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intermediate accounting reporting

Questions and Answers of Intermediate Accounting Reporting

On December 31, 2024, the inventory of Powhattan Company amounts to $800,000. During 2025, the company decides to use the dollar-value LIFO method of costing inventories. On December 31, 2025, the
Shania Twain Company was formed on December 1, 2024. The following information is available from Twain’s inventory records for Product BAP.A physical inventory on March 31, 2025, shows 1,600 units
Harrisburg Company is considering changing its inventory valuation method from FIFO to LIFO because of the potential tax savings. However, management wishes to consider all of the effects on the
Describe the LIFO double-extension method. Using the following information, compute the index at December 31, 2025, applying the double-extension method to a LIFO pool consisting of 25,500 units of
Kumar Inc. uses LIFO inventory costing. At January 1, 2025, inventory was $214,000 at both cost and market value. At December 31, 2025, the inventory was $286,000 at cost and $265,000 at market
Garcia Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual
Riegel Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2025, consists of products D, E, F, G, H, and I. Relevant per unit
Dover Company began operations in 2025 and determined its ending inventory at cost and at LCNRV at December 31, 2025, and December 31, 2026. This information is presented below.Instructionsa. Prepare
Malone Company determined its ending inventory at cost and at LCNRV at December 31, 2025, December 31, 2026, and December 31, 2027, as shown below.Instructionsa. Prepare the journal entries required
The inventory of Oheto Company on December 31, 2025, consists of the following items.Instructionsa. Determine the inventory as of December 31, 2025, by the LCNRV method, applying this method to each
Remmers Company manufactures desks. Most of the company’s desks are standard models and are sold on the basis of catalog prices. At December 31, 2025, the following finished desks (10 desks in each
Stallworth Inc. uses a perpetual inventory system. At January 1, 2025, inventory was $428,000 at both cost and net realizable value. At December 31, 2025, the inventory was $572,000 at cost and
The dollar-value LIFO method was adopted by Enya Corp. on January 1, 2025. Its inventory on that date was $160,000. On December 31, 2025, the inventory at prices existing on that date amounted to
On April 15, 2026, fire damaged the office and warehouse of Stanislaw Corporation. The only accounting record saved was the general ledger, from which the balance sheet data below was prepared.The
MaddoxSpecialty Company, a division of Lost World Inc., manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers, retailers, and catalog outlets. Since
LaGreca Company uses the LCNRV method, on an individual- item basis, in pricing its inventory items. The inventory at December 31, 2025, included product X. Relevant per-unit data for product X are
Fuque Inc. uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single department for the month of October
Corrs Company began operations in 2024 and determined its ending inventory at cost and at lower-of-LIFO cost-or-market at December 31, 2024, and December 31, 2025. This information is presented
As of January 1, 2025, Aristotle Inc. adopted the retail method of accounting for its merchandise inventory. To prepare the store’s financial statements at June 30, 2025, you obtain the following
Selected accounts included in the property, plant, and equipment section of Lobo Corporation’s balance sheet at December 31, 2024, had the following balances.During 2025, the following transactions
Kemper Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2026 at a cost of $1,000,000. At December 31, 2025, the raw materials to be
Late in 2022, Joan Seceda and four other investors took the chain of Becker Department Stores private, and the company has just completed its third year of operations under the ownership of the
A fire destroys all of the merchandise of Assante Company on February 10, 2025. Presented below is information compiled up to the date of the fire.What is the approximate inventory on February 10,
Marvin Gaye Company has been having difficulty obtaining key raw materials for its manufacturing process. The company therefore signed a long-term noncancelable purchase commitment with its largest
Diderot Stores Inc., which uses the conventional retail inventory method, wishes to change to the LIFO retail method beginning with the accounting year ending December 31, 2025.Amounts as shown below
At December 31, 2025, Indigo Girls Company has outstanding noncancelable purchase commitments for 36,000 gallons, at $3.00 per gallon, of raw material to be used in its manufacturing process. The
Davenport Department Store converted from the conventional retail method to the LIFO retail method on January 1, 2025, and is now considering converting to the dollar-value LIFO inventory method.
