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Financial Accounting 7th Edition Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso - Solutions

Data for the Paula and Shannon companies are given in BE12-9. Instead of paying $190,000, assume that Paula pays $200,000 to acquire the 100% interest in Shannon Company. Complete the worksheet for the accounts identified in BE12-9 and for the excess of cost over book value.
On January 1, 2011, Lennon Corporation acquires 100% of Ono Inc. for $220,000 in cash. The condensed balance sheets of the two corporations immediately following the acquisition are as follows.InstructionsPrepare a worksheet for a consolidated balancesheet.
Data for the Lennon and Ono corporations are presented in E12-13. Assume that instead of paying $220,000 in cash for Ono Inc., Lennon Corporation pays $225,000 in cash. Thus, at the acquisition date, the assets of Lennon Corporation are: Current assets $55,000, Investment in Ono Inc. common stock
The following data, presented in alphabetical order, are taken from the records of Urbina Corporation.Accounts payable ......................... $ 240,000Accounts receivable ........................ 140,000Accumulated depreciation—building .................. 180,000Accumulated
Robinson Corporation purchased all the outstanding common stock of Hoffman Plastics, Inc. on December 31, 2011. Just before the purchase, the condensed balance sheets of the two companies appeared as follows.Robinson used current assets of $1,225,000 to acquire the stock of Hoffman Plastics. The
Patel Company purchased all the outstanding common stock of Singh Company on December 31, 2011. Just before the purchase, the condensed balance sheets of the two companies were as follows.Patel used current assets of $710,000 to acquire the stock of Singh. The excess of this purchase price over the
Russ Holub invested $4,000 at 5% annual interest, and left the money invested without withdrawing any of the interest for 10 years. At the end of the 10 years, Russ withdrew the accumulated amount of money.(a) What amount did Russ withdraw assuming the investment earns simple interest?(b) What
For each of the following cases, indicate (1) to what interest rate columns and (2) to what number of periods you would refer in looking up the future value factor.1. In Table 1 (future value of 1):2. In Table 2 (future value of an annuity of1):
Racine Company signed a lease for an office building for a period of 10 years. Under the lease agreement, a security deposit of $10,000 is made. The deposit will be returned at the expiration of the lease with interest compounded at 4% per year. What amount will Racine receive at the time the lease
Chaffee Company issued $1,000,000, 10-year bonds and agreed to make annual sinking fund deposits of $75,000. The deposits are made at the end of each year into an account paying 6% annual interest. What amount will be in the sinking fund at the end of 10 years?
Wayne and Brenda Anderson invested $5,000 in a savings account paying 5% compound annual interest when their daughter, Sue, was born. They also deposited $1,000 on each of her birthdays until she was 18 (including her 18th birthday). How much will be in the savings account on her 18th birthday
Ty Ngu borrowed $20,000 on July 1, 2005.This amount plus accrued interest at 6% compounded annually is to be repaid on July 1, 2011. How much will Ty have to repay on July 1, 2011?
For each of the following cases, indicate (a) to what interest rate columns and (b) to what number of periods you would refer in looking up the discount rate.1. In Table 3 (present value of 1):2. In Table 4 (present value of an annuity of1):
(a) What is the present value of $20,000 due 8 periods from now, discounted at 8% ?(b) What is the present value of $20,000 to be received at the end of each of 6 periods, discounted at 9%?
Gonzalez Company is considering an investment that will return a lump sum of $500,000 5 years from now. What amount should Gonzalez Company pay for this investment in order to earn a 10% return?
Lasorda Company earns 9% on an investment that will return $875,000 8 years from now. What is the amount Lasorda should invest now in order to earn this rate of return?
Bosco Company is considering investing in an annuity contract that will return $30,000 annually at the end of each year for 15 years. What amount should Bosco Company pay for this investment if it earns a 6% return?
Modine Enterprises earns 11% on an investment that pays back $120,000 at the end of each of the next 4 years. What is the amount Modine Enterprises invested to earn the 11% rate of return?
Midwest Railroad Co. is about to issue $100,000 of 10-year bonds paying a 10% interest rate, with interest payable semiannually. The discount rate for such securities is 8%. How much can Midwest expect to receive from the sale of these bonds?
Assume the same information as in BEC-13 except that the discount rate is 10% instead of 8%. In this case, how much can Midwest expect to receive from the sale of these bonds?
Lounsbury Company receives a $50,000, 6-year note bearing interest of 8% (paid annually) from a customer at a time when the discount rate is 9%.What is the present value of the note received by Lounsbury Company?
