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Financial Accounting 5th edition David Spiceland, Wayne M. Thomas, Don Herrmann - Solutions

On January 1, 2021, Lizzy’s Lemonade issues 5%, 20-year bonds with a face amount of $100,000 for $88,443, priced to yield 6%. Interest is paid semiannually. What amount of interest expense will be recorded on June 30, 2021, the first interest payment date?
Pretzelmania, Inc., issues 7%, 15-year bonds with a face amount of $70,000 for $76,799 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 6%. Interest is paid annually on December 31.1. Record the bond issue.2. Record the first interest payment on December 31,
Pretzelmania, Inc., issues 7%, 15-year bonds with a face amount of $70,000 for $64,008 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 8%. Interest is paid annually on December 31.1. Record the bond issue.2. Record the first interest payment on December 31,
Pretzelmania, Inc., issues 7%, 10-year bonds with a face amount of $70,000 for $70,000 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 7%. Interest is paid annually on December 31.1. Record the bond issue.2. Record the first interest payment on December 31,
Pretzelmania, Inc., issues 7%, 15-year bonds with a face amount of $70,000 for $76,860 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 6%. Interest is paid semiannually on June 30 and December 31.1. Record the bond issue.2. Record the first interest payment on
Pretzelmania, Inc., issues 7%, 15-year bonds with a face amount of $70,000 for $63,948 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 8%. Interest is paid semiannually on June 30 and December 31.1. Record the bond issue.2. Record the first interest payment on
Pretzelmania, Inc., issues 7%, 10-year bonds with a face amount of $70,000 for $70,000 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 7%. Interest is paid semiannually on June 30 and December 31.1. Record the bond issue.2. Record the first interest payment on
Suppose a company signs a three-year lease agreement. The lease payments have a present value of $40,000. Prior to signing the lease, the company had total assets of $600,000, total liabilities of $400,000, and total stockholders’ equity of $200,000. Calculate the balance of total assets, total
On April 1, 2021, Primer Corp. signs a five-year lease to use office space. The present value of the monthly lease payments is $100,000. Record the lease.
On January 1, 2021, Beaver Tours financed the purchase of a new building by borrowing $600,000 from the bank using a 30-year, 6% note payable. Payments of $3,597.30 are due at the end of each month, with the first installment due on January 31, 2021. Record the issuance of the note payable and the
On January 1, 2021, Corvallis Carnivals borrows $30,000 to purchase a delivery truck by agreeing to a 5%, five-year loan with the bank. Payments of $566.14 are due at the end of each month, with the first installment due on January 31, 2021. Record the issuance of the note payable and the first
What is a lease and how does a lease affect a company’s balance sheet?
Quattro Technologies, a hydraulic manufacturer in the aeronautics industry, has reported steadily increasing net income over the past few years. The company reported net income of $120 million in 2019 and $140 million in 2020. The stock is receiving increasing analyst attention because many
Western Manufacturing is involved with several potential contingent liabilities. Your assignment is to draft the appropriate accounting treatment for each situation described below. Western’s fiscal year-end is December 31, 2021, and the financial statements will be issued in early February
A very helpful site to learn about individual publicly traded companies is finance.yahoo.com. Go to this website and look up a well-known publicly traded company. Once you find the company page, perform the following tasks.Required:1. Click on “Basic Chart.” How has the stock price changed over
Eugene Wright is CFO of Caribbean Cruise Lines. The company offers luxury cruises. It’s near year-end, and Eugene is feeling kind of queasy. The economy is in a recession, and demand for luxury cruises is way down. Eugene doesn’t want the company’s current ratio to fall below the 1.0 minimum
Financial information for American Eagle is presented in Appendix A at the end of the book, and financial information for Buckle is presented in Appendix B at the end of the book.Required:1. Calculate the current ratio for both companies for the year ended February 3, 2018. Which company has the
At the end of 2022, the following information is available for Great Adventures.• Additional interest for five months needs to be accrued on the $30,000, 6% loan obtained on August 1, 2021. Recall that annual interest is paid each July 31.• Assume that $10,000 of the $30,000 loan discussed
Authors Academic Press faces three potential contingency situations, described below. Authors’ fiscal year ends December 31, 2021.Required:Determine the appropriate means of reporting each situation for the year ended December 31, 2021, and record any necessary entries. Explain your reasoning.1.
