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intermediate accounting

Questions and Answers of Intermediate Accounting

The following article appeared in the Wall Street Journal.Bond MarketsGiant Commonwealth Edison Issue Hits Resale Market With $70 Million Left Over new york—Commonwealth Edison Co.’s slow-selling
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) Compute the debt to assets and the
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
Donald Lennon is the president, founder, and majority owner of Wichita Medical Corporation, an emerging medical technology products company. Wichita is in dire need of additional capital to keep
Part I: The appropriate method of amortizing a premium or discount on issuance of bonds is the effective-interest method.Instructions (a) What is the effective-interest method of
Crocker Corp. owes D. Yaeger Corp. a 10-year, 10% note in the amount of $330,000 plus $33,000 of accrued interest. The note is due today, December 31, 2014. Because Crocker Corp. is in financial
Halvor Corporation is having financial difficulty and therefore has asked Frontenac National Bank to restructure its $5 million note outstanding. The present note has 3 years remaining and pays a
Daniel Perkins is the sole shareholder of Perkins Inc., which is currently under protection of the U.S. bankruptcy court. As a “debtor in possession,” he has negotiated the following revised loan
Samantha Cordelia, an intermediate accounting student, is having difficulty amortizing bond premiums and discounts using the effective-interest method. Furthermore, she cannot understand why GAAP
On December 31, 2014, Faital Company acquired a computer from Plato Corporation by issuing a $600,000 zero-interest-bearing note, payable in full on December 31, 2018. Faital Company’s credit
Presented below are selected transactions on the books of Simonson Corporation.May 1, 2014 Bonds payable with a par value of $900,000, which are dated January 1, 2014, are sold at 106 plus
In each of the following independent cases the company closes its books on December 31. 1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2014. The bonds pay interest on September 1 and
Holiday Company issued its 9%, 25-year mortgage bonds in the principal amount of $3,000,000 on January 2, 2000, at a discount of $150,000, which it proceeded to amortize by charges to expense over
Good-Deal Inc. developed a new sales gimmick to help sell its inventory of new automobiles. Because many new car buyers need financing, Good-Deal offered a low down-payment and low car payments for
Venezuela Co. is building a new hockey arena at a cost of $2,500,000. It received a downpayment of $500,000 from local businesses to support the project, and now needs to borrow $2,000,000 to
The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2008, and the subsequent interest payments and charges. The company’s
Vargo Corp. owes $270,000 to First Trust. The debt is a 10-year, 12% note due December 31, 2014. Because Vargo Corp. is in financial trouble, First Trust agrees to extend the maturity date to
Gottlieb Co. owes $199,800 to Ceballos Inc. The debt is a 10-year, 11% note. Because Gottlieb Co. is in financial trouble, Ceballos Inc. agrees to accept some property and cancel the entire debt. The
Using the same information as in E14-22 and E14-24, answer the following questions related to American Bank (creditor).Instructions (a) Compute the loss American Bank will suffer under this new
Use the same information as in E14-22 above except that American Bank reduced the principal to $1,900,000 rather than $2,400,000. On January 1, 2018, Barkley pays $1,900,000 in cash to American Bank
Using the same information as in E14-22, answer the following questions related to American Bank (creditor).Instructions (a) What interest rate should American Bank use to calculate the loss on
Strickland Company owes $200,000 plus $18,000 of accrued interest to Moran State Bank. The debt is a 10-year, 10% note. During 2014, Strickland’s business deteriorated due to a faltering regional
Fallen Company commonly issues long-term notes payable to its various lenders. Fallen has had a pretty good credit rating such that its effective borrowing rate is quite low (less than 8% on an
Assume the same information as in E14-4, except that Celine Dion Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of
Celine Dion Company issued $600,000 of 10%, 20-year bonds on January 1, 2014, at 102. Interest is payable semiannually on July 1 and January 1. Dion Company uses the straight-line method of
Presented below are two independent situations. 1. On January 1, 2014, Simon Company issued $200,000 of 9%, 10-year bonds at par. Interest is payable quarterly on April 1, July 1, October 1,
Presented below are various account balances of K.D. Lang Inc. (a) Unamortized premium on bonds payable, of which $3,000 will be amortized during the next year. (b) Bank loans payable of
Shlee Corporation issued a 4-year, $60,000, zero-interest-bearing note to Garcia Company on January 1, 2014, and received cash of $60,000. In addition, Shlee agreed to sell merchandise to Garcia at
McCormick Corporation issued a 4-year, $40,000, 5% note to Greenbush Company on January 1, 2014, and received a computer that normally sells for $31,495. The note requires annual interest payments
Samson Corporation issued a 4-year, $75,000, zero-interest-bearing note to Brown Company on January 1, 2014, and received cash of $47,664. The implicit interest rate is 12%. Prepare Samson’s
Coldwell, Inc. issued a $100,000, 4-year, 10% note at face value to Flint Hills Bank on January 1, 2014, and received $100,000 cash. The note requires annual interest payments each December 31.
