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intermediate accounting 11th
Intermediate Accounting 11th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions
(Assumptions, Principles, and Constraints) Presented below are a number of operational guidelines and practices that have developed over time Instructions Select the assumption, principle, or constraint that most appropriately justifies these procedures and practices.(Do not use qualitative
(Full Disclosure Principle) Presented below are a number of facts related to R. Kelly, Inc. Assume that no mention of these facts was made in the financial statements and the related notes.Instructions Assume that you are the auditor of R. Kelly, Inc. and that you have been asked to explain the
(Accounting Principles—Comprehensive) Presented below are a number of business transactions that occurred during the current year for Fresh Horses, Inc.Instructions In each of the situations, discuss the appropriateness of the journal entries in terms of generally accepted accounting
(Accounting Principles—Comprehensive) Presented below is information related to Garth Brooks, Inc.Instructions Comment on the appropriateness of the accounting procedures followed by Garth Brooks, Inc.(a) Depreciation expense on the building for the year was $60,000. Because the building was
(Conceptual Framework—General) Roger Morgan has some questions regarding the theoretical framework in which standards are set. He knows that the FASB and other predecessor organizations have attempted to develop a conceptual framework for accounting theory formulation. Yet, Roger’s supervisors
(Conceptual Framework—General) The Financial Accounting Standards Board (FASB) has developed a conceptual framework for financial accounting and reporting. The FASB has issued seven Statements of Financial Accounting Concepts. These statements are intended to set forth objectives and fundamentals
(Objectives of Financial Reporting) Regis Gordon and Kathy Medford are discussing various aspects of the FASB’s pronouncement Statement of Financial Accounting Concepts No. 1, “Objectives of Financial Reporting by Business Enterprises.” Regis indicates that this pronouncement provides little,
(Qualitative Characteristics) Accounting information provides useful information about business transactions and events. Those who provide and use financial reports must often select and evaluate accounting alternatives. FASB Statement of Financial Accounting Concepts No. 2, “Qualitative
(Revenue Recognition and Matching Principle) After the presentation of your report on the examination of the financial statements to the board of directors of Bones Publishing Company, one of the new directors expresses surprise that the income statement assumes that an equal proportion of the
(Revenue Recognition and Matching Principle) On June 5, 2003, McCoy Corporation signed a contract with Sulu Associates under which Sulu agreed (1) to construct an office building on land owned by McCoy, (2) to accept responsibility for procuring financing for the project and finding tenants, and
(Matching Principle) An accountant must be familiar with the concepts involved in determining earnings of a business entity. The amount of earnings reported for a business entity is dependent on the proper recognition, in general, of revenue and expense for a given time period. In some situations,
(Matching Principle) Accountants try to prepare income statements that are as accurate as possible.A basic requirement in preparing accurate income statements is to match costs against revenues properly. Proper matching of costs against revenues requires that costs resulting from typical business
(Matching Principle) Carlos Rodriguez sells and erects shell houses, that is, frame structures that are completely finished on the outside but are unfinished on the inside except for flooring, partition studding, and ceiling joists. Shell houses are sold chiefly to customers who are handy with
(Qualitative Characteristics) Recently, your Uncle Waldo Ralph, who knows that you always have your eye out for a profitable investment, has discussed the possibility of your purchasing some corporate bonds. He suggests that you may wish to get in on the “ground floor” of this deal. The bonds
(Matching) Hinckley Nuclear Power Plant will be “mothballed” at the end of its useful life(approximately 20 years) at great expense. The matching principle requires that expenses be matched to revenue. Accountants Jana Kingston and Pete Henning argue whether it is better to allocate the expense
3M Company The financial statements of 3M are presented in Appendix 5B or can be accessed on the Take Action! CD.Instructions Refer to 3M’s financial statements and the accompanying notes to answer the following questions.(a) Using the notes to the consolidated financial statements, determine
Weyerhaeuser Company Presented below is a statement that appeared about Weyerhaeuser Company in a financial magazine.The land and timber holdings are now carried on the company’s books at a mere $422 million. The value of the timber alone is variously estimated at $3 billion to $7 billion and is
The Coca-Cola Company and PepsiCo, Inc.Instructions Go to the Take Action! CD, and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc.(a) What are the primary lines of business of these two companies as shown in their notes to the
Case 1 Retrieval of Information on Public Company There are several commonly available indexes that enable individuals to locate articles previously included in numerous business publications and periodicals. Articles can generally be searched by company or by subject matter. Four common indexes
As discussed in Chapter 1, the International Accounting Standards Board (IASB) develops accounting standards for many international companies. The IASB also has developed a conceptual framework to help guide the setting of accounting standards. Following is an Overview of the IASB
Paul Molitor, maintenance supervisor for Blue Jay Insurance Co., has purchased a riding lawnmower and accessories to be used in maintaining the grounds around corporate headquarters. He has sent the following information to the accounting department.Compute the amount of depreciation expense
Selanne Enterprises made the following entry on December 31, 2005.What entry would Anaheim National Bank make regarding its outstanding loan to Selanne Enterprises?Explain why this must be the case. Dec. 31, 2005 Interest Expense Interest Payable 10,000 10,000 (To record interest expense due on
Explain basic accounting terminology.
