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intermediate accounting reporting
Intermediate Accounting Reporting and Analysis 3rd edition James M. Wahlen, Jefferson P. Jones, Donald Pagach - Solutions
What are the advantages of the retail inventory method compared to the gross profit method?
Under what conditions can inventory be valued above cost?
In applying the inventory valuation rules to inventory, how do IFRS define market value?
What is the major criticism of the inventory valuation rules?
Describe the two approaches to recording the reduction of inventory.
What three implementation approaches may a company choose when applying the inventory valuation rules?
Define the terms cost, net realizable value, and market value.
What is the conceptual justification for reducing inventory below cost?
Under what circumstances will a company value inventory below its cost?
Obtain Nestlé’s 2017 annual report using the “Investor Relations” portion of its web site (do a Web search for Nestlé investor relations).Required:1. Which inventory method does Nestlé use? Why doesn’t Nestlé use LIFO?2. Describe the composition of Nestlé’s inventory.3. Assume
Obtain Starbucks’s 2017 annual report either using the “Investor Relations” portion of its web site (do a Web search for Starbucks investor relations) or go to http://www.sec.gov and click “Search for company filings” under “Filings and Forms (EDGAR).”Required:1. What is the primary
Kelly Company adopted dollar-value LIFO on January 1, 2018, using two inventory pools each of which includes two types of inventory items. Kelly uses the double-extension method to compute the appropriate cost index. The following information about the inventory at the end of each year is
Webster Company adopted dollar-value LIFO on January 1, 2019. Webster produces three products: X, Y, and Z. Webster’s beginning inventory consisted of the following:Required:1. Compute the LIFO cost of the ending inventory assuming Webster uses a single inventory pool. Round cost index to 4
The following information for 2019 is available for Marino Company:1. The beginning inventory is $100,000.2. Purchases returns of $4,000 were made.3. Purchases of $300,000 were made on terms of 2/10, n/30. Eighty percent of the discounts were taken.4. At December 31, purchases of $20,000 were in
On April 11, Edwards Construction Company purchased inventory for $30,000 on terms of 2/10, n/30. It pays the account balance on April 21. Edwards uses a periodic inventory system.Required:1. Prepare the journal entries to record the purchase and payment using (a) gross price and (b) net price.2.
The inventory on hand at the end of 2019 for Reddall Company is valued at a cost of $94,550. The following items were not included in this inventory:1. Purchased goods in transit, under terms FOB shipping point, invoice price $4,100, freight costs $220.2. Goods out on consignment to Marlman
As the auditor of Hayes Company for the year ended December 31, 2019, you found the following transactions occurred near its closing date:1. Merchandise received on January 8, 2020, and costing $800 was recorded as inventory on January 8, 2020.An invoice on hand showed the shipment was made FOB
Assume prices were stable during the period. The following values were obtained from the inventory records of Harris Company which has a fiscal year ending on December 31:Inventory, January 1, 2019, LIFO $80,000Inventory, March 31, 2019, LIFO 70,000Required:1. Under what conditions is Harris’s
For goods in transit at the end of a period, describe how a company determines if the goods should be included in inventory.
Obtain Nestlé’s 2017 annual report using the “Investor Relations” portion of its web site (do a Web search for Nestlé investor relations).Required:1. With regard to Nestlé’s cash and cash equivalents:a. What amount did Nestlé report as cash and cash equivalents at the end of 2017?b.
Obtain Starbucks’s 2017 annual report either using the “Investor Relations” portion of its web site (do a Web search for Starbucks investor relations) or go to http://www.sec.gov and click “Search for company filings” under “Filings and Forms (EDGAR).”Required:1. (a) What were the
At the end of 2019, the accounting firm for which you work is auditing the books of Debitus Publishing Inc. for the first time. Debitus, a calendar year company, publishes textbooks that are used in colleges and universities across the country. These textbooks are purchased by students through
Magrath Company has an operating cycle of less than one year and provides credit terms for all of its customers. On April 3, 2019, the company factored, without recourse, some of its accounts receivable. Magrath does not normally factor its receivables.On August 1, 2019, Magrath sold special order
Faeber Textile Company frequently factors its accounts receivable. During 2019, Faeber made credit sales of $100,000 to customers, under terms of 2/10, n/30. Faeber records its credit sales using gross price. In 2019, Faeber sold $70,000 of these receivables to a factor. The factor remitted 90% of
December 11, 2019, Hooper Inc. made a credit sale to Marshall Company and required Marshall to sign a $12,000, 60-day note.Required:Prepare the journal entries necessary to record the receipt of the note by Hooper, the accrual of interest on December 31, 2019, and the customer’s repayment on
At the end of 2019, Karras Inc. had a debit balance of $141,120 in its accounts receivable. Additionally, Karras had a credit balance in its allowance for doubtful accounts of $4,350 and $9,420 at the beginning and end of the year, respectively. During the year, Karras made credit sales of
Balances The following information is extracted from Shelton Corporation’s accounting records at the beginning of 2019:Accounts Receivable ...................................................$63,000Allowance for Doubtful Accounts .................................1,400 (credit)During 2019, sales on
Blunt Company makes credit sales of $21,000 during the month of February 2019. During 2019, collections are received on February sales of $20,400, accounts representing $600 of these sales are written off as uncollectible, and a $100 account previously written off is collected.Required:1. Prepare
Towbin Products sells merchandise on credit for $7,000 on December 1, 2019. The merchandise cost Towbin $4,900 (70% of the selling price). Towbin estimates that returns and allowances will amount to 4% of sales. On December 22, 2019, a customer returns for credit merchandise originally sold on
Eastman Corporation sells merchandise with a list price of $13,000 on February 1, 2019, with terms of 1/10, n/30. On February 10, 2019, payment was received on merchandise originally billed for $7,500, and the balance due was received on March 1, 2019.Required:1. Prepare the journal entries to
On December 1, 2019, Lynch Incorporated sold $18,000 of merchandise with terms 2/10, n/EOM. On December 11, 2019, collections were made on sales originally billed for $12,000, and on December 31, 2019, additional collections on sales originally billed for $5,000 were received.Required:1. Prepare
How does IFRS differ from U.S. GAAP with regard to the derecognition of financial assets?
