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financial accounting information

Questions and Answers of Financial Accounting Information

(Learning Objective 3: Applying the net realizable value to inventories—perpetual system) ELV Trade Mart has recently had lackluster sales. The rate of inventory turnover has dropped, and the
The starting point in accounting for all investments isa. cost.c. cost minus dividends.b. equity value.d. market value on the balance-sheet date.
Dividends received on an equity-method investmenta. decrease the investment account.c. increase the investment account.b. increase dividend revenue.d. increase owners’ equity.
Suppose Clear sells the ABC shares for $73 per share. Journalize the sale.
Clear’s income statement should reporta. gain on sale of investment of $19,900.c. dividend revenue of $3,290.b. unrealized gain of $19,900.d. investments of $89,050.
Clear’s balance sheet should reporta. investments of $108,950.c. investments of $89,050.b. unrealized loss of $19,900.d. dividend revenue of $3,290.
(Learning Objectives 1, 4: Explaining and analyzing other comprehensive income)In-the-Box Retail Corporation reported shareholders’ equity on its balance sheet at December 31, as follows:❙
(Learning Objectives 1, 2, 3, 4: Accounting for various types of investments) Suppose ChatNow owns the following investments at December 31, 20X6:a. 100% of the ordinary shares of ChatNow United
(Learning Objective 5: Using the statement of cash fl ows) At the end of the year, Elite Properties’ statement of cash fl ows reported the following for investment activities:❙ Requirement 1. For
(Learning Objective 6: Preparing and using the statement of cash fl ows) During fi scal year 20X5, Frosted Doughnuts reported net loss of €131.1 million. Frosted received€1.8 million from the
(Learning Objective 4: Translating a foreign currency balance sheet into dollars)Translate into dollars the balance sheet of Wyoming Leather Goods’ Spanish subsidiary. When Wyoming Leather Goods
(Learning Objective 4: Managing and accounting for foreign currency transactions)Assume that Tech Know Stores completed the following foreign currency transactions:■ writing assignment❙
(Learning Objective 3: Preparing a consolidated balance sheet) Gamma, Inc., owns Hamlet Corp. These two companies’ individual balance sheets follow:❙ Requirements 1. Prepare a consolidated
(Learning Objective 2: Applying the appropriate accounting method for a 20%investment) Ever Financial paid €560,000 for a 20% investment in the ordinary shares of Laker, Inc. For the fi rst year,
(Learning Objective 2: Measuring gain or loss on the sale of an equity-method investment) Without making journal entries, record the transactions of Exercise 8-26B directly in the Watson account,
(Learning Objective 2: Accounting for transactions under the equity method)Watson Corporation owns equity-method investments in several companies. Suppose Watson paid €1,200,000 to acquire a 35%
(Learning Objective 4: Recording bond investment transactions) Assume that on September 30, 20X0, Baytex, Inc., paid 96 for 7.5% bonds of Collins Corporation as a long-term held-to-maturity
(Learning Objectives 1, 4: Estimating inventory by the gross profi t method; preparing the income statement) Assume Thompson Company, a copy center, lost some inventory in a fi re. To fi le an
(Learning Objective 1: Accounting for available-for-sale investments) Leary Co.bought 3,800 Canada shares at €38; 640 Chile shares at €47.25; and 1,500 Milan shares at€77—all as
(Learning Objective 1: Journalizing transactions for trading securities) Journalize the following trading securities investment transactions of Johnson Brothers Department Stores:a. Purchased 460
(Learning Objective 5: Using the statement of cash fl ows) At the end of the year, Crown King Properties’ statement of cash fl ows reported the following for investment activities:❙ Requirement
(Learning Objective 5: Preparing and using the statement of cash fl ows) During fi scal year 20X6, Sugar Land Doughnuts reported net loss of $129.6 million. Sugar Land received $1.7 million from the
(Learning Objective 4: Translating a foreign-currency balance sheet into dollars)Translate into dollars the balance sheet of Utah Leather Goods’ Spanish subsidiary. When Utah Leather Goods acquired
(Learning Objective 4: Managing and accounting for foreign currency transactions)Assume that Computer City Stores completed the following foreign currency transactions:■ writing assignment❙
(Learning Objective 3: Preparing a consolidated balance sheet) XYZ, Inc., owns Cressida Corp. The two companies’ individual balance sheets follow:■ spreadsheet❙ Requirements 1. Prepare a
(Learning Objective 2: Applying the appropriate accounting method for a 30%investment) Ashcroft Financial paid $590,000 for a 30% investment in the ordinary shares of Sonic, Inc. For the fi rst year,
(Learning Objective 2: Measuring gain or loss on the sale of an equity-method investment) Without making journal entries, record the transactions of Exercise 8-16A directly in the Nelson account,
(Learning Objective 2: Accounting for transactions under the equity method) Nelson Corporation owns equity-method investments in several companies. Suppose Nelson paid$1,500,000 to acquire a 25%
(Learning Objective 1: Recording bond investment transactions) Assume that on September 30, 20X0, Newtex, Inc., paid 98 for 8% bonds of Teague Corporation as a long-term held-to-maturity investment.
