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intermediate accounting

Intermediate Accounting 2nd edition Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella - Solutions

Early in 2018, Bicycle Messenger Service Corporation (BMSC) purchased a multi-line/multi-function telephone system at a cost of $50,000. At that time, BMSC estimated that the system had a useful life of 5 years with no salvage value expected at the end of that time. The company elected to use the
How would your answer to BE17-20 change if Year 1 income were equal to $100,000?Data from BE17-20W. Pickett Fence Company incurred a net loss for Year 3. The firm does not have any book-tax differences. We preset the results of operations for the first 3 years of the company"s operations:Future tax
Errol Toys. Inc. recorded book income of $240,000 in 2016. It does not have any permanent differences. and the only temporary difference relates to a $12,000 warranty expense that it recorded for book purposes. Errol Toys anticipates fulfilling half of the warranties in the following year and then
Finer Shoes Company recorded book income of $120,000 in 2016. It does not have any permanent differences. and the only temporary difference relates to a $60,000 installment sale that it recorded for book purposes. Finer Shoes anticipates collecting the installment sales equally over the following 2
Mulligan Company carries an equity investment of a privately held company. Mulligan elected to measure this equity security without a readily determinable fair value at adjusted cost. The current carrying value of the equity shares is equal to $326,400. Mulligan uses market comparables to estimate
Metia Company purchased a debt investment in 2016 and classified it as held to maturity. The carrying value on December 31, 2016, is $250,000. At December 31, 2016, the fair value of the investment is $238,000, and the present value of the future cash flows from the debt investment is $241,000.
Repeat P16-8 assuming that Pugh Company is an IFRS reporter and would like to elect to report the investment at fair value through other comprehensive income if it qualifies for this treatment. Pugh is not holding the investments for trading, nor is it part of contingent consideration in a business
Repeat P16-4 assuming that DcNauh Air craft Corporation is an IFRS reporter and would like to elect to report the investments at fair value through other comprehensive income if it qualifies for Ibis treatment. DeNault is not holding !he investments for trading nor is it part of contingent
Sabran Corporation, a calendar year-end firm. invested in three debt securities on December 15, 2016, and classified them as trending securities. Sabran sold all three securities on January 1, 2017. The following table provides the purchase price, fair values, annual interest amounts, and selling
Match Ltd and Box Ltd both began operations on 1 January 2017. For illustrative purposes, assume that at that date their statement of financial positions were identical and that their operations during 2017 were also identical. The only difference between the two companies is that they elected to
Warren Buffett is regarded as one of the world’s most successful investors. He does not believe that markets are efficient. The following quote is attributed to him: ‘I’d be a bum on the street with a tin cup if markets were always efficient. Investing in a market where people believe in
Paul’s Parts Ltd’s statement of financial position (extract only) on 30 June 2017 is set out below:PAUL’S PARTS LTDStatement of Financial PositionAs at 30 June 2017CURRENT ASSETSCashReceivablesInventoriesPrepaid expenses$180 000125 600270 400 24 800CURRENT
The following information relates to the operations of Branded Ltd. The profit was $1 500 000. The company distributed preference dividends of $50 000, and ordinary dividends of $600 000. Over the year, issued ordinary shares were 2 000 000. Ordinary shares are currently selling for $8.00 per
Read the article extract by Penny Pryor and answer the questions that follow.Ethical investing used to be all about the ‘no’ or what you couldn’t invest in because it was bad for your health, the environment or had poor human rights practices. But during the past decade, and particularly
The float of Freelancer.com next month is indicative of the world’s evolution from hard copy to hard wired in the digital realm, where it is just as easy to talk to someone on the other side of the world as to somebody in your own house.Freelancer.com presents a unique business model for an
