Questions and Answers of Intermediate Accounting 11th

On January 1, 2024, Rick’s Pawn Shop leased a truck from Corey Motors for a six-year period with an option to extend the lease for three years. Rick’s had no significant economic incentive as of
Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2024, Rhone-Metro leased equipment to Western Soya Co. for a noncancelable stated lease term of four years ending
On January 1, 2024, Taco King leased retail space from Fogelman Properties. The 10-year finance lease requires quarterly variable lease payments equal to 3% of Taco King’s sales revenue, with a
On January 1, 2024, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to
On January 1, 2024, Worcester Construction leased International Harvester equipment from Waltham LeaseCorp.∙ Waltham LeaseCorp purchased the equipment from Wellesley Harvester at a cost of
Werner Chemical, Inc., leased a protein analyzer on September 30, 2024. The five-year lease agreement calls for Werner to make quarterly lease payments of $391,548, payable each September 30,
NutraLabs, Inc., leased a protein analyzer to Werner Chemical, Inc., on September 30, 2024.∙ NutraLabs manufactured the machine at a cost of $5 million.∙ The five-year lease agreement calls for
Federated Fabrications leased a tooling machine on January 1, 2024, for a three-year period ending December 31, 2026.∙ The lease agreement specified annual payments of $36,000 beginning with the
To raise operating funds, North American Courier Corporation sold its building on January 1, 2024, to an insurance company for $500,000 and immediately leased the building back.∙ The lease is for a
On January 1, 2024, Harlon Consulting entered into a three-year lease for new office space agreeing to lease payments of $7,000 in 2024, $6,000 in 2025, and $5,000 in 2026. Payments are due on
Lahiri Leasing purchased a single-engine plane for $400,000 and leased it to Red Baron Flying Club for its fair value of $645,526 on January 1, 2024. Terms of the lease agreement and related facts
Chance Enterprises leased equipment from Third Bank Leasing on January 1, 2024. Chance elected the short-term lease option.Required:Prepare appropriate entries for Chance from the beginning of the
Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2024, Rhone-Metro leased equipment to Western Soya Co. for a four-year period ending December 31, 2028, at which
Universal Leasing leases electronic equipment to a variety of businesses. The company’s primary service is providing alternate financing by acquiring equipment and leasing it to customers under
On January 1, 2024, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 12% rate of return for providing long-term financing. The lease
Terms of a lease agreement and related facts were as follows:a. Incremental costs of commissions for brokering the lease and consummating the completed lease transaction incurred by the lessor were
To raise operating funds, Signal Aviation sold an airplane on January 1, 2024, to a finance company for $770,000. Signal immediately leased the plane back for a 13-year period, at which time
Microsoft Corporation reported the following disclosure note in its 2020 financial statements:Required:1. Prepare a journal entry that summarizes the cash payments for operating leases during the
Listed below are several terms and phrases associated with leases. Pair each item from List A with the item from List B (by letter) that is most appropriately associated with it. List A 1. Effective
The following relate to an operating lease agreement:a. The lease term is three years, beginning January 1, 2024.b. The leased asset cost the lessor $800,000 and had a useful life of eight years with
The lease agreement and related facts indicate the following:a. Leased equipment had a retail cash selling price of $300,000. Its useful life was five years with no residual value.b. The lease term
For each of the following inventory errors occurring in 2024, determine the effect of the error on 2024’s cost of goods sold, net income, and retained earnings. Assume that the error is not
Thomas Plastics is in the process of developing a revolutionary new plastic valve. A new division of the company was formed to develop, manufacture, and market this new product. As of year-end
The plant asset and accumulated depreciation accounts of Pell Corporation had the following balances at December 31, 2023:Transactions during 2024 were as follows:a. On January 2, 2024, equipment
Walgreens Boots Alliance, Inc., reported inventories of $9,451 million and $9,333 million in its August 31, 2020, and August 31, 2019, balance sheets, respectively. Cost of goods sold for the year
Mogul Processing maintains its internal inventory records using average cost under a perpetual inventory system. The following information relates to its inventory during the year:Required:1.
AmerisourceBergen is an American drug wholesale company. The company uses the LIFO inventory method for external reporting but maintains its internal records using FIFO. The following information was
At the beginning of 2024, a company adopts the dollar-value LIFO inventory method for its one inventory pool. The pool’s value on that date was $1,400,000. The 2024 ending inventory valued at
The MegaMart Company began 2024 with inventory of 10,000 units at a cost of $7 per unit. During 2024, 50,000 units were purchased for $8.50 each. Sales for the year totaled 54,000 units leaving 6,000
The table below contains selected information from recent financial statements of The Home Depot, Inc., and Lowe’s Companies, Inc., two companies in the home improvement retail industry ($ in
On January 1, 2024, a company adopted the dollar-value LIFO method for its one inventory pool. The pool’s value on this date was $660,000. The 2024 and 2025 ending inventory valued at year-end
Mercury Company has only one inventory pool. On December 31, 2024, Mercury adopted the dollar-value LIFO inventory method. The inventory on that date using the dollar-value LIFO method was $200,000.
