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business
intermediate accounting reporting

Questions and Answers of Intermediate Accounting Reporting

How would each of the following items be reported on the balance sheet?(a) Accrued vacation pay.(b) Estimated taxes payable.(c) Service warranties on appliance sales.(d) Bank overdraft.(e) Employee
When should liabilities for each of the following items be recorded on the books of an ordinary business corporation?(a) Acquisition of goods by purchase on credit.(b) Officers’ salaries.(c)
How should the costs of issuing bonds be accounted for and classified in the financial statements?
Kuga Co. has equipment with a carrying amount of $700,000. The expected future net cash flows from the equipment is $705,000, and its fair value is $590,000. The equipment is expected to be used in
Assume the same information as question 15, except that an indefinite-life intangible other than goodwill is being considered for write-off. How would this situation be recorded?In question 15Astaire
What is goodwill? What is negative goodwill?
Recently, Michelangelo Manufacturing Co. presented the account “Allowance for Repairs” in the long-term liabilities section. Evaluate this procedure.
Discuss the basic accounting problem that arises in handling each of the following situations.(a) Assets purchased by issuance of capital stock.(b) Acquisition of plant assets by gift or donation.(c)
The Buildings account of Denis Leary Inc. includes the following items that were used in determining the basis for depreciating the cost of a building.(a) Architect’s fees.(b) Interest and taxes
Indicate where the following items would be shown on a balance sheet.(a) A lien that was attached to the land when purchased.(b) Landscaping costs.(c) Attorney’s fees and recording fees related to
You have been asked by the financial vice president to develop a short presentation on the lower-of-cost-or-market method for inventory purposes. The financial VP needs to explain this method to the
As indicated in the chapter, the FIFO and LIFO inventory methods can result in significantly different income statement and balance sheet figures. However, it is possible to convert income for a
An article in the Wall Street Journal used the phrases “phantom (paper) profits” and “high LIFO profits” through involuntary liquidation. Explain these phrases.
On December 31, 2007, the inventory of Alando Company amounts to $800,000. During 2008, the company decides to use the dollar-value LIFO method of costing inventories. On December 31, 2008, the
As compared with the FIFO method of costing inventories, does the LIFO method result in a larger or smaller net income in a period of rising prices? What is the comparative effect on net income in a
Outkast Outfitters Company includes in its trial balance for December 31 an item for Accounts Receivable $769,000. This balance consists of the following items:Due from regular
Hale Hardware is planning to factor some of its receivables. The cash received will be used to pay for inventory purchases. The factor has indicated that it will require “recourse” on the sold
On January 1, 2008, John Singer Co. sells property for which it had paid $690,000 to Sargent Company, receiving in return Sargent’s zero-interest-bearing note for $1,000,000 payable in 5 years.
The following note appears in the “Summary of Significant Accounting Policies” section of the annual report of Westinghouse Electric Corporation.Westinghouse Electric CorporationSummary of
The major classifications of activities reported in the statement of cash flows are operating, investing, and financing. Below is a list of common transactions.(a) Issuance of capital stock.(b)
The T accounts for Equipment and the related Accumulated Depreciation for Triangle Art Company at the end of 2008 are shown here.In addition, Triangle Art Company’s income statement reported a loss
What are the limitations of the statement of cash flows?
Identify two noncash charges other than depreciation expense that are treated like depreciation expense in the statement of cash flows.