A. Contrast, by means of comparative ratios, the reported conditions with those that you believe more appropriately represent the financial position of the company. Limit your comparison to the convertible note holders’ agreement.B. Explain if you believe the company met the conditions of the
‘Dizzying’ is an appropriate adjective to describe the share price of Commonwealth Bank of Australia at the moment. In December 2012, the stock of Australia’s largest bank by market capitalisation broke through the $60 mark, a value it had only previously reached during the 2007 run-up to the
The comparative financial statements of Stratum Ltd are shown below and on the next page.STRATUM LTDComparative Statements of Profit or Lossfor the years ended 30 June($000)Note20172016RevenueExpenses, excluding finance costsFinance costs24$16 00013 705
The following financial statements were prepared for the management of Worldcorp Ltd. The statements contain some information that will be disclosed in note form in the general purpose financial statements to be issued.WORLDCORP LTDStatement of Profit or Lossfor the year ended 30 June 2017Revenue
The following values relate to various ratios determined for a sole trader, A. Solve, for the year ended 30 June 2017. At that date, the total assets in the statement of financial position was $1 200 000. The ratios relate to the accounts either in respect of the 12-month period or at the date of
Financial statements of iPud Ltd are presented below.Additional information· Payables includes $5620 (2017) and $5730 (2016) trade accounts payable; the remainder is accrued expenses.· Market prices of issued shares at year-end (2017):Ordinary, $12.00 Preference,
The following information relates to the business of Chef One, and the owner is concerned about the profitability and financial structure of his business at 30 June 2017, especially since the bank is requiring repayment of the business’s overdraft.30 June 201730 June 2016Revenue (sales on
Sunrise Ltd completed the following transactions during a given year:TransactionRatio1. Sold obsolete inventory at cost2 Redeemed debentures by issuing ordinary shares3. Issued a share dividend on ordinary shares4. Declared a cash dividend on
Certain items taken from the financial statements, the notes thereto and other records of Lucky Nine Ltd have been expressed as percentages of net revenue:Percentage of net revenue20172016Revenue (net)Beginning inventoriesPurchases (net)Ending inventoriesSelling and distribution
Comparative data extracted from the general purpose financial statements and notes thereto of Express Delivery Ltd are presented below:EXPRESS DELIVERY LTDComparative Statements of Profit or Loss (extracts)for the years ended 31 December($000)201220132014201520162017RevenueLess: Cost of
‘A statement of cash flows is of limited use as a business needs to know if it will have sufficient cash to support its planned future activities.’ Discuss the merit of this statement focusing on both the purpose and limitations of a statement of cash flows.
Wayne Deng is reviewing the statement of cash flows for his technology business. The Statement has been provided by his accountant. He is dismayed that the statement shows net cash outflows for investing activities. Discuss if Wayne should be concerned by this.
Laura Prebble, the owner-manager of a small business enterprise, had carefully monitored her cash position over the past financial year, and was pleased to note at the end of the year that the cash position was strong, and had shown a healthy 50% increase over the year. When presented with the
Describe the direct method of preparing the cash flows from operating activities in a statement of cash flows. Contrast this with the indirect method.
A student of accounting, after studying Illustrative Example A to AASB 107, was confused. Long-term borrowings are correctly recognised as a financing activity of an entity, yet interest paid is included in cash flow from operations. After some consideration the student concluded, ‘Interest paid
Distinguish between cash flows from operating activities, investing activities and financing activities. Identify three separate cash flows where the accounting standard appears to allow classification under more than one activity. Explain why such choice of classification is allowed.
An accounting student asked the following question: ‘Why does the cash on hand balance as at the end of December 2016 in the statement of cash flow not concur with the cash balance shown in current assets in the statement of financial position?’ Provide the student with an explanation.
Explain why cash flows from operating activities are important to users of a statement of cash flow.
Describe the concept of cash used in the preparation of the statement of cash flows.
