Accounting Principles A Business Perspective Financial Accounting Chapters 9 To 18 1st Edition Bill Buxton, Amy Sibiga - Solutions

Exercise F Smart Corporation owes a trade creditor USD 30,000 on open account which the corporation does not have sufficient cash to pay. The trade creditor suggests that Smart Corporation issue to him 750 shares of the USD 24 par value common stock, which is currently selling on the market at USD
Exercise E Li & Tu, Inc., needed land for a plant site. It issued 100 shares of USD 480 par value common stock to the incorporators of their corporation in exchange for land, which cost USD 56,000 one year ago. Experienced appraisers recently valued the land at USD 72,000. What journal entry would
Exercise D Thore Company issued 30,000 shares of USD 20 par value common stock for USD 680,000. What is the journal entry for this transaction? What would the journal entry be if the common stock had no-par or stated value?
Exercise C Gordon Company issued 10,000 shares of common stock for USD 1,120,000 cash. The common stock has a par value of USD 100 per share. Give the journal entry for the stock issuance.
Exercise B Zeff Corporation has 2,000 shares outstanding of cumulative preferred stock and 6,000 shares of common stock. The preferred stock is entitled to an annual dividend of USD 18 per share before dividends are declared on common stock. No preferred dividends were paid for last year and the
Exercise A Winters Corporation has outstanding 1,000 shares of noncumulative preferred stock and 2,000 shares of common stock. The preferred stock is entitled to an annual dividend of USD 100 per share before dividends are declared on common stock. What are the total dividends received by each
➢ Assuming there is no preferred stock outstanding, how can the book value per share of common stock be determined? Of what significance is the book value per share? What is the relationship of book value per share to market value per share?
➢ What assumptions are made in determining book value?
➢ What is the general approach of the accountant in determining the dollar amount at which to record the issuance of capital stock for services or property other than cash?
➢ Blake Corporation issued 5,000 shares of USD 100 par value common stock at USD 120 per share. What is the legal capital of Blake Corporation, and why is the amount of legal capital important?
➢ Explain the nature of the account entitled Paid-In Capital in Excess of Par Value. Under what circumstances is this account credited?
➢ Explain why a corporation might issue a preferred stock that is both convertible into common stock and callable.
➢ A corporation has 1,000 shares of 8 percent, USD 200 par value, cumulative, preferred stock outstanding. Dividends on this stock have not been declared for three years. Is the corporation legally liable to its preferred stockholders for these dividends? How should this fact be shown in the
➢ What are dividends in arrears, and how should they be disclosed in the financial statements?
➢ What do the terms cumulative and noncumulative mean in regard to preferred stock?
➢ What are the meanings of the terms stock preferred as to dividends and stock preferred as to assets?
➢ Explain the terms liquidation value and redemption value.
➢ Corporate capital stock is seldom issued for less than par value. Give two reasons why this statement is true.
➢ What are the differences between par value stock and stock with no-par value?
➢ Explain the purpose or function of: (a) the stockholders' ledger, (b) the minutes book, (c) the stock-transfer agent, and (d) the stock registrar.
➢ What are the basic rights associated with a share of capital stock if there is only one class of stock outstanding?
➢ Why is Organization Expense not a good title for the account that records the costs of organizing a corporation? Could you justify leaving the balance of an Organization Costs account intact throughout the life of a corporation?
➢ What is meant by the statement that corporate income is subject to double taxation? Cite several other disadvantages of the corporate form of organization.
➢ Cite the major advantages of the corporate form of business organization and indicate why each is considered an advantage.
You are given the following information: Capital Stock, USD 80,000 (USD 80 par); Paid-In Capital in Excess of Par Value—Common, USD 200,000; and Retained Earnings, USD 400,000. Assuming only one class of stock, the book value per share is:a. USD 680.b. USD 280.c. USD 80.d. USD 400.e. None of the
Quinn Corporation issued 10,000 shares of USD 20 par value common stock at USD 50 per share. The amount that would be credited to Paid-In Capital in Excess of Par Value—Common is:a. USD 200,000.b. USD 300,000.c. USD 500,000.d. USD 700,000.e. None of the above.
Preferred stock that has dividends in arrears is:a. Noncumulative preferred stock.b. Noncumulative and callable preferred stock.c. Noncumulative and convertible preferred stock.d. Cumulative preferred stock.
An arbitrary amount assigned by the board of directors to each share of a given class of no-par stock is:a. Quasi-par value.b. Stated value.c. Redemption value.d. Liquidation value.
Which of the following is not an advantage of the corporate form of organization?a. Continuous existence of the entity.b. Limited liability of stockholders.c. Government regulation.d. Easy transfer of ownership.
When 10,000 shares of USD 20 par value common stock are issued in payment for a parcel of land with a fair market value of USD 300,000, the Common Stock account is credited for USD 200,000, and the Paid-In Capital in Excess of Par Value—Common account is credited for USD 100,000.true or false.