Explain double-entry rules.
Identify steps in the accounting cycle.
Explain the reasons for preparing adjusting entries.
Explain how inventory accounts are adjusted at year-end.
Differentiate the cash basis of accounting from the accrual basis of accounting.
On August 1, George Bell Company paid $8,400 in advance for 2 years’ insurance coverage. Prepare Bell’s August 1 journal entry and the annual adjusting entry on December 31.
(Transaction Analysis—Service Company) Beverly Crusher is a licensed CPA. During the first month of operations of her business (a sole proprietorship), the following events and transactions occurred.April 2 Invested $32,000 cash and equipment valued at $14,000 in the business.2 Hired a
(Corrected Trial Balance) The trial balance of Wanda Landowska Company shown below does not balance. Your review of the ledger reveals the following: (a) Each account had a normal balance.(b) The debit footings in Prepaid Insurance, Accounts Payable, and Property Tax Expense were each understated
(Corrected Trial Balance) The trial balance of Blues Traveler Corporation (see next page) does not balance.An examination of the ledger shows these errors.1. Cash received from a customer on account was recorded (both debit and credit) as $1,380 instead of $1,830.2. The purchase on account of a
(Corrected Trial Balance) The trial balance of Antoine Watteau Co. shown below does not balance.Each of the listed accounts has a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors.1. Cash received from a customer on account was debited for
(Adjusting Entries) The ledger of Duggan Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared.An analysis of the accounts shows the following.1. The equipment depreciates $250 per month.2. One-third of the unearned rent
(Adjusting Entries) Selected accounts of Urdu Company are shown below.Instructions From an analysis of the T-accounts, reconstruct (a) the October transaction entries, and (b) the adjusting journal entries that were made on October 31, 2005. Supplies Accounts Receivable Beg. Bal. 800 10/31 470
(Adjusting Entries) Greco Resort opened for business on June 1 with eight air-conditioned units.Its trial balance on August 31 is as follows.Other data:1. The balance in prepaid insurance is a one-year premium paid on June 1, 2005.2. An inventory count on August 31 shows $450 of supplies on hand.3.
(Closing Entries) The adjusted trial balance of Lopez Company shows the following data pertaining to sales at the end of its fiscal year, October 31, 2005: Sales $800,000, Freight-out $12,000, Sales Returns and Allowances $24,000, and Sales Discounts $15,000.Instructions(a) Prepare the sales
(Closing Entries) Presented below is information related to Gonzales Corporation for the month of January 2005.Instructions Prepare the necessary closing entries. Cost of goods sold $208,000 Salary expense $ 61,000 Freight-out 7,000 Sales discounts 8,000 Insurance expense 12,000 Sales returns and
(Work Sheet) Presented on the next page are selected accounts for Alvarez Company as reported in the work sheet at the end of May 2005.Instructions Complete the work sheet by extending amounts reported in the adjusted trial balance to the appropriate columns in the work sheet. Do not total
(Missing Amounts) Presented below is financial information for two different companies.Instructions Compute the missing amounts. Alatorre Company Eduardo Company Sales Sales returns $90,000 (d) (a) $ 5,000 Net sales 81,000 95,000 Cost of goods sold 56,000 (e) Gross profit Operating expenses Net
(Find Missing Amounts—Periodic Inventory) Financial information is presented below for four different companiesInstructions Determine the missing amounts (a–i). Show all computations. Pamela's Cosmetics Dean's Anderson Grocery Wholesalers Baywatch Supply Co. Sales $78,000 (c) $144,000 Sales
(Cost of Goods Sold Section—Periodic Inventory) The trial balance of the Neville Mariner Company at the end of its fiscal year, August 31, 2005, includes the following accounts: Merchandise Inventory$17,500; Purchases $149,400; Sales $200,000; Freight-in $4,000; Sales Returns and Allowances
(Closing Entries for a Corporation) Presented below are selected account balances for Homer Winslow Co. as of December 31, 2005.Instructions Prepare closing entries for Homer Winslow Co. on December 31, 2005. Merchandise Inventory 12/31/05 $ 60,000 Cost of Goods Sold $225,700 Common Stock 75,000