Compact Electronics is a leading manufacturer of digital camera equipment. Assume the following transactions occur during the year ended December 31, 2021.Required:Record any amounts as a result of each of these contingencies.1. Accounts receivable were $29 million (all credit) at the end of 2021.
Eskimo Joe’s, designer of the world’s second best-selling T-shirt (just behind Hard Rock Cafe), borrows $21 million cash on November 1, 2021. Eskimo Joe’s signs a six-month, 7% promissory note to Stillwater National Bank under a prearranged short-term line of credit. Interest on the note is
Listed below are several terms and phrases associated with current liabilities. Pair each item from List A (by letter) with the item from List B that is most appropriately associated with it.1. Interest expense is recorded in the periodinterest is incurred rather than in theperiod interest is
Dinoco Petroleum faces three potential contingency situations, described below. Dinoco’s fiscal year ends December 31, 2021, and it issues its 2021 financial statements on March 15, 2022.Required:Determine the appropriate means of reporting each situation for the year ended December 31, 2021, and
The ink-jet printing division of Environmental Printing has grown tremendously in recent years. Assume the following transactions related to the ink-jet division occur during the year ended December 31, 2021.Required:Record any amounts as a result of each of these contingencies.1. Environmental
Precision Castparts, a manufacturer of processed engine parts in the automotive and airline industries, borrows $41 million cash on October 1, 2021, to provide working capital for anticipated expansion. Precision signs a one-year, 9% promissory note to Midwest Bank under a prearranged short-term
Listed below are several terms and phrases associated with current liabilities. Pair each item from List A (by letter) with the item from List B that is most appropriately associated with it.1. An IOU promising to repay the amount borrowed plus interest.a. Recording of a contingent liability.2.
On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances:During January 2021, the following transactions occur:January 2 Sold gift cards totaling $8,000. The cards are redeemable for merchandise within one year of the purchase date.January 6 Purchase
On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances:During January 2021, the following transactions occur:January 2 Sold gift cards totaling $8,000. The cards are redeemable for merchandise within one year of the purchase date.January 6 Purchase
Lindy Appliance begins operations in 2021 and offers a one-year warranty on all products sold. Total appliance sales in 2021 are $1,600,000, and Lindy estimates future warranty costs in 2022 to be 2% of current sales. Actual warranty costs in 2022 are $25,000. Also in 2022, Lindy has additional
Computer Wholesalers restores and resells notebook computers. It originally acquires the notebook computers from corporations upgrading their computer systems, and it backs each notebook it sells with a 90-day warranty against defects. Based on previous experience, Computer Wholesalers expects
Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December 2021 of a circuit flaw in an amplifier that poses a potential fire hazard. Further investigation indicates that a product recall is probable, estimated to cost the
Vail is one of the largest ski resorts in the United States. Suppose that on October 1, 2021, Vail sells gift cards (lift passes) for $100,000. The gift cards are redeemable for one day of skiing during the upcoming winter season. The gift cards expire on April 1, 2022. Customers redeem gift cards
Apple Inc. is the number one online music retailer through its iTunes music store. Apple sells iTunes gift cards in $15, $25, and $50 increments. Assume Apple sells $21 million in iTunes gift cards in November, and customers redeem $14 million of the gift cards in December.Required:1. Record the
Aspen Ski Resorts has 100 employees, each working 40 hours per week and earning $20 an hour. Although the company does not pay any health or retirement benefits, one of the perks of working at Aspen is that employees are allowed free skiing on their days off. Federal income taxes are withheld at
On August 1, 2021, Trico Technologies, an aeronautic electronics company, borrows $21 million cash to expand operations. The loan is made by FirstBanc Corp. under a short-term line of credit arrangement. Trico signs a six-month, 9% promissory note. Interest is payable at maturity. FirstBanc
On August 1, 2021, Trico Technologies, an aeronautic electronics company, borrows $21 million cash to expand operations. The loan is made by FirstBanc Corp. under a short-term line of credit arrangement. Trico signs a six-month, 9% promissory note. Interest is payable at maturity. Trico’s
On November 1, 2021, Aviation Training Corp. borrows $60,000 cash from Community Savings and Loan. Aviation Training signs a three-month, 7% note payable. Interest is payable at maturity. Aviation’s year-end is December 31.Required:1. Record the note payable by Aviation Training.2. Record the
For each of the transactions below, determine the effect on(a) The current ratio(b) The acid-test ratio.1. Provide services to customers on account.2. Borrow cash from the bank by signing a long-term note payable.3. Purchase office supplies with cash.4. Pay rent for the current period.
