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intermediate accounting

Intermediate Accounting 14th Edition Kieso, weygandt and warfield. - Solutions

On January 1, 2012, Wetzel Company sold property for $250,000. The note will be collected as follows: $120,000 in 2012, $90,000 in 2013, and $40,000 in 2014. The property had cost Wetzel $150,000 when it was purchased in 2010.Instructions (a) Compute the amount of gross profit realized each
Swift Corp., a capital goods manufacturing business that started on January 4, 2012, and operates on a calendar-year basis, uses the installment-sales method of profit recognition in accounting for all its sales. The following data were taken from the 2012 and 2013 records.The amounts given for
Becker Corporation sells farm machinery on the installment plan. On July 1, 2012, Becker entered into an installment-sales contract with Valente Inc. for an 8-year period. Equal annual payments under the installment sale are $100,000 and are due on July 1. The first payment was made on July 1,
Basler Corporation, which began business on January 1, 2012, appropriately uses the installment sales method of accounting. The following data were obtained for the years 2012 and 2013.Instructions (a) Compute the balance in the deferred gross profit accounts on December 31, 2012, and on
Samuels Co. appropriately uses the installment-sales method of accounting. On December 31, 2014, the books show balances as follows.Instructions (a) Prepare the adjusting entry or entries required on December 31, 2014 to recognize 2014 realized gross profit. (Installment receivables have
Coffin Corporation appropriately uses the installment-sales method of accounting to recognize income in its financial statements. The following information is available for 2012 and 2013.Instructions (a) Compute the amount of realized gross profit recognized in each year. (b) Prepare
Yanmei Construction Company began operations January 1, 2012. During the year, Yanmei Construction entered into a contract with Lundquist Corp. to construct a manufacturing facility. At that time, Yanmei estimated that it would take 5 years to complete the facility at a total cost of $4,500,000.
Hamilton Construction Company uses the percentage-of-completion method of accounting. In 2012, Hamilton began work under contract #E2-D2, which provided for a contract price of $2,200,000. Other details follow:Instructions (a) What portion of the total contract price would be recognized as
Taylor Marina has 300 available slips that rent for $800 per season. Payments must be made in full at the start of the boating season, April 1, 2013. Slips for the next season may be reserved if paid for by December 31, 2012. Under a new policy, if payment is made by December 31, 2012, a 5%
Schuss Corporation sold equipment to Potsdam Company for $20,000. The equipment is on Schuss’s books at a net amount of $13,000. Schuss collected $10,000 in 2012, $5,000 in 2013, and $5,000 in 2014. If Schuss uses the cost-recovery method, what amount of gross profit will be recognized in each
At December 31, 2012, Grinkov Corporation had the following account balancesInstallment Accounts Receivable, 2011 $ 65,000Installment Accounts Receivable, 2012 110,000Deferred Gross Profit, 2011
Mojave sold her condominium for $500,000 on September 14, 2012; she had paid $330,000 for it in 2004. Mojave collected the selling price as follows: 2012, $80,000; 2013, $320,000; and 2014, $100,000. Mojave appropriately uses the installment-sales method. Prepare a schedule to determine the gross
Describe the installment-sales method of accounting.
Explain the differences between the installment-sales method and the cost-recovery method.
What is the revenue recognition principle?
