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intermediate accounting reporting

Questions and Answers of Intermediate Accounting Reporting

Borrell Company purchased four delivery trucks on January 2, 2019, for $22,000 each.Borrell expected two of the trucks to last 5 years and have a residual value of $3,500 each. The other two trucks
Yummy Cereal Company is offering one toy shovel set for 15 box tops of its cereal. Yearto-date sales have been off, and it is hoped that this offer will stimulate demand. Each shovel set costs the
Intella Inc. adopted the dollar-value retail LIFO method on January 1, 2018. The following data apply to the 4 subsequent years:In addition, the following price indexes are available:Required:Compute
Red Department Store uses the retail inventory method. Information relating to the computation of the inventory at December 31, 2019, is as follows:Estimated normal shrinkage is 2% of
EKC Company uses the retail inventory method. The following information for 2019 is available:Required:Compute the cost of the ending inventory under each of the following cost flow assumptions
Turner Corporation uses the retail inventory method. The following information relates to 2019:Required:Compute the cost of the ending inventory under each of the following cost flow assumptions
On June 30, 2019, a flash flood damaged the warehouse and factory of Padway Corporation, completely destroying the work-in-process inventory. There was no damage to either the raw materials or
January 1, 2018, Sato Company adopted the dollar-value LIFO method of inventory costing. Sato’s ending inventory records appear as follows:Required:Compute the ending inventory for the years 2018,
When the double-extension approach to the dollar-value LIFO inventory cost flow method is used, the inventory layer added in the current year is multiplied by an index number. How would the following
Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valued using the FIFO method exceeds cost of goods sold when
During 2019, R Corp., a manufacturer of chocolate candies, contracted to purchase 100,000 pounds of cocoa beans at $1.00 per pound, delivery to be made in the spring of 2020. Because a record harvest
Hogan Company uses the net method of accounting for sales discounts. Hogan also offers trade discounts to various groups of buyers. On August 1, 2019, Hogan factored some accounts receivable on a
SituationGilmatt Company developed a new product that it planned to sell directly to customers and to promote heavily because of “stiff” competition in the marketplace. Its marketing department
SituationAfter securing lease commitments from several major stores, Bay Lake Shops Inc. was organized and built a shopping center in a growing suburb. The shopping center would have opened on
Obtain Nestlé’s 2017 annual report using the “Investor Relations” portion of its website (do a web search for Nestlé investor relations).Required:1. What was the total amount of intangible
Obtain Starbucks’s 2017 annual report either using the “Investor Relations” portion of its web-site (do a web search for Starbucks investor relations) or go to http://www.sec.gov and click
On June 30, 2019, your client, Sprauge Corporation, was granted two patents covering plastic cartons that it has been producing and marketing profitably for the past 3 years. One patent covers the
Elson Corporation, a retail fuel oil distributor, has increased its annual sales volume to a level three times greater than the annual sales of a dealer it purchased in 2015 in order to begin
In examining Samson Manufacturing Company’s books, you find on the December 31, 2019, balance sheet the item, “Costs of patents, $308,440.” Referring to the ledger accounts, you note the
Bryant Corporation was incorporated on December 1, 2018, and began operations one week later. Before closing the books for the fiscal year ended November 30, 2019, Bryant’s controller prepared the
Hamilton Company’s balance sheet on January 1, 2019, was as follows:Korbel Company is considering purchasing Hamilton (a privately held company) and discovers the following about Hamilton:a. No
Wember Company acquired a subsidiary company on December 31, 2015, and recorded the cost of the intangible assets it acquired as follows:Patent...................... $100,000Trade name
Bailey Company was formed in January 2017 and is preparing its financial statements under GAAP for the first time at the end of 2019. Its general ledger at December 31, 2019, includes the following
During the year-end audit of Cressman Corporation’s financial statements for 2019, you discover the following items:1. Cressman capitalized $57,000 to the Patent account at the beginning of 2018
Byrd Corporation engaged in the following transactions at the beginning of 2019:a. Purchased a Hogburger franchise for a 5-year, $60,000, 10% interest-bearing note. The franchise has an indefinite
