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

Business decision case A You are a new staff auditor assigned to audit Cray Company's Buildings account. You determine that Cray Company made the following entries in its Buildings account in 2009:Debits 2009 Jan. 2 Cost of land and old buildings purchased $ 720,000 2 Legal fees incident to
Alternate problem F Crawford Company paid USD 60,000 for a machine on 2009 April 1, and placed it in use on that same date. The machine has an estimated life of 10 years and an estimated salvage value of USD 10,000.Compute the amount of depreciation to the nearest dollar the company should record
Alternate problem E Land Company acquired and put into use a machine on 2009 January 1, at a cash cost of USD 120,000 and immediately spent USD 5,000 to install it. The machine had an estimated useful life of eight years and an estimated salvage value of USD 15,000 at the end of this time. It was
Alternate problem D You are the new controller for Jayson Company, which began operations on 2009 October 1, after a start-up period that ran from the middle of 2008. While reviewing the accounts, you find an account entitled "Fixed Assets", which contains the following items:Cash paid to previous
Alternate problem C Dawson Towing Company purchased a used panel truck for USD 28,800 cash. The next day the company's name and business were painted on the truck at a total cost of USD 1,488. The truck was then given a minor overhaul at a cost of USD 192, and new "super" tires were mounted on the
Alternate problem B Maxwell Company purchased 2 square miles of farmland under the following terms: USD 968,000 cash; and liability assumed on mortgage note of USD 320,000 and interest accrued on mortgage note assumed, USD 12,800.The company paid USD 67,200 of legal and brokerage fees and also paid
Alternate problem A Brite Company purchased a machine that had an invoice price of USD 400,000 excluding sales tax. Terms were net 30. A 4 percent sales tax was levied on the sale. The company incurred and paid freight costs of USD 10,000.Special electrical connections were run to the machine at a
Problem F Goodrich Company purchased a machine on 2009 October 1 for USD 100,000. The machine has an estimated salvage value of USD 30,000 and an estimated useful life of eight years.Compute to the nearest dollar the amount of depreciation Goodrich should record on the machine for the years ending
Problem E Cardine Company acquired and placed into use equipment on 2009 January 2, at a cash cost of USD 935,000. Transportation charges amounted to USD 7,500, and installation and testing costs totaled USD 55,000.The equipment was estimated to have a useful life of nine years and a salvage value
Problem D Peach Company has the following entries in its Building account:Debits 2009 May 5 Cost of land and building purchased $200,000 5 Broker fees incident to purchase of land and building 12,000 2010 Jan. 3 Contract price of new wing added to south end 84,000 15 Cost of new machinery,
Problem C Timothy Company acquired and placed into use a heavy factory machine on 2009 October 1. The machine had an invoice price of USD 360,000, but the company received a 3 percent cash discount by paying the bill on the date of acquisition. An employee of Timothy Company hauled the machine down
Problem B Pressler Company planned to erect a new factory building and a new office building in Atlanta, Georgia, USA. A report on a suitable site showed an appraised value of USD 180,000 for land and orchard and USD 120,000 for a building.After considerable negotiation, the company and the owner
Problem A Bolt Company purchased a machine for use in its operations that had an invoice price of USD 80,000 excluding sales tax. A 4 percent sales tax was levied on the sale. Terms were net 30. The company estimated the total cost of hauling the machine from the dealer's warehouse to the company's
Exercise O Bragg Company owns a plant asset that originally cost USD 240,000 in 2006 The asset has been depreciated for three years assuming an eight-year useful life and no salvage value. During 2009, Bragg incorrectly capitalized USD 120,000 in repairs on the plant asset rather than expensing
Exercise N Lasky Company purchased a machine on 2009 January 3, at a cost of USD 50,000. It debited freight and installation charges of USD 10,000 to Repairs Expense. It recorded straight-line depreciation on the machine in 2009 and 2010 using an estimated life of 10 years and no expected salvage
