Questions and Answers of Intermediate Accounting 11th

On January 1, a company purchased 3%, 20-year corporate bonds for $69,057,776 as an investment. The bonds have a face amount of $80 million and are priced to yield 4%. Interest is paid semiannually.
Universal Foods sold the entire bond issue described in the previous exercise to Wang Communications.Required:1. Prepare the journal entry to record the purchase of the bonds by Wang Communications
On January 1, 2024, Rodriguez Window and Pane issued $18 million of 10-year, zero-coupon bonds for $5,795,518.Required:1. Prepare the journal entry to record the bond issue.2. Determine the effective
On January 1, 2024, Nantucket Ferry borrowed $14,000,000 cash from Bank One and issued a four-year, $14,000,000, 6% note. Interest was payable annually on December 31. Prepare the journal entries for
When PaAmerican Food Services, Inc., acquired a packaging machine from Barton and Barton Corporation.∙ Barton and Barton completed construction of the machine on January 1, 2024.∙ In payment for
National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 on January 1, 2024.∙ The bonds mature on December 31, 2027 (4 years).∙ For bonds of similar risk and
When companies offer new debt security issues, they publicize the offerings in the financial press and on Internet sites. Assume the following were among the debt offerings reported in December
At January 1, 2024, Brant Cargo acquired equipment by issuing a five-year, $150,000 (payable at maturity), 4% note. The market rate of interest for notes of similar risk is 10%.Required:1. Prepare
On March 1, 2024, Tanaka Lighting issued 14% bonds, dated March 1, with a face amount of $300,000.∙ The bonds sold for $294,000 and mature on February 28, 2044 (20 years).∙ Interest is paid
On February 1, 2024, Strauss-Lombardi issued 9% bonds, dated February 1, with a face amount of $800,000.∙ The bonds sold for $731,364 and mature on January 31, 2044 (20 years).∙ The market yield
At the beginning of 2024, VHF Industries acquired a machine with a fair value of $6,074,700 by issuing a four year, noninterest-bearing note in the face amount of $8 million. The note is payable in
Braxton Technologies, Inc., constructed a conveyor for A&G Warehousers that was completed and ready for use on January 1, 2024.∙ A&G paid for the conveyor by issuing a $100,000, four-year
At the end of 2023, Majors Furniture Company failed to accrue $61,000 of interest expense that accrued during the last five months of 2023 on bonds payable. The bonds mature in 2037. The discount on
Hoffman Corporation issued $60 million of 5%, 20-year bonds at 102. Each of the 60,000 bonds was issued with 10 detachable stock warrants, each of which entitled the bondholder to purchase, for $20,
Federal Semiconductors issued 11% bonds, dated January 1, with a face amount of $800 million on January 1, 2024.∙ The bonds sold for $739,813,200 and mature on December 31, 2043 (20 years).∙ For
The long-term liability section of Twin Digital Corporation’s balance sheet as of December 31, 2023, included 12% bonds having a face amount of $20 million and a remaining discount of $1 million.
AI Tool and Dye issued 8% bonds with a face amount of $160 million on January 1, 2024. The bonds sold forv$150 million. For bonds of similar risk and maturity the market yield was 9%. Upon issuance,
Cupola Fan Corporation issued 10%, $400,000, 10-year bonds for $385,000 on June 30, 2024.∙ Debt issue costs were $1,500.∙ Interest is paid semiannually on December 31 and June 30.∙ One year
Bradley-Link’s December 31, 2024, balance sheet included the following items:On January 3, 2025, when Bradley-Link’s common stock had a market price of $32 per share, Bradley-Link called the
Refer to the situation described in P 14–16.Data from in P 14-16Cupola Fan Corporation issued 10%, $400,000, 10-year bonds for $385,000 on June 30, 2024.∙ Debt issue costs were $1,500.∙
Nakano Food Products, Inc., acquired a packaging machine from Lawrence Specialists Corporation.∙ Lawrence completed construction of the machine on January 1, 2022.∙ In payment for the machine
Amber Mining and Milling, Inc., contracted with Truax Corporation to have constructed a custom-made lathe.∙ The machine was completed and ready for use on January 1, 2024.∙ Amber paid for the
