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business
intermediate accounting reporting

Questions and Answers of Intermediate Accounting Reporting

Refer to the debt restructuring information listed in P14-14.Required:For each of the independent alternatives listed in the “additional information disclosed” sections 1 through 4 of P14-14,
Tenth National Bank has a $200,000, 12% note receivable from Priday Company that is due on December 31, 2022. On December 31, 2019, Priday misses the interest payment due on that date. The bank
On February 1, 2017, Aubrey Company sold its 5-year, $1,000 par value, 9% bonds, which were convertible at the option of the investor into Aubrey Company common stock at a ratio of 10 shares of
You are beginning the 2019 audit of Alta Tierra Company’s long-term debt, and you determine that the company’s long-term note payable requires that it comply with certain financial covenants. The
You are the accountant for Speedy Company and are preparing the financial statements for 2019. Near the end of 2019, Speedy loaned its president $100,000 (a material amount) because she was having
Koreaco produces automobile transmissions, which are then sent to the United States where they are installed in domestically built cars. CarCo. a U.S. auto company, received a shipment of
Witte Inc. carries 4 items in inventory. The following per-unit data relate to these items at the end of 2002.Instructions:1. Calculate the value of the inventory under each of the following
The Jamison Appliance Company began business on January' 1, 2001. The company decided from the beginning to grant allowances on merchandise traded in as partial payment on new sales. During 2002 the
The Olsen Company values its inventory at the lower of FIFO cost or market. The inventory accounts at December 31, 2001, had the following balances.The following are some of the transactions that
Kimbell Manufacturing began operations 5 years ago. On August 13, 2002, a fire broke out in the warehouse destroying all inventory and many accounting records relating to the inventory. The
The following information was taken from the records of the Prairie Company.Instructions: Using the gross profit method, compute the value to be assigned to the inventory as of September 30, 2002,
In December 2002, BuUseye Merchandise Inc. had a significant portion of its inventory stolen. The company determined the cost of inventory remaining to be \($31,100.\) The following information was
Soho Clothing Store values its inventoy under the retail inventory method. The following data are available for 2002.Instructions:1. Compute the estimated inventory at December 3 1 , 2002, using the
The following information was taken from the records of Trump Inc. for the years 2001 and 2002.Instructions: Compute the value of the inventory at the end of 2001 and 2002 using the retail inventory
Johnson & Jones, a pharmaceutical company, uses the retail inventor method to estimate inventory at lower of cost or market. The limited information shown on the next page is available for the
The Sonntag Corporation has adjusted and closed its books at the end of 2001 . The company arrives at its inventory position by a physical count taken on December 31 of each year In March of 2002,
In 1999, Van Hover Inc. adopted the dollar-value LIFO retaU inventory method. The January 1. 1999. price index was 1,00. The data shown on the next page are available for the 4-year period ending
The St. George Sports Shop values its inventory on the dollar-value LIFO retail basis.Incremental inventory layers are costed at end-of-year prices. At December 31 , 2001, the inventory was valued as
On November 17, 2002, Chaldees Airways entered into a commitment to purchase 3,000 barrels of aviation fuel for \($165,000\) on March 23, 2003. Chaldees entered into this purchase commitment to
Charles & Sons, a U.S. computer supplies firm, had the following transactions with foreign companies during December 2001.a. Goldstar Co., Ltd., a South Korea-based firm, sold 5,000 computer hard
How are purchase discounts and sales discounts treated when using the retail inventory method?
Karen Stewart, president of Laronco, Inc., recently attended a seminar on effectively managing a business. One session of the seminar that particularly impressed Karen was the discussion of inventory
REGINA, INC., was a fast-srowins floor-care company that went public in 1985 and went bankrupt in 1988. Resina went from a one-product company with \($60\) million in sales in 1985 to a four-product
The following inventory data are available for Alpine Ski Shop at December 31.1. Determine the value of ending inventory using the lower-of-cost-or-market method applied to(a) individual items and(b)
The Muhlstein Corporation began business on January 1. 2002. The following table shows information about inventories, as of December 31. for 3 consecutive years under different valuation methods.
