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intermediate accounting reporting
Schaum's Outline Of Intermediate Accounting II, Second Edition (Schaum's Outline Series) 2nd Edition Baruch Englard - Solutions
Changing from the straight-line method of depreciation to an accelerated method is an example of a change in .
The total of all three sections of the statement of cash flows should equal the net change in for the year.
The purchase of a bond would appear in the section.
The direct method determines cash from by directly analyzing the .
Decreases in the Investment in Subsidiary account (under the equity method) would be added to the in the section.
The collection of the principal on a loan would appear in the section.
The three sections of the statement of cash flows are , , and .
The two methods of determining cash flow from operations are the method and the method.
A situation where the owner of an asset sells the asset and then immediately rents it back is called a.
In a lease, the lessor does not make any profit at the inception of the lease.
If the present value of the rental annuity is greater than % of the asset’s fair market value, the lease is a(n) lease.
Initial direct costs incurred by the lessor in consummating an operating lease should be debited to an account.
For capital leases, annual depreciation is recorded by the .
The two types of leases are leases and leases.
Non-counterbalancing errors require a correction entry even if the error is discovered after closing. True–False B. Completion Questions. Fill in the blanks.
Counterbalancing errors self-correct over 3 years. True–False
Corrections of careless estimates from previous periods are considered to be prior period adjustments. True–False
Changes in accounting estimates affect the future but not the past. True–False
Changes from LIFO to another method require the retroactive approach. True–False
For prospective type changes, the statements of prior periods are not restated. True–False
A change in accounting principle involves changing from an unacceptable accounting principle to an acceptable one. True–False
Significant noncash transactions should be disclosed in the body of the statement of cash flows. True–False
Payment of cash dividends should be included in the investment activity section. True–False
Purchases of treasury stock should be included in the finance activity section. True–False
Cash received from the issuance of a company’s own stock should be included in the investment activity section. True–False
To determine cash from operations, decreases in accounts receivable should be added to the net income. True–False
In the statement of cash flows, depreciation expense should be subtracted from the net income. True–False
If the salvage value is guaranteed by the lessee, it should be capitalized as part of the asset cost. True–False
Executory costs should be capitalized. True–False
If the lessee is aware of both his or her interest rate and the rate of the lessor, he or she should use the lower of the two rates. True–False
The annual lease payment is determined by dividing the selling price by the future value of an annuity, at rate i, for n periods. True–False
In a sales-type lease, the lessor makes a profit at the time of sale. True–False
For the lessor, if the lease term is less than 75% of the asset life, the lease is a capital lease. True–False
A lease that transfers a material ownership interest is an operating lease. True–False
27 On January 1, 19A, Company I purchased a machine with an estimated life of 5 years and no salvage value for $100,000. By mistake the company debited Machine Expense and credited Cash. The error was not discovered until 19B.(a) Is this error counterbalancing or not? Why?(b) What effect does the
26 At the end of 19A, Company H failed to accrue interest of $300 on a note payable. It recognized this interest early in 19B when it was paid.(a) What is the effect of this error on the 19A income statement and balance sheet?(b) Show what entries should be made in 19B if (1) the error is
25 At the beginning of 19A, Company G bought supplies for $4,000 and debited Supplies Expense. The supplies are expected to last 2 years. No adjusting entries regarding these supplies were made in 19A.(a) What is the effect of this error on the 19A financial statements?(b) If the error is
24 On December 31, 19A, Company F failed to accrue a utility expense of $10,000. This expense was recognized in 19B when it was paid.(a) What is the effect of this error on the 19A balance sheet and income statement?(b) If this error is discovered in 19B before closing, what correction entry, if
23 In 19A the payment of a utility bill was erroneously debited to Telephone Expense. Prepare the required correction entries if:(a) the error is discovered in 19A.(b) the error is discovered in 19B.
22 In 19A Company E purchased a machine for $50,000 and erroneously debited the account Building.This error is discovered in 19B. What correction entry is needed in 19B? Assume a tax rate of 30%for all years.
