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intermediate accounting 11th

Intermediate Accounting IFRS International Adaptation 5th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions

E12.18 (LO 2) (Environmental Liability) Bassinger Company purchases an oil tanker depot on January 1, 2025, at a cost of $600,000. Bassinger expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. It is
E12.17 (LO 2, 3) (Provisions and Contingencies) Presented below are three independent situations.1. During 2025, Maverick ASA became involved in a tax dispute with the government. Maverick’s attorneys have indicated that they believe it is probable that Maverick will lose this dispute. They also
E12.16 (LO 2) (Restructuring) On December 31, 2025, the board of Dolman Group decided to close one of its divisions. The same day a detailed plan for closing the division was agreed to by the board, and letters were sent to customers and employees affected by this closure.Instructionsa. What is a
E12.15 (LO 2) (Restructuring Issues) EADS Ltd. is involved in a restructuring related to its energy division. The company controller and CFO are considering the following costs to accrue as part of the restructuring. The costs are as follows (amounts in thousands).1. The company has a long-term
E12.14 (LO 2) (Premium Entries) No Doubt Company includes 1 coupon in each box of soap powder that it packs, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2025, No Doubt Company purchased 8,800 premiums at 80 cents each and sold 110,000 boxes of soap powder at $3.30 per box;
E12.13 (LO 2) (Warranties) Early in 2025, Sheryl Crow Equipment sold 500 Rollomatics at €6,000 each. During 2025, Crow spent €20,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.Instructionsa. Prepare 2025 entries for
E12.12 (LO 2) (Warranties) Soundgarden Ltd. sold 200 color laser copiers on July 10, 2025, for£4,000 apiece, together with a 1-year warranty. Maintenance on each copier during the warranty period is estimated to be £330.Instructions Prepare entries to record the sale of the copiers, the related
E12.11 (LO 1) (Payroll Tax Entries) Allison Hardware Company’s payroll for November 2025 is as follows: factory, €140,000; sales, €32,000; and administrative, €36,000. The Social Security rate is 8% on an employee’s wages. Income tax withheld amounts to €16,000 for factory, €7,000 for
E12.10 (LO 1) (Payroll Tax Entries) The payroll of Kee Ltd. for September 2025 is as follows(amounts in thousands): total payroll was ¥340,000; income taxes in the amount of ¥80,000 were withheld, as was ¥9,000 in union dues; and the current Social Security tax is 8% of an employee’s wages.The
E12.9 (LO 1) (Adjusting Entry for Sales Tax and VAT) Eastwood Ranchers sells a herd of cattle to Rozo Meat Packers for €30,000 and the related VAT. Rozo Meat Packers sells the beef to Wrangler Supermarkets for €40,000 and the related VAT. Wrangler Supermarkets sells this beef to customers
E12.8 (LO 1) (Adjusting Entry for Sales Tax and VAT) During the month of June, Danielle’s Boutique had cash sales of R$265,000 and credit sales of R$153,700, both of which include the 6% sales tax that must be remitted to the government by July 15.Instructionsa. Prepare the adjusting entry that
E12.7 (LO 1) (Compensated Absences) Use the same information as in E12.6, except that Matthewson SA has chosen (1) not to accrue paid sick leave until used and (2) to accrue vacation time at expected future rates of pay without discounting. The company used the following projected rates to accrue
E12.6 (LO 1) (Compensated Absences) Matthewson SA began operations on January 2, 2024. It employs nine individuals who work 8-hour days and are paid hourly. Each employee earns 10 paid vacation days and 6 paid sick days annually. Vacation days may be taken after January 15 of the year following the
E12.5 (LO 1) (Debt Classifications) Presented below are four different situations related to Mckee plc’s debt obligations. Mckee’s next financial reporting date is December 31, 2024. The financial statements are authorized for issuance on March 1, 2025.1. Mckee has a debt obligation maturing on
E12.4 (LO 1) (Refinancing of Short-Term Debt) The CFO for Yong Corporation is discussing with the company’s CEO issues related to the company’s short-term obligations. Presently, both the current ratio and the acid-test ratio for the company are quite low, and the CEO is wondering if any of
