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Financial Accounting 12th Edition Warren, Reeve, Duchac - Solutions
Immediately after a used truck is acquired, a new motor is installed at a total cost of $4,150. Is this a capital expenditure or revenue expenditure?
Biggest Company purchased a machine that has a manufacturer’s suggested life of 18 years. The company plans to use the machine on a special project that will last 10 years. At the completion of the project, the machine will be sold. Over how many years should the machine be depreciated?
On September 30, Madison River Inflatables Co. paid $1,425 to install a hydraulic lift and $35 for an air filter for one of its delivery trucks. Journalize the entries for the new lift and air filter expenditures.
On June 9, Martin Associates Co. paid $1,300 to repair the transmission on one of its delivery vans. In addition, Martin Associates paid $600 to install a GPS system in its van. Journalize the entries for the transmission and GPS system expenditures.
Equipment acquired at the beginning of the year at a cost of $275,000 has an estimated residual value of $30,000 and an estimated useful life of 10 years. Determine(a) The depreciable cost,(b) The straight-line rate, and(c) The annual straight-line depreciation.
A building acquired at the beginning of the year at a cost of $980,000 has an estimated residual value of $60,000 and an estimated useful life of 20 years. Determine(a) The depreciable cost,(b) The straight-line rate, and(c) The annual straight-line depreciation.
A tractor acquired at a cost of $315,000 has an estimated residual value of $27,000, has an estimated useful life of 90,000 hours, and was operated 3,700 hours during the year. Determine(a) The depreciable cost,(b) The depreciation rate, and(c) The units-of-production depreciation for the year.
A truck acquired at a cost of $150,000 has an estimated residual value of $40,000, has an estimated useful life of 400,000 miles, and was driven 80,000 miles during the year. Determine(a) The depreciable cost,(b) The depreciation rate, and(c) The units-of-production depreciation for the year.
Equipment acquired at the beginning of the year at a cost of $190,000 has an estimated residual value of $30,000 and an estimated useful life of eight years. Determine(a) The double-declining-balance rate and(b) The double-declining-balance depreciation for the first year.
A building acquired at the beginning of the year at a cost of $820,000 has an estimated residual value of $100,000 and an estimated useful life of 50 years. Determine(a) The double-declining-balance rate and(b) The double-declining-balance depreciation for the first year.
A truck with a cost of $94,000 has an estimated residual value of $20,500, has an estimated useful life of 15 years, and is depreciated by the straight-line method.(a) Determine the amount of the annual depreciation.(b) Determine the book value at the end of the seventh year of use.(c) Assuming
Equipment with a cost of $300,000 has an estimated residual value of $42,000, has an estimated useful life of 24 years, and is depreciated by the straight-line method. (a) Determine the amount of the annual depreciation. (b) Determine the book value at the end of the fourteenth year of use. (c)
Equipment was acquired at the beginning of the year at a cost of $215,000. The equipment was depreciated using the straight-line method based on an estimated useful life of 18 years and an estimated residual value of $39,500.a. What was the depreciation for the first year?b. Assuming the equipment
Equipment was acquired at the beginning of the year at a cost of $450,000. The equipment was depreciated using the double-declining-balance method based on an estimated useful life of 10 years and an estimated residual value of $60,000.a. What was the depreciation for the first year?b. Assuming the
Big Horn Mining Co. acquired mineral rights for $90,000,000. The mineral deposit is estimated at 250,000,000 tons. During the current year, 30,000,000 tons were mined and sold.a. Determine the depletion rate.b. Determine the amount of depletion expense for the current year.c. Journalize the
Silver Tip Mining Co. acquired mineral rights for $300,000,000. The mineral deposit is estimated at 400,000,000 tons. During the current year, 84,000,000 tons were mined and sold.a. Determine the depletion rate.b. Determine the amount of depletion expense for the current year.c. Journalize the
On December 31, it was estimated that goodwill of $750,000 was impaired. In addition, a patent with an estimated useful economic life of 18 years was acquired for $864,000 on August 1.a. Journalize the adjusting entry on December 31 for the impaired goodwill.b. Journalize the adjusting entry on
On December 31, it was estimated that goodwill of $1,200,000 was impaired. In addition, a patent with an estimated useful economic life of 12 years was acquired for $288,000 on April 1.a. Journalize the adjusting entry on December 31 for the impaired goodwill.b. Journalize the adjusting entry on
Financial statement data for years ending December 31 for Winnett Company are shown below.a. Determine the fixed asset turnover ratio for 2012 and 2011.b. Does the change in the fixed asset turnover ratio from 2011 to 2012 indicate a favorable or an unfavorabletrend?