Wilma Flintstone and Barny Rublestone were discussing the format of the statement of cash flows of Rock Candy Co. At the bottom of Rock Candy’s statement of cash flows was a separate section
One of the more closely watched ratios by investors is the price/earnings or P/E ratio. By dividing price per share by earnings per share, analysts get insight into the value the market attaches to a
Rap Corp. has 100,000 shares of common stock outstanding. In 2008, the company reports income from continuing operations before income tax of $1,210,000. Additional transactions not considered in the
Below is the retained earnings account for the year 2008 for LeClair Corp.Instructions(a) Prepare a corrected retained earnings statement. LeClair Corp. normally sells investments of the type
Presented below is a combined single-step income and retained earnings statement for Sandy Freewalt Company for 2008.Additional facts are as follows.1. “Selling, general, and administrative
The following account balances were included in the trial balance of J.R. Reid Corporation at June 30, 2008.The Retained Earnings account had a balance of $337,000 at July 1, 2007. There are 80,000
Tony Rich Inc. reported income from continuing operations before taxes during 2008 of $790,000. Additional transactions occurring in 2008 but not considered in the $790,000 are as follows.1. The
At December 31, 2007, Shiga Naoya Corporation had the following stock outstanding.10% cumulative preferred stock, $100 par, 107,500 shares.............$10,750,000Common stock, $5 par, 4,000,000
The stockholders’ equity section of Tkachuk Corporation appears below as of December 31, 2008.Net income for 2008 reflects a total effective tax rate of 34%. Included in the net income figure is a
Presented below is information related to Ivan Calderon Corp. for the year 2008.Instructions(a) Prepare a multiple-step income statement for 2008. Assume that 60,000 shares of common stock are
Presented below are selected ledger accounts of Tucker Corporation as of December 31, 2008.Cash....................................................................................................$
The following balances were taken from the books of Alonzo Corp. on December 31, 2008.Assume the total effective tax rate on all items is 34%.InstructionsPrepare a multiple-step income statement;
Two accountants for the firm of Elwes and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following
The financial records of LeRoi Jones Inc. were destroyed by fire at the end of 2008. Fortunately the controller had kept certain statistical data related to the income statement as presented below.1.
Presented below are certain account balances of Paczki Products Co.InstructionsFrom the foregoing, compute the following:(a) Total net revenue,(b) Net income,(c) Dividends declared during the current
On January 1, 2008, Creative Works Inc. had cash and common stock of $60,000. At that date the company had no other asset, liability or equity balances. On January 2, 2008, it purchased for cash
Using the information from BE5-9, prepare a retained earnings statement for the year ended December 31, 2008. Assume an error was discovered: land costing $80,000 (net of tax) was charged to repairs
Lincoln Corporation has retained earnings of $675,000 at January 1, 2008. Net income during 2008 was $2,400,000, and cash dividends declared and paid during 2008 totaled $75,000. Prepare a retained
Green Day Corporation had income from continuing operations of $12,600,000 in 2008. During 2008, it disposed of its restaurant division at an after-tax loss of $189,000. Prior to disposal, the
Turner Corporation had net sales of $2,400,000 and interest revenue of $31,000 during 2008. Expenses for 2008 were: cost of goods sold $1,250,000; administrative expenses $212,000; selling expenses
Tim Allen Co. had sales revenue of $540,000 in 2008. Other items recorded during the year were:Cost of goods
What is meant by the terms elements and items as they relate to the income statement? Why might items have to be disclosed in the income statement?
On January 30, 2007, a suit was filed against Pierogi Corporation under the Environmental Protection Act. On August 6, 2008, Pierogi Corporation agreed to settle the action and pay $920,000 in
During 2008, Natsume Sozeki Company earned income of $1,000,000 before income taxes and realized a gain of $450,000 on a government-forced condemnation sale of a division plant facility. The income
Below and on page 194 are the titles of a number of debit and credit accounts as they might appear on the balance sheet of Ethan Allen Corporation as of October 31, 2008.InstructionsSelect the
In its December 31, 2008, balance sheet Oakley Corporation reported as an asset, “Net notes and accounts receivable, $7,100,000.” What other disclosures are necessary?