At December 31, 2014, Hyasaki Corporation has the following account balances:Bonds payable, due January 1, 2023 $2,000,000Discount on bonds payable
Teton Corporation issued $600,000 of 7% bonds on November 1, 2014, for $644,636. The bonds were dated November 1, 2014, and mature in 10 years, with interest payable each May 1 and November 1. Teton
Devers Corporation issued $400,000 of 6% bonds on May 1, 2014. The bonds were dated January 1, 2014, and mature January 1, 2017, with interest payable July 1 and January 1. The bonds were issued at
The Colson Company issued $300,000 of 10% bonds on January 1, 2014. The bonds are due January 1, 2020, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare
Under what circumstances would a transaction be recorded as a troubled-debt restructuring by only one of the two parties to the transaction?
Briggs and Stratton reported unamortized debt issue costs of $5.1 million. How should the costs of issuing these bonds be accounted for and classified in the financial statements?
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/
Hincapie Co. manufactures specialty bike accessories. The company is most well known for its product quality, and it has offered one of the best warranties in the industry on its higher-priced
Kobayashi Corporation reports in the current liability section of its statement of financial position at December 31, 2014 (its year-end), short-term obligations of $15,000,000, which includes the
The following situations relate to Bolivia Company. 1. Bolivia provides a warranty with all its products it sells. It estimates that it will sell 1,000,000 units of its product for the year
Presented below are two different situations related to Mckee Corporation’s debt obligations. Mckee’s next financial reporting date is December 31, 2014. The financial statements are authorized
YellowCard Company manufactures accessories for iPods. It had the following selected transactions during 2014. 1. YellowCard provides a 2-year warranty on its docking stations, which it began
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) How much working capital do each of
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
The following two independent situations involve loss contingencies.Part 1: Benson Company sells two products, Grey and Yellow. Each carries a one-year warranty. 1. Product Grey—Product
Presented below is a note disclosure for Matsui Corporation.Litigation and Environmental: The Company has been notified, or is a named or a potentially responsible party in a number of
Dumars Corporation reports in the current liability section of its balance sheet at December 31, 2014 (its year-end), short-term obligations of $15,000,000, which includes the current portion of 12%
Rodriguez Corporation includes the following items in its liabilities at December 31, 2014. 1. Notes payable, $25,000,000, due June 30, 2015. 2. Deposits from customers on equipment
Presented below is the current liabilities section of Micro Corporation.
Schmitt Company must make computations and adjusting entries for the following independent situations at December 31, 2015. 1. Its line of amplifiers carries a 3-year warranty against defects.
You are the independent auditor engaged to audit Millay Corporation’s December 31, 2014, financial statements. Millay manufactures household appliances. During the course of your audit, you
Garison Music Emporium carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet music. Garison uses two sales promotion techniques—warranties and
Sycamore Candy Company offers an MP3 download (seven-single medley) as a premium for every five candy bar wrappers presented by customers together with $2.50. The candy bars are sold by the company
To stimulate the sales of its Alladin breakfast cereal, Loptien Company places 1 coupon in each box. Five coupons are redeemable for a premium consisting of a children’s hand puppet. In 2015, the
Alvarado Company sells a machine for $7,400 with a 12-month warranty agreement that requires the company to replace all defective parts and to provide the repair labor at no cost to the customers.
Dos Passos Company sells televisions at an average price of $900 and also offers to each customer a separate 3-year warranty contract for $90 that requires the company to perform periodic services
Brooks Corporation sells computers under a 2-year warranty contract that requires the corporation to replace defective parts and to provide the necessary repair labor. During 2014, the corporation
Listed below are selected transactions of Schultz Department Store for the current year ending December 31. 1. On December 5, the store received $500 from the Selig Players as a deposit to be
Presented below is information related to Carver Inc. Instructions (a) Compute the following ratios or relationships
Sprague Company has been operating for several years, and on December 31, 2014, presented the following balance sheet.
