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intermediate accounting 11th
Intermediate Accounting IFRS International Adaptation 5th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions
E6.9 (LO 3) (Computing Bad Debts and Preparing Journal Entries) The trial balance before adjustment of Estefan Inc. shows the following balances.Dr. Cr.Accounts Receivable $80,000 Allowance for Doubtful Accounts 1,750 Sales Revenue $580,000 Instructions Give the entry for estimated bad debts
E6.8 (LO 3) (Recording Bad Debts) At the end of 2025, Sorter plc has accounts receivable of£900,000 and an allowance for doubtful accounts of £40,000. On January 16, 2026, Sorter determined that its receivable from Ordonez Orchards of £8,000 will not be collected, and management authorized its
E6.7 (LO 3) (Recording Bad Debts) Duncan SA reports the following financial information before adjustments.Dr. Cr.Accounts Receivable €100,000 Allowance for Doubtful Accounts € 2,000 Sales Revenue 900,000 Instructions Prepare the journal entry to record bad debt expense assuming Duncan
E6.6 (LO 2) (Recording Sales Transactions) Presented below is information from Lopez Computers.July 1 Sold R$30,000 of computers to Smallwood Company with terms 3/15, n/60. Lopez uses the gross method to record cash discounts.10 Lopez received payment from Smallwood for the full amount owed from
E6.5 (LO 2) (Recording Sales Gross and Net) On June 3, Bolton plc sold to Arquette Company merchandise having a sales price of £2,000 with terms of 2/10, n/60. An invoice totaling £90, terms n/30, was received by Arquette on June 8 from John Booth Transport Service for the freight cost. On June
E6.4 (LO 2) (Determine Ending Accounts Receivable) Your accounts receivable clerk, Mary Nguyen, to whom you pay a salary of $1,500 per month, has just purchased a new Audi. You decided to test the accuracy of the accounts receivable balance of $117,000 as shown in the ledger.The following
E6.3 (LO 2) (Financial Statement Presentation of Receivables) Pique AG shows a balance of €241,140 in the Accounts Receivable account on December 31, 2025. The balance consists of the following.Installment accounts due in 2026 €23,000 Installment accounts due after 2026 (within the operating
E6.2 (LO 1) (Determine Cash Balance) The following are independent situations.1. Checking account balance $925,000; certificate of deposit $1,400,000; cash advance to subsidiary of$980,000; utility deposit paid to gas company $180.2. Checking account balance $500,000; an overdraft in special
E6.1 (LO 1) (Determine Cash Balance) The controller for Wallaby plc is attempting to determine the amount of cash and cash equivalents to be reported on its December 31, 2025, statement of financial position. The following information is provided.1. Commercial savings account of £600,000 and a
*B E6.17 (LO 6) Horton Corporation is preparing a bank reconciliation and has identified the following potential reconciling items. For each item, indicate if it is (1) added to balance per bank statement, (2) deducted from balance per bank statement, (3) added to balance per books, or (4) deducted
*B E6.16 (LO 6) Finman plc designated Jill Holland as petty cash custodian and established a petty cash fund of £200. The fund is reimbursed when the cash in the fund is at £15. Petty cash receipts indicate funds were disbursed for office supplies £94 and miscellaneous expense £86. Prepare
BE6.15 (LO 5) Recent financial statements of adidas (DEU) report net sales of €21,915 million.Accounts receivable (net) are €2,410 million at the beginning of the year and €2,315 million at the end of the year. Compute adidas’s accounts receivable turnover. Compute adidas’s average
BE6.14 (LO 5) Use the information presented in BE6.13 for Arness Woodcrafters but assume that the receivables were sold with a full guarantee for credit losses. Prepare the journal entry and discuss the effects on Arness’s financial statements.
BE6.13 (LO 5) Arness Woodcrafters sells $250,000 of receivables to Commercial Factors, Inc. on a without guarantee basis. Commercial assesses a finance charge of 5% and retains an amount equal to 4%of accounts receivable. Prepare the journal entry for Arness to record the sale.
BE6.12 (LO 5) Use the information in BE6.11 for Wood SA. Assume that the receivables are sold with recourse (guarantee). Prepare the journal entry for Wood to record the sale.
BE6.11 (LO 5) Wood SA factored €150,000 of accounts receivable with Engram Factors, without guarantee of credit loss. Engram assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments. Prepare the journal
BE6.10 (LO 5) On October 1, 2025, Chung Group assigns ¥1,000,000 of its accounts receivable to Seneca National Bank as collateral for a ¥750,000 note. The bank assesses a finance charge of 2% of the receivables assigned and interest on the note of 9%. Prepare the October 1, 2025, journal entries
BE6.9 (LO 4) Modest Mouse SE had the following information related to an account receivable from Counting Crows Inc. Initial face value, €22,000; payments received, €3,000; provision for uncollectibility,€5,000. Determine the cash realizable value for the Counting Crows receivable.