Wailea Inc. sells new equipment with a \($3,900\) list price. A dissatisfied customer returned one piece of equipment. Wailea determines that the returned equipment can be resold if it is
On August 15, 2002, a hurricane damaged a warehouse of Rheinhart Merchandise Company. The entire inventory and many accounting records stored in the warehouse were completely destroyed. Although
On June 30, 2002, a flash flood damaged the warehouse and factory of Bend Corporation, completed destroying the work in process inventory. There was no damage to either the raw materials or finished
The Evening Out Clothing Store values its inventory using the retail inventory method. The following data are available for the month of November 2002.Compute the estimated inventory at November 30,
Carmel Department Store uses the retail inventory method. On December 31, 2002, the following information relating to the inventory was gathered.Compute the ending inventory value at December 31,
Armual income for the Stoker Co. for the period 1998-2002 appears below. However, a review of the records for the company reveals inventory misstatements as listed.Calculate corrected net income for
The Martin Company reported income before taxes of \($370,000\) for 2001 and \($526,000\) for 2002. A later audit produced the following information.a. The ending inventory for 2001 included 2,000
The Cardoza Products Company's inventory record appears below.The company uses a LIFO cost flow assumption. It reported ending inventories as follows for its first 3 years of operations:Determine if
The Paradise Hardware Store began using the dollar-value LIFO retail method in 2001 for determining inventory values. In 2001. the cost percentage was computed at 62%. Information relating to the
On Februan 15. 2003. Rooker. Madras & Associates compiled the following information concerning inxentory for five years. They used the dollar-value LIFO retail inventory method.Compute the
On October 1. 2002, Gore Electronics Inc. entered into a 6-month. \($520,000\) purchase commitment for a supply of Product A. On December 31, 2002, the market value of this material had fallen to
Guenther's. a German company that supplies your firm with a necessan- raw material, recently shipped 10,000 units of the material to your production facilit)-.1. Prepare the necessary journal entries
The White Wove Corporation began operations in 2002. A summary of the first quarter appears below.The White Wove Corporation used the LIFO perpetual inventory method and correctly computed an
In 1 989 an investigation by the U.S. Department of Justice Criminal Division uncovered a massive fraud perpetrated by top management of MINISCRIBE CORPORATION. MiniScribe manufactured and sold
Caitlin Georse, an accountins student at Rider Coliese, is wntins a research paper on inventories.She discovers that Accountins Research Study No. 1 3 on inventories was issued in the 1970s by the
The Innovative Production Co. has used the LIFO method of valuins its inventories for several years. Layers for some of the inventory items are valued at amounts one-third to one-half of the current
The following inventory information is for Debo Company.Sales for the year totaled \($6,000.\) All sales and purchases are on account.1. Make the journal entries necessary to record purchases and
Using the following data, compute the total cash expended for inventory in 2002. Accounts payable: January 1, 2002 December 31, 2002 Cost of goods sold-2002 Inventory balance: January 1, 2002
The Joliet Manufacturing Company reviewed its year-end inventory and found the following items. Indicate which items should be included in the inventory balance at December 31, 2002. Give your
The following quarterly cost data have been accumulated for Garrison Mfg. Inc.Garrison uses the FIFO method for valuing raw materials inventories. Prepare a cost of goods manufactured schedule for
On July 23. Pultnewille Company purchased goods on account for \($5,000.\) Pultneyville later returned defective goods costing \($300\).Record the purchase and the return of the defective goods
Spearman Truck Sales sells semitrailers. The current inventory includes the following 5 semitrailers (identical except for paint color) along with purchase dates and costs:On May 20, 2002, a trucking