Gretta Company purchased a debt investment on June 15, 2016, and classified it as available for sale. On December 31, 2016, the investment had a carrying value of $8,500 and a fair value of $8,000. On that date, the present value of the future cash flows from the debt investment is $8,100. On
Repeat E 16-19 assuming that Gretta Company reports under lFRS and measures the debt security at amortized cost Grella determines that there has not been a significant increase in credit risk in 2017 or 2018. In 2017, Gretta determines that the probability of default is 1% over the next 12 months
Gretta Company purchased a debt investment on June 15, 2017, and classified it as held to maturity. On December 31, 2017, the investment had a carrying value of $8,500 and a fair value of $8,000. On that dale, the present value of the future cash flows from the debt investment is $8,100. On
On January 1, 2018, Racine Company accepted a 10% note, dated January 1, 2018, with a face amount of $2,400,000 in exchange for cash. The note is due in 10 years. For notes of similar risk and maturity, the market interest rate is 12%. Interest is paid each December 31.Requireda. Determine the
On January 1. Chloe Mikenzie Incorporated acquired 32% of the outstanding voting shares of Mannin Company at a cost of $2,196,000 by acquiring 72,000 of the company's total 225,000 outstanding shares at a cost of $30.50 per share. During the year, Mannin reponed $1,238,000 in net income and
Repeat E16-10 assuming that Tekky is an IFRS reporter, Tekky accounts for the investment at a fair value through other comprehensive income investment because the corporation does not intend to trade it nor is holding it as contingent consideration. Prepare the journal entries to record the
Tekky Corporation purchased an equity investment in Hui Zu. Ltd, on December 15 for $100,000. Tekky accounts for the equity investment by using market comparable. Hui Zu, Ltd's equity is not actively traded, and it does not have a readily determinable fair value, bur fair value is estimated at
Repeat E16-8 assuming that Greenburg Company is an IFRS reporter and the company would like to elect to report the investment at fair value through other comprehensive income if it qualifies for this treatment. Greenburg is holding the investment in common stock for trading. Greenburg is not
Using the same information from E16-4, assume that Barney Equipment Corporation is an IFRS reporter and the company would like to elect to report these investments at fair value through other comprehensive income if it qualifies for this treatment. Barney is not holding the investment for trading,
Barney Equipment Corporation acquired the following equity investments at the beginning of Year 1. Barney does not have significant influence over the investees. Both companies are publicly traded.Requireda. Prepare the journal entry to record the acquisition of the investments.b. Prepare the
For each debt investment in the following table, compute the impairment loss, if any, and determine whether the loss is reported in net income. All of the investments were purchased in the current year. Assume that the investor is not expected to sell the investments prior to full recovery of the
Prepare the journal entry needed to record the partial sale of the investment acquired in BE16-9. Assume that Turner sold 12,800 of the Fenwick shares for $47 per share in 2017 and the fair value of the remaining shares is $41 per share on December 31, 2017. Prepare the journal entry on December
Using the information provided in BE16-7, prepare the entries assuming that Turner Tires, Inc. is an lFRS reporter. Tonier plans to trade the securities. Prepare the journal entries required on the date of acquisition and at the end of the year.Data from BE16-7Turner Tires. lnc., acquired 40,000
Using the information provided in BE16-7, prepare the entries assuming that Turner Tires. Inc., is an IFRS reporter and elects to report these securities at fair value through other comprehensive income. Turner is not holding the investment for trading, nor is it part of contingent consideration in
Turner Tires. lnc., acquired 40,000 shares of Fenwick Corporation stock at a price of $35 per share during 2016. This investment docs not allow Turner to participate in the decision making of Fenwick, and the company therefore docs not have the ability to exert significant influence over the
Kimberly-Clark Corporation and Procter & Gamble Company reported the following information about inventory in their financial statements and footnotes. Use this information to answer the following questions:a. What cost-flow assumptions does Kimberly-Clark use?b. What is Kimberly-Clark's LIFO
Using the information provided in BE16-5. prepare the entry to record the fair value adjustment if Ruban plans to hold the bonds to generate cash flows by selling the bonds.Data from BE16-5Ruban Company, an IFRS reporter, acquired $3,500,000 face value, 8 % bonds on January 1 of the current year
How do companies report impairment losses on debt investments measured at amortized cost?