On July 1, 2012, Selig Company purchased for cash 40% of the outstanding capital stock of Spoor Corporation. Both Selig and Spoor have a December 31 year-end. Spoor Corporation, whose common stock is actively traded on the American Stock Exchange, paid a cash dividend on November 15, 2012, to Selig
On July 1, 2013, Fontaine Company purchased for cash 40% of the outstanding capital stock of Knoblett Company. Both Fontaine Company and Knoblett Company have a December 31 year-end. Knoblett Company, whose common stock is actively traded in the over-the-counter market, reported its total net
Presented below are three unrelated situations involving equity securities.Situation 1An equity security, whose fair value is currently less than cost, is classified as available-for-sale but is to be reclassified as trading.Situation 2A noncurrent portfolio with an aggregate fair value in excess
Lexington Co. has the following available-for-sale securities outstanding on December 31, 2012 (its first year of operations).During 2013, Summerset Company stock was sold for $9,200, the difference between the $9,200 and the “fair value” of $8,800 being recorded as a “Gain on Sale of
Hart Golf Co. uses titanium in the production of its specialty drivers. Hart anticipates that it will need to purchase 200 ounces of titanium in October 2012, for clubs that will be shipped in the holiday shopping season. However, if the price of titanium increases, this will increase the cost to
On August 15, 2012, Outkast Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $360. The notional value of the call option is 400 shares, and the option price is $40. (Market price of an Outkast share is $40.) The option expires on January 31, 2013. The
Sarazan Company issues a 4-year, 7.5% fixed-rate interest only, non-prepayable $1,000,000 note payable on December 31, 2012. It decides to change the interest rate from a fixed rate to variable rate and enters into a swap agreement with M&S Corp. The swap agreement specifies that Sarazan will
On January 2, 2012, Parton Company issues a 5-year, $10,000,000 note at LIBOR, with interest paid annually. The variable rate is reset at the end of each year. The LIBOR rate for the first year is 5.8%. Parton Company decides it prefers fixed-rate financing and wants to lock in a rate
On January 2, 2012, MacCloud Co. issued a 4-year, $100,000 note at 6% fixed interest, interest payable semiannually. MacCloud now wants to change the note to a variable-rate note. As a result, on January 2, 2012, MacCloud Co. enters into an interest rate swap where it agrees to receive
On January 2, 2012, Jones Company purchases a call option for $300 on Merchant common stock. The call option gives Jones the option to buy 1,000 shares of Merchant at a strike price of $50 per share. The market price of a Merchant share is $50 on January 2, 2012 (the intrinsic value is therefore
Presented below is selected information related to the financial instruments of Dawson Company at December 31, 2012. This is Dawson Company’s first year of operations.Instructions (a) Dawson elects to use the fair value option whenever possible. Assuming that Dawson’s net income is
Assume the same information as in E17-19 for Lilly Company. In addition, assume that the investment in the Woods Inc. stock was sold during 2013 for $195,000. At December 31, 2013, the following information relates to its two remaining investments of common stock.Net income before any security
Presented below is information related to the purchases of common stock by Lilly Company during 2012.Instructions (a) What entry would Lilly make at December 31, 2012, to record the investment in Arroyo Company stock if it chooses to report this security using the fair value option? (b)
Cairo Corporation has municipal bonds classified as available-for-sale at December 31, 2012. These bonds have a par value of $800,000, an amortized cost of $800,000, and a fair value of $740,000. The unrealized loss of $60,000 previously recognized as other comprehensive income and as a separate
On January 1, 2012, Meredith Corporation purchased 25% of the common shares of Pirates Company for $200,000. During the year, Pirates earned net income of $80,000 and paid dividends of $20,000.InstructionsPrepare the entries for Meredith to record the purchase and any additional entries related to
Gregory Inc. acquired 20% of the outstanding common stock of Handerson Inc. on December 31, 2012. The purchase price was $1,250,000 for 50,000 shares. Handerson Inc. declared and paid an $0.80 per share cash dividend on June 30 and on December 31, 2013. Handerson reported net income of $730,000 for
Swanson Company has the following securities in its trading portfolio of securities on December 31, 2012.All of the securities were purchased in 2012. In 2013, Swanson completed the following securities transactions.March 1 Sold the 1,500 shares of Parker, Inc., Common, @ $45 less
Capriati Corporation made the following cash purchases of securities during 2012, which is the first year in which Capriati invested in securities. 1. On January 15, purchased 9,000 shares of Gonzalez Company’s common stock at $33.50 per share plus commission $1,980. 2. On April 1,
Assume the same information as E17-9 and that Wenger, Inc. reports net income in 2012 of $120,000 and in 2013 of $140,000. Total holding gains (including any realized holding gain or loss) arising during 2013 total $30,000.Instructions (a) Prepare a statement of comprehensive income for 2012
At December 31, 2012, the available-for-sale equity portfolio for Wenger, Inc. is as follows.On January 20, 2013, Wenger, Inc. sold security A for $15,300. The sale proceeds are net of brokerage fees.Instructions (a) Prepare the adjusting entry at December 31, 2012, to report the portfolio at
On December 21, 2012, Zurich Company provided you with the following information regarding its trading securities.During 2013, Carolina Company stock was sold for $9,500. The fair value of the stock on December 31, 2013, was: Stargate Corp. stock—$19,300; Vectorman Co.