Hartzler Enterprises issued 8%, 8-year, $2,000,000 par value bonds that pay interest semiannually on October 1 and April 1.The bonds are dated April 1, 2011, and are issued on that date. The discount rate of interest for such bonds on April 1, 2011, is 10%.What cash proceeds did Hartzler receive
Vinny Carpino owns a garage and is contemplating purchasing a tire retreading machine for $16,280. After estimating costs and revenues, Vinny projects a net cash inflow from the retreading machine of $3,000 annually for 8 years. Vinny hopes to earn a return of 11% on such investments. What is the
Rodriguez Company issues a 10%, 6-year mortgage note on January 1, 2011, to obtain financing for new equipment. Land is used as collateral for the note. The terms provide for semiannual installment payments of $56,413.What were the cash proceeds received from the issuance of the note?
Goltra Company is considering purchasing equipment. The equipment will produce the following cash inflows: Year 1, $30,000; Year 2, $40,000; Year 3, $50,000. Goltra requires a minimum rate of return of 12%.What is the maximum price Goltra should pay for this equipment?
If Maria Sanchez invests $3,152 now, she will receive $10,000 at the end of 15 years. What annual rate of interest will Maria earn on her investment?
Lori Burke has been offered the opportunity of investing $42,410 now. The investment will earn 10% per year and at the end of that time will return Lori $100,000. How many years must Lori wait to receive $100,000?
Nancy Burns purchased an investment for $12,462.21. From this investment, she will receive $1,000 annually for the next 20 years, starting one year from now. What rate of interest will Nancy’s investment be earning for her?
Betty Estes invests $7,536.08 now for a series of $1,000 annual returns, beginning one year from now. Betty will earn a return of 8% on the initial investment. How many annual payments of $1,000 will Betty receive?
Reba McEntire wishes to invest $19,000 on July 1, 2011, and have it accumulate to $49,000 by July 1, 2021. Use a financial calculator to determine at what exact annual rate of interest Reba must invest the $19,000.
On July 17, 2011, Tim McGraw borrowed $42,000 from his grandfather to open a clothing store. Starting July 17, 2012, Tim has to make 10 equal annual payments of $6,500 each to repay the loan. Use a financial calculator to determine what interest rate Tim is paying.
As the purchaser of a new house, Patty Loveless has signed a mortgage note to pay the Memphis National Bank and Trust Co. $14,000 every 6 months for 20 years, at the end of which time she will own the house. At the date the mortgage is signed the purchase price was $198,000, and Loveless made a
Using a financial calculator, solve for the unknowns in each of the following situations.(a) On June 1, 2011, Shelley Long purchases lakefront property from her neighbor, Joey Brenner, and agrees to pay the purchase price in seven payments of $16,000 each, the first payment to be payable June 1,
Using a financial calculator, provide a solution to each of the following situations.(a) Bill Schroeder owes a debt of $35,000 from the purchase of his new sport utility vehicle. The debt bears annual interest of 9.1% compounded monthly. Bill wishes to pay the debt and interest in equal monthly
You are a newly hired accountant with Schindlebeck Company. On your first day, the controller asks you to identify the main internal control objectives related to payroll accounting. How would you respond?
Distinguish between the two types of payroll deductions and give examples of each. Discuss.
Hernandez Company has the following payroll procedures.(a) Supervisor approves overtime work.(b) The human resources department prepares hiring authorization forms for new hires.(c) A second payroll department employee verifies payroll calculations.(d) The treasurer’s department pays
Sandy Teter’s regular hourly wage rate is $16, and she receives an hourly rate of $24 for work in excess of 40 hours. During a January pay period, Sandy works 45 hours. Sandy’s federal income tax withholding is $95, and she has no voluntary deductions. Compute Sandy Teter’s gross earnings and
Data for Sandy Teter are presented in BED-2. Prepare the journal entries to record(a) Sandy’s pay for the period and(b) The payment of Sandy’s wages.Use January 15 for the end of the pay period and the payment date.
In January, gross earnings in Yoon Company totaled $90,000. All earnings are subject to 8% FICA taxes, 5.4% state unemployment taxes, and 0.8% federal unemployment taxes. Prepare the entry to record January payroll tax expense.