The long-term liability section of Eastern Post Corporation’s balance sheet as of December 31, 2023, included 10% bonds having a face amount of $40 million and a remaining premium of $6 million. On
Refer to the situation described in E 14–17.Data from in E14-17Amber Mining and Milling, Inc., contracted with Truax Corporation to have constructed a custom-made lathe.∙ The machine was
The following transactions relate to bond investments of Livermore Laboratories. The company’s fiscal year ends on December 31. Livermore uses the straight-line method to determine
Appling Enterprises issued 8% bonds with a face amount of $400,000 on January 1, 2024.∙ The bonds sold for $331,364 and mature in 2043 (20 years).∙ For bonds of similar risk and maturity the
FinanceCo lent $8 million to Corbin Construction on January 1, 2024, to construct a playground. Corbin signed a three-year, 6% installment note to be paid in three equal payments at the end of each
American Food Services, Inc., acquired a packaging machine from Barton and Barton Corporation.∙ Barton and Barton completed construction of the machine on January 1, 2024.∙ In payment for the $4
On January 1, 2024, NFB Visual Aids issued $800,000 of its 20-year, 8% bonds.∙ The bonds were priced to yield 10%.∙ Interest is payable semiannually on June 30 and December 31.∙ NFB Visual Aids
LCD Industries purchased a supply of electronic components from Entel Corporation on November 1, 2024. In payment for the $24 million purchase, LCD issued a 1-year installment note to be paid in
The balance sheet of River Electronics Corporation as of December 31, 2023, included 12.25% bonds having a face amount of $90 million. The bonds had been issued in 2016 and had a remaining discount
On March 1, 2024, Baddour, Inc., issued 10% bonds, dated January 1, with a face amount of $160 million.∙ The bonds were priced at $140 million (plus accrued interest) to yield 12%.∙ The price if
On January 1, 2024, Gless Textiles issued $12 million of 9%, 10-year convertible bonds at 101.∙ The bonds pay interest on June 30 and December 31.∙ Each $1,000 bond is convertible into 40 shares
At January 1, 2024, Rothschild Chair Company, Inc., was indebted to First Lincoln Bank under a $20 million, 10% unsecured note. The note was signed January 1, 2021, and was due December 31, 2027.
At January 1, 2024, Mahmoud Industries, Inc., owed Second BancCorp $12 million under a 10% note due December 31, 2026. Interest was paid last on December 31, 2022. Mahmoud was experiencing severe
Refer to the situation described in E 14–24.Data from in 14-24On January 1, 2024, Gless Textiles issued $12 million of 9%, 10-year convertible bonds at 101.∙ The bonds pay interest on June 30 and
On January 1, 2024, Madison Products issued $40 million of 6%, 10-year convertible bonds at a net price of $40.8 million.∙ Madison recently issued similar, but nonconvertible, bonds at 99 (that is,
Refer to the situation described in E 14–26.Data from in E 14-26On January 1, 2024, Madison Products issued $40 million of 6%, 10-year convertible bonds at a net price of $40.8 million.∙ Madison
On August 1, 2024, Perez Communications issued $30 million of 10% nonconvertible bonds at 104.∙ The bonds are due on July 31, 2044.∙ Each $1,000 bond was issued with 20 detachable stock warrants,
Federal Semiconductors issued 11% bonds, dated January 1, with a face amount of $800 million on January 1, 2024.∙ The bonds sold for $739,813,200 and mature on December 31, 2043 (20 years).∙ For
On January 1, 2024, Rapid Airlines issued $200 million of its 8% bonds for $184 million.∙ The bonds were priced to yield 10%.∙ Interest is payable semiannually on June 30 and December 31.∙
On January 1, 2024, Essence Communications issued $800,000 of its 10-year, 8% bonds for $700,302.∙ The bonds were priced to yield 10%.∙ Interest is payable semiannually on June 30 and December
On March 1, 2024, Brown-Ferring Corporation issued $100 million of 12% bonds, dated January 1, 2024, for $99 million (plus accrued interest). The bonds mature on December 31, 2043, and pay interest
At January 1, 2024, Transit Developments owed First City Bank Group $600,000, under an 11% note with three years remaining to maturity.∙ Due to financial difficulties, Transit was unable to pay the