(Learning Objective 3: Determining the amount of inventory to purchase) Maroney’s Convenience Store’s income statement and balance sheet reported the following.The business is organized as a
(Learning Objective 1: Accounting for available-for-sale investments) Osborn Co.bought 3,400 Stockholm shares at $35; 660 London shares at $46.50; and 1,200 Glasgow shares at $74—all as
(Learning Objective 1: Journalizing transactions for trading securities) Journalize the following trading securities investment transactions of Cullen Brothers Department Stores:a. Purchased 470
(Learning Objective 5: Using a statement of cash fl ows) Excerpts from The ABC Company statement of cash fl ows, as adapted, appear as follows:As the chief executive offi cer of The ABC Company, your
(Learning Objective 5: Reporting cash fl ows) Companies divide their cash fl ows into three categories for reporting on the cash fl ows statement.1. List the three categories of cash fl ows in the
(Learning Objective 4: Accounting for transactions stated in a foreign currency)Ocean Belting sells goods for 1,100,000 Mexican pesos. The foreign exchange rate for a peso is $0.086 on the date of
(Learning Objective 4: Accounting for transactions stated in a foreign currency) Suppose Pepson sells soft drink syrup to a Russian company on September 12. Pepson agrees to accept 500,000 Russian
(Learning Objective 3: Understanding goodwill and non-controlling interest) Two accounts that arise from consolidation accounting are goodwill and non-controlling interest.1. What is goodwill, and
(Learning Objective 3: Understanding consolidated fi nancial statements) Answer these questions about consolidation accounting:1. Defi ne “parent company.” Defi ne “subsidiary company.”2. How
(Learning Objective 2: Accounting for the sale of an equity-method investment) Use the data given in Short Exercise 8-5. Assume that in November 20X7, Fall Motors sold half its investment in Yuza
(Learning Objective 2: Accounting for a 40% investment in another company) Suppose on February 1, 20X6, Fall Motors paid $420 million for a 40% investment in Yuza Motors.Assume Yuza earned net income
(Learning Objective 1: Recording bond investment transactions) Return to Short Exercise 8-3, the Hopter Khan (HK) investment in Tyconix bonds. Journalize on HK’s books:a. Purchase of the bond
(Learning Objective 1: Working with a bond investment) Hopter Khan (HK) owns vast amounts of corporate bonds. Suppose HK buys $1,100,000 of Tyconix bonds at a price of 104. The Tyconix bonds pay cash
(Learning Objective 1: Accounting for the sale of an available-for-sale investment)Use the data given in Short Exercise 8-1. On May 21, 20X7, Ship Your Way sold its investment in Naradon for $27 per
(Learning Objective 1: Accounting for an available-for-sale investment; recording unrealized gain or loss) Ship Your Way completed these long-term available-for-sale investment transactions during
Insight, a company headquartered in Hong Kong, owns numerous foreign subsidiary companies. When Insight consolidates its subsidiaries, Insight should translate the subsidiary’s monetary assets into
Bahrain Development Corporation purchased earth-moving equipment from a Canadian company. The cost was $1,600,000 Canadian (CAD), and the Canadian dollar was quoted at 1 CAD = 0.40 BHD. A month
You are taking a vacation to Italy, and you buy Euros for LC1.50. LC is your local currency.On your return you cash in your unused Euros for LC1.20. During your vacationa. the euro rose against your
Royalston, Inc., holds an investment in Daley bonds that pay interest each October 31.Royalston’s balance sheet at December 31 should reporta. Interest expense.c. Interest payable.b. Interest
Tidal, Inc., owns 70% of Granite Corporation, and Granite owns 70% of Shaw Company.During 20X6, these companies’ net incomes are as follows before any inter-corporation income-related