Toofles Company, a publicly traded entity, issued nonredeemable preferred stock on January 1, 2018, Toofles issued 1,000 shares of $100 par value shares for $82,425. On January 1, 2015. the market rate or interest for preferred stock with the same characteristics was 6%. The preferred shares will
With declining demand and sales. the last several years have been challenging in the global auto industry. You are interested in better understanding the performance and valuation of major global companies in the industry. The following table presents net income for the year and shareholders'
When preparing its financial statements at the end of 2018, Thom Retail Inc. discovered an error in accounting for inventory. When Thom started to purchase merchandise from a new supplier, it expensed all transportation costs rather than capitalizing them as a cost of the inventory. It estimated
On January 1, 2016, Pollo Company issued 1,000 shares of 4%, $100 par cumulative preferred stock for $110,000. On December 26, 2017, the board of directors declared dividends of $6,000, which were paid on December 31, 2017. The board of directors did not declare dividends again until December 24,
Information from the shareholders' equity footnote for Mendes Manufacturing follows.RequiredPrepare the journal entries for 2017 and 2018 to reflect the treasury stock transactions included in the preceding footnote information. Additional Paid in Capital from Treasury Stock Transactions 2018 2017
The stockholders' equity section of Siri Stores, lnc.'s balance sheet at December 31, 2017, follows:Stockholders' EquityCommon Stock: no-par, $3 stated value, 80,000 shares authorized. 50,000 shares issued. and 40,500 shares outstanding
Royal Hill Companies provided the following information regarding its stockholders' equity section of the balance sheet for the 3-year period ending December 31, 2018.RequiredPrepare the summary journal entries for 2017 and 2018 to reflect the changes in the shareholders' equity accounts included
The stockholders' equity section of Five Voices Music, Inc.'s balance sheet at December 31, 2017, follows:Stockholders' EquityCommon Stock - no par, 10,000 shares authorized, 1,000 shares issued and outstanding .......... $ 90,000Retained Earnings
On January 1, 2018. Queens Company reported the following stockholders' equity:Common Stock, $5 par (300,000 shares authorized, 100,000 shares issued and outstanding) ....... $ 500,000Additional Paid-in Capital in Excess of Par - Common
In 2018, Thom Inc. discovered an error in its 2015 financial statements. The firm recorded $8,500,000 of depreciation expense on its equipment instead of recording $9,500,000. Thom has a constant tax rate of 40% and reports 3 years of comparative income statements and 2 years of comparative balance
In 2018, Meg Inc, discovered a n error in its 2015 financial statements. The firm recorded $11,000,000 of depreciation expense on its equipment instead of recording $10,000,000. Meg has a constant tax rate of 40% and reports 3 years of comparative income statements and 2 years of comparative
Fontlyn Inc. issued $20 million of $10 par preferred stock on February 1, 2018. The company issued 1 million shares. The preferred stock has a 4% fixed annual cash dividend and no maturity date. Assume that the holder of the preferred shares has the option to require redemption. a. How would
On January 1, 2018. Gato Company issued 1,000 shares of $80 par callable preferred shares for $200,000. Gato can call these preferred shares on January 1, 2019, for $200 per share. On June 1, 2019, Gato calls the shares.Requireda. What is the journal entry to record the issuance of the preferred
The stockholders' equity section of Bellwood Brands' 2017 balance sheet follows:Stockholders' EquityCommon Stock - no par, 100,000 shares authorized, 1,000 shares issued and outstanding ...... $90,000Retained Earnings
The stockholders' equity section of ORB plc's balance sheet at December 31, 2018, was as follows:Common Stock-$3 par (2,000,000 shares authorized, 1,000,000 shares issued and outstanding).... $3,000,000Additional Paid-in Capital in Excess of Par - Common
In its audit of Oz Lollypop Company, Able and Ready, CPAs, discovered in 2018 that the firm had not recorded a $975,000 expense in 2014 (for both book and tax purposes). Oz never paid this amount due on the invoice it received. Assuming a constant tax rate of 35%. prepare the journal entry required
ABC Toy Company earned $357 million of net income in 2019 and paid $45 million in dividends. It issued no new stock. Complete the stockholders' equity section for ABC Toy Company: December 31 (in millions) 2019 2018 Common Stock, Par Value Addit onal Pad in Cap tal in Excess of Par – Common