Hope Still, chief executive of Great Divide Technologies (GDT), a state-certified aircraft repair company, worked with her local bank to get a $210,000 loan under the Paycheck Protection Program in
On January 1, 2024, the general ledger of Freedom Fireworks includes the following account balances:During January 2024, the following transactions occurred:January 1 Borrowed $100,000 from Captive
Hope Still, chief executive of Great Divide Technologies (GDT), a state-certified aircraft repair company, worked with her local bank to get a $210,000 loan under the Paycheck Protection Program in
At January 1, 2024, NCI Industries, Inc., was indebted to First Federal Bank under a $240,000, 10% unsecured note.∙ The note was signed January 1, 2017, and was due December 31, 2025.∙ Annual
Van Rushing Hunting Goods’ fiscal year ends on December 31. At the end of the 2024 fiscal year, the company had notes payable of $12 million due on February 8, 2025. Rushing sold 2 million shares
Fleener Company is in the process of refinancing some long-term debt. Its fiscal year ends on December 31, 2024, and its financial statements will be issued on March 15, 2025. Under current IFRS, how
An annual report of Marriott International, Inc., contained a rather lengthy narrative entitled “Liquidity and Capital Resources.” The narrative noted that a revolving credit agreement
Das Medical introduced a new implant that carries a five-year warranty against manufacturer’s defects. Based on industry experience with similar product introductions, warranty costs are expected
Consider the information presented in E 13–11.Data from in E 13-11An annual report of Marriott International, Inc., contained a rather lengthy narrative entitled “Liquidity and Capital
Transit Airlines provides regional jet service in the Mid-South. The following is information on liabilities of Transit at December 31, 2024. Transit’s fiscal year ends on December 31. Its annual
Domestic Transfer and Storage is a large trucking company headquartered in the Midwest. Rapid expansion in recent years has been financed in large part by debt in a variety of forms. In preparing the
At December 31, 2024, Newman Engineering’s liabilities include the following:1. $10 million of 9% bonds were issued for $10 million on May 31, 2002. The bonds mature on May 31, 2032, but
Late in 2024, you and two other officers of Curbo Fabrications Corporation just returned from a meeting with officials of the City of Jackson. The meeting was unexpectedly favorable even though it
Cupola Awning Corporation introduced a new line of commercial awnings in 2024 that carry a two-year warranty against manufacturer’s defects. Based on their experience with previous product
“I see an all-nighter coming on,” Gayle grumbled. “Why did Mitch just now give us this assignment?” Your client, Western Manufacturing, is involved with several situations that possibly
Define a loss contingency. Provide three examples.
Outdoors R Us owns several membership-based campground resorts throughout the Southwest. The company sells campground sites to new members, usually during a get-acquainted visit and tour. The
At March 13, 2025, the Securities Exchange Commission is in the process of investigating a possible securities law violation by Now Chemical. The SEC has not yet proposed a penalty assessment.
The Manda Panda Company uses the allowance method to account for bad debts. At the beginning of 2024, the allowance account had a credit balance of $75,000. Credit sales for 2024 totaled $2,400,000
At April 1, 2025, the Food and Drug Administration is in the process of investigating allegations of false marketing claims by Hulkly Muscle Supplements. The FDA has not yet proposed a penalty
The following selected transactions relate to contingencies of Classical Tool Makers, Inc., which began operations in July 2024. Classical’s fiscal year ends on December 31. Financial statements
Name a loss contingency that almost always is accrued.
Indicate (by letter) the way each of the items listed below should be reported in a balance sheet at December 31, 2024. Item 1. Commercial paper 2. Noncommitted line of credit 3. Customer advances 4.