The par value of a share of capital stock is no indication of the market value or book value of the share of stock.true or false.
In the event of corporate liquidation, stockholders whose stock is preferred as to assets are entitled to receive the par value of their shares before any amounts are distributed to creditors or common stockholders.true or false.
A person may favor the corporate form of organization for a risky business enterprise primarily because a corporation's shares can be easily transferred.true or false.
Group project G In a group of one or two other students, go to the library and locate Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", published by the Financial Accounting Standards Board. Write a
Group project F In a group of one or two other students, go to the library and locate Statement of Financial Accounting Standards No. 2, "Accounting for Research and Development Costs", published by the Financial Accounting Standards Board. Write a report to your instructor giving the highlights of
Group project E In teams of two or three students, find a recent annual report that includes intangible assets on the balance sheet. Select one member of each team to give an informal presentation discussing intangible asset disclosures on the face of the statements and in the notes to the
Ethics case D Based on the situation described in the ethics case regarding ABC Corporation, respond in writing to the following questions.a. Depending on his actions, what are the possible consequences for John Gilbert in this situation?b. Assuming that the president cannot find another appraiser
Annual report analysis C The mission of Rational Software Corporation is to ensure the success of customers constructing the software systems that they depend on.Using the following excerpts from Rational Software's annual reports, calculate the firm's total assets turnover for 2004 and 2003.
Business decision case B Currently, many corporations are looking for acquisition opportunities. Tyre, Inc., is trying to decide whether to buy Amite Company or Beauman Company. Tyre, Inc., has hired you as a consultant to analyze the two companies' financial information and to determine the more
Business decision case A During your audit examination of the Shirley Company's Plant, Property, and Equipment accounts, the following transaction came to your attention. On 2009 January 2, machine A was exchanged for machine B.Shirley Company acquired machine A for USD 90,000 on 2007 January 2.
Alternate problem G Selected transactions and other data for Grant Company:a. The company purchased a patent in early January 2006 for USD 144,000 and began amortizing it over its finite life of 10 years. In early January 2008, the company hired an outside law firm and successfully defended the
Alternate problem F Trask Company purchased a patent for USD 108,000 on 2009 January 2. The patent was estimated to have a finite life of 10 years. The USD 108,000 cost was properly charged to an asset account and amortized in 2009. On 2010 January 1, the company incurred legal and court costs of
Alternate problem E In December 2008, Brown Company acquired a mine for USD 2,700,000. The mine contained an estimated 10 million tons of ore. It was also estimated that the land would have a value of USD 240,000 when the mine was exhausted and that only 4 million tons of ore could be economically
Alternate problem D On 2009 July 1, Morgan Company had the following balances in some of its accounts:Accumulated Asset Depreciation Land $ 672,000 Leasehold 252,000 Buildings 3,151,680 $369,768 Equipment 1,370,880 436,800 Trucks 238,560 71,652 The leasehold covers a plot of ground leased on 2004
Alternate problem C Kine Company purchased a new Model II computer 2009 October 1. Cash price of the new computer was USD 24,960; Jackson received a trade-in allowance of USD 9,300 from the cash price for a Model I computer. The old computer was acquired on 2007 January 1, at a cost of USD 23,040.
Alternate problem B On 2007 January 1, Wood Company purchased a truck for USD 43,200 cash. The truck has an estimated useful life of six years and an expected salvage value of USD 5,400. Depreciation on the truck was computed using the straight-line method.a. Prepare a schedule showing the
Alternate problem A Ray, Inc., purchased a new 2010 model automobile on 2010 December 31. The cash price of the new automobile was USD 28,080, from which Ray received a trade-in allowance of USD 4,320 for a 2008 model traded in.The 2008 model had been acquired on 2008 January 1, at a cost of USD
Problem F Following are selected transactions and other data relating to Long Company for the year ended 2009 December 31.a. The company rented the second floor of a building for five years on 2009 January 2, and paid the annual rent of USD 18,000 for the first and fifth years in advance.b. In
Problem E East Company spent USD 249,900 to purchase a patent on 2009 January 2. Management assumes that the patent's finite useful life is 17 years. In January 2010, the company hired an outside law firm and successfully defended the patent in a lawsuit at a cost of USD 48,000. Also, in January
Problem D On 2009 January 2, York Mining Company acquired land with ore deposits at a cash cost of USD 1,800,000. Exploration and development costs amounted to USD 192,000. The residual value of the land is expected to be USD 360,000. The ore deposits contain an estimated 6 million tons. Present
Problem D On 2009 January 1, Moyer Company had the following balances in some of its accounts:Accumulated Asset Depreciation Land $ 624,000 Leasehold 780,000 Buildings 3,425,760 $ 286,650 Equipment 2,995,200 1,389,960 Trucks 449,280 158,790• The leasehold covers a plot of ground leased on 2005
Problem C Eagle Moving Company purchased a new moving van on 2009 October 1. The cash price of the new van was USD 33,750, and the company received a trade-in allowance of USD 5,600 for a 2007 model. The balance was paid in cash.The 2007 model had been acquired on 2007 January 1, at a cost of USD
Problem B On 2007 January 2, Blake Company purchased a delivery truck for USD 78,750 cash. The truck has an estimated useful life of six years and an estimated salvage value of USD 6,750. The straight-line method of depreciation is being used.a. Prepare a schedule showing the computation of the
Problem A Orr Company traded in an automobile that cost USD 18,000 and on which USD 15,000 of up-to-date depreciation has been recorded for a new automobile with a cash price of USD 34,500. The company received a trade-in allowance (its fair value) for the old automobile of USD 2,100 and paid the
Exercise L Rye Company purchased all of the assets of Shef Company for USD 900,000. Rye Company also agreed to assume responsibility for Shef Company's liabilities of USD 90,000. The fair market value of the assets acquired was USD 810,000. How much goodwill should be recorded in this transaction?
