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business
intermediate accounting reporting

Questions and Answers of Intermediate Accounting Reporting

On January 1, 2019, Lynch Company acquired 13% bonds with a face value of $50,000. The bonds pay interest on June 30 and December 31 and mature on December 31, 2021. Lynch paid $51,229.35, a price
On January 1, 2019, Rodgers Company purchased $200,000 face value, 10%, 3-year bonds for $190,165.35, a price that yields a 12% effective annual interest rate. The bonds pay interest semiannually on
On November 1, 2018, Reid Corporation acquired bonds with a face value of $700,000 for $673,618.61. The bonds carry a stated rate of interest of 10%, were purchased to yield 11%, pay interest
On March 31, 2019, Brodie Corporation acquired bonds with a par value of $400,000 for $425,800. The bonds are due December 31, 2024, carry a 12% annual interest rate, pay interest on June 30 and
On January 1, 2019, Kelly Corporation acquired bonds with a face value of $500,000 for $483,841.79, a price that yields a 10% effective annual interest rate. The bonds carry a 9% stated rate of
The following investments occurred in 2019 for Mole Company.a. Mole purchased a bond that will mature in 10 years. Mole purchased this bond because it expects that over the next 6 months, interest
Refer to the information in RE13-1. Prepare the journal entry on June 30 for Gatrong to record the first interest receipt, using the effective interest method. Round to the nearest dollar.RE13-1On
On January 1, 2019, Tiger Company purchased 6,720 shares of Eagle Corporation’s common stock when Eagle had 22,400 shares outstanding. On that date, the following information pertained to
Refer to the information in RE13-11. Assume that on February 1, 2020, Wolfpack sold its investment in Cornett stock for $10,000. Prepare the journal entries of Wolfpack to record the sale.RE13-11On
Refer to the information in RE13-11. Assume that on December 31, 2019, the investment in Cornett Company stock has a market value of $10,500. Prepare the year-end journal entry to record the
Obtain Nestlé’s 2017 annual report using the “Investor Relations” portion of its web site (do a Web search for Nestlé investor relations).Required:1. What is the value of Nestlé’s
While examining the 2019 financial statements of Warder Corporation, you found evidence that the following were not included in its current liabilitieson the December 31, 2019, balance sheet:1. A
Bailey Dry Cleaners has six employees who were paid the following wages during 2019:Frank Johnson ....................$ 27,000Bill Long .................................18,000Duff Morse
Rexallo Company begins business on January 2, 2019, with 15 employees. Its company policy is to permit each employee to take 6 days of paid sick leave each year and 1½ days of paid vacation leave
Rosen Corporation was formed on December 12, 2018. It plans to close its books annually each December 31. Rosen is located in Lanmark City and Apple County. The fiscal period of these two
On January 1, 2019, Northern Manufacturing Company bought a piece of equipment by signing a non-interest-bearing $80,000, 1-year note. The face value of the note includes the price of the equipment
On December 31, 2019, Atwood Table Company has $8 million of short-term notes payable owed to City National Bank. On February 1, 2020, Atwood negotiates a revolving credit agreement providing for
Several times during 2019, Palmer Company issued shortterm commercial paper totaling $7 million. On December 31, 2019, the company’s year-end, Palmer intends to refinance the commercial paper by
Adjusto Corporation (which is on a December 31 fiscal year-end) engaged in the following transactions during 2019 and 2020:2019Nov. 1 Issued a 120-day, 12% note, face value of $20,000, to Johnson
On November 1, 2019, Edwin Inc. borrowed cash and signed a $60,000, 1-year note payable.Required:1. Compute the following items assuming (a) an interest-bearing note at 12%, (b) a
Byrd Company had the following transactions during 2019 and 2020:1. On December 24, 2019, a computer was purchased on account from Computers International for $60,000.Terms of the sale were 2/10,
On December 31, 2019, Braino Tech Inc. learned that its competitor had introduced a product using an accessory to which Braino has exclusive patent rights. Braino planned to file suit and its
On January 1, 2020, Fro-Yo Inc. began offering customers a cash rebate of $5.00 if the customer mails in 10 proof-of-purchase labels from its frozen yogurt containers. Based on historical experience,
On the back of its cereal boxes, Tiger Cereal Company offers a premium to its customers. The premium, a toy truck, may be claimed by sending in $1 plus 10 coupons; one coupon is included in each box
Sweet Dates Company offers a premium to its customers—a glass bowl (cost to Sweet Dates is $0.90) upon return of 40 coupons. Two coupons are placed in each box of dates sold. The company estimates,
On August 1, 2019, Pereira Corporation has sold 1,600 Wiglows to Mendez Company at $450 each. Mendez also purchased a 1-year service-type warranty on all the Wiglows for $12 per unit. In 2019,