Cars Electronics adopted the dollar-value LIFO method on January 1, 2024, when the inventory value of its one inventory pool was $720,000. The company decided to use an external index, the Consumer
On January 1, 2024, Displays Incorporated had the following account balances:From January 1 to December 31, the following summary transactions occurred:a. Purchased inventory on account for
On January 1, 2024, the general ledger of Tripley Company included the following account balances:The $30,000 beginning balance of inventory consists of 300 units, each costing $100. During January
A1 Electronics has one product in its ending inventory. Per unit data consist of the following: cost, $20; selling price, $30; selling costs, $4. What unit value should A1 use when applying the lower
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
Han Company has three products in its ending inventory. Specific per unit data at the end of the year for each of the products are as follows:Required:What unit values should Han use for each of its
York Co. sells one product, which it purchases from various suppliers. York’s trial balance at December 31, 2024, included the following accounts:York Co.’s inventory purchases during 2024 were
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
Ace Hardware Store sells two product categories, tools and paint products. Information pertaining to its year-end inventory is as follows:Required:1. Determine the carrying value of inventory at
A1 Electronics has one product in its ending inventory. Per unit data consist of the following: cost, $20; replacement cost, $18; selling price, $30; selling costs, $4. The normal profit is 30% of
Action and Fashion (A&F) Company is a specialty retail company operating over 1,000 stores globally. The following disclosure note was included in the financial statements:Required:1. What
Han Company has three products in its ending inventory. Specific per unit data at the end of the year for each of the products are as follows:Required:What unit values should Han use for each of its
On February 26, a hurricane destroyed the entire inventory stored in a warehouse owned by the Rockport Corporation. The following information is available from the records of the company’s periodic
Danville Bottlers is a wholesale beverage company. Danville uses the FIFO inventory method to determine the cost of its ending inventory. Ending inventory quantities are determined by a physical
Southern Distributors, Inc., supplies ice cream shops with various toppings for making sundaes. On November 17, 2024, a fire resulted in the loss of all of the toppings stored in one section of the
Amax Corporation estimates that it lost $75,000 in inventory from a recent flood. The following information is available from the records of the company’s periodic inventory system: beginning
Eddie’s Galleria sells billiard tables. The company has the following purchases and sales for 2024.Eddie is worried about the company’s financial performance. He has noticed an increase in the
Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold. Data for 2024 are as follows:The company records sales net of employee discounts. Employee
This exercise is a continuation of BE 9–11. During 2025 (the following year), purchases at cost and retail were $168,000 and $301,000, respectively. Net markups, net markdowns, and net sales for
Raleigh Department Store uses the conventional retail method for the year ended December 31, 2022. Available information follows:a. The inventory at January 1, 2022, had a retail value of $45,000 and
On January 1, 2024, Pet Friendly Stores adopted the retail inventory method. Inventory transactions at both costnand retail, and cost indexes for 2024 and 2025 are as follows:Required:1. Estimate the
Colonial Corporation uses the retail method to value its inventory. The following information is available for the year:Required:Determine ending inventory and cost of goods sold by applying the
In 2024, Clear Window and Glass changed its inventory method from FIFO to LIFO. Inventory at the end of 2023 is $150,000. Describe the steps Clear Window and Glass should take to report this change.
You have been hired as the new controller for the Radiance Company. Shortly after joining the company in 2024, you discover the following errors related to the 2022 and 2023 financial statements:a.
In 2024, Waterway International, Inc.’s controller discovered that ending inventories for 2022 and 2023 were overstated by $200,000 and $500,000, respectively. Determine the effect of the errors on
The December 31, 2024, inventory of Tog Company, based on a physical count, was determined to be $450,000. Included in that count was a shipment of goods received from a supplier at the end of the
Refer to the situation described in BE 9–15. What steps would be taken to report the error in the 2024 financial statements?Data from in BE 9-15In 2024, Waterway International, Inc.’s controller
It is discovered in 2024 that ending inventory in 2022 was understated. What is the effect of the understatement on the following: 2022: 2023: Cost of goods sold Net income Ending retained
Aztec Corporation uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available for the month of September:The
Capwell Corporation uses a periodic inventory system. The company’s ending inventory on December 31, 2024, its fiscal-year end, based on a physical count, was determined to be $326,000. Capwell’s
On January 1, 2024, the Brunswick Hat Company adopted the dollar-value LIFO retail method. The following data are available for 2024:Required:Calculate the estimated ending inventory and cost of
In November 2024, the Brunswick Company signed two purchase commitments. The first commitment requires Brunswick to purchase 10,000 units of inventory at $10 per unit by December 15, 2024. The second
Canova Corporation adopted the dollar-value LIFO retail method on January 1, 2024. On that date, the cost of the inventory on hand was $15,000 and its retail value was $18,750. Information for 2024
In 2024, Hopyard Lumber changed its inventory method from LIFO to FIFO. Inventory at the end of 2023 of $127,000 would have been $145,000 if FIFO had been used. Inventory at the end of 2024 is
Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2024, the company decided to switch to the average cost method. Data
Lance-Hefner Specialty Shoppes decided to use the dollar-value LIFO retail method to value its inventory. Accounting records provide the following information:Related retail price indexes are as
In 2024, CPS Company changed its method of valuing inventory from the FIFO method to the average cost method. At December 31, 2023, CPS’s inventories were $32 million (FIFO). CPS’s records
Goldmeyer Company has used the FIFO method of inventory valuation since it began operations in 2021. Goldmeyer decided to change to the average cost method for determining inventory costs at the
During 2024, WMC Corporation discovered that its ending inventories reported in its financial statements were misstated by the following material amounts:WMC uses a periodic inventory system and the
A company began 2024 with 10,000 units of inventory on hand. The cost of each unit was $5.00. During 2024, an additional 30,000 units were purchased at a single unit cost, and 20,000 units remained
At the beginning of 2024, a company adopted the dollar-value LIFO (DVL) inventory method. On that date the value of its one inventory pool was $84,000. The company uses an internally generated cost
Altira Corporation provides the following information related to its inventory during the month of August 2024:Required:Using calculations based on a periodic inventory system, determine the
Refer to the situation described in BE 8–12. SAM uses a periodic inventory system. Calculate ending inventory and cost of goods sold for January using (1) FIFO and (2) average cost.Data from in BE
Inverness Steel Corporation is a producer of flat-rolled carbon, stainless and electrical steels, and tubular products. The company’s income statement for the 2024 fiscal year reported the
Comfort Company purchased 100 units of inventory on November 17, 2024. The units have a list price of $500 each, but Comfort was given a 30% trade discount. The terms of the sale were 2/10, n/30.