Financial statement data for years ending December 31 for Fallon Company are shown below.a. Determine the fixed asset turnover ratio for 2012 and 2011.b. Does the change in the fixed asset turnover ratio from 2011 to 2012 indicate a favorable or an unfavorabletrend?
Les Bancroft owns and operates Crown Print Co. During January, Crown Print Co. incurred the following costs in acquiring two printing presses. One printing press was new, and the other was used by a business that recently filed for bankruptcy.Costs related to new printing press:1. Sales tax on
Alpine Ski Co. has developed a tract of land into a ski resort. The company has cut the trees, cleared and graded the land and hills, and constructed ski lifts.(a) Should the tree cutting, land clearing, and grading costs of constructing the ski slopes be debited to the land account?(b) If such
Discount Delivery Company acquired an adjacent lot to construct a new warehouse, paying $25,000 and giving a short-term note for $300,000. Legal fees paid were $2,100, delinquent taxes assumed were $14,000, and fees paid to remove an old building from the land were $9,000. Materials salvaged from
Emerald Lines Co. incurred the following costs related to trucks and vans used in operating its delivery service:1. Installed security systems on four of the newer trucks.2. Rebuilt the transmission on one of the vans that had been driven 40,000 miles. The van was no longer under warranty.3.
Aubrey Seagars owns and operates Diamond Transport Co. During the past year, Aubrey incurred the following costs related to an 18-wheel truck:1. Installed a television in the sleeping compartment of the truck.2. Replaced the old radar detector with a newer model that is fastened to the truck with a
Reliable Move Company made the following expenditures on one of its delivery trucks:Feb. 4 Replaced transmission at a cost of $4,300.May 6 Paid $1,900 for installation of a hydraulic lift.Sept. 10 Paid $60 to change the oil and air filter.Prepare journal entries for each expenditure.
Butte Ironworks Co. reported $7,500,000 for equipment and $6,175,000 for accumulated depreciation—equipment on its balance sheet.Does this mean (a) That the replacement cost of the equipment is $7,500,000 and (b) That $6,175,000 is set aside in a special fund for the replacement of the equipment?
Convert each of the following estimates of useful life to a straight-line depreciation rate, stated as a percentage:(a) 4 years, (b) 8 years,(c) 10 years, (d) 16 years,(e) 25 years, (f) 40 years, (g) 50 years.
A refrigerator used by a meat processor has a cost of $120,000, an estimated residual value of $14,000, and an estimated useful life of 16 years. What is the amount of the annual depreciation computed by the straight-line method?
A diesel-powered tractor with a cost of $185,000 and estimated residual value of $37,000 is expected to have a useful operating life of 40,000 hours. During February, the generator was operated 140 hours. Determine the depreciation for the month.
Prior to adjustment at the end of the year, the balance in Trucks is $275,900 and the balance in Accumulated Depreciation'Trucks is $91,350. Details of the subsidiary ledger are as follows:a. Determine the depreciation rates per mile and the amount to be credited to the accumulated depreciation
A Kubota tractor acquired on January 9 at a cost of $80,000 has an estimated useful life of 25 years. Assuming that it will have no residual value, determine the depreciation for each of the first two years(a) By the straight-line method and(b) By the double-declining balance method.
