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intermediate accounting
Intermediate Accounting Volume 2 4th Edition Kin Lo, George Fisher - Solutions
Prescott Appliances is a relatively new producer of commercial grade appliances. To enhance the competitiveness of its products, on July 2, 2017, the company introduced a warranty against defects for 12 months from the date of installation.The company’s products are of a sufficiently high quality
Arthur and Doyle Ltd. is a company involved in the construction of small residential complexes. Until the end of 2017, the company used the cost ratio method to estimate the percentage complete. After that point, the company switched to using estimates from architectural engineers to estimate the
Selkirk Inc. issued a 10-year bond on July 1, 2017. The $20,000,000 par bond pays $600,000 of interest on December 31 and June 30. The company has a calendar year-end. It is now February 2021. During the audit of the 2020 financial statements, it was discovered that the bond indenture allowed
On January 1, 2017, Timmins Resorts signed a long-term rental agreement with Uxbridge Properties. The agreement gave Timmins the exclusive right to use the specified property for a period of 10 years at a rental rate of $1.5 million per year paid at the beginning of each year. Timmins’ accounting
Financial information for Solnickova Inc. follows:Additional information: ■ Preferred shares were converted to common shares during the year at their book value. ■ The face value of the bonds is $400,000; they pay a coupon rate of 5% per annum. The effective rate of interest is 6% per
Quitzau’s Supplies Inc.’s income statement for the year ended December 31, 2021, follows:Additional information: ■ Accounts receivable decreased $20,000 during the year. ■ Accounts payable increased $15,000 during the year. ■ Prepaid expenses increased $5,000 during the
Angela’s Angels Corp.’s policy is to report all cash inflows from interest and dividends in the investing section and cash outflows arising from interest and dividends in the financing section. Angela’s activities for the year ended December 31, 2021, included the following: ■ Declared
Financial information for Robinson Inc. follows:Additional information: ■ Ordinary shares were redeemed during the year at their book value. ■ The face value of the bonds is $400,000; they pay a coupon rate of 7% per annum. The effective rate of interest is 6% per annum. ■ Net
Information pertaining to select activities of Rosamelia Corp. during 2021 is set out below: 1. On January 1, 2021, Rosamelia leased right-of-use equipment. The lease calls for five annual payments of $20,000 due at the beginning of the year. Rosamelia must return the equipment to the lessor
Coastal Cares Inc.’s (CCI) policy is to report all cash flows arising from interest and dividends in the operating section. The company’s activities for the year ended December 31, 2021, included the following: ■ Comprehensive income totalled $350,000, including $50,000 in other
Zippo’s financial statements as at December 31, 2021, appear below:Additional information: ■ Property, plant, and equipment costing $570,000 was sold for $422,000. ■ 100,000 ordinary shares were issued to acquire $450,000 of property, plant, and equipment. ■ $212,000 of
Valli Ltd.’s financial statements as at December 31, 2021, appear below:Supplemental information: ■ During the year, Valli exchanged 5,000 ordinary shares for plant assets having a fair value of $100,000. ■ During the year, Valli declared and issued a stock dividend of 1,000
Luke and Angie Inc.’s financial statements as at December 31, 2021, appear below:Supplemental financial information for the year ended December 31, 2021: ■ Luke and Angie exchanged 1,500 preferred shares for plant assets having a fair value of $150,000. ■ Luke and Angie declared and
The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marks-and Spencer-Annual-report-and-financial-statements-2012.pdf.InstructionsRefer to M&S’s financial
Rainmaker Company prepares its financial statements in accordance with IFRS. In 2014, Rainmaker recorded the following revaluation adjustments related to its buildings and land: The company’s building increased in value by $200,000; its land declined by $35,000. How will these revaluation
Go to the book’s companion website and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc. (a) What format(s) did these companies use to present their balance sheets? (b) How much working capital did each of these companies
The financial statements of P&G are presented in Appendix 5B. The company’s complete annual report, including the notes to the financial statements, can be accessed at the book’s companion website, www.wiley.com/college/kieso.InstructionsRefer to P&G’s financial statements and the
The partner in charge of the Kappeler Corporation audit comes by your desk and leaves a letter he has started to the CEO and a copy of the cash flow statement for the year ended December 31, 2014. Because he must leave on an emergency, he asks you to finish the letter by explaining: (1) the
The assets of Fonzarelli Corporation are presented below (000s omitted). structionsIndicate the deficiencies, if any, in the foregoing presentation of Fonzarelli Corporation’s assets.
