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intermediate accounting 11th
Intermediate Accounting 11th Edition David Spiceland - Solutions
Norfolk Southern Corporation, one of the nation’s premier transportation companies, reported the following amounts in the asset section of its balance sheets:In addition, information from the 2019 statement of cash flows and related notes reported the following items ($ in millions):Required:What
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 copper. After the copperis extracted in approximately four years, the company is required to restore
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 year ended December 31, 2019, are available in Connect. This material is also available under the
Darden Restaurants, Inc., is a full-service restaurant company, including brands such as Olive Garden, Long- Horn Steakhouse, and Bahama Breeze. The company’s fixed-asset turnover ratio, using the average book value of property, plant, and equipment (PP&E) as the denominator, was
Falcon Waste Management purchased land and a warehouse for $600,000. In addition to the purchase price, Falcon made the following expenditures related to the acquisition: broker’s commission, $30,000; title insurance, $3,000; miscellaneous closing costs, $6,000. The warehouse was immediately
Chilton Peripherals manufactures printers, scanners, and other computer peripheral equipment. In the past, the company purchased equipment used in manufacturing from an outside vendor. In March 2024, Chilton decided to design and build equipment to replace some obsolete equipment. A section of the
In 2024, Bratten Fitness Company made the following cash purchases:1. The exclusive right to manufacture and sell the X-Core workout equipment from Symmetry Corporation for $200,000. Symmetry created the unique design for the equipment. Bratten also paid an additional $10,000 in legal and filing
On March 31, 2024, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,000,000 in cash. The book values and fair values of Barney’s assets and liabilities were as follows:Required:Calculate the amount paid for goodwill. Current assets Property, plant,
On March 17, Advanced Technologies purchased a patent related to laser surgery techniques. The purchase price of the patent is $1,200,000. The patent is expected to benefit the company for the next five years. The company had the following additional costs: $20,000 in legal fees associated with the
On September 3, 2024, the Robers Company exchanged equipment with Phifer Corporation. The facts of the exchange are as follows:To equalize the exchange, Phifer paid Robers $5,000 in cash.Required:Record the exchange for both Robers and Phifer. The exchange has commercial substance for both
Janzen Corporation acquired all of the outstanding common stock of Steinbeck Corporation for $11,000,000 in cash. The book values and fair values of Steinbeck’s assets and liabilities were the following:Required:1. Calculate the amount paid for goodwill.2. Record the acquisition of Steinbeck
Maxtor Technology incurred the following costs during the year related to the creation of a new type of personal computer monitor:What amount should Maxtor report as research and development expense in its income statement? Salaries Depreciation on R&D facilities and equipment Utilities and other
Case A. Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of $12,000 (original cost of $28,000 less accumulated depreciation of $16,000) and a fair value of $9,000. Kapono paid $20,000 cash to complete the exchange. The exchange has commercial
On January 1, 2024, the Shagri Company began construction on a new manufacturing facility for its own use. The building was completed in 2025. The only interest-bearing debt the company had outstanding during 2024 was long-term bonds with a book value of $10,000,000 and an effective interest rate
Mayer Biotechnical, Inc., develops, manufactures, and sells pharmaceuticals. Significant research and development (R&D) expenditures are made for the development of new drugs and the improvement of existing drugs. During 2024, $220 million was spent on R&D. Of this amount, $30 million was
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 the program was available for release on April 30, 2025. Development costs were incurred as
NXS Semiconductor prepares its financial statements according to International Financial Reporting Standards. The company incurred the following expenditures during 2024 related to the development of a chip to be used in mobile devices:The development costs were incurred after NXS established
On January 1, 2024, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a noninterest-bearing note requiring $25,000 to be paid on December 31, 2026. The fair value of the tractor is not determinable.An interest rate of 10% properly reflects the time value of money for this
The Manguino Oil Company incurred exploration costs in 2024 searching and drilling for oil as follows:It was determined that Wells 104–108 were dry holes and were abandoned. Wells 101, 102, and 103 were determined to have sufficient oil reserves to be commercially successful.Required:1. Prepare a
Refer to the situation described in BE 10–14. Answer the questions assuming that the fair value of the equipment was $24,000, instead of $17,000.Data from in BE 10-14Calaveras Tire exchanged equipment for two pickup trucks. The book value and fair value of the equipment given up were