Jolis Company has provided information on the following items:1. A patent was purchased from Totley Company for $500,000 on January 1, 2018. At that time, Jolis estimated the remaining useful life to
Several years ago, Blaha Company purchased Husker Company as a subsidiary. At that time, Blaha recorded goodwill of $100,000 related to the purchase. Since that time, the company has not considered
Marino Company had the following balance sheet on January 1, 2019:On January 2, 2019, Paul Company purchased Marino by acquiring all its outstanding shares for $300,000 cash.On that date, the fair
In 2019, eGames spent $8,000,000 developing new software. Of this amount, $5,300,000 was spent before July 2019—when technological feasibility was established. The product was marketed to consumers
Elm Company is considering purchasing EKC Company. EKC’s balance sheet at December 31, 2019, is as follows:At December 31, 2019, Elm discovered the following about EKC:a. No allowance for
Probst Company acquired a trademark several years ago at a cost of $60,000. Probst has never considered the trademark to be impaired. However, at the end of 2019, Probst has determined that the
Davis Research Company engaged in the following 5 transactions during 2019:1. Purchased a patent for $35,000. Legal costs of $5,000 were also incurred.2. Costs paid to improve patent:Engineering
Brush Company engaged in the following transactions at the beginning of 2019:a. Purchased a patent (Patent A) for $70,000 that had originally been filed in January 2013. The purchase was made to
Barnum Company acquired several small companies at the end of 2018, and based on the acquisitions, reported the following intangible assets on its December 31, 2018, balance sheet:Patent
Kling Company was organized in late 2019 and began operations on January 2, 2020. Prior to the start of operations, it incurred the following costs:Costs of hiring new employees
In 2019, Lalli Corporation incurred R&D costs as follows:Materials used from inventory ............................................................................$100,000Personnel in R&D lab
Cressman Company incurred R&D costs for various projects in 2019 as follows:Materials used for research .....................................................$ 240,000Materials used for
Gansac Publishing Company signed a contract with an author to publish her book. The signing took place on January 1, 2019, and a payment of $20,000 was made to obtain a copyright. Gansac expectsto
On January 11, 2019, Hughes Company applied for a trade name. Legal costs associated with the application were $20,000. In January 2020, the company incurred $8,000 of legal fees in a successful
On January 4, 2019, Franc Company purchased for $27,000 a patent that had been filed 8 years earlier. The patent covers a manufacturing process that the company plans to use for 15 years. On January
Using the information from RE12-9, assume that America’s Sweethearts is a reporting unit of Grand Champion. At the end of 2020, America’s Sweethearts has a fair value of $720,000 and a book value
Grand Champion Inc. purchased America’s Sweethearts Corporation on January 1, 2019. At the time, America’s Sweethearts had the following assets and liabilities (stated at fair value):Cash
Mystic Pizza Company purchases a franchise from NY Pizzeria Inc. for $96,000 on June 1, 2019. The franchise will last 8 years. Record Mystic Pizza’s purchase of the franchise on June 1 and
Mystic Pizza Company purchased a patent from Prime Pizza Plus on January 1, 2019, for $72,000. The patent has a remaining legal life of 9 years. Prepare the journal entries to record the acquisition
Notting Hill Company incurred the following costs for R&D activities:Material used from inventory ....................................................................$15,000Equipment purchased
Steel Magnolia Incorporated purchased a trademark 7 years ago for $275,000. Steel Magnolia believed the trademark would have an indefinite life. At the end of 2020, the corporation believes the fair
Flint Corporation’s general ledger as of December 31, 2019, includes the following accounts:Corporation (start-up) costs ...........................................................................$
Sherwood Corporation incurred $68,000 of R&D costs in its laboratory to develop a patent that was granted on January 2, 2019. Legal fees and other costs associated with registration of the patent
During 2015, Traco Machine Company spent $176,000 on R&D costs for an invention. This invention was patented on January 2, 2016, at a nominal cost that was expensed in 2016. The patent had a
Frye Company incurred R&D costs in 2019 as follows:Equipment acquired for use in multiple R&D projects ..........$1,000,000Depreciation on the equipment
Plaza Company originated late in 2018 and began operations on January 2, 2019. Plaza is engaged in conducting market research studies on behalf of manufacturers. Prior to the start of operations, the
Explain how a company accounts for the cost of its intangible assets.