On September 1, 2021, Southwest Airlines borrows $41 million, of which $10 million is due next year. Show how Southwest Airlines would record the $41 million debt on its December 31, 2021, balance sheet.
On May 31, Marty’s Ice Cream Shop sells gift cards for $5,000. Customers redeem $1,200 in June, $2,100 in July, and $1,400 in August. Marty’s experience is that any unredeemed gift cards as of August 31 are not likely to be redeemed. Calculate the amount of gift card revenue each month.
Mike Samson is a college football coach making a base salary of $652,800 a year ($54,400 per month). Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a 1.45% Medicare tax with no maximum. Assuming the FICA base amount is $128,400, compute how much will
How do retailers like McDonald’s, American Eagle, and Apple Inc. account for the sale of gift cards?
Companies are increasingly making their accounting information, especially their annual reports, available through their websites. Select a well-known publicly traded company and go to its website. Look for the investment section, and then click on annual reports. Select the most recent annual
Companies often are under pressure to meet or beat Wall Street earnings projections in order to increase stock prices and also to increase the value of stock options. Such pressure may cause some managers to alter their estimates for depreciation to artificially create desired results.Required:1.
Financial information for Buckle is presented in Appendix B at the end of the book.Required:1. The summary of significant accounting policies is located in note A to the financial statements. Locate the section on property and equipment. What depreciation method does Buckle use? What are the
Financial information for American Eagle is presented in Appendix A at the end of the book.Required:1. The summary of significant accounting policies is located in note 2 to the financial statements. Locate the section on property and equipment. What depreciation method does American Eagle use?
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2022, for $12,000. They expect to use the Suburban for five years and then sell the vehicle for $4,500. The following expenditures related to the
Togo’s Sandwich Shop had the following long-term asset balances as of January 1, 2021:Togo’s purchased all the assets at the beginning of 2019 (3 years ago). The building is depreciated over a 10-year service life using the double-declining-balance method and estimating no residual value. The
On January 1, 2021, the general ledger of TNT Fireworks includes the following account balances:During January 2021, the following transactions occur:January 1 Purchase equipment for $19,500. The company estimates a residual value of $1,500 and a five-year service life.January 4 Pay cash on
On January 1, 2021, Weaver Corporation purchased a patent for $237,000. The remaining legal life is 20 years, but the company estimates the patent will be useful for only six more years. In January 2023, the company incurred legal fees of $57,000 in successfully defending a patent infringement
Togo’s Sandwiches acquired equipment on April 1, 2021, for $18,000. The company estimates a residual value of $2,000 and a five-year service life.Required:Calculate depreciation expense using the straight-line method for 2021 and 2022, assuming a December 31 year-end.
Refer to the situation described in BE7–19. Assume the sum of estimated future cash flows is $32 million instead of $38 million. What amount of impairment loss should Vegetarian Delights record?BE7-19Vegetarian Delights has been experiencing declining market conditions for its specialty foods
Eddie’s Galleria sells billiard tables. The company has the following purchases and sales for 2021.Eddie is worried about the company’s financial performance. He has noticed an increase in the purchase cost of billiard tables, but at the same time, competition from other billiard table stores
Horizon Corporation manufactures personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2019. Due primarily to increased competition and price slashing in the industry, 2020’s income statement reported a loss of $20 million. Just before the end of
Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinic participants wear multiuse (MU) watches. Beyond the normal timekeeping features of most watches, MU watches are able to report
At the beginning of October, Bowser Co.’s inventory consists of 50 units with a cost per unit of $50. The following transactions occur during the month of October.October 4 Purchase 130 units of inventory on account from Waluigi Co. for $50 per unit, terms 2/10, n/30.October 5 Pay cash for
For the current year, Parker Games has the following inventory transactions related to its traditional board games.Required:1. Using FIFO, calculate ending inventory and cost of goods sold.2. Using LIFO, calculate ending inventory and cost of goods sold.3. Because of the increasing popularity of
Greg’s Bicycle Shop has the following transactions related to its top-selling Mongoose mountain bike for the month of March.Required:1. Calculate ending inventory and cost of goods sold at March 31, using the specific identification method. The March 5 sale consists of bikes from beginning
A company like Golf USA that sells golf-related inventory typically will have inventory items such as golf clothing and golf equipment. As technology advances the design and performance of the next generation of drivers, the older models become less marketable and therefore decline in value.
