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intermediate accounting 11th
Intermediate Accounting 11th Edition David Spiceland - Solutions
At December 31, 2024, Hull-Meyers Corp. had the following investments that were purchased during 2024, its first year of operations:No investments were sold during 2024. All securities except Security D and Security F are considered shortterm investments. None of the fair value changes is
Kim Company bought 30% of the shares of Phelps, Inc., at the start of 2024. Kim paid $10 million for the shares. Thirty percent of the book value of Phelps’s net assets is $8 million, and the difference of $2 million is due to land that Phelps owns that has appreciated in value. During 2024,
On January 1, 2024, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $150,000. The Cortland bonds have a stated interest rate of 6%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market
On January 2, 2024, Miller Properties paid $19 million for 1 million shares of Marlon Company’s 6 million outstanding common shares. Miller’s CEO became a member of Marlon’s board of directors during the first quarter of 2024. The carrying amount of Marlon’s net assets was $66 million.
At the beginning of 2024, Pioneer Products’ ownership interest in the common stock of LLB Co. increased to the point that it became appropriate to begin using the equity method of accounting for the investment. The balance in the investment account was $44 million at the time of the change but
On March 31, 2024, Chow Brothers, Inc., bought 10% of KT Manufacturing’s capital stock for $50 million. KT’s net income for the year ended December 31, 2024, was $80 million. The fair value of the shares held by Chow was $35 million at December 31, 2024. KT did not declare or pay a dividend
Turner Company purchased 40% of the outstanding stock of ICA Company for $10,000,000 on January 2, 2024. Turner elects the fair value option to account for the investment. During 2024, ICA reports $750,000 of net income, and on December 30 pays a dividend of $500,000. On December 31, 2024, the fair
Note: The loss included in NI equals the difference between the proceeds ($30 million) and the carrying value of the investment ($35 million). An additional $15 million was recognized in net income as an unrealized loss in 2024, when fair value decreased from $50 million to $35 millionOn January 2,
Feherty, Inc., accounts for its investments under IFRS No. 9 and purchased the following investments during December 2024:1. Fifty of Donald Company’s $1,000 bonds. The bonds pay semiannual interest, return principal in eight years, and include no other cash flows or other features. Feherty plans
Superior Company owns 40% of the outstanding stock of Bernard Company. During 2024, Bernard paid a $100,000 cash dividend on its common shares. What effect did this dividend have on Superior’s 2024 financial statements?
Stewart Enterprises has the following investments, all purchased prior to 2024:1. Bee Company 5% bonds, purchased at face value, with an amortized cost of $4,000,000, and classified as held-to-maturity. At December 31, 2024, the Bee investment had a fair value of $3,500,000, and Stewart calculated
On February 18, 2024, Union Corporation purchased 600 IBM bonds as a long-term investment at their face value for a total of $600,000. Union will hold the bonds indefinitely, and may sell them if their price increases sufficiently. On December 31, 2024, and December 31, 2025, the market value of
The accounting records of Jamaican Importers, Inc., at January 1, 2024, included the following:No changes occurred during 2024 in the investment portfolio.Required:Prepare appropriate adjusting entry(s) at December 31, 2024, assuming the fair value of the IBM common shares was1. $1,175,0002.
The investments of Harlon Enterprises included the following cost and fair value amounts ($ in millions):Harlon accounts for its equity investment portfolio at fair value through net income. Harlon sold its holdings of A Corporation shares on June 1, 2025, for $15 million. On September 12, it
As a long-term investment at the beginning of the 2024 fiscal year, Florists International purchased 30% of Nursery Supplies Inc.’s 8 million shares for $56 million. The fair value and book value of the shares were the same at that time. During the year, Nursery Supplies earned net income of $40
Assume the same facts as in BE 12-20, except that Wickum accounts for the investment as FVOCI rather than HTM. How would Wickum record the $300,000 decrease in credit loss?Data from in BE 12-20Wickum Corporation reports under IFRS, and recognized a $500,000 impairment of an HTM debt investment in
On December 12, 2024, an equity investment costing $80,000 was sold for $100,000. The investment was carried in the balance sheet at $75,000, and was accounted for under the equity method. An error was made in which the total of the sale proceeds was credited to the investment account.Required:1.
