Intermediate Accounting Archives

Intermediate Accounting

February 11, 2023/in Accounting /by Rose

Intermediate Accounting

Brief Exercise 7-15

Grouper Company designated Jill Holland as petty cash custodian and established a petty cash fund of $260. The fund is reimbursed when the cash in the fund is at $23, which it is. Petty cash receipts indicate funds were disbursed for office supplies $98 and miscellaneous expense $136.
Prepare journal entries for the establishment of the fund and the reimbursement. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

(To record establishment of the fund.)

(To record reimbursement.)

Exercise 9-4

Teal Company began operations in 2017 and determined its ending inventory at cost and at LCNRV at December 31, 2017, and December 31, 2018. This information is presented below.

Cost

Net Realizable Value

12/31/17

$315,690

$293,860

12/31/18

437,360

419,880

(a) Prepare the journal entries required at December 31, 2017, and December 31, 2018, assuming inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

12/31/17

12/31/18

(b) Prepare journal entries required at December 31, 2017, and December 31, 2018, assuming inventory is recorded at cost and a perpetual system using the loss method. (Use Recovery of Loss Inventory account.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

12/31/17

12/31/18

(c) Which of the two methods above provides the higher net income in each year?

Brief Exercise 13-5

Kingbird Corporation made credit sales of $43,800 which are subject to 7% sales tax. The corporation also made cash sales which totaled $18,618 including the 7% sales tax.

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Prepare the entry to record Kingbird’s credit sales. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

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Prepare the entry to record Kingbird’s cash sales. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

Brief Exercise 13-10

Sheridan Inc. is involved in a lawsuit at December 31, 2017.

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Prepare the December 31 entry assuming it is probable that Sheridan will be liable for $896,500 as a result of this suit. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

December 31, 2017

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Prepare the December 31 entry, if any, assuming it is not probable that Sheridan will be liable for any payment as a result of this suit. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

December 31, 2017

Brief Exercise 13-13

Vaughn Factory provides a 2-year warranty with one of its products which was first sold in 2017. Vaughn sold $986,900 of products subject to the warranty. Vaughn expects $117,650 of warranty costs over the next 2 years. In that year, Vaughn spent $65,190 servicing warranty claims. Prepare Vaughn’s journal entry to record the sales (ignore cost of goods sold) and the December 31 adjusting entry, assuming the expenditures are inventory costs. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

2017

(To record sales)

During 2017

(To record warranty claims)

12/31/17

Brief Exercise 14-3

The Splish Company issued $370,000 of 7% bonds on January 1, 2017. The bonds are due January 1, 2022, with interest payable each July 1 and January 1. The bonds were issued at 96.
Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Splish Company records straight-line amortization semiannually. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548.)

No.

Date

Account Titles and Explanation

Debit

Credit

(a)

January 1, 2017

(b)

(c)

Brief Exercise 14-12

Sheffield Corporation issued a 4-year, $53,000, 5% note to Greenbush Company on January 1, 2017, and received a computer that normally sells for $41,732. The note requires annual interest payments each December 31. The market rate of interest for a note of similar risk is 12%.
Prepare Sheffield’s journal entries for (a) the January 1 issuance and (b) the December 31 interest. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.

Date

Account Titles and Explanation

Debit

Credit

(a)

January 1, 2017

(b)

December 31, 2017

Brief Exercise 14-14

Sweet Corporation has elected to use the fair value option for one of its notes payable. The note was issued at an effective rate of 12% and has a carrying value of $19,000. At year-end, Sweet’s borrowing rate (credit risk) has declined; the fair value of the note payable is now $21,000.

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Determine the unrealized holding gain or loss on the note. (Enter loss using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).)

Unrealized Holding Gain or Loss

$

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Prepare the entry to record any unrealized holding gain or loss. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

Brief Exercise 21-11

Sarasota Corporation manufactures replicators. On January 1, 2017, it leased to Althaus Company a replicator that had cost $105,300 to manufacture. The lease agreement covers the 5-year useful life of the replicator and requires 5 equal annual rentals of $43,200 payable each January 1, beginning January 1, 2017. An interest rate of 12% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs.
Prepare Sarasota’s January 1, 2017, journal entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)
Click here to view factor tables

Date

Account Titles and Explanation

Debit

Credit

January 1, 2017

(To record the lease.)

January 1, 2017

(To record cost.)

January 1, 2017

(To record first lease payment.)

Exercise 21-1

On January 1, 2017, Waterway Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Waterway to make annual payments of $8,634 at the beginning of each year, starting January 1, 2017. The machine has an estimated useful life of 6 years and a $4,900 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Waterway uses the straight-line method of depreciation for all of its plant assets. Waterway’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown.
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Compute the present value of the minimum lease payments. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)

The present value of the minimum lease payments

$

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Prepare all necessary journal entries for Waterway for this lease through January 1, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,971.)

Date

Account Titles and Explanation

Debit

Credit

(To record the lease.)

(To record first payment.)