In an examination of Arenes Corporation as of December 31, 2014, you have learned that the following situations exist. No entries have been made in the accounting records for these items. 1. The corporation erected its present factory building in 1999. Depreciation was calculated by the
Aero Inc. had the following balance sheet at December 31, 2013. During 2014, the following occurred. 1. Aero liquidated its available-for-sale investment portfolio at a loss of $5,000.
Lansbury Inc. had the following balance sheet at December 31, 2013. During 2014, the following occurred. 1. Lansbury Inc. sold part of its investment portfolio for $15,000. This
Inc. had the following balance sheet at December 31, 2013. During 2014, the following occurred. 1. Lansbury Inc. sold part of its investment portfolio for $15,000. This
Presented below is the balance sheet of Sargent Corporation for the current year, 2014. The following information is presented. 1. The current assets section includes cash $150,000, accounts receivable $170,000 less
The adjusted trial balance of Eastwood Company and other related information for the year 2014 are presented as follows. Additional information: 1. The LIFO method of inventory value is
Presented below are a number of balance sheet items for Montoya, Inc., for the current year, 2014. InstructionsPrepare a classified balance sheet in good form. Common stock authorized was 400,000
Presented below is a list of accounts in alphabetical order.Accounts Receivable Inventory—EndingAccumulated Depreciation—Buildings
Presented below is a condensed version of the comparative balance sheets for Zubin Mehta Corporation for the last two years at December 31. Additional information:Investments were sold at a loss (not extraordinary) of
The comparative balance sheets of Constantine Cavamanlis Inc. at the beginning and the end of the year 2014 are as follows. Net income of $44,000 was reported, and dividends of $23,000 were paid in 2014. New equipment was
Presented below is the adjusted trial balance of Kelly Corporation at December 31, 2014. Additional information: 1. Net loss for the year was $2,500. 2. No dividends were declared
Norma Smith is the controller of Baylor Corporation and is responsible for the preparation of the year-end financial statements. The following transactions occurred during the year. (a) On December 20, 2014, a former employee filed a legal action against Baylor for $100,000 for wrongful
Presented below are selected accounts of Yasunari Kawabata Company at December 31, 2014.The following additional information is available. 1. Inventories are valued at lower-of-cost-or-market using LIFO. 2. Equipment is recorded at cost. Accumulated depreciation, computed on a
Uhura Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented below in order to obtain additional funds for expansion.
Martinez Corporation engaged in the following cash transactions during 2014.Sale of land and building $191,000Purchase of treasury stock
Hawthorn Corporation’s adjusted trial balance contained the following accounts at December 31, 2014: Retained Earnings $120,000; Common Stock $750,000; Bonds Payable $100,000; Paid-in Capital in Excess of Par—Common Stock $200,000; Goodwill $55,000; Accumulated Other Comprehensive Loss
Thomas Corporation’s adjusted trial balance contained the following liability accounts at December 31, 2014: Bonds Payable (due in 3 years) $100,000; Accounts Payable $72,000; Notes Payable (due in 90 days) $22,500; Salaries and Wages Payable $4,000; Income Taxes Payable $7,000. Prepare the
Patrick Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2014: Prepaid Rent $12,000; Goodwill $50,000; Franchise Fees Receivable $2,000; Franchises $47,000; Patents $33,000; Trademarks $10,000. Prepare the intangible assets section of the balance sheet.
Crane Corporation has the following accounts included in its December 31, 2014, trial balance: Equity Investments (trading) $21,000; Goodwill $150,000; Prepaid Insurance $12,000; Patents $220,000; Franchises $130,000. Prepare the intangible assets section of the balance sheet.
