Questions and Answers of Intermediate Accounting 11th

The following is a portion of the Statement of Shareholders’ Equity from Cisco Systems’ July 25, 2020 annual report.Required:1. How does Cisco account for its share buybacks? Treasury stock or
Bricker Graphics is a privately held company specializing in package labels. Representatives of the firm have just returned from Switzerland, where a Swiss firm is manufacturing a custom-made high
Ozark Distributing Company is primarily engaged in the wholesale distribution of consumer products in the Ozark Mountain regions. The following disclosure note appeared in the company’s 2024 annual
During its first year of operations, Cupola Fan Corporation issued 30,000 of $1 par Class B shares for $385,000 on June 30, 2024. Share issue costs were $1,500. One year from the issue date (July 1,
The shareholders’ equity of Wang Industries includes the data shown below. During 2025, cash dividends of $150 million were declared. Dividends were not declared in 2023 or 2024.Required:Determine
Following is a recent Target press release: MINNEAPOLIS, March 12, 2020 /PRNewswire/—The board of directors of Target Corporation (NYSE:TGT) has declared a quarterly dividend of 66 cents per common
Borner Communications’ articles of incorporation authorized the issuance of 130 million common shares. The transactions described below effected changes in Borner’s outstanding shares. Prior to
Indicate by letter whether each of the transactions listed below increases (I), decreases (D), or has no effect (N) on retained earnings. Assume the shareholders’ equity of the transacting company
The shareholders’ equity of MLS Enterprises includes $200 million of no par common stock and $400 million of 6% cumulative preferred stock. The board of directors of MLS declared cash dividends of
In 2024, Borland Semiconductors entered into the transactions described below. In 2021, Borland had issued 170 million shares of its $1 par common stock at $34 per share.Required:Assuming that
Part AIn late 2023, the Nicklaus Corporation was formed. The corporate charter authorizes the issuance of 5,000,000 shares of common stock carrying a $1 par value, and 1,000,000 shares of $5 par
In 2024, Western Transport Company entered into the treasury stock transactions described below. In 2022, Western Transport had issued 140 million shares of its $1 par common stock at $17 per
Douglas McDonald Company’s balance sheet included the following shareholders’ equity accounts at December 31, 2023:On March 16, 2024, a 4% common stock dividend was declared and distributed. The
The balance sheet of Consolidated Paper, Inc. included the following shareholders’ equity accounts at December 31, 2023:During 2024, several events and transactions affected the retained earnings
Comparative balance sheets for Softech Canvas Goods for 2024 and 2023 are shown below. Softech pays no dividends and instead reinvests all earnings for future growth.Required:1. Determine the return
Indicate by letter whether each of the terms or phrases listed below is more associated with financial statements prepared in accordance with U.S. GAAP (U) or International Financial Reporting
On January 1, 2024, the general ledger of Freedom Fireworks includes the following account balances:During January 2024, the following transactions occur:The following information is available on
Like the rest of the airline industry, American Airlines was dealt a cruel blow in 2020 by the COVID-19 pandemic. Struggling to cope with plummeting demand for air travel and the resulting financial
In keeping with a modernization of corporate statutes in its home state, Miller-Li Corporation decided in 2024 to discontinue accounting for reacquired shares as treasury stock. Instead, shares
Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2024. On January 1, 2024, the corporation had outstanding 105 million common shares,
The shareholders’ equity of ILP Industries includes the items shown below. The board of directors of ILP declared cash dividends of $8 million, $20 million, and $150 million in its first three
The shareholders’ equity of Core Technologies Company on June 30, 2023, included the following:On April 1, 2024, the board of directors of Core Technologies declared a 10% stock dividend on common
Each of the four independent situations below describes a sales-type lease in which annual lease payments of $10,000 are payable at the beginning of each year. Each is a finance lease for the lessee.
