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Intermediate Accounting 14th Edition Kieso, weygandt and warfield. - Solutions

Sole Proprietorships (Appendix) On May 1, Chong Yu deposited $120,000 of his own savings in a separate bank account to start a printing business. He purchased copy machines for $42,000. Expenses for the year, including depreciation on the copy machines, were $84,000. Sales for the year, all in
Partnerships (Appendix) Kirin Nerise and Milt O’Brien agreed to form a partnership to operate a sandwich shop. Kirin contributed $25,000 cash and will manage the store. Milt contributed computer equipment worth $8,000 and $92,000 cash. Milt will keep the financial records. During the year, sales
Analysis of Stockholders’ Equity The Stockholders’ Equity section of the December 31, 2010, balance sheet of Eldon Company appeared as follows: Preferred stock, $30 par value, 5,000 shares authorized, ? shares issued ... $120,000Common stock, ? par, 10,000 shares authorized, 7 ,000 shares
Effects of Stockholders’ Equity Transactions on the Balance Sheet The following transactions occurred at Horton Inc. during its first year of operation:a. Issued 100,000 shares of common stock at $5 each; 1,000,000 shares are authorized at $1 par value.b. Issued 10,000 shares of common stock for
Stockholders’ Equity Section of the Balance Sheet The newly hired accountant at Ives Inc. prepared the following balance sheet: Assets Cash .....................$ 3,500 Accounts receivable ...............5,000 Treasury stock ....................500 Plant, property, and equipment
Stockholders’ Equity Category Kebler Company was incorporated as a new business on January 1, 2010. The corporate charter approved on that date authorized the issuance of 2,000 shares of $100 par, 7% cumulative, nonparticipating preferred stock and 20,000 shares of $5 par common stock. On January
Evaluating Alternative Investments Rob Lowe would like to invest $100,000 in Franklin Inc., which is offering common stock, preferred stock, and bonds on the open market. The common stock has paid $1 per share in dividends for the past three years, and the company expects to be able to double the
Dividends for Preferred and Common Stock The Stockholders’ Equity category of Rausch Company’s balance sheet as of December 31, 2010, appeared as follows: Preferred stock, $100 par, 8%, 2,000 shares issued and outstanding ..... $ 200,000 Common stock, $10 par, 40,000 shares issued and
Effect of Stock Dividend Travanti Company has a history of paying cash dividends on its common stock. Although the firm has been profitable this year, the board of directors is planning construction of a second manufacturing plant. To reduce the amount that they must borrow to finance the
Dividends and Stock Splits On January 1, 2010, Svenberg Inc.’s Stockholders’ Equity category appeared as follows: Preferred stock, $80 par value, 8%, 1,000 shares issued and outstanding ....... $ 80,000 Common stock, $10 par value, 10,000 shares issued and outstanding ....... 100,000
Statement of Stockholders’ Equity Refer to all of the facts in Problem 11-1A.Peeler Company was incorporated as a new business on January 1, 2010. The corporate charter approved on that date authorized the issuance of 1,000 shares of $100 par, 7% cumulative, nonparticipating preferred stock and
Costco€™s Comprehensive Income Following is the consolidated statement of stockholders€™ equity of Costco Wholesale Corporation for the year ended August 31, 2008:Required1. Costco has an item in the statement of stockholders€™ equity called Other Comprehensive Income.
