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principles of accounting volume 1

Questions and Answers of Principles Of Accounting Volume 1

Nutritious Pet Food Company’s board of directors declares a 2-for-1 stock split on June 30 when the stock’s market value per share is $30. At that time, there are 10,000 shares of $1 par value
Which of the following is true of a stock dividend?A. It is a liability.B. The decision to issue a stock dividend resides with shareholders.C. It does not affect total equity but transfers amounts
Your friend has questions about retained earnings and dividends. How do you explain to him that dividends are paid out of retained earnings?
You are a consultant working with various companies that are considering incorporating and listing shares on a stock exchange. Explain the importance of the EPS calculation to financial analysts who
Farmington Corporation began the year with a retained earnings balance of $20,000. The company paid a total of $3,000 in dividends and earned a net income of $60,000 this year. What is the ending
Aggregate Mining Corporation was incorporated five years ago. It is authorized to issue 500,000 shares of $100 par value 8% preferred stock. It is also authorized to issue 750,000 shares of $1 par
St. Marie Company is authorized to issue 1,000,000 shares of $5 par value preferred stock, and 5,000,000 shares of $1 stated value common stock. During the year, the company has the following
Aggregate Mining Corporation was incorporated five years ago. It is authorized to issue 500,000 shares of $100 par value 8% cumulative preferred stock. It is also authorized to issue 750,000 shares
Cocochips is a manufacturer of vegan snacks and treats, including a unique brand of granola and a distinct brand of coconut-flavoured chips and snacks. The company began its operations in 20X8, and
Lake Country Ltd. (LCL) is a Canadian manufacturer of outdoor furniture products. LCL manufactures high-quality, durable, and attractive furniture such as outdoor seating, tables, and accessories.
Paper Supply Ltd. has contracted with a local copy and print centre to provide packages of plain printer paper, as needed, each month. Each package costs $15 and contains 500 sheets of paper. If the
Green Equipment Inc. (Green) sells heavy-duty tractors. The 250GT tractor has a stand-alone price of $220,000. Green offers to sell the 250GT inclusive of a five-year service contract intended to
Floral Design Co. is a chain of florists located in the Greater Halifax area. Floral Design sells made-to-order bouquets, in-store floral arrangements, and provides design services for events such as
Apricot Candy Inc. (ACI) manufactures non-GMO, plant-based snacks. In November 20X4, ACI supplied $12,700 worth of snacks to Planet Food (PF), a boutique health food store. The cost to manufacture
A boutique spa provides a variety of services to customers. As a way to retain customers, the spa provides a loyalty program in which customers earn a $10 future service credit for every $200 spent
Organizer Ltd. (Organizer) sells home organization solutions to customers. They have a wide range of products and three locations in the Greater Vancouver area. The company currently uses the retail
A large winery in Kelowna has a number of grapevines and fruit trees. The company develops wine on-site.Required:1. Identify the types of biological assets that would exist at the vineyard and
Macmulk purchased a new facility to run its operations. The total cost of the space was $1,719,000. The facility had the following significant components: Land, building, electrical, roof, interior
Jules Company sells a variety of beauty products online. Their products fall into three broad categories: nail care, makeup, and hair care. The company has over 250 different products in its
A farm buys beef cattle for $40,000 at the end of 20X7. The cost to feed, shelter, and grow the cattle was $12,700 and 6,300 in 20X8 and 20X9, respectively. On 2 May 20X9, the cattle were slaughtered
A tree farm harvests a variety of trees that are sold to garden centres. In 20X5, the company was created and they acquired 1,500 immature blue spruce trees and 300 mature blue spruce trees. Each
A farmer buys 1,000 chickens for $120,000 at the beginning of 20X3. The cost to feed, shelter, and grow the chickens is $22,000 in 20X3 and $24,000 in 20X4. Based on the chickens’ age and size, the
Consider the following two scenarios:Case A On 27 February 20X7, JJJ Inc. upgraded its windows and doors in order to make the building green-certified. The upgrades have a 20-year useful life.
Pipa Incorporated entered into an arrangement with Gianardo Ltd. to exchange equipment and cash. Pipa gave up a piece of equipment that was no longer being used by the business, as well as $11,500 in
On 28 April 20X2, Peele Realty purchased land and building for $4.65 million and $2.79 million, respectively. The company uses the revaluation model for the land and building. Assume that the
IMG owns a number parcels of land. The land is held by IMG for future development purposes (no intention to sell). IMG accounts for its land using the revaluation model under IFRS. The below graph
Bellair Corp. a tool-making company, acquired equipment for $4M on 1 January 20X7. The equipment had an estimated useful life of eight years at acquisition and the residual value was estimated at
The following are two independent scenarios:1. On 1 March 20X9 Tunio Corp. purchased a copper mine on a land site for $3,500,000, and $1 million of the purchase price related to the land. At the time
The following select data has been extracted from Reelo Inc.’s financial records relating to equipment acquisitions during 20X7 and 20X8.On 31 December 20X8 equipment was retired which had an
The following independent scenarios are provided:Scenario A Yaloo Incorporated purchased machinery on 2 December 20X2. Delivery was guaranteed within 10 days and the machinery arrived on 7
Brioche Incorporated is a private company that uses IFRS for financial reporting. The company acquired equipment for $90,000 on 1 January 20X1. At acquisition, Brioche estimated the equipment would
Calico Inc. purchased a patent on a new drug. The patent cost $21,000. The patent has a life of twenty years, but Calico only expects to be able to sell the drug for fifteen years. Calculate the
Define natural resources.