Fizer Pharmaceutical paid $68 million on January 2, 2024, for 4 million shares of Carne Cosmetics common stock. The investment represents a 25% interest in the net assets of Carne and gave Fizer the ability to exercise significant influence over Carne’s operations. Fizer received dividends of $1
On January 1, 2024, Cameron Inc. bought 20% of the outstanding common stock of Lake Construction Company for $300 million cash, giving Cameron the ability to exercise significant influence over Lake’s operations. At the date of acquisition of the stock, Lake’s net assets had a fair value of
Northwest Carburetor Company established a fund in 2021 to accumulate money for a new plant scheduled for construction in 2024. How should this special purpose fund be reported in Northwest’s balance sheet?
Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity, but when the bonds were acquired, Tanner-UNF decided to elect the fair value option for
On July 1, 2024, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $100 million cash, giving Gupta the ability to exercise significant influence over VB’s operations. At the date of acquisition of the stock, VB’s net assets had a total fair value of $350 million and
Lacy Construction has a noncontributory, defined benefit pension plan. At December 31, 2024, Lacy received the following information:The expected long-term rate of return on plan assets was 10%. There were no AOCI balances related to pensions on January 1, 2024. At the end of 2024, Lacy amended the
Rell Corporation reports under IFRS No. 9. Rell has an investment in Tirish, Inc., bonds that Rell accounts for at amortized cost, given that the bonds pay only interest and principal and Rell’s business purpose is to hold the bonds to maturity. Rell purchased the bonds for €10,000,000. As of
At December 31, 2023, the balance sheet of Meca International included the following shareholders’ equity accounts:Required:Assuming that Meca International views its share buybacks as treasury stock, record the appropriate journal entryfor each of the following transactions:1. On February 12,
Classified Electronics has an unfunded retiree health care plan. Each of the company’s three employees has been with the firm since its inception at the beginning of 2023. As of the end of 2024, the actuary estimates the total net cost of providing health care benefits to employees during their
The EPBO for Branch Industries at the end of 2024 was determined by the actuary to be $20,000 as it relates to employee Will Lawson. Lawson was hired at the beginning of 2010. He will be fully eligible to retire with health care benefits after 15 more years but is expected to retire in 25 years.
On January 1, 2024, Hugh Morris Comedy Club (HMCC) granted 1 million stock options to key executives exercisable for 1 million shares of the company’s common stock at $20 per share. The stock options are intended as compensation for the next three years. The options are exercisable within a
On December 31, 2023, Ainsworth, Inc., had 600 million shares of common stock outstanding.∙ Twenty million shares of 8%, $100 par value cumulative, nonconvertible preferred stock were sold on January 2, 2024.∙ On April 30, 2024, Ainsworth purchased 30 million shares of its common stock as
Assume all of the same facts and scenarios as E 12–30, except that Bloom Corporation classifies its Taylor investment as AFS.Data from in E 12-30Bloom Corporation purchased $1,000,000 of Taylor Company 5% bonds, at their face amount, with the intent and ability to hold the bonds until they
Bloom Corporation purchased $1,000,000 of Taylor Company 5% bonds, at their face amount, with the intent and ability to hold the bonds until they matured in 2028, so Bloom classifies its investment as HTM. Unfortunately, a combination of problems at Taylor Company and in the debt securities market
Below are two unrelated situations relating to life insurance.Required:Prepare the appropriate journal entry for each situation.1. Ford Corporation owns a whole life insurance policy on the life of its president. Ford Corporation is the beneficiary. The insurance premium is $25,000. The cash
Edible Chemicals Corporation owns a $4 million whole life insurance policy on the life of its CEO, naming Edible Chemicals as beneficiary. The annual premiums are $70,000 and are payable at the beginning of each year. The cash surrender value of the policy was $21,000 at the beginning of
Colah Company purchased $1 million of Jackson, Inc., 5% bonds at their face amount on July 1, 2024, with interest paid semi-annually. The bonds mature in 20 years but Colah planned to keep them for less than three years, and classified them as available for sale investments. When the bonds were