At December 31, 2024, certain accounts included in the property, plant, and equipment section of Reagan Company’s balance sheet had the following balances.During 2025, the following transactions
Keller Company began operations on January 1, 2024, adopting the conventional retail inventory system. None of the company’s merchandise was marked down in 2024 and, because there was no beginning
Leonard Company began operations late in 2024 and adopted the conventional retail inventory method. Because there was no beginning inventory for 2024 and no markdowns during 2024, the ending
Amiras Corporation began operations on January 1, 2025, with a beginning inventory of $30,100 at cost and $50,000 at retail. The following information relates to 2025.Instructionsa. Assume Amiras
Connie Chung Corporation adopted the dollar-value LIFO retail inventory method on January 1, 2024. At that time the inventory had a cost of $54,000 and a retail price of $100,000. The following
John Olerud Ltd., a local retailing concern in the Bronx, New York, has decided to change from the conventional retail inventory method to the LIFO retail method starting on January 1, 2026. The
During 2024, YellowCard constructed a small manufacturing facility specifically to manufacture one particular accessory. YellowCard paid the construction contractor $5,000,000 cash (which was the
Durler Company purchased equipment on January 2, 2021, for $112,000. The equipment had an estimated useful life of 5 years with an estimated salvage value of $12,000. Durler uses straight-line
Schultz Department Store determines it will cost $100,000 to restore the area (considered a land improvement) surrounding one of its store parking lots, when the store is closed in 2 years. Schultz
Mickelson Inc. owns land that it purchased on January 1, 2005, for $450,000. At December 31, 2025, its current value is $770,000 as determined by appraisal. At what amount should Mickelson report
Spitfire Company was incorporated on January 2, 2025, but was unable to begin manufacturing activities until July 1, 2025, because new factory facilities were not completed until that date.The Land
Grieg Landscaping began construction of a new plant on December 1, 2025. On this date, the company purchased a parcel of land for $139,000 in cash. In addition, it paid $2,000 in surveying costs and
On January 1, 2025, Blair Corporation purchased for $500,000 a tract of land (site number 101) with a building. Blair paid a real estate broker’s commission of $36,000, legal fees of $6,000, and
Laserwords Inc. is a book distributor that had been operating in its original facility since 1995. The increase in certification programs and continuing education requirements in several professions
Klamath Company, a manufacturer of ballet shoes, is experiencing a period of sustained growth. In an effort to expand its production capacity to meet the increased demand for its product, the company
Harrisburg Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $5,000,000 on January 1, 2025. Harrisburg expected to complete
On December 31, 2024, Main Inc. borrowed $3,000,000 at 12% payable annually to finance the construction of a new building. In 2025, the company made the following expenditures related to this
Calaf’s Drillers erects and places into service an off-shore oil platform on January 1, 2025, at a cost of $10,000,000. Calaf estimates it will cost $1,000,000 to dismantle and remove the platform
Worf Co. both purchases and constructs various equipment it uses in its operations. The following items for two different types of equipment were recorded in random order during the calendar year
The following transactions occurred during 2025. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage
Kelly Clarkson Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2025. The terms of acquisition for each truck
A depreciation schedule for semi-trucks of Ichiro Manufacturing Company was requested by your auditor soon after December 31, 2026, showing the additions, retirements, depreciation, and other data
Oil Products Company purchases an oil tanker depot on January 1, 2025, at a cost of $600,000. Oil Products expects to operate the depot for 10 years, at which time it is legally required to dismantle
On July 31, 2025, Amsterdam Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction began immediately and was completed on November 1, 2025. To
On December 31, 2025, Tritt Inc. has a machine with a book value of $940,000. The original cost and related accumulated depreciation at this date are as follows.Depreciation is computed at $60,000
The following three situations involve the capitalization of interest. Situation I: On January 1, 2025, Ohno, Inc. signed a fixed-price contract to have Builder Associates construct a major plant
Flint Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2025, to expand its production capacity to meet customers’ demand for its product. Flint issues an
