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business
intermediate accounting reporting

Questions and Answers of Intermediate Accounting Reporting

The following inventory information is for Debo Company.Sales for the year totaled \($6,000.\) All sales and purchases are on account.1. Make the journal entries necessary to record purchases and
Using the following data, compute the total cash expended for inventory in 2002. Accounts payable: January 1, 2002 December 31, 2002 Cost of goods sold-2002 Inventory balance: January 1, 2002
The Joliet Manufacturing Company reviewed its year-end inventory and found the following items. Indicate which items should be included in the inventory balance at December 31, 2002. Give your
The following quarterly cost data have been accumulated for Garrison Mfg. Inc.Garrison uses the FIFO method for valuing raw materials inventories. Prepare a cost of goods manufactured schedule for
On July 23. Pultnewille Company purchased goods on account for \($5,000.\) Pultneyville later returned defective goods costing \($300\).Record the purchase and the return of the defective goods
Spearman Truck Sales sells semitrailers. The current inventory includes the following 5 semitrailers (identical except for paint color) along with purchase dates and costs:On May 20, 2002, a trucking
A note to the financial statements of Alpine Inc. at December 31, 2002, reads as follows:Because of the manufacturer's production problems for our Widget Limited line, our inventories were
First-in, first-out has been used for inventory valuation by the Atwood Co. since it was organized in 1999. Using the data that follow, redetermine the net incomes for each year on the assumption of
The Boise Implement Company showed the following data in its fmancial statements.1. Compute the number of days' sales in average inventony for both 2001 and 2002.What can you infer from these
The Johnson Manufacturing Company manufactures a single product. The managers, Ron and Ken Johnson, decided on December 31. 1999. to adopt the dollar-value LIFO inventory method. The inventory value
Jennifer Inc. adopted dollar-value LIFO on December 31, 1999. Data for 1999-2002 follows:1. Compute the inventory value at December 31 of each year under the dollar-value LIFO method, assuming new
On December 31, 2002, the controller of Hardman Enterprises selected 6 items to use as a representative sample of the company's inventory Information relative to these products was compiled and
LaRue's Fashion Clothing Store has hired you to assist with some year-end fmancial data preparation. The company's accountant quit 3 weeks ago and left many items incomplete. Summary information is
The following information is available for Woodfield Inc.Instructions: Compute the missing amounts. Products in Sample Inventory 2002 2001 2000 Raw materials: Beginning inventory Purchases Materials
Streuling Inc. is preparing its 2002 year-end financial statements. Prior to any adjustments, inventory is valued at \($76,050.\) The following information has been found relating to certain
The Zerbel Manufacturing Co. was organized in 2000 to produce a single product. The company's production and sales records for the period 2000-2002 are summarized below.All units produced in a given
A portion of the Stark Company's balance sheet appears as follows:Stark Company pays for all operating expenses with cash and purchases all inventory on credit. During 2002, cash totaling
The Manuel Corporation sells household appliances and uses UFO for inventory costing. The inventory contains 10 different products, and historical LIFO layers are maintained for each of them. The
The Greenriver Manufacturing Company manufactures two products: Raft and Float. At December 31, 2001, Greenriver used the FIFO inventory method. Effective January 1, 2002, Greenriver changed to the
The following information for Valdez Industries was taken from the company's financial statements (amounts in thousands).Instructions:1 . Compute the inventory turnover and the number of days' sales
The Bergman Company sells 3 different products. Five years ago, management adopted the LIFO inventory method and established 3 specific pools of goods. Bergman values all incremental layers of
Steve's Repair Shop began operations on January 1, 1997. After discussing the matter with his accountant, Steve decided dollar-value LIFO should be used for inventory costing.Information concerning
The Mietus Company manufactures a single product. The company adopted the dollar-value LIFO inventory method on December 31, 1997. More information concerning Mietus Company is shown
On January 1, 1998, Nolder Company changed its inventory cost flow method from FIFO to LIFO for its raw materials inventory. The change was made for both financial statement and income tax reporting
Kristy's Cosmetics Supply is interested in generating price indexes for inventory. To aid in accomplishing this task, on December 31, 2002, the controller assembled information on various inventory
On December 3 1 , 2002, Lelegren Architectural Supply took a statistical inventory of items for the sample of its inventory The inventory revealed the following information.Instructions:1 . Compute
What is an activity-based cost (ABC) system?
