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intermediate accounting reporting
Intermediate Accounting Reporting and Analysis 3rd edition James M. Wahlen, Jefferson P. Jones, Donald Pagach - Solutions
In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change:Frost reported net income of $2,500,000,
Delta Oil Company uses the successful-efforts method to account for oil exploration costs. Delta started business in 2017 and prepared the following income statements:The company chooses to change to the full-cost method at the beginning of 2019. Under the full-cost method, Delta capitalizes all
Berg Company began operations on January 1, 2019, and uses the FIFO method in costing its raw materials inventory. During 2020, management is contemplating a change to the LIFO method and is interested in determining what effect such a change will have on net income. Accordingly, the following
Fava Company began operations in 2018 and used the LIFO inventory method for both financial reporting and income taxes. At the beginning of 2019, the anticipated cost trends in the industry had changed, so that it adopted the FIFO method for both financial reporting and income taxes. Fava reported
At the beginning of 2020, Brett Company decided to change from the FIFO to the average cost inventory cost flow assumption for financial reporting purposes. The following data are available in regard to its pretax operating income and cost of goods sold:The income tax rate is 21%, and the company
Abrat Company failed to accrue an allowance for doubtful accounts of $13,500 in 2019. Upon discovery of this error in 2020 prior to making its estimate of doubtful accounts, what correcting journal entry should Abrat make? Ignore income taxes.
At the end of 2019, Manny Company recorded its ending inventory at $350,000 based on a physical count. During 2020, the company discovered that the correct inventory value at the end of 2019 should have been $400,000 because it made a counting error. Upon discovery of this error in 2020, what
At the end of 2019, Jayrad Company paid $6,000 for insurance coverage for 2020. It recorded this by debiting Insurance Expense and crediting Cash, but failed to record a year-end adjustment. Upon discovery of this error at the end of 2020, what correcting journal entry will Jayrad Company make?
At the end of 2019, Cortex Company failed to accrue interest revenue of $3,200 that it had earned but not received on an outstanding note receivable. Instead, Cortex increased interest revenue in 2020 when it received the cash. Upon discovery of this error in 2020, what correcting journal entry
At the end of 2019, Framber Company received $8,000 as a prepayment for renting a building to a tenant during 2020. The company erroneously recorded the transaction by debiting Cash and crediting Rent Revenue in 2019 instead of 2020. Upon discovery of this error in 2020, what correcting journal
Refer to RE22-2. Assume Heller Company had sales revenue of $510,000 in 2019 and $650,000 in 2020.Prepare Heller’s partial income statements (through gross profit) for 2019 and 2020.RE22-2Heller Company began operations in 2019 and used the LIFO method to compute its $300,000 cost of goods sold
Refer to RE22-2. Assume the pretax cumulative effect adjustment is $50,000. Prepare the journal entry that Heller Company would make at the beginning of 2020 to record the cumulative effect of the change from LIFO to FIFO.RE22-2Heller Company began operations in 2019 and used the LIFO method to
Heller Company began operations in 2019 and used the LIFO method to compute its $300,000 cost of goods sold for that year. At the beginning of 2020, Heller changed to the FIFO method. Heller determined that its cost of goods sold under FIFO would have been $250,000 in 2019. For 2020, Heller’s
You have just been promoted to manager at a national CPA firm. A new accountant approaches you with the following situation: He has discovered that the president of your client’s company has a brother who is both the major shareholder and the president of a local bank. Your client has a $300,000,
On March 1, 2019, White Company purchased $400,000 worth of inventory on credit with terms that require payment in 60 days but allow White to take a 1% discount if it pays in 10 days (often quoted as 1/10, net/60 payment terms). In the past, White has always followed the policy of making payment 30
On January 1, 2019, Philip Holding invests $40,000 in an annuity to provide 8 equal semi-annual payments. Interest is 10%, compounded semiannually.Required:Compute the equal semiannual amounts that Philip will receive assuming that the first withdrawal is to be received on:1. July 1, 20192. January
You are given the following situations:1. Thomas Petry owes a debt of $7,000 from the purchase of a boat. The debt bears 12% interest payable annually. Thomas will pay the debt and interest in 5 annual installments beginning in 1 year. Calculate the equal annual installments that will pay off the
Ralph Benke wants to make 8 equal semiannual withdrawals of $8,000 from a fund that will earn interest at 11% compounded semiannually.Required:How much would Ralph have to invest on:1. January 1, 2019, if the first withdrawal is made on July 1, 20192. July 1, 2019, if the first withdrawal is made
John Joshua wants to make 5 equal annual withdrawals of $20,000 from a fund that will earn interest at 12% compounded annually.Required:How much would John have to invest on January 1, 2019, if he makes the first withdrawal on:1. January 1, 20202. January 1, 20193. January 1, 2023
The following are two independent situations.1. Ted Houser wishes to accumulate a fund of $40,000 for the purchase of a house and lot. He plans to deposit $4,000 semiannually at the end of each 6 months. Assuming interest at 14% a year compounded semiannually, how many deposits of $4,000 each will
Using the appropriate tables, solve each of the following.Required:1. Beginning December 31, 2020, 5 equal withdrawals are to be made. Determine the equal annual withdrawals if $30,000 is invested at 10% interest compounded annually on December 31, 2019.2. Ten payments of $3,000 are due at annual
On December 31, 2026, Michael McDowell wants to have $60,000. He plans to make 6 deposits in a fund to provide this amount. Interest is compounded annually at 12%.Required:Compute the equal annual amounts that Michael must deposit assuming that he makes the first deposit on:1. December 31, 20212.
