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Accounting Principles 11th Edition Jerry Weygandt, Paul Kimmel, Donald Kieso - Solutions
Presented below are the sales and cash receipts journals for Wicked Co. for its first month of operations. In addition, the following transactions have not been journalized for February 2010.Feb. 2 Purchased merchandise on account from J. Garland for $3,600, terms 2/10, n/30.7 Purchased
You will need the working papers that accompany this textbook in order to work this mini practice set. Bluma Co. uses a perpetual inventory system and both an accounts receivable and an accounts payable subsidiary ledger. Balances related to both the general ledger and the subsidiary ledger for
Microsoft Office Accounting Professional is one of the leading accounting software packages. Information related to this package is found at its website.Address: office.microsoft.com/en-us/accounting/HA102505581033.aspx, or go to www. wiley.com/college/weygandtInstructionsGo to the website shown
Hughey & Payne is a wholesaler of small appliances and parts. Hughey & Payne is operated by two owners, Rich Hughey and Kristen Payne. In addition, the company has one employee, a repair specialist, who is on a fixed salary. Revenues are earned through the sale of appliances to retailers
Barb Doane, a classmate, has a part-time bookkeeping job. She is concerned about the inefficiencies in journalizing and posting transactions. Jim Houser is the owner of the company where Barb works. In response to numerous complaints from Barb and others, Jim hired two additional bookkeepers a
Roniger Products Company operates three divisions, each with its own manufacturing plant and marketing/sales force. The corporate headquarters and central accounting office are in Roniger, and the plants are in Freeport, Rockport, and Bayport, all within 50 miles of Roniger. Corporate management
In this chapter you learned about a basic manual accounting information system. Computerized accounting systems range from the very basic and inexpensive to the very elaborate and expensive. Even the most sophisticated systems are based on the fundamental structures and relationships that you
Dain Company acquires the land and building owned by Corrs Company. What types of costs may be incurred to make the asset ready for its intended use if Dain Company wants to use (a) Only the land, and (b) Both the land and the building?
In a recent newspaper release, the president of Keene Company asserted that something has to be done about depreciation. The president said, “Depreciation does not come close to accumulating the cash needed to replace the asset at the end of its useful life. What is your response to the president?
Robert is studying for the next accounting examination. He asks your help on two questions: (a) What is salvage value? (b) Is salvage value used in determining periodic depreciation under each depreciation method? Answer Robert’s questions.
Contrast the straight-line method and the units-of-activity method as to (a) Useful life, and (b) The pattern of periodic depreciation over useful life.
Contrast the effects of the three depreciation methods on annual depreciation expense.
Distinguish between revenue expenditures and capital expenditures during useful life.
How is a gain or loss on the sale of a plant asset computed?
Mendez Corporation owns a machine that is fully depreciated but is still being used. How should Mendez account for this asset and report it in the financial statements?
What are natural resources, and what are their distinguishing characteristics?
Explain what depletion is and how it is computed.
What are the similarities and differences between the terms depreciation, depletion, and amortization?
Pendergrass Company hires an accounting intern who says that intangible assets should always be amortized over their legal lives. Is the intern correct? Explain.
Kenny Sain, a business major, is working on a case problem for one of his classes. In the case problem, the company needs to raise cash to market a new product it developed. Joe Morris, an engineering major, takes one look at the company’s balance sheet and says, “This company has an awful lot
Under what conditions is goodwill recorded?
Often research and development costs provide companies with benefits that last a number of years. (For example, these costs can lead to the development of a patent that will increase the company’s income for many years.) However, generally accepted accounting principles require that such costs be
McDonald’s Corporation reports total average assets of $28.9 billion and net sales of $20.5 billion. What is the company’s asset turnover ratio?
Resco Corporation and Yapan Corporation operate in the same industry. Resco uses the straight-line method to account for depreciation; Yapan uses an accelerated method. Explain what complications might arise in trying to compare the results of these two companies.