Patrick Moving & Storage Co. paid $180,000 for 30% of the ordinary shares of McDonough Co. McDonough earned net income of $50,000 and paid dividends of$20,000. The carrying value of Patrick’s
Use the Jacques Corporation data in question 2. Jacques sold the Home Central shares for $45,000 two years later. Jacques’ income statement should reporta. investments of $45,000.c. gain on sale of
Use the Jacques Corporation data in question 2. Assume tax rate of 20%. Jacques’ should reporta. unrealized loss of $4,500 in the income statement.b. realized gain of $4,500 in other comprehensive
Jacques Corporation purchased an available-for-sale investment in 1,500 shares of Home Central shares for $24 per share. On the next balance-sheet date, Home Central shares are quoted at $27 per
(Learning Objectives 1, 2: Accounting for inventory in a perpetual system using average costing method) Best Guy purchases inventory in crates of merchandise; each crate of inventory is a unit. The
SABIC (Saudi Arabia Basic Industries Company) invests in 100,000 Apple Inc.’s shares.SABIC expects to hold these shares for a medium term and not trade actively. How should SABIC classify this
Examine Exhibit 8-8. Why does the consolidated shareholders’ equity ($176,000 + $155,000) exclude the equity of Subsidiary Corporation?
(Learning Objective 1, 2: Measuring cost of goods sold and ending inventory—perpetual system) Assume a Championship Sports outlet store began March with 46 pairs of running shoes that cost the
(Learning Objective 2, 3: Computing inventory by three methods—perpetual system)SWAT Team Surplus began July with 66 tents that cost €23 each. During the month, SWAT Team Surplus made the
(Learning Objective 2, 3: Applying the different inventory costing methods—perpetual system) The records of Buzz Aviation include the following accounts for inventory of aviation fuel at December
(Learning Objective 3: Applying the net realizable value to inventories—perpetual system) Aquarium Trade Mart has recently had lackluster sales. The rate of inventory turn over has dropped, and the
(Learning Objectives 1, 4: Estimating inventory by the gross profi t method; preparing the income statement) Assume Ross Company, a sporting goods store, lost some inventory in a fi re. To fi le an
(Learning Objective 3: Determining the amount of inventory to purchase) Dave’s Convenience Store’s income statement and balance sheet reported the following. The business is organized as a
Determine the cost of a PPE and account for depreciation
Understand additional issues related to accounting for PPE
Analyze the effects of a PPE disposal
Account for natural resources and depletion
Account for intangible assets and amortization
Report PPE transactions on the statement of cash flows
How would Dairy Farm divide a $120,000 lump-sum purchase price for land, building, and equipment with estimated market values of $40,000, $95,000, and $15,000, respectively?
An item of Dairy Farm offi ce equipment that cost $10,000, has a useful life of fi ve years, and residual value of $2,000, was purchased on January 1. What is SL depreciation for each year?
What is the DDB depreciation each year for the asset in the Stop & Think on page 432?
Capitalize or expense a cost?
Bartman, Inc., purchased a tract of land, a small offi ce building, and some equipment for $1,900,000. The appraised value of the land was $1,380,000, the building $575,000, and the equipment
Which statement is false?a. Depreciation is a process of allocating the cost of a PPE over its useful life.b. Depreciation is based on the matching principle because it matches the cost of the asset
What is the depreciation expense for 20X6 if Amir uses the straight-line method?a. $4,000c. $4,500b. $2,000d. $2,250
Assume Amir Communications purchased the equipment on January 1, 20X6. If Amir uses the straight-line method for depreciation, what is the asset’s book value at the end of 20X7?a. $42,000c.