Home Furnishings reports inventory using the lower of cost and net realizable value (NRV). Below is information related to its year-end inventory.Required:1. Calculate the total recorded cost of ending inventory before any adjustments.2. Calculate ending inventory using the lower of cost and net
During the year, Trombley Incorporated has the following inventory transactions.For the entire year, the company sells 81 units of inventory for $30 each.Required:1. Using FIFO, calculate(a) Ending inventory,(b) Cost of goods sold,(c) Sales revenue, (d) gross profit.2. Using LIFO, calculate(a)
How is cost of inventory determined? How is net realizable value determined?
You have recently been hired as the assistant controller for Stanton Industries. Your immediate superior is the controller who, in turn, reports to the vice president of finance. The controller has assigned you the task of preparing the year-end adjustments. For receivables, you have prepared an
Financial information for Buckle is presented in Appendix B at the end of the book.Required:1. Determine whether the trend in net sales has been increasing or decreasing for the past three years.2. Where is accounts receivable reported? Explain why using net sales to calculate the receivables
Outdoor Expo provides guided fishing tours. The company charges $300 per person but offers a 20% discount to parties of four or more. Consider the following transactions during the month of May.May 2 Charlene books a fishing tour with Outdoor Expo for herself and four friends at the group discount
The general ledger of Pop’s Fireworks includes the following account balances in 2021:In addition, the following transactions occurred during 2021 and are not yet reflected in the account balances above:1. Provide additional services on account for $7,000. All services on account include terms
On January 1, 2021, the general ledger of 3D Family Fireworks includes the following account balances:During January 2021, the following transactions occur:January 2 Provide services to customers for cash, $35,100.January 6 Provide services to customers on account,
Refer to the information in E5–19, but now assume that the balance of the Allowance for Uncollectible Accounts on December 31, 2021, is $1,100 (debit) (before adjustment).Required:1. Record the adjustment for uncollectible accounts using the percentage-of-receivables method. Suzuki estimates 12%
Suzuki Supply reports the following amounts at the end of 2021 (before adjustment).Required:1. Record the adjustment for uncollectible accounts using the percentage-of-receivables method. Suzuki estimates 12% of receivables will not be collected.2. Record the adjustment for uncollectible accounts
Refer to the information in BE5–17, but now assume that the balance of Allowance for Uncollectible Accounts before adjustment is $4,000 (debit). The company still estimates future uncollectible accounts to be 3% of credit sales for the year. What adjustment would Brinkley record for Allowance for
On October 1, 2021, Oberley Corporation loans one of its employees $40,000 and accepts a 12 month, 9% note receivable. Calculate the amount of interest revenue Oberley will recognize in 2021 and 2022.
Spade Agency separates its accounts receivable into three age groups for purposes of estimating the percentage of uncollectible accounts.1. Accounts not yet due = $25,000; estimated uncollectible = 4%.2. Accounts 1–60 days past due = $10,000; estimated uncollectible = 25%.3. Accounts more than 60
Refer to the information in BE5–6, but now assume that the balance of Allowance for Uncollectible Accounts before adjustment is $600 (debit). The company still estimates future uncollectible accounts to be 12% of Accounts Receivable. What is the adjustment Mercy Cosmetics would record for
Financial accounting information can often be found at financial websites. These websites are useful for collecting information about a company’s stock price, analysts’ forecasts, dividend history, historical financial accounting information, and much more. One such site is Yahoo! Finance (
Between his freshman and sophomore years of college, Jack takes a job as ticket collector at a local movie theatre. Moviegoers purchase a ticket from a separate employee outside the theatre and then enter through a single set of doors. Jack takes half their ticket, and they proceed to the movie of
Financial information for American Eagle is presented in Appendix A at the end of the book.Required:1. What does the Report of Independent Registered Public Accounting Firm indicate about American Eagle’s internal controls?2. In the summary of significant accounting policies, how does American
Below is a summary of all transactions of Dreamworks Bedding Supplies for the month of August 2021.Cash TransactionsCash collections from:Customers .............................................................................................. $ 80,400Sale of unused land
Refer to the information in E4–16.Required:Calculate cash flows from financing activities.E4-16Below are cash transactions for Goldman Incorporated, which provides consulting services related to mining of precious metals.a. Cash used for purchase of office supplies, $2,400.b. Cash provided from
Refer to the information in E4–16.Required:Calculate cash flows from investing activities.E4-16Below are cash transactions for Goldman Incorporated, which provides consulting services related to mining of precious metals.a. Cash used for purchase of office supplies, $2,400.b. Cash provided from