The following information is available for Kinney Company at December 31, 2012, regarding its investments.Instructions (a) Prepare the adjusting entry (if any) for 2012, assuming the securities are classified as trading. (b) Prepare the adjusting entry (if any) for 2012, assuming the
On January 1, 2012, Morgan Company acquires $300,000 of Nicklaus, Inc., 9% bonds at a price of $278,384. The interest is payable each December 31, and the bonds mature December 31, 2014. The investment will provide Morgan Company a 12% yield. The bonds are classified as held-to
Assume the same information as in E17-3 except that the securities are classified as available-for-sale. The fair value of the bonds at December 31 of each year end is as follows.Instructions (a) Prepare the journal entry at the date of the bond purchase. (b) Prepare the journal entries
On January 1, 2011, Roosevelt Company purchased 12% bonds, having a maturity value of $500,000, for $537,907.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2011, and mature January 1, 2016, with interest receivable December 31 of each year. Roosevelt Company uses
On January 1, 2012, Jennings Company purchased at par 10% bonds having a maturity value of $300,000. They are dated January 1, 2012, and mature January 1, 2017, with interest receivable December 31 of each year. The bonds are classified in the held-to maturity category.Instructions (a)
Cleveland Company has a stock portfolio valued at $4,000. Its cost was $3,300. If the Fair Value Adjustment account has a debit balance of $200, prepare the journal entry at year-end.
What is a variable-interest entity?
(a) Assuming no Fair Value Adjustment (available-for-sale) account balance at the beginning of the year, prepare the adjusting entry at the end of the year if Laura Company’s available-for-sale securities have a fair value $60,000 below cost. (b) Assume the same information as part (a), except
On July 1, 2012, Wheeler Company purchased $4,000,000 of Duggen Company’s 8% bonds, due on July 1, 2019. The bonds, which pay interest semiannually on January 1 and July 1, were purchased for $3,500,000 to yield 10%. Determine the amount of interest revenue Wheeler should report on its income
If the bonds in question 8 are classified as available-for-sale and they have a fair value at December 31, 2012, of $3,604,000, prepare the journal entry (if any) at December 31, 2012, to record this transaction.
Wheeler Company purchased $4,000,000 of Duggen Company’s 8% bonds, due on July 1, 2019. The bonds, which pay interest semiannually on January 1 and July 1, were purchased for $3,500,000 to yield 10%. Determine the amount of interest revenue Wheeler should report on its income statement for the
Cordero Corporation has an employee share-purchase plan which permits all full-time employees to purchase 10 ordinary shares on the third anniversary of their employment and an additional 15 shares on each subsequent anniversary date. The purchase price is set at the market price on the date
Chorkina Corporation, a new audit client of yours, has not reported earnings per share data in its annual reports to stockholders in the past. The treasurer, Beth Botsford, requested that you furnish information about the reporting of earnings per share data in the current year’s annual report in
The executive officers of Rouse Corporation have a performance-based compensation plan. The performance criteria of this plan is linked to growth in earnings per share. When annual EPS growth is 12%, the Rouse executives earn 100% of the shares; if growth is 16%, they earn 125%. If EPS growth is
Agassi Corporation is preparing the comparative financial statements to be included in the annual report to stockholders. Agassi employs a fiscal year ending May 31. Income from operations before income taxes for Agassi was $1,400,000 and $660,000, respectively, for fiscal years ended
The information below pertains to Barkley Company for 2013. There were no changes during 2013 in the number of common shares, preferred shares, or convertible bonds outstanding. There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 75,000
Charles Austin of the controller’s office of Thompson Corporation was given the assignment of determining the basic and diluted earnings per share values for the year ending December 31, 2013. Austin has compiled the information listed below. 1. The company is authorized to issue 8,000,000
Melton Corporation is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2012, and May 31, 2013. The income from operations for each year was $1,800,000 and $2,500,000, respectively. In both years, the company incurred a 10%
Amy Dyken, controller at Fitzgerald Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Fitzgerald’s financial statements. Below is selected financial information for the fiscal year ended June
Assume that Amazon has a stock-option plan for top management. Each stock option represents the right to purchase a share of Amazon $1 par value common stock in the future at a price equal to the fair value of the stock at the date of the grant. Amazon has 5,000 stock options outstanding, which
Berg Company adopted a stock-option plan on November 30, 2011, that provided that 70,000 shares of $5 par value stock be designated as available for the granting of options to officers of the corporation at a price of $9 a share. The market price was $12 a share on November 30, 2012. On
Volker Inc. issued $2,500,000 of convertible 10-year bonds on July 1, 2012. The bonds provide for 12% interest payable semiannually on January 1 and July 1. The discount in connection with the issue was $54,000, which is being amortized monthly on a straight-line basis. The bonds are