Identify whether each of the following descriptions of pension plans describes defined contribution plans, defined benefit plans, or both. a. Must use a pension trust to hold the plan's assets. b. Transfers risk from retirees to plan sponsors. c. Allows employees to contribute to a pension
Identify whether the following are lease characteristics relevant to the classification of a lease as a finance (capital) lease for the lessor. ਜੇ b. C. d. C. f. Lease transfers title to the lessee at the end of the lease. Lease payments include payments for related non-lease components. Lease
Identify whether the following are characteristics relevant to the classification of a lease as a finance (capital) lease for the lessor. a. b. C. d. c. f. Present value of minimum lease payments comprise at least 75% of the fair value of the leased asset (under ASPE). Present value of lease
A company issued 100,000 preferred shares and received proceeds of $6,540,000. These shares have a par value of $60 per share and pay cumulative dividends of 8%. Buyers of the preferred shares also received a detachable warrant with each share purchased. Each warrant gives the holder the right to
Brandy Dudas Maternity Wear Ltd. (BDM) had 100,000 ordinary shares outstanding during all of 2019. In 2017, BDM issued $500,000, 3% non-cumulative preferred shares. Each $100 preferred share is convertible into one ordinary share. BDM also had 6,000, $100 cumulative preferred shares outstanding
English as a second language (ESL) has been a significant part of the Canadian education landscape for several decades, and its importance continues to grow with the increasing amount of immigration from countries where English is not the mother tongue. In addition, many individuals visit Canada
A pension plan promises to pay $30,000 at the end of each year for 25 years of the retirement period.Required:Compute the funds required to fund this pension plan at the start of the retirement period assuming: a. A discount rate of 8% b. A discount rate of 6%
It is January, and Ms. Deb. T. Laden, president of Debt Laden Inc. (Debt Laden), has just returned from an annual visit with the company’s banker, Mr. Green, to present Debt Laden’s December financial statements. Mr. Green expressed concern over Debt Laden’s profitability and debt level. In
The following are the characteristics of a lease:Required:Determine the present value of the lease payments and the appropriate classification of this lease for the lessor. Fair value of leased asset Lease payments Lease term Payment frequency Payment timing Guaranteed residual value Interest rate
On January 1, 2019, Star Company leased equipment to Planet Company. The terms of the lease are as follows:Planet uses straight-line depreciation for its property, plant, and equipment, and its year end is December 31. Required:Prepare Planet’s journal entries for the lease for 2019. Lease
Parcels Delivered Quickly (PDQ) is a public company that provides shipping and delivery services for household and commercial parcels ranging from a few grams to several hundred kilograms. The company uses a fleet of 800 trucks and vans to pick up and deliver parcels. For inter-city shipping, the
Accounting standards for leases require an assessment of whether the lease transfers substantially all the risks and rewards of ownership.Required:Discuss how these standards relate to the definition of assets in the IFRS Framework.
The following are the characteristics of a lease:Required:Determine the present value of the lease payments and the appropriate classification of this lease for the lessor. Fair value of leased asset Lease payments Lease term Payment frequency Payment timing Guaranteed residual value Interest rate
Part 1The Lilliput Transport Authority (LTA) provides public transport services in a major metro-politan area. On October 1, 2019, it entered a deal with Bus Finance Co. (BFC) to lease 100 new buses with the following terms: ■ Lease term is 9 years. ■ Useful life is 13 years. ■
Accounting standards for leases require an assessment of whether the lease transfers substantially all the risks and rewards of ownership. Required: Discuss how these standards relate to the concept of information asymmetry in financial accounting theory.
On January 1, 2019, Hanover Company (lessor) entered a lease to rent out office space. The lease requires the lessee to pay Hanover $200,000 per year, at the beginning of each year, for 10 years. The lease is non-cancellable and non-renewable. The land and building’s cost and current fair value
Longview Corporation started operations on March 1, 2019. It needs to acquire a special piece of equipment for its manufacturing operations. It is evaluating the following two options: Option 1: Lease the equipment for eight years. Lease payments would be $11,950 per year, due at the beginning
Five years ago, Tobey’s Well Being Inc. recognized an ROU asset for $50,000. Today, on January 1, 2019, Tobey exercised its option to purchase the equipment for $10,000. This ROU asset has been depreciated over its economic life of eight years on a straight-line basis. At the commencement date of
Cappy Ltd. leased equipment to Swen Company on July 1, 2019. The terms of the lease are:Swen uses straight-line depreciation for its property, plant, and equipment, and its year end is December 31. Required: a. Prepare Swen’s journal entries for the lease for 2019. b. You are the
Six years ago, Tidball Valuations Corp. leased office equipment. A $30,000 ROU asset was recognized at that time. Tidball depreciated the asset on a straight-line basis over the lease term. Provisions of the lease included a requirement to provide a $10,000 residual value guarantee. Tidball