Santa Rosa recently purchased a new boat to help ship product overseas. The following information is related to that purchase:• Purchase price $4,500,000• Cost to bring boat to production
Ronson recently purchased a new boat to help ship product overseas. The following information is related to that purchase:• Purchase price $4,500,000• Cost to bring boat to production facility
For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense:A. A patent with a ten-year remaining legal life was
Prepare the assets section of the balance sheet as of December 31 for Hooper’s International using the following information: Cash Equipment Accounts receivable Copyright* Copyright amortization
Akira Company had the following transactions for the month.Calculate the gross margin for the period for each of the following cost allocation methods, using periodic inventory updating. Assume that
During the current year, Alanna Co. had the following transactions pertaining to its new office building.A. What should Alanna Co. record on its books for the land? The total cost of land includes
Which of the following indicates a positive trend for inventory management?A. Increasing number of days’ sales in inventory ratioB. Increasing inventory turnover ratioC. Increasing cost of goods
During the current year, Alanna Co. had the following transactions pertaining to its new office building.A. What should Alanna Co. record on its books for the land? The total cost of land includes
Montello Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is expected to be driven for eight years. Montello uses the straight-line depreciation method.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for ten years. Montello uses the straight-line depreciation method.
Speedy Delivery has a very lazy accountant. When originally setting up the delivery trucks into the accounting system, the accountant did not want to calculate the expected salvage value for each
Which of the following statements about capitalizing costs is correct?A. Capitalizing costs refers to the process of converting assets to expenses.B. Only the purchase price of the asset is
What is goodwill, and how is it generated?
Montello Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is expected to be driven for 120,000 miles. Montello uses the units-of-production depreciation method
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation
During the current year, Arkells Inc. made the following expenditures relating to plant machinery.• Renovated five machines for $100,000 to improve efficiency in production of their remaining
During the current year, Arkells Inc. made the following expenditures relating to plant machinery.• Renovated seven machines for $250,000 to improve efficiency in production of their remaining
Malone Industries has been in business for five years and has been very successful. In the past year, it expanded operations by buying Hot Metal Manufacturing for a price greater than the value of
Ngo Company purchased a truck for $54,000. Sales tax amounted to $5,400; shipping costs amounted to $1,200; and one-year registration of the truck was $100. What is the total amount of costs that
For each of the following transactions, state whether the cost would be capitalized (C) or recorded as an expense (E).A. Purchased a machine, $100,000; gave long-term noteB. Paid $600 for ordinary
Steele Corp. purchases equipment for $25,000. Regarding the purchase, Steele recorded the following transactions:• Paid shipping of $1,000• Paid installation fees of $2,000• Pays annual
Steele Corp. purchases equipment for $30,000. Regarding the purchase, Steele• Paid shipping of $1,200,• Paid installation fees of $2,750,• Pays annual maintenance cost of $250, and• Received
Jada Company had the following transactions during the year:• Purchased a machine for $500,000 using a long-term note to finance it• Paid $500 for ordinary repair• Purchased a patent for
Johnson, Incorporated, had the following transactions during the year:• Purchased a building for $5,000,000 using a mortgage for financing• Paid $2,000 for ordinary repair on a piece of
If a company capitalizes costs that should be expensed, how is its income statement for the current period impacted?A. Assets understatedB. Net Income understatedC. Expenses understatedD. Revenues
Calico Inc. purchased a patent on a new drug it created. The patent cost $12,000. The patent has a life of twenty years, but Calico expects to be able to sell the drug for fifty years. Calculate the
Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons of ore within the mine. Gimli paid $23,100,000 for the rights and expects to harvest the
Underwood’s Miners recently purchased the rights to a diamond mine. It is estimated that there are two million tons of ore within the mine. Underwood’s paid $46,000,000 for the rights and expects
Depreciation of a plant asset is the process of ________.A. Asset valuation for statement of financial position purposesB. Allocation of the asset’s cost to the periods of useC. Fund accumulation
Describe the relationship between expense recognition and long-term assets.