At the beginning of 2019, Shanklin Company issued 10-year bonds with a face value of $1,000,000 due on December 31, 2028. Shanklin wants to accumulate a fund to retire these bonds at maturity by making annual deposits beginning on December 31, 2019.Required:How much must Shanklin deposit each
Jerry Rockness needs $40,000 to pay off a loan due on December 31, 2028. His plans included the making of 10 annual deposits beginning on December 31, 2019, in accumulating a fund to pay off the loan. Without making a precise calculation, Jerry made 3 annual deposits of $4,000 each on December 31,
Using the future values tables, solve the following.Required:1. What is the future value on December 31, 2028, of 10 cash flows of $20,000 with the first cash payment made on December 31, 2019, and interest at 10% being compounded annually?2. What is the future value on June 30, 2029, of 20 cash
Using the present value tables, solve the following.Required:1. What is the present value on January 1, 2019, of $30,000 due on January 1, 2023, and discounted at 10% compounded annually?2. What is the present value on January 1, 2019, of $40,000 due on January 1, 2023, and discounted at 11%
Using the future value tables, solve the following.Required:1. What is the future value on December 31, 2023, of a deposit of $35,000 made on January 1, 2020, assuming interest of 10% compounded annually?2. What is the future value on December 31, 2023, of a deposit of $10,000 made on January 1,
Beginning December 31, 2023, 5 equal annual withdrawals are to be made.Required:Using the appropriate tables, determine the equal annual withdrawals if $25,000 is invested at an interest of 12% compounded annually on:1. January 1, 20232. December 31, 20233. January 1, 2020
On January 1, 2019, Ashly Farms leased a hay baler from Agrico Company. The lease requires Ashly to make $3,000 payments on January 1 of each year for 5 years beginning in 2019. The interest rate is 12%.Required:Calculate the present value of Ashly’s lease payments as of January 1, 2019.
On July 1, 2019, Boston Company purchased a machine at a cost of $80,000. It paid $56,046.06 in cash and signed a 10% note for the difference. This note is to be paid off in annual installments of $5,000 each, payable each July 1, beginning immediately. The $5,000 includes a payment of interest on
The following are several situations involving compound interest.Required:Using the appropriate table, solve each of the following:1. Hope Dearborn invests $40,000 on January 1, 2019, in a savings account that earns interest of 8% compounded semiannually. What will be the amount in the fund on
John Goodheart wishes to provide for 6 annual withdrawals of $3,000 each beginning January 1, 2029. He wishes to make 10 annual deposits beginning January 1, 2019, with the last deposit to be made on January 1, 2028.Required:If the fund earns interest compounded annually at 10%, how much is each of
On January 1, 2019, Charles Jamison borrows $40,000 from his father to open a business. Charles is the beneficiary of a trust created by his aunt from which he will receive $25,000 on January 1, 2029. He signs an agreement to make this amount payable to his father and, further, to pay his father
Samuel David wants to make 5 equal annual withdrawals of $8,000 from a fund that will earn interest at 10% compounded annually.Required:How much would Samuel have to invest on:1. January 1, 2019, if the first withdrawal is made on January 1, 2020?2. January 1, 2019, if the first withdrawal is made
Beginning on January 1, 2020, 5 equal deposits are to be made in a fund.Required:Using the appropriate tables, determine the equal deposits if interest at 10% is compounded annually and if $200,000 must be in the fund on1. January 1, 20242. January 1, 2025
Six equal annual contributions are made to a fund, with the first deposit on December 31,2019.Required:Using the future value tables, determine the equal contributions that, if invested at 10% compounded annually, will accumulate to a fund of $30,000 on December 31, 2024.