Lopez Corporation uses straight-line depreciation for financial reporting purposes but an accelerated method for tax purposes. Is it acceptable to use different methods for the two purposes? What is Lopez’s motivation for doing this?
You are comparing two companies in the same industry. You have determined that May Corp. depreciates its plant assets over a 40-year life, whereas Won Corp. depreciates its plant assets over a 20-year life. Discuss the implications this has for comparing the results of the two companies.
What classifications and amounts are shown in PepsiCo’s Note 4 to explain its total property, plant, and equipment (net) of $11,228 million?
Tatum Refrigeration Company trades in an old machine on a new model when the fair market value of the old machine is greater than its book value. The transaction has commercial substance. Should Tatum recognize a gain on disposal? If the fair market value of the old machine is less than its book
The following expenditures were incurred by Obermeyer Company in purchasing land: cash price $70,000, accrued taxes $3,000, attorneys’ fees $2,500, real estate broker’s commission $2,000, and clearing and grading $3,500.What is the cost of the land?
Neeley Company incurs the following expenditures in purchasing a truck: cash price $30,000, accident insurance $2,000, sales taxes $1,500, motor vehicle license $100, and painting and lettering $400.What is the cost of the truck?
Conlin Company acquires a delivery truck at a cost of $42,000.The truck is expected to have a salvage value of $6,000 at the end of its 4-year useful life. Compute annual depreciation for the first and second years using the straight-line method.
Ecklund Company purchased land and a building on January 1, 2010. Management’s best estimate of the value of the land was $100,000 and of the building $200,000. But management told the accounting department to record the land at $220,000 and the building at $80,000. The building is being
Depreciation information for Conlin Company is given in BE10-3. Assuming the declining-balance depreciation rate is double the straight-line rate, compute annual depreciation for the first and second years under the declining-balance method.
Speedy Taxi Service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 150,000 miles. Taxi no. 10 cost $33,500 and is expected to have a salvage value of $500.Taxi no. 10 is driven 30,000 miles in year 1 and 20,000 miles in year 2. Compute
On January 1, 2010, the Ramirez Company ledger shows Equipment $29,000 and Accumulated Depreciation $9,000. The depreciation resulted from using the straight-line method with a useful life of 10 years and salvage value of $2,000. On this date, the company concludes that the equipment has a
Firefly Company had the following two transactions related to its delivery truck.1. Paid $45 for an oil change.2. Paid $400 to install special shelving units, which increase the operating efficiency of the truck. Prepare Firefly’s journal entries to record these two transactions.
Prepare journal entries to record the following.(a) Gomez Company retires its delivery equipment, which cost $41,000. Accumulated depreciation is also $41,000 on this delivery equipment. No salvage value is received.(b) Assume the same information as (a), except that accumulated depreciation is
Chan Company sells office equipment on September 30, 2010, for $20,000 cash. The office equipment originally cost $72,000 and as of January 1, 2010, had accumulated depreciation of $42,000. Depreciation for the first 9 months of 2010 is $5,250. Prepare the journal entries to(a) Update depreciation
Olpe Mining Co. purchased for $7 million a mine that is estimated to have 35 million tons of ore and no salvage value. In the first year, 6 million tons of ore are extracted and sold.(a) Prepare the journal entry to record depletion expense for the first year.(b) Show how this mine is reported on
Galena Company purchases a patent for $120,000 on January 2, 2010. Its estimated useful life is 10 years.(a) Prepare the journal entry to record patent expense for the first year.(b) Show how this patent is reported on the balance sheet at the end of the first year.
Information related to plant assets, natural resources, and intangibles at the end of 2010 for Spain Company is as follows: buildings $1,100,000; accumulated depreciation—buildings $650,000; goodwill $410,000; coal mine $500,000; accumulated depletion—coal mine $108,000. Prepare a partial
Both the “All About You” story and the Feature Story at the beginning of the chapter discussed the company Rent-A-Wreck. Note that the tradename Rent-A-Wreck is a very important asset to the company, as it creates immediate product identification. As indicated in the chapter, companies invest
Rivera Company exchanges old delivery equipment for new delivery equipment. The book value of the old delivery equipment is $31,000 (cost $61,000 less accumulated depreciation $30,000). Its fair market value is $19,000, and cash of $5,000 is paid. Prepare the entry to record the exchange, assuming
Assume the same information as BE10-15, except that the fair market value of the old delivery equipment is $38,000. Prepare the entry to record the exchange.