Effects of Stockholders’ Equity Transactions on the Statement of Cash Flows Refer to all of the facts in Problem 11-1A.Peeler Company was incorporated as a new business on January 1, 2010. The corporate charter approved on that date authorized the issuance of 1,000 shares of $100 par, 7%
Income Distribution of a Partnership (Appendix) Kay Katz and Doris Kan are partners in a dry-cleaning business. The partnership agreement specifies the manner in which income of the business is to be distributed. Kay is to receive a salary of $40,000 for managing the business. Doris is to receive
Sole Proprietorships (Appendix) On May 1, Chen Chien Lao deposited $150,000 of her own savings in a separate bank account to start a printing business. She purchased copy machines for $52,500. Expenses for the year, including depreciation on the copy machines, were $105,000. Sales for the year, all
Partnerships (Appendix) Karen Locke and Gina Keyes agreed to form a partnership to operate a sandwich shop. Karen contributed $35,000 cash and will manage the store. Gina contributed computer equipment worth $11,200 and $128,800 cash. Gina will keep the financial records. During the year, sales
Analysis of Stockholders’ Equity The Stockholders’ Equity section of the December 31, 2010, balance sheet of Carter Company appeared as follows: Preferred stock, $50 par value, 10,000 shares authorized, ? shares issued ...........$ 400,000 Common stock, ? par value, 20,000 shares authorized,
Effects of Stockholders’ Equity Transactions on Balance Sheet The following transactions occurred at Hilton Inc. during its first year of operation:a. Issued 10,000 shares of common stock at $10 each; 100,000 shares are authorized at $1 par value.b. Issued 10,000 shares of common stock for a
Stockholders’ Equity Section of the Balance Sheet The newly hired accountant at Grain field Inc. is considering the following list of accounts as he prepares the balance sheet. All of the accounts have positive balances. The company is authorized to issue 1,000,000 shares of common stock and
Comparing Two Companies in the Same Industry: Kellogg’s and General Mills Refer to the Stockholders’ Equity section of the balance sheets of Kellogg’s as of December 31, 2008, and General Mills as of May 31, 2009. Required1. For each company, what are the numbers of shares of common stock
Reading General Mills’s Statement of Cash Flows Refer to General Mills’s statement of cash flows for the year ending May 31, 2009. Required1. What sources of cash are revealed in the Financing Activities category of the statement of cash flows?2. What was the amount of dividends paid to
Debt versus Preferred Stock Assume that you are an analyst attempting to compare the financial structures of two companies. In particular, you must analyze the debt and equity categories of the two firms and calculate a debt-to-equity ratio for each firm. The Liability and Equity categories of
Preferred versus Common Stock Rohnan Inc. needs to raise $500,000. It is considering two options:a. Issue preferred stock, $100 par, 8%, cumulative, nonparticipating, callable at $110. The stock could be issued at par.b. Issue common stock, $1 par, market $10. Currently, the company has 400,000
Dividend Policy Hancock Inc. is owned by nearly 100 shareholders. Judith Stitch owns 48% of the stock. She needs cash to fulfill her commitment to donate the funds to construct a new art gallery. Some of her friends have agreed to vote for Hancock to pay a larger-than-normal dividend to
Following are the financial statements for Griffin Inc. for the year 2010:Additional information:Griffin Inc. has authorized 500,000 shares of 10%, $10 par value, cumulative preferred stock. There were 100,000 shares issued and outstanding at all times during 2010.The firm also has authorized 5
What is meant by the following statement? The items depicted in financial statements are merely representations of the real thing.
What is the meaning of the following statement? The choice between historical cost and current value is a good example of the trade-off in accounting between relevance and reliability.
A realtor earns a 10% commission on the sale of a $150,000 home. The realtor lists the home on June 5, the sale occurs on June 12, and the seller pays the realtor the $15,000 commission on July 8. When should the realtor recognize revenue from the sale assuming(a) The cash basis of accounting
What does the following statement mean? If I want to assess the cash flow prospects for a company “down the road,” I look at the company’s most recent statement of cash flows. An income statement prepared under the accrual basis of accounting is useless for this purpose.
What is the relationship between the time period assumption and accrual accounting?
Is it necessary for an asset to be acquired when revenue is recognized? Explain your answer.
A friend says to you: “I just don’t get it. Assets cost money. Expenses reduce income. There must be some relationship among assets, costs, and expenses—I’m just not sure what it is!” What is the relationship? Can you give an example of it?
What is the meaning of depreciation to the accountant?
What are the four basic types of adjustments? Give an example of each.
What is the difference between a real account and a nominal account?
What two purposes are served in making closing entries?
What are two possible attributes to be measured when an item is to be included in financial statements? What unit of money is used to measure items in the United States?
For the following situations, indicate the date on which revenue would be recognized, assuming the accrual basis of accounting. _____________a. On June 10, a customer orders a product over the phone. The product is shipped to the customer on June 14, and the customer pays the amount owed on July
Explain whether a company must have an inflow of an asset to be able to recognize revenue. Also, give two examples of situations in which revenue is earned continuously over a period of time.
Assume that a company purchases merchandise for resale on December 20, 2010. The merchandise is still on hand on December 31, the company’s year-end. On January 12, 2011, the merchandise is sold to a customer. Explain how the merchandise will be treated on any of the financial statements at
For the following situations, indicate the types of accounts affected in a year-end adjustment. Use the following legend: IA = Increase in Asset; DA = Decrease in Asset; IL = Increase in Liability; DL = Decrease in Liability; IR = Increase in Revenue; IE = Increase in Expense. Accounts
Recall the steps in the accounting cycle shown in Exhibit 4-5. Assume that a company does not prepare a work sheet. Which of the two remaining steps in the accounting cycle are performed in a different order than they would be if a work sheet were prepared? Explain your answer.