E12.3 (LO 1) (Refinancing of Short-Term Debt) On December 31, 2024, Alexander AG had€1,200,000 of short-term debt in the form of notes payable due February 2, 2025. On January 21, 2025,the company issued 25,000 ordinary shares for €36 per share, receiving €900,000 proceeds after brokerage
E12.2 (LO 1) (Accounts and Notes Payable) The following are selected 2025 transactions of Darby Corporation.Sept. 1 Purchased inventory from Orion Company on account for $50,000. Darby records purchases gross and uses a periodic inventory system.Oct. 1 Issued a $50,000, 12-month, 8% note to Orion
E12.1 (LO 1) (Statement of Financial Position Classification) Consider the following items.a. Accrued vacation pay. j. Premium offers outstanding.b. Income taxes payable. k. Accounts payable.c. Service-type warranties on appliance sales. l. Employee payroll deductions unremitted.d. Social Security
BE12.20 (LO 2) Luckert NV decided to cancel an existing property lease in one of its divisions, as its operations in this area were no longer profitable. Unfortunately, Luckert has a non-cancelable lease and cannot sublease the property. The present value of future lease payments under the lease is
BE12.19 (LO 2) Management at Eli plc has decided to close one of its plants. It will continue to operate the plant for approximately 1 year. It anticipates the following costs will be incurred as a result of this closing: (1) termination compensation costs, (2) marketing costs to rebrand the
BE12.18 (LO 2, 3) Cargo Company purchased land from Hazard Company for €20,000,000 on September 13, 2025. On October 31, 2025, it learned that the site was contaminated. As a result, Cargo sued Hazard for €4,000,000. Cargo’s attorneys believe that their odds of winning the case are
BE12.17 (LO 2) Wynn Company offers a set of building blocks to customers who send in three box tops from Wynn cereal, along with 50¢. The block sets cost Wynn $1.10 each to purchase and 60¢ each to mail to customers. During 2025, Wynn sold 1,200,000 boxes of cereal. The company expects 30% of the
BE12.16 (LO 2) Leppard AG sells DVD players. The company also offers its customers a 4-year warranty contract. Early in 2025, Leppard sold 20,000 warranty contracts at €99 each. The company spent€180,000 servicing warranties during 2025. Prepare Leppard’s journal entries for (a) the sale of
BE12.15 (LO 2) Streep Factory provides a 2-year warranty with one of its products which was first sold in 2025. Streep sold $1,000,000 of products subject to the warranty. Streep expects $125,000 of warranty costs over the next 2 years. In that year, Streep spent $70,000 servicing warranty claims.
BE12.14 (LO 2) 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 at the end of its useful life in 10 years, which it is legally obligated to do.
BE12.13 (LO 2, 3) Buchanan Company recently was sued by a competitor for patent infringement.Attorneys have determined that it is probable that Buchanan will lose the case and that a reasonable estimate of damages to be paid by Buchanan is $300,000. In light of this case, Buchanan is considering
BE12.12 (LO 2, 3) Scorcese A.Ş. is involved in a lawsuit at December 31, 2025. (a) Prepare the December 31 entry assuming it is probable that Scorcese will be liable for 900,000 as a result of this suit. (b) Prepare the December 31 entry, if any, assuming it is not probable that Scorcese will be
BE12.11 (LO 1) Mayaguez Ltd. provides its officers with bonuses based on net income. For 2024, the bonuses total £350,000 and are paid on February 15, 2025. Prepare Mayaguez’s December 31, 2024, adjusting entry and the February 15, 2025, entry.
BE12.10 (LO 1) Kasten SA provides paid vacations to its employees. At December 31, 2025, 30 employees have each earned 2 weeks of vacation time. The employees’ average salary is €700 per week. Prepare Kasten’s December 31, 2025, adjusting entry.
BE12.9 (LO 1) Lexington AG’s weekly payroll of €24,000 included Social Security taxes withheld of€1,920, income taxes withheld of €2,990, and insurance premiums withheld of €250. Prepare the journal entry to record Lexington’s payroll.
BE12.8 (LO 1) Henning plc sells its products to Len Taylor, a private individual, for €5,000. The sale is subject to a VAT of 15%. Prepare the journal entry to record the sale by Henning.
