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intermediate accounting reporting
Intermediate Accounting Reporting and Analysis 3rd edition James M. Wahlen, Jefferson P. Jones, Donald Pagach - Solutions
The following is a list of the items for Lombardo Company’s 2019 statement of cash flows:a. Depreciation expense, $4,200b. Proceeds from sale of land, $5,600c. Payment of dividends, $5,000d. Net income, $7,900e. Conversion of bonds to common stock, $7,000f. Increase in accounts payable, $3,100g.
On October 4, 2019, Collins Company purchased 100 bonds of Steph Company for $6,400 as a short-term investment in securities classified as available for sale. On December 31, 2019, the bonds had a fair value of $6,300, and on February 8, 2020, Collins sold the bonds for $6,700.Required:In journal
Staggs Company has prepared its 2019 statement of cash flows. In conjunction with this statement, it plans to disclose the interest and income taxes it paid during 2019. The following information is available from its 2019 income statement and beginning and ending balance
The following 2019 information is available for Stewart Company:Condensed Income Statement for 2019Sales ..............................................$ 9,000Cost of goods sold ........................(6,000)Other expenses .............................(2,000)Loss on sale of equipment
The following 2019 information is available for Payne Company:Partial additional information: The net income for 2019 totaled $1,600. During 2019, the company sold, for $390, equipment that cost $390 and had a book value of $300. The company sold land for $200, resulting in a loss of $40.The
Hanks Company has prepared the following changes in account balances for the spreadsheet to support its 2019 statement of cash flows:Additional information: The net income was $1,300. Depreciation expense was $350, and patent amortization expense was $100. At the end of 2019, long-term investments
Andell Company’s 2019 statement of cash flows, as developed by its bookkeeper, is shown here:You determine that the amounts of the items listed on the statement are correct, but in certain circumstances, incorrectly classified.Required:Prepare a corrected 2019 statement of cash flows for Andell.
The following is a list of items for Witts Company’s 2019 statement of cash flows:a. Receipt from sale of equipment, $2,700b. Increase in inventory, $3,900c. Net income, $13,500d. Payment for purchase of building, $29,000e. Depreciation expense, $8,700f. Receipt from issuance of bonds, $8,000g.
Hyde Company’s records for 2019 provide the following information:a. Amortization of premium on bonds payable, $600b. Purchase of equipment, $6,000c. Depreciation expense, $7,400d. Decrease in accounts receivable, $800e. Decrease in accounts payable, $2,800f. Issuance of long-term note for cash,
The following beginning balance sheet and statement of cash flows for 2019 are available for Fazzi Company:Required:On the basis of this information, prepare a balance sheet for Fazzi as of December 31, 2019. Balance Sheet January 1, 2019 $ 1,600 3,900 4,500 1,800 7,200 $19,000 Accounts payable
Noble Company’s accounting records provided the following changes in account balances and other information for 2019:Additional information: Net income was $9,900. Dividends were declared and paid. Land was sold for $1,700.No land was purchased. A building was purchased for $23,000. No buildings
Gordon Company’s accounting records provided the following changes in account balances and other information for 2019:Additional information: Net income totaled $5,800. Dividends were declared and paid. Equipment was purchased for $8,800. No buildings and equipment were sold during the year. One
Following are totals from selected financial statements of Magdalene Corporation for the years ended December 31, 2019 and 2020:Required:1. Next Level Calculate the operating cash flow ratio for the year ended December 31, 2020. What information does this provide about the company?2. Next Level
The following information was taken from Oregon Corporation’s accounting records for 2019:Proceeds from issuance of preferred stock .................................$4,000,000Dividends paid on preferred stock .....................................................400,000Bonds payable converted to
Smith Company provided the following information on selected transactions for 2019:Net income ................................................................$20,000,000Proceeds from short-term borrowings .....................1,200,000Proceeds from long-term borrowings
The net income for Mountain Corporation was $4,000,000 for the year ended December 31, 2019. Additional information is as follows:Depreciation on fixed assets ..........................$2,000,000Proceeds from sale of land ..................................200,000Increase in accounts payable
Selected information from Brook Corporation’s accounting records and financial statements for 2019 follows:Net cash provided by operating activities ..........................................$1,500,000Mortgage payable issued to acquire land and building ......................1,800,000Common
Saratoga Company reports sales of $200,000 and interest revenue of $17,000 for the current year. During the year, accounts receivable increased by $21,000 and interest receivable decreased by $3,000. Under the direct method, Saratoga would report cash inflows from operating activities of:a.
