Welk Associates sold a piece of equipment to Convey Company on June 1, 2016, for $800,000. Welk agreed to accept a 7-month, 7% note with interest due on its maturity date, December 31, 2016. Welk prepares financial statements only at its calendar year-end. Prepare the journal entries required to record the sale and the full collection at maturity. Ignore cost of goods sold and inventory.
> Using the information in BE10-18, now assume that Sarat Boot uses FIFO for inventory costing purposes. Determine the ending inventory value per unit using the lower-of-cost-or-market rule assuming that Sarat Boot uses the group-by-group approach to LCM.
> Sarat Boot Company manufactures two types of boots—rain boots and snow boots. Information related to both products is presented in the following table. Determine the ending inventory value per unit using the lower-of-cost-or-market rul
> IFRS. Using the facts in BE10-15, assume that Count Clothing has 2,000 units of its Stain Resistant model in stock a year later when the net realizable value has increased to $230. What is the reversal of the inventory write-down, if any? Assume the comp
> IFRS. Using the information in BE10-15, prepare the journal entry to record the write-down to market for the Stain Resistant model under both the direct and indirect methods. Assume that Count Clothing has 3,500 units of the Stain Resistant model in stoc
> Using the information provided in BE8-5, determine the bonus using the most-likely-amount approach. Ignore any constraints on variable consideration. Data from BE8-5:
> IFRS. Using the information in BE10-13, now assume that Count Clothing is an IFRS reporter. Determine the ending inventory value per unit and the amount of any write-downs per unit using the lower-of-cost-or-market rule assuming that Count Clothing uses
> sing the information in BE10-13, prepare the journal entry to record the writedown to market for the Stain Resistant model under both the direct and indirect methods. Assume that Count Clothing has 3,500 units of the Stain Resistant model in stock. Data
> Count Clothing Company manufactures two types of raincoats—Regular and Stain Resistant. Information related to both products is presented in the following table. Determine the ending inventory value per unit and the amount of any write
> Using the information provided in BE10-11, prepare the journal entry required to adjust Todgren’s ending inventory from a FIFO to a dollar-value LIFO basis. Data from BE10-11: Todgren Incorporated adopted the dollar-value LIFO method last year. Last yea
> Todgren Incorporated adopted the dollar-value LIFO method last year. Last year’s ending inventory was $56,400 with a price index of 1.0. The ending inventory for the current year at year-end (FIFO) costs is $96,000 and the price index is 1.2. Based on th
> Using the information provided in BE10-9, determine whether there is a LIFO liquidation. Data from BE10-9:
> Complete the following inventory disclosure: At the end of 2019 and 2018, inventories were composed of:
> Ciano Landscaping Company uses the allowance method to account for its uncollectible accounts. Three years ago, it wrote off a $40,000 account due from Haber Incorporated. Haber paid this account in full on June 30 of the current year. Prepare the journa
> Vince Ventures Company reported an opening balance of $925,000 in its allowance for uncollectible accounts. Vince Ventures determined that a $57,500 account due from Ric Associates was uncollectible. Prepare the journal entry to write off the Ric account
> Grotto Products, Inc. reported an opening balance in the allowance for doubtful accounts of $560,000. During the year, the company determined that a $23,000 receivable due from Zeer Company was uncollectible. Prepare the journal entry to write off the Ze
> Gear Garage Inc. enters into a contract to provide services totaling $80,000. The contract includes a potential performance bonus based on when Gear Garage completes the services. Gear Garage estimates the following scenarios for completion. Determine th
> On July 1, Oura Corp. made a sale of $450,000 to Stratus, Inc. on account. Terms of the sale were 2/10, n/30. Stratus makes payment on July 29. Oura uses the most-likely-amount method and assumes that the customer will take the discount when accounting f
> On July 1, Oura Corp. made a sale of $450,000 to Stratus, Inc. on account. Terms of the sale were 2/10, n/30. Stratus makes payment on July 9. Oura uses the most-likely-amount method and assumes that the customer will take the discount when accounting fo
> On July 1, Gillette Corp. made a sale of $650,000 to Huck, Inc. on account. Terms of the sale were 2/5, n/30. Huck makes payment on July 29. Gillette uses the expected value method assuming that there is an 80% chance that the customer will not take the
> On July 1, Willette Corp. made a sale of $650,000 to Luc, Inc. on account. Terms of the sale were 2/10, n/30. Luc makes payment on July 29. Willette uses the most likely-amount method and assumes that the customer will not take the discount when accounti
> Identify and discuss at least four features of an effective system of internal controls over cash receipts and disbursements.
