Can't figure out how to calculate FIFO and LIFO for exercise 8-20 on page 15.

Problem 3-1 (Part Level Submission) Listed below are the transactions of Yasunari Kawabata, D.D.S., for the month of September. Sept. 1 2 4 4 5 8 10 14 18 19 20 25 Kawabata begins practice as a dentist and invests $21,710 cash. Purchases dental equipment on account from Green Jacket Co. for $17,640. Pays rent for office space, $844 for the month. Employs a receptionist, Michael Bradley. Purchases dental supplies for cash, $963. Receives cash of $1,710 from patients for services performed. Pays miscellaneous office expenses, $480. Bills patients $6,910 for services performed. Pays Green Jacket Co. on account, $4,150. Withdraws $3,460 cash from the business for personal use. Receives $1,080 from patients on account. Bills patients $2,890 for services performed. Pays the following expenses in cash: Salaries and wages $2,550; miscellaneous office 30 expenses $97. (Record each separately.) 30 Dental supplies used during September, $360. Record depreciation using a 5-year life on the equipment, the straight-line method, and no salvage value. Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). (Post entries in the order displayed in the problem statement.) Prepare a trial balance. Prepare a statement of owner's equity. (List items that increase owner's equity first.) Prepare an unclassified balance sheet. (List assets in order of liquidity.) Prepare an income statement. Problem 133 (Part Level Submission) Selected amounts from Trent Company's trial balance of 12/31/14 appear below: 1. Accounts Payable $123,920 2. Accounts Receivable 3. Accumulated DepreciationEquipment 4. Allowance for Doubtful Accounts 143,510 187,950 15,350 5. Bonds Payable 499,000 6. Cash 152,860 7. Common Stock 8. Equipment 9. Prepaid Insurance 10. Interest Expense 50,000 947,100 29,150 10,730 11. Inventory 300,400 12. Notes Payable (due 6/1/15) 217,900 13. Prepaid Rent 212,040 14. Retained Earnings 839,800 15. Salaries and Wages Expense 301,900 (All of the above accounts have their standard or normal debit or credit balance.) (a) Your answer is correct. Prepare adjusting journal entries at year end, December 31, 2014, based on the following supplemental information. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) The equipment has a useful life of 15 years with no salvage value. (Straight-line method a. being used.) b. Interest accrued on the bonds payable is $14,970 as of 12/31/14. c. Prepaid insurance at 12/31/14 is $22,330. d. The rent payment of $212,040 covered the six months from November 30, 2014 through May 31, 2015. e. Salaries and wages earned but unpaid at 12/31/14, $22,740. Exercise 123 Your answer is correct. For each of the items listed below, indicate how it should be treated in the financial statements. 1. The bad debt rate was increased from 1% to 2%, thus increasing bad debt expense. 2. Obsolete inventory was written off. This was the first loss of this type in the company's history. 3. An uninsured casualty loss was incurred by the company. This was the first loss of this type in the company's 50-year history. 4. Recognition of income earned last year which was inadvertently omitted from last year's income statement. 5. The company sold one of its warehouses at a loss. 6. Settlement of litigation with federal government related to income taxes of three years ago. The company is continually Ordinary or unusual (but not extraordinary) item on the income statement Ordinary or unusual (but not extraordinary) item on the income statement Extraordinary item on the income statement Prior period adjustment Ordinary or unusual (but not extraordinary) item on the income statement Ordinary or unusual (but not extraordinary) item on the income statement 7. 8. 9. $$ $10. 