I want cmenezes to work on this: Review the Ethical Issue: Dobbs Wholesale Antiques in chapter 5 (Page 317). By Saturday, March 2, 2013, address the following in your initial post: 1. Under Dobbs FOB policy, when should the company record a sale? 2. Do you approve or disapprove of Dobbs's manner of deciding when to ship goods to customers and record the sales revenue? If you approve, give your reason. If you disapprove, identify a better way to decide when to ship goods. Is there an accounting rule against Dobbs's practice? By the end of the week, provide substantive responses to at least two other students' initial posts \fEquipment was acquired at the beginning of the year at a cost of $75,000. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,500. a. What was the depreciation expense for the first year? $ b. Assuming the equipment was sold at the end of the second year for $59,000, determine the gain or loss on sale of the equipment. c. Journalize the entry to record the sale. For a compound transaction, if an amount box does not require an entry, leave it blank. Solution: a. Depreciaiton expense for the first year is $11,250 Depreciation Expense = (Cost - Residual Value)/Life of the asset =(75000-7500)/6 $11,250 b. The gain on sale of the equipment is $6,500 Balance at the end of second year is Cost - Accumulated Depreciation for 2 years =75000-11250*2 $52,500 Sale Price BV Profit on sale $59,000 $52,500 $6,500 c. Journal Entry to record the sale Cash Accumulated Depreciation Equipment Profit on sale of asset $59,000 $22,500 $75,000 $6,500 Copy equipment was acquired at the beginning of the year at a cost of $56,000 that has an estimated residual value of $8,000 and an estimated useful life of 5 years. The machine has an estimated 1,000,000 copies. This year 240,000 copies were made. Determine the (a) depreciable cost, (b) depreciation rate, and (c) the units-of-production depreciation for the year. Round "depreciation rate" to three decimal places. a. Depreciable cost $ b. Depreciation rate per copy c. The units-of-production depreciation for the year $ Solution: a. Depreciable cost is $48,000 Depreciable cost is cost less estimated value =$56,000 less $8,000 48000 b. Depreciation rate per copy $0.048 Depreciable cost/Estimated copies =48000/1000000 0.048 c. The units-of-production depreciation for the year $11,520 =0.048*240000 11520 Champion Company purchased and installed carpet in its new general offices on March 30 for a total cost of $18,000. The carpet is estimated to have a 15-year useful life and no residual value. 1. Prepare the journal entry necessary for recording the purchase of the new carpet. Solution: Furniture/fixtures (New Carpet) 18000 Cash 18000 On October 1, Sebastian Company acquired new equipment with a fair market value of $458,000. Sebastian received a trade-in allowance of $92,000 on the old equipment of a similar type and paid cash of $366,000. The following information about the old equipment is obtained from the account in the equipment ledger: Cost, $336,000; accumulated depreciation on December 31, the end of the preceding fiscal year, $220,000; annual depreciation, $20,000. Assuming the exchange has commercial substance, journalize the entries to record: a. The current depreciation of the old equipment to the date of trade-in b. The exchange transaction on October 1. For a compound transaction, if an amount box does not require an entry, leave it blank. Solution: Annual depreciation Dec 31 through Oct 1 Dep 20000 15000 a. The current depreciation of the old equipment to the date of trade-in Depreciation expense 15000 Accumulated Depreciation 15000 Accumulated Depreciation - old equipment Dec 31 Add: Depreciation for the year Accumulated Depreciation - old equipment Oct 1 220000 15000 235000 Cost WDV Trade in allowance Loss on exchange 336000 101000 92000 9000 New equipment 458000 467000 In case of like exchange - loss will increase the cost of new equipment 30000 28000 b. Entry to record the exchange transaction on October 1 New Equipment Accumulated Dep - Old Equipment Cash Old Equipment 467000 235000 366000 336000 On May 1, 10,000 shares of $10 par common stock were issued at $30, and on May 7, 5,000 shares of $50 par preferred stock were issued at $111 Journalize the entry for May 1. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Journalize the entry for May 7. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Solution: May 1 Journal Entry Cash 300000 Common Stock 100000 (10000 shares @10 per share) Additional Paid in Capital 200000 (10000 shares @20 per share) May 7 Journal Entry Cash 555000 Preferred stock 250000 Paid in capital in excess of par value - Preferred Stock 305000 (5000 shares @50 per share) (5000 shares @61 per share) The dates of importance in connection with a cash dividend of $65,000 on a corporation's common stock are January 15, February 15, and March 15. Journalize the entries required on each date. If no entry is required, type "No entry required" and leave the amount boxes blank. Solution: Jan 15 - Date of Declaration Retained Earnings 65000 Dividends payable 65000 Feb 15 - Date of Record NO ENTRY March 15 - Date of Payment Dividends payable Cash 65000 65000 A corporation, which had 18,000 shares of common stock outstanding, declared a 3-for-1 stock split. a. What will be the number of shares outstanding after the split? shares b. If the common stock had a market price of $240 per share before the stock split, what would be an approximate market price per share after the split? $ per share c. Journalize the entry to record the stock split. If no entry is required, type "No entry required" and leave the amount boxes blank. Solution: a. The number of shares outstanding after the split is 54,000 shares (derived as 18,000 shares times 3.) b. The approximate market price per share after the split is $80 per share (derived as $240/3) c. "No entry required" On April 2nd a corporation purchased for cash 5,000 shares of its own $10 par common stock at $26 a share. They sold 3,000 of the treasury shares at $29 a share on June 15th. The remaining 2,000 shares were sold on November 10th for $22 a share. a. Journalize the entry to record the purchase (treasury stock is recorded at cost). b. Journalize the entries to record the sale of the stock. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Solution: a. The entry to record the purchase (treasury stock is recorded at cost). Treasury stock 130000 (5,000 shares @26 a share) Cash 130000 (5,000 shares @26 a share) b. Sale of treasury shares on June 15th Cash Treasury stock Paid in capital -treasury stock 87000 (3,000 shares @29 a share) (3,000 shares @26 a share) (3,000 shares @3 a share) 78000 9000 Nov 10th Cash Paid in capital -treasury stock Treasury stock 44000 8000 (2,000 shares @22 a share) 52000 (2,000 shares @26 a share) The following data regarding purchases and sales of a commodity were taken from the related perpetual inventory account: june 1 balance 25 units at $60 6 sale 20 units 8purchase 20 units at $61 16 sales 10 units 20 purchase 20 units at $62 23 sales 25 units 30 purchase 15 units at $63 Calculate the cost of the ending inventory at June 30, using (1) the first-in, first-out (FIFO) method and (2) the last-in, first-out (LIFO) method. Identify the quantity, unit price, and total cost of each lot in the inventory. Solution: FIFO METHOD JUNE TRANSACTION UNITS PRICE/U CUMU Inventory balance Qty unit price total cost 1 BALANCE 25 60 June 20 purch 10 62 620 6 SALE 20 June 30 purch 15 63 945 8 PURCHASE 20 61 1565 16 SALE 10 20 PURCHASE 20 62 LIFO METHOD 23 SALE 25 Inventory balance Qty unit price total cost 30 PURCHASE 15 63 Beg balance 25 60 1500 BEGINNING BAL 25 TOTAL PURC 55 TOTAL SALE 55 ENDING 25 Using FIFO - cost of the ending inventory is $1,565 Using LIFO - cost of the ending inventory is $1,500 Machinery is purchased on July 1 of the current fiscal year for $240,000. It is expected to have a useful life of 4 years, or 25,000 operating hours, and a residual value of $15,000. Compute the depreciation for the last six months of the current fiscal year ending December 31 by each of the following methods: a. Straight-line $ b. Declining-balance at twice the straight-line rate $ c. Units-of-production (used for 1,600 hours during the current year) Solution: a. Depreciaiton expense for the last six months - SLM Depreciation Expense = (Cost - Residual Value)/Life of the asset =(240000-15000)/4/2 $28,125 b. Depreciaiton expense for the last six months - DB twice SLM Rate SLM Rate DB Rate 25.0% 50.0% Depreciation Expense = Cost * Declining Balance Rate =240000*50%/2 $60,000 c. Depreciaiton expense for the last six months - Units-of-production (UOP) UOP Rate =(240000-15000)/25000 9 Deprecaition expense = UOP Rate * number of hours used $14,400 Prepare entries to record the following: a. Issued 1,000 shares of $10 par common stock at $59 for cash. For a compound transaction, if an amount box does not require an entry, leave it blank or enter " 0. b. Issued 1,400 shares of common stock in exchange for equipment with a fair market price of $60,000. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". c. Purchased 100 shares of treasury stock at $32. d. Sold 100 shares of treasury stock at $42. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Solution: a Journal entry Cash 59000 Common Stock 10000 (1000 shares @10 par value) Additional Paid in capital 49000 (1000 shares @49 par value) b Journal entry Equipment Common Stock Additional Paid in Capital c Journal entry Treasury Stock Cash d Journal entry Cash Paid in capital - treasury stock Treasury Stock 60000 14000 46000 3200 (1400 shares @10 par value) Balancing (100 shares @32 per share) 3200 4200 (100 shares @42 per share) 1000 3200 (100 shares @32 per share) Equipment was acquired at the beginning of the year at a cost of $75,000. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,500. a. What was the depreciation expense for the first year? $ b. Assuming the equipment was sold at the end of the second year for $59,000, determine the gain or loss on sale of the equipment. c. Journalize the entry to record the sale. For a compound transaction, if an amount box does not require an entry, leave it blank. Solution: a. Depreciaiton expense for the first year is $11,250 Depreciation Expense = (Cost - Residual Value)/Life of the asset =(75000-7500)/6 $11,250 b. The gain on sale of the equipment is $6,500 Balance at the end of second year is Cost - Accumulated Depreciation for 2 years =75000-11250*2 $52,500 Sale Price BV Profit on sale $59,000 $52,500 $6,500 c. Journal Entry to record the sale Cash Accumulated Depreciation Equipment Profit on sale of asset $59,000 $22,500 $75,000 $6,500 Copy equipment was acquired at the beginning of the year at a cost of $56,000 that has an estimated residual value of $8,000 and an estimated useful life of 5 years. The machine has an estimated 1,000,000 copies. This year 240,000 copies were made. Determine the (a) depreciable cost, (b) depreciation rate, and (c) the units-of-production depreciation for the year. Round "depreciation rate" to three decimal places. a. Depreciable cost $ b. Depreciation rate per copy c. The units-of-production depreciation for the year $ Solution: a. Depreciable cost is $48,000 Depreciable cost is cost less estimated value =$56,000 less $8,000 48000 b. Depreciation rate per copy $0.048 Depreciable cost/Estimated copies =48000/1000000 0.048 c. The units-of-production depreciation for the year $11,520 =0.048*240000 11520 Champion Company purchased and installed carpet in its new general offices on March 30 for a total cost of $18,000. The carpet is estimated to have a 15-year useful life and no residual value. 1. Prepare the journal entry necessary for recording the purchase of the new carpet. Solution: Furniture/fixtures (New Carpet) 18000 Cash 18000 On October 1, Sebastian Company acquired new equipment with a fair market value of $458,000. Sebastian received a trade-in allowance of $92,000 on the old equipment of a similar type and paid cash of $366,000. The following information about the old equipment is obtained from the account in the equipment ledger: Cost, $336,000; accumulated depreciation on December 31, the end of the preceding fiscal year, $220,000; annual depreciation, $20,000. Assuming the exchange has commercial substance, journalize the entries to record: a. The current depreciation of the old equipment to the date of trade-in b. The exchange transaction on October 1. For a compound transaction, if an amount box does not require an entry, leave it blank. Solution: Annual depreciation Dec 31 through Oct 1 Dep 20000 15000 a. The current depreciation of the old equipment to the date of trade-in Depreciation expense 15000 Accumulated Depreciation 15000 Accumulated Depreciation - old equipment Dec 31 Add: Depreciation for the year Accumulated Depreciation - old equipment Oct 1 220000 15000 235000 Cost WDV Trade in allowance Loss on exchange 336000 101000 92000 9000 New equipment 458000 467000 In case of like exchange - loss will increase the cost of new equipment 30000 28000 b. Entry to record the exchange transaction on October 1 New Equipment Accumulated Dep - Old Equipment Cash Old Equipment 467000 235000 366000 336000 On May 1, 10,000 shares of $10 par common stock were issued at $30, and on May 7, 5,000 shares of $50 par preferred stock were issued at $111 Journalize the entry for May 1. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Journalize the entry for May 7. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Solution: May 1 Journal Entry Cash 300000 Common Stock 100000 (10000 shares @10 per share) Additional Paid in Capital 200000 (10000 shares @20 per share) May 7 Journal Entry Cash 555000 Preferred stock 250000 Paid in capital in excess of par value - Preferred Stock 305000 (5000 shares @50 per share) (5000 shares @61 per share) The dates of importance in connection with a cash dividend of $65,000 on a corporation's common stock are January 15, February 15, and March 15. Journalize the entries required on each date. If no entry is required, type "No entry required" and leave the amount boxes blank. Solution: Jan 15 - Date of Declaration Retained Earnings 65000 Dividends payable 65000 Feb 15 - Date of Record NO ENTRY March 15 - Date of Payment Dividends payable Cash 65000 65000 A corporation, which had 18,000 shares of common stock outstanding, declared a 3-for-1 stock split. a. What will be the number of shares outstanding after the split? shares b. If the common stock had a market price of $240 per share before the stock split, what would be an approximate market price per share after the split? $ per share c. Journalize the entry to record the stock split. If no entry is required, type "No entry required" and leave the amount boxes blank. Solution: a. The number of shares outstanding after the split is 54,000 shares (derived as 18,000 shares times 3.) b. The approximate market price per share after the split is $80 per share (derived as $240/3) c. "No entry required" On April 2nd a corporation purchased for cash 5,000 shares of its own $10 par common stock at $26 a share. They sold 3,000 of the treasury shares at $29 a share on June 15th. The remaining 2,000 shares were sold on November 10th for $22 a share. a. Journalize the entry to record the purchase (treasury stock is recorded at cost). b. Journalize the entries to record the sale of the stock. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Solution: a. The entry to record the purchase (treasury stock is recorded at cost). Treasury stock 130000 (5,000 shares @26 a share) Cash 130000 (5,000 shares @26 a share) b. Sale of treasury shares on June 15th Cash Treasury stock Paid in capital -treasury stock 87000 (3,000 shares @29 a share) (3,000 shares @26 a share) (3,000 shares @3 a share) 78000 9000 Nov 10th Cash Paid in capital -treasury stock Treasury stock 44000 8000 (2,000 shares @22 a share) 52000 (2,000 shares @26 a share) The following data regarding purchases and sales of a commodity were taken from the related perpetual inventory account: june 1 balance 25 units at $60 6 sale 20 units 8purchase 20 units at $61 16 sales 10 units 20 purchase 20 units at $62 23 sales 25 units 30 purchase 15 units at $63 Calculate the cost of the ending inventory at June 30, using (1) the first-in, first-out (FIFO) method and (2) the last-in, first-out (LIFO) method. Identify the quantity, unit price, and total cost of each lot in the inventory. Solution: FIFO METHOD JUNE TRANSACTION UNITS PRICE/U CUMU Inventory balance Qty unit price total cost 1 BALANCE 25 60 June 20 purch 10 62 620 6 SALE 20 June 30 purch 15 63 945 8 PURCHASE 20 61 1565 16 SALE 10 20 PURCHASE 20 62 LIFO METHOD 23 SALE 25 Inventory balance Qty unit price total cost 30 PURCHASE 15 63 Beg balance 25 60 1500 BEGINNING BAL 25 TOTAL PURC 55 TOTAL SALE 55 ENDING 25 Using FIFO - cost of the ending inventory is $1,565 Using LIFO - cost of the ending inventory is $1,500 Machinery is purchased on July 1 of the current fiscal year for $240,000. It is expected to have a useful life of 4 years, or 25,000 operating hours, and a residual value of $15,000. Compute the depreciation for the last six months of the current fiscal year ending December 31 by each of the following methods: a. Straight-line $ b. Declining-balance at twice the straight-line rate $ c. Units-of-production (used for 1,600 hours during the current year) Solution: a. Depreciaiton expense for the last six months - SLM Depreciation Expense = (Cost - Residual Value)/Life of the asset =(240000-15000)/4/2 $28,125 b. Depreciaiton expense for the last six months - DB twice SLM Rate SLM Rate DB Rate 25.0% 50.0% Depreciation Expense = Cost * Declining Balance Rate =240000*50%/2 $60,000 c. Depreciaiton expense for the last six months - Units-of-production (UOP) UOP Rate =(240000-15000)/25000 9 Deprecaition expense = UOP Rate * number of hours used $14,400 Prepare entries to record the following: a. Issued 1,000 shares of $10 par common stock at $59 for cash. For a compound transaction, if an amount box does not require an entry, leave it blank or enter " 0. b. Issued 1,400 shares of common stock in exchange for equipment with a fair market price of $60,000. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". c. Purchased 100 shares of treasury stock at $32. d. Sold 100 shares of treasury stock at $42. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Solution: a Journal entry Cash 59000 Common Stock 10000 (1000 shares @10 par value) Additional Paid in capital 49000 (1000 shares @49 par value) b Journal entry Equipment Common Stock Additional Paid in Capital c Journal entry Treasury Stock Cash d Journal entry Cash Paid in capital - treasury stock Treasury Stock 60000 14000 46000 3200 (1400 shares @10 par value) Balancing (100 shares @32 per share) 3200 4200 (100 shares @42 per share) 1000 3200 (100 shares @32 per share)