(Work Sheet Preparation) The trial balance of R. L. Stein Roofing at March 31, 2005, is as follows.Other data:1. A physical count reveals only $520 of roofing supplies on hand.2. Equipment is depreciated at a rate of $120 per month.3. Unearned service revenue amounted to $100 on March 31.4. Accrued
(Work Sheet and Balance Sheet Presentation) The adjusted trial balance of Ed Bradley Co. work sheet for the month ended April 30, 2005, contains the following.Instructions Complete the work sheet and prepare a balance sheet as illustrated in this chapter. ED BRADLEY CO. WORK SHEET (PARTIAL) FOR THE
(Partial Work Sheet Preparation) Jurassic Park Co. prepares monthly financial statements from a work sheet. Selected portions of the January work sheet showed the following data.During February no events occurred that affected these accounts, but at the end of February the following information was
(Transactions of a Corporation, Including Investment and Dividend) Scratch Miniature Golf and Driving Range Inc. was opened on March 1 by Scott Verplank. The following selected events and transactions occurred during March.Mar. 1 Invested $50,000 cash in the business in exchange for common stock.3
(Cash to Accrual Basis) Jill Accardo, M.D., maintains the accounting records of Accardo Clinic on a cash basis. During 2005, Dr. Accardo collected $142,600 from her patients and paid $55,470 in expenses.At January 1, 2005, and December 31, 2005, she had accounts receivable, unearned service
(Cash and Accrual Basis) Wayne Rogers Corp. maintains its financial records on the cash basis of accounting. Interested in securing a long-term loan from its regular bank, Wayne Rogers Corp. requests you as its independent CPA to convert its cash-basis income statement data to the accrual basis.
(Adjusting and Reversing Entries) When the accounts of Daniel Barenboim Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period.1. The prepaid insurance account shows a debit of $5,280, representing the cost of a 2-year fire insurance
(Adjusting Entries and Financial Statements) Yount Advertising Agency was founded by Thomas Grant in January 2001. Presented below are both the adjusted and unadjusted trial balances as of December 31, 2005.Instructions (a) Journalize the annual adjusting entries that were made.(b) Prepare an
(Adjusting Entries) A review of the ledger of Oklahoma Company at December 31, 2005, produces the following data pertaining to the preparation of annual adjusting entries.1. Salaries Payable $0. There are eight salaried employees. Salaries are paid every Friday for the current week. Five employees
(Work Sheet, Balance Sheet, Adjusting and Closing Entries) Noah’s Ark has a fiscal year ending on September 30. Selected data from the September 30 work sheet are presented belowInstructions (a) Prepare a complete work sheet.(b) Prepare a classified balance sheet. (Note: $10,000 of the mortgage
(Financial Statements, Adjusting and Closing Entries) The trial balance of Becky Bishop Fashion Center contained the following accounts at November 30, the end of the company’s fiscal year.Adjustment data:1. Store supplies on hand totaled $3,500.2. Depreciation is $9,000 on the store equipment
(Adjusting Entries) The accounts listed below appeared in the December 31 trial balance of the Jane Alexander Theater.Instructions (a) From the account balances listed above and the information given below, prepare the annual adjusting entries necessary on December 31.(1) The equipment has an
(Adjusting Entries and Financial Statements) Presented below are the trial balance and the other information related to Muhammad Ali, a consulting engineer.1. Fees received in advance from clients $6,900.2. Services performed for clients that were not recorded by December 31, $4,900.3. Bad debt
(Adjusting Entries and Financial Statements) Ana Alicia Advertising Corporation was founded by Ana Alicia in January 2001. Presented on the next page are both the adjusted and unadjusted trial balances as of December 31, 2005.Instructions (a) Journalize the annual adjusting entries that were
(Adjusting and Closing) Following is the trial balance of the Platteville Golf Club, Inc. as of December 31. The books are closed annually on December 31.Instructions (a) Enter the balances in ledger accounts. Allow five lines for each account.(b) From the trial balance and the information given,