11. involved in various adjustments with the federal government related to its taxes. A loss incurred from expropriation (the company owned resources in South America which were taken over by a dictator unsympatheti c to American business). The company neglected to record its depreciation in the previous year. Discontinuanc e of all production in the United States. The manufacturin g operations were relocated in Mexico. Loss on sale of investments. The company last sold some of its investments two years ago. Loss on the disposal of a component of a business. Problem 126 Your answer is correct. Extraordinary item on the income statement Prior period adjustment Ordinary or unusual (but not extraordinary) item on the income statement Ordinary or unusual (but not extraordinary) item on the income statement Discontinued operations Shown below is an income statement for 2014 that was prepared by a poorly trained bookkeeper of Howell Corporation. Howell Corporation INCOME STATEMENT December 31, 2014 Sales revenue Investment revenue Cost of goods sold Selling expenses Administrative expenses Interest expense Income before special items Special items Loss on disposal of a component of the business Major casualty loss (extraordinary item) Net federal income tax liability Net income $ 907,500 17,040 (408,170) (143,510) (192,500) (12,360) 168,000 (29,170) (49,540) (26,787) $ 62,503 Prepare a multiple-step income statement for 2014 for Howell Corporation that is presented in accordance with generally accepted accounting principles (including format and terminology). Howell Corporation has 50,000 shares of common stock outstanding and has a 30% federal income tax rate on all tax related items. (Round per share values to 2 decimal places, e.g. $2.50.) Problem 127 Your answer is correct. Presented below is an income statement for Kinder Company for the year ended December 31, 2014. Kinder Company Income Statement For the Year Ended December 31, 2014 Net sales $794,050 Costs and expenses: Cost of goods sold Selling, general, and administrative expenses Other, net 567,900 76,930 30,760 Total costs and expenses 675,590 Income before income taxes Income taxes 118,460 35,538 Net income $82,922 Additional information: 1. "Selling, general, and administrative expenses" included a usual but infrequent charge of $7,390 due to a loss on the sale of investments. 2. "Other, net" consisted of interest expense, $11,430, and an extraordinary loss of $19,330 before taxes due to earthquake damage. If the extraordinary loss had not occurred, income taxes for 2014 would have been $41,337 instead of $35,538. 3. Kinder had 20,000 shares of common stock outstanding during 2014. Using the single-step format, prepare a corrected income statement, including the appropriate per share disclosures. (Round earnings per share to 2 decimal places, e.g. $1.48.) Exercise 111 Your answer is correct. Indicate, for each balance sheet item listed below the usual valuation reported on the balance sheet. 1. Common stock 2. Prepaid insurance 3. Natural resources Property, 4. plant, and equipment 5. Accounts receivable 6. Copyrights 7. Inventory Long-term 8. bonds payable 9. Land (in use) Land 10 (future . plant site) 11 Patents . Equity 12 investment . s (trading) 13 Accounts . payable Problem 120 Your answer is correct. Selected financial statement information and additional data for Stanislaus Co. is presented below. December 31 Cash Accounts Receivable (net) Inventory Land Equipment TOTAL Accumulated depreciation Accounts payable Notes payable - short-term Notes payable - long-term Common stock Retained earnings TOTAL 2013 $41,530 83,320 168,550 59,510 506,600 2014 $72,290 140,720 205,120 18,960 788,530 $859,510 $1,225,620 $84,000 48,460 65,620 165,350 415,780 80,300 $114,410 85,280 29,830 295,160 484,450 216,490 $859,510 $1,225,620 Additional data for 2014: 1. Net income was $217,730. 2. Depreciation was $30,410. 3. Land was sold at its original cost. 4. Dividends of $81,540 were paid. 5. Equipment was purchased for $83,450 cash. 6. A long-term note for $198,480 was used to pay for an equipment purchase. 7. Common stock was issued to pay a $68,670 long-term note payable. Problem 5-2 Your answer is correct. Presented below are a number of balance sheet items for Montoya, Inc., for the current year, 2014. Goodwill Payroll Taxes Payable Bonds payable Discount on bonds payable Cash Land Notes receivable Notes payable (to banks) Accounts payable Retained earnings Income taxes receivable Notes payable (long-term) $ 129,040 181,631 304,040 15,172 364,040 484,040 449,740 269,040 494,040 ? 101,670 1,604,040 Accumulated Depreciation-Equipment Inventory Rent payable (short-term) Income taxes payable Rent payable (long-term) Common stock, $1 par value Preferred stock, $10 par value Prepaid expenses Equipment Equity investments (trading) Accumulated Depreciation-Buildings Buildings $ 292,172 243,840 49,040 102,402 484,040 204,040 154,040 91,960 1,474,040 125,040 270,372 1,644,040 Prepare a classified balance sheet in good form. Common stock authorized was 400,000 shares, and preferred stock authorized was 20,000 shares. Assume that notes receivable and notes payable are short-term, unless stated otherwise. Cost and fair value of equity investments (trading) are the same. (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Building and Equipment.) Exercise 136 If $80,000 is deposited annually starting on January 1, 2014 and it earns 15%, how much will accumulate by December 31, 2023? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) (Use the below table.) Problem 144 (Part Level Submission) Bates Company has entered into two lease agreements. In each case the cash equivalent purchase price of the asset acquired is known and you wish to find the interest rate which is applicable to the lease payments. Calculate the implied interest rate for the lease payments. (Use the below tables.) Problem 144 (Part Level Submission) Bates Company has entered into two lease agreements. In each case the cash equivalent purchase price of the asset acquired is known and you wish to find the interest rate which is applicable to the lease payments. Calculate the implied interest rate for the lease payments. (Use the below tables.) Problem 145 (Part Level Submission) Pine Leasing Company purchased specialized equipment from Wayne Company on December 31, 2013 for $720,000. On the same date, it leased this equipment to Sears Company for 5 years, the useful life of the equipment. The lease payments begin January 1, 2014 and are made every 6 months until July 1, 2018. Pine Leasing wants to earn 10% annually on its investment. Various Factors at 10% Periods or Future Present Rents Value of $1 Value of $1 9 2.35795 0.42410 10 2.59374 0.38554 11 6.49506 0.35049 Future Value of an Ordinary Annuity 13.57948 15.93742 18.53117 Present Value of an Ordinary Annuity 5.75902 6.14457 6.49506 Various Factors at 5% Periods or Future Present Rents Value of $1 Value of $1 9 1.01725 0.64461 10 1.62889 0.61391 11 8.30641 0.58468 Future Value of an Ordinary Annuity 11.02656 12.57789 Present Value of an Ordinary Annuity 7.10782 7.72173 14.20679 8.30641 Problem 145 (Part Level Submission) Pine Leasing Company purchased specialized equipment from Wayne Company on December 31, 2013 for $720,000. On the same date, it leased this equipment to Sears Company for 5 years, the useful life of the equipment. The lease payments begin January 1, 2014 and are made every 6 months until July 1, 2018. Pine Leasing wants to earn 10% annually on its investment. Various Factors at 10% Periods or Future Present Rents Value of $1 Value of $1 9 2.35795 0.42410 10 2.59374 0.38554 11 6.49506 0.35049 Future Value of an Ordinary Annuity 13.57948 15.93742 18.53117 Present Value of an Ordinary Annuity 5.75902 6.14457 6.49506 Various Factors at 5% Periods or Future Present Rents Value of $1 Value of $1 9 1.01725 0.64461 10 1.62889 0.61391 11 8.30641 Future Value of an Ordinary Annuity 11.02656 12.57789 Present Value of an Ordinary Annuity 7.10782 7.72173 14.20679 8.30641 0.58468 Exercise 161 Your answer is correct. Accounts receivable in the amount of $520,000 were assigned to the Fast Finance Company by Marsh, Inc., as security for a loan of $590,000. The finance company charged a 2% commission on the face amount of the loan, and the note bears interest at 4% per year. During the first month, Marsh collected $380,000 on assigned accounts. This amount was remitted to the finance company along with one month's interest on the note. Make all the entries for Marsh Inc. associated with the transfer of the accounts receivable, the loan, and the remittance to the finance company. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.) Problem 162 The trial balance before adjustment of Risen Company reports the following balances: Dr. Accounts receivable $100,000 Allowance for doubtful accounts $1,000 Sales (all on credit) Sales returns and allowances Cr. 500,000 20,000 Problem 163 (Part Level Submission) On December 31, 2014, Green Company finished consultation services and accepted in exchange a promissory note with a face value of $610,000, a due date of December 31, 2017, and a stated rate of 5%, with interest receivable at the end of each year. The fair value of the services is not readily determinable and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of 10%. The following interest factors are provided: Interest Rate Table Factors For Three Periods 5% 10% Future Value of 1 1.15763 1.33100 Present Value