Zekany Corporation would have had identical income before taxes on both its income tax returns and income statements for the years 2024 through 2027 except for differences in depreciation on an
Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the
Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100%
In 2024, DFS Medical Supply collected rent revenue for 2025 tenant occupancy. For income tax reporting, the rent is taxed when collected. For financial statement reporting, the rent is recorded as
Lance Lawn Services reports warranty expense by estimating the amount that eventually will be paid to satisfy warranties on its product sales. For tax purposes, the expense is deducted when the
LossCo reported a net operating loss of $25 million for financial reporting and tax purposes. The enacted tax rate] is 25%. Assume that LossCo does not qualify as a type of company that is allowed to
The information that follows pertains to Esther Food Products: a. At December 31, 2024, temporary differences were associated with the following future taxable (deductible) amounts:b. No temporary
Sachs Brands’s defined benefit pension plan specifies annual retirement benefits equal to 1.6% × service years × final year’s salary, payable at the end of each year. Angela Davenport was hired
On August 31, 2021, Chickasaw Industries issued $25 million of its 30-year, 5% convertible bonds dated August 31, priced to yield 6%. The bonds are convertible at the option of the investors into
Your investment department has researched possible investments in corporate debt securities. Among the available investments are the following $100 million bond issues, each dated January 1, 2024.
On January 1, 2024, Baddour, Inc., issued 10%, 12-year bonds with a face amount of $160 million.∙ The bonds were priced at $140 million to yield 12%.∙ Interest is paid semiannually on June 30 and
Target Corporation prepares its financial statements according to U.S. GAAP. Target’s financial statements and disclosure notes for the year ended February 1, 2020, are available in Connect. This
The following inventory transactions took place near December 31, 2024, the end of the Rasul Company’s fiscal year-end:1. On December 27, 2024, inventory costing $2,000 was shipped to the Milat
In 2023, the Moncrief Company purchased from Jim Lester the right to be the sole distributor in the western states of a product called Zelenex. In payment, Moncrief agreed to pay Lester 20% of the
Air France–KLM (AF), a Franco-Dutch company, prepares its financial statements according to International Financial Reporting Standards. AF’s financial statements and disclosure notes for the
Autumn Company began the month of October with inventory of $15,000. The following inventory transactions occurred during the month:a. The company purchased inventory on account for $22,000 on
The Cloud Company employs a perpetual inventory system, and the Sky Corporation uses a periodic system. Describe the differences between the two systems in accounting for the following
Refer to the situation described in BE 8–2. Prepare the journal entries to record these transactions using a periodic inventory system.Data from in BE 8-2A company uses a perpetual inventory
Income statement and balance sheet information abstracted from a recent annual report of Wolverine World Wide, Inc., appears below:The significant accounting policies note disclosure contained the
The June 30, 2024, year-end trial balance for Askew Company contained the following information:In addition, you determine that the June 30, 2024, inventory balance is $40,000.Required:Calculate the
Rachet Corporation is a wholesale distributor of truck replacement parts. Initial amounts taken from Rachet’s records are as follows:Additional Information:1. Parts held by Rachet on consignment
The Boxcar Company shipped inventory to Depot Corporation on December 28, 2024. Depot received the shipment on January 3, 2025. December 31 is the fiscal year-end for both companies. The inventory
On April 1, 2024, Titan Corporation purchases office equipment for $50,000. For tax reporting, the company uses MACRS and classifies the equipment as five-year personal property. In 2024, this type
Highsmith Rental Company purchased an apartment building early in 2024. There are 20 apartments in the building and each is furnished with major kitchen appliances. The company has decided to use the
Refer to the situation described in BE 11–14. Assume that instead of changing the useful life and residual value, in 2024 the company switched to the double-declining-balance depreciation method.