Which of the following would be considered a cash outflow for investing activities?a. Cash paid to purchase product for inventoryb. Cash paid to reacquire common stockc. Cash paid to repay debtd. Cash paid to purchase equipment
Jordan Company recognized a $5,000 unrealized holding gain on investment in Starbucks’s common stock during 2019. The company classified as equity investments. How would this information be reported in a statement of cash flows prepared using the indirect method?
Dunn Company recognized a $5,000 unrealized holding gain on investment in Starbucks’s long-term bonds during 2019. The company classified its investment as an available-for-sale security. How would this information be reported on a statement of cash flows prepared using the indirect method?
On January 1, Hazard Company, a lessee, entered into three noncancelable leases for brand new general equipment: Lease J, Lease K, and Lease L. None of the three leases transfers ownership of the equipment to Hazard at the end of the lease term. For each of the three leases, the present value of
RaleighTech enters into an arrangement with Bloomington Corp. to provide services, through a centralized data center. Because this involves a new secret project for Bloomington, it asks that RaleighTech maintain all of the information on a specified server, Server-XB22. RaleighTech maintains many
A customer enters into a 3-year contract with the Raleigh Sports Arena for the right to occupy a luxury box at events. Each luxury box has 20 individual seats. The contract provides that the customer will have the use of 90% of the luxury box’s seats at all events throughout the contract’s
As of 2017, drivers in the United States now lease almost 80% of battery electric vehicles and over 55% of plug-in hybrids.16 The study found that the lease rate for nonelectric and non-hybrid vehicles is only about 30%.Required:1. What might be the reasons that electric car drivers lease their
Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord $280,000 (useful life is 6 years with no residual value). The fair value of the equipment is $300,000. The interest rate implicit in the
Farrington Company leases a computer from Wilson Company. The lease includes the following provisions:• The lease is noncancelable and has a term of 8 years.• The annual rentals are $60,000, payable at the end of each year.• Farrington agrees to pay all executory costs directly to a third
Benjamin Company has rented new equipment to Murrell Builders that cost Benjamin $48,000, and has a fair value of $50,000. This nonspecialized equipment has a life of 4 years and no residual value at the end of that time. The lease is noncancelable and is signed on January 1, 2019. Murrell assumes
Lessee Company leases heavy equipment on January 1, 2019, from Lessor Company with the following lease provisions:• The lease is noncancelable and has a term of 10 years.• The lease does not contain a renewal or bargain purchase option.• The annual rentals are $27,653.77, payable at the
On January 1, 2019, Amity Company leases a crane to Baltimore Company.The lease contains the following terms and provisions:• The lease is noncancelable and has a term of 10 years.• The lease does not contain a renewal or bargain purchase option.• The annual rentals are $4,000, payable at the
Lamplighter Company, the lessor, agrees to lease equipment to Tilson Company, the lessee, beginning January 1, 2019. The lease terms, provisions, and related events are as follows:• The lease is noncancelable and has a term of 8 years.• The annual rentals are $32,000, payable at the end of each
Lessor Company and Lessee Company enter into a 5-year, noncancelable, sales-type lease on January 1, 2019, for equipment that cost Lessor $375,000 (useful life is 5 years). The fair value of the equipment is $400,000. Lessor expects a 12% return on the cost of the asset over the 5-year period of
Calder Company, the lessor, enters into a lease with Darwin Company, the lessee, to provide heavy equipment beginning January 1, 2017. The lease is appropriately classified as a sales-type lease. The lease terms, provisions, and related events are as follows:• The lease is noncancelable, has a
Timmer Company signs a lease agreement dated January 1, 2019, that provides for it to lease equipment from Landau Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows:• The lease is noncancelable and has a term of 5 years.• The annual rentals are
Scupper Farms, the lessee, and Tyrrell Equipment, the lessor, sign a lease agreement on January 1, 2019, that provides for Scupper to lease a cultivator from Tyrrell. The lease terms, provisions, and other related events are as follows:• The lease is noncancelable and has a term of 6 years.•
On January 1, 2019, Alice Company leases nonspecialized equipment for 5 years, agreeing to pay $65,000 annually at the beginning of each year under the noncancelable lease. Superior Equipment Company, the lessor, agrees to remit all executory costs, estimated to be $3,450 per year. The cost of the
On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions:• The lease is noncancelable and has a term of 8 years.• The annual rentals are $35,000, payable at the beginning of each
