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Questions and Answers of Accounting

Ndon Company reported net income of $157,000. It reported depreciation expense of $12,000 and accumulated depreciation of $47,000. Amortization expense was $8,000. Ndon purchased new equipment during
Depreciation information for Alan Chemicals Company is given in BE9-3. Assuming the declining-balance depreciation rate is double the straight-line rate, compute annual depreciation for the first and
DriveUp Taxi Service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 150,000 miles. Taxi 10 cost $27,500 and is expected to have a
Hidden Lakes Company purchased a delivery truck. The total cash payment was $30,020, including the following items.Negotiated purchase price ..... $24,000Installation of special shelving ....
On January 1, 2012, Willow Way Country Club purchased a new riding mower for $15,000. The mower is expected to have a 10-year life with a $1,000 salvage value. What journal entry would Willow Way
Whistler Corporation purchased a piece of equipment for $50,000. It estimated an 8-year life and $2,000 salvage value. At the end of year four (before the depreciation adjustment), it estimated the
Reinbold Manufacturing has an old factory machine that cost $50,000. The machine has accumulated depreciation of $28,000. Reinbold has decided to sell the machine.(a) What entry would Reinbold make
Match the statement with the term most directly associated with it.Goodwill Intangible assets Research and development costsAmortizationFranchise1. _______ Rights, privileges, and competitive
The following expenditures relating to plant assets were made by Newport Company during the first 2 months of 2012.1. Paid $7,000 of accrued taxes at the time the plant site was acquired.2. Paid $200
Belinda Lorenz has prepared the following list of statements about depreciation.1. Depreciation is a process of asset valuation, not cost allocation.2. Depreciation provides for the proper matching
Ramona Company incurred the following costs.1. Sales tax on factory machinery purchased $ 5,0002. Painting of and lettering on truck immediately upon purchase 7003. Installation and testing of
Deloise Company purchased a new machine on October 1, 2012, at a cost of $90,000. The company estimated that the machine has a salvage value of $8,000. The machine is expected to be used for 70,000
On March 1, 2012, Enrique Company acquired real estate, on which it planned to construct a small office building, by paying $80,000 in cash. An old warehouse on the property was demolished at a cost
Brett Richard, the new controller of Maldonado Company, has reviewed the expected useful lives and salvage values of selected depreciable assets at the beginning of 2012. Here are his findings: All
Kemp Co. has delivery equipment that cost $50,000 and has been depreciated $24,000.InstructionsRecord entries for the disposal under the following assumptions.(a) It was scrapped as having no
Here are selected 2012 transactions of Eghan Corporation.Jan. 1 Retired a piece of machinery that was purchased on January 1, 2002.The machine cost $62,000 and had a useful life of 10 years with no
The following situations are independent of one another.1. An accounting student recently employed by a small company doesn’t understand why the company is only depreciating its buildings and
During 2009, Federal Express reported the following information (in millions): net sales of $35,497 and net income of $98. Its balance sheet also showed total assets at the beginning of the year of
Mangrich International is considering a significant expansion to its product line. The sales force is excited about the opportunities that the new products will bring. The new products are a
Tobias Company reports the following information (in millions) during a recent year: net sales, $11,408.5; net earnings, $264.8; total assets, ending, $4,312.6; and total assets, beginning,
These are selected 2012 transactions for Jendusa Corporation:Jan. 1 Purchased a copyright for $120,000. The copyright has a useful life of 6 years and a remaining legal life of 30 years.Mar. 1
Kopke Company, organized in 2012, has these transactions related to intangible assets in that year:Jan. 2 Purchased a patent (5-year life) $280,000.Apr. 1 Goodwill acquired as a result of purchased
Alliance Atlantis Communications Inc. changed its accounting policy to amortize broadcast rights over the contracted exhibition period, which is based on the estimated useful life of the program.