On January 2, 2024, the Jackson Company purchased equipment to be used in its manufacturing process. The equipment has an estimated life of eight years and an estimated residual value of $30,625. The
Refer to the situation described in BE 11–14. Assume that 2022 depreciation was incorrectly recorded as $32,000. This error was discovered in 2024. (1) Record the journal entry needed in 2024
On April 17, 2024, the Loadstone Mining Company purchased the rights to a copper mine. The purchase price plus additional costs necessary to prepare the mine for extraction of the copper totaled
Collison and Ryder Company (C&R) has been experiencing declining market conditions for its sportswear division. Management decided to test the assets of the division for possible impairment. The
At the beginning of 2024, Terra Lumber Company purchased a timber tract from Boise Cantor for $3,200,000. After the timber is cleared, the land will have a residual value of $600,000. Roads to enable
Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,000,000 in 2024 for the mining site and spent an additional $600,000 to prepare the mine for extraction of the
Janes Company provided the following information on intangible assets:a. A patent was purchased from the Lou Company for $700,000 on January 1, 2022. Janes estimated the remaining useful life of the
WebHelper Inc. acquired 100% of the outstanding stock of Silicon Chips Corporation (SCC) for $45 million, of which $15 million was allocated to goodwill. At the end of the current fiscal year, an
Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the patent on a straight-line basis since 2020, when it was acquired at a cost of $9 million at
Saint John Corporation prepares its financial statements according to IFRS. On June 30, 2024, the company purchased a franchise for $1,200,000. The franchise is expected to have a 10-year useful life
Wardell Company purchased a minicomputer on January 1, 2022, at a cost of $40,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated
Alteran Corporation purchased office equipment for $1.5 million at the beginning of 2022. The equipment is being depreciated over a 10-year life using the double-declining-balance method. The
For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2021 for $2,560,000. Its useful life was
In 2024, internal auditors discovered that PKE Displays, Inc., had debited an expense account for the $350,000 cost of equipment purchased on January 1, 2021. The equipment’s life was expected to
Refer to the situation described in E 11–27.Data from in E 11-27Chadwick Enterprises, Inc., operates several restaurants throughout the Midwest. Three of its restaurants located in the center of a
Collinsworth LTD, a U.K. company, prepares its financial statements according to International Financial Reporting Standards. Late in its 2024 fiscal year, a significant adverse change in business
In 2022, Alliant Corporation acquired Centerpoint Inc. for $300 million, of which $50 million was allocated to goodwill. At the end of 2024, management has provided the following information for a
On May 28, 2024, Pesky Corporation acquired all of the outstanding common stock of Harman, Inc., for $420 million. The fair value of Harman’s identifiable tangible and intangible assets totaled
On September 30, 2022, Leeds LTD. acquired a patent in conjunction with the purchase of another company. The patent, valued at $6 million, was estimated to have a 10-year life and no residual value.
Cadillac Construction Company uses the retirement method to determine depreciation on its small tools. During 2022, the first year of the company’s operations, tools were purchased at a cost of
On January 1, 2024, the general ledger of TNT Fireworks included the following account balances:During January 2024, the following transactions occurred:Required:1. Record each of the transactions
On January 2, 2024, David Corporation purchased a patent for $500,000. The remaining legal life is 12 years, but the company estimated that the patent will be useful only for eight years. In January
On January 1, 2024, the general ledger of Parts Unlimited included the following account balances:From January 1 to December 31, the following summary transactions occurred:In addition, Parts
Lance Brothers Enterprises acquired $720,000 of 3% bonds, dated July 1, on July 1, 2024, as a long-term investment. Management has the positive intent and ability to hold the bonds until maturity.