As a long-term investment at the beginning of the 2024 fiscal year, Florists International purchased 30% of Nursery Supplies Inc.’s 8 million shares of capital stock for $56 million. The fair value and book value of the shares were the same at that time. The company realizes that this investment
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
On November 1, 2024, Quantum Technology, a geothermal energy supplier, borrowed $16 million cash to fund a geological survey. The loan was made by Nevada BancCorp under a noncommitted short-term line of credit arrangement. Quantum issued a nine-month, 12% promissory note. Interest was payable at
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
Blanton Plastics, a household plastic product manufacturer, borrowed $14 million cash on October 1, 2024, to provide working capital for year-end production. Blanton issued a four-month, 12% promissory note to L&T Bank under a prearranged short-term line of credit. Interest on the note was
A fellow accountant has solicited your opinion regarding the classification of short-term obligations repaid prior to being replaced by a long-term security. Cheshire Foods, Inc., issued $5,000,000 of short-term commercial paper during 2023 to finance construction of a plant. At September 30, 2024,
The Heinrich Tire Company recalled a tire in its subcompact line in December 2024. Costs associated with the recall were originally thought to approximate $50 million. Now, though, while management feels it is probable the company will incur substantial costs, all discussions indicate that $50
Consider the following liabilities of Future Brands, Inc., at December 31, 2024, the company’s fiscal year-end. Should they be reported as current liabilities or long-term liabilities?1. $77 million of 8% notes are due on May 31, 2028. The notes are callable by the company’s bank, beginning
On July 1, 2024, Li-Ma Industries issued nine-month notes in the amount of $400 million. Interest is payable at maturity.Required:Determine the amount of interest expense that should be recorded in a year-end adjusting entry under each of the following independent assumptions: 1. 2. 3. 4. Interest
The following selected transactions relate to liabilities of Interstate Farm Equipment Company for December 2024. Interstate’s fiscal year ends on December 31.Required:Prepare the appropriate journal entries for these transactions.1. On December 15, received $7,500 from Bradley Farms toward the
The information that follows pertains to Richards Refrigeration, Inc.: a. At December 31, 2024, temporary differences existed between the financial statement book values and the tax bases of the following ($ in millions):b. No temporary differences existed at the beginning of 2024.c. Pretax
IGF Foods Company is a large, primarily domestic, consumer foods company involved in the manufacture, distribution, and sale of a variety of food products. Industry averages are derived from Troy’s The Almanac of Business and Industrial Financial Ratios. Following are the 2024 and 2023
Camden Biotechnology began operations in September 2024. The following selected transactions relate to liabilities of the company for September 2024 through March 2025. Camden’s fiscal year ends on December 31. Its financial statements are issued in April.2024a. On September 5, opened checking
The following selected transactions relate to liabilities of United Insulation Corporation. United’s fiscal year ends on December 31.Required:Prepare the appropriate journal entries through the maturity of each liability. 2024 Jan. 13 Feb. 1 May 1 Dec. 1 31 2025 Sept. 1 Negotiated a revolving
The following is an excerpt from ABC News:Required:1. Why must Microsoft report this charge of over $1 billion entirely in one quarter, the last quarter of the company’s fiscal year?2. When the announcement was made, analyst Richard Doherty stated that either a high number of Xbox 360s will fail
On January 1, 2024, Poplar Fabricators Corporation agreed to grant its employees two weeks of vacation each year, with the stipulation that vacations earned each year can be taken the following year. For the year ended December 31, 2024, Poplar Fabricators’ employees each earned an average of
As a second-year financial analyst for A.J. Straub Investments, you are performing an initial analysis on Reliant Pharmaceuticals. A difficulty you’ve encountered in making comparisons with its chief rival is that Reliant uses U.S. GAAP, and the competing company uses International Financial
Wang Corporation issued $12 million of commercial paper on March 1 on a nine-month note. Interest was discounted at issuance at a 9% discount rate. Prepare the journal entry for the issuance of the commercial paper and its repayment at maturity.