The questions listed below are independent of one another.InstructionsProvide a brief answer to each question.(a) Why should a company depreciate its buildings?(b) How can a company have a building
Elmbrook Corporation reported net income of $58,000. Depreciation expense for the year was $132,000. The company calculates depreciation expense using the straightline method, with a useful life of
Buckeye Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2012, at a cost of $100,000. Over its 4-year useful life, the bus is expected to be
Basic information relating to a new machine purchased by Deloise Company is presented in E9-5.InstructionsUsing the facts presented in E9-5, compute depreciation using the following methods in the
Irina Company was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order. Debits 1. Cost of real estate
At December 31, 2012, Rivera Corporation reported the following plant assets During 2013, the following selected cash transactions occurred.Apr. 1 Purchased land for $2,200,000.May 1 Sold
Presented here are selected transactions for Snow Company for 2012.Jan. 1 Retired a piece of machinery that was purchased on January 1, 2002. The machine cost $71,000 on that date and had a useful
The intangible assets section of Cepeda Corporation’s balance sheet at December 31, 2012, is presented here. Patents ($60,000 cost less $6,000 amortization) ..... $54,000Copyrights ($36,000 cost
Due to rapid employee turnover in the accounting department, the following transactions involving intangible assets were improperly recorded by Neitzke Corporation in 2012.1. Neitzke developed a new
Phelan Corporation and Keevin Corporation, two companies of roughly the same size, are both involved in the manufacture of shoe-tracing devices. Each company depreciates its plant assets using the
In recent years, Walz Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation
Rogers Corporation purchased machinery on January 1, 2012, at a cost of $250,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of
Franz Company was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order. Debits 1. Cost of real estate
At December 31, 2011, Craig Corporation reported these plant assets. During 2012, the following selected cash transactions occurred.Apr. 1 Purchased land for $2,600,000.May 1 Sold equipment that
Here are selected transactions for Halverson Corporation for 2012.Jan. 1 Retired a piece of machinery that was purchased on January 1, 2002.The machine cost $47,000 and had a useful life of 10
The intangible assets section of the balance sheet for Vincent Company at December 31, 2012, is presented here.Patents ($70,000 cost less $7,000 amortization) .... $63,000Copyrights ($48,000 cost
Due to rapid employee turnover in the accounting department, the following transactions involving intangible assets were improperly recorded by the Demeyer Company in 2012.1. Demeyer developed a new
Culver Corporation and Kiltie Corporation, two corporations of roughly the same size, are both involved in the manufacture of umbrellas. Each company depreciates its plant assets using the
In recent years, Harper Transportation purchased three used buses. Because of frequent employee turnover in the accounting department, a different accountant selected the depreciation method for each
Kiram Corporation purchased machinery on January 1, 2012, at a cost of $350,000. The estimated useful life of the machinery is 5 years, with an estimated salvage value at the end of that period of
Paulson Corporation??s unadjusted trial balance at December 1, 2012, is presented below. The following transactions occurred during December.Dec. 2 Paulson purchased equipment for $16,000, plus
Refer to the financial statements and the Notes to Consolidated Financial Statements of Tootsie Roll Industries in Appendix A.InstructionsAnswer the following questions.(a) What were the total cost
The financial statements of The Hershey Company are presented in Appendix B, following the financial statements for Tootsie Roll Industries in Appendix A.Instructions(a) Based on the information in
The September 9, 2007, issue of the New York Times includes an article by Denise Caruso entitled “When Balance Sheets Collide with the New Economy.”InstructionsRead the article and answer the
Bob Evans Farms, Inc. operates 714 restaurants in 31 states and produces fresh and fully cooked sausage products, fresh salads, and related products distributed to grocery stores in the Midwest,
Delzer Furniture Corp. is nationally recognized for making high-quality products. Management is concerned that it is not fully exploiting its brand power. Delzer??s production managers are also
The chapter presented some concerns regarding the current accounting standards for research and development expenditures.InstructionsAssume that you are either (a) The president of a company that is
Clean Air Anti-Pollution Company is suffering declining sales of its principal product, nonbiodegradable plastic cartons. The president, Dixon Nuber, instructs his controller, Gavin Wood, to lengthen
A company’s tradename is a very important asset to the company, as it creates immediate product identification. Companies invest substantial sums to ensure that their product is well-known to the
If your school has a subscription to the FASB Codification, log in and prepare responses to the following.(a) What does it mean to capitalize an item?(b) What is the definition provided for an
What is component depreciation, and when must it be used?
Some product development expenditures are recorded as development expenses and others as development costs. Explain the difference between these accounts and how a company decides which
Mandall Company constructed a warehouse for $280,000. Mandall estimates that the warehouse has a useful life of 20 years and no residual value. Construction records indicate that $40,000 of the cost
At the end of its first year of operations, Brianna Company chose to use the revaluation framework allowed under IFRS. Brianna’s ledger shows Plant Assets $480,000 and Accumulated
Newell Industries spent $300,000 on research and $600,000 on development of a new product. Of the $600,000 in development costs, $400,000 was incurred prior to technological feasibility and $200,000
The financial statements of Zetar plc are presented in Appendix C.InstructionsUse the company’s annual report, available at www.zetarplc.com, to answer the following questions.(a) According to the
What are the reasons that companies invest in securities?
(a) What is the cost of an investment in bonds?(b) When is interest on bonds recorded?
Kate Denton is confused about losses and gains on the sale of debt investments. Explain these issues to Kate:(a) How the gain or loss is computed.(b) The statement presentation of gains and losses.
Quiddich Company sells bonds that cost $40,000 for $45,000, including $1,000 of accrued interest. In recording the sale, Quiddich books a $5,000 gain. Is this correct? Explain.
What is the cost of an investment in stock?
To acquire Bailey Corporation stock, Harris Co. pays $60,000 in cash plus $1,500 broker’s fees. What entry should be made for this investment, assuming the stock is readily marketable?
(a) When should a long-term investment in common stock be accounted for by the equity method?(b) When is revenue recognized under the equity method?