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $80 million of 8% bonds, dated January 1, on January 1, 2024. Management has the positive intent and ability to hold the bonds
On January 1, 2024, Instaform, Inc., issued 10% bonds with a face amount of $50 million, dated January 1.∙ The bonds mature in 2043 (20 years).∙ The market yield for bonds of similar risk and
The following appeared in the October 15, 2024, issue of the Financial Smarts Journal:Required:1 Based on the information provided in the announcement, indicate whether the market rate of interest is
Target Corporation prepares its financial statements according to U.S. GAAP. Target’s financial statements and disclosure notes for the year ended February 1, 2020, are available in Connect. This
Determine the price of a $1 million bond issue under each of the following independent assumption. 1. 2. 3. 4. 5. Maturity 10 years 10 years 10 years 20 years 20 years Interest
Air France–KLM (AF), a Franco-Dutch company, prepares its financial statements according to International Financial Reporting Standards. AF’s financial statements and disclosure notes for the
On January 1, 2024, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear
On January 1, 2024, Reyes Recreational Products issued $100,000, 9%, four-year bonds. Interest is paid semiannually on June 30 and December 31. The bonds were issued at $96,768 to yield an annual
The Bradford Company issued 10% bonds, dated January 1, with a face amount of $80 million on January 1, 2024.∙ The bonds mature on December 31, 2033 (10 years).∙ For bonds of similar risk and
The Liu Group, Inc., manufactures various kinds of hydraulic pumps. In June 2024, the company signed a fouryear purchase agreement with one of its main parts suppliers, Hydraulics, Inc. Over the
What information is contained in a bond indenture? What purpose does it serve?
AGF Foods Company is a large, primarily domestic, consumer foods company involved in the manufacture, distribution, and sale of a variety of food products. Industry averages are derived from Troy’s
The Bradford Company sold the entire bond issue described in the previous exercise to Saxton-Bose Corporation.Required:1. Prepare the journal entry to record the purchase of the bonds by Saxton-Bose
On February 1, 2024, Sanyal Motor Products issued 9% bonds, dated February 1, with a face amount of $80 million.∙ The bonds mature on January 31, 2028 (four years).∙ The market yield for bonds of
On January 1, 2024, Brandon Electronics issued $85 million of 11.5% bonds, dated January 1. The market yield for bonds of maturity issued by similar firms in terms of riskiness is 12.25%. How can
On January 1, a company issued 7%, 15-year bonds with a face amount of $90 million for $82,218,695 to yield 8%. Interest is paid semiannually. What was interest expense at the effective interest rate
Myriad Solutions, Inc., issued 10% bonds, dated January 1, with a face amount of $320 million on January 1, 2024, for $283,294,720.∙ The bonds mature on December 31, 2033 (10 years).∙ For bonds
On April 1, 2024, Western Communications, Inc., issued 12% bonds, dated March 1, 2024, with face amount of $30 million.∙ The bonds sold for $29.3 million and mature on February 28, 2027.∙
As a recently hired loan officer for USA Bank, your job description includes evaluating and recommending approval of commercial, real estate, or credit loans. USA has a policy of having its new hires
On January 1, a company issued 3%, 20-year bonds with a face amount of $80 million for $69,057,776 to yield 4%. Interest is paid semiannually. What was the interest expense at the effective interest
The Gonzalez Group issued $900,000 of 13% bonds on June 30, 2024, for $967,707.∙ The bonds were dated on June 30 and mature on June 30, 2044 (20 years).∙ The market yield for bonds of similar
McWherter Instruments sold $400 million of 8% bonds, dated January 1, on January 1, 2024.∙ The bonds mature on December 31, 2043 (20 years).∙ For bonds of similar risk and maturity, the market
A zero-coupon bond pays no interest. Explain.
Universal Foods issued 10% bonds, dated January 1, with a face amount of $150 million on January 1, 2024.∙ The bonds mature on December 31, 2038 (15 years).∙ The market rate of interest for
On January 1, a company issued 3%, 20-year bonds with a face amount of $80 million for $69,057,776 to yield 4%. Interest is paid semiannually. What was the straight-line interest expense on the
Being fairly new to the accounting team, you are eager to make a good impression in your meeting with the CFO. The meeting concerns the way you have proposed accounting for an upcoming issue of
The fiscal year ends December 31 for Lake Hamilton Development. To provide funding for its Moonlight Bay project, LHD issued 5% bonds with a face amount of $500,000 on November 1, 2024. The bonds
Some financial instruments can be considered compound instruments in that they have features of both debt and shareholders’ equity. The most common example encountered in practice is convertible

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