of 1 0.86384 0.75132 Future Value of Ordinary Annuity of 1 3.15250 3.31000 Present Value of Ordinary Annuity of 1 2.72325 2.48685 Problem 163 (Part Level Submission) On December 31, 2014, Green Company finished consultation services and accepted in exchange a promissory note with a face value of $610,000, a due date of December 31, 2017, and a stated rate of 5%, with interest receivable at the end of each year. The fair value of the services is not readily determinable and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of 10%. The following interest factors are provided: Interest Rate Table Factors For Three Periods 5% 10% Future Value of 1 1.15763 1.33100 Present Value of 1 0.86384 0.75132 Future Value of Ordinary Annuity of 1 3.15250 3.31000 Present Value of Ordinary Annuity of 1 2.72325 2.48685 Prepare a Schedule of Note Discount Amortization for Green Company under the effective interest method. (Do not leave any answer field blank. Enter 0 for amounts.) Problem 164 (Part Level Submission) Prepare journal entries for Mars Co. for: (a) Your answer is correct. Accounts receivable in the amount of $1,150,000 were assigned to Utley Finance Co. by Mars as security for a loan of $900,000. Utley charged a 2% commission on the accounts; the interest rate on the note is 11%. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Problem 164 (Part Level Submission) Prepare journal entries for Mars Co. for: (b) Your answer is correct. During the first month, Mars collected $300,000 on assigned accounts after deducting $660 of discounts. Mars wrote off a $920 assigned account. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Problem 164 (Part Level Submission) Prepare journal entries for Mars Co. for: (c) Your answer is correct. Mars paid to Utley the amount collected plus 3 month's interest on the note. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Problem 157 Your answer is correct. Vogts Company sells TVs. The perpetual inventory was stated as $38,500 on the books at December 31, 2014. At the close of the year, a new approach for compiling inventory was used and apparently a satisfactory cut-off for preparation of financial statements was not made. Some events that occurred are as follows. 1. TVs shipped to a customer January 2, 2015, costing $5,000 were included in inventory at December 31, 2014. The sale was recorded in 2015. 2. TVs costing $12,000 received December 30, 2014, were recorded as received on January 2, 2015. 3. TVs received during 2014 costing $4,600 were recorded twice in the inventory account. 4. TVs shipped to a customer December 28, 2014, f.o.b. shipping point, which cost $9,000, were not received by the customer until January, 2015. The TVs were included in the ending inventory. 5. TVs on hand that cost $6,100 were never recorded on the books. Compute the correct inventory at December 31, 2014. Exercise 8-8 (Part Level Submission) Cruise Industries purchased $10,100 of merchandise on February 1, 2014, subject to a trade discount of 9% and with credit terms of 3/15, n/60. It returned $2,800 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13. (a) Your answer is correct. Assuming that Cruise uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 6,578. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Exercise 8-8 (Part Level Submission) Cruise Industries purchased $10,100 of merchandise on February 1, 2014, subject to a trade discount of 9% and with credit terms of 3/15, n/60. It returned $2,800 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13. (b) Your answer is correct. Assuming that Cruise uses the periodic method for recording merchandise transactions, record the purchase, return, and payment using the gross method. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 6,578. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Exercise 8-8 (Part Level Submission) Cruise Industries purchased $10,100 of merchandise on February 1, 2014, subject to a trade discount of 9% and with credit terms of 3/15, n/60. It returned $2,800 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13. (c) Your answer is correct. At what amount would the purchase on February 1 be recorded if the net method were used? (Round answer to 0 decimal places, e.g. 6,578.) Exercise 8-18 Your answer is correct. The board of directors of Ichiro Corporation is considering whether or not it should instruct the accounting department to shift from a first-in, first-out (FIFO) basis of pricing inventories to a lastin, first-out (LIFO) basis. The following information is available. Sales 21,200 units @ $63 Inventory, January 1 6,480 units @ 25 Purchases 6,760 units @ 28 10,400 units @ 31 7,730 units @ 38 10,170 units @ ? Inventory, December 31 Operating expenses $251,800 Prepare a condensed income statement for the year on both bases for comparative purposes. Exercise 8-20 Johnny Football Shop began operations on January 2, 2014. The following stock record card for footballs was taken from the records at the end of the year. Date Voucher Terms Units Receive d Unit Invoice Cost Gross Invoice Amount 1/15 10624 Net 30 59 $30 3/15 11437 1/5, net 30 74 24 1,776 6/20 21332 1/10, net 30 99 22 2,178 9/12 27644 1/10, net 30 93 18 1,674 11/24 31269 1/10, net 30 85 16 1,360 Totals 410 $1,770 $8,758 A physical inventory on December 31, 2014, reveals that 103 footballs were in stock. The bookkeeper informs you that all the discounts were taken. Assume that Johnny Football Shop uses the invoice price less discount for recording purchases. Exercise 8-20 Johnny Football Shop began operations on January 2, 2014. The following stock record card for footballs was taken from the records at the end of the year. Date Voucher Terms Units Receive d Unit Invoice Cost Gross Invoice Amount 1/15 10624 Net 30 59 $30 $1,770 3/15 11437 1/5, net 30 74 24 1,776 6/20 21332 1/10, net 30 99 22 2,178 9/12 27644 1/10, net 30 93 18 1,674 11/24 31269 1/10, net 30 Totals 85 16 410 1,360 $8,758 A physical inventory on December 31, 2014, reveals that 103 footballs were in stock. The bookkeeper informs you that all the discounts were taken. Assume that Johnny Football Shop uses the invoice price less discount for recording purchases. Your answer is correct. Compute the December 31, 2014, inventory using the FIFO method. (Round per unit and final answer to 2 decimal paces, e.g. 35.57.) What method would you recommend to the owner to minimize income taxes in 2014, using the inventory information for footballs as a guide? Exercise 8-25 Your answer is correct. Presented below is information related to Dino Radja Company. Date Ending Inventory (End-of-Year Prices) Price Index December 31, 2011 $ 60,400 100 December 31, 2012 178,948 154 December 31, 2013 179,872 176 December 31, 2014 206,910 190 December 31, 2015 245,795 205 December 31, 2016 284,504 212 Compute the ending inventory for Dino Radja Company for 2011 through 2016 using the dollarvalue LIFO method. Problem 151 Flint Department Store wishes to use the retail LIFO method of valuing inventories for 2015. The appropriate data are as follows: December 31, 2014 inventory (base layer) Purchases (net of returns, allowances, markups, and markdowns) At Cost At Retail $1,250,000 2,100,000 $2,100,000 3,500,000 Sales revenue 3,290,000 Price index for 2015 105 Complete the following schedule. (Do not leave any answer field blank. Enter 0 for amounts.) Brief Exercise 9-1 Presented below is information related to Rembrandt Inc.'s inventory. (per unit) Historical cost Selling price Cost to distribute Current replacement cost Normal profit margin Determine the following: Skis $278.16 310.37 27.82 297.19 46.85 Boots $155.18 212.28 11.71 153.72 42.46 Parkas $77.59 107.97 3.66 74.66 31.11 (a) the two limits to market value (i.e., the ceiling and the floor) that should be used in the lowerof-cost-or-market computation for skis. Brief Exercise 9-3 Your answer is correct. Kumar Inc. uses a perpetual inventory system. At January 1, 2014, inventory was $233,570 at both cost and market value. At December 31, 2014, the inventory was $293,740 at cost and $260,650 at market value. Prepare the necessary December 31 entry under (a) the cost-of-goods-sold method (b) Loss method. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Brief Exercise 9-4 Your answer is correct. Bell, Inc. buys 1,200 computer game CDs from a distributor who is discontinuing those games. The purchase price for the lot is $9,300. Bell will group the CDs into three price categories for resale, as indicated below Grou p 1 2 3 No. of CDs 200 800 200 Price per CD $6 12 18 Determine the cost per CD for each group, using the relative sales value method. (Do not round ratios for computational purposes and round final answers to 2 decimal places, e.g. 5.85.) Brief Exercise 9-5 Your answer is correct. Kemper Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2015 at a cost of $1,383,200. At December 31, 2014, the raw materials to be purchased have a market value of $978,900. Prepare any necessary December 31, 2014 entry.