On September 1, 2019, Carolina Electronics Company has 1,000 Blu-ray players ready for sale. On October 1, 2019, 900 are sold at $125 each with a 1-year assurance-type warranty. Carolina estimates
On December 4, 2019, Dan Johnson, delivery truck driver for Farmers Products Inc., ran astop sign and collided with another vehicle. On January 8, 2020, the driver of the other vehicle filed suit
Bettinghaus Corporation began business on January 2, 2019, with five employees. Its sick leave and vacation policy follows: Each employee is allowed 8 days of paid sick leave each year and one day of
Ames Company is located in a city and county that issue property tax statements in May of each year. The fiscal year for the two local governmental units is May 1 to April 30. Property taxes of
Family Practice Associates has an estimated property tax liability of $7,200 assessed as of January 1, 2019, for the year May 1, 2019, to April 30, 2020. The property tax is paid on September 1,
On December 5, 2019, Super Circuit Store sold gift certificates totaling $12,000. By December 31, 2019, all but $2,125 worth of these certificates had been redeemed for merchandise. Outstanding
On December 31, 2019, Carrboro Textile Company had short term debt in the form of notes payable totaling $600,000. These notes were due on June 1, 2020. Carrboro expected to refinance these notes on
On December 31, 2019, Excello Electric Company had $1 million of short-term notes payable due February 7, 2020. Excello expected to refinance these notes on a longterm basis. On January 15, 2020, the
On May 1, 2019, Ramden Company issues 13% bonds with a face value of $2 million. The bond contract calls for retirement of the bonds in periodic installments of $200,000, starting on May 1, 2020,
On October 30, 2019, Sanchez Company acquired a piece of machinery and signed a 12-month note for $24,000. The face value of the note includes the price of the machinery and interest.The note is to
On November 16, 2019, Clear Glass Company borrowed $20,000 from First American Bank by issuing a 90-day, non-interest-bearing note. The bank discounted this note at 12% and remitted the difference to
On December 1, 2019, Insto Photo Company purchased merchandise, invoice price $25,000, and issued a 12%, 120-day note to Ringo Chemicals Company. Insto uses the calendar year as its fiscal year and
On January 4, 2019, Dunbar Company purchased, on credit, 2,500 television sets at $800 each. Terms of the purchase were 2/10, n/30. Dunbar paid for 20% of these sets on January 13 and the remaining
During 2019, Lawton Company introduced a new line of machines that carry a 3-year assurance-type warranty against manufacturer’s defects. Based on industry experience, warranty costs are estimated
All of Rolf Co.’s employees are entitled to two weeks of paid vacation for each full year in Rolf’s employ. Unused vacation time can be accumulated and carried forward to succeeding years and
Morgan Company determined that (1) it has a material obligation relating to employees’ rights to receive compensation for future absences attributable to employees’ services already rendered, (2)
Bronson Apparel Inc. operates a retail store and must determine the proper December 31, 2019, year-end accrual for the following expenses:• The store lease calls for fixed rent of $1,000 per month,
On September 1, 2019, a company borrowed cash and signed a 1-year, interest-bearing note on which both the principal and interest are payable on September 1, 2021. How will the note payable and the
The inventory records of Frost Company for the years 2019 and 2020 reveal the cost and market of the January 1, 2019, inventory to be $125,000. On December 31, 2019, the cost of inventory was
The following are the inventories for the years 2019, 2020, and 2021 for Parry Company:.Required:1. Assume the inventory that existed at the end of each year was sold in the subsequent year. Prepare
On January 1, 2019, Seaver Company sold land with a book value of $23,000 to Bench Company. Bench paid $15,000 down and signed a $15,000 non-interest-bearing note, payable in two $7,500 annual
On January 1, 2019, Lisa Company sold machinery with a book value of $118,000 to Mark Company. Mark signed a $180,000 non-interest-bearing note, payable in three $60,000 annual installments on
On January 1, 2019, Somerville Corporation sold a used truck to Cornelius Company and accepted a $28,000 non-interest-bearing note due January 1, 2020. Somerville carried the truck on its books at a
On January 1, 2019, Lion Company paid $600,000 for 10,000 shares of Wolf Company’s voting common stock, which was a 10% interest in Wolf. Lion does not have the ability to exercise significant
On January 1, 2019, Easton Corporation acquired 30% of the outstanding common shares of Feeley Corporation for $140,000, purchased 25% of the outstanding common shares of Holmes Company for $82,500,
Harper Corporation acquired 80,000 of the 200,000 outstanding shares of Moore Corporation on April 1, 2019, for $400,000 and obtained significant influence. The following information concerning Moore
On January 1, 2019, Doe Company purchased 3,000 of the 10,000 common shares outstanding of Ray Company for $15 per share and obtained significant influence. Doe amortizes its patents over 10 years.