On December 31, 2009, Flessel Company issues 120,000 stock appreciation rights to its officers entitling them to receive cash for the difference between the market price of its stock and a pre-established price of $10. The fair value of the SARs is estimated to be $4 per SAR on December 31, 2010;
Brooks Inc. recently purchased Donovan Corp., a large midwestern home painting corporation. One of the terms of the merger was that if Donovan’s income for 2013 was $110,000 or more, 10,000 additional shares would be issued to Donovan’s stockholders in 2014. Donovan’s income for 2012 was
Zambrano Company’s net income for 2012 is $40,000. The only potentially dilutive securities outstanding were 1,000 options issued during 2011, each exercisable for one share at $8. None has been exercised, and 10,000 shares of common were outstanding during 2012. The average market price of
On January 1, 2012, Lindsey Company issued 10-year, $3,000,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 15 shares of Lindsey common stock. Lindsey’s net income in 2013 was $240,000, and its tax rate was 40%. The company had 100,000 shares of common stock outstanding
The Ottey Corporation issued 10-year, $4,000,000 par, 7% callable convertible subordinated debentures on January 2, 2012. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 14:1, and in 2 years it will increase to 18:1. At the date of issue, the
On June 1, 2011, Bluhm Company and Amanar Company merged to form Davenport Inc. A total of 800,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis. On April 1, 2013, the company issued an additional 600,000 shares of stock for cash. All
In 2012, Buraka Enterprises issued, at par, 75 $1,000, 8% bonds, each convertible into 100 shares of common stock. Buraka had revenues of $17,500 and expenses other than interest and taxes of $8,400 for 2013. (Assume that the tax rate is 40%.) Throughout 2013, 2,000 shares of common stock were
At January 1, 2012, Cameron Company’s outstanding shares included the following.280,000 shares of $50 par value, 7% cumulative preferred stock800,000 shares of $1 par value common stockNet income for 2012 was $2,830,000. No cash dividends were declared or paid during 2012. On February 15, 2013,
On January 1, 2012, Bailey Industries had stock outstanding as follows. To acquire the net assets of three smaller companies, Bailey authorized the issuance of an additional 170,000 common shares. The acquisitions took place as shown below. On May 14, 2012, Bailey realized a
Ott Company had 210,000 shares of common stock outstanding on December 31, 2012. During the year 2013, the company issued 8,000 shares on May 1 and retired 14,000 shares on October 31. For the year 2013, Ott Company reported net income of $229,690 after a casualty loss of $40,600 (net of
On January 1, 2012, Chang Corp. had 480,000 shares of common stock outstanding. During 2012, it had the following transactions that affected the Common Stock account.February 1 Issued 120,000 sharesMarch 1 Issued a 20% stock
Gogean Inc. uses a calendar year for financial reporting. The company is authorized to issue 9,000,000 shares of $10 par common stock. At no time has Gogean issued any potentially dilutive securities. Listed below is a summary of Gogean’s common stock activities. 1. Number of common
Tweedie Company issues 10,000 shares of restricted stock to its CFO, Mary Tokar, on January 1, 2012. The stock has a fair value of $500,000 on this date. The service period related to this restricted stock is 5 years. Vesting occurs if Tokar stays with the company until December 31, 2016. The par
Derrick Company issues 4,000 shares of restricted stock to its CFO, Dane Yaping, on January 1, 2012. The stock has a fair value of $120,000 on this date. The service period related to this restricted stock is 4 years. Vesting occurs if Yaping stays with the company for 4 years. The par value of the
On January 1, 2011, Scooby Corporation granted 10,000 options to key executives. Each option allows the executive to purchase one share of Scooby’s $5 par value common stock at a price of $20 per share. The options were exercisable within a 2-year period beginning January 1, 2013, if the grantee
On January 1, 2012, Magilla Inc. granted stock options to officers and key employees for the purchase of 20,000 shares of the company’s $10 par common stock at $25 per share. The options were exercisable within a 5-year period beginning January 1, 2014, by grantees still in the employ of the
On November 1, 2011, Olympic Company adopted a stock-option plan that granted options to key executives to purchase 40,000 shares of the company’s $10 par value common stock. The options were granted on January 2, 2012, and were exercisable 2 years after the date of grant if the grantee was still
On May 1, 2012, Barkley Company issued 3,000 $1,000 bonds at 102. Each bond was issued with one detachable stock warrant. Shortly after issuance, the bonds were selling at 98, but the fair value of the warrants cannot be determined.Instructions (a) Prepare the entry to record the issuance of
On September 1, 2012, Jacob Company sold at 104 (plus accrued interest) 3,000 of its 8%, 10-year, $1,000 face value, nonconvertible bonds with detachable stock warrants. Each bond carried two detachable warrants. Each warrant was for one share of common stock at a specified option price of $15 per
On January 1, 2011, Trillini Corporation issued $3,000,000 of 10-year, 8% convertible debentures at 102. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into eight shares of Trillini Corporation $100 par value common stock after December 31,
The December 31, 2012, balance sheet of Osygus Corp. is as follows.On March 5, 2013, Osygus Corp. called all of the bonds as of April 30, for the principal plus interest through April 30. By April 30, all bondholders had exercised their conversion to common stock as of the interest payment date.