Using appropriate tables, solve the following future value of annuity problems.Required:1. What is the future value on December 31, 2025, of 7 annual cash flows of $10,000 with the first cash payment being made on December 31, 2019, and interest at 12% being compounded annually?2. What is the
Using the present value tables, solve the following problems.Required:1. What is the present value on January 1, 2019, of $30,000 due on January 1, 2024, and discounted at 12% compounded annually?2. What is the present value on July 1, 2019, of $8,000 due January 1, 2024, and discounted at 16%
Using the future value tables, solve the following.Required:1. What is the value on January 1, 2026, of $40,000 deposited on January 1, 2019, which accumulates interest at 12% compounded annually?2. What is the value on January 1, 2025, of $10,000 deposited on July 1, 2019, which accumulates
What is the present value on January 1, 2019, of 7 equal future annual receipts of $30,000 if the first receipt is received on January 1, 2019, and the interest rate is 10% compounded annually?
What is the future value on December 31, 2024, of 6 annual cash flows of $50,000 with the first cash flow being made on December 31, 2019, and interest at 9% compounded annually?
If $90,000 is invested in a fund on December 31, 2019, and 5 equal annual withdrawals of $23,138.32 are made starting on December 31, 2020, that will deplete the fund, what is the interest rate being earned if interest is compounded annually?
If $80,000 is invested in a fund on December 31, 2019, what is the amount of each of 6 annual withdrawals starting on December 31, 2020, that would deplete the fund if the interest rate earned in the fund is 10% compounded annually?
What is the present value on January 1, 2019, of 7 equal future annual receipts of $30,000 if the first receipt is received on January 1, 2020, and the interest rate is 10% compounded annually?
What will be the future value on December 31, 2023, of 5 annual $60,000 deposits starting on December 31, 2019, if the amounts earn 8% compounded annually?
What is the future value on December 31, 2025, of 6 annual cash flows of $50,000 with the first cash flow being made on December 31, 2019, and interest at 9% compounded annually?
What is the present value on January 1, 2019, of $10,000 to be received on January 1, 2023, and discounted at 6% compounded quarterly?
What is the present value on January 1, 2019, of $40,000 to be received on January 1, 2022, and discounted 8% compounded annually?
What is the future value on January 1, 2025, of $20,000 deposited on January 1, 2019, which accumulates interest at 10% compounded annually?
On January 1, 2019, Ken Company sold a machine to Burns Company. Burns signed a non-interest-bearing note requiring payment of $30,000 annually for 7 years. The first payment was made on January 1, 2019. The prevailing rate of interest for this type of note at the date of issuance was 10%.
On May 1, 2019, a company purchased a new machine that it does not have to pay for until May 1, 2021. The total payment on May 1, 2021, will include both principal and interest. Assuming interest at a 10% rate, the cost of the machine would be the total payment multiplied by what time value of
Give two examples of assets and three examples of liabilities that are measured and reported using present values under U.S. GAAP.
How do you compute the present value of a deferred ordinary annuity?
What is a deferred ordinary annuity? How does it differ from one that is not deferred? Draw a time line of each.
Distinguish between the present value of an ordinary annuity and the present value of an annuity due. Draw a time line of each.
How do you compute the present value of an annuity due?
How do you compute the present value of an ordinary annuity?
Distinguish between the future value of $1 and the future value of an annuity due of $1.
Explain the factors in the present value of a single sum table.
What is the difference between present value and future value?
Explain the factors in the future value of a single sum table.
Define discounting and compounding.
Explain the time value of money and how it can be viewed as compensation.
Explain interest.