A note to the financial statements of Alpine Inc. at December 31, 2002, reads as follows:Because of the manufacturer's production problems for our Widget Limited line, our inventories were
First-in, first-out has been used for inventory valuation by the Atwood Co. since it was organized in 1999. Using the data that follow, redetermine the net incomes for each year on the assumption of
The Boise Implement Company showed the following data in its fmancial statements.1. Compute the number of days' sales in average inventony for both 2001 and 2002.What can you infer from these
The Johnson Manufacturing Company manufactures a single product. The managers, Ron and Ken Johnson, decided on December 31. 1999. to adopt the dollar-value LIFO inventory method. The inventory value
Jennifer Inc. adopted dollar-value LIFO on December 31, 1999. Data for 1999-2002 follows:1. Compute the inventory value at December 31 of each year under the dollar-value LIFO method, assuming new
On December 31, 2002, the controller of Hardman Enterprises selected 6 items to use as a representative sample of the company's inventory Information relative to these products was compiled and
LaRue's Fashion Clothing Store has hired you to assist with some year-end fmancial data preparation. The company's accountant quit 3 weeks ago and left many items incomplete. Summary information is
The following information is available for Woodfield Inc.Instructions: Compute the missing amounts. Products in Sample Inventory 2002 2001 2000 Raw materials: Beginning inventory Purchases Materials
Streuling Inc. is preparing its 2002 year-end financial statements. Prior to any adjustments, inventory is valued at \($76,050.\) The following information has been found relating to certain
The Zerbel Manufacturing Co. was organized in 2000 to produce a single product. The company's production and sales records for the period 2000-2002 are summarized below.All units produced in a given
A portion of the Stark Company's balance sheet appears as follows:Stark Company pays for all operating expenses with cash and purchases all inventory on credit. During 2002, cash totaling
The Manuel Corporation sells household appliances and uses UFO for inventory costing. The inventory contains 10 different products, and historical LIFO layers are maintained for each of them. The
The Greenriver Manufacturing Company manufactures two products: Raft and Float. At December 31, 2001, Greenriver used the FIFO inventory method. Effective January 1, 2002, Greenriver changed to the
The following information for Valdez Industries was taken from the company's financial statements (amounts in thousands).Instructions:1 . Compute the inventory turnover and the number of days' sales
The Bergman Company sells 3 different products. Five years ago, management adopted the LIFO inventory method and established 3 specific pools of goods. Bergman values all incremental layers of
Steve's Repair Shop began operations on January 1, 1997. After discussing the matter with his accountant, Steve decided dollar-value LIFO should be used for inventory costing.Information concerning
The Mietus Company manufactures a single product. The company adopted the dollar-value LIFO inventory method on December 31, 1997. More information concerning Mietus Company is shown
On January 1, 1998, Nolder Company changed its inventory cost flow method from FIFO to LIFO for its raw materials inventory. The change was made for both financial statement and income tax reporting
Kristy's Cosmetics Supply is interested in generating price indexes for inventory. To aid in accomplishing this task, on December 31, 2002, the controller assembled information on various inventory
On December 3 1 , 2002, Lelegren Architectural Supply took a statistical inventory of items for the sample of its inventory The inventory revealed the following information.Instructions:1 . Compute
What is an activity-based cost (ABC) system?
In accounting for long-term contracts (those taking longer than 1 year to complete), the two methods commonly followed are the percentage-of-completion method and the completed-contract method.1.