In accounting for long-term contracts (those taking longer than 1 year to complete), the two methods commonly followed are the percentage-of-completion method and the completed-contract method.1.
Magleby Inn sells franchises to independent operators throughout the westem part of the United States. The contract with the franchisee includes the following provisions.a. The franchisee is charged
On December 1. 2002. bids were submitted for a construction project to build a new municipal building and fire station. The lowest bid was \($3,980,000.\) submitted by the Jessop Construction
Espiritu Construction Co. has used the cost-to-cost percentage-of-completion method of recognizing revenue. Tony Espiritu assumed leadership of the business after the recent death of his father,
Smokey International Inc. recently acquired the Kurtz Builders Company. Kurtz has incomplete accounting records. On one particular project, only the information below is available.Because the
Tara Builders Inc. is building a new home for Margaret Mitchell at a contracted price of \($120,000.\) The estimated cost at the time the contract is signed Qanuary 2, 2002) is \($97,000.\) At
Central Iowa Builders Inc. entered into a contract to construct an office building andplaza at a contract price of \($10,000,000.\) Income is to be reported using the percentage of completion method
On January 1, 2001, the Ishikawa Construction Company entered into a 3-year contract to build a dam. The original contract price was \($18,000,000\) and the estimated cost was \($16,100,000.\) The
The Build-It Construction Company enters into a contract on January 1, 2002, to construct a 20-story office building for \($42,000,000.\) During the construction period, many change orders are made
The Fitness Health Spa charges an annual membership fee of \($600\) for its services. For this fee, each member receives a fitness evaluation (value \($100),\) a monthly magazine (value \($32),\) and
Denna Corporation had sales in 2001 of \($210,000,\) in 2002 of \($270,000,\) and in 2003 of \($350,000.\) The gross profit percentage of each year, in order, was 25%, 29%, and 27%.Past history has
Bailey Bats Inc. had the following sales and gross profit percentages for the years 2001-2004.Historically, 55% of sales are collected in the year of the sale, 30% in the following year, 10% in the
Johnson Enterprises uses the cost recovery method for all installment sales. Complete the following table. Installment sales Cost of installment sales Gross profit percentage Cash collections: 2001
On September 1, 2002, Jensen Company entered into franchise agreements with 3 franchisees. The agreements required an initial fee payment of \($7,000\) plus 4 \($3,000\) payments due ever) 4 months,
Starbrite Pizzas franchises its name to different people across the country. The franchise agreement requires the franchisee to make an initial payment of \($12,000\) and sign a \($32,000\)
In 2002, Rawlings Wholesalers transferred goods to a retailer on consignment. The transaction was recorded as a sale by Rawlings. The goods cost \($45,000\) and normally are sold at a 30% markup. In
Zamponi's Construction Company reports its income for tax purposes on a completedcontract basis and income for financial statement purposes on a percentage of completion basis. A record of
The Rushing Construction Company obtained a construction contract to build a highway and bridge over the Snake River It was estimated at the beginning of the contract that it would take 3 years to
The Urban Construction Company commenced doing business in January 2002.Construction activities for the year 2002 are summarized in the following table.The company is your client. The president has
The Kurtz Construction Corporation contracted with the City of Port Huron to construct a dam on the Erie River at a price of \($16.000.000.\) Kurtz expects to earn \($1,520.000\) on the contract.
