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Accounting
What is the only significant difference between the provisions of IAS 39 and those of FASB Statement No. 115?
The company purchased 1,000 shares of equity securities for $32 per share. The shares were purchased as an available-for-sale investment. The broker’s commission on the purchase was $20. Make the
The company owns 2,000 shares of Stock A and 4,000 shares of Stock B. The company received dividends of $2.50 per share from Stock A and $0.65 per share from Stock B. The company classifies Stock A
On January 1 of Year 1, Davis Company purchased 4,000 shares of the 10,000 outstanding shares of Company B for a total of $65,000. At the time of the purchase, the book value of Company B’s equity
On December 1, the company purchased securities for $1,000. On December 31, the company still held the securities. Make the necessary adjusting journal entry to record a change in value of the
Refer to Practice 14–10. Make the adjusting journal entries for (a) and (b) and the computations for (c) and (d), assuming that the securities are classified as available for sale.
Refer to Practice 14–10. Make the adjusting journal entries for (a) and (b) and the computations for (c) and (d), assuming that the securities are classified as held to maturity. The changes in
Refer to Practice 14–10. Make the adjusting journal entries for (a) and (b) and the computations for (c) and (d), assuming that the securities are accounted for using the equity method. Ignore the
The company purchased the following securities during Year 1:In Year 2, the company reclassified both of these securities. Security A was reclassified as held to maturity; the market value of
During Year 1, Rosie Company purchased 8,000 shares of Company A common stock for $30 per share and 5,000 shares of Company B common stock for $50 per share. These investments are classified as
The following transactions of Knight, Inc., occurred within the same accounting period:(a) Purchased $105,000 U.S. Treasury 7% bonds, paying 103 plus accrued interest of $1,200. In addition, Knight
On January 10, 2008, Washington Corporation acquired 20,000 shares of the outstanding common stock of United Company for $900,000. At the time of purchase, United Company had outstanding 80,000
On January 1, 2008, Rex Incorporated purchased $400,000 of 10-year, 12% bonds when the market rate of interest was 9%.Interest is to be paid on June 30 and December 31 of each year. 1. Prepare the
During 2007, Sunbeam Inc. purchased the following trading securities:At the beginning of 2007, Sunbeam had a zero balance in Market AdjustmentTrading Securities.1. What entry would be
The securities portfolio for Hill Top Industries contained the following trading securities:1. Assuming that all changes in fair value are considered temporary, what is the effect of the changes in
Bridgeman Paper Co. reported the following selected balances on its financial statements for each of the four years 20062009:Based on these balances, reconstruct the valuation entries
Galaxy Enterprises loaned $200,000 to Vader Inc. on January 1, 2007. The terms of the loan require principal payments of $40,000 each year for five years plus interest at the market rate of interest
During 2008, Buzz Company purchased 4,000 shares of Honey Company common stock for $12 per share and 2,500 shares of Pollen Company common stock for $27 per share. These investments are intended to
During 2008 and 2009,Kopson Co. made the following journal entries to account for transactions involving trading securities:2008(a) Nov. 1 Investment in Trading Securities'10% U.S. Treasury Bonds . .
On January 1, 2008, Compustat Co. bought 30% of the outstanding common stock of Freelance Corp. for $258,000 cash. Compustat Co. accounts for this investment by the equity method. At the date of
One Tree Incorporated had the following portfolio of securities on December 31, 2007:The balances in the market adjustment accounts as of January 1, 2007, were as follows:Market
On January 2, 2006, Bradley Company acquired 20% of the 100,000 shares of outstanding common stock of Caldecott Corp. for $20 per share. The purchase price was equal to Caldecotts
Jayleen Associates loaned Norris Company $750,000 on January 1, 2006. The terms of the loan were payment in full on January 1, 2011, plus annual interest payments at 11%. The interest payment was
FASB Statement No. 115 is another example of the Board’s emphasis on the balance sheet as contrasted with the income statement. As treasurer of Diamond Instrument, you desire to maximize income
Accounting methods of financial institutions, such as savings and loan companies and banks, were the major reasons the FASB studied the valuation issues relating to investments. FASB Statement No.