Obtain Starbucks’s 2017 annual report either using the “Investor Relations” portion of its web site (do a Web search for Starbucks investor relations) or go to http://www.sec.gov and click
Lurch Company’s December 31, 2018, balance sheet follows:During 2019, the following transactions occurred:1. To avoid paying monthly rent of $5,000 on existing plant facilities, the company
Pell Corporation’s Property, Plant, and Equipment and Accumulated Depreciation accounts had the following balances at December 31, 2018:Depreciation method and useful lives:• Land improvements:
Information for Blake Corporation’s property, plant, and equipment for 2019 is:Depreciation Method and Useful LifeBuilding: 150%-declining-balance; 25 years.Machinery and equipment: Straight-line;
Soon after December 31, 2019, the auditor requested a depreciation schedule for trucks of Jarrett Trucking Company, showing the additions, retirements, depreciation, and other data affecting the
On December 31, 2019, Vail Company owned the following assets:Vail computes depreciation and amortization expense to the nearest whole year. During 2020, Vail engaged in the following
Logan Corporation, a manufacturer of steel products, began operations on October 1, 2018.Logan’s accounting department has started the fixed asset and depreciation schedule shown as follows:You
Hunter Company purchased a light truck on January 2, 2019 for $18,000. The truck, which will be used for deliveries, has the following characteristics:Estimated life: 5 yearsEstimated residual value:
On July 1, 2019, Amplex Company purchased a coal mine for $2 million. The estimated capacity of the mine was 800,000 tons. During 2019, Amplex mines 10,000 tons of coal per month and sells 9,000 tons
On January 2, 2019, Whistler Company purchased land for $450,000, from which it is estimated that 400,000 tons of ore could be extracted. It estimates that the present value of the cost necessary to
On January 1, 2014, Borstad Company purchased equipment for $1,180,000. It is depreciating the equipment over 25 years using the straight-line method and a zero residual value. Late in 2019, because
Pete’s Petroleum, Inc., an SEC registrant with a calendar year-end, is in the business of constructing and operating offshore oil platforms. Pete’s Petroleum is required legally to dismantle and
During 2019, Ryel Company’s controller asked you to prepare correcting journal entries for the following three situations:1. Machine A was purchased for $50,000 on January 1, 2014. Straight-line
Kam Company purchased a machine on January 2, 2019, for $20,000. The machine had an expected life of 8 years and a residual value of $300. The double-declining-balance method of depreciation is
Dinnell Company owns the following assets:In the year of acquisition and retirement of an asset, Dinnell records depreciation expense for one-half year. During 2020, Asset A was sold for
Cheadle Company purchased a fleet of 20 delivery trucks for $8,000 each on January 2, 2019. It decided to use composite depreciation on a straight-line basis and calculated the depreciation from the
Heist Company purchased a machine on January 2, 2019, and uses the 150%-declining-balance depreciation method. The machine has an expected life of 10 years and an expected residual value of $5,000.