BE12.7 (LO 1) Dillons AS made credit sales of €30,000 which are subject to 6% VAT. The company also made cash sales which totaled €20,670 including the 6% VAT. (a) Prepare the entry to record Dillons’credit sales. (b) Prepare the entry to record Dillons’ cash sales.
BE12.6 (LO 1) Sport Pro Magazine sold 12,000 annual subscriptions on August 1, 2025, for €18 each.Prepare Sport Pro’s August 1, 2025, journal entry and the December 31, 2025, annual adjusting entry.
BE12.5 (LO 1) Herzog SE has a long-term debt with a maturity date of November 2, 2026. On October 10, 2024, it breaches a covenant related to this debt and the loan becomes due on demand. Herzog reaches an agreement with the lender on January 5, 2025, to provide a waiver of the breach. The
BE12.4 (LO 1) At December 31, 2024, Burr AG owes €500,000 on a note payable due February 15, 2025.(a) If Burr expects to refinance the obligation by issuing a long-term note on February 14 and using the proceeds to pay off the note due February 15, how much (if any) of the €500,000 should be
BE12.3 (LO 1) Takemoto Ltd. borrowed ¥60,000,000 on November 1, 2024, by signing a ¥61,350,000 3-month, zero-interest-bearing note. Prepare Takemoto’s November 1, 2024, entry; the December 31, 2024, annual adjusting entry; and the February 1, 2025, entry.
BE12.2 (LO 1) Upland Company borrowed $40,000 on November 1, 2024, by signing a $40,000, 9%, 3-month note. Prepare Upland’s November 1, 2024, entry; the December 31, 2024, annual adjusting entry;and the February 1, 2025, entry.
BE12.1 (LO 1) Roley SA uses a periodic inventory system and the gross method of accounting for purchase discounts. On July 1, Roley purchased €60,000 of inventory, terms 2/10, n/30, FOB shipping point.Roley paid freight costs of €1,200. On July 3, Roley returned damaged goods and received
33. When should liabilities for each of the following items be recorded on the books of an ordinary business?a. Acquisition of goods by purchase on credit.b. Onerous contract.c. Special bonus to employees.d. Warranty.e. Profit-sharing payment.
32. How does the acid-test ratio differ from the current ratio? How are they similar?
31. Within the current liabilities section, how do you believe the accounts should be listed? Defend your position.
30. What factors must be considered in determining whether to record a liability for pending litigation? For threatened litigation?
29. Should a liability be recorded for risk of loss due to lack of insurance coverage? Discuss.
28. When must a company recognize an environmental provision?
27. Define restructuring. What costs should not be accrued in a restructuring?
26. What is an onerous contract? Give two examples of an onerous contract.
25. How does an assurance-type warranty differ from a service-type warranty?
24. Grant plc has had a record-breaking year in terms of growth in sales and profitability. However, market research indicates that it will experience operating losses in two of its major businesses next year. The controller has proposed that the company record a provision for these future losses
23. Explain the accounting for an assurance-type warranty.
22. Explain the difference between a legal obligation and a constructive obligation.
21. How are the terms “probable” and “virtually certain” related to provisions and contingencies?
20. Distinguish between a current liability, such as accounts payable, and a provision.
19. Under what conditions should a provision be recorded?
18. Define a provision, and give three examples of a provision.
17. Explain the difference between a value-added tax and a sales tax.
16. Faith Battle operates a health-food store, and she has been the only employee. Her business is growing, and she is considering hiring some additional staff to help her in the store. Explain to her the various payroll deductions that she will have to account for, including their potential impact
15. What do the terms vested rights, accumulated rights, and nonaccumulated rights mean in relation to compensated absences?Explain their accounting significance.
14. Under what conditions must an employer accrue a liability for the cost of compensated absences?
13. What are compensated absences?
12. How does unearned revenue arise? Why can it be classified properly as a current liability? Give several examples of business activities that result in unearned revenues.
11. Discuss the accounting treatment or disclosure that should be accorded a declared but unpaid cash dividend; an accumulated but undeclared dividend on cumulative preference shares; and a share dividend distributable.