Sometimes a business entity may change its method of accounting for certain items. It may classify the change as a change in accounting principle, a change in accounting estimate, or a change in reporting entity. The following are three situations faced by Hyde Company relating to accounting
Obtain LVMH (Moet Hennessy 2 Louis Vuitton)’ s 2017 annual report using the “Investor Relations” portion of its website (do a web search for Moet Hennessy 2 Louis Vuitton investor relations).Required:1. Did LVMH report any changes in accounting principle or estimate in 2017? If so, describe
Disclosures Obtain Kellogg’s 2017 annual report either using the “Investor Relations” portion of its website (do a web search for Kellogg’s investor relations) or go to http://www.sec.gov and click “Search for company filings” under “Filings and Forms (EDGAR).”Required:1. Did
Berkeley Company, a manufacturer of many different products, changed its inventory method from FIFO to LIFO. The LIFO method was determined to be preferable. In addition, Berkeley changed the residual values used in computing depreciation for its office equipment. It made this change on January 1,
Ingalls Corporation is in the process of negotiating a loan for expansion purposes. The books and records have never been audited, and the bank has requested that an audit be performed. Ingalls has prepared the following comparative financial statements for the years ended December 31, 2020 and
Cask Company’s bookkeeper, who has maintained its accounting records since the company’s formation in January 2017, has prepared the unaudited financial statements. In your examination of these statements at the end of 2019, you discover the following items:1. Sales taxes collected from
A review of Anderson Corporation’s books indicates that the errors and omissions pertaining to the balance sheet accounts shown as follows had not been corrected during the applicable years. The net income per the books is: 2017, $10,000; 2018, $12,000; 2019, $15,000; and 2020, $20,000. No
At the beginning of 2020, Tanham Company discovered the following errors made in the preceding 2 years:Reported net income was $27,000 in 2018 and $35,000 in 2019. The allowance for doubtful accounts had a zero balance at the beginning of 2018. No accounts were written off during 2018 or 2019.
Kraft Manufacturing Company manufactures two products: Mult and Tran. At December 31, 2019, Kraft used the FIFO inventory method. Effective January 1, 2020, Kraft changed to the LIFO inventory method. The cumulative effect of this change is not determinable, and, as a result, the ending inventory
On January 2, 2019, Quo Inc. hired Reed as its controller.During the year, Reed, working closely with Quo’s president and outside accountants, made changes in accounting policies, corrected several errors dating from 2018 and before, and instituted new accounting policies. Quo’s 2019 financial
SituationYou are the new accountant for 12th National Bank and are preparing its 2019 statement of cash flows. The bank reports net income of $75,800 on its 2019 income statement. Included in this net income are the following items: $6,700 gain on sale of trading securities, $1,200 unrealized
Obtain The Coca-Cola Company’s 2017 annual report either using the “Investor Relations” portion of its website (do a web search for Coca-Cola investor relations) or go to http://www.sec.gov and click “Search for company filings” under “Filings and Forms (EDGAR).” Required:1. What
Alfred Engineering Company is a young and growing producer of electronic measuring instruments and technical equipment. You have been retained by Alfred to advise it in the preparation of a statement of cash flows. For the fiscal year ended October 31, 2019, you have obtained the following
Refer to the information for Heinz Company in P21-8.Required:Using the direct method for operating cash flows, prepare a spreadsheet to support a 2019 statement of cash flows.P21-8Heinz Company’s post-closing trial balance as of December 31, 2018, and the adjusted trial balance as of December 31,
The following are Adair Company’s December 31, 2018, post-closing trial balance and the December 31, 2019, adjusted trial balance:A review of the accounting records reveals the following additional information for 2019:• Investments in bonds to be held to maturity were purchased at year-end for
Refer to the information for Farrell Corporation in P21-13.Required:1. Using the direct method for operating cash flows, prepare a spreadsheet to support a 2019 statement of cash flows.2. Prepare the statement of cash flows. (A separate schedule reconciling net income to cash provided by operating
The following is a list of the items to be included in the preparation of Yellow Company’s 2019 statement of cash flows:a. Proceeds from sale of land, $2,100b. Payments of interest, $5,000c. Equipment acquired by capital lease, $7,200d. Proceeds from issuance of preferred stock, $11,000e. Other
Refer to the information for Lamberson Company in P21-6.Required:1. Using the direct method, prepare the operating activities section of the 2019 statement of cash flows for Lamberson.2. (Optional). If you completed P21-6 earlier, prepare the remaining portion of the statement of cash flows. (A
