair value of $95,000 to Sharrer Corporation on a 3-year noncancelable contract. Sharrer Corporation agrees to assume all risks of normal ownership including such costs as insurance,

> Hawkins Corporation has the following balances at December 31, 2014. How should these balances be reported on Hawkins’s balance sheet at December 31, 2014? $2,600,000 2,000,000 1,100,000 Projected benefit obligation Plan assets at f

> Bandung Corporation began 2014 with a $92,000 balance in the Deferred Tax Liability account. At the end of 2014, the related cumulative temporary difference amounts to $350,000, and it will reverse evenly over the next 2 years. Pretax accounting income f

> Adani Inc. sells goods to Geo Company for $11,000 on January 2, 2014, with payment due in 12 months. The fair value of the goods at the date of sale is $10,000. Prepare the journal entry to record this transaction on January 2, 2014. How much total reven

> What is a variable-interest entity?

> Douglas Corporation had 120,000 shares of stock outstanding on January 1, 2014. On May 1, 2014, Douglas issued 60,000 shares. On July 1, Douglas purchased 10,000 treasury shares, which were re issued on October 1. Compute Douglas’s weighted-average numbe

> Answer each of the questions in the following unrelated situations. (a) The current ratio of a company is 5:1 and its acid-test ratio is 1:1. If the inventories and prepaid items amount to $500,000, what is the amount of current liabilities? (b) A compan

> Each of the following items must be considered in preparing a statement of cash flows (indirect method) for Turbulent Indigo Inc. for the year ended December 31, 2014. (a) Plant assets that had cost $20,000 6 years before and were being depreciated on a

> Identify and explain the major steps involved in preparing the statement of cash flows.

> Taveras Co. decides at the beginning of 2014 to adopt the FIFO method of inventory valuation. Taveras had used the LIFO method for financial reporting since its inception on January 1, 2012, and had maintained records adequate to apply the FIFO method re

> Castle Leasing Company signs a lease agreement on January 1, 2014, 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

> Shin Corporation had a projected benefit obligation of $3,100,000 and plan assets of $3,300,000 at January 1, 2014. Shin also had a net actuarial loss of $465,000 in accumulated OCI at January 1, 2014. The average remaining service period of Shin’s emplo

> The following information is available for Wenger Corporation for 2013 (its first year of operations). 1. Excess of tax depreciation over book depreciation, $40,000. This $40,000 difference will reverse equally over the years 2014–2017. 2. Deferral, for

> Manual Company sells goods to Nolan Company during 2014. It offers Nolan the following rebates based on total sales to Nolan. If total sales to Nolan are 10,000 units, it will grant a rebate of 2%. If it sells up to 20,000 units, it will grant a rebate o

> Kalin Corporation had 2014 net income of $1,000,000. During 2014, Kalin paid a dividend of $2 per share on 100,000 shares of preferred stock. During 2014, Kalin had outstanding 250,000 shares of common stock. Compute Kalin’s 2014 earnings per share.

> Identifiable assets for the seven industry segments of Foley Corporation are: Based only on the identifiable assets test, which industry segments are reportable? Penley $500 Cheng $200 Konami 550 Takuhi 150 KSC 250 Molina 475 Red Moon 400

> Red Hot Chili Peppers Co. had the following activity in its most recent year of operations. (a) Purchase of equipment. (b) Redemption of bonds payable. (c) Sale of building. (d) Depreciation. (e) Exchange of equipment for furniture. (f) Issuance of capit

> Holder-Webb Company began operations on January 1, 2012, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2015. The following information is available for the years 2012â€&#14

> Assume that on January 1, 2014, Kimberly-Clark Corp. signs a 10-year noncancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal ren

> What is the indirect effect of a change in accounting principle? Briefly describe the reporting of the indirect effects of a change in accounting principle.

> At December 31, 2014, Besler Corporation had a projected benefit obligation of $560,000, plan assets of $322,000, and prior service cost of $127,000 in accumulated other comprehensive income. Determine the pension asset/liability at December 31, 2014.

> E19-1 (One Temporary Difference, Future Taxable Amounts, One Rate, No Beginning Deferred Taxes) South Carolina Corporation has one temporary difference at the end of 2014 that will reverse and cause taxable amounts of $55,000 in 2015, $60,000 in 2016, an

> What changes are made in the franchisor’s recording of the initial franchise fee when the franchise agreement: (a) Contains an option allowing the franchisor to purchase the franchised outlet, and it is likely that the option will be exercised? (b) Allow

> What are hybrid securities? Give an example of a hybrid security.

> On January 1, 2014 (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

> Pam Erickson Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2015. For tax purposes, the company employs the completed-contract method and will cont

> Operating profits and losses for the seven industry segments of Foley Corporation are: Based only on the operating profit (loss) test, which industry segments are reportable? $ (20) $ 90 (40) Penley Cheng Takuhi Konami 34 KSC Red Moon 25 Molina 150 5

> Indicate in general journal form how the items below would be entered in a worksheet for the preparation of the statement of cash flows. (a) Net income is $317,000. (b) Cash dividends declared and paid totaled $120,000. (c) Equipment was purchased for $1

> Pat Delaney Company leases an automobile with a fair value of $8,725 from John Simon Motors, Inc., on the following terms: 1. Noncancelable term of 50 months. 2. Rental of $200 per month (at end of each month). (The present value at 1% per month is $7,84

> Mancuso Corporation amended its pension plan on January 1, 2014, and granted $160,000 of prior service costs to its employees. The employees are expected to provide 2,000 service years in the future, with 350 service years in 2014. Compute prior service

> Distinguish between minimum rental payments and minimum lease payments, and indicate what is included in minimum lease payments.

> 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