Betty Williams’ regular hourly wage rate is $14, and she receives a wage of 11⁄2 times the regular hourly rate for work in excess of 40 hours. During a March weekly pay period Betty worked 42 hours. Her gross earnings prior to the current week were $6,000. Betty is married and claims three
Employee earnings records for Brantley Company reveal the following gross earnings for four employees through the pay period of December 15.For the pay period ending December 31, each employee€™s gross earnings is $4,000. Employees are required to pay a FICA tax rate of 8% gross earnings
Piniella Company has the following data for the weekly payroll ending January 31.Employees are paid 11â„2 times the regular hourly rate for all hours worked in excess of 40 hours per week. FICA taxes are 8% on the first $106,800 of gross earnings. Piniella Company is subject to 5.4% state
Selected data from a February payroll register for Landmark Company are presented below. Some amounts are intentionally omitted.FICA taxes are 8%. State income taxes are 3% of gross earnings.Instructions(a) Fill in the missing amounts.(b) Journalize the February payroll and the payment of
According to a payroll register summary of Cruz Company, the amount of employees’ gross pay in December was $850,000, of which $70,000 was not subject to FICA tax and $760,000 was not subject to state and federal unemployment taxes.Instructions(a) Determine the employer’s payroll tax expense
The payroll procedures used by three different companies are described below.1. In Brewer Company each employee is required to mark on a clock card the hours worked. At the end of each pay period, the employee must have this clock card approved by the department manager. The approved card is then
Graves Drug Store has four employees who are paid on an hourly basis plus time-and a half for all hours worked in excess of 40 a week. Payroll data for the week ended February 15, 2011, are presented below.Leiss and Bjork are married. They claim 2 and 4 withholding allowances, respectively. The
The following payroll liability accounts are included in the ledger of Eikleberry Company on January 1, 2011.FICA Taxes Payable .............$ 662.20Federal Income Taxes Payable .........1,254.60State Income Taxes Payable .............102.15Federal Unemployment Taxes Payable ........312.00State
For the year ended December 31, 2011, R. Visnak Company reports the following summary payroll data.Gross earnings:Administrative salaries ......... .$180,000Electricians€™ wages .............320,000Total ................$500,000Deductions:FICA taxes ...............$ 35,200Federal income
Selected payroll procedures of Wallace Company are described below.1. Department managers interview applicants and on the basis of the interview either hire or reject the applicants. When an applicant is hired, the applicant fills out a W-4 form (Employee’s Withholding Allowance Certificate). One
Lee Hardware has four employees who are paid on an hourly basis plus time-and-a half for all hours worked in excess of 40 a week. Payroll data for the week ended March 15, 2011, are presented below.Coomer and Walker are married. They claim 0 and 4 withholding allowances, respectively. The following
The following payroll liability accounts are included in the ledger of Nordlund Company on January 1, 2011.FICA Taxes Payable ..............$ 760.00Federal Income Taxes Payable ..........1,204.60State Income Taxes Payable ...........108.95Federal Unemployment Taxes Payable ......288.95State
For the year ended December 31, 2011, Niehaus Electrical Repair Company reports the following summary payroll data.Gross earnings:Administrative salaries .........$180,000Electricians€™ wages ...........370,000Total .................$550,000Deductions:FICA taxes ................$
Summerville Processing Company provides word-processing services for business clients and students in a university community. The work for business clients is fairly steady throughout the year. The work for students peaks significantly in December and May as a result of term papers, research
Ivan Blanco, president of the Blue Sky Company, has recently hired a number of additional employees. He recognizes that additional payroll taxes will be due as a result of this hiring, and that the company will serve as the collection agent for other taxes.InstructionsIn a memorandum to Ivan
Johnny Fuller owns and manages Johnny’s Restaurant, a 24-hour restaurant near the city’s medical complex. Johnny employs 9 full-time employees and 16 part-time employees. He pays all of the full-time employees by check, the amounts of which are determined by Johnny’s public accountant, Mary
Darby Company’s chart of accounts includes the following selected accounts.101 Cash ...........401 Sales112 Accounts Receivable ......414 Sales Discounts120 Merchandise Inventory ...505 Cost of Goods Sold311 Common StockOn June 1 the accounts receivable ledger of Darby Company showed the
Gonya Company’s chart of accounts includes the following selected accounts.101 Cash ............157 Equipment120 Merchandise Inventory .......201 Accounts Payable130 Prepaid Insurance .......332 Cash DividendsOn November 1 the accounts payable ledger of Gonya Company showed the following
The chart of accounts of Emley Company includes the following selected accounts.112 Accounts Receivable .......401 Sales120 Merchandise Inventory .......412 Sales Returns and Allowances126 Supplies .............505 Cost of Goods Sold157 Equipment ............610 Advertising Expense201 Accounts
Selected accounts from the chart of accounts of Litke Company are shown below.101 Cash ...........201 Accounts Payable112 Accounts Receivable ......401 Sales120 Merchandise Inventory .....414 Sales Discounts126 Supplies ...........505 Cost of Goods Sold140 Land 610 Advertising Expense145
Presented below are the sales and cash receipts journals for Wyrick Co. for its first month of operations.In addition, the following transactions have not been journalized for February 2011.Feb. 2 Purchased merchandise on account from J.Vopat for $4,600, terms 2/10, n/30.7 Purchased merchandise on
Packard Company has the following opening account balances in its general and subsidiary ledgers on January 1 and uses the periodic inventory system. All accounts have normal debit and credit balances.Jan. 3 Sell merchandise on account to B. Remy $3,100, invoice no. 510, and J. Fine $1,800, invoice
Great Plains’ Accounting is one of the leading accounting software packages. Information related to this package is found at its website.Address: www.microsoft.com/dynamics/gp/product/demos.mspx, or go to www.wiley.com/ college/weygandt Steps1. Go to the site shown above.2. Choose General Ledger.