Reuben Company retires a machine from active use on January 2, 2019, for the express purpose of leasing it. The machine had a carrying value of $900,000 after 12 years of use and is expected to have 10 more years of economic life. The machine is depreciated on a straight-line basis. On March 2,
The following information is available for a noncancelable lease of equipment entered into on March 1, 2019. The lease is classified as a sales-type lease by the lessor (Anson Company) and as a finance lease by the lessee (Bullard Company). Assume that the lease payments are made at the beginning
Diego Leasing Company agrees to provide La Jolla Company with equipment under a noncancelable lease for 5 years. The equipment has a 5-year life, cost Diego $25,000, and will have no residual value when the lease term ends. The fair value of the equipment is $30,000. La Jolla agrees to pay all
Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows:1. The lease term is 8 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year.2. The cost of
Ravis Rent-A-Car Company leases a car to Ira Reem, an employee, on January 1, 2019. The term of the noncancelable lease is 4 years. The following information about the lease is provided:1. Title to the car passes to Ira on the termination of the lease with no additional payment required by the
Use the information for Edom Company in E20-8, except that the residual value was guaranteed by Davis Company (the lessee).Required:1. Assuming that the lease is a sales-type lease, calculate the selling price.2. Prepare a table summarizing the lease receipts and interest income earned by Edom.3.
Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January 1, 2019. The lease terms, provisions, and related events are as follows:1. The lease term is 5 years. The lease is noncancelable and requires annual rental receipts of $100,000 to be made
Berne Company (lessor) enters into a lease with Fox Company to lease equipment to Fox beginning January 1, 2019. The lease terms, provisions, and related events are as follows:1. The lease term is 4 years. The lease is noncancelable and requires annual rental payments of $50,000 to be made at the
Ramsey Company leases heavy equipment to Terrell Inc. on March 1, 2019, on the following terms:1. Twenty-four lease rentals of $2,950 at the beginning of each month are to be paid by Terrell, and the lease is noncancelable.2. The cost of the heavy equipment to Ramsey was $55,000.3. Ramsey uses an
On January 1, 2019, Nelson Company leases certain property to Queens Company at an annual rental of $60,000 payable in advance at the beginning of each year for 8 years. The first payment is received immediately. The leased property, which is new, cost $275,000 and has an estimated economic life of
On January 1, 2019, Concord Corp. signs a contract to lease nonspecialized manufacturing equipment from Stone Inc. Concord agrees to make lease payments of $47,500 per year.Additional information pertaining to the lease is as follows:1. The term of the noncancelable lease is 3 years, with a renewal
Sax Company signs a lease agreement dated January 1, 2019, that provides for it to lease computers from Appleton Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows:1. The lease term is 5 years. The lease is noncancelable and requires equal rental
Adden Company signs a lease agreement dated January 1, 2019, that provides for it to lease non-specialized heavy equipment from Scott Rental Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows:1. The lease term is 4 years. The lease is noncancelable and
On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement:1. The agreement requires rental payments of $100,000 at the beginning of each year.2.
Use the following information to decide whether this equipment lease qualifies as an operating, sales-type, or direct financing lease to a lessor.a. • There is no transfer of ownership at the end of the lease term.• There is no bargain purchase option.• The lease term is 60% of the economic
Use the information in RE20-1. Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease.RE20-1Keller Corporation (the lessee) entered into a general equipment lease with Dallo Company (the lessor) on
Keller Corporation (the lessee) entered into a general equipment lease with Dallo Company (the lessor) on January 1 of Year 1. Use the following information to decide whether this lease qualifies as an operating or finance lease for Keller, and give an explanation using the five classification
On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of $10,000 at the beginning of each year. The machine cost $40,000 and has a useful life of 8 years with no residual value. Kern’s implicit interest rate is 10%, and present value factors are as
On January 2, 2019, Lafayette Machine Shops Inc. signed a 10-year noncancelable lease for a heavyduty drill press, stipulating annual payments of $15,000 starting at the end of the first year, with title passing to Lafayette at the expiration of the lease. Lafayette treated this transaction as a
Refer to the information for Tiger Inc. above. Assuming that Tiger uses straight-line amortization, what is the amount of amortization and interest expense that Tiger should record for the year ended December 31, 2019?a. $158,250 and $159,900b. $158,250 and $189,900c. $168,750 and $159,900d.