The unadjusted trial balance of the Manufacturing Equitable at December 31, 2024, the end of its fiscal year, included the following account balances. Manufacturing’s 2024 financial statements were issued on April 1, 2025.Other information:a. The bank notes, issued August 1, 2024, are due on July
JWS Transport Company’s employees earn vacation time at the rate of 1 hour per 40-hour work period. The vacation pay vests immediately (that is, an employee is entitled to the pay even if employment terminates). During 2024, total salaries paid to employees equaled $404,000, including $4,000 for
The balance sheet at December 31, 2024, for Nevada Harvester Corporation includes the liabilities listed below:a. 11% bonds with a face amount of $40 million were issued for $40 million on October 31, 2015. The bonds mature on October 31, 2035. Bondholders have the option of calling (demanding
Reporting requirements for contingent liabilities under IFRS differ somewhat from those under U.S. GAAP.Required:For each of the following, access the online version of the indicated financial report and answer the question. Also compare reporting under IFRS to similar reporting under U.S. GAAP.1.
On December 12, 2021, Park Electronics received $24,000 from a customer toward a cash sale of $240,000 of diodes to be completed on January 16, 2025. What journal entries should Park record on December 12 and January 16?
Honda Motor Company, Ltd., is a Japanese manufacturer of automobiles, motorcycles, and power equipment. The company’s fiscal year ends Mach 31, 2020, and it filed its financial statements with the SEC on June 22, 2020. On August 26, 2020, Reuters reported that Honda would make a $85 million
In the March 2025 meeting of Valleck Corporation’s board of directors, a question arose as to the way a possible obligation should be disclosed in the forthcoming financial statements for the year ended December 31. A veteran board member brought to the meeting a draft of a disclosure note that
Bavarian Bar and Grill opened for business in November 2024. During its first two months of operation, the restaurant sold gift cards in various amounts totaling $5,200, mostly as Christmas presents. They are redeemable for meals within two years of the purchase date, although experience within the
The long-term liabilities section of CPS Transportation’s December 31, 2023, balance sheet included the following:a. A lease liability with 15 remaining lease payments of $10,000 each, due annually on January 1:The incremental borrowing rate at the inception of the lease was 11% and the
Russell-James Corporation is a diversified consumer products company. During 2024, Russell-James discontinued its line of cosmetics, which constituted discontinued operations for financial reporting purposes. As vice president of the food products division, you are interested in the effect of the
Eastern Manufacturing is involved with several situations that possibly involve contingencies. Each is described below. Eastern’s fiscal year ends December 31, and the 2024 financial statements are issued on March 15, 2025.a. Eastern is involved in a lawsuit resulting from a dispute with a
In Lizzie Shoes’ experience, gift cards that have not been redeemed within 12 months are not likely to be redeemed. Lizzie Shoes sold gift cards for $18,000 during August 2024. $4,000 of cards were redeemed in September 2024, $3,000 in October, $2,500 in November, and $2,000 in December 2024. In
Diversified Semiconductors sells perishable electronic components. Some must be shipped and stored in reusable protective containers. Customers pay a deposit for each container received. The deposit is equal to the container’s cost. They receive a refund when the container is returned. During
Holmes Watson (HW) is considering what the effect would be of reporting its liabilities under IFRS rather than U.S. GAAP. The following facts apply:a. HW is defending against a lawsuit and believes it is virtually certain to lose in court. If it loses the lawsuit, management estimates it will need