(Adjusting and Closing) Presented below is the December 31 trial balance of Nancy Drew Boutique.Instructions (a) Construct T-accounts and enter the balances shown.(b) Prepare adjusting journal entries for the following and post to the T-accounts. Open additional T-accounts as necessary. (The books
(Cash and Accrual Basis) On January 1, 2005, Jill Monroe and Jenni Meno formed a computer sales and service enterprise in Soapsville, Arkansas, by investing $90,000 cash. The new company, Razorback Sales and Service, has the following transactions during January.1. Pays $6,000 in advance for 3
3M Company The financial statements of 3M are presented in Appendix 5B or can be accessed on the Take Action! CD.Instructions Refer to these financial statements and the accompanying notes to answer the following questions.(a) What were 3M’s total assets at December 30, 2001? At December 31,
Kellogg Company Kellogg Company has its headquarters in Battle Creek, Michigan. The company manufactures and sells ready-to-eat breakfast cereals and convenience foods including cookies, toaster pastries, and cereal bars.Selected data from Kellogg Company’s 2001 annual report follows (dollar
The Coca-Cola Company and PepsiCo, Inc.Instructions Go to the Take Action! CD and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc.(a) Which company had the greater percentage increase in total assets from 2000 to 2001?(b) Using the
The Enterprise Standard Industrial Classification (SIC) coding scheme, a published classification of firms into separate industries, is commonly used in practice. SIC codes permit identification of company activities on three levels of detail. Two-digit codes designate a “major group,”
In this simulation, you will be asked various questions regarding the accounting information system.Prepare responses to all parts Nalezny Advertising Agency was founded by Casey Hayward in January 2002. Presented below are both the adjusted and unadjusted trial balances as of December 31,
What is the nature of interest? Distinguish between“simple interest” and “compound interest.”
Presented are a number of values taken from compound interest tables involving the same number of periods and the same rate of interest. Indicate what each of these four values represents.(a)
71008 (c) .46319(b) 2.15892 (d) 14.48656 6. Bill Jones is considering two investment options for a $1,000 gift he received for graduation. Both investments have 8% annual interest rates. One offers quarterly compounding;the other compounds on a semiannual basis.Which investment should he choose?
Identify accounting topics where time value of money is relevant.
how to use appropriate compound interest tables.
Identify variables fundamental to solving interest problems.
(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 table2. In a present value of an annuity of 1 table Annual Rate Number of Years Invested
(Expected Cash Flows) For each of the following, determine the expected cash flows. Cash Flow Estimate Probability Assessment (a) $3,800 20% 6,300 50% 7,500 30% (b) $ 5,400 30% 7,200 50% 8,400 20% (c) $(1,000) 10% 2,000 80% 5,000 10%
(Expected Cash Flows and Present Value) Andrew Kelly is trying to determine the amount to set aside so that he will have enough money on hand in 2 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 2 years, by conducting some
(Simple and Compound Interest Computations) Alan Jackson invests $20,000 at 8% annual interest, leaving the money invested without withdrawing any of the interest for 8 years. At the end of the 8 years, Alan withdrew the accumulated amount of money.Instructions(a) Compute the amount Alan would
(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 $7,000 at the end of 5 periods at 8% compounded interest?(b) What is the present value of $7,000
(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 $4,000 each made at the beginning of each period and compounded at 8%?(b) What is
(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) $30,000 receivable at the end of each period for 8 periods compounded at 12%.(b) $30,000 payments to be made at the end of
(Future Value and Present Value Problems) Presented below are three unrelated situations.(a) Kobe Bryant Company recently signed a lease for a new office building, for a lease period of 10 years. Under the lease agreement, a security deposit of $12,000 is made, with the deposit to be returned at
(Computation of Bond Prices) What would you pay for a $50,000 debenture bond that matures in 15 years and pays $5,000 a year in interest if you wanted to earn a yield of:(a) 8%? (b) 10%? (c) 12%?