BE6.8 (LO 4) On January 1, 2025, Deng Acrobats lent NT$16,529 to Donaldson, Inc., accepting Donaldson’s 2-year, NT$20,000, zero-interest-bearing note. The implied interest rate is 10%. Prepare Deng’s journal entries for the initial transaction, recognition of interest each year, and the
BE6.7 (LO 4) Milner Family Importers sold goods to Tung Decorators for $30,000 on November 1, 2025, accepting Tung’s $30,000, 6-month, 6% note. Prepare Milner’s November 1 entry, December 31 annual adjusting entry, and May 1, 2026, entry for the collection of the note and interest.
BE6.6 (LO 3) Use the information presented in BE6.5 for Wilton, AG.a. Instead of an Allowance for Doubtful Accounts Balance of €2,400 credit, the balance was€1,900 debit. Assume that 10% of accounts receivable will prove to be uncollectible. Prepare the entry to record bad debt expense.b.
BE6.5 (LO 3) Wilton, AG had net sales in 2025 of €1,400,000. At December 31, 2025, before adjusting entries, the balances in selected accounts were Accounts Receivable €250,000 debit, and Allowance for Doubtful Accounts €2,400 credit. If Wilton estimates that 8% of its receivables will prove
BE6.4 (LO 3) Roeher Company sold $9,000 of its specialty shelving to Elkins Office Supply Co. on account. Prepare the entries when (a) Roeher makes the sale, (b) Roeher grants an allowance of $700 when some of the shelving does not meet exact specifications but still could be sold by Elkins, and
BE6.3 (LO 2) Use the information from BE6.2, assuming Restin plc uses the net method to account for cash discounts. Prepare the required journal entries for Restin plc.
BE6.2 (LO 2) Restin plc uses the gross method to record sales made on credit. On June 1, 2025, it made sales of £50,000 with terms 3/15, n/45. On June 12, 2025, Restin received full payment for the June 1 sale.Prepare the required journal entries for Restin plc.
BE6.1 (LO 1) Kraft Enterprises owns the following assets at December 31, 2025.Cash in bank—savings account €68,000 Cash on hand 9,300 Tax refund due 31,400 Checking account balance 17,000 Postdated checks 750 Certificates of deposit (180-day) 90,000 What amount should be reported as cash?
* 23. Distinguish among the following: (1) a general checking account,(2) an imprest bank account, and (3) a lockbox account.
22. You are evaluating Woodlawn Racetrack for a potential loan.An examination of the notes to the financial statements indicates restricted cash at year-end amounts to $100,000. Explain how you would use this information in evaluating Woodlawn’s liquidity.
21. What is the accounts receivable turnover, and what type of information does it provide?
20. Horizon Outfitters AG includes in its trial balance for December 31 an item for Accounts Receivable €789,000. This balance consists of the following items.Due from regular customers �523,000 Refund receivable on prior year’s income taxes (an established claim) 15,500 Travel advance to
19. Moon Hardware is planning to factor some of its receivables. The cash received will be used to pay for inventory purchases. The factor has indicated that it will require a full guarantee (with recourse)on the sold receivables. Explain to the controller of Moon Hardware what “full guarantee”
18. When is the risks and rewards approach to recording the transfers of receivables used? When should a transfer of receivables be recorded as a sale?
17. Indicate three reasons why a company might sell its receivables to another company.
16. What is “imputed interest”? In what situations is it necessary to impute an interest rate for notes receivable? What are the considerations in imputing an appropriate interest rate?
15. At January 1, 2025, Antorio SpA sells property for which it had paid €690,000 to Sargent Company, receiving in return Sargent’s zerointerest-bearing note for €1,000,000 payable in 5 years. What entry would Antorio make to record the sale, assuming that Antorio frequently sells similar
14. What is the normal procedure for handling the collection of accounts receivable previously written off using the direct write-off method? The allowance method?
13. Because of calamitous earthquake losses, Bernstein Company, one of your client’s oldest and largest customers, suddenly and unexpectedly became bankrupt. Approximately 30% of your client’s total sales have been made to Bernstein Company during each of the past several years. The amount due
12. Explain how the accounting for bad debts can be used for earnings management.
11. Of what merit is the contention that the allowance method lacks the objectivity of the direct write-off method? Discuss in terms of accounting’s measurement function.