The Investing Activities section of the statement of cash flows of Archer Daniels Midland Company (ADM), seller of agricultural commodities and products, follows.Based on the information given,
The following note is taken from Ford Motor Companys 2004 annual report:Note 5. Marketable, loaned and other securitiesInvestments in available-for-sale securities at December 31, 2004,
On January 1, the company had 100,000 common shares outstanding. During the year, the following events occurred:March 1: 2-for-1 stock splitJune 1: Issued 30,000 additional sharesSeptember 1: 20%
The company had 100,000 shares of common stock outstanding throughout the year. In addition, as of January 1, the company had issued stock options that allowed employees to purchase 40,000 shares of
Refer to Practice 18–5. Assume that the options were issued on September 1 instead of being outstanding throughout the year. Compute diluted earnings per share, assuming that (1) The average stock
The company had 100,000 shares of common stock outstanding throughout the year. In addition, as of January 1, the company had issued 500 convertible bonds ($1,000 face value, 10%). The company has no
Refer to Practice 18–9. Assume that the convertible bonds were issued on October 1. Compute diluted earnings per share, assuming that (1) Each bond was convertible into 50 shares of common stock
The company had 100,000 shares of common stock outstanding on January 1. In addition, as of January 1, the company had issued 10,000 convertible preferred shares (cumulative, 5%, $100 par). These
The company reported net income of $220,000 for the year and 100,000 shares of common stock were outstanding during the year. The income tax rate is 40%. The company has the following potentially
Compute the weighted-average number of shares outstanding for Troy Company, which has a simple capital structure, assuming that the following transactions in common stock occurred during the
At December 31,2008,Munter Corporation had 50,000 shares of common stock issued and outstanding, 30,000 of which had been issued and outstanding throughout the year and 20,000 of which had been
On January 1, 2008, Wander Corporation had 68,000 shares of common stock outstanding that did not change during 2008. In 2007, Wander granted options to certain executives to purchase 9,000 shares of
Barone Company has employee stock options outstanding to purchase 40,000 common shares at $14 per share. All options were outstanding during the entire year. The average price of the company’s
On January 2, 2008, McGregor Co. issued at par $45,000 of 9% bonds convertible in total into 4,000 shares of McGregor’s common stock. No bonds were converted during 2008. Throughout 2008, McGregor
During all of 2008, Van Horn Inc. had outstanding 200,000 shares of common stock and 12,000 shares of $6 preferred stock. Each share of the preferred stock is convertible into three shares of common
Atlas, Inc., has the following capital structure at January 1, 2008.During 2008, Atlas had the following stock transactions:May 1 Issued 50,000 shares of common stock for $30 per share.Aug. 1
Information relating to the capital structure of Roninger Corporation at December 31, 2007 and 2008, is as follows:Roninger Corporation paid dividends of $5 per share on its preferred stock. The
The following condensed financial statements for Tomac Corporation were prepared by the accounting department.Instructions: Compute the basic EPS under each of the following independent assumptions
Great Northern Inc. reported the following comparative information in the Stockholders' Equity section of its 2009 balance sheet.*Par value after June 1, 2009, stock split.In addition, company
Ugrumov Technology Co. provides the following data at December 31, 2008.Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Carrizo Corporation's capital structure is as follows:The following additional information is available.(a) On September 1, 2009, Carrizo sold 56,000 additional shares of common stock.(b) Net income
1. Happy Valley Inc. began the year with 100,000 shares of common stock outstanding.The following events occurred during the year relating to common stock:• March 1—2-for-1 stock split• June
Data for Dwight Powder Company at the end of 2009 follow. All bonds are convertible as indicated and were issued at their face amounts.Instructions:1. Compute basic and diluted EPS for 2009, assuming
Tolman Yacht Company has just completed its determination of EPS for the year. As a result of issuing convertible securities during the year, Tolman’s capital structure is now defined as being
As you know, a firm with multiple potentially dilutive securities must individually determine the effect of each security’s incremental per-share contribution and include those securities with the