(Computations for a Retirement Fund) Clarence Weatherspoon, a super salesman contemplating retirement on his fifty-fifth birthday, decides to create a fund on an 8% basis that will enable him to withdraw $20,000 per year on June 30, beginning in 2011 and continuing through 2014. To develop this
(Unknown Rate) LEW Company purchased a machine at a price of $100,000 by signing a note payable, which requires a single payment of $123,210 in 2 years. Assuming annual compounding of interest, what rate of interest is being paid on the loan?
(Unknown Periods and Unknown Interest Rate) Consider the following independent situations.(a) Mike Finley wishes to become a millionaire. His money market fund has a balance of $92,296 and has a guaranteed interest rate of 10%. How many years must Mike leave that balance in the fund in order to get
(Evaluation of Purchase Options) Sosa Excavating Inc. is purchasing a bulldozer. The equipment has a price of $100,000. The manufacturer has offered a payment plan that would allow Sosa to make 10 equal annual payments of $16,274.53, with the first payment due one year after the
(Analysis of Alternatives) The Black Knights Inc., a manufacturer of high-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in the Sunbelt. In order to do so, Black Knights has decided to locate a new factory in the Panama City area. Black Knights will either
(Computation of Bond Liability) Lance Armstrong Inc. manufactures cycling equipment. Recently the vice president of operations of the company has requested 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
(Computation of Pension Liability) Nerwin, 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, 2003. Each
(Investment Decision) Jason Williams just received a signing bonus of $1,000,000. His plan is to invest this payment in a fund that will earn 8%, compounded annually.Instructions(a) If Williams plans to establish the JW Foundation once the fund grows to $1,999,000, how many years until he can
(Retirement of Debt) Jesper Parnevik borrowed $70,000 on March 1, 2002. This amount plus accrued interest at 12% compounded semiannually is to be repaid March 1, 2012. To retire this debt, Jesper plans to contribute to a debt retirement fund five equal amounts starting on March 1, 2007, and for the
(Computation of Amount of Rentals) Your client, Ron Santo Leasing Company, is preparing a contract to lease a machine to Souvenirs Corporation for a period of 25 years. Santo has an investment cost of $365,755 in the machine, which has a useful life of 25 years and no salvage value at the end of
(Least Costly Payoff) Assume that Sonic Foundry Corporation has a contractual debt outstanding.Sonic has available two means of settlement: It can either make immediate payment of $2,600,000, or it can make annual payments of $300,000 for 15 years, each payment due on the last day of the
(Least Costly Payoff) Assuming the same facts as those in E6-20 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?
(Determine Interest Rate) Reba McEntire wishes to invest $19,000 on July 1, 2003, and have it accumulate to $49,000 by July 1, 2013.Instructions Use a financial calculator to determine at what exact annual rate of interest Reba must invest the $19,000.
(Determine Interest Rate) On July 17, 2002, Tim McGraw borrowed $42,000 from his grandfather to open a clothing store. Starting July 17, 2003, Tim has to make ten equal annual payments of$6,500 each to repay the loan.Instructions Use a financial calculator to determine what interest rate Tim is
(Determine Interest Rate) As the purchaser of a new house, Patty Loveless has signed a mortgage note to pay the Memphis National Bank and Trust Co. $14,000 every 6 months for 20 years, at the end of which time she will own the house. At the date the mortgage is signed the purchase price
(Evaluating Payment Alternatives) Terry O’Malley has just learned he has won a $900,000 prize in the lottery. The lottery has given him two options for receiving the payments: (1) If Terry takes all the money today, the state and federal governments will deduct taxes at a rate of 46% immediately.
(Analysis of Alternatives) Sally Brown died, leaving to her husband Linus an insurance policy contract that provides that the beneficiary (Linus) can choose any one of the following four options.(a) $55,000 immediate cash.(b) $3,700 every 3 months payable at the end of each quarter for 5 years.(c)
(Expected Cash Flows and Present Value) Larry’s Lawn Equipment sells high-quality lawn mowers and offers a 3-year warranty on all new lawn mowers sold. In 2003, Larry sold $300,000 of new specialty mowers for golf greens for which Larry’s service department does not have the equipment to do the
(Expected Cash Flows and Present Value) At the end of 2003, Richards Company is conducting an impairment test and needs to develop a fair value estimate for machinery used in its manufacturing operations.Given the nature of Richard’s production process, the equipment is for special use. (No
(Purchase Price of a Business) During the past year, Nicole Bobek planted a new vineyard on 150 acres of land that she leases for $27,000 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 the first 5
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