On January 1, 2019, Snow Corporation purchased 20% of the 200,000 outstanding shares of common stock of Garvey Company for $4.00 per share as a long-term investment. The purchase price of the shares
During the first quarter of 2019, Payne Corporation entered into the following transactions:Jan. 1 Acquired 150 shares of Block Corporation common stock for $20 per share, 200 shares of Bridle
Manson Incorporated reported investments in equity securities of $60,495 as a current asset on its December 31, 2018, balance sheet. An analysis of Manson’s investments on December 31, 2018,
Noonan Corporation prepares quarterly financial statements and invests its excess funds in marketable securities. At the end of 2018, Noonan’s portfolio of investments consisted of the following
8th State Bank prepares interim financial statements and follows an investment strategy of investing in equity securities. At the beginning of the third quarter of 2019, the bank held the following
The investment manager of 4th National Bank invests some of the bank’s financial resources in equity securities. During the last quarter of 2019, the following transactions occurred in regard to
During 2019, Dana Company decided to begin investing its idle cash in marketable securities. The information contained below relates to Dana’s 2019 marketable security transactions:Apr. 1 Purchased
The following information relates to Starr Company’s investment in available-for-sale bonds for 2019:Jan. 1 Purchased $30,000 face value of Bradford Company 8% bonds for $29,100. The market rate
Holly Company invests its excess cash in marketable securities. At the beginning of 2019, it had the following portfolio of investments in available-for-sale debt securities:During 2019, the
The following information relates to Sanders Company’s investment in trading securities for 2019:Jan. 1 Purchased $30,000 face value of Busbin Company 8% bonds for $29,100. The market rate of
Akers Company invests its excess cash in marketable securities. At the beginning of 2019, it had the following portfolio of investments in trading debt securities:During 2019, the following
On January 1, 2019, Mark Corporation purchased bonds with a face value of $500,000 for $475,413.60. The bonds are due December 31, 2021, carry a 10% stated rate, and were purchased to yield 12%.
Mercer Corporation acquired $400,000 of Park Company’s bonds on June 30, 2019, for $409,991.12. The bonds carry a 12% stated interest rate and pay interest semi-annually on June 30 and December 31.
On October 1, 2019, Jenkins Corporation bought bonds with a face value of $200,000 for $199,175, which included accrued interest. The bonds are due December 31, 2021, and carry a face rate of
Tudor Company acquired $500,000 of Carr Corporation bonds for $487,706.69 on January 1, 2019. The bonds carry an 11% stated interest rate, pay interest semiannually on January 1 and July 1, were
On January 1, 2019, Hyde Corporation purchased bonds with a face value of $300,000 for $308,373.53. The bonds are due June 30, 2022, carry a 13% stated interest rate, and were purchased to yield
The following data were available from Hegge Department Store’s records for the year ended December 31, 2019:Required:Using the retail method, what is the estimate of the merchandise inventory at
On November 21, 2019, a flood at Hodge Company’s warehouse caused severe damage to its entire inventory of Product Tex. Hodge estimates that all usable damaged goods can be sold for $10,000. The
Belstock Company manufactures one product. On December 31, 2018, Belstock adopted the dollar-value LIFO inventory method. The inventory on that date using the dollar value LIFO inventory method was
Guide Company requires additional cash for its business. Guide has decided to use its accounts receivable to raise the additional cash as follows:1. On June 30, 2019, Guide assigned $200,000 of
At January 1, 2019, the credit balance in Master Company’s Allowance for Doubtful Accounts was $400,000. For 2019, the provision for doubtful accounts is based on a percentage of credit
On January 1, 2019, Seminole Inc. purchased 300 shares of Cornett Company common stock at $40 per share. Prepare the January 1 journal entry to record the purchase of these equity securities.