10. What evidence is necessary to demonstrate the ability to defer settlement of short-term debt?
9. Under what conditions should a short-term obligation be excluded from current liabilities?
8. How should a debt callable by the creditor be reported in the debtor’s financial statements?
7. Explain how to account for a zero-interest-bearing note payable.
6. How is present value related to the concept of a liability?
5. Leong Hock, a newly hired loan analyst, is examining the current liabilities of a company loan applicant. He observes that unearned revenues have declined in the current year compared to the prior year.Is this a positive indicator about the client’s liquidity? Explain.
4. How are current liabilities related to a company’s operating cycle?
3. Why is the liabilities section of the statement of financial position of primary significance to bankers?
2. Assume that your friend Hans Jensen, who is a music major, asks you to define and discuss the nature of a liability. Assist him by preparing a definition of a liability and by explaining to him what you believe are the elements or factors inherent in the concept of a liability.
1. Distinguish between a current liability and a non-current liability.
Case 2: Analysis of Goodwill As a new intern for the local branch office of a national brokerage firm, you are excited to get an assignment that allows you to use your accounting expertise. Your supervisor provides you with the spreadsheet below, which contains data for the most recent quarter for
Case 1: Merck and Johnson & Johnson Merck & Co., Inc. (USA) and Johnson & Johnson (USA) are two leading producers of healthcare products.Each has considerable assets and each expends considerable funds each year toward the development of new products. The development of a new healthcare product is
CA11.5 (LO 5) Ethics (Accounting for Research and Development Costs) Czeslaw Corporation’s research and development department has an idea for a project it believes will culminate in a new product that would be very profitable for the company. Because the project will be very expensive, the
CA11.4 (LO 5) Writing (Accounting for Research and Development Costs) Cuevas Co. is in the process of developing a revolutionary new product. A new division of the company was formed to develop, manufacture, and market this new product. As of year-end (December 31, 2025), the new product has not
CA11.3 (LO 1, 2) Writing (Accounting for Patents) On June 30, 2025, your client, Ferry plc, was granted two patents covering plastic cartons that it had been producing and marketing profitably for the past 3 years. One patent covers the manufacturing process, and the other covers the related
CA11.2 (LO 1, 2, 5) (Accounting for Pre-Opening Costs) After securing lease commitments from several major stores, Auer Shopping Center, Inc. was organized and built a shopping center in a growing suburb.The shopping center would have opened on schedule on January 1, 2025, if it had not been struck
CA11.1 (LO 1, 5) Writing (Development Costs) Dogwood Electronics has been working to develop a patented technology for backing up computer hard drives. Dogwood had the following activities related to this project.March 1 Dogwood incurred €10,000 in legal and processing fees to file and record a
P11.6 (LO 2, 3, 4) (Comprehensive Intangible Assets) Montana Matt’s Golf Ltd. was formed on July 1, 2024, when Matt Magilke purchased the Old Master Golf Company. Old Master provides video golf instruction at kiosks in shopping malls. Magilke plans to integrate the instructional business into his
P11.3 (LO 2) (Accounting for Franchise, Patents, and Trademark) Information concerning Sandro SA’s intangible assets is as follows.1. On January 1, 2025, Sandro signed an agreement to operate as a franchisee of Hsian Copy Service for an initial franchise fee of R$75,000. Of this amount, R$15,000
P11.2 (LO 2) (Accounting for Patents) Choo Laboratories holds a valuable patent (No. 758-6002-1A)on a precipitator that prevents certain types of air pollution. Choo does not manufacture or sell the products and processes it develops. Instead, it conducts research and develops products and
P11.1 (LO 2) Groupwork (Correct Intangible Assets Account) Reichenbach Co., organized in 2024, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2024 and 2025.Intangible Assets 7/1/24 8-year franchise; expiration
E11.17 (LO 5) (Accounting for R&D Costs) Martinez Company incurred the following costs during 2025 in connection with its research and development activities.Cost of equipment acquired that will have alternative uses in future R&D projects over the next 5 years (uses straight-line