Assume Amir Communications purchased the equipment on January 1, 20X6. If Amir uses the double-declining-balance method, what is the depreciation for 20X7?a. $9,000c. $16,200b. $6,400d. $7,200
Return to Amir’s original purchase date of July 1, 20X5. Assume that Amir uses the straightline method of depreciation and sells the equipment for $36,500 on July 1, 20X9. The result of the sale of
A company bought a new machine for $24,000 on January 1. The machine is expected to last fi ve years and has a residual value of $4,000. If the company uses the doubledeclining-balance method,
Which of the following is not a capital expenditure?a. The addition of a building wingb. A tune-up of a company vehiclec. A complete overhaul of an air-conditioning systemd. Replacement of an old
Which of the following assets is not subject to a decreasing book value through depreciation, depletion, or amortization?a. Land improvementsc. Intangiblesb. Goodwilld. Natural resources
Why would a business select an accelerated method of depreciation for tax purposes?a. Accelerated depreciation will result in higher gain on disposal of PPE than straightline depreciation.b.
Which item among the following is not an intangible asset?a. A copyrightd. Goodwillb. A patente. All of the above are intangible assets.c. A trademark
(Learning Objective 1: Determining cost and book value of a company’s PPEs) Examine Round Rock’s assets.1. What is Round Rock’s largest category of assets? List all 20X7 assets in the largest
(Learning Objective 1: Measuring the cost of a PPE) This chapter lists the costs included for the acquisition of land in the ‘Land and Land Improvements’ section of this chapter. First is the
(Learning Objective 1: Determining the cost of individual assets in a lump-sum purchase of assets) Foley Distribution Service pays $140,000 for a group purchase of land, building, and equipment. At
(Learning Objective 1: Capitalizing versus expensing PPE costs) Assume Nation Car Rentals changed the tires for its entire fl eet of cars at a cost of $1.5 million, which Nation paid in cash.
(Learning Objective 2: Computing depreciation by three methods—fi rst year only)Assume that at the beginning of 20X6, AirAsia, a regional airline operating predominantly in Southeast Asia,
(Learning Objective 2: Computing depreciation by three methods—third year only)Use the AirAsia data in Short Exercise 7-5 to compute AirAsia’s third-year depreciation on the plane using the
(Learning Objectives 2, 3: Computing partial year depreciation; selecting the best depreciation method) Assume that on September 30, 20X6, LoganAir, the national airline of Switzerland, purchased an
(Learning Objectives 2, 3: Computing and recording depreciation after a change in useful life of the asset) Ten Flags over Georgia paid $100,000 for a concession stand. Ten Flags started out
(Learning Objectives 2, 4: Computing depreciation; recording a gain or loss on disposal)On January 1, 20X6, Scoot Airline purchased an airplane for $37,700,000. Scoot Airline expects the plane to
(Learning Objective 4: Accounting for the depletion of a company’s natural resources)North Coast Petroleum, the giant oil company, holds reserves of oil and gas assets. At the end of 20X6, assume
(Learning Objective 5: Measuring and recording goodwill) Vector, Inc., dominates the snack-food industry with its Tangy-Chip brand. Assume that Vector, Inc., purchased Concord Snacks, Inc., for $8.8
(Learning Objective 5: Accounting for patents and research and development cost)This exercise summarizes the accounting for patents, which, like copyrights, trademarks, and franchises, provide the
(Learning Objective 6: Reporting investing activities on the statement of cash fl ows)During 20X6, Northern Satellite Systems, Inc., purchased two other companies for $16 million.Also during 20X6,
(Learning Objective 1: Determining the cost of PPE) Ayer Self Storage purchased land, paying $175,000 cash as a downpayment and signing a $190,000 note payable for the balance. Ayer also had to pay
(Learning Objectives 1, 2: Allocating costs to assets acquired in a lump-sum purchase;disposing of a PPE) Deadwood Manufacturing bought three used machines in a $167,000 lump-sum purchase. An
(Learning Objective 1: Distinguishing capital expenditures from expenses) Assume Candy Corner, Inc., purchased conveyor-belt machinery. Classify each of the following expenditures as a capital
(Learning Objectives 1, 2: Measuring, depreciating, and reporting PPE) During 20X6, Chun Book Store paid $487,000 for land and built a store in Akron. Prior to construction, the city of Akron charged

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