On January 1, 2012, when its $30 par value common stock was selling for $80 per share, Bartz Corp. issued $10,000,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock.
Schuss Inc. issued $3,000,000 of 10%, 10-year convertible bonds on June 1, 2012, at 98 plus accrued interest. The bonds were dated April 1, 2012, with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2013, $1,000,000
For each of the unrelated transactions described below, present the entry(ies) required to record each transaction. 1. Coyle Corp. issued $10,000,000 par value 10% convertible bonds at 99. If the bonds had not been convertible, the company’s investment banker estimates they would have been
Ferraro, Inc. established a stock-appreciation rights (SAR) program on January 1, 2012, which entitles executives to receive cash at the date of exercise for the difference between the market price of the stock and the pre-established price of $20 on 5,000 SARs. The required service period is 2
The 2012 income statement of Wasmeier Corporation showed net income of $480,000 and an extraordinary loss of $120,000. Wasmeier had 100,000 shares of common stock outstanding all year. Prepare Wasmeier’s income statement presentation of earnings per share.
Bedard Corporation reported net income of $300,000 in 2012 and had 200,000 shares of common stock outstanding throughout the year. Also outstanding all year were 45,000 options to purchase common stock at $10 per share. The average market price of the stock during the year was $15. Compute diluted
DiCenta Corporation reported net income of $270,000 in 2012 and had 50,000 shares of common stock outstanding throughout the year. Also outstanding all year were 5,000 shares of cumulative preferred stock, each convertible into 2 shares of common. The preferred stock pays an annual dividend of $5
Rockland Corporation earned net income of $300,000 in 2012 and had 100,000 shares of common stock outstanding throughout the year. Also outstanding all year was $800,000 of 10% bonds, which are convertible into 16,000 shares of common. Rockland’s tax rate is 40 percent. Compute Rockland’s 2012
Tomba Corporation had 300,000 shares of common stock outstanding on January 1, 2012. On May 1, Tomba issued 30,000 shares. (a) Compute the weighted-average number of shares outstanding if the 30,000 shares were issued for cash. (b) Compute the weighted-average number of shares outstanding if the
Douglas Corporation had 120,000 shares of stock outstanding on January 1, 2012. On May 1, 2012, Douglas issued 60,000 shares. On July 1, Douglas purchased 10,000 treasury shares, which were reissued on October 1. Compute Douglas’s weighted-average number of shares outstanding for 2012.
Eisler Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 98, and the warrants had a market price of $40. Use the proportional method to record the issuance of the bonds and warrants.
Petrenko Corporation has outstanding 2,000 $1,000 bonds, each convertible into 50 shares of $10 par value common stock. The bonds are converted on December 31, 2012, when the unamortized discount is $30,000 and the market price of the stock is $21 per share. Record the conversion using the book
At December 31, 2012, Reid Company had 600,000 shares of common stock issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 200,000 of which were issued on October 1, 2012. Net income for 2012 was $2,000,000, and dividends declared on preferred stock were
How is compensation expense computed using the fair value approach?
On July 1, 2012, Roberts Corporation issued $3,000,000 of 9% bonds payable in 20 years. The bonds include detachable warrants giving the bondholder the right to purchase for $30 one share of $1 par value common stock at any time during the next 10 years. The bonds were sold for $3,000,000. The
Mask Company has 30,000 shares of $10 par value common stock authorized and 20,000 shares issued and outstanding. On August 15, 2012, Mask purchased 1,000 shares of treasury stock for $18 per share. Mask uses the cost method to account for treasury stock. On September 14, 2012, Mask sold 500 shares
Wallace Computer Company is a small, closely held corporation. Eighty percent of the stock is held by Derek Wallace, president. Of the remainder, 10% is held by members of his family and 10% by Kathy Baker, a former officer who is now retired. The balance sheet of the company at June 30, 2012, was
Penn Company was formed on July 1, 2010. It was authorized to issue 300,000 shares of $10 par value common stock and 100,000 shares of 8% $25 par value, cumulative and nonparticipating preferred stock. Penn Company has a July 1–June 30 fiscal year.The following information relates to the
The books of Conchita Corporation carried the following account balances as of December 31, 2012.Cash
Washington Company has the following stockholders’ equity accounts at December 31, 2012.Common Stock ($100 par value, authorized 8,000 shares) $480,000Retained Earnings
Clemson Company had the following stockholders’ equity as of January 1, 2012.Common stock, $5 par value, 20,000 shares issued $100,000Paid-in capital in excess of par—common stock 300,000Retained earnings

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