Cast Iron Grills, Inc., manufactures premium gas barbecue grills. The company reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. Cast Iron’s
Refer to the situation described in BE 8–10. Prepare the necessary journal entries assuming that VTC uses the net method to account for purchase discounts.Data from in BE 8-10On December 28, 2024,
Cansela Corporation reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. The company began 2024 with inventory of 4,500 units of its only product. The
On July 15, 2024, the Niche Car Company purchased 1,000 tires from the Treadwell Company for $50 each. The terms of the sale were 2/10, n/30. Nixon uses a perpetual inventory system and the net
A company reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. The company’s records under this system reveal the following inventory layers at the
On December 28, 2024, Videotech Corporation (VTC) purchased 10 units of a new satellite uplink system from Tristar Communications for $25,000 each. The terms of each sale were 1/10, n/30. VTC uses
On July 15, 2024, the Niche Car Company purchased 1,000 tires from the Treadwell Company for $50 each. The terms of the sale were 2/10, n/30. Niche uses a perpetual inventory system and the gross
Maxi Corporation uses the unit LIFO inventory method. The costs of the company’s products have been steadily rising since the company began operations in 2008, and cost increases are expected to
Refer to the situation described in BE 8–8. Record (1) the purchase of inventory on account (2) the purchase return, assuming the company uses a periodic inventory system.Data from in BE 8-8A
Auto Dealers Inc. sells a handmade automobile as its only product. Each automobile is identical; however, they can be distinguished by their unique ID number. At the beginning of 2024, Auto Dealers
A company purchased inventory on account for $250,000. The company returned $20,000 of the inventory to the supplier for credit. Record (1) the purchase of inventory on account (2) the purchase
Topanga Group began operations early in 2024. Inventory purchase information for the quarter ended March 31, 2024, for Topanga’s only product is provided below. The unit costs include the cost of
The Kwik Company’s inventory balance on December 31, 2024, was $165,000 (based on a 12/31/2024 physical count) before considering the following transactions:1. Goods shipped to Kwik f.o.b.
You were recently hired to work in the controller’s office of the Balboa Lumber Company. Your boss, Alfred Eagleton, took you to lunch during your first week and asked a favor. “Things have been
A company purchased inventory on account for $100,000. Freight charges to have the inventory shipped to the company’s location were $5,000 (paid in cash). Record (1) the purchase of inventory on
Jillet Corporation began the year with inventory of 10,000 units of its only product. The units cost $8 each. The company uses a perpetual inventory system and the FIFO cost method. The following
Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system), find the annual report (10-K) for Coca-Cola and Pepsico for the year ended December 2019. Locate the “Consolidated
On January 1, 2024, the general ledger of 3D Family Fireworks includes the following account balances:During January 2024, the following transactions occur:1. January 2 Provide services to customers
Kryoton Corporation shipped goods to a customer f.o.b. destination on December 29, 2024. The goods arrived at the customer’s location in January. In addition, one of Kryoton’s major suppliers
Harrison Company maintains a checking account at the First National City Bank. The bank provides a bank statement along with canceled checks on the last day of each month. The July 2024 bank
At January 1, 2024, Clayton Hoists Inc. owed Third BancCorp $12 million, under a 10% note due December 31, 2025. Interest was paid last on December 31, 2022. Clayton was experiencing severe financial
Loucks Company established a $200 petty cash fund on October 2, 2024. The fund is replenished at the end of each month. At the end of October 2024, the fund contained $37 in cash and the following
The petty cash fund of Ricco’s Automotive contained the following items at the end of September 2024:The petty cash fund was established at the beginning of September with a transfer of $150 from

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