Jana Crebs is a contractor for the construction of large office buildings. At the beginning of 2002. 3 buildings were in progress. The following data describe the status of these buildings at the
The Power Construction Company was the low bidder on a specialized equipment contract.The contract bid was \($6,000.000\) with an estimated cost to complete the project of \($5,300.\) 000. The
Seattle Boatbuilders was recently awarded a \($14,000,000\) contract to construct a luxury liner for Cruiseliners Inc. Seattle estimates it will take 42 months to complete the contract.The company
London Corporation has been using the cash method to account for income since its first year of operation in 2002. All sales are made on credit with notes receivable given by the customers. The
Bain's Furniture sells furniture and electronic items. The majority of its business is on credit, and the following information is available relating to sales transactions for 2001, 2002, and
The Wasatch Construction Company entered into a \($4,500,000\) contract in early 2002 to construct a multipurpose recreational facility for the city of helper. Construction time extended over a
Tingey Industries sells merchandise on a consignment basis to dealers. Shipping costs are chargeable to Tingey. although in some cases the dealer pays them. The selling price of the merchandise
In what way does U.S. GAAP differ from LAS 18 in the area of revenue recognition?
Under the provisions of IAS 11, what revenue recognition approach should be used whenever the outcome of a construction contract can not be reliably estimated? Briefly describe this approach.
What special recognition problems arise in accounting for franchise fees?
Consignment accounting is primarily a method of accounting for transfers of inventory' prior to the point of revenue recognition. Describe the essential elements of this method from the standpoint of
Ultimate Corporation is a computer products supplier. Ultimate sells products to dealers who then sell the products to the end users. Most of the company's competitors require dealers to pay for
Jack Wilson, manager of Expert Building Company, is a valued and trusted employee. He has been with the company from its start 2 years ago. Because of the demands of his job, he has not taken a
You have just accepted a job with Philodendron Co. Your duties include being cashier of the petty cash fund. Upon inspection of the fund, you find that it includes \($143\) in currency, \($5\) in
The following information from Jumbo Company's first year of operations is to be used in testing the accuracy' ofAccounts Receivable. The December 31, 2002, balance is \($33,500\).(a) Collections
Accounts Receivable of the Drummond Manufacturing Co. on December 31. 2002, had a balance of \($300,000.\) Allowance for Bad Debts had a \($4,200\) debit balance. Sales in 2002 were \($1,690,000\)
Blanchard Company's accounts receivable subsidiary ledger reveals the following information.Blanchard Company's receivable collection experience indicates that, on the average, losses have occurred
The Transtech Publishing Company follows the procedure of debiting Bad Debt Expense for 2% of all new sales. Sales for 4 consecutive years and year-end allowance account balances were as follows:1.
In 2001 Hampton Office Supply began selling a new computer that carried a 2-year warranty against defects. Based on the manufacturer's recommendations. Hampton projects estimated warranty costs (as a
Modem Appliance Company's accountant has been reviewing the firms past television sales. For the past 2 years, Modern has been offering a special service warranty on all televisions sold. With the
Trend Industries Company reported the following amounts on its 2001 and 2002 financial statements.1. Compute the accounts receivable turnover for 2002.2. What is the average collection period during
Warfield Company had the following cash balances at December 31, 2002:Undeposited coin and currency \($35,000 \) .In exchange for a guaranteed line of credit. Warfield has agreed to maintain a
High Country', Inc., purchased inventory costing \($50,000\). Terms of the purchase were 5/10, n/30. In order to take advantage of the cash discount. High Country' borrowed \($40,000\) from Downtown
An examination on the morning of January 2 by the auditor for the Santiago Appliance Company discloses the following items in the petty cash drawer.The ledger account discloses a \($1,125\) balance
The following transactions affecting the accounts receivable of Wonderland Corporation took place during the year ended January 31, 2002.The following two balances were taken from the January 31.