21 Company D acquired an asset in 19A for $100,000 and estimated it would have a life of 10 years and a salvage value of $10,000. At the beginning of 19E the company realized that the total life should only be 8 years, with a salvage value of $8,000.(a) What type of change is this?(b) What
20 Company C changes to the LIFO inventory method in 19C. During 19A and 19B, it used FIFO. Had LIFO been used in those years, income before taxes would have been lower by $10,000 and $15,000, respectively. If we assume a tax rate of 30%, what entry is required in 19C? Why?
19 During 19X1 and 19X2, Company B used the percentage-of-completion method of accounting for construction. At the beginning of 19X3 it decides to switch to the completed-contract method (for both book and tax purposes). Under this method income before taxes would have been $100,000 lower for both
18 During 19X1 and 19X2, Company A used straight-line depreciation for its assets, resulting in depreciation expense of $40,000 each year. During 19X3, the company decided to switch to the double-declining balance method. Had Company A used this method in 19X1 and 19X2, depreciation in these years
For these errors, if the error is discovered in the second year before closing, a must be made. If the error is discovered after closing, need be made.
Errors that correct themselves within two periods are called .
If an accounting change results in the financial statements of a new organization, this is called a change in .
Changes in depreciation methods require the approach.
Changes in the method of accounting for long-term construction contracts require the approach.
Changes to LIFO from another inventory method require the approach.
The two approaches for changes in accounting principle are the approach, and the approach.
If the change is from an unacceptable accounting method, this change is considered to be an .
Changing the estimate percentage for bad debts would be a change in .
The three types of accounting changes are: change in , change in , and change in .
30 The beginning and ending balances of the Merchandise Inventory account during 19B were $50,000 and $100,000, respectively. The beginning and ending balances of Accounts Payable were $15,000 and$8,000, respectively. The income statement showed cost of goods sold of $120,000. Determine the amount
29 Corporation S showed sales (on account) on its income statement of $150,000 for 19A. Its beginning balance of Accounts Receivable was $70,000; its ending balance was $120,000. Determine cash received as collections for sales.
28 Corporation P had beginning and ending balances of $50,000 and $40,000, respectively, in its Taxes Payable account during 19A. On its income statement it reported income tax expense of $70,000.Determine the amount it paid for taxes during 19A.
27 The balances in the Retained Earnings account of Company S at the beginning and end of 19B were $100,000 and $400,000, respectively. During 19B, Company P earned $600,000 net income.There were no other transactions involving retained earnings except for the declaration of a cash dividend.How
26 From the following information prepare a statement of cash flows under the indirect method:19A 19B Cash $150 $ 65 Accounts Receivable 70 50 Prepaid Insurance 50 60 Merchandise Inventory 40 45 Equipment (net) 500 700 Long-term Investment 800 1,000 Accounts Payable 200 250 Accrued Expenses Payable
25 From the following information, determine net cash flow from investment activities during 19B:(a) Change in accounts receivable during 19B, $4,000.(b) Net income, $50,000.(c) Depreciation expense, $7,000.(d) Purchased land, $70,000.(e) Sold machinery (cost $50,000; accumulated depreciation
24 During 19A, the balance in the Equipment account increased by $10,000 despite the fact that equipment(cost $7,000; accumulated depreciation $4,000) was sold for $8,000. How much new equipment must have been purchased?
23 From the following information determine the net cash flow from financing activities:(a) Retired a bond payable for $10,000.(b) Issued 100 shares of $100 par common stock at $110.(c) Paid a long-term note payable of $7,000.(d) Purchased treasury stock for $10,000.(e) Issued 100 shares of $100
22 From the following information, determine the net cash flow from investment activities:(a) Sold equipment (book value of $7,000) for $8,000.(b) Purchased land for $6,000.(c) Purchased treasury stock for $9,000.(d) Collected principal on long-term loan of $50,000.(e) Sold investment (cost of
21 From the following information, determine the net cash flow from operating activities for 19B:19A 19B Accounts receivable $ 5,000 $ 7,000 Merchandise 3,000 2,500 Prepaid items 2,000 2,200 Accounts Payable 4,000 3,000 Accrued expenses payable 3,000 3,500 Bonds payable 50,000 48,000 Net income
Significant noncash transactions should be disclosed in a .