Review the information relating to EPS found in The Walt Disney Company’s income statement and notes to the financial statements on the Internet.Answer the following questions.1. Using the
McDonald's Corporation is in the business of'wait, we all know what McDonald's does. The company's earnings per share information and an accompanying note relating to its computation of EPS
Cadbury Schweppes manufactures beverages and confectionary candies. Because the company is based in the United Kingdom, it is not required to comply with U.S.GAAP. However, the standards relating to
On January 1, 2005, the company purchased equipment for $100,000. The equipment has a 10-year expected useful life and $0 residual value. Initially, the company used double declining- balance
Refer to Practice 20-2. Assume that before 2008 the company used straight-line depreciation for tax purposes while using double-declining-balance depreciation for book purposes. The change to
On January 1, 2005, the company purchased equipment for $100,000. The equipment has a 10-year expected useful life and $0 residual value. Initially, the company used straight-line depreciation. On
On December 31, 2008, Large Company acquired Small Company for $100,000. This amount exceeded the recorded value of Small Company's net assets by $20,000 on the acquisition date. The entire excess
The company miscounted its total credit sales in the last two weeks of the year. The correct amount of credit sales for this period was $100,000. The error was not discovered until the following year
In December 2007, the company paid $2,500 for insurance for the first six months of 2008. This payment was mistakenly recorded as insurance expense in 2007. Make the necessary correcting entry,
In January 2006, the company made $10,000 in expenditures. These expenditures should have been expensed immediately. Instead, the company recorded this $10,000 payment as a purchase of equipment with
Refer to Practice 20-21. Assume that the error was found in May 2008. Net income for 2008 (correctly stated) was $25,000. Dividends for 2008 were $10,000. The Retained Earnings balance as originally
Carlos Company purchased a machine on January 1, 2005, for $1,200,000. At the date of acquisition, the machine had an estimated useful life of eight years with no residual value. The machine is being
Albrecht Inc. began business in 2005. An examination of the company's allowance for bad debts account reveals the following.In the past, the company has estimated that 3% of credit sales would be
Tennecott Mining Company purchased a tract of land with estimated copper ore deposits totaling 800,000 tons. The purchase price for the land was $2.2 million. During the first year of operation,
Kamila Stores decided to change from LIFO to FIFO as of January 1, 2008. The change is being made for both book and tax purposes.1. Using LIFO, the beginning retained earnings as of January 1, 2006,
Refer to Exercise 20-29. Assume that the detailed information for 2006 and 2007 is not available. During 2008, dividends of $17,500 were paid (compared to dividends of $15,000 in both 2006 and 2007).
The following errors in the accounting records of the Willis & Glassett Partnership were discovered on January 10, 2008.The partners share net income and losses as follows: 60%, Willis; 40%,
The first audit of the books for Hintze Corporation was made for the year ended December 31, 2008. In reviewing the books, the auditor discovered that certain adjustments had been overlooked at the
The following information relates to depreciable assets of Bright Electronics.(a) Machine A was purchased for $45,000 on January 1, 2003. The entire cost was erroneously expensed in the year of
During 2008, All Seasons Company changed its inventory valuation method from LIFO to FIFO. The following information shows the effect of this change.Instructions:1. Before the change from LIFO to
On January 3, 2007, Sandy’s Fashions, a clothing chain selling moderately priced women’s clothing, purchased a large number of personal computers. The cost of these computers was $120,000. On the
A CPA was engaged by Alpine Corp. in 2008 to examine its books and records and to make whatever corrections are necessary. An examination of the accounts discloses the following.(a) Dividends had
Hornberger Company has demonstrated a consistently increasing earnings trend over the past 10 years. Stockholders have come to expect this steady increase, and management has gone to great lengths to
Locate the 2004 financial statements for The Walt Disney Company on the Internet at www.disney.com, and answer the following questions.1. Review the income statement and related notes and determine
Cendant Corporation was created through the merger of CUC International, Inc. and HFS Incorporated. The company provides travel service, real estate services, and membership based consumer services.