Exercise M On 2009 January 2, a company purchased and placed in operation a new machine at a total cost of USD 60,000. Depreciation was recorded on the machine for 2009 and 2010 under the straight-line method using an estimated useful life of five years and no expected salvage value. Early in 2011,
Exercise L Vineland Company purchased a computer for USD 60,000 and placed it in operation on 2008 January 2. Depreciation was recorded for 2008 and 2009 using the straight-line method, a six-year life, and an expected salvage value of USD 2,400.The introduction of a new model of this computer in
Exercise K Assume that the truck described in the previous exercise was used 40 percent of the time in 2010 to haul materials used in the construction of a building by Regal Company for its own use. (Remember that 2010 is before the revision was made on estimated life.) During the remaining time,
Exercise J Regal Company acquired a delivery truck on 2009 January 2, for USD 107,200. The truck had an estimated salvage value of USD 4,800 and an estimated useful life of eight years. At the beginning of 2009, a revised estimate shows that the truck has a remaining useful life of six years. The
Exercise I Australia Company purchased a machine for USD 3,200 and incurred installation costs of USD 800. The estimated salvage value of the machine is USD 200.The machine has an estimated useful life of four years. Compute the annual depreciation charges for this machine under the
Exercise H Katherine Company purchased a machine on 2009 April 1, for USD 72,000. The machine has an estimated useful life of five years with no expected salvage value. The company's accounting year ends on December 31.Compute the depreciation expense for 2009 and 2010 under the
Exercise G Terrill Company finds its records are incomplete concerning a piece of machinery used in its plant. According to the company records, the machinery has an estimated useful life of 10 years and an estimated salvage value of USD 24,000. It has recorded USD 12,000 in depreciation each year
Exercise F On 2009 January 2, a new machine was acquired for USD 900,000. The machine has an estimated salvage value of USD 100,000 and an estimated useful life of 10 years. The machine is expected to produce a total of 500,000 units of product throughout its useful life. Compute depreciation for
Exercise E Keely Company purchased some office furniture for USD 29,760 cash on 2009 March 1. It also paid USD 480 cash for freight costs incurred. The furniture is being depreciated over four years under the straight-line method, assuming a salvage value of USD 1,440. The company employs a
Exercise D A machine is acquired in exchange for 50 shares of Marley Corporation capital stock. The stock recently traded at USD 400 per share. The machine cost USD 30,000 three years ago. At what amount should the machine be recorded?
Exercise C Fine Company purchased a heavy machine to be used in its factory for USD 720,000, less a 2 percent cash discount. The company paid a fine of USD 3,600 because an employee hauled the machine over city streets without securing the required permits. The machine was installed at a cost of
Exercise B Laural Company paid USD 840,000 cash for real property consisting of a tract of land and a building. The company intended to remodel and use the old building. To allocate the cost of the property acquired, Laural had the property appraised. The appraised values were as follows: land, USD
Exercise A Stephon Company paid USD 640,000 cash for a tract of land on which it plans to erect a new warehouse, and paid USD 8,000 in legal fees related to the purchase. Stephon also agreed to assume responsibility for USD 25,600 of unpaid taxes on the property. The company incurred a cost of USD
➢ Real world question Based on the financial statements and the notes to those statements of The Limited, Inc., (see volume 1 appendix)contained in the Annual report appendix, what was the 2000 ending net property and equipment balance? Did the company acquire any of these assets in 2000? What
➢ What advantages can accrue to a company that maintains plant asset subsidiary records?
➢ How do subsidiary records provide control over a company's plant assets?
➢ Painting an office building at a cost of USD 1,000. The building is painted every year.➢ Adding on a new plant wing at a cost of USD 24,000,000.➢ Expanding a paved parking lot at a cost of USD 144,000.➢ Replacing a stairway with an escalator at a cost of USD 20,000.➢ Replacing the
➢ Indicate which type of account (asset, accumulated depreciation, or expense) would be debited for each of the following expenditures:
➢ Cost of repairing an electric motor. The expenditure extended the estimated useful life beyond the original estimate.
