Presented below is information related to Bowman, Inc. Instructions Comment on the appropriateness of the accounting procedures

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Presented below is information related to Bowman, Inc.

Instructions
Comment on the appropriateness of the accounting procedures followed by Bowman, Inc.
(a) During the year, the company purchased equipment through the issuance of common stock. The stock had a par value of $135,000 and a fair market value of $450,000. The fair market value of the equipment was not easily determinable. The company recorded this transaction as follows.
Equipment .......... 135,000
Common Stock ...... 135,000
(b) During the year, the company sold certain equipment for $285,000, recognizing a gain of $69,000. Because the controller believed that new equipment would be needed in the near future, she decided to defer the gain and amortize it over the life of any new equipment purchased.
(c) An order for $61,500 has been received from a customer for products on hand. This order was shipped on January 9, 2015. The company made the following entry in 2014.
Accounts Receivable ...... 61,500
Sales ........... 61,500
(d) Materials were purchased on January 1, 2014, for $120,000 and this amount was entered in the Materials account. On December 31, 2014, the materials would have cost $141,000, so the following entry is made.
Inventory ........... 21,000
Gain on Inventories .... 21,000
(e) Depreciation expense on the company’s building for the year was $60,000. Because the building was increasing in value during the year, the controller decided to charge the depreciation expense to retained earnings instead of to net income. The following entry is recorded.
Retained Earnings .......... 60,000
Accumulated Depreciation—Buildings ... 60,000

Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
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Intermediate Accounting

ISBN: 978-1118147290

15th edition

Authors: Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield

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