African Lakes Company purchased a delivery truck. The total cash payment was $27,900, including the following items.Negotiated purchase price....... $24,000Installation of special shelving..... 1,100Painting and lettering.......... 900Motor vehicle license.......... 100Annual
On January 1, 2010, Pine Grove Country Club purchased a new riding mower for $15,000.The mower is expected to have an 8-year life with a $1,000 salvage value. What journal entry would Pine Grove make at December 31, 2010, if it uses straight-line depreciation?
Ritenour Manufacturing has an old factory machine that cost $50,000.The machine has accumulated depreciation of $28,000 and a fair value of $26,000. Ritenour has decided to sell the machine.(a) What entry would Ritenour make to record the sale of the truck for $26,000 cash?(b) What entry would
Match the statement with the term most directly associated with it. Goodwill.......... AmortizationIntangible assets....... FranchiseResearch and development costs1. _______ Rights, privileges, and competitive advantages that result from the ownership of long-lived assets that do not possess
The following expenditures relating to plant assets were made by Spaulding Company during the first 2 months of 2010.1. Paid $5,000 of accrued taxes at time plant site was acquired.2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery was in transit.3.
Trudy Company incurred the following costs.1. Sales tax on factory machinery purchased $5,0002. Painting of and lettering on truck immediately upon purchase 7003. Installation and testing of factory machinery 2,0004. Real estate broker’s commission on land purchased 3,5005. Insurance premium paid
On March 1, 2010, Penner Company acquired real estate on which it planned to construct a small office building. The company paid $80,000 in cash. An old warehouse on the property was razed at a cost of $8,600; the salvaged materials were sold for $1,700. Additional expenditures before construction
Chris Rock has prepared the following list of statements about depreciation. 1. Depreciation is a process of asset valuation, not cost allocation.2. Depreciation provides for the proper matching of expenses with revenues.3. The book value of a plant asset should approximate its market value.4.
Younger Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2010, at a cost of $168,000. Over its 4-year useful life, the bus is expected to be driven 100,000 miles. Salvage value is expected to be $8,000.Instructions(a) Compute the
Kelm Company purchased a new machine on October 1, 2010, at a cost of $120,000.The company estimated that the machine will have a salvage value of $12,000. The machine is expected to be used for 10,000 working hours during its 5-year life.InstructionsCompute the depreciation expense under the
Brainiac Company purchased a delivery truck for $30,000 on January 1, 2010.The truck has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2010 and 12,000 in 2011.Instructions(a) Compute
Jerry Grant, the new controller of Blackburn Company, has reviewed the expected useful lives and salvage values of selected depreciable assets at the beginning of 2010. His findings are as follows. All assets are depreciated by the straight-line method. Blackburn Company uses a calendar year in
Presented below are selected transactions at Ingles Company for 2010. Jan. 1 Retired a piece of machinery that was purchased on January 1, 2000.The machine cost $62,000 on that date. It had a useful life of 10 years with no salvage value.June 30 Sold a computer that was purchased on January 1,
Beka Company owns equipment that cost $50,000 when purchased on January 1, 2007. It has been depreciated using the straight-line method based on estimated salvage value of $5,000 and an estimated useful life of 5 years.InstructionsPrepare Beka Company’s journal entries to record the sale of the
On July 1, 2010, Hurtig Inc. invested $720,000 in a mine estimated to have 800,000 tons of ore of uniform grade. During the last 6 months of 2010, 100,000 tons of ore were mined and sold. Instructions(a) Prepare the journal entry to record depletion expense.(b) Assume that the 100,000 tons of ore
The following are selected 2010 transactions of Franco Corporation.Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite.May 1 Purchased for $90,000 a patent with an estimated useful life of 5 years and a legal life of 20 years.InstructionsPrepare
Herzogg Company, organized in 2010, has the following transactions related to intangible assets. InstructionsPrepare the necessary entries to record these intangibles. All costs incurred were for cash. Make the adjusting entries as of December 31, 2010, recording any necessary amortization and