A storage tank acquired at the beginning of the fiscal year at a cost of $344,000 has an estimated residual value of $50,000 and an estimated useful life of 16 years. Determine the following:(a) The amount of annual depreciation by the straight-line method and(b) The amount of depreciation for the
Sandblasting equipment acquired at a cost of $64,000 has an estimated residual value of $4,000 and an estimated useful life of eight years. It was placed in service on April 1 of the current fiscal year, which ends on December 31. Determine the depreciation for the current fiscal year and for the
A building with a cost of $900,000 has an estimated residual value of $250,000, has an estimated useful life of 40 years, and is depreciated by the straight-line method.(a) What is the amount of the annual depreciation?(b) What is the book value at the end of the twenty-fourth year of use?(c) If at
Viking Company purchased and installed carpet in its new general offices on June 30 for a total cost of $15,000. The carpet is estimated to have a 12-year useful life and no residual value.a. Prepare the journal entries necessary for recording the purchase of the new carpet.b. Record the December
Equipment acquired on January 5, 2009, at a cost of $380,000, has an estimated useful life of 16 years, has an estimated residual value of $40,000, and is depreciated by the straight-line method.a. What was the book value of the equipment at December 31, 2012, the end of the year?b. Assuming that
Equipment acquired on January 4, 2009, at a cost of $425,000, has an estimated useful life of nine years and an estimated residual value of $65,000.a. What was the annual amount of depreciation for the years 2009, 2010, and 2011, using the straight-line method of depreciation?b. What was the book
Ashwood Mining Co. acquired mineral rights for $15,000,000. The mineral deposit is estimated at 120,000,000 tons. During the current year, 24,000,000 tons were mined and sold.a. Determine the amount of depletion expense for the current year.b. Journalize the adjusting entry to recognize the
Greenleaf Company acquired patent rights on January 6, 2009, for $300,000. The patent has a useful life equal to its legal life of 12 years. On January 3, 2012, Greenleaf successfully defended the patent in a lawsuit at a cost of $72,000.a. Determine the patent amortization expense for the current
Apple Computer, Inc., designs, manufactures, and markets personal computers and related software. Apple also manufactures and distributes music players (iPod) and mobile phones (iPhone) along with related accessories and services including online distribution of third party music, videos, and
List the errors you find in the following partial balancesheet:
Verizon Communications is a major telecommunications company in the United States. Verizon's balance sheet disclosed the following information regarding fixed assets:Verizon's revenue for 2009 was $107,808 million. The fixed asset turnover for the telecommunications industry averages 1.10.a.
The following table shows the revenue and average net fixed assets (in millions) for a recent fiscal year for Best Buy and RadioShack:a. Compute the fixed asset turnover for each company. Round to two decimal places.b. Which company uses its fixed assets more efficiently?Explain.
A printing press priced at a fair market value of $400,000 is acquired in a transaction that has commercial substance by trading in a similar press and paying cash for the difference between the trade-in allowance and the price of the new press.a. Assuming that the trade-in allowance is $175,000,
Assume the same facts as in Exercise 10-25, except that the book value of the press traded in is $185,000.(a) What is the amount of cash given?(b) What is the gain or loss on the exchange?
On April 1, Clear Water Co., a water distiller, acquired new bottling equipment with a list price (fair market value) of $350,000. Clear Water received a trade-in allowance of $50,000 on the old equipment of a similar type and paid cash of $300,000. The following information about the old equipment
On July 1, Potts Delivery Services acquired a new truck with a list price (fair market value) of $80,000. Potts received a trade-in allowance of $15,000 on an old truck of similar type and paid cash of $65,000. The following information about the old truck is obtained from the account in the
The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale ceramic business. The receipts are identified by an asterisk.a. Fee paid to attorney for title search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,000b.