On February 1, 2019, Razorback Corporation decides to transfer its available-for-sale securities to the trading category. These securities had been purchased for $9,400 early in 2018 and had a fair
Refer to the information in RE13-5. Assume that on February 1, 2020, Aggie sold its investment in Smith Corporation for $12,500. Prepare the journal entries of Aggie Corporation to record the sale
Refer to the information in RE13-5. Assume that on December 31, 2019, the investment in Smith Corporation bonds has a market value of $12,300. Prepare the year-end journal entry to record the
Refer to the information in RE13-5. Assume that on June 30, Aggie received interest on the Smith Corporation bonds. Prepare the June 30 journal entries to record the receipt of the interest.RE13-5On
On April 30, 2019, Aggie Corporation purchased Smith Corporation 10%, 5-year bonds with a face value of $12,000 at par plus four months of accrued interest. Prepare the April 30 journal entry to
Refer to the information in RE13-3. Assume that on December 31, 2019, Wolfpack received interest on the Todd Corporation bonds. Wolfpack uses the straight-line method to amortize premiums and
On July 1, 2019, Wolfpack Corporation purchased securities which it intends to buy and sell frequently. These securities consisted of Todd Corporation 10%, 5-year bonds with a face value of $20,000
On January 1, 2019, Gatrong Corporation purchased 12%, 5-year Fleming Corporation bonds with a face value of $200,000. It expects to hold these bonds until maturity. The bonds pay interest
On January 1, 2019, Park Company accepted a $36,000, non-interest-bearing, 3-year note from a major customer in exchange for used equipment. The equipment had originally cost Park $200,000 and had a
On January 2, 2019, Portela Inc. bought 30% of the outstanding common stock of Bracero Corporation for $258,000 cash. Portela accounts for this investment by the equity method. At the date of
On its December 31, 2018, balance sheet, Fay Company reported equity investments at a market value of $183,000. There was no change during 2019 in the composition of Fay’s portfolio of marketable
In 2021, Cromwell Corporation purchased bonds of Oliver Company at par for $300,000 and classified the investment as available-for-sale. In 2022, the market value declined to $200,000. In 2023, the
On July 1, 2019, Aldrich Company purchased as an available-for-sale security $200,000 face value, 9% U.S. Treasury notes for $194,000.The notes mature July 1, 2020, and pay interest semiannually on
During 2021, Anthony Company purchased debt securities as a long-term investment and classified them as trading. All securities were purchased at par value. Pertinent data are as follows:The net
On January 1, 2019, Weaver Company purchased as held-to-maturity debt securities $500,000 face value of Park Corporation’s 8% bonds for $456,200. The bonds were purchased to yield 10% interest and
Briefly describe how to determine and record the gain or loss on the sale of a minority passive investment in equity securities.
Briefly describe how to determine and record any subsequent increases or decreases in the fair value of a minority passive investment in equity securities.
Briefly summarize the accounting for an investment in equity securities.
Describe how to recognize an impairment under the current expected credit loss model.
What accounting is required for minority passive equity investments?
a. On January 1, 2019, Tully signed an agreement to operate as a franchisee of Rapid Copy Service Inc. for an initial franchise fee of $85,000. Of this amount, $25,000 was paid when the agreement was
Lee Manufacturing Corporation was incorporated on January 3, 2018. The corporation’s financial statements for its first year’s operations were not examined by a CPA. You have been engaged to
Munn Inc. had the following intangible account balance at December 31, 2018:Patent .........................$168,000Information relating to Munn’s patent and transactions involving other intangible
Barb Company has provided information on intangible assets as follows:1. A patent was purchased from Lou Company for $1,500,000 on January 1, 2018. Barb estimated the remaining useful life of the
On January 2, 2019, Brock Corporation purchased a tract of land (site number 101) with a building for $600,000. Additionally, Brock paid a real estate broker’s commission of $36,000, legal fees of

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