Freitas Corporation was organized early in 2024. The following expenditures were made during the first few months of the year:Required:Prepare a summary journal entry to record the $107,000 in cash expenditures. Attorneys' fees in connection with the organization of the corporation State filing
The fact that generally accepted accounting principles allow companies flexibility in choosing between certain allocation methods can make it difficult for a financial analyst to compare periodic performance from firm to firm. Suppose you were a financial analyst trying to compare the performance
Early in 2024, the Excalibur Company began developing a new software package to be marketed. The project was completed in December 2024 at a cost of $6 million. Of this amount, $4 million was spent before technological feasibility was established. Excalibur expects a useful life of five years for
On January 1, 2024, the Excel Delivery Company purchased a delivery van for $33,000. At the end of its five-year service life, it is estimated that the van will be worth $3,000. During the five-year period, the company expects to drive the van 100,000 miles.Required:Calculate annual depreciation
At December 31, 2023, Cord Company’s plant asset and accumulated depreciation and amortization accounts had balances as follows:Depreciation is computed to the nearest month and residual values are immaterial. Transactions during 2024 and other information:a. On January 6, 2024, a plant facility
Whaley Distributors is a wholesale distributor of electronic components. Financial statements for the year ended December 31, 2024, reported the following amounts and subtotals ($ in millions):In 2025, the following situations occurred or came to light:a. Internal auditors discovered that ending
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 material is also available under the Investor Relations link at the company’s website
On January 1, 2024, Canseco Plumbing Fixtures purchased equipment for $30,000. Residual value at the end of an estimated four-year service life is expected to be $2,000. The company expects the equipment to operate for 10,000 hours. Calculate depreciation expense for 2024 and 2025 using each of the
On January 1, 2024, the Allegheny Corporation purchased equipment for $115,000. The estimated service life of the equipment is 10 years and the estimated residual value is $5,000. The equipment is expected to produce220,000 units during its life.Required:Calculate depreciation for 2024 and 2025
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 year ended December 31, 2020, are available in Connect. This material is also available under the
Refer to the situation described in BE 11–2. Assume the equipment was purchased on March 31, 2024, instead of January 1. Calculate depreciation expense for 2024 and 2025 using each of the following depreciation methods: (1) Straight line, (2) Double-declining balance, and (3)
For each asset classification, prepare a schedule showing depreciation for the year ended December 31, 2024, using the following depreciation methods and useful lives:Depreciation is computed to the nearest month and whole dollar amount, and no residual values are used. Automobiles were driven
On October 1, 2024, the Allegheny Corporation purchased equipment for $115,000. The estimated service life of the equipment is 10 years and the estimated residual value is $5,000. The equipment is expected to produce220,000 units during its life.Required:Calculate depreciation for 2024 and 2025
Refer to the situation described in BE 11–2. Calculate depreciation expense for 2024 and 2025 using sum-of-theyears’- digits, assuming the equipment was purchased on (1) January 1, 2024, and (2) March 31, 2024.Data from in BE 11-2On January 1, 2024, Canseco Plumbing Fixtures purchased
On April 1, 2022, the KB Toy Company purchased equipment to be used in its manufacturing process. The equipment cost $48,000, has an eight-year useful life, and has no residual value. The company uses the straight-line depreciation method for all manufacturing equipment. On January 4, 2024, $12,350
On January 1, 2024, the Allegheny Corporation purchased equipment for $115,000. The estimated service life of the equipment is 10 years and the estimated residual value is $5,000. The equipment is expected to produce 220,000 units during its life.Required:Calculate depreciation for 2024 and 2025
The Thompson Corporation, a manufacturer of steel products, began operations on October 1, 2022. The accounting department of Thompson has started the fixed-asset and depreciation schedule presented below. You have been asked to assist in completing this schedule. In addition to ascertaining that
Tristen Company purchased a five-story office building on January 1, 2022, at a cost of $5,000,000. The building has a residual value of $200,000 and a 30-year life. The straight-line depreciation method is used. On June 30, 2024, construction of a sixth floor was completed at a cost of
At the beginning of 2022, the Healthy Life Food Company purchased equipment for $42 million to be used in the manufacture of a new line of gourmet frozen foods. The equipment was estimated to have a 10-year service life and no residual value. The straight-line depreciation method was used to
Funseth Farms Inc. purchased a tractor in 2021 at a cost of $30,000. The tractor was sold for $3,000 in 2024. Depreciation recorded through the disposal date totaled $26,000. (1) Prepare the journal entry to record the sale.(2) Now assume the tractor was sold for $10,000; prepare the journal