Beebe Company sold goods on account with a sales price of \($50,000\) on August 17.The terms of the sale were 2/10, n/30.Instructions:1. Record the sale using the gross method of accounting for cash
During 2002, Lacee Enterprises had gross sales of \($247,000.\) At the end of 2002, Lacee had accounts receivable of \($83,000\) and a credit balance of \($5,600\) in Allowance for Bad Debts. Lacee
Rainy Day Company, a wholesaler, uses the aging method to estimate bad debt losses.The following schedule of aged accounts receivable was prepared at December 31 , 2002.The following schedule shows
High Fidelity Corporation sells stereos under a 2-year warranty contract that requires High Fidelity to replace defective parts and provide free labor on all repairs. During 2001, 1,050 units were
Monroe Corporation, a client, requests that you compute the appropriate balance of its estimated liability for product warranty account for a statement as of June 30. 2002.Monroe Corporation
The balance sheet for the Itex Corporation on December 31, 2001, includes the following cash and receivables balances.Current liabilities reported in the December 31 , 2001, balance sheet
On July 1. 2002. Balmforth Company used receivables totaling \($200,000\) as collateral on a \($150,000,\) 16% note from Rocky Mountain Bank. The transaction is not structured such that receivables
During its second year of operations. Shank Corporation found itself in financial difficulties. Shank decided to use its accounts receivable as a means of obtaining cash to continue operations. On
Freemont Factors provides financing to other companies by purchasing their accounts receivable on a nonrecourse basis. Freemont charges a commission to its clients of 15% of all receivables factored.
On January 1, 2002, Lost Valley Realty sold a tract of land to three doctors as an investment. The land, purchased 10 years ago, was carried on Lost Valley's books at a value of \($125,000.\) Lost
On January 1, 2002, the Denver Company sold land that originally cost \($400,000\) to the Boise Company. As payment. Boise gave Denver a \($600,000\) note. The note bears an interest rate of 4% and
On December 1. 2002, LGA Corporation established an imprest petty cash fund. The operations of the fund for the last month of 2002 and the first month of 2003 are summarized as follows:Dec.1 The
In accounting for uncollectible accounts receivable, why is the allowance method, rather than the direct write-off method, required by GAAP?
(a) What are the major advantages in using imprest petty cash funds?(b) What dangers must be guarded against when petty cash funds are used?
Early in the year 2003, John Roberts, a recent graduate of Southeast State College, delivers the financial statements shown on page 277 to Laura Dennis of Dennis, Inc. After a quick review, Dennis
State how each of the following items would be reflected on a statement of cash flows.(a) Securities classified as available:foi:sa.le were purchased for \($5,000.\) (b) Buildings were acquired for
The accountant for Alpine Hobby Stores prepared the following selected information for the vear ended December 31. 2002.Equipment with a book value of \($20,000\) was sold for \($17,000\) cash. The
Anakin, Inc. provides the following account balances for 2002 and 2001Using the format presented in the chapter, prepare the operating activities section of the statement of cash flows and present
Naboo Enterprises provides the following income statement for 2002.In addition, the following balance sheet information is available:Using the format presented in the chapter, prepare the operating
From the following information for the Carter Corporation, prepare a statement of cash flows for the year ended December 31, 2002, using the indirect method. Amortization of patent. Depreciation
The following information was taken from the books of Tapwater Company. Compute the amount of net cash provided by (used in) operating activities during 2002 using the indirect method. Accounts
A summary of revenues and expenses for Stanton Company for 2002 follows:Net changes in working capital accounts for 2002 were as follows:Depreciation on plant and equipment for the year totaled
The following information was taken from the comparative financial statements of Buttercup Corporation.Using the indirect method, compute the net amount of cash provided by (used in)operating
Based on the information given in Exercise 5-18 and using the direct method, compute the net amount of cash provided by (used in) operating activities for the year.Exercise 5-18:The following
A comparative balance sheet, income statement, and additional information for the Xavier Metals Company are presented below.Additional information for Xavier:(a) All accounts receivable and accounts
Below is information for Boswell Manufacturing Company:(a) Long-term debt of \($450,000\) was retired at face value.(b) New machinery was purchased for \($48,000\).(c) Common stock with a par value
The Sunny-vale Corporation prepared for 2002 and 2001 the following balance sheet data.Cash needed to purchase new equipment and to improve the company's working capital position was raised by
The following are financial statements for LaForge Company.The following information is also available for 2002:(a) Plant assets were sold for their book value of \($200\) during the year. The assets

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