The highway department contracted with a private company to collect tolls and maintain facilities on a turnpike. Users of the turnpike can pay cash as they approach the toll booth, or they can purchase a pass. The pass is equipped with an electronic sensor that subtracts the toll fee from the pass
Comparing the Income Statement and the Statement of Cash Flows On January 1, 2010, Campus Internet Connection opened for business across the street from Upper Eastern University. The company charges students a monthly fee of $20 and $1 for each hour they are online. During January, 500 students
Three methods of matching costs with revenue were described in the chapter: (a) Directly match a specific form of revenue with a cost incurred in generating that revenue, (b) Indirectly match a cost with the periods during which it will provide benefits or revenue, and (c) Immediately recognize a
For the following situations, indicate whether each involves a deferred expense (DE), a deferred revenue (DR), an accrued liability (AL), or an accrued asset (AA). Example: __DE__ Office supplies purchased in advance of their use___________ 1. Wages earned by employees but not yet paid___________
Somerville Corp. purchases office supplies once a month and prepares monthly financial statements. The asset account Office Supplies on Hand has a balance of $1,450 on May 1. Purchases of supplies during May amount to $1,100. Supplies on hand at May 31 amount to $920. Identify and analyze the
On September 1, Northhampton Industries signed a six-month lease for office space, which is effective September 1. Northhampton agreed to prepay the rent and mailed a check for $12,000 to the landlord on September 1. Assume that Northhampton prepares adjustments only four times a year: on March 31,
On July 1, 2010, Dexter Corp. buys a computer system for $260,000 in cash. Assume that the computer is expected to have a four-year life and an estimated salvage value of $20,000 at the end of that time.Required1. Identify and analyze the transaction for the purchase of the computer on July 1,
On April 1, 2010, Briggs Corp. purchases a 24-month property insurance policy for $72,000. The policy is effective immediately. Assume that Briggs prepares adjustments only once a year, on December 31.Required1. Compute the monthly cost of the insurance policy.2. Identify and analyze the
Horse Country Living publishes a monthly magazine for which a 12-month subscription costs $30. All subscriptions require payment of the full $30 in advance. On August 1, 2010, the balance in the Subscriptions Received in Advance account was $40,500. During the month of August, the company sold 900
Wolfe & Wolfe collected $9,000 from a customer on April 1 and agreed to provide legal services during the next three months. Wolfe & Wolfe expects to provide an equal amount of services each month.Required1. Identify and analyze the transaction for the receipt of the customer deposit on
Rock N Roll produces an outdoor concert festival that runs from June 28, 2010, through July 1, 2010. Concertgoers pay $80 for a four-day pass to the festival, and all 10,000 tickets are sold out by the May 1, 2010, deadline to buy tickets. Assume that Rock N Roll prepares adjustments at the end of
Denton Corporation employs 50 workers in its plant. Each employee is paid $10 per hour and works seven hours per day, Monday through Friday. Employees are paid every Friday. The last payday was Friday, October 20.Required1. Compute the dollar amount of the weekly payroll.2. Identify and analyze the
Billings Company takes out a 12%, 90-day, $100,000 loan with First National Bank on March 1, 2010.Required1. Identify and analyze the transaction to take out the loan on March 1, 2010.2. Identify and analyze the adjustments for the months of March and April 2010.3. Identify and analyze the
Glendive takes out a 12%, 90-day, $100,000 loan with Second State Bank on March 1, 2010. Assume that Glendive prepares adjustments only four times a year: on March 31, June 30, September 30, and December 31.Required1. Identify and analyze the transaction to take out the loan on March 1, 2010.2.
Lexington Builders owns property in Kaneland County. Lexington’s 2009 property taxes amounted to $50,000. Kaneland County will send out the 2010 property tax bills to property owners during April 2011. Taxes must be paid by June 1, 2011. Assume that Lexington prepares adjustments only once a
On June 1, 2010, MicroTel Enterprises lends $60,000 to MaxiDriver Inc. The loan will be repaid in 60 days with interest at 10%.Required1. Identify and analyze the transaction on MicroTel’s books on June 1, 2010.2. Identify and analyze the adjustment on MicroTel’s books on June 30, 2010.3.
Hudson Corp. has extra space in its warehouse and agrees to rent it out to Stillwater Company at the rate of $2,000 per month. The space was made available to Stillwater beginning on September 1, 2010. Under the terms of the agreement, Stillwater pays the month’s rent on the fifth day after the
For each of the following independent situations, determine whether the effect of ignoring the required adjustment will result in an understatement (U), will result in an overstatement (O), or will have no effect (NE) on net income for the period.