On March 31, 2024, the Herzog Company purchased a factory complete with vehicles and equipment. The allocation of the total purchase price of $1,000,000 to the various types of assets along with estimated useful lives and residual values are as follows:On June 29, 2025, equipment included in the
On March 31, 2024, Susquehanna Insurance purchased an office building for $12,000,000. Based on their relative fair values, one-third of the purchase price was allocated to the land and two-thirds to the building. Furniture and fixtures were purchased separately from office equipment on the same
On July 15, 2024, Cottonwood Industries sold a patent and equipment to Roquemore Corporation for $750,000 and $325,000, respectively. On the date of the sale, the book value of the patent was $120,000, and the book value of the equipment was $400,000 (cost of $550,000 less accumulated depreciation
In 2024, the Marion Company purchased land containing a mineral mine for $1,600,000. Additional costs of $600,000 were incurred to develop the mine. Geologists estimated that 400,000 tons of ore would be extracted. After the ore is removed, the land will have a resale value of $100,000. To aid in
The Cummings Company charged various expenditures made during 2024 to an account called repairs and maintenance expense. You have been asked by your supervisor in the company’s internal audit department to review the expenditures to determine if they were appropriately recorded. The amount of
On December 31, 2024, management of Jines Construction committed to a plan for selling an office building and its related equipment. Both are available for immediate sale. The building has a book value of $800,000 and a fair value of $900,000. The equipment has a book value of $240,000 and a fair
Amgen, Inc. is an American multinational biopharmaceutical company headquartered in Thousand Oaks, California. Located in the Conejo Valley, Amgen is the world’s largest independent biotechnology firm. Amgen reported the following in a disclosure note accompanying its 2019 financial statements ($
The following information concerns the intangible assets of Baez Corporation:a. On June 30, 2024, Baez completed the acquisition of the Johnstone Corporation for $2,000,000 in cash. The fair value of the net identifiable assets of Johnstone was $1,700,000.b. Included in the assets purchased from
On June 30, 2024, Rosetta Granite purchased equipment for $120,000. The estimated useful life of the equipment is eight years and no residual value is anticipated. An important component of the equipment is a specialized highspeeddrill that will need to be replaced in four years. The $20,000 cost
The property, plant, and equipment section of the Jasper Company’s December 31, 2023, balance sheet contained the following:The land and building were purchased at the beginning of 2019. Straight-line depreciation is used and a residual value of $40,000 for the building is anticipated.The
Mondale Winery depreciates its equipment using the group method. The cost of equipment purchased in 2024 totaled $425,000. The estimated residual value of the equipment was $40,000 and the group depreciation rate was determined to be 18%. (1) What is the annual depreciation for the group? (2) If
Dower Corporation prepares its financial statements according to IFRS. On March 31, 2024, the company purchased equipment for $240,000. The equipment is expected to have a six-year useful life with no residual value. Dower uses the straight-line depreciation method for all equipment. On December
Collins Corporation purchased office equipment at the beginning of 2022 and capitalized a cost of $2,000,000. This cost figure included the following expenditures:The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method
Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2024 before any adjusting entries or closing entries are prepared.a. On December 30, 2020, Rival Industries acquired its office building at a cost of $10,000,000. It has been
Mercury Inc. purchased equipment in 2022 at a cost of $400,000. The equipment was expected to produce 700,000 units over the next five years and have a residual value of $50,000. The equipment was sold for $210,000 part way through 2024. Actual production in each year was: 2022 = 100,000 units;
Redline Publishers, Inc. produces various manuals ranging from computer software instructional booklets to manuals explaining the installation and use of large pieces of industrial equipment. At the end of 2024, the company’s balance sheet reported total assets of $62 million and total
On July 1, 2019, Farm Fresh Industries purchased a specialized delivery truck for $126,000. At the time, Farm Fresh estimated the truck to have a useful life of eight years and a residual value of $30,000. On March 1, 2024, the truck was sold for $58,000. Farm Fresh uses the straight-line
Early in 2024, the Excalibur Company began developing a new software package to be marketed. The project was completed in December 2024 at a cost of $6 million. Of this amount, $4 million was spent before technological feasibility was established. Excalibur expects a useful life of five years for
At the beginning of 2022, Robotics Inc. acquired a manufacturing facility for $12 million. $9 million of the purchase price was allocated to the building. Depreciation for 2022 and 2023 was calculated using the straight-line method, a 25-year useful life, and a $1 million residual value. In 2024,
Imani West, CEO of West Industries, stopped by the company’s finance department with a question. “I am considering having West Industries purchase bonds of Triton Corporation as an investment. Our auditor told me that ordinary changes in the market value of this investment may or may not affect
Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2024. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid
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 material also is available under the Investor Relations link at the company’s website
The following disclosure note appeared in the July 27, 2019, annual report of Cisco Systems, Inc. Note 9: Available-for-Sale Debt Investments and Equity Investments (in part) Available-for-sale investments as of July 27, 2019, and July 28, 2018, were as follows:Note 9 also indicates that, during
S&L Financial buys and sells securities expecting to earn profits on short-term differences in price. Assume that on December 27, 2024, S&L purchased Coca-Cola bonds at par for $875,000 and sold the bonds on January 3, 2025, for $880,000. At December 31, the bonds had a fair value of
Fuzzy Monkey Technologies, Inc., purchased as a short-term investment $80 million of 8% bonds, dated January 1, on January 1, 2024. Management intends to include the investment in a short-term, active trading portfolio. For bonds of similar risk and maturity the market yield was 10%. The price paid
Mills Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2024. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 4% for bonds of similar risk and maturity. Mills paid $280
Microsoft’s 2020 10-K includes the following information relevant to its available-for-sale investments in Note 17—Accumulated Other Comprehensive Income (Loss):Required:1. Prepare a journal entry to record unrealized gains for 2020. (Hint: $3,987 is net of tax effects, so you will need to add
FF&T Corporation is a confectionery wholesaler that frequently buys and sells securities to meet various investment objectives. The following selected transactions relate to FF&T’s investment activities during the last two months of 2024. At November 1, FF&T held $48 million of
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 year ended December 31, 2019, are available in Connect. This material is also available under the
For the Coca-Cola bonds described in BE 12–2, prepare journal entries to record (a) any unrealized gains or losses occurring in 2024 and (b) the sale of the bonds in 2025.Data from in BE 12-2S&L Financial buys and sells securities expecting to earn profits on short-term differences in price.
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $80 million of 8% bonds, dated January 1, on January 1, 2024. Management intends to have the investment available for sale when circumstances warrant. For bonds of similar risk and maturity the market yield was 10%. The price paid
S&L Financial buys and sells securities which it classifies as available-for-sale. Assume that on December 27, 2024, S&L purchased Coca-Cola bonds at par for $875,000 and sold the bonds on January 3, 2025, for $880,000. At December 31, the bonds had a fair value of $873,000, and S&L has
The following are excerpts from the 2019 financial statements of Renault, a large French automobile manufacturer.In view of this situation, Renault is considered to exercise significant influence over Nissan, and therefore uses the equity method to include its investment in Nissan in the
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2024. The company buys debt securities, intending to profit from short-term differences in price and maintaining them in an active trading portfolio. Ornamental’s fiscal year ends on
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $80 million of 8% bonds, dated January 1, on January 1, 2024. Management intends to have the investment available for sale when circumstances warrant. When the company purchased the bonds, management elected to account for them
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2024. The company buys debt securities, not intending to profit from short-term differences in price and not necessarily to hold debt securities to maturity, but to have them available
General Motors invests in securities of other companies. Access GM’s 2019 10-K (which includes financial statements) using EDGAR at www.sec.gov.Required:1. What is the amount and classification of any AFS investment securities reported in the balance sheet? In which current and noncurrent asset
For the Coca-Cola bonds described in BE 12–4, prepare journal entries to record (a) any unrealized gains or losses occurring in 2024 and (b) the sale of the bonds in 2025, including recognition of any unrealized gains in 2025 prior to sale and reclassification of amounts out of OCI.Data from in
Tanner-UNF Corporation acquired as an investment $240 million of 6% bonds, dated July 1, on July 1, 2024. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The
S&L Financial buys and sells securities that it typically classifies as available-for-sale. Assume that on December 27, 2024, S&L purchased Coca-Cola bonds at par for $875,000 and sold the bonds on January 3, 2025, for $880,000. At December 31, the bonds had a fair value of $873,000. When
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2024. The company buys equity securities as noncurrent investments. None of Ornamental’s investments are large enough to exert significant influence on the investee. Ornamental’s
Obtain the 2019 annual report of FCA Group (archived at www.stellantis.com), which manufactures Fiat-brand automobiles as well as other products.Required:Find FCA’s discussion of “Basis of Consolidation” in the “Significant Accounting Policies” note that follows the financial statements.