Exercise K Lem Company leased the first three floors in a building under an operating lease contract for a 10-year period beginning 2009 January 1. The company paid USD 240,000 in cash (not representing a specific period's rent) and agreed to make annual payments equal to 1 percent of the first USD
Exercise J Don Jackson paid Hungry Hannah's Hamburgers USD 54,000 for the right to operate a fast-food restaurant in Thomasville under the Hungry Hannah's name. Jackson also agreed to pay an operating fee of 0.5 percent of sales for advertising and other services rendered by Hungry Hannah's.
Exercise I Talse Company purchased a patent on 1995 January 1, at a total cost of USD 61,200. In 2006 January, the company hired an outside law firm and successfully defended the patent in a lawsuit. The legal fees amounted to USD 13,500. What will be the amount of patent cost amortized in 2009?
Exercise H The Slate Mining Company acquired a tract of land for mining purposes and erected a building on-site at a cost of USD 675,000 and having no salvage value. Though the building has a useful life of 10 years, the mining operations are expected to last only 6 years. The company has
Exercise G Boyd Company paid USD 7,200,000 for the right to extract all of the mineral-bearing ore, estimated at 10 million tons, that can be economically extracted from a certain tract of land. During the first year, Boyd Company extracted 1,000,000 tons of the ore and sold 800,000 tons. What part
Exercise F Nola Mining Company purchased a tract of land containing ore for USD 630,000. After spending USD 90,000 in exploration costs, the company determined that 600,000 tons of ore existed on the tract but only 500,000 tons could be economically removed. No other costs were incurred. When the
Exercise E Equipment costing USD 330,000, on which USD 225,000 of up-todate accumulated depreciation has been recorded, was disposed of on 2009 January 2. What journal entries are required to record the equipment's disposal under each of the following unrelated assumptions?a. The equipment was sold
Exercise D Kale Company owned an automobile acquired on 2007 January 1, at a cash cost of USD 35,100; at that time, the automobile was estimated to have a useful life of four years and a USD 2,700 salvage value. Depreciation has been recorded through 2009 December 31, on a straight-line basis. On
Exercise C A machine costing USD 120,000, on which USD 90,000 of up-todate depreciation has been accumulated, was completely destroyed by fire. What journal entry should record the machine's destruction and the resulting fire loss under each of the following unrelated assumptions?a. The machine was
Exercise B On 2009 August 31, Hutch Company sold a truck for USD 6,900 cash.The truck was acquired on 2006 January 1, at a cost of USD 17,400. Depreciation of USD 10,800 on the truck has been recorded through 2008 December 31, using the straight-line method, four-year expected useful life, and an
Exercise A Plant equipment originally costing USD 32,400, on which USD 21,600 of up-to-date depreciation has been accumulated, was sold for USD 8,100.a. Prepare the journal entry to record the sale.b. Prepare the entry to record the sale of the equipment if USD 90 of removal costs were incurred to
➢ You note that a certain store seems to have a steady stream of regular customers, a favorable location, courteous employees, high-quality merchandise, and a reputation for fairness in dealing with customers, employees, and suppliers. Does it follow automatically that this business should have
➢ Walt Company leased a tract of land for 40 years at an agreed annual rental fee of USD 18,000. The effective date of the lease was 2009 July 1.During the last six months of 2009, Walt constructed a building on the land at a cost of USD 450,000. The building was placed in operation on 2010
➢ What is the difference between a leasehold (under an operating lease contract) and a leasehold improvement? Is there any difference in the accounting procedures applicable to each?
➢ What is a capital lease? What features may characterize a capital lease?