The financial statements of The Coca-Cola Company and PepsiCo, Inc. can be accessed at the book’s website.InstructionsUse information found at the book’s website to answer the following
The financial statements of Procter & Gamble (P&G) can be accessed at the book’s website.InstructionsRefer to P&G’s financial statements and the accompanying notes to answer the
A review of the ledger of Oklahoma Company at December 31, 2008, produces the following data pertaining to the preparation of annual adjusting entries.1. Salaries Payable $0. There are eight salaried
Greco Resort opened for business on June 1 with eight air-conditioned units. Its trial balance on August 31 is as follows.Other data:1. The balance in prepaid insurance is a one-year premium paid on
Karen Weller, D.D.S., opened a dental practice on January 1, 2008. During the first month of operations the following transactions occurred.1. Performed services for patients who had dental plan
A partial adjusted trial balance of Piper Company at January 31, 2008, shows the following.InstructionsAnswer the following questions, assuming the year begins January 1.(a) If the amount in Supplies
The trial balance of Blues Traveler Corporation does not balance.An examination of the ledger shows these errors.1. Cash received from a customer on account was recorded (both debit and credit) as
The trial balance of Wanda Landowska Company (shown below) does not balance. Your review of the ledger reveals the following:(a) Each account had a normal balance.(b) The debit footings in Prepaid
Assume that Best Buy made a December 31 adjusting entry to debit Salaries Expense and credit Salaries Payable for $3,600 for one of its departments. On January 2, Best Buy paid the weekly payroll of
Using the data in BE3-3, journalize the entry on July 1 and the adjusting entry on December 31 for Hindi Insurance Company. Hindi uses the accounts Unearned Insurance Revenue and Insurance
On July 1, 2008, Blair Co. pays $18,000 to Hindi Insurance Company for a 3-year insurance contract. Both companies have fiscal years ending December 31. For Blair Co. journalize the entry on July 1
Selanne Enterprises made the following entry on December 31, 2008.Interest Expense..........................................10,000Interest Payable...........................................10,000(To
As discussed in Chapter 1, the International Accounting Standards Board (IASB) develops accounting standards for many international companies. The IASB also has developed a conceptual framework to
Presented below is a statement that appeared about Weyerhaeuser Company in a financial magazine.The land and timber holdings are now carried on the company’s books at a mere $422 million. The value
What accounting assumption, principle, or modifying convention does Target Corporation use in each of the situations below?(a) Target uses the lower-of-cost-or-market basis to value inventories.(b)
In January 2008, Alan Jackson Inc. doubled the amount of its outstanding stock by selling on the market an additional 10,000 shares to finance an expansion of the business. You propose that this
The text discussed three expense recognition methods (associating cause and effect, rational and systematic allocation, and immediate recognition) under the matching principle. Indicate the basic
Go to the book’s companion website, at www.wiley.com/college/warfield, to find an interactive problem that simulates the computerized CPA exam. The professional simulation for this chapter asks you
Explain each of the following terms included in the equity section of the partial balance sheet above: a. $0.50 cumulative b. Total contributed capital c. 20,000 shares authorized d. 150,000 shares
On January 1, 2019, Belmont Company changedits inventory cost flow method to the FIFOmethod from the LIFO method. Belmont canjustify the change that was made for both financialstatement and income
Refer to the information for Shannon Corporationabove. Ignoring income taxes, what is thetotal effect of the errors on the amount of workingcapital (current assets minus current liabilities)at
Refer to the information for Shannon Corporation above. Ignoring income taxes, what is the total effect of the errors on 2020 net income?a. Net income understated by $1,800b. Net income overstated by
On January 2, 2017, Garr Company acquired machinery at a cost of $320,000. This machinery was being depreciated by the double-declining- balance method over an estimated useful life of 8 years, with
During 2019, White Company determined that machinery previously depreciated over a 7-year life had a total estimated useful life of only 5 years. An accounting change was made in 2019 to reflect the
Dudley Company failed to recognize the following accruals. It also recorded the prepaid expenses and unearned revenues as expenses and revenues, respectively, in the following year when paid or