Rantzow-Lear Company buys and sells debt securities expecting to earn profits on short-term differences in price, and holds these investments in its trading portfolio. The company’s fiscal year ends on December 31. The following selected transactions relating to Rantzow-Lear’s trading account
Mills Corporation acquired as an investment $240 million of 6% bonds, dated July 1, on July 1, 2024. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 4% for bonds of similar risk and maturity. Mills paid $280 million for the bonds. The company
Assume that for several years Fister Links Products has held Microsoft bonds, considered by the company to be securities available-for-sale. The bonds were acquired at a cost of $500,000. At the end of 2024, their fair value was $610,000 and their amortized cost was $510,000. At the end of 2025,
American Surety and Fidelity buys and sells securities expecting to earn profits on short-term differences in price. For the first 11 months of 2024, gains from selling trading securities totaled $8 million, losses from selling trading securities were $11 million, and the company had earned $5
Amalgamated General Corporation is a consulting firm that also offers financial services through its credit division. From time to time the company buys and sells securities. The following selected transactions relate to Amalgamated’s investment activities during the last quarter of 2024 and the
Fowler Inc. purchased $75,000 of bonds on January 1, 2024. The bonds pay interest semiannually and mature in 20 years, at which time the $75,000 principal will be paid. The bonds do not pay any amounts other than interest and principal. Fowler’s intention is to collect contractual cash flows and
Loreal-American Corporation purchased several marketable securities during 2024. At December 31, 2024, the company had the investments in bonds listed below. None was held at the last reporting date, December 31, 2023, and all are considered securities available-for-sale.Required:1. Prepare
Assume the same facts as in BE 12–8, but that Fowler intends to hold the bonds until maturity. How much unrealized gain or loss would Fowler include in 2024 net income with respect to the bonds?Data from in BE 12-8Fowler Inc. purchased $75,000 of bonds on January 1, 2024. The bonds pay interest
Assume that Adams Industries holds 40,000 shares of FedEx common stock, which is not a large enough ownership interest to allow Adams to exercise significant influence over FedEx. On December 31, 2024, and December 31, 2025, the market value of the stock is $95 and $100 per share, respectively.
On January 4, 2024, Runyan Bakery paid $324 million for 10 million shares of Lavery Labeling Company common stock. The investment represents a 30% interest in the net assets of Lavery and gave Runyan the ability to exercise significant influence over Lavery’s operations. Runyan received dividends
Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2024. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $200
Turner Company owns 10% of the outstanding stock of ICA Company. During the current year, ICA paid a $5 million cash dividend on its common shares. What effect did this dividend have on Turner’s 2024 financial statements? Explain the reasoning for this effect.
On January 4, 2024, Runyan Bakery paid $324 million for 10 million shares of Lavery Labeling Company common stock. The investment represents a 30% interest in the net assets of Lavery and gave Runyan the ability to exercise significant influence over Lavery’s operations. Runyan chose the fair
Colah Company purchased $1 million of Jackson, Inc., 5% bonds at par on July 1, 2024, with interest paid semi-annually. Colah determined that it should account for the bonds as an available-for-sale investment. At December 31, 2024, the Jackson bonds had a fair value of $1.2 million. Colah sold the
Mills Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2024. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 4% for bonds of similar risk and maturity. Mills paid $280 million for
Turner Company owns 40% of the outstanding stock of ICA Company. During the current year, ICA paid a $5 million cash dividend on its common shares. What effect did this dividend have on Turner’s 2024 financial statements? Explain the reasoning for this effect.
Companies can choose the fair value option for investments that otherwise would be accounted for under the equity method. If the fair value option is chosen, the investment is shown at fair value in the balance sheet, and unrealized holding gains and losses are recognized in the income statement.
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2024, for $400 million. At the date of purchase, the book
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