➢ During 2010, Hardy Company incurred USD 123,000 of research and development costs in its laboratory to develop a patent that was granted on 2010 December 29. Legal fees (outside counsel) and other costs associated with registration of the patent totaled USD 22,800. What amount should be
➢ Describe the typical accounting for a patent.
➢ Should costs incurred on internally generated intangible assets be capitalized in asset accounts?
➢ Over what length of time should intangible assets be amortized?
➢ What reasons justify the immediate expensing of most research and development costs?
➢ What are the characteristics of intangible assets? Give an example of an asset that has no physical existence but is not classified as an intangible asset.
➢ A building with an estimated physical life of 40 years was constructed at the site of a coal mine. The coal mine is expected to be completely exhausted within 20 years. Over what length of time should the building be depreciated, assuming the building will be abandoned after all the coal has
➢ Distinguish between tangible and intangible assets, and classify the assets named in part (a) accordingly.
➢ Distinguish between depreciation, depletion, and amortization.Name two assets that are subject to depreciation, to depletion, and to amortization.
➢ What is the proper accounting treatment for the costs of removing or dismantling a company's old plant assets?
➢ When nonmonetary assets not having commercial substance are exchanged, a resulting gain is not recognized. Discuss why this is so.
➢ A plant asset was exchanged for a new asset of a similar type. How is the cost of the new asset determined?
➢ A machine and USD 22,500 cash were exchanged for a delivery truck.The exchange has commercial substance. How should the cost basis of the delivery truck be measured?
➢ A plant asset that cost USD 27,000 and has a related accumulated depreciation account balance of USD 27,000 is still being used in business operations. Would it be appropriate to continue recording depreciation on this asset? Explain. When should the asset's cost and accumulated depreciation be
➢ When depreciable plant assets are sold for cash, how is the gain or loss measured?
Bren Company purchased a patent for USD 36,000. The patent is expected to have a finite life of 10 years even though its legal life is 17 years. The amortization for the first year is:a. USD 36,000.b. USD 3,600.c. USD 2,118.d. USD 3,240.e. None of the above.
Land containing a mine having an estimated 1,000,000 tons of economically extractable ore is purchased for USD 375,000. After the ore deposit is removed, the land will be worth USD 75,000. If 100,000 tons of ore are mined and sold during the first year, the depletion cost charged to expense for the
A truck costing USD 45,000 and having an estimated salvage value of USD 4,500 and an original life of five years is exchanged for a new truck. The cash price of the new truck is USD 57,000, and a trade-in allowance of USD 22,500 is received. The old truck has been depreciated for three years using
When a fully depreciated asset is still in use:a. Prior years' depreciation should be adjusted.b. The cost should be adjusted to market value.c. Part of the depreciation should be reversed.d. The cost and accumulated depreciation should remain in the ledger and no more depreciation should be
All recorded intangible assets are subject to amortization. true or false.
In calculating depletion, the residual value of acquired land containing an ore deposit is included in total costs subject to depletion. true or false.
In an exchange of nonmonetary assets having commercial substance, the new asset is recorded at the fair market value of the asset received or the fair market value of the asset given up plus cash paid, whichever is more clearly evident. true or false.
When a plant asset is still being used after it has been fully depreciated, depreciation can be taken in excess of its cost. true or false.
Group project H In a small group of students, visit a large company in your community to determine how it decides to account for expenditures on fixed assets made after the assets have been in use for some time. In other words, how does it decide whether to debit the asset account, the accumulated
Group project G With a team of two or three students, visit two companies in your community to inquire about why they use certain depreciation methods. Try to locate companies that use several depreciation methods in accounting for various depreciable fixed assets. Interview those who made the
Group project F In a group of two or three students, visit a large company in your community and inquire about the subsidiary records it maintains to establish accounting control over its plant assets. Also inquire about physical controls used to protect its equipment that is movable, such as
Annual report analysis E The following footnote excerpted from a recent annual report of Kerr-McGee Corporation describes the company's accounting policies for property, plant, and equipment:Property, plant, and equipment is depreciated over its estimated life by the unitof-production or the
Business decision case D Discuss the meaning of rate of return on operating assets, its elements, and what it means to investors and management.Calculate the rate of return on operating assets for The Limited in the Annual report appendix for the two most recent years. Assume all assets are
Business decision case C The notes to the financial statements of Wolverine World Wide, Inc., in "A Broader Perspective", stated that substantially all fixed assets are depreciated using the straight-line method. Explain why the straight-line method of depreciation may be appropriate for this
Business decision case B On 2010 October 1, Besler Company acquired and placed into use new equipment costing USD 504,000. The equipment has an estimated useful life of five years and an estimated salvage value of USD 24,000.Besler estimates that the equipment will produce 2 million units of

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Accounting Principles A Business Perspective Financial Accounting Chapters 9 To 18 1st Edition Bill Buxton, Amy Sibiga - Solutions

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