On January 1, 2019, Archibald Industries entered into an agreement to lease office space for a five-year period. Details of the lease are: ■ Payments: $55,000 per annum first due at the commencement date. ■ Payment includes: $50,000 for office rental and $5,000 for property
On January 1, 2019, Mackenzie Yoga Studios leased exercise equipment for a four-year period. Payments are $10,000 per year, first payable at the commencement date. Of this, $9,900 of the payment is for the lease of the equipment and $100 is for liability insurance forwarded by the lessor on behalf
Brow Corp. leased equipment from Rachel Finance, with the following details: ■ Commencement date: January 1, 2019. ■ Term of lease: 4 years.■ Payments: $45,000 per annum first due at the commencement date. ■ Residual guarantee: $15,000. Expected payout is $5,000. ■
A lessee has the following amortization schedule for a particular lease: The company entered into the lease at the beginning of its fiscal year, on January 1, 2019. Depreciation follows the straight-line method. Required: Provide the appropriate presentation of this lease in the
A lessee has the following amortization schedule for a particular lease:The company entered into the lease at the beginning of its fiscal year, on January 1, 2019. Depreciation follows the straight-line method. Required:Provide the appropriate presentation of this lease in the lessee’s
LaSalle Leasing Company (lessor) agrees on January 1, 2019, to rent Rockwood Winery (lessee) the equipment that Rockwood requires to expand its production capacity to meet customers’ demands for its products. The lease agreement calls for five annual lease payments of $200,000 at the end of each
Adams Leasing (lessor) agrees on January 1, 2019, to rent Healthy Diner (HD) (lessee) the equipment that HD requires to expand its restaurant. The lease agreement calls for 10 annual lease payments of $50,000 at the beginning of each year. HD determined that the present value of the lease payments,
Yucatil Leasing (lessor) signs a lease on January 1, 2019, with Zebra Charters (lessee). The lease agreement calls for five annual lease payments of $80,000 at the beginning of each year. Yucatil’s implicit rate in the lease is 6%. Zebra, whose incremental borrowing rate is 5%, cannot readily
On April 1, 2019, Help Company entered into a five-year lease for equipment. Annual lease payments are $25,000, payable at the beginning of each lease year (April 1). At the end of the lease, possession of the equipment will revert to the lessor. The equipment has an expected useful life of five
The details of the equipment lease agreement that Taj Corp. (lessee) recently entered into with Stanger Leasing (lessor) are: ■ Commencement date: January 1, 2019. ■ Term of lease: 12 months. ■ Payments: $1,000 per month first due at the commencement date. ■ Other: Title
On January 1, 2019, Dudas Inc. entered into a 12-month, non-renewable lease to rent office equipment. The lease payment is $1,500 per month first due on January 31, 2019. The interest rate implicit in the lease is 4.8% per annum (0.4% per month) and Dudas, which has an incremental borrowing rate of
Thornhill Equipment (lessor) leased a construction crane to Vanier Construction (lessee) on January 1, 2019. The following information relates to the leased asset and the lease agreement:Both companies use the straight-line depreciation method for cranes, and they both have December 31 year
Hicks Co. leased a new computer for three years on January 1, 2019, with the following details: ■ Payments: $1,200 per annum first due at the commencement date. ■ Interest rate implicit in the lease: 5% and lessee is able to readily determine. ■ Incremental borrowing rate: 7%
Gail Inc. leased new office furniture for two years on January 1, 2019, with the following details: ■ Payments: $2,000 per annum first due at the commencement date. ■ Interest rate implicit in the lease: 5%; however, lessee is not able to readily determine this. ■ Incremental
Gidget Corp. entered into a lease on January 1, 2019, to rent a car for a three-year period. Payments are $700 per month, $600 of which is for the car rental and $100 of which is for a repairs and maintenance service agreement. The first payment is due on the commencement date. Gidget has the
Sam Inc. leased a photocopier on January 1, 2019, for a three-year period. Payments, which are first due on the commencement date, are $3,000 per year. The $3,000 is comprised of $2,500 for the photocopier rental, $400 for a maintenance agreement, and $100 for an environmental tax that the lessor
Trucks for Sale Corp. (TFS) manufactures tractor-trailer units at a cost of $89,000 per unit. On January 1, 2019, TFS offered Nate’s Trucking Inc. (NTI) the option of buying a unit for $122,000 cash or leasing it from TFS. Pertinent details are: ■ The lease offered was a four-year,
William Corp. (the lessee) leased equipment from Daniel Finance (the lessor), details of which are: ■ Commencement date: January 1, 2019. ■ Fair value of equipment: $150,000. ■ Cost of equipment to William Corp.: $150,000. ■ Term of lease: 6 years. ■ Payments due:
Salem Creamery (lessee) leases its ice cream making equipment from Big City Finance Company (lessor) under the following lease terms: ■ The lease term is five years, non-cancellable, and requires equal rental payments of $46,498 first payable on the commencement date of the lease (January 1,
On January 1, 2019, a lessor agrees to rent a truck with fair value and carrying value of $129,999 for a period of four years at an annual rental of $34,478 first payable at the commencement date. The truck’s residual value is estimated to be $20,000. The interest rate implicit in the lease is