How are the cash proceeds determined when a note receivable is transferred?
How is revenue recognition related to the recognition of accounts receivable?
On June 1, Snow Company established a petty cash fund of $1,000 to pay for various office supplies.A count at the end of the month shows $325 remaining in the fund, while the vouchers indicate that $650 of costs were incurred. Prepare the journal entries to establish the petty cash fund on June 1
On December 1, Newton Enterprises sells $100,000 of accounts receivable to a factor without recourse, receives 85% of the value of the factored accounts, and is charged a 10% commission on the gross amount of the factored accounts receivable. Newton normally factors its accounts receivable.
Refer to RE6-8. On April 23, 2020, McKinney & Co. receives a check from Mangold Corporation for $8,500. Prepare the journal entry for McKinney to record the collection of the account previously written off.Refer RE6-8Refer to RE6-7. At the end of the first quarter of 2020, McKinney & Co.
Refer to RE6-7. At the end of the first quarter of 2020, McKinney & Co. reevaluates its receivables. McKinney’s management decides that $8,500 due from Mangold Corporation will not be collectible. This amount was previously included in the allowance account. Prepare the journal entry to
McKinney & Co. estimates its uncollectible accounts as a percentage of credit sales. McKinney made credit sales of $1,500,000 in 2019. McKinney estimates 2.5% of its sales will be uncollectible. Prepare the journal entry to record bad debt expense for McKinney at the end of 2019.
SituationKelly Company, a small corporation, is preparing its 2019 financial statements. At the end of 2019, the company purchased a building for $100,000, paid $20,000 as a down payment, and signed an $80,000 mortgage.Kelly’s president is concerned about how to report this transaction on the
The comparative consolidated income statements and the comparative statements of comprehensive gains and losses for the years 2017, 2016, and 2015 for LVMH Group (Moet Hennessy – Louis Vuitton) are presented in the chapter on pages 5–31 and 5–32, respectively (with amounts in millions of
Review Starbucks’s financial statements and notes in Appendix A.Required:1. Does the company use a multiple-step or a single-step format on its income statement? Explain.2. What was the net earnings attributable to Starbucks for 2017? What was the basic earnings per common share for 2017?3. What
It is the end of 2019, and, as an accountant for Newell Company, you are preparing its 2019 financial statements. On December 29, 2019, Newell’s management decided to sell one of its major divisions, subject to some legal work that is expected to be completed during the first week in April 2020
The following items were derived from Woodbine Circle Corporation’s adjusted trial balance on December 31, 2019:Other financial data for the year ended December 31, 2019:Federal Income TaxesPaid with federal income tax
Olson Company’s bookkeeper prepared the following income statement and retained earnings statement for the year ended December 31, 2019:The preceding account balances are correct but have been incorrectly classified in certain instances. Assume the income tax amounts are correct and linked to the
Rox Corporation’s multiple-step income statement and retained earnings statement for the year ended December 31, 2019, as developed by its bookkeeper, are shown here:You determine that the account balances listed on the statements are correct but are incorrectly classified in certaincases. The
The following are the financial statements issued by Allen Corporation for its fiscal year ended October 31, 2019:Notes to Financial Statements:1. Long-Term Lease. Under the terms of a 5-year, noncancelable lease for a building, Allen is obligated to make annual rental payments of $40,000 in each
Cunningham Company reports a retained earnings balance of $365,200 at the beginning of 2019. For the year ended December 31, 2019, the company reports pretax income from continuing operations of $150,500. The following information is also available pertaining to 2019:1. The company declared and
At the beginning of 2019, Cameron Company’s retained earnings was $212,000. For 2019, Cameron has calculated its pretax income from continuing operations to be $120,000.During 2019, the following events also occurred:1. During July, Cameron sold Division M (a component of the company). It has
O’Connor Company’s income statement information for 2019 and 2020 (a sole proprietorship) is as follows:Required:Next Level Provide the missing amounts for the blanks labeled (a) through (g). All the necessary information is listed. 2020 2019 $ (d) (e) 140,000 6,000 (6) 100,000 120,000 36,000
The following are selected items derived from Dibb Company’s adjusted trial balance on December 31, 2019:Twelve thousand shares of common stock were outstanding the entire year.Required:Assuming a 30% income tax rate on all items of income, prepare Dibb’s 2019 income statement using (1) A
What is a statement of cash flows? What is its primary purpose?