To help you become familiar with the accounting standards, this case is designed to take you to the FASB’s Web site and have you access various publications. Access the FASB’s Web site at
The company is a golf course developer that constructs approximately 10 courses per year. Next year the company will buy 10,000 trees to install in the courses it builds. In recent years, the price
Refer to Practice 19-3 and complete the following:1. Compute the total amount (including all forward-related cash flows) that the golf course developer will pay to buy 10,000 trees in Year 2,
The company makes colorful 100% cotton shirts that are very popular among sophisticated business executives. The company uses 50,000 pounds of cotton each month in its production process. On December
Refer to Practice 19-7 and complete the following:1. Compute the total amount (including all option-related cash flows) that the shirt company will pay to buy 50,000 pounds of cotton in January of
Refer to Practice 19-3 and Practice 19-4. What would be the impact on the golf course developer’s total cash payment to purchase trees in Year 2 if the forward contract had been for just 3,000
Refer to Practice 19-3. Make any necessary journal entry on the golf course developer’s books on December 31 of Year 1 in connection with the tree forward contract, assuming that the price per tree
Refer to Practice 19-7. Make any necessary journal entry on the shirt company’s books on December 31 of Year 1 in connection with the cotton option contract, assuming that the price of cotton per
In each of the following cases, make the necessary journal entry, if any. If no journal entry is necessary, describe how the item would be reported in the financial statements.1. The company has sued
Yelrome Company manufactures candy. On September 1, Yelrome purchased a futures contract that obligates it to sell 100,000 pounds of sugar on September 30 at $0.24 per pound. Yelrome typically
On January 1, 2008, Slidell Company received a 2-year, $500,000 loan, with interest payments occurring at the end of each year and the principal to be repaid on December 31, 2009. The interest rate
On September 1, 2008, Ramus Company purchased machine parts from Ho Man Tin Company for 6,000,000 Hong Kong dollars to be paid on January 1, 2009. The exchange rate on September 1 is HK$7.7 = $1. On
Quincy Bottlers produces bottled orange juice.Orange juice concentrate is typically bought and sold by the pound, and Quincy uses 100,000 pounds of orange juice concentrate each month. On December 1,
Refer back to Exercises 19-26 and 19-27.1. What is the notional value of the Hong Kong dollar forward contract described in Exercise 19-26? What is the fair value of the forward contract on December
A lawsuit has been filed against Picture Perfect, Inc., a manufacturer of video post cards, by Picture This, another manufacturer of video post cards. The suit alleges patent right infringements by
Industrious Industries sells five different types of products. Internally, Industrious is divided into five different divisions based on these five different product lines. Industrious has prepared
On December 31, 2007, Ryanes Company had LIFO ending inventory consisting of 500 units with a LIFO cost of $10 per unit. During the first quarter of 2008, Ryanes sold 1,000 units. As of March 31,
On January 1, 2008, Kindall Company received a 5-year, $2,000,000 loan, with interest payments occurring at the end of each year and the principal to be repaid on December 31, 2012. The interest rate
On January 1, 2008, Jessica Marie Company sold equipment to Gwang Ju Company for 20,000,000 Korean won, with payment to be received in two years on January 1, 2010. The exchange rate on January 1,
Refer to Problems 19-41 and 19-42.Instructions:1. What is the notional value of the lobster forward contract described in Problem 19-41? What is the fair value of the forward contract during its
Winter Quarters Company employs 30 analysts who closely track news about supply and demand for livestock and agricultural commodities. Winter Quarters uses that information to enter into futures
Asbestos Inc. manufactures heat shields for use in oil refineries. Management has prepared financial statements for the year ended 2008 for review by the auditors. The audit team has questioned
Backenstos Company has two different product lines and makes significant sales in both the United States and Mexico. Backenstos has compiled the following information:Required:a. Assume that
King Follett Foods produces premium tofu for the U.S. market. Sales are growing rapidly in the health-conscious United States, and King Follett expects sales in 2009 to be 30% more than sales in
One of the most difficult estimation questions in accounting is when contingent liabilities need to be recognized in a company’s financial statements. The FASB indicated in Statement No. 5 that a
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