Prairie Railroad Inc. (PRI) (the lessee) and Loco-Motive Corporation (LMC) (the lessor) enter into an agreement that requires LMC to build a diesel-electric engine to PRI’s specifications. Upon completion of the engine, PRI has agreed to lease it for a period of 12 years and to assume all costs
On January 1, 2019, Amelia Company (seller-lessee) sold a plane to Lewis Financial (buyer lessor) for its fair value of $14,000,000 and immediately leased it back under a 10-year lease at $1,676,199 per year, payable at the beginning of each year. The lease payment reflects market rents. Amelia
On January 1, 2019, Amelia Company (seller-lessee) sold a plane to Lewis Financial (buyer lessor) for its fair value of $14,000,000 and immediately leased it back under a 10-year lease at $1,676,199 per year, payable at the beginning of each year. The lease payment reflects market rents. Amelia
On January 1, 2019, Devlin Company (seller-lessee) sold heavy-duty equipment to Bancroft Bank (buyer-lessor) for its fair market value of $6,400,000 and immediately leased it back under a 20-year non-cancellable lease at $765,022 per year, first payable on the commencement date. The remaining
On January 1, 2019, Devlin Company (seller-lessee) sold heavy-duty equipment to Bancroft Bank (buyer-lessor) for its fair market value of $6,400,000 and immediately leased it back under a 20-year non-cancellable lease at $765,022 per year, first payable on the commencement date. The remaining
On January 1, 2019, Tobey Company (seller-lessee) sold excavating equipment to Eli Bank (buyer-lessor) for its fair market value of $6,400,000 and immediately leased it back under a fiveyear non-cancellable lease at $1,023,021 per year, first payable on the commencement date. The remaining useful
On January 1, 2019, Archibald Inc. (seller-lessee) sold a cargo ship to MacPherson Capital (buyer-lessor) for its fair value of $24,000,000 and immediately leased it back under a 10-year non-cancellable lease at $2,250,758 per year, first payable on the commencement date of the lease. Archibald
Koch Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2014: Cash $7,000; Land $40,000; Patents $12,500; Accounts Receivable $90,000; Prepaid Insurance $5,200; Inventory $30,000; Allowance for Doubtful Accounts $4,000; Equity Investments (trading)
Harding Corporation has the following accounts included in its December 31, 2014, trial balance: Accounts Receivable $110,000; Inventory $290,000; Allowance for Doubtful Accounts $8,000; Patents $72,000; Prepaid Insurance $9,500; Accounts Payable $77,000; Cash $30,000. Prepare the current assets
Each of the following items must be considered in preparing a statement of cash flows. Indicate where each item is to be reported in the statement, if at all. Assume that net income is reported as $90,000. (a) Accounts receivable increased from $34,000 to $39,000 from the beginning to the end
The New York Knicks, Inc. sold 10,000 season tickets at $2,000 each. By December 31, 2014, 16 of the 40 home games had been played. What amount should be reported as a current liability at December 31, 2014?
The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marks-and-Spencer-Annual-report-and-financial-statements-2012.pdf.InstructionsRefer to M&S’s financial
Below is the income statement for a British company, Avon Rubber plc. Avon prepares its financial statements in accordance with IFRS. Instructions (a) Review the Avon Rubber
Counting Crows Inc. provided the following information for the year 2014. AccountingPrepare (a) a single-step income statement for 2014, (b) a retained earnings statement for 2014, and (c) a
Go to the book’s companion website and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc. (a) What type of income format(s) is used by these two companies? Identify any differences in income statement format between these two
Identify whether the following financial instruments are (i) A basic financial asset, financial liability, or equity instrument; (ii) A derivative; or (iii) A compound financial instrument. Item a. 10-year bond payable b. Convertible debenture c. Preferred shares d. Convertible
Identify whether each of the following is a financial instrument.a. Account payableb. Note payablec. Warranty provisiond. Long-term debte. Common share
Ultramart is a chain of large discount supermarkets with 30 locations primarily in southern Ontario. The company was founded about 40 years ago. Although the company is now publicly traded, the founding family still has 30% of the 50 million common shares outstanding, which are trading around $40
In relation to stock options, identify whether each of the following statements is true or false. Item a. A stock option provides a right to buy but not a right to sell a share. b. An option's fair value is at least as high as its intrinsic value. c. A stock option's fair value increases with the
Identify whether the following financial instruments are (i) A basic financial asset, financial liability, or equity instrument; (ii) A derivative; or (iii) A compound financial instrument. Item a. Employee stock option b. Shares with warrants c. Bank loan d. Convertible bond e.
Identify whether each of the following is a financial liability.a. Account payableb. Note payablec. Warranty provisiond. Long-term debte. Deferred tax liability
Lord Motor Co. is a large carmaker famous for the high-quality automobiles it manufactures. The Company recently completed a debt restructuring initiative that substantially reduced its debt and lowered its interest expense. The company previously issued $50 million in 5% convertible bonds on
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