Breyer Company purchased packaging equipment on January 3, 2010, for $101,250. The equipment was expected to have a useful life of three years, or 25,000 operating hours, and a residual value of $7,500. The equipment was used for 9,500 hours during 2010, 8,400 hours in 2011, and 7,100 hours in
Security IDs Company purchased equipment on July 1, 2010, for $135,000. The equipment was expected to have a useful life of three years, or 12,000 operating hours, and a residual value of $6,000. The equipment was used for 1,500 hours during 2010, 3,500 hours in 2011, 5,000 hours in 2012, and 2,000
New lithographic equipment, acquired at a cost of $787,500 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of $67,500. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense
The following transactions, adjusting entries, and closing entries were completed by D. Hurd Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used.2010Jan. 9. Purchased a used delivery truck for
Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows:a. Timber rights on a tract of land were purchased for $864,000 on July 10. The stand of timber is estimated at 3,600,000 board feet. During the current year, 1,500,000
The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale apparel business. The receipts are identified by an asterisk.a. Finder’s fee paid to real estate agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Plum Coatings Company purchased waterproofing equipment on January 2, 2011, for $450,000. The equipment was expected to have a useful life of four years, or 10,000 operating hours, and a residual value of $50,000. The equipment was used for 3,000 hours during 2011, 4,000 hours in 2012, 2,500 hours
Helix Company purchased tool sharpening equipment on April 1, 2010, for $72,000. The equipment was expected to have a useful life of three years, or 9,000 operating hours, and a residual value of $2,700. The equipment was used for 2,400 hours during 2010, 4,000 hours in 2011, 2,000 hours in 2012,
New tire retreading equipment, acquired at a cost of $72,000 at the beginning of a fiscal year, has an estimated useful life of four years and an estimated residual value of $5,400. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense
The following transactions, adjusting entries, and closing entries were completed by McHenry Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used.2010Jan. 4. Purchased a used delivery truck for
Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows:a. On December 31, the company determined that $1,800,000 of goodwill was impaired.b. Governmental and legal costs of $900,000 were incurred on June 30 in obtaining a
Rosa Salinas, CPA, is an assistant to the controller of Zebra Consulting Co. In her spare time, Rosa also prepares tax returns and performs general accounting services for clients. Frequently, Rosa performs these services after her normal working hours, using Zebra Consulting Co.’s computers and
Atlas Construction Co. specializes in building replicas of historic houses. Paul Raines, president of Atlas Construction, is considering the purchase of various items of equipment on July 1, 2010, for $500,000. The equipment would have a useful life of five years and no residual value. In the past,
The following table shows the revenues and average net fixed assets for a recent fiscal year for three different companies from three different industries: retailing, manufacturing, and communications.a. For each company, determine the fixed asset turnover ratio. Round to two decimal places.b.
General Motors Corporation reported $7.0 billion of product warranties in the Current Liabilities section of a recent balance sheet. How would costs of repairing a defective product be recorded?
On September 1, Rongo Co. issued a 45-day note with a face amount of $80,000 to Simone Co. for merchandise inventory.a. Determine the proceeds of the note, assuming the note carries an interest rate of 8%.b. Determine the proceeds of the note, assuming the note is discounted at 8%.
On February 1, Tectronic Co. issued a 60-day note with a face amount of $120,000 to Tokai Warehouse Co. for cash.a. Determine the proceeds of the note, assuming the note carries an interest rate of 9%.b. Determine the proceeds of the note, assuming the note is discounted at 9%.
Bob Tappert’s weekly gross earnings for the present week were $1,600. Tappert has one exemption. Using the wage bracket withholding table in Exhibit 3 with a $70 standard withholding allowance for each exemption, what is Tappert’s federal income tax withholding?
John Wolfe’s weekly gross earnings for the present week were $2,200. Wolfe has two exemptions. Using the wage bracket withholding table in Exhibit 3 with a $70 standard withholding allowance for each exemption, what is Wolfe’s federal income tax withholding?