Buster Container Company is suffering declining sales of its principal product, nonbiodegradeable plastic cartons. The president, Dennis Harwood, instructs his controller, Shelly McGlone, to lengthen asset lives to reduce depreciation expense. A processing line of automated plastic extruding
Presented below are two independent transactions. Both transactions have commercial substance.1. Sidney Co. exchanged old trucks (cost $64,000 less $22,000 accumulated depreciation) plus cash of $17,000 for new trucks. The old trucks had a fair market value of $36,000.2. Lupa Inc. trades its used
Coran’s Delivery Company and Enright’s Express Delivery exchanged delivery trucks on January 1, 2010. Coran’s truck cost $22,000. It has accumulated depreciation of $15,000 and a fair market value of $4,000. Enright’s truck cost $10,000. It has accumulated depreciation of $8,000 and a fair
Diaz Company was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order. InstructionsAnalyze the foregoing transactions using the following column headings. Insert the number of each transaction in the Item
In recent years, Juresic Transportation purchased three used buses. Because of frequent turnover in the accounting department, a different accountant selected the depreciation method for each bus, and various methods were selected. Information concerning the buses is summarized below. For the
On January 1, 2010, Pele Company purchased the following two machines for use in its production process. Machine A: The cash price of this machine was $38,000. Related expenditures included: sales tax $1,700, shipping costs $150, insurance during shipping $80, installation and testing costs $70,
At the beginning of 2008, Lehman Company acquired equipment costing $90,000. It was estimated that this equipment would have a useful life of 6 years and a residual value of $9,000 at that time. The straight-line method of depreciation was considered the most appropriate to use with this type of
At December 31, 2010, Jimenez Company reported the following as plant assets. During 2011, the following selected cash transactions occurred. April 1 Purchased land for $2,130,000. May 1 Sold equipment that cost $780,000 when purchased on January 1, 2007.The equipment was sold for $450,000. June
Puckett Co. has office furniture that cost $75,000 and that has been depreciated $50,000. Record the disposal under the following assumptions.(a) It was scrapped as having no value.(b) It was sold for $21,000.(c) It was sold for $31,000.
The intangible assets section of Redeker Company at December 31, 2010, is presented below.Patent ($70,000 cost less $7,000 amortization)..... $63,000Franchise ($48,000 cost less $19,200 amortization)... 28,800Total...................... $91,800The patent was acquired in January 2010 and has a
Due to rapid turnover in the accounting department, a number of transactions involving intangible assets were improperly recorded by the Thorne Company in 2010.1. Thorne developed a new manufacturing process, incurring research and development costs of $136,000. The company also purchased a patent
Lebo Company and Ritter Corporation, two corporations of roughly the same size, are both involved in the manufacture of in-line skates. Each company depreciates its plant assets using the straight-line approach. An investigation of their financial statements reveals the following
Dewey Company was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order. InstructionsAnalyze the foregoing tranactions using the following column headings. Insert the number of each transaction in the Item
In recent years, Pablo Company purchased three machines. Because of heavy turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and each selected a different method. Information concerning the machines is summarized
On January 1, 2010, Arlo Company purchased the following two machines for use in its production process.Machine A: The cash price of this machine was $55,000. Related expenditures included: sales tax $2,750, shipping costs $100, insurance during shipping $75, installation and testing costs $75, and
At the beginning of 2008, Anfernee Company acquired equipment costing $200,000. It was estimated that this equipment would have a useful life of 6 years and a residual value of $20,000 at that time. The straight-line method of depreciation was considered the most appropriate to use with this type
At December 31, 2010, Starkey Company reported the following as plant assets. During 2011, the following selected cash transactions occurred. April 1 Purchased land for $1,200,000. May 1 Sold equipment that cost $420,000 when purchased on January 1, 2007.The equipment was sold for $240,000. June
Bobby’s has delivery equipment that cost $40,000 and that has been depreciated $26,000. Record the disposal under the following assumptions.(a) It was scrapped as having no value.(b) It was sold for $29,000.(c) It was sold for $10,000.