What is interperiod tax allocation?
Define expenses. What do expenses measure?
What are the five steps to determine when revenues can be recognized?
SituationYou are the assistant accountant for Tyler Corporation. It is mid-January 2020 and you are helping to prepare Tyler’s balance sheet for December 31, 2019. Tyler will publish this balance sheet on March 1, 2020, after the auditors have completed their work. Tyler has a $100,000 note
It is February 16, 2020, and you are auditing Davenport Corporation’s financial statements for 2019 (which will be issued in March 2020). You read in the newspaper that Travis Corporation, a major customer of Davenport, is in financial difficulty. Included in Davenport’s accounts receivable
On January 1, 2019, Knox Company showed the following alphabetical list of shareholders’ equity items:Additional paid-in capital on common stock ........................$130,000Additional paid-in capital on preferred stock ............................6,000Common stock, $10 par
On January 1, 2019, Osgood Film Studios reported the following alphabetical list of shareholders’ equity items:Additional paid-in capital on common stock .....................................$170,000Additional paid-in capital on preferred stock .......................................12,000Common
On January 1, 2019, Powder Company provided the following shareholders’ equity section of its balance sheet:Contributed Capital:Preferred stock, $100 par ...........................................................................$ 92,800Common stock, $5 par
On December 31, 2019, Stevens Company’s bookkeeper prepared the following balance sheet with items erroneously classified.Required:Next Level You determine that the account balances listed on the balance sheet are correct but, in certain cases, incorrectly classified. Prepare a properly
Fermer Company’s balance sheet information at the end of 2019 and 2020 is as follows:Additional information: At the end of 2019, additional paid-in capital is twice the amount of common stock. In 2020, the company issued (sold) 100 shares of common stock.Required:Next Level Fill in the blanks
Dawson Company’s balance sheet information at the end of 2019 and 2020 is as follows:Additional information: The company did not issue any common stock during 2020.Required:Next Level Fill in the blanks labeled (a) through (l). All the necessary information is provided. (Hint: It is not
The December 31, 2019, balance sheet accounts of Hitt Company are shown here in alphabetical order:Required:1. Prepare Hitt’s December 31, 2019, balance sheet.2. Compute the working capital and the current ratio.3. Next Level Discuss how the format of Hitt’s balance sheet would be different
Baggett Company’s balance sheet accounts and amounts as of December 31, 2019, are shown in random order as follows:Required:1. Prepare a December 31, 2019, balance sheet for Baggett.2. Compute the debt-to-assets ratio. Debit (Credit) Debit (Credit) Account Account Income Taxes Payable Prepaid
The following are several of Graf Corporation’s accounts at the end of 2019:Account .................................................................................................Credit BalanceCommon Stock, $10 par ...........................................................................$
Listed here are certain accounts of Jenkins Company at the end of 2019:Account ...........................................................................Debit (Credit)Land .................................................................................$12,000Prepaid Insurance
Taylor Company uses a periodic inventory system. The following is partial information from its income statements for 2019 and 2020:Required:Next Level Fill in the blanks lettered a through f. 2019 2020 $ (b) 220,000 118,000 2,000 48,000 (a) 106,000 65,000 (c) $ d) (6) 140,000 3,000 74,000 77,000
On December 31, 2019, Kellams Company made the following adjusting entries for its annual accounting period:Required:Prepare whatever reversing entries are appropriate. Depreciation Expense Accumulated Depreciation To record depreciation on buildings. 2,400 2,400 Interest Receivable 500 500
A company purchased a patent 4 years ago, and was amortizing that patent over a 10-year useful life. In the current year, the company determined the patent had become worthless. The write-off of the patent asset in the current year is an example of which of the following expense recognition
What are the primary sources of useful information identified in the model?
How do accounting concepts, principles, standards, and rules differ?
What is the Conceptual Framework of the FASB?
What is the purpose of an income statement? What information does it provide?Identify at least one type of stakeholder that would be interested in the information on a company’s income statement.
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