Under the indirect method, Accounts Receivable and its related allowance should be .
Under the direct method we are not concerned with the expiration of prepaid items but rather with the of these items.
To prepare the statement of cash flows, we must have comparative and an statement.
Cash dividends declared but not paid should be shown in the section.
Cash dividends paid belongs in the section.
Cash paid to purchase treasury stock belongs in the section.
Collection of interest on loans belong in the section.
Purchases of stock of other companies belong in the section.
Collection of principal on loans belongs in the section.
Gains on sales of plant assets should be .
Decreases in the investment in a subsidiary under the equity method should be .
Decreases in accounts payable and accrued liabilities must be .
Increases in accounts receivable, merchandise, and prepaid items must be to (from) net income.
Amortization of bond premium must be from the net income.
The two methods of determining cash from operations are the method and the method.
The three sections of the statement of cash flows are: cash from , cash from , and cash from .
31 Seller-Lessee sells a machine to Buyer-Lessor on January 1, 19A, for $150,000 and immediately leases it back for a 3-year period at a rate of 10%. Seller-Lessee’s original cost was $120,000 and the machine has no salvage value. Assume the lease qualifies as a capital lease. Prepare entries for
30 Assume the same information as in the previous problem except that the salvage value is guaranteed.Do requirements (a), (b), and (c). In addition, assume that when Lessee returns the machine after 3 years, the machine is only worth $6,000. Prepare an entry for the return.
29 Lessor rents a machine with a cost and selling price of $50,000 to Lessee for 3 years. At that time the salvage value is expected to be $7,000, which is unguaranteed. The interest rate, known to both parties, is 10%, and the lease meets all the requirements needed to qualify as a capital lease.
28 Lessor enters into an agreement with Lessee on January 1, 19A, for the 3-year rental of a machine.The machine has a 4-year life with a salvage value of $9,000 after 3 years and zero at the end of 4 years. Lessor’s cost and selling price are both $75,000, and the interest rate for both parties
27 Assume the same information as in the previous problem, except that the selling price is $50,000. What type of lease is this to Lessor? Do requirements (b), (c), and (d).
26 Lessor leases a building for 3 years to Lessee. The building has a life of 3 years and no salvage value at the end. Lessor’s cost and selling price are both $30,000 and Lessor has a target rate of return of 12%.Lessee, who is aware of this rate, has an incremental rate of 15%. There are no
25 Lessor’s target rate of return (known to Lessee) is 10%. Lessee’s incremental borrowing rate is 9%.What rates should Lessor and Lessee use to capitalize this lease?
24 A building with a life of 5 years is leased for a 3-year period. The selling price is $200,000; the present value of the rental payments is $180,000. There is no BPO at the end of the lease term. Does this qualify as a capital lease to Lessee? Why?
23 If the annual rental is $3,000, the number of rental payments is 5, and the target rate is 9%, find the selling price. (Assume the payments are made at the beginning of each period.)
22 In a capital lease situation, if the selling price is $100,000, the number of rental payments is five, and the target rate of return is 12%, what is the annual rental? Assume the rentals are payable at the beginning of each period.
21 Lessor rents a building to Lessee for a 3-year period beginning on January 1, 19A. The annual rental is$7,000 and the total rent is payable in advance on January 1, 19A. The lease does not meet any of the conditions necessary to be considered a capital lease. In order to consummate the lease,
20 What are the four conditions (of which only one need be met) for a lease to be considered a capital lease? What are the two additional conditions to be met for the lessor to consider the lease a capital lease?
Annual insurance and maintenance costs are called .
In the above situation, a gain on the sale must be , while a loss would be .
If an asset is sold and then immediately leased back, this is a situation.
In a BPO situation, the depreciation period to be used is the life of the rather than the life of the .
If the lessee’s interest rate is different from the lessor’s rate, the one should be used by the lessee.
The amount the lessee will debit the asset for is the .
If a lease qualifies as a capital lease, the party that records the depreciation is the .
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