➢ Cost of replacing the roof on a 10-year-old building that was purchased new and has an estimated total life of 40 years. The expenditure did not extend the life of the asset beyond the original estimate.
➢ Cost of installing air-conditioning equipment in a building that was not air-conditioned.➢ Painting of an owned factory building every other year.
➢ For each of the following, state whether the expenditure made should be charged to an expense, an asset, or an accumulated depreciation account:
➢ Distinguish between capital expenditures and revenue expenditures.
➢ What is the justification for reporting plant assets on the balance sheet at undepreciated cost (book value) rather than market value?
➢ What does the balance in the accumulated depreciation account represent? Does this balance represent cash that can be used to replace the related plant asset when it is completely depreciated?
➢ Nancy Company purchased a machine that originally had an estimated eight years of useful life. At the end of the third year, Nancy determined that the machine would last only three more years. Does this revision affect past depreciation taken?
➢ Provide a theoretical reason to support using an accelerated depreciation method.
➢ What does the term accelerated depreciation mean? Give an example showing how depreciation is accelerated.
➢ A friend, Mindy Jacobs, tells you her car depreciated USD 5,000 last year.Explain whether her concept of depreciation is the same as the accountant's concept.
➢ What four factors must be known to compute depreciation on a plant asset? How objective is the calculation of depreciation?
➢ Define the terms inadequacy and obsolescence as used in accounting for depreciable plant assets.
➢ Why should periodic depreciation be recorded on all plant assets except land?
➢ In any exchange of noncash assets, the accountant's task is to find the most appropriate valuation for the asset received. What is the general rule for determining the most appropriate valuation in such a situation?
➢ Describe how a company may determine the cost of a self-constructed asset.
➢ Brown Company purchased an old farm with a vacant building as a factory site for USD 1,040,000. Brown decided to use the building in its operations. How should Brown allocate the purchase price between the land and the building? How should this purchase be handled if the building is to be torn
➢ In what way does the purchase of a plant asset resemble the prepayment of an expense?
➢ In general terms, what does the cost of a plant asset include?
➢ The cost of constructing and paving a driveway that has an estimated useful life of 10 years.
➢ Adding machines acquired by an office supply company to be sold to customers.
➢ An automobile acquired by an insurance company to be used by one of its salespersons.
➢ A truck acquired by a manufacturing company to be used to deliver the company's products to wholesalers.
➢ Advertising that will appear in the future to inform the public about new energy-saving programs at a manufacturing plant.
➢ Which of the following items are properly classifiable as plant assets on the balance sheet?
➢ What is the main distinction between inventory and a plant asset?
The result of recording a capital expenditure as a revenue expenditure is an:a. Overstatement of current year's expense.b. Understatement of current year's expense.c. Understatement of subsequent year's net income.d. Overstatement of current year's net income.e. None of the above.
Hatfield Company purchased a computer on 2008 January 2, for USD 10,000. The computer had an estimated salvage value of USD 3,000 and an estimated useful life of five years. At the beginning of 2010, the estimated salvage value changed to USD 1,000, and the computer is expected to have a remaining
In Question 1, if the equipment were purchased on 2010 July 1, and Jackson used the double-declining-balance method, the depreciation expense for 2010 would be:a. USD 88,000.b. USD 72,000.c. USD 36,000.d. USD 44,000.e. USD 40,000.
On 2010 January 1, Jackson Company purchased equipment for USD 400,000, and installation and testing costs totaled USD 40,000. The equipment has an estimated useful life of 10 years and an estimated salvage value of USD 40,000. If Jackson uses the straight-line depreciation method, the depreciation
Plant asset subsidiary ledgers are used to increase control over plant assets.true or false.
Expenditures made on plant assets that increase the quality of services are debited to the accumulated depreciation account.true or false.
The purpose of depreciation accounting is to provide the cash required to replace plant assets.true or false.
Depreciation is the process of valuation of an asset to arrive at its market value.true or false.