Determine whether recording each of the following adjustments will increase (I), decrease (D), or have no effect (NE) on each of the three elements of the accounting equation.
The steps in the accounting cycle are listed in random order. Fill in the blank next to each step to indicate its order in the cycle. The first step in the cycle is filled in as an example. Order Procedure ______________________________________________ Prepare a work sheet.________ Close the
Hathaway Health Club sold three-year memberships at a reduced rate during its opening promotion. It sold 1,000 three-year nonrefundable memberships for $366 each. The club expects to sell 100 additional three-year memberships for $900 each over each of the next two years. Membership fees are paid
During 2010, Carter Company acquired three assets with the following costs, estimated useful lives, and estimated salvage values:The company uses the straight-line method to depreciate all assets and computes depreciation to the nearest month. For example, the computer system will be depreciated
On July 1, 2010, Paxson Corporation takes out a 12%, two-month, $50,000 loan at Friendly National Bank. Principal and interest are to be repaid on August 31.Required1. Identify and analyze the transactions or adjustments for July 1 to record the borrowing, for July 31 to record the accrual of
Kretz Corporation prepares monthly financial statements and therefore adjusts its accounts at the end of every month. The following information is available for March 2010:a. Kretz Corporation takes out a 90-day, 8%, $15,000 note on March 1, 2010, with interest and principal to be paid at
Annual Adjustments Palmer Industries prepares annual financial statements and adjusts its accounts only at the end of the year. The following information is available for the year ended December 31, 2010:a. Palmer purchased computer equipment two years ago for $15,000. The equipment has an
Following are Butler Realty Corporation€™s accounts, identified by number. The company has been in the real estate business for ten years and prepares financial statements monthly. Following the list of accounts is a series of transactions entered into by Butler. For each transaction,
The following account balances are taken from the records of Chauncey Company at December 31, 2010. The Prepaid Insurance account represents the cost of a three-year policy purchased on August 1, 2010. The Rent Collected in Advance account represents the cash received from a tenant on June 1, 2010,
Bob Reynolds operates a real estate business. A list of accounts on April 30, 2010, before any adjustments are recorded, appears as follows:_____________________________List of Accounts_____________________Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,700Prepaid
Taggart Corp. records adjustments each month before preparing monthly financial statements. The following selected account balances on May 31, 2010, and June 30, 2010, reflect month-end adjustments:Required1. The company purchased a 36-month insurance policy on June 1, 2009. Identify and analyze
Four Star Video has been in the video rental business for five years. The following is a list of accounts for Four Star Video at May 31, 2010. It reflects the recurring transactions for the month of May but does not reflect any month-end adjustments.Cash ..............$ 4,000Prepaid Rent
Two years ago, Darlene Darby opened a delivery service. Darlene reports the following accounts on her income statement: Sales ................ $69,000Advertising Expense ......... 3,500Salaries Expense .......... 39,000Rent Expense ............ 10,000These amounts represent two years
Moonlight Bay Inn is incorporated on January 2, 2010, by its three owners, each of whom contributes $20,000 in cash in exchange for shares of stock in the business. In addition to the sale of stock, the following transactions are entered into during the month of January:January 2: A Victorian inn
Flood Relief Inc. prepares monthly financial statements and therefore adjusts its accounts at the end of every month. The following information is available for June 2010:a. Flood received a $10,000, 4%, two-year note receivable from a customer for services rendered. The principal and interest are
Ogonquit Enterprises prepares annual financial statements and adjusts its accounts only at the end of the year. The following information is available for the year ended December 31, 2010:a. Ogonquit purchased office furniture last year for $25,000. The furniture has an estimated useful life of
Following are the accounts of Dominique Inc., an interior decorator. The company has been in the decorating business for ten years and prepares quarterly financial statements. Following the list of accounts is a series of transactions entered into by Dominique. For each transaction, enter the
The following account balances are taken from the records of Laugherty Inc. at December 31, 2010. The Supplies account represents the cost of supplies on hand at the beginning of the year plus all purchases. A physical count on December 31, 2010, shows only $1,520 of supplies on hand. The Unearned
Use of Account Balances as a Basis for Adjustments LoriMatlock operates a graphic arts business. A list of accounts on June 30, 2010, before recording any adjustments, appears as follows:Cash ..............$ 7,000Prepaid Rent ........... 18,000Supplies ............. 15,210Office Equipment