(Credit account titles are automatically indented when amount is entered. Do not indent manually.) Brief Exercise 9-6 Your answer is correct. Kemper Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2015 at a cost of $1,108,900. At December 31, 2014, the raw materials to be purchased have a market value of $979,700. In 2015, Kemper paid $1,108,900 to obtain the raw materials which were worth $979,700. Prepare the entry to record the purchase. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Brief Exercise 9-7 Your answer is correct. Fosbre Corporation's April 30 inventory was destroyed by fire. January 1 inventory was $250,700, and purchases for January through April totaled $512,900. Sales revenue for the same period were $715,800. Fosbre's normal gross profit percentage is 35% on sales. Using the gross profit method, estimate Fosbre's April 30 inventory that was destroyed by fire. Brief Exercise 9-9 (Part Level Submission) In its 2012 annual report, Gap Inc. reported inventory of $1,615 million on January 25, 2012, and $1,620 million on January 29, 2011, cost of sales of $9,275 million for fiscal year 2012, and net sales of $14,549 million. (a) Your answer is correct. Compute Gap's inventory turnover for the fiscal year 2012. (Round answer to 2 decimal places, e.g. 7.60.) Brief Exercise 9-9 (Part Level Submission) In its 2012 annual report, Gap Inc. reported inventory of $1,615 million on January 25, 2012, and $1,620 million on January 29, 2011, cost of sales of $9,275 million for fiscal year 2012, and net sales of $14,549 million. (b) Your answer is correct. Compute Gap's average days to sell inventory for the fiscal year 2012. (Round answer to 1 decimal place, e.g. 7.6.) Exercise 10-5 Your answer is correct. Ben Sisko Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment. Abstract company's fee for title search $1,076 Architect's fees 6,562 Cash paid for land and dilapidated building thereon Removal of old building Less: Salvage 180,090 $41,400 11,385 30,015 Interest on short-term loans during construction 15,318 Excavation before construction for basement 39,330 Machinery purchased (subject to 2% cash discount, which was not taken). Company uses net method to record discount. Freight on machinery purchased 113,850 2,774 Storage charges on machinery, necessitated by noncompletion of building when machinery was delivered 4,513 New building constructed (building construction took 6 months from date of purchase of land and old building) 1,003,950 Assessment by city for drainage project 3,312 Hauling charges for delivery of machinery from storage to new building 1,283 Installation of machinery 4,140 Trees, shrubs, and other landscaping after completion of building (permanent in nature) 11,178 Determine the amounts that should be debited to Land, to Buildings, and to Machinery and Equipment. Assume the benefits of capitalizing interest during construction exceed the cost of implementation. (Please leave spaces blank if there is no answer. Do not enter zeros in those spaces.) Exercise 10-11 Your answer is correct. Jane Geddes Engineering Corporation purchased conveyor equipment with a list price of $16,600. Presented below are three independent cases related to the equipment. (a) Geddes paid cash for the equipment 8 days after the purchase. The vendor's credit terms are 2/10, n/30. Assume that equipment purchases are initially recorded gross. (b) Geddes traded in equipment with a book value of $2,300 (initial cost $8,500), and paid (c) $13,530 in cash one month after the purchase. The old equipment could have been sold for $420 at the date of trade. (The exchange has commercial substance.) Geddes gave the vendor a $17,270 zero-interest-bearing note for the equipment on the date of purchase. The note was due in one year and was paid on time. Assume that the effectiveinterest rate in the market was 9%. Prepare the general journal entries required to record the acquisition and payment in each of the independent cases above. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Problem 10-7 Laserwords Inc. is a book distributor that had been operating in its original facility since 1987. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for Laserwords since 2009. Laserwords' original facility became obsolete by early 2014 because of the increased sales volume and the fact that Laserwords now carries CDs in addition to books. On June 1, 2014, Laserwords contracted with Black Construction to have a new building constructed for $8,716,000 on land owned by Laserwords. The payments made by Laserwords to Black Construction are shown in the schedule below. Date July 30, 2014 January 30, 2015 May 30, 2015 Total payments Amount $1,961,100 3,268,500 3,486,400 $8,716,000 Construction was completed and the building was ready for occupancy on May 27, 2015. Laserwords had no new borrowings directly associated with the new building but had the following debt outstanding at May 31, 2015, the end of its fiscal year. 10%, 5-year note payable of $4,358,000, dated April 1, 2011, with interest payable annually on April 1. 12%, 10-year bond issue of $6,537,000 sold at par on June 30, 2007, with interest payable annually on June 30. The new building qualifies for interest capitalization. The effect of capitalizing the interest on the new building, compared with the effect of expensing the interest, is material. Some interest cost of Laserwords Inc. is capitalized for the year ended May 31, 2015. Compute the amount of each items that must be disclosed in Laserwords' financial statements. Exercise 10-22 Your answer is correct. The following transactions occurred during 2014. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year. Jan. 30 Mar. 10 A building that cost $438,240 in 1997 is torn down to make room for a new building. The wrecking contractor was paid $16,932 and was permitted to keep all materials salvaged. Machinery that was purchased in 2007 for $53,120 is sold for $9,628 cash, f.o.b. Mar. 20 May 18 June 23 purchaser's plant. Freight of $996 is paid on the sale of this machinery. A gear breaks on a machine that cost $29,880 in 2009. The gear is replaced at a cost of $6,640. The replacement does not extend the useful life of the machine but does make the machine more efficient. A special base installed for a machine in 2008 when the machine was purchased has to be replaced at a cost of $18,260 because of defective workmanship on the original base. The cost of the machinery was $47,144 in 2008. The cost of the base was $11,620, and this amount was charged to the Machinery account in 2008. One of the buildings is repainted at a cost of $22,908. It had not been painted since it was constructed in 2010. Prepare general journal entries for the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Brief Exercise 10-15 Your answer is correct. Ottawa Corporation owns machinery that cost $35,760 when purchased on July 1, 2011. Depreciation has been recorded at a rate of $4,291 per year, resulting in a balance in accumulated depreciation of $15,019 at December 31, 2014. The machinery is sold on September 1, 2015, for $9,298. Prepare journal entries to (a) update depreciation for 2015 and (b) record the sale. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Exercise 129 (Part Level Submission) A machine which cost $300,000 is acquired on October 1, 2014. Its estimated salvage value is $30,000 and its expected life is eight years. (a) Your answer is correct. Calculate depreciation expense for 2014 and 2015 by Double-declining balance. Exercise 129 (Part Level Submission) A machine which cost $300,000 is acquired on October 1, 2014. Its estimated salvage value is $30,000 and its expected life is eight years. (b1) Your answer is correct. Calculate depreciation expense for 2014 and 2015 by Sum-of-the-years'-digits. Exercise 129 (Part Level Submission) A machine which cost $300,000 is acquired on October 1, 2014. Its estimated salvage value is $30,000 and its expected life is eight years. (b2) Your answer is correct. At the end of 2015, which method results in the larger accumulated depreciation amount? Problem 11-1 (Part Level Submission) Alladin Company purchased Machine #201 on May 1, 2014. The following information relating to Machine #201 was gathered at the end of May. Price Credit terms Freight-in Preparation and installation costs Labor costs during regular production operations $93,500 2/10, n/30 $ 880 $ 4,180 $11,550 It is expected that the machine could be used for 10 years, after which the salvage value would be zero. Alladin intends to use the machine for only 8 years, however, after which it expects to be able to sell it for $1,650. The invoice for Machine #201 was paid May 5, 2014. Alladin uses the calendar