Orbison Company rents a warehouse on a month-to month basis for the storage of its excess inventory. The company periodically must rent space when its production greatly exceeds actual sales. What is the nature of this type of lease agreement, and what accounting treatment should be accorded it?
Costello Company entered into an agreement to lease 12 computers from Estes Electronics Inc. The present value of the lease payments is $186,300. Assuming that this is a capital lease, what entry would Costello Company make on the date of the lease agreement?
Identify three additional types of fringe benefits associated with employees’ compensation.
What are the two types of postretirement benefits? During what years does the FASB advocate expensing the employer’s costs of these postretirement benefits?
What basis of accounting for the employer’s cost of postretirement healthcare and life insurance benefits has been used by most companies, and what basis does the FASB advocate in the future? Explain the basic difference between these methods in recognizing postretirement benefit costs.
Identify the three parties in a pension plan. What role does each party have in the plan?
Brenna Ottare and Caitlin Wilkes are reviewing pension plans. They ask your help in distinguishing between a defined-contribution plan and a defined-benefit plan. Explain the principal difference to Brenna and Caitlin.
On December 1,Vina Company introduces a new product that includes a 1-year warranty on parts. In December 1,000 units are sold. Management believes that 5% of the units will be defective and that the average warranty costs will be $60 per unit. Prepare the adjusting entry at December 31 to accrue
Prepare the journal entries that the lessee should make to record the following transactions.1. The lessee makes a lease payment of $80,000 to the lessor in an operating lease transaction.2. Zander Company leases a new building from Joel Construction, Inc. The present value of the lease payments is
In Alomar Company, employees are entitled to 1 day’s vacation for each month worked. In January, 50 employees worked the full month. Record the vacation pay liability for January assuming the average daily pay for each employee is $120.
Boone Company sells automatic can openers under a 75-day warranty for defective merchandise. Based on past experience, Boone Company estimates that 3% of the units sold will become defective during the warranty period. Management estimates that the average cost of replacing or repairing a defective
Larkin Online Company has the following liability accounts after posting adjusting entries: Accounts Payable $63,000, Unearned Ticket Revenue $24,000, Estimated Warranty Liability $18,000, Interest Payable $8,000, Mortgage Payable $120,000, Notes Payable $80,000, and Sales Taxes Payable
Presented below are two independent situations.1. Speedy Car Rental leased a car to Rundgren Company for 1 year. Terms of the operating lease agreement call for monthly payments of $500.2. On January 1, 2011, Miles Inc. entered into an agreement to lease 20 computers from Halo Electronics. The
Bunill Company has two fringe benefit plans for its employees:1. It grants employees 2 days’ vacation for each month worked. Ten employees worked the entire month of March at an average daily wage of $80 per employee.2. It has a defined-contribution pension plan in which the company contributes
On January 1, 2011, the ledger of Shumway Software Company contains the following liability accounts.Accounts Payable .........$42,500Sales Taxes Payable .........5,800Unearned Service Revenue .....15,000During January the following selected transactions occurred.Jan. 1 Borrowed $15,000 in cash
Presented below are three different lease transactions in which Ortiz Enterprises engaged in 2011.Assume that all lease transactions start on January 1, 2011. In no case does Ortiz receive title to the properties leased during or at the end of the lease term.Instructions(a) Identify the leases
On January 1, 2011, the ledger of Zaur Company contains the following liability accounts.Accounts Payable ..........$52,000Sales Taxes Payable ..........7,700Unearned Service Revenue ......16,000During January the following selected transactions occurred.Jan. 5 Sold merchandise for cash totaling
Presented below are three different lease transactions that occurred for Milo Inc. in 2011. Assume that all lease contracts start on January 1, 2011. In no case does Milo receive title to the properties leased during or at the end of the lease term.Instructions(a) Which of the leases above are
Refer to the financial statements of PepsiCo and the Notes to Consolidated Financial Statements in Appendix A to answer the following questions about contingent liabilities, lease liabilities, and pension costs.(a) Where does PepsiCo report its contingent liabilities?(b) What is management’s
Presented below is the lease portion of the notes to the financial statements of CF Industries, Inc.Rent expense for operating leases was $38.1 million for the year ended December 31, 2008, $31.2 million for 2007, and $26.5 million for 2006.InstructionsWhat type of leases does CF Industries, Inc.