The cost of land includes its purchase price and other related costs, including the cost of removing an old unusable building that is on the land.true or false.
Group project F In a group of two or three students, visit a fairly large company in your community to investigate the effectiveness of its management of accounts receivable. Inquire about its credit and sales discount policies, collection policies, and how it establishes the amount for the
Group project E "Lapping" of accounts receivable has been used to conceal the fact that payments received on accounts receivable have been "borrowed" and used by an employee for personal use. With one or two other students, research this topic in the library. Write a paper to your instructor
Group project D In groups of two or three students, write a two-page, doublespaced paper on one of the following topics:Which is better—the percentage-of-sales method or the percentage-of-receivables method?Why not eliminate bad debts by selling only for cash?Why allow customers to use credit
Business decision case B Jim Perry operates a large fruit and vegetable stand on the outskirts of a city. In a typical year he sells USD 600,000 of goods to regular customers. His sales are 40 percent for cash and 60 percent on credit. He carries all of the credit himself. Only after a customer has
Business decision case A Sally Stillwagon owns a hardware store; she sells items for cash and on account. During 2009, which seemed to be a typical year, some of her company's operating data and other data were as follows:Sales:For cash $1,200,000 On credit 2,200,000 Cost of obtaining credit
Alternate problem F On 2010 November 1, Grand Strand Property Management, Inc., discounted its own USD 50,000, 180-day, non interest-bearing note at its bank at 18 percent. The note was paid on its maturity date. The company uses a calendar-year accounting period.Prepare dated journal entries to
Alternate problem E Vance Commercial Properties, Inc., has an accounting period of one year, ending on July 31. On 2009 July 1, the balances of certain ledger accounts are Notes Receivable, USD 654,000; and Notes Payable, USD 900,000. A schedule of the notes receivable is as follows:Face Date
Alternate problem D Quick Wheels, Inc., sells racing bicycles and warrants all parts for one year. The average price per bicycle is USD 560, and the company sold 4,000 in 2009. The company expects 20 percent of the bicycles to develop defective parts within one year of sale. The estimated average
Alternate problem C Beacham Hardware, Inc., sells merchandise in a state that has a 6 percent sales tax. On 2010 July 1, it sold goods with a sales price of USD 20,000 on credit. Sales taxes collected are recorded in a separate account. Assume that sales for the entire month were USD 400,000. On
Alternate problem B The cash register at Frank's Restaurant at the close of business showed cash sales of USD 7,500 and credit card sales of USD 10,000 (USD 6,000 VISA and USD 4,000 American Express). The VISA (bank credit card) invoices were discounted 5 percent when they were deposited. The
Alternate problem A The following selected accounts are for Keystone, Inc., a name brand shoe wholesale store, as of 2009 December 31. Prior to closing the accounts and making allowance for uncollectible accounts entries, the USD 5,000 account of Morgan Company is to be written off (this was a
Problem F Premium Office Equipment, Inc., discounted its own USD 30,000, non interest-bearing, 180-day note on 2009 November 16, at Niagara County Bank at a discount rate of 12 percent.Prepare dated journal entries for:a. The original discounting on November 16.b. The adjustment required at the end
Problem E Celoron Power Boat Company is in the power boat manufacturing business. As of 2010 September 1, the balance in its Notes Receivable account is USD 256,000. The balance in Dishonored Notes Receivable is USD 60,660 (includes the interest of USD 600 and the protest fee of USD 60). A schedule
Problem D Honest Tim's Auto Company sells used cars and warrants all parts for one year. The average price per car is USD 10,000, and the company sold 900 in 2009.The company expects 30 percent of the cars to develop defective parts within one year of sale. The estimated average cost of warranty
Problem C Ruiz Company sells merchandise in a state that has a 5 percent sales tax. On 2010 January 2, Ruiz sold goods with a sales price of USD 80,000 on credit.Sales taxes collected are recorded in a separate account. Assume that sales for the entire month were USD 900,000. On 2010 January 31,
Problem B At the close of business, Jim's Restaurant had credit card sales of USD 12,000. Of this amount, USD 4,000 were VISA (bank credit card) sales invoices, which can be deposited in a bank for immediate credit, less a discount of 3 percent. The balance of USD 8,000 consisted of American
Problem A As of 2009 December 31, Fargo Company's accounts prior to adjustment show:Allowance for uncollectible accounts (credit balance)Accounts receivable $ 40,000 Allowance for uncollectible accounts (credit balance) 750 Sales 250,000 Fargo Company estimates uncollectible accounts at 1 percent
Exercise L Pistol Pete provides communication services and products, as well as network equipment and computer systems, to businesses, consumers, communications services providers, and government agencies. The following amounts were included in its 2010 annual report:(Millions)Net sales USD 79,609
Exercise K Based on the previous exercise, prepare the entry or entries that would be made at the maturity date for each alternative, assuming the loan is paid before the end of the accounting period.