Zola Corporation records adjustments each month before preparing monthly financial statements. The following selected account balances on May 31, 2010, and June 30, 2010, reflect month-end adjustments:Required1. The company paid for a six-month lease on April 1, 2010. Identify and analyze the
Lewis and Associates has been in the termite inspection and treatment business for five years. The following is a list of accounts for Lewis on June 30, 2010. It reflects the recurring transactions for the month of June but does not reflect any month-end adjustments.Cash ..............$
Two years ago, Sue Stern opened an audio book rental shop. Sue reports the following accounts on her income statement: Sales ............. $84,000Advertising Expense ...... 10,500Salaries Expense ....... 12,000Depreciation on CDs ...... 5,000Rent Expense ......... 18,000These amounts
The following account balances are available for Tenfour Trucking Company on January 31, 2010:Cash .................. $ 27,340Accounts Receivable ............. 41,500Prepaid Insurance ............. 18,000Warehouse ................ 40,000Accumulated Depreciation—Warehouse .... 21,600Truck Fleet
Refer to the financial information for Kellogg’s and General Mills reproduced at the end of the book for the information needed to answer the following questions. Required1. Locate the note in each company’s annual report in which it discusses revenue recognition. How does each company describe
The following excerpt is taken from Note 1 on page 38 of Nordstrom’s 2008 10K (amounts are in millions of dollars):Net SalesWe record revenues net of estimated returns and we exclude sales taxes. Our retail stores record revenue at the point of sale. Our catalog and online sales include shipping
The following excerpt is taken from page 60 of the Sears Holdings Corporation (parent company of Kmart and Sears) 2008 annual report: “Revenues from the sale of service contracts and the related direct acquisition costs are deferred and amortized over the lives of the associated contracts, while
The Use of Net Income and Cash Flow to Evaluate a Company After you have gained ï¬ ve years of experience with a large CPA firm, one of your clients, Duke Inc., asks you to take over as chief financial officer for the business. Duke advises its clients on the purchase of software
Jenner Inc., a graphic arts studio, is considering the purchase of computer equipment and software for a total cost of $18,000. Jenner can pay for the equipment and software over three years at the rate of $6,000 per year. The equipment is expected to last 10 to 20 years; but because of changing
Listum & Sellum Inc. is a medium-sized midwestern real estate company. It was founded ﬁ ve years ago by its two principal stockholders, Willie Listum and Dewey Sellum. Willie is president of the company, and Dewey is vice president of sales. Listum & Sellum has enjoyed tremendous growth since its
Century Company was organized 15 months ago as a management consulting ï¬ rm. At that time, the owners invested a total of $50,000 cash in exchange for stock. Century purchased equipment for $35,000 cash and supplies to be used in the business. The equipment is expected to last seven
Mountain Home Health Inc. provides home nursing services in the Great Smoky Mountains of Tennessee. When contacted by a client or referred by a physician, nurses visit the patient and discuss needed services with the physician. Mountain Home Health earns revenue from patient services. Most of the
The cost of Baxter’s inventory at the end of the year was $50,000. Due to obsolescence, the cost to replace the inventory was only $40,000. Net realizable value—what the inventory could be sold for—is $42,000.RequiredDetermine the amount Baxter should report on its year-end balance sheet for
Maple Corp. owns a building with an original cost of $1,000,000 and accumulated depreciation at the balance sheet date of $200,000. Based on a recent appraisal, the fair value of the building is $850,000.Required1. At what amount will the building be reported on the year-end balance sheet if
During the most recent year, Butler paid $95,000 in interest to its lenders and $80,000 in dividends to its stockholders.Required1. In which category of the statement of cash flows (operating, investing, or financing) should each of these amounts be shown if Butler follows U.S. GAAP? If more than
Chan Company sells office equipment on September 30, 2011, for $20,000 cash. The office equipment originally cost $72,000 and as of January 1, 2011, had accumulated depreciation of $42,000. Depreciation for the first 9 months of 2011 is $5,250. Prepare the journal entries to(a) update depreciation
Where can authoritative IFRS related to the accounting for leases are found?
Where can authoritative IFRS related to the statement of cash flows be found?
Discuss how a change in accounting policy is handled when it is impracticable to determine previous amounts.
Manual Company sells goods to Nolan Company during 2012. It offers Nolan the following rebates based on total sales to Nolan. If total sales to Nolan are 10,000 units, it will grant a rebate of 2%. If it sells up to 20,000 units, it will grant a rebate of 4%. If it sells up to 30,000 units, it will
Travel Inc. sells tickets for a Caribbean cruise to Carmel Company employees. The total cruise package costs Carmel $70,000 from Ship A way Cruise liner. Travel Inc. receives a commission of 6% of the total price. Travel Inc. therefore remits $65,800 to Ship A way. Prepare the entry to record the

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