Presented below is the condensed balance sheet for Express, Inc. as of December 31, 2011.Express has decided that it needs to purchase a new crane for its operations. The new crane costs $900,000 and has a useful life of 15 years. However, Express€™s bank has refused to provide any help
What is the definition of the fair value principle?
Classify the following items as issuance of stock (I), dividends (D), revenues (R), or expenses (E). Then indicate whether each item increases or decreases stockholders’ equity.(1) Dividends (2) Rent Revenue (3) Advertising Expense(4) Stockholders invest cash in the business
Deer Park, a public camping ground near the Lake Mead National Recreation Area, has compiled the following financial information as of December 31, 2011.Instructions(a) Determine Deer Park€™s net income for 2011.(b) Prepare a balance sheet for Deer Park as of December 31,2011.
Presented below is information related to Kevin and Johnson, Attorneys at Law.Retained earnings, January 1, 2011 ........ $ 23,000Legal service revenue—2011 ........... 350,000Total expenses—2011 ............. 211,000Assets, January 1, 2011 ............ 85,000Liabilities, January 1, 2011
This information is for Heartland Company for the year ended December 31, 2011.Cash received from revenues from customers ........ $600,000Cash received for issuance of common stock ......... 350,000Cash paid for new equipment ............... 100,000Cash dividends paid ..................
Barone’s Repair Inc. was started on May 1. A summary of May transactions is presented below.1. Stockholders invested $10,000 cash in the business in exchange for common stock.2. Purchased equipment for $5,000 cash.3. Paid $400 cash for May office rent.4. Paid $500 cash for supplies.5. Incurred
On August 31, the balance sheet of Nashville Veterinary Clinic showed Cash $9,000, Accounts Receivable $1,700, Supplies $600, Office Equipment $6,000, Accounts Payable $3,600, Common Stock $13,000, and Retained Earnings $700. During September the following transactions occurred.1. Paid $2,900
On April 1, Jenny Russo established Matrix Travel Agency. The following transactions were completed during the month.1. Stockholders invested $10,000 cash in the business in exchange for common stock.2. Paid $400 cash for April office rent.3. Purchased office equipment for $2,500 cash.4. Incurred
Cindy Belton opened a law office, Cindy Belton, Attorney at Law, on July 1, 2011. On July 31, the balance sheet showed Cash $4,000, Accounts Receivable $1,500, Supplies $500, Office Equipment $5,000, Accounts Payable $4,200, and Common Stock $6,000, and Retained Earnings $800. During August the
Divine Cosmetics Co., a company that provides individual skin care treatment, was started on June 1 with an investment of $26,200 cash. Following are the assets and liabilities of the company at June 30 and the revenues and expenses for the month of June.Stockholders made no additional investments
Laura Geller started a consulting firm, Geller Consulting, on May 1, 2011.The following transactions occurred during the month of May.May 1 Geller invested $8,000 cash in the business in exchange for stock.2 Paid $800 for office rent for the month.3 Purchased $500 of supplies on account.5 Paid $50
Financial statement information about four different companies is as follows.Instructions(a) Determine the missing amounts. (b) Prepare the retained earnings statement for McKane Company. Assume beginning retained earnings was $0.(c) Write a memorandum explaining the sequence for preparing
The accounts in the ledger of Sanford Delivery Service contain the following balances on July 31, 2011.InstructionsPrepare a trial balance with the accounts arranged as illustrated in the chapter and fill in the missing amount forCash.
The statement of cash flows classifies each transaction as an operating activity, an investing activity, or a financing activity. Operating activities are the types of activities the company performs to generate profits. Investing activities include the purchase of long-lived assets such as
The trial balances before and after adjustment for Garcia Company at the end of its fiscal year are presented below.InstructionsPrepare the adjusting entries that weremade.
In its first year of operations, Queenan Company earned $30,000 in service revenue, $8,000 of which was on account and still outstanding at year-end. The remaining $22,000 was received in cash from customers. The company incurred operating expenses of $15,500. Of these expenses $13,000 was paid in

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