Grifols, S.A. is a Spanish pharmaceutical company focusing on the development, manufacturing, and sale of therapeutic products. At the end of 2016, Grifols was rated "BB" by Standard & Poor's and considered to have a stable business risk profile.REQUIREDa. What is a credit rating and why
On January 1, 2018, Mesa Machinery Corporation issued 75 of 12-year, 12% convertible bonds at par. Each bond had a par value of $1,000 and pays interest annually on December 31. Because the bonds were issued at par, the yield on the bond is also equal to 12%. Each $1,000 bond converts into 2 5
Using the information provided in P14-9. complete the following requirements assuming that Super View Video is an lFRS reporter.Data from P14-9On January 1, 2018, Super View Video. Incorporated issued $1,550,000 of $1,000 par value, 8%. 6-year bonds. Interest is payable semiannually each January 1
On January 1, 2018, Super View Video. Incorporated issued $1,550,000 of $1,000 par value, 8%. 6-year bonds. Interest is payable semiannually each January 1 and July 1 with the first interest payment due at the end of the period on July 1, 2018. The market rate of interest for similar
Tyka Manufacturing Company, an IFRS reporter, issued $900,000 par value, 5%. 5-year bonds dated January 1, 2018. The bonds pay interest semiannually each June 30 and December 31. Tyka received cash of $863,825 when the bonds were issued, excluding accrued interest and bond issue costs, on April 30,
Summa Manufacturing Company issued $900,000 par value, 5%, 5-year bonds dated January 1, 2018. The bonds pay interest semiannually each June 30 and December 31. Summa issued the bonds on April 30, 2018, when the market rate of interest was 6%.a. Determine the bond issue price including accrued
On January 1, 2018, Organic Products issued $1,200,000 par value, 7%, 5-year bonds. Interest is payable semiannually at the end of the period. The market rate of interest on the date of the bond issue was 6%.Requireda. Determine the issue price of the debt.b. Prepare the amortization table for the
On January 1, 2018, Tara Clothing Corporation issued $900,000 par value, 5%, 6-year bonds. Interest is payable semiannually each January 1 and July 1 with the first interest payment due at the end of the period on July 1, 2018. The market rare of interest on the date of the bond issue was 8%. Bond
Freiberg Associates issued $700,000 par value, 4-year, zero-coupon bonds on January 1, 2018. The market rare of interest on the date of the bond issue was 4%. Bond issue costs are $3,600. The company's fiscal year ends on December 31.Requireda. Determine the issue price of the debt.b. Find the
On September 30, 2018, Laurino Landscaping Company issued a 6 -year, 3%. $800,000 note payable. The note was issued on a date when the market rate was 5%. Interest m 3% is due annually every September 30. beginning September 30, 2019. The full amount of the principal amount is due and payable at
On January 1, 2018, Priolo Builders Company borrowed $650,000 by issuing 4%, 5-year notes. The full amount of the cash was received immediately. Under the terms of the loan agreement, Priolo must make principal and interest payments every 6 months, beginning June 30, 2018. The note matures on
On January 1, 2017, Antonia Lee Stores, Inc., borrowed $700,000 and immediately received the full amount. The note carried a 7% interest rate and requires annual payments of $146,857 beginning on December 31, 2017. The note matures on December 31, 2022. The company's fiscal year ends on December
On January 1, 2018, Sohape Corporation issued $100,000 par value, 5-year bonds with a 3% slated interest rate. Interest is paid annually each December 31. The market rate of interest on the date of the bond issue was 2.5%. The amortization table for the bond follows. Assume that Sohape elected the
On January 1, 2018, McMillan Corporation issued $86,000 par value, 6 -year bonds with a 0% stated interest rate. The discount on the bonds is amortized annually each December 31. The market rare of interest on the date of the bond issue was 3.25%. Fair value changes are not the result or instrument
Using the information provided in E 14-13, complete the following requirements assuming that Mobile Technology reports under IFRS.Data from E14-13On January 1, 2018, Mobile Technology, Incorporated issued $850,000 of $1,000 par value, 6%, 6-year bonds. Interest is payable semiannually each January
Using the information provided in E14-13, complete the following requirements assuming that the effective rate of interest for convertible bonds is 4% on the date of issue.Data from E14-13On January 1, 2018, Mobile Technology, Incorporated issued $850,000 of $1,000 par value, 6%, 6-year bonds.