Oil Products Company purchases an oil tanker depot on January 1, 2014, at a cost of $600,000. Oil Products expects to operate the depot for 10 years, at which time it is legally required to dismantle
Sheryl Crow Equipment Company sold 500 Rollomatics during 2014 at $6,000 each. During 2014, Crow spent $20,000 servicing the 2-year warranties that accompany the Rollomatic. All applicable
Wynn Company offers a set of building blocks to customers who send in 3 UPC codes from Wynn cereal, along with 50¢. The block sets cost Wynn $1.10 each to purchase and 60¢ each to mail to
Leppard Corporation sells DVD players. The corporation also offers its customers a 2-year warranty contract. During 2014, Leppard sold 20,000 warranty contracts at $99 each. The corporation spent
Leppard Corporation sells DVD players. The corporation also offers its customers a 2-year warranty contract. During 2014, Leppard sold 20,000 warranty contracts at $99 each. The corporation spent
Streep Factory provides a 2-year warranty with one of its products which was first sold in 2014. In that year, Streep spent $70,000 servicing warranty claims. At year-end, Streep estimates that an
Calaf’s Drillers erects and places into service an off-shore oil platform on January 1, 2015, at a cost of $10,000,000. Calaf is legally required to dismantle and remove the platform at the end of
Scorcese Inc. is involved in a lawsuit at December 31, 2014. (a) Prepare the December 31 entry assuming it is probable that Scorcese will be liable for $900,000 as a result of this suit. (b) Prepare
Mayaguez Corporation provides its officers with bonuses based on net income. For 2014, the bonuses total $350,000 and are paid on February 15, 2015. Prepare Mayaguez’s December 31, 2014, adjusting
Kasten Inc. provides paid vacations to its employees. At December 31, 2014, 30 employees have each earned 2 weeks of vacation time. The employees’ average salary is $500 per week. Prepare
Sport Pro Magazine sold 12,000 annual subscriptions on August 1, 2014, for $18 each. Prepare Sport Pro’s August 1, 2014, journal entry and the December 31, 2014, annual adjusting entry, assuming
Upland Company borrowed $40,000 on November 1, 2014, by signing a $40,000, 9%, 3-month note. Prepare Upland’s November 1, 2014, entry; the December 31, 2014, annual adjusting entry; and the
Distinguish between a determinable current liability and a contingent liability. Give two examples of each type.
The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://corporate.marksandspencer.com/documents/publications/2012
Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2012, the company expends $325,000 on a research project, but by the end
Treasure Land Corporation incurred the following costs in 2014. Prepare the necessary 2014 journal entry(ies) for Treasure Land.
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) (1) What amounts for intangible
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
Cuevas Co. is in the process of developing a revolutionary new product. A new division of the company was formed to develop, manufacture, and market this new product. As of year-end (December 31,
After securing lease commitments from several major stores, Auer Shopping Center, Inc. was organized and built a shopping center in a growing suburb.The shopping center would have opened on schedule
Information concerning Sandro Corporation’s intangible assets is as follows. 1. On January 1, 2014, Sandro signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an
Fields Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Fields does not manufacture or sell the products and processes it
Presented below is net asset information related to the Carlos Division of Santana, Inc. The purpose of the Carlos
Fred Moss, owner of Moss Interiors, is negotiating for the purchase of Zweifel Galleries. The balance sheet of Zweifel is given in an abbreviated form below.
Tones Industries has the following patents on its December 31, 2013, balance sheet. The following events occurred
Joni Hyde Inc. has the following amounts reported in its general ledger at the end of the current year.
Presented below is selected information related to Martin Burke Inc. at year-end. All these accounts have debit balances.Cable television franchises
Presented below is a list of items that could be included in the intangible assets section of the balance sheet. 1. Investment in a subsidiary company. 2. Timberland. 3. Cost of
Nieland Industries had one patent recorded on its books as of January 1, 2014. This patent had a book value of $288,000 and a remaining useful life of 8 years. During 2014, Nieland incurred research
Gershwin Corporation obtained a franchise from Sonic Hedgehog Inc. for a cash payment of $120,000 on April 1, 2014. The franchise grants Gershwin the right to sell certain products and services for a
Use the information provided in BE12-1. Assume that at January 1, 2016, the carrying amount of the patent on Celine Dion’s books is $43,200. In January, Celine Dion spends $24,000 successfully
Celine Dion Corporation purchases a patent from Salmon Company on January 1, 2014, for $54,000. The patent has a remaining legal life of 16 years. Celine Dion feels the patent will be useful for 10
An intangible asset with an estimated useful life of 30 years was acquired on January 1, 2004, for $540,000. On January 1, 2014, a review was made of intangible assets and their expected service
McNabb Company spent $190,000 developing a new process, $45,000 in legal fees to obtain a patent, and $91,000 to market the process that was patented, all in the year 2014. How should these costs be
The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at
Assume the same information as in IFRS11-11, except that Pujols intends to dispose of the equipment in the coming year.Instructions (a) Prepare the journal entry (if any) to record the
Presented below is information related to equipment owned by Pujols Company at December 31, 2014.Cost (residual value $0)
Brazil Group purchases a vehicle at a cost of $50,000 on January 2, 2014. Individual components of the vehicle and useful lives are as follows.
Tan Chin Company purchases a building for $11,300,000 on January 2, 2014. An engineer’s report shows that of the total purchase price, $11,000,000 should be allocated to the building (with a

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