Spock Corporation uses the equity method to account for its ownership of 30% of the common stock of English Packing. During 2012, English reported a net income of $80,000 and declares and pays cash
What constitutes “significant influence” when an investor’s financial interest is less than 50%?
Distinguish between the cost and equity methods of accounting for investments in stocks.
What are consolidated financial statements?
What are the valuation guidelines for trading and available-for-sale investments at a balance sheet date?
Diana Malt is the controller of G-Products, Inc. At December 31, the company’s investments in trading securities cost $74,000 and have a fair value of $70,000. Indicate how Diana would report these
Using the data in question 13, how would Diana report the data if the investment were long-term and the securities were classified as available-for-sale?
Roso Company’s investments in available-for-sale securities at December 31 show total cost of $202,000 and total fair value of $210,000. Prepare the adjusting entry.
Using the data in question 15, prepare the adjusting entry assuming the securities are classified as trading securities.
What purposes are served by reporting Unrealized Gains (Losses)—Equity in the stockholders’ equity section?
Justin Corporation had these transactions pertaining to debt investments:Jan. 1 Purchased 90 10%, $1,000 Graham Co. bonds for $90,000 cash plus brokerage fees of $1,200. Interest is payable
Rojas Company had these transactions pertaining to stock investments:Feb. 1 Purchased 1,200 shares of MJ common stock (2% of outstanding shares) for $8,000 cash plus brokerage fees of $400.July 1
Glyder Inc. had these transactions pertaining to investments in common stock:Jan. 1 Purchased 1,200 shares of Bethke Corporation common stock (5% of outstanding shares) for $58,000 cash plus $1,200
On January 1, Jackson Corporation purchased a 25% equity investment in Batchelor Corporation for $150,000. At December 31, Batchelor declared and paid a $80,000 cash dividend and reported net income
These are two independent situations:1. Angel Cosmetics acquired 12% of the 300,000 shares of common stock of Chic Fashion at a total cost of $14 per share on March 18, 2012. On June 30, Chic
At December 31, 2012, the trading securities for Lynette, Inc., are as follows. Instructions(a) Prepare the adjusting entry at December 31, 2012, to report the securities at fair value.(b) Show the
Data for investments in stock classified as trading securities are presented in EE-6. Assume instead that the investments are classified as available-for-sale securities with the same cost and fair
Redfield Company has these data at December 31, 2012: The available-for-sale securities are held as a long-term investment.Instructions(a) Prepare the adjusting entries to report each class of
Pegasus Corporation purchased debt investments for $40,800 on January 1, 2012. On July 1, 2012, Pegasus received cash interest of $1,660. Journalize the purchase and the receipt of interest. Assume
On August 1, Jewel Company buys 1,000 shares of ABC common stock for $35,000 cash plus brokerage fees of $600. On December 1, the stock investments are sold for $38,000 in cash. Journalize the
Faye Company owns 25% of Trish Company. For the current year, Trish reports net income of $150,000 and declares and pays a $60,000 cash dividend. Record Faye’s equity in Trish’s net income and
Cost and fair value data for the trading securities of Hayden Company at December 31, 2012, are $62,000 and $59,600, respectively. Prepare the adjusting entry to record the securities at fair value.
For the data presented in BEE-4, show the financial statement presentation of the trading securities and related accounts.
In its first year of operations, Kearney Corporation purchased available-for-sale stock securities costing $72,000 as a long-term investment. At December 31, 2012, the fair value of the securities is
For the data presented in BEE-6, show the financial statement presentation of the available-for-sale securities and related accounts. Assume the available-for-sale securities are noncurrent.
Sydney Corporation has these long-term investments: common stock of Russ Co. (10% ownership) held as available-for-sale securities, cost $108,000, fair value $112,000; common stock of Thomas Inc.
Knuth Farms is a grower of hybrid seed corn for DeKalb Genetics Corporation. It has had two exceptionally good years and has elected to invest its excess funds in bonds. The following selected
In January 2012, the management of Sarah Company concludes that it has sufficient cash to purchase some short-term investments in debt and stock securities. During the year, the following
On December 31, 2011, Maxell Associates owned the following securities that are held as long-term investments. On this date, the total fair value of the securities was equal to its cost. The
Coakley Company acquired 30% of the outstanding common stock of Ginger Inc. on January 1, 2012, by paying $1,800,000 for 60,000 shares. Ginger declared and paid a $0.50 per share cash dividend on
Here is Maple Company’s portfolio of long-term available-for-sale securities at December 31, 2011:Cost1,400 shares of Wickham Inc. common stock $73,5001,200 shares of Kerry Corporation common stock
The following data, presented in alphabetical order, are taken from the records of Texton Corporation.Accounts payable........... $ 150,000Accounts receivable..........
Randy Owen invested $8,000 at 5% annual interest, and left the money invested without withdrawing any of the interest for 12 years. At the end of the 12 years, Randy withdrew the accumulated amount
For each of the following cases, indicate(a) To what interest rate columns and(b) To what number of periods you would refer in looking up the future value factor.(1) In Table 1 (future value of

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