Tru Developers, Inc., sells plots of land for industrial development. Tru recognizes income for financial reporting purposes in the year it sells the plots. For some of the plots sold this year, Tru took the position that it could recognize the income for tax purposes when the installments are
J-Matt, Inc., had pretax accounting income of $291,000 and taxable income of $300,000 in 2024. The only difference between accounting and taxable income is estimated product warranty costs of $9,000 for sales in 2024. Warranty payments are expected to be in equal amounts over the next three years
Syer Co. reports net operating income (loss) for financial reporting and tax purposes in each year as follows:Syer’s 2020 NOL is driven by an unfortunate obsolescence of its primary product. Given great uncertainty in Syer’s future profitability, Syer’s management does not believe it is more
At the end of 2023, Payne Industries had a deferred tax asset account with a balance of $25 million attributable to a temporary book-tax difference of $100 million in a liability for estimated expenses. At the end of 2024, the temporary difference is $64 million. Payne has no other temporary
Assume the same facts as in E 16-23. During 2025, Baginski reported income of $200,000 for financial reporting and tax purposes. The enacted tax rate is 25%.Required:1. Prepare the journal entry to recognize Baginski’s 2025 tax expense or tax benefit.2. Show the lower portion of the 2025 income
Superior Developers sells lots for residential development. When lots are sold, Superior recognizes income for financial reporting purposes in the year of the sale. For some lots, Superior recognizes income for tax purposes when the cash is collected. In 2023, Superior sold lots for $20 million,
For the year ended December 31, 2024, Fidelity Engineering reported pretax accounting income of $978,000. Selected information for 2024 from Fidelity’s records follows:Fidelity’s income tax rate is 25%. At January 1, 2024, Fidelity’s records indicated balances of zero and $7,500 in its
At the end of 2023, Payne Industries had a deferred tax asset account with a balance of $25 million attributable to a temporary book-tax difference of $100 million in a liability for estimated expenses. At the end of 2024, the temporary difference is $64 million. Payne has no other temporary
An August 11, 2020 article from World Oil Magazine had the following headline: “Marathon Sets Up for $1.1 Billion Tax Refund via Coronavirus Aid Law.” * The article goes on to indicate, “That measure included a tax provision that allows companies to immediately deduct net operating losses and
Allmond Corporation, organized on January 3, 2024, had pretax accounting income of $14 million and taxable income of $20 million for the year ended December 31, 2024. The 2024 tax rate is 25%. The only difference between accounting income and taxable income is estimated product warranty costs.
What is intraperiod tax allocation?
LossCo reported a net operating loss of $25 million for financial reporting and tax purposes. Taxable income last year and the previous year, respectively, was $20 million and $15 million. The enacted tax rate each year is 25%.Assume that LossCo qualifies as a type of company that is allowed to
Southern Atlantic Distributors began operations in January 2024 and purchased a delivery truck for $40,000. Southern Atlantic plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2024, 30%
The date is November 15, 2020. You are the new controller for Engineered Solutions. The company treasurer, Randy Patey, believes that as a result of pending legislation, the currently enacted 40% income tax rate may be decreased for 2021 to 25% and is uncertain which tax rate to apply in
What are the primary ways in which the CARES Act changed accounting for the tax effects of NOLs?
The date is January 10, 2023, and Maryton Hotels’ CFO George Smith is looking with dismay at his company’s financial performance during 2022. Already facing stiff competition from other hotel chains as well as Airbnb, Maryton had run an operating loss in 2020 and 2021 and had responded by
The CARES Act allows some companies to (1) save more taxes and (2) obtain those savings faster. How does the Act enable those benefits?