Alfredo Company purchased a new 3-D printer for $900,000. Although this printer is expected to last for ten years, Alfredo knows the technology will become old quickly, and so they plan to replace
Kenzie purchased a new 3-D printer for $450,000. Although this printer is expected to last for ten years, Kenzie knows the technology will become old quickly and so she plans to replace this printer
Tree Lovers Inc. purchased 100 acres of woodland in which the company intends to harvest the complete forest, leaving the land barren and worthless. Tree Lovers paid $2,100,000 for the land. Tree
Tree Lovers Inc. purchased 2,500 acres of woodland in which it intends to harvest the complete forest, leaving the land barren and worthless. Tree Lovers paid $5,000,000 for the land. Tree Lovers
An accelerated depreciation method that takes more expense in the first few years of the asset’s life is ________.A. Units-of-production depreciationB. Double-declining-balance depreciationC.
Using the information from EA7, calculate depreciation using the straight-line method.Data from in EA7Alfredo Company purchased a new 3-D printer for $900,000. Although this printer is expected to
Using the information from EB7, calculate depreciation using the straight-line method.Data from in EB7Kenzie purchased a new 3-D printer for $450,000. Although this printer is expected to last for
Referring to PA7 where Kenzie Company purchased a 3-D printer for $450,000, consider how the purchase of the printer impacts not only depreciation expense each year but also the asset’s book value.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of production depreciation
The estimated economic life of an asset is also known as ________.A. Residual valueB. Book valueC. Salvage lifeD. Useful life
The amortization process is like what other process?A. DepreciationB. ValuationC. Recognizing revenueD. Capitalization
Explain the differences between the process of amortizing intangible assets and the process of depreciating tangible assets.
Warriors Productions recently purchased a copyright. Although the copyright is expected to last a minimum of twenty-five years, the chief executive officer of the company believes this B-list movie
Warriors Production recently purchased a copyright on its new film. Although the copyright is expected to last a minimum of twenty-five years, the chief executive officer of the company believes this
Buchanan Imports purchased McLaren Corporation for $5,000,000 cash when McLaren had net assets worth $4,500,000.A. What is the amount of goodwill in this transaction?B. What is Buchanan’s journal
For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense:A. A patent with a seventeen-year remaining legal life was
How are intangible assets with an indefinite life treated?A. They are depreciated.B. They are amortized.C. They are depleted.D. They are tested yearly for impairment.
What is goodwill, and what are the unique aspects of accounting for it?
The following intangible assets were purchased by Hanna Unlimited:A. A patent with a remaining legal life of twelve years is bought, and Hanna expects to be able to use it for six years. It is
Montezuma Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is expected to be driven for eight years. Montezuma uses the straight-line depreciation method.
On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received $12,000,000 in net assets. In 2016, the market value of the goodwill obtained from Branta Corp. was valued
If the market value of goodwill is found to be lower than the book value, goodwill is __________ and must be adjusted by __________.A. Worthless; reducing it with a creditB. Impaired; reducing it
What are some examples of special issues in accounting for long-term assets? How are they handled?
Sand River Sales has a fork truck used in its warehouse operations. The truck had an original useful life of five years. However, after depreciating the asset for three years, the company makes a
Baglia’s Wholesale Trinkets has a 3-D printer used in operations. The original useful life was estimated to be six years. However, after two years of use, the printer was overhauled, and its total
Farm Fresh Agriculture Company purchased Sunny Side Egg Distribution for $400,000 cash when Sunny Side had net assets worth $390,000.A. What is the amount of goodwill in this transaction?B. What is
Which of the following represents an event that is less routine when accounting for long-term assets?A. Recording an asset purchaseB. Recording depreciation on an assetC. Recording accumulated
What is the difference between functional obsolescence and physical obsolescence?
Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun
Montezuma Inc. purchases a delivery truck for $20,000. The truck has a salvage value of $8,000 and is expected to be driven for ten years. Montezuma uses the straight-line depreciation method.
Which of the following is true regarding special issues in accounting for long-term assets?A. An asset’s useful life can never be changed.B. An asset’s salvage value can never be changed.C.
Garcia Co. owns equipment that costs $150,000, with accumulated depreciation of $65,000. Garcia sells the equipment for cash. Record the journal entry for the sale of the equipment if Garcia were to
The loss in value from all causes within a property except those due to physical deterioration is known as which of the following?A. Functional obsolescenceB. ObsolescenceC. True obsolescenceD.
Urquhart Global purchases a building to house its administrative offices for $500,000. The best estimate of the salvage value at the time of purchase was $45,000, and it is expected to be used for
Calculate a) cost of goods sold, b) ending inventory, and c) gross margin for B76 Company, considering the following transactions under three different cost allocation methods and using perpetual
Prepare journal entries to record the following transactions, assuming perpetual inventory updating and first-in, first-out (FIFO) cost allocation. Assume no beginning inventory. Nov. 19, purchased
Which of the following describes features of a perpetual inventory system?A. Technology is normally used to record inventory changes.B. Merchandise bought is recorded as purchases.C. An adjusting

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