Magleby Inn sells franchises to independent operators throughout the westem part of the United States. The contract with the franchisee includes the following provisions.a. The franchisee is charged
On December 1. 2002. bids were submitted for a construction project to build a new municipal building and fire station. The lowest bid was \($3,980,000.\) submitted by the Jessop Construction
Espiritu Construction Co. has used the cost-to-cost percentage-of-completion method of recognizing revenue. Tony Espiritu assumed leadership of the business after the recent death of his father,
Smokey International Inc. recently acquired the Kurtz Builders Company. Kurtz has incomplete accounting records. On one particular project, only the information below is available.Because the
Tara Builders Inc. is building a new home for Margaret Mitchell at a contracted price of \($120,000.\) The estimated cost at the time the contract is signed Qanuary 2, 2002) is \($97,000.\) At
Central Iowa Builders Inc. entered into a contract to construct an office building andplaza at a contract price of \($10,000,000.\) Income is to be reported using the percentage of completion method
On January 1, 2001, the Ishikawa Construction Company entered into a 3-year contract to build a dam. The original contract price was \($18,000,000\) and the estimated cost was \($16,100,000.\) The
The Build-It Construction Company enters into a contract on January 1, 2002, to construct a 20-story office building for \($42,000,000.\) During the construction period, many change orders are made
The Fitness Health Spa charges an annual membership fee of \($600\) for its services. For this fee, each member receives a fitness evaluation (value \($100),\) a monthly magazine (value \($32),\) and
Denna Corporation had sales in 2001 of \($210,000,\) in 2002 of \($270,000,\) and in 2003 of \($350,000.\) The gross profit percentage of each year, in order, was 25%, 29%, and 27%.Past history has
Bailey Bats Inc. had the following sales and gross profit percentages for the years 2001-2004.Historically, 55% of sales are collected in the year of the sale, 30% in the following year, 10% in the
Johnson Enterprises uses the cost recovery method for all installment sales. Complete the following table. Installment sales Cost of installment sales Gross profit percentage Cash collections: 2001
On September 1, 2002, Jensen Company entered into franchise agreements with 3 franchisees. The agreements required an initial fee payment of \($7,000\) plus 4 \($3,000\) payments due ever) 4 months,
Starbrite Pizzas franchises its name to different people across the country. The franchise agreement requires the franchisee to make an initial payment of \($12,000\) and sign a \($32,000\)
In 2002, Rawlings Wholesalers transferred goods to a retailer on consignment. The transaction was recorded as a sale by Rawlings. The goods cost \($45,000\) and normally are sold at a 30% markup. In
Zamponi's Construction Company reports its income for tax purposes on a completedcontract basis and income for financial statement purposes on a percentage of completion basis. A record of
The Rushing Construction Company obtained a construction contract to build a highway and bridge over the Snake River It was estimated at the beginning of the contract that it would take 3 years to
The Urban Construction Company commenced doing business in January 2002.Construction activities for the year 2002 are summarized in the following table.The company is your client. The president has
The Kurtz Construction Corporation contracted with the City of Port Huron to construct a dam on the Erie River at a price of \($16.000.000.\) Kurtz expects to earn \($1,520.000\) on the contract.
Jana Crebs is a contractor for the construction of large office buildings. At the beginning of 2002. 3 buildings were in progress. The following data describe the status of these buildings at the
The Power Construction Company was the low bidder on a specialized equipment contract.The contract bid was \($6,000.000\) with an estimated cost to complete the project of \($5,300.\) 000. The
Seattle Boatbuilders was recently awarded a \($14,000,000\) contract to construct a luxury liner for Cruiseliners Inc. Seattle estimates it will take 42 months to complete the contract.The company
London Corporation has been using the cash method to account for income since its first year of operation in 2002. All sales are made on credit with notes receivable given by the customers. The
Bain's Furniture sells furniture and electronic items. The majority of its business is on credit, and the following information is available relating to sales transactions for 2001, 2002, and
The Wasatch Construction Company entered into a \($4,500,000\) contract in early 2002 to construct a multipurpose recreational facility for the city of helper. Construction time extended over a
Tingey Industries sells merchandise on a consignment basis to dealers. Shipping costs are chargeable to Tingey. although in some cases the dealer pays them. The selling price of the merchandise
In what way does U.S. GAAP differ from LAS 18 in the area of revenue recognition?
Under the provisions of IAS 11, what revenue recognition approach should be used whenever the outcome of a construction contract can not be reliably estimated? Briefly describe this approach.
What special recognition problems arise in accounting for franchise fees?
Consignment accounting is primarily a method of accounting for transfers of inventory' prior to the point of revenue recognition. Describe the essential elements of this method from the standpoint of
Ultimate Corporation is a computer products supplier. Ultimate sells products to dealers who then sell the products to the end users. Most of the company's competitors require dealers to pay for

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