10. Indicate how the percentage-of-receivables method, based on an aging schedule, accomplishes the objectives of the allowance method of accounting for bad debts. What other methods, besides an aging analysis, can be used for estimating uncollectible accounts?
9. What is the theoretical justification of the allowance method as contrasted with the direct write-off method of accounting for bad debts?
8. What are the basic problems that occur in the valuation of accounts receivable?
7. Discuss the accounting for sales allowances and how they relate to the concept of variable consideration.
6. What are two methods of recording accounts receivable transactions when a cash discount situation is involved? Which is more theoretically correct? Which is used in practice more of the time? Why?
5. What are the reasons that a company gives trade discounts? Why are trade discounts not recorded in the accounts like cash discounts?
4. Feng Group reported in a recent annual report “Restricted cash for debt redemption.” What section of the statement of financial position would report this item?
3. Define a “compensating balance.” How should a compensating balance be reported?
2. In what accounts should the following items be classified?a. Coins and currency.b. Government bonds.c. Certificate of deposit (matures in 5 months).d. Cash in a bank that is in receivership.e. NSF check (returned with bank statement).f. Deposit in foreign bank (exchangeability limited).g.
1. What may be included under the heading of “cash”?
P5.15 (LO 5) (Fair Value Estimate) Murphy Mining Company recently purchased a quartz mine that it intends to work for the next 10 years. According to state environmental laws, Murphy must restore the mine site to its original, natural prairie state after it ceases mining operations at the site. To
P5.14 (LO 4, 5) (Expected Cash Flows and Present Value) At the end of 2025, Sawyer SE is conducting an impairment test and needs to develop a fair value estimate for machinery used in its manufacturing operations. Given the nature of Sawyer’s production process, the equipment is for special
P5.13 (LO 4, 5) (Expected Cash Flows and Present Value) Danny’s Lawn Equipment sells high-quality lawn mowers and offers a 3-year warranty on all new lawn mowers sold. In 2025, Danny sold$300,000 of new specialty mowers for golf greens for which Danny’s service department does not have the
P5.12 (LO 5) Ethics (Pension Funding) Tim Buhl, newly appointed controller of STL, is considering ways to reduce his company’s expenditures on annual pension costs. One way to do this is to switch STL’s pension fund assets from First Security to NET Life. STL is a very well-respected computer
P5.11 (LO 5) (Pension Funding) You have been hired as a benefit consultant by Jean Barclay, the owner of Attic Angels. She wants to establish a retirement plan for herself and her three employees. Jean has provided the following information. The retirement plan is to be based upon annual salary for
P5.10 (LO 2, 4) (Analysis of Lease vs. Purchase) Dunn Inc. owns and operates a number of hardware stores in New England. Recently, the company has decided to locate another store in a rapidly growing area of Maryland. The company is trying to decide whether to purchase or lease the building and
P5.9 (LO 2, 4) (Analysis of Business Problems) James Kirk is a financial executive with McDowell Enterprises. Although James Kirk has not had any formal training in finance or accounting, he has a“good sense” for numbers and has helped the company grow from a very small company ($500,000
P5.8 (LO 4) (Analysis of Alternatives) Ellison plc, a manufacturer of steel school lockers, plans to purchase a new punch press for use in its manufacturing process. After contacting the appropriate vendors, the purchasing department received differing terms and options from each vendor. The
P5.7 (LO 2, 3, 4) (Time Value Concepts Applied to Solve Business Problems) Answer the following questions related to Dubois Inc.a. Dubois Inc. has $600,000 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides $80,000 at the end of each year
P5.6 (LO 5) (Purchase Price of a Business) During the past year, Stacy McGill planted a new vineyard on 150 acres of land that she leases for €30,000 a year. She has asked you as her accountant to assist her in determining the value of her vineyard operation.The vineyard will bear no grapes for
P5.5 (LO 2, 4) (Analysis of Alternatives) Julia Byrne died, leaving to her husband Brent an insurance policy contract that provides that the beneficiary (Brent) can choose any one of the following four options.a. €55,000 immediate cash.b. €4,000 every 3 months payable at the end of each quarter
P5.4 (LO 4) (Evaluating Payment Alternatives) Ronald Long has just learned he has won a$500,000 prize in the lottery. The lottery has given him two options for receiving the payments. (1) If Ronald takes all the money today, the government will deduct taxes at a rate of 46% immediately. (2) The