The following are Farrell Corporation’s balance sheets as of December 31, 2019, and 2018, and the statement of income and retained earnings for the year ended December 31, 2019:Additional information:a. On January 2, 2019, Farrell sold equipment costing $45,000, with a book value of $24,000, for
Angel Company has prepared its financial statements for the year ended December 31, 2019, and for the 3 months ended March 31, 2020. You have been asked to prepare a statement of cash flows for the 3 months ended March 31, 2020. The company’s balance sheet data at December 31, 2019, and March
Ryan Company’s bookkeeper prepared the following 2019 statement of cash flows:After a thorough investigation, you have determined that the amounts of the items listed on the statement are correct. However, you notice several items that are incorrectly classified and reported.Required:Prepare a
The following transactions were recorded on the books of Baxter Company during the current year.a. Issued a “small” common stock dividend of 400 shares. The par value is $10 per share, and the relevant market price was $20 per share.b. Exchanged equipment with a cost of $10,000 and a book
On December 31, 2019, a fire destroyed a significant portion of Richey Company’s accounting records. Only the January 1, 2019, balance sheet, the statement of cash flows for 2019, and several additional documents were saved as follows:• The new building was acquired on December 31, 2019. The
Heinz Company’s post-closing trial balance as of December 31, 2018, and the adjusted trial balance as of December 31, 2019, are shown here:A review of the accounting records reveals the following additional information:a. Bonds payable with a face value, book value, and market value of $14,000
The following information is available for Bott Company:Additional information for the year:a.b. Last year, depreciation expense was inadvertently understated in the amount of $1,800. The correction was made this year to Accumulated Depreciation and to Retained Earnings as a prior period
The following information was taken from Lamberson Company’s accounting records:Additional information for the year:Sales ...........................................................$ 39,930Cost of goods sold .....................................(19,890)Depreciation expense
The following partially completed spreadsheet has been prepared for Perrin Company’s 2019 statement of cash flows:Additional relevant information:a.b. Accumulated depreciation is a contra account for all the depreciable assets. Depreciation on these assets totaled $2,200 for the year.c. On
The following is a list of the items to be included in the preparation of Trone Company’s2019 statement of cash flows:a. Ordinary gain, $9,200b. Proceeds from issuance of note, $25,000c. Decrease in accounts receivable, $5,000d. Payment for purchase of patent, $19,800e. Increase in inventory,
The following is a list of the items to be included in the preparation of Warrick Company’s 2019 statement of cash flows:a. Net income, $59,200b. Payment for purchase of building, $98,000c. Increase in accounts receivable, $7,400d. Proceeds from issuance of common stock, $37,100e. Increase in
Verna Company’s records provided the following information for 2019:a. Decrease in accounts payable, $4,600b. Loss on sale of land, $1,900c. Increase in inventory, $7,800d. Increase in income taxes payable, $2,700e. Net income, $68,400f. Patent amortization expense, $1,600g. Ordinary loss,
Dauve Company reported the following condensed income statement for 2019:During 2019, the following changes occurred in the company’s current assets and current liabilities:Increase (Decrease)Cash $ 3,700Accounts receivable (5,500)Inventories 8,900Accounts payable (purchases) (4,600)Salaries
The following changes in account balances were taken from Walson Company’s adjusted trial balance at the end of 2019:In addition, the following information was obtained from the company’s records:• Land was sold, at cost, for $1,900.• Dividends of $4,000 were declared and paid.• Equipment
The following is a list of items to be included in Estes Company’s 2019 statement of cash flows:a. Payments to suppliers, $31,500b. Other operating receipts, $1,200c. Payments of dividends, $4,000d. Payments of income taxes, $5,000e. Collections from customers, $68,400f. Payment for purchase of
following is accounting information taken from Woodrail Company’s adjusted trial balance for 2019:In addition, the following changes occurred in selected accounts during 2019:Accounts Receivable ..........................$5,700 creditInventory ................................................9,800
Refer to the information for Stewart Company in E21-11.Required:Based only on the information presented and using the direct method, prepare the cash flows from operating activities section of the 2019 statement of cash flows for Stewart using the spreadsheet method.E21-11The following 2019
Verlando Company had the following account balances and information available for 2019:During 2019, Verlando recorded the following transactions affecting these accounts:a. Land with a carrying value of $35,000 was sold at a loss of $6,000.b. Land and equipment were purchased with cash during the
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