Alladin Company purchased Machine #201 on May 1, 2025. The following information relating to Machine #201 was gathered at the end of May.It is expected that the machine could be used for 10 years,
Cardinals Corporation purchased a computer on December 31, 2024, for $105,000, paying $30,000 down and agreeing to pay the balance in five equal installments of $15,000 payable each December 31
Ottawa Corporation owns machinery that cost $20,000 when purchased on July 1, 2021. Depreciation has been recorded at a rate of $2,400 per year, resulting in a balance in accumulated depreciation of
Crowe Company purchased a heavy-duty truck on July 1, 2021, for $30,000. It was estimated that it would have a useful life of 10 years and then would have a trade-in value of $6,000. The company uses
Burnitz Manufacturing Company was organized on January 1, 2025. During 2025, it has used in its internal reports the straight-line method of depreciating its plant assets.On November 8, you are
On April 1, 2025, Estefan Company received a condemnation award of $430,000 cash as compensation for the forced sale of the company’s land and building, which stood in the path of a new state
The cost of equipment purchased by Charleston, Inc., on June 1, 2025, is $89,000. It is estimated that the machine will have a $5,000 salvage value at the end of its service life. Its service life is
Fernandez Corporation purchased a truck at the beginning of 2025 for $50,000. The truck is estimated to have a salvage value of $2,000 and a useful life of 160,000 miles. It was driven 23,000 miles
The following data relate to the Machinery account of Eshkol, Inc. at December 31, 2025.*In the year an asset is purchased, Eshkol, Inc. does not record any depreciation expense on the asset. In the
Lockard Company purchased machinery on January 1, 2025, for $80,000. The machinery is estimated to have a salvage value of $8,000 after a useful life of 8 years. (a) Compute 2025 depreciation
Judds Company purchased a new plant asset on April 1, 2025, at a cost of $711,000. It was estimated to have a service life of 20 years and a salvage value of $60,000. Judds’ accounting period is
Electroboy Enterprises, Inc. operates several stores throughout the western United States. As part of an operational and financial reporting review in a response to a downturn in its markets, the
The following are three different and unrelated situations involving depreciation accounting. Answer the question(s) at the end of each situation.Situation I: Recently, Broderick Company
Muggsy Bogues Company purchased equipment for $212,000 on October 1, 2025. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $12,000. Estimated production
Jon Seceda Furnace Corp. purchased machinery for $315,000 on May 1, 2025. It is estimated that it will have a useful life of 10 years, salvage value of $15,000, production of 240,000 units, and
Bronson Paper Products purchased 10,000 acres of forested timberland in March 2025. The company paid $1,700 per acre for this land, which was above the $800 per acre most farmers were paying for
As a cost accountant for San Francisco Cannery, you have been approached by Phil Perriman, canning room supervisor, about the 2025 costs charged to his department. In particular, he is concerned
Darby Sporting Goods Inc. has been experiencing growth in the demand for its products over the last several years. The last two Olympic Games greatly increased the popularity of basketball around the
Cominsky Company purchased a machine on July 1, 2026, for $28,000. Cominsky paid $200 in title fees and county property tax of $125 on the machine. In addition, Cominsky paid $500 shipping charges
Conan O’Brien Logging and Lumber Company owns 3,000 acres of timberland on the north side of Mount Leno, which was purchased in 2013 at a cost of $550 per acre. In 2025, O’Brien began selectively
George Zidek Corporation bought a machine on June 1, 2023, for $31,000, f.o.b. the place of manufacture. Freight to the point where it was set up was $200, and $500 was expended to install it. The
Workman Company purchased a machine on January 2, 2025, for $800,000. The machine has an estimated useful life of 5 years and a salvage value of $100,000. Depreciation was computed by the 150%
Holt Company purchased a computer for $8,000 on January 1, 2024. Straight line depreciation is used, based on a 5-year life and a $1,000 salvage value. In 2026, the estimates are revised. Holt now
Silverman Company purchased machinery for $162,000 on January 1, 2025. It is estimated that the machinery will have a useful life of 20 years, salvage value of $15,000, production of 84,000 units,
Roland Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2024 for $10,000,000 and had an estimated useful life of 8 years with no salvage
Bill Jovi is reviewing the cash accounting for Nottleman, Inc., a local mailing service. Jovi’s review will focus on the petty cash account and the bank reconciliation for the month ended May 31,
Briefly describe the process for recording bad debt expense under the allowance method.