year as the basis for the preparation of financial statements. Problem 11-1 (Part Level Submission) Alladin Company purchased Machine #201 on May 1, 2014. The following information relating to Machine #201 was gathered at the end of May. Price Credit terms Freight-in Preparation and installation costs Labor costs during regular production operations $93,500 2/10, n/30 $ 880 $ 4,180 $11,550 It is expected that the machine could be used for 10 years, after which the salvage value would be zero. Alladin intends to use the machine for only 8 years, however, after which it expects to be able to sell it for $1,650. The invoice for Machine #201 was paid May 5, 2014. Alladin uses the calendar year as the basis for the preparation of financial statements. Problem 11-1 (Part Level Submission) Alladin Company purchased Machine #201 on May 1, 2014. The following information relating to Machine #201 was gathered at the end of May. Price Credit terms Freight-in Preparation and installation costs Labor costs during regular production operations $93,500 2/10, n/30 $ 880 $ 4,180 $11,550 It is expected that the machine could be used for 10 years, after which the salvage value would be zero. Alladin intends to use the machine for only 8 years, however, after which it expects to be able to sell it for $1,650. The invoice for Machine #201 was paid May 5, 2014. Alladin uses the calendar year as the basis for the preparation of financial statements. Brief Exercise 11-6 Your answer is correct. Dickinson Inc. owns the following assets. Asse Cost Salvag Estimated Useful t e Life A $78,500 $7,850 10 years B 55,700 5,570 5 years C 140,220 6,840 12 years Compute the composite depreciation rate and the composite life of Dickinson's assets. (Round answers to 1 decimal place, e.g. 4.8% or 4.8 years.) Exercise 11-16 (Part Level Submission) Presented below is information related to equipment owned by Suarez Company at December 31, 2014. Cost Accumulated depreciation to date $ 21,843,000 2,427,000 Expected future net cash flows 16,989,000 Fair value 11,649,600 Assume that Suarez will continue to use this asset in the future. As of December 31, 2014, the equipment has a remaining useful life of 5 years. (a) Your answer is correct. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Exercise 11-16 (Part Level Submission) Presented below is information related to equipment owned by Suarez Company at December 31, 2014. Cost Accumulated depreciation to date $ 21,843,000 2,427,000 Expected future net cash flows 16,989,000 Fair value 11,649,600 Assume that Suarez will continue to use this asset in the future. As of December 31, 2014, the equipment has a remaining useful life of 5 years. (b) Your answer is correct. Prepare the journal entry to record depreciation expense for 2015. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Exercise 11-16 (Part Level Submission) Presented below is information related to equipment owned by Suarez Company at December 31, 2014. $ 21,843,000 Cost Accumulated depreciation to date 2,427,000 Expected future net cash flows 16,989,000 Fair value 11,649,600 Assume that Suarez will continue to use this asset in the future. As of December 31, 2014, the equipment has a remaining useful life of 5 years. (c) Your answer is correct. The fair value of the equipment at December 31, 2015, is $12,377,700. Prepare the journal entry (if any) necessary to record this increase in fair value. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Exercise 11-19 Stanislaw Timber Company owns 9,000 acres of timberland purchased in 2003 at a cost of $3,276 per acre. At the time of purchase, the land without the timber was valued at $936 per acre. In 2004, Stanislaw built fire lanes and roads, with a life of 30 years, at a cost of $196,560. Every year, Stanislaw sprays to prevent disease at a cost of $7,020 per year and spends $16,380 to maintain the fire lanes and roads. During 2005, Stanislaw selectively logged and sold 1,638,000 board feet of timber, of the estimated 8,190,000 board feet. In 2006, Stanislaw planted new seedlings to replace the trees cut at a cost of $234,000. Exercise 11-24 Your answer is correct. The 2011 Annual Report of Tootsie Roll Industries contains the following information. (in millions) Total assets December 31, 2011 December 31, 2010 $857.9 $858.0 Total liabilities 191.9 190.6 Net sales 528.4 517.1 43.9 53.0 Net income Compute the following ratios for Tootsie Roll for 2011