The following are independent errors:a. In January 2019, repair costs of $9,000 were debited to the Machinery account. At the beginning of 2019, the book value of the machinery was $100,000. No
Refer to the information in E22-13.Required:Prepare the correcting journal entries if the company discovers each error 2 years after it is made and it has closed the books for the second year. Ignore
The following are independent errors made by a company that uses the periodic inventory system:a. Goods in transit, purchased on credit and shipped FOB destination, $10,000, were included in
The following are independent errors made by a company that uses a periodic inventory system:a. Failure to record a purchase of inventory on credit (however, inventory was properly counted at the end
On January 1, 2014, Klinefelter Company purchased a building for $520,000. The building had an estimated life of 20 years and an estimated residual value of $20,000. The company has been depreciating
Newton Company introduced a line of laptop computers in 2019 that carry a 1-year assurance-type warranty. Based on experience with other computers that it sells, Newton estimated warranty costs as 3%
Gundrum Company purchased equipment on January 1, 2015 for $850,000. The equipment was expected to have a useful life of 10 years and a salvage value of $30,000. Gundrum uses the straight-line method
In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared
Delta Oil Company uses the successful-efforts method to account for oil exploration costs. Delta started business in 2017 and prepared the following income statements:The company chooses to change to
Berg Company began operations on January 1, 2019, and uses the FIFO method in costing its raw materials inventory. During 2020, management is contemplating a change to the LIFO method and is
Fava Company began operations in 2018 and used the LIFO inventory method for both financial reporting and income taxes. At the beginning of 2019, the anticipated cost trends in the industry had
At the beginning of 2020, Brett Company decided to change from the FIFO to the average cost inventory cost flow assumption for financial reporting purposes. The following data are available in regard
Abrat Company failed to accrue an allowance for doubtful accounts of $13,500 in 2019. Upon discovery of this error in 2020 prior to making its estimate of doubtful accounts, what correcting journal
At the end of 2019, Manny Company recorded its ending inventory at $350,000 based on a physical count. During 2020, the company discovered that the correct inventory value at the end of 2019 should
At the end of 2019, Jayrad Company paid $6,000 for insurance coverage for 2020. It recorded this by debiting Insurance Expense and crediting Cash, but failed to record a year-end adjustment. Upon
At the end of 2019, Cortex Company failed to accrue interest revenue of $3,200 that it had earned but not received on an outstanding note receivable. Instead, Cortex increased interest revenue in
At the end of 2019, Framber Company received $8,000 as a prepayment for renting a building to a tenant during 2020. The company erroneously recorded the transaction by debiting Cash and crediting
Refer to RE22-2. Assume Heller Company had sales revenue of $510,000 in 2019 and $650,000 in 2020.Prepare Heller’s partial income statements (through gross profit) for 2019 and 2020.RE22-2Heller
Refer to RE22-2. Assume the pretax cumulative effect adjustment is $50,000. Prepare the journal entry that Heller Company would make at the beginning of 2020 to record the cumulative effect of the
Heller Company began operations in 2019 and used the LIFO method to compute its $300,000 cost of goods sold for that year. At the beginning of 2020, Heller changed to the FIFO method. Heller
You have just been promoted to manager at a national CPA firm. A new accountant approaches you with the following situation: He has discovered that the president of your client’s company has a
On March 1, 2019, White Company purchased $400,000 worth of inventory on credit with terms that require payment in 60 days but allow White to take a 1% discount if it pays in 10 days (often quoted as
On January 1, 2019, Philip Holding invests $40,000 in an annuity to provide 8 equal semi-annual payments. Interest is 10%, compounded semiannually.Required:Compute the equal semiannual amounts that
You are given the following situations:1. Thomas Petry owes a debt of $7,000 from the purchase of a boat. The debt bears 12% interest payable annually. Thomas will pay the debt and interest in 5
Ralph Benke wants to make 8 equal semiannual withdrawals of $8,000 from a fund that will earn interest at 11% compounded semiannually.Required:How much would Ralph have to invest on:1. January 1,
John Joshua wants to make 5 equal annual withdrawals of $20,000 from a fund that will earn interest at 12% compounded annually.Required:How much would John have to invest on January 1, 2019, if he

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