> Identify whether the following internal control procedures relate to cash receipts or cash disbursements
> Complete the following lettered items representing the disclosures of trade accounts receivables from Cheris Corp.’s notes to the financial statements. Note 7. Trade Receivables
> Foster Technologies, Inc., provides specialized network solutions for companies in the financial services industry. During the current year, Foster completed a network project for Hextel Communications. The fair value of the project is not determinable.
> What is the fundamental principle underlying the measurement of revenue?
> What is the fundamental principle underlying the timing of revenue recognition?
> Using the information provided in BE9-19, prepare the journal entries to record the sale, the accrued interest revenue, and the full collection at maturity assuming that the sale date was September 1, 2016, and the note was due on March 31, 2017. Data f
> What are the primary issues involved in revenue recognition?
> Does a firm acquiring a long-lived operating asset by issuing a note payable record the finance charges and asset value separately? Explain.
> For a long-lived operating asset acquired by issuing a note payable, do firms measure the initial carrying value of the asset by the face value of the note? Explain.
> Should firms value multiple assets acquired in a lump-sum purchase separately? Explain
> Can firms combine the cost of acquiring land and land improvements in a single “land” account on the balance sheet? Explain.
> Will the expense/capitalization choice impact asset valuation, income measurement, and total cash flows?
> Explain the accounting for exploration costs associated with natural resources
> How does a company record natural resources?
> When can an IFRS-reporting firm recognize a gain on a nonmonetary exchange?
> When can a firm recognize a gain on a nonmonetary exchange?
> On July 1, Willette Corp. made a sale of $650,000 to Luc, Inc. on account. Terms of the sale were 2/10, n/30. Luc makes payment on July 9. Willette uses the most likely-amount method and assumes that the customer will not take the discount when accountin
> Perfect Party Company contracts with a customer to provide its birthday party package, including a cake, balloons, and musical entertainment. In addition, Perfect Party will host the event. Perfect Party commonly offers the musical entertainment when it
> In a nonmonetary exchange, does a firm record the new asset acquired at the book value of the asset given up in the transaction? Explain
> Are all intangibles reported in a single line on the balance sheet? Explain.
> What is included in an asset’s acquisition cost?
> Do all intangible assets require amortization? Why or why not?
> Does legal life take precedence over the economic life when amortizing a finite-life intangible asset? Explain.
> How do companies select the method of amortization for finite-life intangible assets?
> What is acquired in-process research and development and how is it recorded?
> When can a company capitalize research and development costs?
> When can a company report goodwill?
> What is goodwill and how is it recorded?
> How do firms record the gain from a bargain purchase?
> Do firms initially record internally created intangibles at cost?
> How can intangible assets pose some significant valuation problems? Does the determination of useful life for an intangible asset pose a valuation problem? Explain.
> What should the total acquisition cost of a long-lived operating asset include?
> What is the intangible-asset goodwill?
> What is a finite-life intangible asset?
> What is an indefinite-life intangible asset?
> Differentiate between a leasehold and a leasehold improvement.
> Distinguish between a tangible and an intangible asset.
> Does an intangible asset have a finite or indefinite life? Explain.
> Using the information provided in BE9-17, prepare the journal entry to record Nicks Incorporated’s sale of accounts receivable to FF assuming that the receivables are factored with recourse and can be reported as a sale. The estimated recourse liability
> Does an intangible asset have a finite or indefinite life? Explain.