Exercise J John Wood is negotiating a bank loan for his company, Wood, Inc., of USD 16,000 for 90 days. The bank's current interest rate is 10 percent. Prepare Wood's entries to record the loan under each of the following assumptions:a. Wood signs a note for USD 16,000. Interest is deducted in
Exercise I Based on the facts in the previous exercise, prepare the entries that Crawford, Inc., and Dunston, Inc., would make at the maturity date, assuming Crawford defaults.
Exercise H Crawford, Inc., gave a USD 20,000, 120-day, 12 percent note to Dunston, Inc., in exchange for merchandise. Crawford uses periodic inventory procedure. Prepare journal entries to record the issuance of the note and the entries needed at maturity for both parties, assuming payment is made.
Exercise G Determine the maturity date for each of the following notes:Issue Date Life 2010 January 13 30 days 2010 January 31 90 days 2010 June 4 1 year 2010 December 2 1 month
Exercise F Assume the following note appeared in the annual report of a company:In 2009, two small retail customers filed separate suits against the company alleging misrepresentation, breach of contract, conspiracy to violate federal laws, and state antitrust violations arising out of their
Exercise E Dunwoody Discount Toys, Inc., sells merchandise in a state that has a 5 percent sales tax. Rather than record sales taxes collected in a separate account, the company records both the sales revenue and the sales taxes in the Sales account. At the end of the first quarter of operations,
Exercise D Jamestown Furniture Mart, Inc., sold USD 80,000 of furniture in May to customers who used their American Express credit cards. Such sales are subject to a 3 percent discount by American Express (a nonbank credit card),a. Prepare journal entries to record the sales and the subsequent
Exercise C On 2009 April 1, Kelley Company, which uses the allowance method of accounting for uncollectible accounts, wrote off Bob Dyer's USD 400 account. On 2009 December 14, the company received a check in that amount from Dyer marked "in full payment of account". Prepare the necessary entries.
Exercise B Compute the required balance of the Allowance for Uncollectible Accounts for the following receivables:Accounts Age Probability Receivable (months) of Collection$180,000 Less than 1 95%90,000 1-3 85 39,000 3-6 75 12,000 6-9 35 2,250 9-12 10
Exercise A The accounts of Stackhouse Company as of 2010 December 31, show Accounts Receivable, USD 190,000; Allowance for Uncollectible Accounts, USD 950(credit balance); Sales, USD 920,000; and Sales Returns and Allowances, USD 12,000.Prepare journal entries to adjust for possible uncollectible
➢ Real world question Refer to "A Broader Perspective: GECS allowance for losses on financing receivables". Explain how the General Electric Company writes off uncollectibles.
➢ Real world question Refer to "A Broader Perspective: GECS allowance for losses on financing receivables". What factors are taken into account by the General Electric Company in determining the adjusting entry to establish the desired balance in the Allowance for Losses?
➢ Under what circumstances does the account Discount on Notes Payable arise? How is it reported in the financial statements? Explain why.

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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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