On January 1, 2018, Mobile Technology, Incorporated issued $850,000 of $1,000 par value, 6%, 6-year bonds. Interest is payable semiannually each January I and July 1 with the first interest payment due at the end of the period on July 1, 2018. The market rate of interest for similar
On January 1, 2018. Faxico, Inc. issued $4,500,000 par value 8%, 5-year bonds, interest is payable semiannually on January 1 and July 1 with the first interest payment on July 1, 2018. The market rate of interest on the date of the bond issue was 10%. Faxico retired the debt early a t the end of
Teter Company issued $700,000 par value, 5-year, 3% bonds on November 30, 2018. The bonds are dated July 1, 2018, and pay interest semiannually on June 30 and December 31. The bonds are sold at $723,807, including accrued interest, because they are sold between interest dates. The market rate of
Briscoe Company issued $700,000 par value, 5-year, 4% bonds on April 30, 2018. The bonds are dated January 1, 2018, and pay interest semiannually on June 30 and December 31. The bonds are sold at $703,455, including accrued interest, because they are sold between interest dates. Prepare the journal
Takedo Company issued $600,000 par value, 10-year, 5% bonds on February 1, 2018. The bonds arc dated January 1, 2018, and pay interest quarterly each March 31, June 30. September 30, and December 31. The bonds are sold at par plus accrued interest because the bonds are sold between interest dates.
On January 1, 2018, Faxico, Inc, issued $4,500,000 par value, 8%, 5-year bonds. Interest is payable semiannually each January 1 and July 1 with the first interest payment due at the end of the period on July 1, 2018. The market rate of interest on the date of the bond issue was 10%.Requireda.
On January 1, 2018, McMillan Corporation issued $100,000 par value, 5-year, zero-coupon bonds. The market rate of interest on the date of the bond issue was 6%. The company's fiscal year ends on December 31.Requireda. Determine the issue price of the debt.b. Prepare the amortization table for the
On January 1, 2018, the Landon Capital Partners issued $600,000 par value, 6%, 6-year bonds. Interest is payable semiannually each January 1 and July 1 with the first interest payment due at the end of the period on July 1, 2018. The market rate of interest on the date of the bond issue was
On January 1, 2018, Mill Road Corporation issued $300,000 par value, 5%, 5-year bonds, interest is payable semiannually each January 1 and July 1 with the first interest payment due at the end of the period on July 1, 2018. The market rate of interest on the date of the bond issue was&%. The
On March 31, 2018, Vine Company issued a $487,000, 2%. 3-year note payable when the market rate was 8%. Interest is due on each March 31, beginning March 31, 2019. The company's fiscal year ends on December 31.Requireda. Prepare the journal entry to record the issuance of the note payable.b.
Broad Street Company borrows $975,050 by issuing an 8%, 7-year note on January 1, 2018. Broad Street must make payments of principal and interest every 6 months beginning June 30, 2018. The note will be fully paid at maturity on December 31, 2024. The company's fiscal year ends on December
EA&Y, Inc. borrowed $350,000 on January 1, 2018, with a 6% interest rate. It will make a payment of $101,007 annually (beginning December 31, 2018) until the note is paid off on December 31, 2021. The company's fiscal year ends on December 31. The payment includes interest and
Use the following excerpt from the financial statements of Fixet Company's debt footnote (from Fixet Company's 2018 annual report) to answer these questions:a. At December 31, 2018, what is the amount of the current portion o f long-term debt?b. How much debt will mature over the next 5 years?c.
Saratoga Company issued bonds with a face value of $300,000 on January 1, 2018, for $306,000. Saratoga uses the fair value option to measure the bonds. At the end of 2018, the carrying value of the bonds is $304,702 and their fair value is $301,600. Half of the fair value change relates to
Saratoga Company issued bonds with a face value of $200,000 on January 1, 2018, for $202,716. Saratoga uses the fair value option to measure the bonds. At the end of 2018, the carrying value of the bonds is $201,403, and their fair value is $203,780. The change in fair value relates to a change in

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