E11.16 (LO 5) (Accounting for R&D Costs) Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2024, the company expends€325,000 on a research project, but by the end of 2024 it is impossible to determine whether any benefit
E11.15 (LO 3, 4) (Goodwill Impairment) The following is net asset information related to the Ting Division of Santana Ltd.Ting Division Net Assets As of December 31, 2025(in millions)Property, plant, and equipment (net) HK$2,600 Goodwill 200 Accounts receivable 200 Cash 60 Less: Notes payable
E11.14 (LO 4) (Copyright Impairment) The following information is related to a copyright owned by Botticelli Company at December 31, 2025.Cost $8,600,000 Carrying amount 4,300,000 Recoverable amount 3,400,000 Assume that Botticelli Company will continue to use this copyright in the future. As of
E11.13 (LO 3) (Accounting for Goodwill) On July 1, 2025, Brandon SE purchased Mills Company by paying €250,000 cash and issuing a €150,000 note payable. At July 1, 2025, the statement of financial position of Mills Company was as follows.Buildings (net) € 75,000 Equity €235,000 Equipment
E11.12 (LO 3) (Accounting for Goodwill) Fred Graf, owner of Graf Interiors, is negotiating for the purchase of Terrell Galleries. The following statement of financial position of Terrell is given in an abbreviated form.Terrell Galleries Statement of Financial Position As of December 31, 2025 Assets
E11.11 (LO 2) (Accounting for Patents) Yoon Industries has the following patents on its December 31, 2024, statement of financial position (amounts in thousands).Patent Item Initial Cost Date Acquired Useful Life at Date Acquired Patent A W40,800 3/1/21 17 years Patent B W15,000 7/1/22 10 years
E11.10 (LO 2) (Accounting for Patents) During 2024, Matsumura Ltd. spent ¥170,000 in research costs. As a result, a new product called the New Age Piano was patented. The patent was obtained on October 1, 2024, and had a legal life of 20 years and a useful life of 10 years. Legal costs of ¥24,000
E11.9 (LO 2, 5) (Accounting for Patents, Franchises, and R&D) Devon Harris Company has provided information on intangible assets as follows.A patent was purchased from Bradtke Company for $2,500,000 on January 1, 2024. Harris estimated the remaining useful life of the patent to be 10 years. The
E11.8 (LO 5) (Accounting for Organization Costs) Fontenot SA was organized in 2024 and began operations at the beginning of 2025. The company is involved in interior design consulting services. The following costs were incurred in 2025, prior to the start of operations.Attorney’s fees in
E11.7 (LO 2, 4) (Accounting for Trade Name) In early January 2024, Reymont Corporation applied for a trade name, incurring legal costs of $18,000. In January 2025, Reymont incurred $7,800 of legal fees in a successful defense of its trade name.Instructionsa. Compute 2024 amortization, 12/31/24 book
E11.6 (LO 2, 5) (Recording and Amortization of Intangibles) Powerglide plc, organized in 2024, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2025.1/2/25 Purchased patent (8-year life) £ 380,000 4/1/25
E11.5 (LO 2, 5) (Correct Intangible Assets Account) As the recently appointed auditor for Ng Ltd., you have been asked to examine selected accounts before the 6-month financial statements of June 30, 2025, are prepared. The controller for Ng mentions that only one account is kept for intangible
E11.4 (LO 2, 5) (Intangible Amortization) Presented below is selected information for Palmiero Company.1. Palmiero purchased a patent from Vania Co. for $1,500,000 on January 1, 2023. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2033. During 2025,
E11.3 (LO 1, 2) (Classification Issues—Intangibles) Langrova SpA has the following amounts reported in its general ledger at December 31, 2025.Organization costs €24,000 Trademarks 20,000 Bonds payable 35,000 Deposits with advertising agency for ads to promote goodwill of company 10,000 Excess
E11.2 (LO 1, 2) (Classification Issues—Intangibles) The following is selected account information related to Matt Perry Inc. as of December 21, 2025. All these accounts have debit balances.Cable television franchises Film contract rights Music copyrights Customer lists Research and development
E11.1 (LO 1, 2) (Classification Issues—Intangibles) The following is a list of items that could be included in the intangible assets section of the statement of financial position.1. Investment in an affiliate company.2. Timberland.3. Cost of engineering activity required to advance the design of
BE11.14 (LO 4) Sinise Industries acquired two copyrights during 2025. One copyright related to a textbook that was developed internally at a cost of €9,900. This textbook is estimated to have a useful life of 3 years from September 1, 2025, the date it was published. The second copyright (a

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