Refer to the information for Fox Company above. What is the amount of profit on the sale and the amount of interest income that Fox should record for the year ended December 31, 2019?a. $0 and $159,900b. $490,000 and $159,900c. $490,000 and $189,900d. $700,000 and $189,900Fox Company, a dealer in
East Company leased a new machine from North Company on May 1, 2019, under a lease with the following information:Lease term ...........................................................................................................10 yearsAnnual rental payable at beginning of each lease year
Which of the following should be included by the lessee in determining the amount of the right-to use asset and lease liability: Unguaranteed Residual Value Fixed Payments Yes Yes a. No Yes Yes b. C. No d. No No
Describe the difference between how a lessor would report the cash flows associated with an operating lease and a finance lease.
Why are compound interest concepts appropriate and applicable in accounting for a sales-type lease?
What must a lessee disclose for all leases whether classified as operating or finance?
Describe the difference between how a lessee would report the cash flows associated with an operating lease and a finance lease.
Describe briefly the procedures followed by the lessee to account for a finance lease.
From a lessor’s standpoint, a direct-financing lease does not meet any of the classification criteria of a sales-type lease but does meet both of the additional criteria. Describe these two additional criteria.
What is the difference between the lessee and lessor?
List the five criteria used to determine if a lease is classified as a finance lease by the lessee.
What conditions are necessary for an entity to have control over an asset?
What is a substitution right, and when does that right result in a contract not being a lease?
What is the definition of a lease?
List four potential benefits to the lessor of leasing versus selling an asset.
List four potential benefits to the lessee of leasing versus purchasing an asset.
SituationPanther Company currently sponsors a defined benefit pension plan for its employees. At the end of 2019, the plan had a projected benefit obligation of $1,456,000 and fair value of plan assets of $1,629,000. Panther recognized a net pension asset in its balance sheet of $173,000 at the
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).” Answer each of The
On January 1, 2019, Vasby Software Company adopted a healthcare plan for its retired employees. To determine eligibility for benefits, Vasby retroactively gives credit to the date of hire for each employee. The service cost for 2019 is $8,000. The plan is not funded, and the discount rate is 10%.
TAN Company has a defined benefit pension plan for its employees. The plan has been in existence for several years. During 2018, for the first time, TAN experienced a difference between its expected and actual projected benefit obligation. This resulted in a cumulative “experience” loss of
Jay Company has had a defined benefit pension plan for several years. At the beginning of 2019, Jay amended the plan; this amendment provided for increased benefits to employees based on services rendered in prior periods. The prior service cost related to this amendment totaled $88,000. As a
On January 1, 2019, Baznik Company adopted a defined benefit pension plan. At that time, Baznik awarded retroactive benefits to certain employees. These retroactive benefits resulted in a prior service cost of $1,200,000 on that date (which it did not fund). Baznik has six participating employees
Various pension plan information of Kerem Company for 2019 and 2020 is as follows:Required:Fill in the blanks lettered (a) through (k). All the necessary information is listed. It is not necessary to calculate your answers in alphabetical order. 2019 2020 $ 100,000 54,000 (i) (g) 9% Service cost
In Fisk Company’s negotiations with its employees’ union on January 1, 2019, the company agreed to an amendment that increased the employee benefits based on services rendered in prior periods. This resulted in an $80,000 prior service cost that increased the projected benefit obligation of the
For several years, Kent Company has had a defined benefit contribution plan for its employees. During those years, Kent experienced differences between its expected and actual projected benefit obligation. These differences resulted in a cumulative net gain or loss at the beginning of each
Lane Company was incorporated in 2004. Because it had become successful, Lane established a defined benefit pension plan for its employees on January 1, 2019. Due to the loyalty of its employees, Lane granted retroactive benefits to them. These retroactive benefits resulted in $1,240,000 of prior