Arnold Industries has pretax accounting income of $32 million for the year ended December 31, 2024. The tax rate is 25%. The only difference between accounting income and taxable income relates to an operating lease in which Arnold is the lessee. The inception of the lease was December 28, 2024. An
Krand Corp had been a very profitable company until the current tax year, in which it generated an NOL because a competitor launched a product that is much better than Krand’s. Krand recognized a deferred tax asset associated with the NOL carryforward, as well as an offsetting valuation allowance
Hwang Inc. had taxable income of $100,000 in 2017, no income or loss in 2018 and 2019, and an NOL of $50,000 in 2020. The applicable tax rate was 40% in 2017 and 25% in 2018 and thereafter. Prepare the journal entry that Hwang would make in 2020, assuming it accounted for the NOL under the CARES
Bronson Industries reported a deferred tax liability of $5 million for the year ended December 31, 2023, related to a temporary difference of $20 million. The tax rate was 25%. The temporary difference is expected to reverse in 2025, at which time the deferred tax liability will become payable.
Wynn Farms reported a net operating loss of $100,000 for financial reporting and tax purposes in 2024. The enacted tax rate is 25%. Taxable income, tax rates, and income taxes paid in Wynn’s first four years of operation were as follows:Required:1. Prepare the journal entry to recognize the
Wynn Farms reported a net operating loss of $160,000 for financial reporting and tax purposes in 2024. The enacted tax rate is 25%. Taxable income, tax rates, and income taxes paid in Wynn’s first four years of operation were as follows:Required:1. NOL carrybacks are not allowed for most
Listed below are ten independent situations. For each situation indicate (by letter) whether it will create a deferred tax asset (A), a deferred tax liability (L), or neither (N). Situation 1. Advance payments on insurance, tax deductible when paid. 2. Estimated warranty costs; tax deductible when
Shwonson Industries reported a deferred tax asset of $5 million for the year ended December 31, 2023, related to a temporary difference of $20 million. The tax rate was 25%. The temporary difference is expected to reverse in 2025, at which time the deferred tax asset will reduce taxable income.
Case Development began operations in December 2024. When property is sold on an installment basis, Case recognizes installment income for financial reporting purposes in the year of the sale. For tax purposes, installment income is reported by the installment method. The 2024 installment income was
Case Development began operations in December 2024. When property is sold on an installment basis, Case recognizes installment income for financial reporting purposes in the year of the sale. For tax purposes, installment income is reported by the installment method. 2024 installment income was
On December 31, DePaul Corporation had the following cumulative temporary differences associated with its operations:1. Estimated warranty expense, $16 million temporary difference: expense recorded in the year of the sale; tax deductible when paid (one-year warranty).2. Depreciation expense, $120
As of December 31, 2024, Lange Company has the following deferred tax assets and liabilities:Required:1. Assume that all of Lange’s deferred tax assets and liabilities are in the same tax jurisdiction. How would deferred taxes be shown on Lange’s balance sheet?2. Assume that the deferred tax
Listed below are several terms and phrases associated with accounting for income taxes. Pair each item from List A with the item from List B (by letter) that is most appropriately associated with it. List A 1. No deferred tax consequences. 2. Originates, then reverses. 3. Revise deferred tax
During 2024, its first year of operations, Baginski Steel Corporation reported a net operating loss of $360,000 for financial reporting and tax purposes. The enacted tax rate is 25%.Required:1. Prepare the journal entry to recognize the income tax benefit of the net operating loss. Assume the
Mallock Inc. reports net operating income (loss) for financial reporting and tax purposes in each year as follows:Mallock’s federal tax rate decreased from 35% to 21% starting in 2018. Mallock accounts for its 2020 NOL under the CARES Act.Required:1. Prepare the appropriate journal entry to
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
Sachs Brands’s defined benefit pension plan specifies annual retirement benefits equal to 1.6% × service years × final year’s salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2010 and is expected to retire at the end of 2044 after 35 years’
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