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intermediate accounting
Intermediate Accounting 15th edition Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield - Solutions
Nottebart Corporation has outstanding 10,000 shares of $100 par value, 6% preferred stock and 60,000 shares of $10 par value common stock. The preferred stock was issued in January 2014, and no dividends were declared in 2014 or 2015. In 2016, Nottebart declares a cash dividend of $300,000. How
Cole Inc. owns shares of Marlin Corporation stock classified as an available-for-sale investment. At December 31, 2014, the available-for-sale securities were carried in Cole’s accounting records at their cost of $875,000, which equals their fair value. On September 21, 2015, when the fair value
Arantxa Corporation has outstanding 20,000 shares of $5 par value common stock. On August 1, 2014, Arantxa reacquired 200 shares at $80 per share. On November 1, Arantxa reissued the 200 shares at $70 per share. Arantxa had no previous treasury stock transactions. Prepare Arantxa’s journal
Sprinkle Inc. has outstanding 10,000 shares of $10 par value common stock. On July 1, 2014, Sprinkle reacquired 100 shares at $87 per share. On September 1, Sprinkle reissued 60 shares at $90 per share. On November 1, Sprinkle reissued 40 shares at $83 per share. Prepare Sprinkle’s journal
Wilco Corporation has the following account balances at December 31, 2014.Common stock, $5 par value $ 510,000Treasury stock
McNabb Corp. had $100,000 of 7%, $20 par value preferred stock and 12,000 shares of $25 par value common stock outstanding throughout 2014. (a) Assuming that total dividends declared in 2014 were $64,000, and that the preferred stock is not cumulative but is fully participating, common
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/Marksand-Spencer-Annual-report-and-financial-statements-2012.pdf.InstructionsRefer to M&S’s financial
Wie Company has been operating for just 2 years, producing specialty golf equipment for women golfers. To date, the company has been able to finance its successful operations with investments from its principal owner, Michelle Wie, and cash flows from operations. However, current expansion plans
Assume the same information as in IFRS14-5, except that the bonds were issued at 84.95 to yield 12%. Prepare the journal entries to record (a) the issuance of the bonds, (b) the payment of interest and related amortization on July 1, 2014, and (c) the accrual of interest and the related
Foreman Company issued $800,000 of 10%, 20-year bonds on January 1, 2014, at 119.792 to yield 8%. Interest is payable semiannually on July 1 and January 1. Prepare the journal entries to record (a) the issuance of the bonds, (b) the payment of interest and the related amortization on July 1, 2014,
The following information is taken from the 2014 annual report of Bugant, Inc. Bugant’s fiscal year ends December 31 of each year. Bugant’s December 31, 2014, balance sheet is as follows.
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 new 9¼% bonds were tossed onto the resale market at a reduced price with about $70 million still
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 times interest earned ratios for these two companies. Comment on the quality of these two ratios for
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 2011 financial statements and
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 operating and to bring several promising products to final development, testing, and production. Donald,
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 amortization and how is it different from and similar to the straight-line method of amortization? (b)
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 trouble, D. Yaeger Corp. agrees to forgive the accrued interest, $30,000 of the principal, and to extend
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 current rate of interest of 10%. The present market rate for a loan of this nature is 12%. The note was
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 agreement with United Bank. Perkins Inc.’s $600,000, 12%, 10-year note was refinanced with a
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 requires that this method be used instead of the straight-line method. She has come to you with the
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 rating permits it to borrow funds from its several lines of credit at 10%. The computer is expected to
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 accrued interest. They are coupon bonds, bear interest at 12% (payable annually at January 1), and mature
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 March 1. The due date of the bonds is September 1, 2017. The bonds yield 12%. Give entries through
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 the life of the issue on a straight line basis. The indenture securing the issue provided that the
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 the first year after purchase. It believes that this promotion will bring in some new buyers.On
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 complete the project. It therefore decides to issue $2,000,000 of 10.5%, 10-year bonds. These bonds were
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 year-end is December 31, and financial statements are prepared once yearly.
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 December 31, 2016, reduce the principal to $220,000, and reduce the interest rate to 5%, payable annually
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 property has a book value of $90,000 and a fair value of $140,000.Instructions (a) Prepare
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 term modification. Prepare the journal entry to record the loss on American’s books. (b)
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 for the principal.Instructions (a) Can Barkley Company record a gain under this term
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 the debt restructuring? (b) Compute the loss that American Bank will suffer from the debt
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 economy. On December 31, 2014, Moran State Bank agrees to accept an old machine and cancel the entire
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 annual basis). Fallen has elected to use the fair value option for the long-term notes issued to
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 9.7705%.InstructionsPrepare the journal entries to record the following. (Round to the nearest dollar.) (a)
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 amortization for bond premium or discount.InstructionsPrepare the journal entries to record the
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, and January 1. 2. On June 1, 2014, Garfunkel Company issued $100,000 of 12%, 10-year bonds dated
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 a winery, due March 10, 2018. (The product requires aging for 5 years before sale.) (c) Serial
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 an amount less than regular selling price over the 4-year period. The market rate of interest for
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 each December 31. The market rate of interest for a note of similar risk is 12%. Prepare McCormick’s
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 journal entries for (a) the January 1 issuance and (b) the December 31 recognition of interest.