On January 1, 2019, Parkway Company adopted a defined benefit pension plan. At that time, Parkway awarded retroactive benefits to its employees, resulting in a prior service cost of $2,180,000 on that date (which it did not fund). Parkway decided to amortize this cost by the straight-line method
Carpenter Company adopted a defined benefit pension plan for its employees on January 1, 2019. At the time of adoption, the pension contract provided for retroactive benefits for the company’s active participating employees. These retroactive benefits resulted in a prior service cost of
When Turner Company adopted its defined benefit pension plan on January 1, 2019, it awarded retroactive benefits to its employees. These retroactive benefits resulted in a prior service cost of $980,000 that created a projected benefit obligation of the same amount on that date (which it did not
Nelson Company has a defined benefit pension plan for its employees. At the end of 2019 and 2020, the following information is available in regard to this pension plan:Required:1. Compute the amount of Nelson’s pension expense in 2019 and 2020.2. Based on the available information, prepare all
On January 1, 2019, Flash and Dash Company adopted a healthcare plan for its retired employees. To determine eligibility for benefits, the company retroactively gives credit to the date of hire for each employee. The following information is available about the plan:Service cost
Wolz Company, a small business, has had a defined benefit pension plan for its employees for several years. At the beginning of 2019, Wolz amended the pension plan; this amendment provides for increased benefits based on services rendered by certain employees in prior periods. Wolz’s actuary has
At the beginning of 2019, Brent Company amended its defined benefit pension plan. The amendment entitled five active participating employees to receive increased future benefits based on their prior service. Brent’s actuary determined that the prior service cost for this amendment amounts to
Refer to the information provided in E19-13.Required:Using the years-of-future-service method, prepare a set of schedules to determine (1) The amortization fraction for each year(2) The amortization of the prior service cost.E19-13.At the beginning of 2019, Brent Company amended its defined
Hudson Company’s actuary has provided the following information concerning the company’s defined benefit pension plan at the end of 2019:Fair value of plan assets (1/1/2019) ................................$ 350,000Actual projected benefit obligation (1/1/2019) ................360,000Expected
Lee Company has a defined benefit pension plan. During 2018, for the first time, Lee experienced a difference between its expected and actual projected benefit obligation. At the beginning of 2019, Lee’s actuary accumulated the following information related to Lee’s pension plan:Net loss
On January 1, 2019, Smith Company adopted a defined benefit pension plan. At that time, Smith awarded retroactive benefits to its employees, resulting in a prior service cost that created a projected benefit obligation of $1,250,000 on that date (which it did not fund). Smith decided to amortize
Pitchford Company adopted a defined benefit pension plan on January 1, 2019, at which time it awarded retroactive benefits to its employees. The following information is available in regard to this plan:Prior service cost on 1/1/19 related to retroactive benefits: ......$300,000 (not funded)Planned
Farber Company adopted a defined benefit pension plan on January 1, 2019, at which time it awarded retroactive benefits to its employees. This prior service cost amounted to $200,000, which the company did not fund. Farber planned to amortize this prior service cost in the amount of $10,000 per
Several years ago, Lewad Company established a defined benefit pension plan for its employees. The following information is available for 2019 in regard to its pension plan: (1) discount rate, 10%; (2) service cost, $142,000; (3) plan assets (1/1), $659,000; and (4) expected return on plan
Carli Company adopted a defined benefit pension plan on January 1, 2018, and funded the entire amount of its 2018 pension expense. The following information pertains to the pension plan for 2019 and 2020:There are no other components of Carli’s pension expense.Required:1. Compute the amount of
Baron Company adopted a defined benefit pension plan on January 1, 2018. The following information pertains to the pension plan for 2019 and 2020:There are no other components of Baron’s pension expense.Required:1. Compute the amount of Baron’s pension expense for 2019 and 2020.2. Prepare the
Verna Company has had a defined benefit pension plan for several years. At the end of 2019, Verna accumulated the following information: (1) service cost for 2019, $127,000; (2) projected benefit obligation, 1/1/2019, $634,000; (3) discount rate, 9%; (4) plan assets, 1/1/2019, $589,000; and (5)
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