Sayers Company purchased a building for $250,000 on January 2, 2019. The building has an expected residual value of $20,000 at the end of its expected life of 20 years.Required:1. Prepare a schedule
Lord Company purchased a machine on January 2, 2019, for $70,000. The machine had an expected residual value of $10,000, an expected life of 8 years or 24,000 hours, and a capacity to produce 100,000
Winsey Company purchased equipment on January 2, 2019, for $700,000. The equipment has the following characteristics:Estimated service life 20 years, ..........100,000 hours, 950,000 units of
Dinkle Company purchased equipment for $50,000. The equipment has an estimated residual value of $5,000 and an expected useful life of 10 years. Dinkle uses straight-line depreciation for its
Feller Company purchased a site for a limestone quarry for $100,000 on January 2, 2019. It estimate that the quarry will yield 400,000 tons of limestone. It estimates that its retirement obligation
On July 1, 2019, Osceola Company retired a metal stamping machine that it had originally purchased for $1,500,000. At December 31, 2018, the machine had a book value of $125,000 and was being
Swann Company sold a delivery truck on April 1, 2019. Swann had acquired the truck on January 1, 2015, for $42,000. At acquisition, Swann had estimated that the truck would have an estimated life of
On January 1, 2015, Vallahara Company purchased machinery for $650,000, which it installed in a rented factory. It is depreciating the machinery over 12 years by the straight-line method to a
On January 1, 2019, Barbosa Company purchased a coal mining site for $1,000,000.Under the terms of the purchase agreement, Barbosa must restore the site to specified conditions at an estimated cost
Reveille, Inc., purchased Machine #204 on April 1, 2019, and placed the machine into production on April 3, 2019. The following information is relevant to Machine #204:Price
On May 10, 2019, Horan Company purchased equipment for $25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is
Hathaway Company purchased a copying machine for $8,700 on October 1, 2019. The machine’s residual value was $500 and its expected service life was 5 years. Hathaway computes depreciation expense
Lightning Delivery Company purchased a new delivery truck for $45,000 on April 1, 2019. The truck is expected to have a service life of 10 years or 120,000 miles and a residual value of $3,000. The
Burrell Company purchased a machine for $20,000 on January 2, 2019. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before
On January 2, 2019, Lapar Corporation purchased a machine for $50,000. Lapar paid shipping expenses of $500, as well as installation costs of $1,200. The company estimated that the machine would have
On January 1, 2018, Emming Corporation purchased some machinery.The machinery has an estimated life of 10 years and an estimated residual value of $5,000. The depreciation expense on this machinery
Nickle Company purchased three identical assets for $17,000 on January 2, 2019. Each asset has an expected residual value of $1,000. The depreciation expense for 2019 and 2020 is shown below for
Sorter Company purchased equipment for $200,000 on January 2, 2019. The equipment has an estimated service life of 8 years and an estimated residual value of $20,000.Required:Compute the depreciation
Gruman Company purchased a machine for $220,000 on January 2, 2019. It made the following estimates:Service life 5 years or ................10,000 hoursProduction
On July 1, 2018, Mundo Corporation purchased factory equipment for $50,000. Residual value was estimated at $2,000. The equipment will be depreciated over 10 years using the double-declining balance
Vorst depreciates Asset C by the straight-line method. On June 30, 2020, Vorst sold Asset C for $28,000 cash. How much gain (loss) should Vorst record in 2020 on the disposal of Asset C?a. $2,800b.
Using the sum-of-the-years’-digits method, how much depreciation expense should Vorst record in 2020 for Asset B?a. $6,000b. $9,000c. $11,000d. $12,000The following information: Vorst
Vorst depreciates Asset A on the double-declining-balance method. How much depreciation expense should Vorst record in 2020 for Asset A?a. $32,000b. $25,600c. $14,400d. $6,400The following
Obtain LVMH (Moet Hennessy Louis Vuitton)’s 2017 annual report using the “Investor Relations” portion of its web site (do a Web search for Moet Hennessy Louis Vuitton investor
Obtain Starbucks’s 2017 annual report either using the “Investor Relations” portion of its web site (do a Web search for Starbucks investor relations) or go to http://www.sec.gov and click
You are the accountant for a division of a company that is constructing a building for its own use. It is January 2020, and you are working on closing the books for 2019. The CEO of the division
You have been hired to examine Brahe Corporation’s financial statements for the year ending December 31, 2019. Brahe was organized in January 2019 by Moses and Price, the original owners of
Iwata Oil Company incurred costs of $6 million during 2019 by drilling for oil. Half the costs resulted in oil being found, and half resulted in dry wells. Iwata expects the oil wells to produce 10%
The following selected events occurred for Orwell Company during the first quarter of 2019:Jan. 11 A motor breaks on a machine and is replaced for $2,400. This replacement was expected when the
Foothills Power Company begins a 2-year construction project on a power plant on January 1, 2019. The following information is available:• The company borrows $10 million on January 1, 2019, at
Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available:• Capitalization period: January 1, 2019, to June 30, 2020•

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