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. Prepare Coldwell’s journal entries to record (a) the issuance of the note and (b) the 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 88,000Interest
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 uses the effective-interest method with an effective rate of 6%. Prepare Teton’s December 31,
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 face value plus accrued interest. Prepare Devers’s journal entries for (a) the May 1 issuance, (b)
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 Colson’s journal entries for (a) the January issuance, (b) the July 1 interest payment, and (c) the
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/ Marks-and-Spencer-Annual-report-and-financial-statements-2012.pdf.InstructionsRefer to M&S’s financial
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 products—a lifetime guarantee. The warranty on these products is included in the sales price. Hincapie
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 current portion of 12% long-term debt in the amount of $10,000,000 (matures in March 2015). Management
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 ended December 31, 2014, and that its total revenue for the product will be $100,000,000. It also
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 for issuance on March 1, 2015. 1. Mckee has a long-term obligation of $400,000, which is
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 selling in 2014. During 2014, YellowCard spent $6,000 servicing warranty claims. At year-end,
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 these companies have at the end of 2011? (b) Compute each company’s (a) current cash debt
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 these financial statements and the
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 warranty costs, based on past experience, will normally be 1% of sales. 2. 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 governmental (federal, state and local) and private actions associated with environmental matters, such as
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% long-term debt in the amount of $10,000,000 (matures in March 2015). Management has stated its
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 ordered by them from Rodriguez, $6,250,000. 3. Salaries and wages payable, $3,750,000, due January
Presented below is the current liabilities section of Micro Corporation. InstructionsAnswer the following questions. (a) What are the essential characteristics that make an item
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. On the basis of past experience the estimated warranty costs related to dollar sales are first year
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 discovered the following contingent liabilities. 1. Millay began production of a new dishwasher in
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 premiums—to attract customers.Musical instruments and sound equipment are sold with a one-year warranty
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 distributors for 30 cents each. The purchase price of each download code to the company is $2.25.
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 company purchases 40,000 puppets at $1.50 each and sells 480,000 boxes of Alladin at $3.75 a box.
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. With sales being made evenly throughout the year, the company sells 600 machines in 2014 (warranty
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 and to replace defective parts. During 2014, the company sold 300 televisions and 270 warranty
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 sells for cash 400 computers at a unit price of $2,500. On the basis of past experience, the 2-year
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 returned after certain furniture to be used in stage production was returned on January 15. 2.
Presented below is information related to Carver Inc. Instructions (a) Compute the following ratios or relationships of Carver Inc. Assume that the ending account balances are representative unless the information
Sprague Company has been operating for several years, and on December 31, 2014, presented the following balance sheet. The net income for 2014 was $25,000. Assume that total assets are the same in 2013 and
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 the depot and remove the underground storage tanks. It is estimated that it will cost $75,000 to
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 transactions are on a cash basis.Instructions (a) Prepare 2014 entries for Crow using the expense
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 customers. During 2014, Wynn sold 1,200,000 boxes of cereal. The company expects 30% of the UPC codes to be
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 $180,000 servicing warranties during 2014, and it estimates that an additional $900,000 will be 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 $180,000 servicing warranties during 2014, and it estimates that an additional $900,000 will be 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 additional $400,000 will be spent in the future to service warranty claims related to 2014 sales.
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 its useful life in 10 years. Calaf estimates it will cost $1,000,000 to dismantle and remove the
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 the December 31 entry, if any, assuming it is not probable that Scorcese will be liable for any
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 entry and the February 15, 2015, entry.
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 Kasten’s December 31, 2014, adjusting entry.
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 the magazines are published and delivered monthly.
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 February 1, 2015, entry.
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 /Annual_Report_2012.InstructionsRefer to M&S’s financial statements and the accompanying notes to
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 of 2012, it is impossible to determine whether any benefit will be derived from it. (a) What
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 assets were reported in their respective balance sheets by Coca Cola and PepsiCo?
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
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, 2014), the new product has not been manufactured for resale. However, a prototype unit was built and is
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 on January 1, 2014, if it had not been struck by a severe tornado in December. Instead, it opened
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 initial franchise fee of $75,000. Of this amount, $15,000 was paid when the agreement was signed, and
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 develops. Instead, it conducts research and develops products and processes which it patents, and then
Presented below is net asset information related to the Carlos Division of Santana, Inc. The purpose of the Carlos Division is to develop a nuclear-powered aircraft. If successful, traveling delays associated with
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. Moss and Zweifel agree that: 1. Land is undervalued by
Tones Industries has the following patents on its December 31, 2013, balance sheet. The following events occurred during the year ended December 31, 2014. 1. Research and development costs of $245,700 were
Joni Hyde Inc. has the following amounts reported in its general ledger at the end of the current year. Instructions (a) On the basis of the information above, compute the total amount to be
Presented below is selected information related to Martin Burke Inc. at year-end. All these accounts have debit balances.Cable television franchises Film contract rightsMusic copyrights
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 engineering activity required to advance the design of a product to the manufacturing stage. 4.
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