The intangible assets section of Time Company at December 31, 2010, is presented below.Patent ($100,000 cost less $10,000 amortization)..... $ 90,000Copyright ($60,000 cost less $24,000 amortization)... 36,000Total...................... $126,600The patent was acquired in January 2010 and has
Due to rapid turnover in the accounting department, a number of transactions involving intangible assets were improperly recorded by Wasp Company in 2010.1. Wasp developed a new manufacturing process, incurring research and development costs of $110,000. The company also purchased a patent for
McLead Corporation and Gene Corporation, two corporations of roughly the same size, are both involved in the manufacture of canoes and sea kayaks. Each company depreciates its plant assets using the straight-line approach. An investigation of their financial statements reveals the following
The financial statements and the Notes to Consolidated Financial Statements of PepsiCo, Inc. are presented in Appendix A. InstructionsRefer to PepsiCo’s financial statements and answer the following questions.(a) What was the total cost and book value of property, plant, and equipment at
PepsiCo’s financial statements are presented in Appendix A. Financial statements of The Coca-Cola Company are presented in Appendix B.Instructions(a) Compute the asset turnover ratio for each company for 2007.(b) What conclusions concerning the efficiency of assets can be drawn from these data?
Reimer Company and Lingo Company are two proprietorships that are similar in many respects. One difference is that Reimer Company uses the straight-line method and Lingo Company uses the declining-balance method at double the straight-line rate. On January 2, 2008, both companies acquired the
The following was published with the financial statements to American Exploration Company.AMERICAN EXPLORATION COMPANYNotes to the Financial StatementsProperty, Plant, and Equipment—The Company accounts for its oil and gas exploration and production activities using the successful efforts
(a) The steps in the accounting cycle for a merchandising company are different from the accounting cycle for a service company. Do you agree or disagree? (b) Is the measurement of net income for a merchandising company conceptually the same as for a service company? Explain.
(a) How do the components of revenues and expenses differ between merchandising and service companies?(b) Explain the income measurement process in a merchandising company.
How does income measurement differ between a merchandising and a service company?
Distinguish between FOB shipping point and FOB destination. Identify the freight terms that will result in a debit to Merchandise Inventory by the purchaser and a debit to Freight-out by the seller.
Goods costing $2,000 are purchased on account on July 15 with credit terms of 2/10, n/30. On July 18 a $200 credit memo is received from the supplier for damaged goods. Give the journal entry on July 24 to record payment of the balance due within the discount period using a perpetual inventory
Joan Roland believes revenues from credit sales may be earned before they are collected in cash. Do you agree? Explain.
(a) What is the primary source document for recording (1) cash sales, (2) credit sales. (b) Using XXs for amounts, give the journal entry for each of the transactions in part (a).
A credit sale is made on July 10 for $900, terms 2/10, n/30. On July 12, $100 of goods are returned for credit. Give the journal entry on July 19 to record the receipt of the balance due within the discount period.
Prepare the closing entries for the Sales account, assuming a balance of $200,000 and the Cost of Goods Sold account with a $145,000 balance.
Reese Co. has sales revenue of $105,000, cost of goods sold of $70,000, and operating expenses of $20,000.What is its gross profit and its gross profit rate?
Ann Fort Company reports net sales of $800,000, gross profit of $370,000, and net income of $240,000.What are its operating expenses?
Identify the distinguishing features of an income statement for a merchandising company.
Identify the sections of a multiple-step income statement that relate to (a) Operating activities, and (b) Non-operating activities.
How does the single-step form of income statement differ from the multiple-step form?
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