The following selected circumstances relate to pending lawsuits for Erismus, Inc. Erismus’s fiscal year ends on December 31. Financial statements are issued in March 2025. Erismus prepares its
Woodmier Lawn Products introduced a new line of commercial sprinklers in 2023 that carry a one-year warranty against manufacturer’s defects. Because this was the first product for which the company
The Commonwealth of Virginia filed suit in October 2022 against Northern Timber Corporation, seeking civil penalties and injunctive relief for violations of environmental laws regulating forest
DuPont Inc. provides chemical, plastic, and agricultural products and services to various consumer markets. The following excerpt is taken from the disclosure notes of DuPont’s 2019 annual
Lee Financial Services pays employees monthly. Payroll information is listed below for January 2024, the first month of Lee’s fiscal year. Assume that none of the employees exceeded any relevant
At the beginning of 2022, Metatec Inc. acquired Ellison Technology Corporation for $600 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also
Howarth Manufacturing Company purchased equipment on June 30, 2020, at a cost of $800,000. The residual value of the equipment was estimated to be $50,000 at the end of a five-year life. The
At a recent luncheon, you were seated next to Mr. Hopkins, the president of a local company that manufactures bicycle parts. He heard that you were a CPA and made the following comments to you: Why
On September 30, 2024, Athens Software began developing a software program to shield personal computers from malware and spyware. Technological feasibility was established on February 28, 2025, and
On May 1, 2024, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine in New Mexico for $10 million. Additional costs and purchases
On March 31, 2024, management of Quality Appliances committed to a plan to sell equipment. The equipment was available for immediate sale, and an active plan to locate a buyer was initiated. The
The adjusted trial balance of Pacific Scientific Corporation on December 31, 2024, the end of the company’s fiscal year, contained the following income statement items ($ in millions): sales
Melody Lane Music Company was started by John Ross early in 2024. Initial capital was acquired by issuing shares of common stock to various investors and obtaining a bank loan. The company operates a
The following is a partial trial balance for General Lighting Corporation as of December 31, 2024:Income tax expense has not yet been recorded. The income tax rate is 25% of income before income
Companies often voluntarily provide non-GAAP earnings when they announce annual or quarterly earnings. These numbers are controversial as they represent management’s view of permanent earnings. The
The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Corporation for the year ended December 31, 2024 ($ in thousands): sales revenue, $15,300; cost
Refer to the situation described in BE 4–7. Assume that the semiconductor segment was not sold during 2024 but was held for sale at year-end. The estimated fair value of the segment’s assets,
Refer to the situation described in E 4–20.Data from in E4-20Presented below is the 2024 income statement and comparative balance sheet information for Tiger Enterprises.Required:Prepare the cash
Refer to the facts described in BE 4–16. Show the DuPont framework’s calculation of the three components of the 2024 return on equity for Circuit TV and Appliance.Data from in BE 4-16The 2024
This exercise is based on the Peabody Toys, Inc., data from E 4–27.Data from in E 4-27The following condensed information was reported by Peabody Toys, Inc., for 2024 and 2023: Required:1.
Refer to the situation described in BE 5–4. Assume that the trip will cost $26,600. What interest rate, compounded annually, must be earned to accumulate enough to pay for the trip?Data from in BE
The Upward Investment Company manages a mutual fund composed mostly of speculative stocks. You recently saw an ad claiming that investments in the funds have been earning a rate of return of 21%.
Refer to the situation described in BE 5–8. Suppose the opportunity requires you to invest $13,200 today. What is the interest rate you would earn on this investment?Data from in BE 5-8You have an
You want to buy a nice road bike. You place $3,000 each year in an investment account that earns 8% compounded annually. How much will be in the account after (a) Two years(b) Three
Refer to the situation described in BE 5–12. How much will accumulate in three years by depositing $500 at the beginning of each of the next 12 quarters?Data from in BE 5-12You would like to
Compute the required annual payment in Question 5–13.Data from in Question 5-13Assume that you borrowed $500 from a friend and promised to repay the loan in five equal annual installments beginning
Refer to the situation described in BE 5–16. What amount did the company borrow, assuming that the first of the five annual $10,000 payments was not due for three years?Data from in BE 5-16A
Refer to the situation described in BE 5–16. What amount did the company borrow, assuming that the first $10,000 payment was due immediately?Data from in BE 5-16A company borrowed money from a
Complete the requirements of P 6–10, assuming that Westgate Construction’s contract with Santa Clara County does not qualify for revenue recognition over time.Data from in P 6-10In 2024, the
Brady Construction Company contracted to build an apartment complex for a price of $5,000,000. Construction began in 2024 and was completed in 2026. The following is a series of independent
This exercise is designed to offer examples of time value problems that cannot be solved using the time value tables at the book of the book. Instead, they can be solved using Excel or a financial
Complete the requirements of E 6–10, assuming that Rocky bases estimates of variable consideration on the expected value it expects to receive.Data from in E 6-10Rocky Guide Service provides guided
Assume the same facts as in BE 6–25. How much revenue will Saar recognize in 2024 under this arrangement if Saar reports under IFRS?Data from in BE 6-25Assume the same facts as in BE 6–24 except

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