In each of the following independent cases, the company closes its books on December 31.1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2025. The bonds pay interest on September 1 and March 1.
Venezuela Co. is building a new hockey arena at a cost of $2,500,000. It received a downpayment of $500,000 from local businesses to support the project, and now needs to borrow $2,000,000 to
On January 1, 2025, Nichols Company issued for $1,085,800 its 20-year, 11% bonds that have a maturity value of $1,000,000 and pay interest semiannually on January 1 and July 1. The following are
Presented below are two independent situations.1. On January 1, 2025, Simon Company issued $200,000 of 9%, 10-year bonds at par. Interest is payable quarterly on April 1, July 1, October 1, and
The Colson Company issued $300,000 of 10% bonds on January 1, 2025. The bonds are due January 1, 2030, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare
Presented below are various account balances of K.D. Lang Inc.a. Unamortized premium on bonds payable, of which $3,000 will be amortized during the next year.b. Bank loans payable of a winery, due
Good-Deal Inc. developed a new sales gimmick to help sell its inventory of new automobiles. Because many new car buyers need financing, Good-Deal offered a low downpayment and low car payments for
The following information is taken from the 2025 annual report of Bugant, Inc. Bugant’s fiscal year ends December 31 of each year. Bugant’s December 31, 2025, balance sheet is as follows.Note X:
On March 1, 2025, Sealy Company sold its 5-year, $1,000 face value, 9% bonds dated March 1, 2025, at an effective annual interest rate (yield) of 11%. Interest is payable semiannually, and the first
Crocker Corp. owes D. Yaeger Corp. a 10-year, 10% note in the amount of $330,000 plus $33,000 of accrued interest. The note is due today, December 31, 2025. Because Crocker Corp. is in financial
On April 1, 2025, Seminole Company sold 15,000 of its 11%, 15-year, $1,000 face value bonds at 97. Interest payment dates are April 1 and October 1, and the company uses the straight-line method of
The following are four independent situations.a. On March 1, 2026, Wilke Co. issued at 103 plus accrued interest $4,000,000, 9% bonds. The bonds are dated January 1, 2026, and pay interest
On June 30, 2025, Mischa Auer Company issued $4,000,000 face value of 13%, 20-year bonds at $4,300,920, a yield of 12%. Auer uses the effective-interest method to amortize bond premium or discount.
Sabonis Cosmetics Co. purchased machinery on December 31, 2024, paying $50,000 down and agreeing to pay the balance in four equal installments of $40,000 payable each December 31. An assumed interest
On January 1, 2025, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds were issued for $559,224, and pay interest each July 1 and January 1. JWS uses the effectiveinterest
Holiday Company issued its 9%, 25-year mortgage bonds in the principal amount of $3,000,000 on January 2, 2011, at a discount of $150,000, which it proceeded to amortize by charges to expense over
On December 31, 2025, Faital Company acquired a computer from Plato Corporation by issuing a $600,000 zero-interest-bearing note, payable in full on December 31, 2029. Faital Company’s credit
Celine Dion Company issued $600,000 of 10%, 20-year bonds on January 1, 2025, at 102. Interest is payable semiannually on July 1 and January 1. Dion Company uses the straight-line method of
Devon Harris Company sells 10% bonds having a maturity value of $2,000,000 for $1,855,816. The bonds are dated January 1, 2025, and mature January 1, 2030. Interest is payable annually on January

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