Below are cash transactions for Goldman Incorporated, which provides consulting services related to mining of precious metals.a. Cash used for purchase of office supplies, $2,400.b. Cash provided from consulting to customers, $50,600.c. Cash used for purchase of mining equipment, $83,000.d. Cash
Below are several transactions for Meyers Corporation for 2021.+Required:1. For each transaction, determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”). If cash is involved in the transaction, indicate whether Meyers should classify it as operating,
Halle’s Berry Farm establishes a $200 petty cash fund on September 4 to pay for minor cash expenditures. The fund is replenished at the end of each month. At the end of September, the fund contains $30 in cash. The company has also issued a credit card and authorized its office manager to make
You have recently been hired as the assistant controller for Stanton Temperton Corporation, which rents building space in major metropolitan areas. Customers are required to pay six months of rent in advance. At the end of 2021, the company’s president, Jim Temperton, notices that net income has
Financial information for Buckle is presented in Appendix B at the end of the book.Required:1. For the most recent year, what amount does Buckle report for current assets? What is the ratio of current assets to total assets?2. For the most recent year, what amount does Buckle report for current
Financial information for American Eagle is presented in Appendix A at the end of the book.Required:1. For the most recent year, what amount does American Eagle report for current assets? What is the ratio of current assets to total assets?2. For the most recent year, what amount does American
You may refer to the opening story of Tony and Suzie and their decision to start Great Adventures in AP 1–1. More of their story and the first set of transactions for the company in July are presented in AP 2–1 and repeated here.July 1 Sell $10,000 of common stock to Suzie.1 Sell $10,000 of
You may refer to the opening story of Tony and Suzie and their decision to start Great Adventures in AP 1–1. More of their story and the first set of transactions for the company in July are presented in AP 2–1 and repeated here.July 1 Sell $10,000 of common stock to Suzie.1 Sell $10,000 of
Refer to the information in BE3–12.(1) Record the lending for Falcon on July 1, 2021.(2) Record the adjusting entry for Falcon on December 31, 2021.(3) Calculate the 2021 year-end adjusted balances of Interest Receivable and Interest Revenue (assuming the balance of Interest Receivable at the
Fill in the blank associated with each adjusting entry:a. Prepaid expense: Debit Supplies Expense; credit _______.b. Deferred revenue: Debit __________; credit Service Revenue.c. Accrued expense: Debit _________; credit Salaries Payable.d. Accrued revenue: Debit Accounts Receivable; credit
Provide an example of an accrued revenue. Describe the adjusting entry associated with an accrued revenue.
Provide an example of an accrued expense. Describe the adjusting entry associated with an accrued expense.
Provide an example of a deferred revenue. Describe the adjusting entry associated with a deferred revenue.
Provide an example of a prepaid expense. Describe the adjusting entry associated with a prepaid expense.
Larry has been the chief financial officer (CFO) of Maxima Auto Service for the past 10 years. The company has reported profits each year it’s been in business. However, this year has been a tough one. Increased competition and the rising costs of labor have reduced the company’s profits. On
Financial information for Buckle is presented in Appendix B at the end of the book.Required:1. Determine the amounts Buckle reports for total assets, total liabilities, and total stockholders’ equity in the balance sheet for the most recent year. Verify that the basic accounting equation
Financial information for American Eagle is presented in Appendix A at the end of the book.Required:1. Calculate American Eagle’s percentage change in total assets and percentage change in net sales for the most recent year.2. Calculate American Eagle’s percentage change in net income for the
Tony and Suzie graduate from college in May 2021 and begin developing their new business. They begin by offering clinics for basic outdoor activities such as mountain biking or kayaking. Upon developing a customer base, they’ll hold their first adventure races. These races will involve
Gator Investments provides financial services related to investment selections, retirement planning, and general insurance needs. At the end of the year on December 31, 2021, the company reports the following amounts:In addition, the company had common stock of $100,000 at the beginning of the year
Account classifications include assets, liabilities, stockholders’ equity, dividends, revenues, and expenses.Required:For each transaction, indicate whether the related account would be classified in the balancesheet as(a) An asset,(b) A liability, or(c) Stockholders’ equity; in the income
Account classifications include assets, liabilities, stockholders’ equity, dividends, revenues, and expenses.Required:For each transaction, indicate whether the related account would be classified in the balancesheet as(a) An asset,(b) A liability,(c) Stockholders’ equity; in the income

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