P5.3 (LO 2, 4) (Analysis of Alternatives) Assume that Koh ShopMart has decided to surface and maintain for 10 years a vacant lot next to one of its stores to serve as a parking lot for customers. Management is considering the following bids involving two different qualities of surfacing for a
P5.2 (LO 2, 3, 4) Groupwork (Various Time Value Situations) Using the appropriate interest table, provide the solution to each of the following four questions by computing the unknowns.a. What is the amount of the payments that Ned Winslow must make at the end of each of 8 years to accumulate a
P5.1 (LO 2, 4) Groupwork (Various Time Value Situations) Answer each of these unrelated questions.a. On January 1, 2025, Yang Ltd. sold a building that cost ¥25,000,000 and that had accumulated depreciation of ¥10,000,000 on the date of sale. Yang received as consideration a ¥24,000,000
E5.22 (LO 5) (Fair Value Estimate) Killroy Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to IFRS, it is assessed for impairment on an annual basis. To perform this impairment test, Killroy must
E5.21 (LO 5) (Expected Cash Flows and Present Value) Angela Contreras is trying to determine the amount to set aside so that she will have enough money on hand in 2 years to overhaul the engine on her vintage used car. While there is some uncertainty about the cost of engine overhauls in 2 years,
E5.20 (LO 5) (Expected Cash Flows) For each of the following, determine the expected cash flows.Cash Flow Estimate Probability Assessmenta. £ 4,800 20%6,300 50%7,500 30%b. £ 5,400 30%7,200 50%8,400 20%c. £(1,000) 10%3,000 80%5,000 10%
E5.19 (LO 4) (Least Costly Payoff) Assuming the same facts as those in E5.18 except that the payments must begin now and be made on the first day of each of the 15 years, what payment method would you recommend?
E5.18 (LO 4) (Least Costly Payoff) Assume that Aoki Ltd. has a contractual debt outstanding. Aoki has available two means of settlement: It can either make immediate payment of ¥3,500,000, or it can make annual payments of ¥400,000 for 15 years, each payment due on the last day of the year (yen
E5.17 (LO 4) (Computation of Amount of Rentals) Your client, Wyeth Leasing Ltd., is preparing a contract to lease a machine to Souvenirs plc for a period of 25 years. Wyeth has an investment cost of£421,087 in the machine, which has a useful life of 25 years and no residual value at the end of
E5.16 (LO 3) (Retirement of Debt) Rual Fernandez borrowed $90,000 on March 1, 2023. This amount plus accrued interest at 12% compounded semiannually is to be repaid March 1, 2033. To retire this debt, Rual plans to contribute to a debt retirement fund five equal amounts starting on March 1, 2028,
E5.15 (LO 2, 3) (Investment Decision) Derek Lee just received a signing bonus of $1,000,000. His plan is to invest this payment in a fund that will earn 6%, compounded annually.Instructionsa. If Lee plans to establish the DL Foundation once the fund grows to $1,898,000, how many years until he can
E5.14 (LO 5) (Computation of Pension Liability) Calder, Inc. is a furniture manufacturing company with 50 employees. Recently, after a long negotiation with the local labor union, the company decided to initiate a pension plan as a part of its compensation plan. The plan will start on January 1,
E5.13 (LO 5) (Computation of Bond Liability) Messier SA manufactures cycling equipment.Recently, the vice president of operations of the company requested the construction of a new plant to meet the increasing demand for the company’s bikes. After a careful evaluation of the request, the board of
E5.12 (LO 4) (Analysis of Alternatives) Brubaker Inc., a manufacturer of high-sugar, lowsodium, low-cholesterol TV dinners, would like to increase its market share in the state of New South Wales, Australia. In order to do so, Brubaker has decided to locate a new factory in Sydney. Brubaker will
E5.11 (LO 4) (Evaluation of Purchase Options) Rossi Excavating is purchasing a bulldozer. The equipment has a price of €100,000. The manufacturer has offered a payment plan that would allow Rossi to make 10 equal annual payments of €15,582, with the first payment due 1 year after the
E5.10 (LO 2) (Unknown Periods and Unknown Interest Rate) Consider the following independent situations.a. R. Chopra wishes to become a millionaire. His money market fund has a balance of $148,644 and has a guaranteed interest rate of 10%. How many years must Chopra leave that balance in the fund in
E5.9 (LO 2) (Unknown Rate) Kross plc purchased a machine at a price of £100,000 by signing a note payable, which requires a single payment of £118,810 in 2 years. Assuming annual compounding of interest, what rate of interest is being paid on the loan?
E5.8 (LO 5) (Computations for a Retirement Fund) Stephen Bosworth, a salesperson contemplating retirement on his 55th birthday, decides to create a fund on an 8% basis that will enable him to withdraw $25,000 per year on June 30, beginning in 2029 and continuing through 2032. To develop this fund,
E5.7 (LO 5) (Computation of Bond Prices) What would you pay for a $100,000 debenture bond that matures in 15 years and pays $10,000 a year in interest if you wanted to earn a yield of:a. 8%?b. 10%?c. 12%?