Bob Tappert’s weekly gross earnings for the week ending December 18 were $1,600, and his federal income tax withholding was $296.16. Assuming the social security rate is 6% and Medicare is 1.5% of all earnings, what is Tappert’s net pay?
John Wolfe’s weekly gross earnings for the week ending September 5 were $2,200, and his federal income tax withholding was $444.88. Assuming the social security rate is 6% and Medicare is 1.5% of all earnings, what is Wolfe’s net pay?
The payroll register of Gregory Communications Co. indicates $4,080 of social security withheld and $1,020 of Medicare tax withheld on total salaries of $68,000 for the period. Federal withholding for the period totaled $13,464.Provide the journal entry for the period’s payroll.
The payroll register of Russert Construction Co. indicates $18,000 of social security withheld and $4,500 of Medicare tax withheld on total salaries of $300,000 for the period. Retirement savings withheld from employee paychecks were $18,000 for the period. Federal withholding for the period
The payroll register of Gregory Communications Co. indicates $4,080 of social security withheld and $1,020 of Medicare tax withheld on total salaries of $68,000 for the period. Assume earnings subject to state and federal unemployment compensation taxes are $12,500, at the federal rate of 0.8% and
The payroll register of Russert Construction Co. indicates $18,000 of social security withheld and $4,500 of Medicare tax withheld on total salaries of $300,000 for the period. Assume earnings subject to state and federal unemployment compensation taxes are $13,000, at the federal rate of 0.8% and
Lutes Company provides its employees with vacation benefits and a defined contribution pension plan. Employees earned vacation pay of $25,500 for the period. The pension plan requires a contribution to the plan administrator equal to 8% of employee salaries. Salaries were $340,000 during the
Wang Equipment Company provides its employees vacation benefits and a defined benefit pension plan. Employees earned vacation pay of $42,000 for the period. The pension formula calculated a pension cost of $273,000. Only $210,000 was contributed to the pension plan administrator.Provide the journal
Zinn Co. sold $500,000 of equipment during May under a one-year warranty. The cost to repair defects under the warranty is estimated at 5% of the sales price. On October 10, a customer required a $100 part replacement, plus $65 of labor under the warranty.Provide the journal entry for(a) The
Caldwell Industries sold $410,000 of consumer electronics during August under a nine month warranty. The cost to repair defects under the warranty is estimated at 4% of the sales price. On October 15, a customer was given $110 cash under terms of the warranty. Provide the journal entry for (a) The
Grangel Company reported the following current assets and liabilities for December 31, 2012 and 2011:a. Compute the quick ratio for December 31, 2012 and 2011.b. Interpret the company's quick ratio. Is the quick ratio improving ordeclining?
Tappert Company reported the following current assets and liabilities for December 31, 2012 and 2011:a. Compute the quick ratio for December 31, 2012 and 2011.b. Interpret the company's quick ratio. Is the quick ratio improving ordeclining?
New Wave Co. sold 10,000 annual subscriptions of Game Life for $75 during December 2012. These new subscribers will receive monthly issues, beginning in January 2013. In addition, the business had taxable income of $550,000 during the first calendar quarter of 2013. The federal tax rate is 40%. A
TKR Enterprises issues a 30-day note for $570,000 to Sweeney Industries for merchandise inventory. Sweeney Industries discounts the note at 8%.a. Journalize TKR Enterprises’ entries to record:1. The issuance of the note.2. The payment of the note at maturity.b. Journalize Sweeney Industries’
A borrower has two alternatives for a loan: (1) Issue a $180,000, 45-day, 10% note or (2) Issue a $180,000, 45-day note that the creditor discounts at 10%.a. Calculate the amount of the interest expense for each option.b. Determine the proceeds received by the borrower in each situation.c. Which
A business issued a 45-day, 6% note for $80,000 to a creditor on account. Journalize the entries to record(a) The issuance of the note and(b) The payment of the note at maturity, including interest.