> How do you calculate a gain or loss on the sale of a plant asset?
> Will a firm recognize a loss on the income statement if a plant asset is either abandoned or damaged by a casualty?
> Under IFRS, when depreciating an asset, do managers have to estimate the useful life and salvage value for all components of the asset? Explain.
> Do managers capitalize expenditures that they believe have future economic benefits? Why or why not?
> When using the double-declining balance depreciation method, will the ending net book value of a plant asset equal the planned scrap value? Explain.
> What is the carrying value of a long-lived asset?
> After a firm determines an asset’s useful life and salvage value, can they be changed? Explain.
> Do firms expense all costs incurred after the acquisition of a long-lived operating asset? Why or why not?
> Do assets under construction for a company’s own use qualify for interest cost capitalization? Explain.
> Nicks Incorporated sells $2,450,000 of its accounts receivable to Fairfield Factors (FF) without recourse. FF charges a fee equal to 7% of the receivables factored and holds back an additional 4% as security. FF will return the hold back to Nicks when th
> Under IFRS, if borrowed funds are idle and invested in income-generating investments, can firms reduce interest to be capitalized by the amount of interest earned?
> If borrowed funds are idle and invested in income-generating investments, is interest to be capitalized reduced by the amount of interest earned?
> What is the maximum amount of interest to be capitalized under IFRS?
> What is the maximum amount of interest to be capitalized?
> Does a firm always measure the amount of interest capitalized by multiplying the weighted-average accumulated expenditures by the firm’s weighted-average interest rate? Explain.
> Is an asset required to have a finite life to be classified as a long-term operating asset?
> Explain the unit of measure under the dollar-value LIFO method of inventory valuation
> How can financial statements be converted from the LIFO basis to the FIFO basis of inventory valuation and vice versa?
> If unit costs are rising and inventory levels are constant or increasing, which method of inventory valuation will result in the lowest net income? Why?
> Which method of inventory results in an inventory valuation that reflects current costs and provides the best matching of costs with revenues? Explain
> Using the information provided in BE9-15, assume that during the first month after the financing is completed, Kitt collects $250,000 of the assigned accounts receivable. Kitt remits this amount to Neville Capital along with the payment of 1 month’s inte
> Explain the difference between the FIFO method of inventory valuation and the LIFO method. Which of these methods best approximates the physical flow of units for most companies? Explain.
> When does the inventory allocation problem arise?
> What is the difference between merchandise inventory and manufacturing inventory?
> What is the difference between merchandise inventory and manufacturing inventory?
> How does a company build LIFO layers under the LIFO retail inventory method?
> How are required LIFO disclosures used to compute inventory balances and cost of goods sold under the FIFO cost flow?
> Why would a company use the gross profit method to estimate ending inventory?
> How does the conventional retail method approximate the lower-of-cost-or-market valuation? What is the impact on ending inventory?
> Do U.S. GAAP and IFRS treat inventory write-downs the same way? Explain.
> What do firms use as the market value when applying the lower-of-cost-or-market (LCM) rule? Are there any limits on the use of this value? Explain.
> Kitt Company borrows $800,000 from Neville Capital by issuing an 8-year (96-month), 12% note payable. Interest is due and payable each month based on the outstanding balance at the beginning of the month. Kitt assigns $850,000 of its accounts receivable
> What do firms use as the market value when applying the lower-of-cost-or-market (LCM) rule? Are there any limits on the use of this value? Explain.
> How is inventory tracked under a perpetual inventory system?
> How do companies account for receivables that are factored?
> What is the difference between pledging accounts receivable and assigning accounts receivable in a secured borrowing transaction?
> Does the aging of accounts receivable method of estimating the allowance for uncollectible accounts provide a more accurate measurement of net accounts receivable than bad debt expense? Explain
> How does an entity record a subsequent recovery of an account previously written off?
> Under the allowance method, will the actual write-off of an uncollectible account have a net effect on the financial statements? Explain.