E5.6 (LO 2, 3, 4) (Future Value and Present Value Problems) Presented below are three unrelated situations (amounts in thousands).a. Li Chang Ltd. recently signed a lease for a new office building, for a lease period of 10 years. Under the lease agreement, a security deposit of ¥1,200,000 is made,
E5.5 (LO 4) (Computation of Present Value) Using the appropriate interest table, compute the present values of the following periodic amounts due at the end of the designated periods.a. £50,000 receivable at the end of each period for 8 periods compounded at 12%.b. £50,000 payments to be made at
E5.4 (LO 3, 4) (Computation of Future Values and Present Values) Using the appropriate interest table, answer the following questions. (Each case is independent of the others.)a. What is the future value of 20 periodic payments of $5,000 each, made at the beginning of each period and compounded at
E5.3 (LO 2, 3, 4) (Computation of Future Values and Present Values) Using the appropriate interest table, answer each of the following questions. (Each case is independent of the others.)a. What is the future value of €9,000 at the end of 5 periods at 8% compounded interest?b. What is the present
E5.2 (LO 1, 2) (Simple and Compound Interest Computations) Sue Ang invests HK$30,000 at 8% annual interest, leaving the money invested without withdrawing any of the interest for 8 years. At the end of the 8 years, Sue withdraws the accumulated amount of money.Instructionsa. Compute the amount Sue
E5.1 (LO 1) (Using Interest Tables) For each of the following cases, indicate (a) to what rate columns, and (b) to what number of periods you would refer in looking up the interest factor.1. In a future value of 1 table Annual Rate Number of Years Invested Compoundeda. 9% 9 Annuallyb. 8% 5
BE5.17 (LO 4) Consider the loan in BE5.16. What payments must Zach Taylor make to settle the loan at the same interest rate but with the six payments beginning on the day the loan is signed?
BE5.16 (LO 4) Zach Taylor is settling a £20,000 loan due today by making six equal annual payments of£4,727.53. Determine the interest rate on this loan, if the payments begin one year after the loan is signed.
BE5.15 (LO 5) Wong Ltd. issues HK$2,000,000 of 7% bonds due in 10 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 8%. What amount will Wong receive when it issues the bonds?
BE5.14 (LO 4) Liv Diaz wants to create a fund today that will enable her to withdraw R$25,000 per year for 8 years, with the first withdrawal to take place 5 years from today. If the fund earns 8% interest, how much must Liv invest today?
BE5.13 (LO 3) Gomez Inc. will deposit $30,000 in a 6% fund at the end of each year for 8 years beginning December 31, 2025. What amount will be in the fund immediately after the last deposit?
BE5.12 (LO 4) Maria Alvarez is investing $300,000 in a fund that earns 4% interest compounded annually. What equal amounts can Maria withdraw at the end of each of the next 20 years?
BE5.11 (LO 4) Leon Tyler’s VISA balance is $793.15. He may pay it off in 12 equal end-of-month payments of $75 each. What interest rate is Leon paying?
BE5.10 (LO 4) Hamza Choudhury wants to withdraw £30,000 each year for 10 years from a fund that earns 8% interest. How much must he invest today if the first withdrawal is at year-end? How much must he invest today if the first withdrawal takes place immediately?
BE5.9 (LO 3) Yousef Ahmad is investing $9,069 at the end of each year in a fund that earns 5% interest.In how many years will the fund be at $100,000?
BE5.8 (LO 2) Refer to the data in BE5.7. Assuming quarterly compounding of amounts invested at 8%, how much of Jose Garcia’s inheritance must be invested to have enough at retirement to buy the boat?
BE5.7 (LO 2) Jose Garcia’s lifelong dream is to own his own fishing boat to use in his retirement.Jose has recently come into an inheritance of $400,000. He estimates that the boat he wants will cost$300,000 when he retires in 5 years. How much of his inheritance must he invest at an annual rate
BE5.6 (LO 3) Steve Madison needs $250,000 in 10 years. How much must he invest at the end of each year, at 5% interest, to meet his needs?
BE5.5 (LO 3) Sally Medavoy will invest €8,000 a year for 20 years in a fund that will earn 6% annual interest. If the first payment occurs at year-end, what amount will be in the fund in 20 years? If the first payment into the fund occurs today, what amount will be in the fund in 20 years?
BE5.4 (LO 2) Bo Newman will invest $10,000 today in a fund that earns 5% annual interest. How many years will it take for the fund to grow to $17,100?
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