A business issued a 30-day note for $72,000 to a creditor on account. The note was discounted at 7%. Journalize the entries to record(a) The issuance of the note and(b) The payment of the note at maturity.
On June 30, Beahm Management Company purchased land for $250,000 and a building for $350,000, paying $300,000 cash and issuing an 8% note for the balance, secured by a mortgage on the property. The terms of the note provide for 20 semiannual payments of $15,000 on the principal plus the interest
Burger King Holdings, Inc., the operator and franchisor of Burger King restaurants, reported the following information about its long-term debt in the notes to a recent financial statement:a. How much of the notes payable was disclosed as a current liability on the June 30, 2009, balance sheet?b.
An employee earns $60 per hour and 1.5 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 55 hours during the week, Assume further that the social security tax rate was 6.0%, the Medicare tax rate was 1.5%, and federal income tax to be withheld was $743.a.
Donohue Professional Services has three employees'a consultant, a computer programmer, and an administrator. The following payroll information is available for each employee:For the current pay period, the computer programmer worked 60 hours and the administrator worked 50 hours. The federal income
In the following summary of data for a payroll period, some amounts have been intentionally omitted:Earnings:1. At regular rate ....... ?2. At overtime rate .. $135,0003. Total earnings ....... ?Deductions:4. Social security tax ... 54,0005. Medicare tax ..... 13,5006. Income tax withheld .
According to a summary of the payroll of Brooks Industries Co., $1,100,000 was subject to the 6.0% social security tax and the 1.5% Medicare tax. Also, $50,000 was subject to state and federal unemployment taxes.a. Calculate the employer’s payroll taxes, using the following rates: state
The payroll register for Robinson Company for the week ended November 18 indicated the following:Salaries .......... $1,300,000Social security tax withheld ... 61,100Medicare tax withheld ...... 19,500Federal income tax withheld ... 260,000In addition, state and federal unemployment taxes were
Faber Company had gross wages of $110,000 during the week ended June 17. The amount of wages subject to social security tax was $110,000, while the amount of wages subject to federal and state unemployment taxes was $15,000. Tax rates are as follows:Social security 6.0%Medicare 1.5%State
Big Dave’s Pizza is a pizza restaurant specializing in the sale of pizza by the slice. The store employs 10 full-time and 15 part-time workers. The store’s weekly payroll averages $5,600 for all 25 workers.Big Dave’s Pizza uses a personal computer to assist in preparing paychecks. Each week,
Matt’s Bikes is a small manufacturer of specialty bicycles. The company employs 18 production workers and four administrative persons. The following procedures are used to process the company’s weekly payroll:a. Whenever an employee receives a pay raise, the supervisor must fill out a wage
A business provides its employees with varying amounts of vacation per year, depending on the length of employment. The estimated amount of the current year’s vacation pay is $61,200.a. Journalize the adjusting entry required on January 31, the end of the first month of the current year, to
Wren Co. operates a chain of gift shops. The company maintains a defined contribution pension plan for its employees. The plan requires quarterly installments to be paid to the funding agent, Whims Funds, by the fifteenth of the month following the end of each quarter. Assume that the pension cost
In a recent year’s financial statements, Procter & Gamble showed an unfunded pension liability of $3,706 million and a periodic pension cost of $341 million.Explain the meaning of the $3,706 million unfunded pension liability and the $341 million periodic pension cost.
Parker Products Co. warrants its products for one year. The estimated product warranty is 3% of sales. Assume that sales were $442,000 for September. In October, a customer received warranty repairs requiring $110 of parts and $86 of labor.a. Journalize the adjusting entry required at September 30,
General Motors Corporation disclosed estimated product warranty payable for comparative years as follows:GM's sales were $177,594 million in 2007 and decreased to $147,732 million in 2008. Assume that the total paid on warranty claims during 2008 was $5,000 million.a. Why are short- and long-term
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