(To record depreciation.)

(To record interest.)

1/1/18

(To record second payament.)

Intermediate Accounting

January 27, 2023/in Accounting /by Rose

Intermediate Accounting

ORDER A PLAGIARISM FREE PAPER NOW

Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition):

• 43 units at $97

• 74 units at $71

• 175 units at $61

Sales for the year totaled 268 units, leaving 24 units on hand at the end of the year.

Ending inventory using the average cost method is (Do not round unit cost calculation. Round your final answer to the nearest whole dollar amount):

$1,652.

$2,328.

$1,464.

$1,514.

Top of Form

Nu Company reported the following pretax data for its first year of operations.

Net sales	2,810
Cost of goods available for sale	2,310
Operating expenses	780
Effective tax rate	30%
Ending inventories:
If LIFO is elected	970
If FIFO is elected	1,130

What is Nu’s net income if it elects LIFO?

$690.

$850.

$595.

$483.

Bottom of Form

Nueva Company reported the following pretax data for its first year of operations.

Net sales	7,400
Cost of goods available for sale	5,650
Operating expenses	1,578
Effective tax rate	40%
Ending inventories:
If LIFO is elected	634
If FIFO is elected	809

What is Nueva’s net income if it elects FIFO? (Round your intermediate and final answer to the nearest whole dollar amount.)

$806.

$484.

$981.

$589.

Thompson TV and Appliance reported the following in its 2016 financial statements:

	2016
Sales	$437,000
Cost of goods sold:
Inventory, January 1	73,000
Net purchases	333,000
Goods available for sale	406,000
Inventory, December 31	87,000
Cost of goods sold	319,000
Gross profit	$118,000

Thompson’s 2016 gross profit ratio is (Round your answer to the nearest whole percentage):

24%.

26%.

27%.

None of these is correct.

Top of Form

Anthony Thomas Candies (ATC) reported the following financial data for 2016 and 2015:

	2016	2015
Sales	$315,000	$295,000
Sales returns and allowances	7,500	5,500
Net sales	$307,500	$289,500
Cost of goods sold:
Inventory, January 1	47,000	31,000
Net purchases	138,000	129,000
Goods available for sale	185,000	160,000
Inventory, December 31	60,000	47,000
Cost of goods sold	125,000	113,000
Gross profit	$182,500	$176,500

ATC’s gross profit ratio in 2016 is (Round your answer to one decimal place e.g., .123 as 12.3%):

59.3%.

60.1%.

56.2%.

None of these is correct.

Bottom of Form

Top of Form

Anthony Thomas Candies (ATC) reported the following financial data for 2016 and 2015:

	2016	2015
Sales	$306,000	$288,000
Sales returns and allowances	8,100	5,000
Net sales	$297,900	$283,000
Cost of goods sold:
Inventory, January 1	62,000	18,000
Net purchases	139,000	142,000
Goods available for sale	201,000	160,000
Inventory, December 31	62,000	62,000
Cost of goods sold	139,000	98,000
Gross profit	$158,900	$185,000

The average days inventory for ATC for 2016 is (Round intermediate calculations to two decimal places. Round your final answer to a whole number):

rev: 11_19_2015_QC_CS-33523

223 days.

163 days.

Less than 100 days.

213 days.

Bottom of Form

On January 1, 2016, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this date was $115,000. The 2016 ending inventory, valued at year-end costs, was $150,800. The relative cost index for this inventory in 2016 was 1.16. Assume that Badger’s 2017 ending inventory, valued at year-end costs, was $164,700 and that the relative cost index for this inventory in 2016 was 1.22.

Suppose that Badger’s 2018 ending inventory, valued at year-end costs, was $167,500 and that the relative cost index for this inventory in 2018 was 1.25. What inventory balance would Badger report on its 12/31/18 balance sheet?

$134,000

$137,280

$167,500

None of these answer choices is correct.

Top of Form

Linguini Inc. adopted dollar-value LIFO (DVL) as of January 1, 2016, when it had an inventory of $864,000. Its inventory as of December 31, 2016, was $897,000 at year-end costs and the cost index was 1.15. What was DVL inventory on December 31, 2016?

780,000

864,000

897,000

993,600

Bottom of Form

Top of Form

Data related to the inventories of Costco Medical Supply are presented below:

	Surgical Equipment	Surgical Supplies	Rehab Equipment	Rehab Supplies
Selling price	$268	$134	$351	$158
Cost	153	131	251	155
Costs to sell	26	17	23	10

In applying the lower of cost and net realizable value rule, the inventory of surgical supplies would be valued at:

$99.

$131.

$77.

$117.

Bottom of Form

Top of Form

Data related to the inventories of Costco Medical Supply are presented below:

	Surgical Equipment	Surgical Supplies	Rehab Equipment	Rehab Supplies
Selling price	$264	$134	$324	$150
Cost	165	106	288	148
Costs to sell	15	9	28	9

In applying the lower of cost and net realizable value rule, the inventory of rehab equipment would be valued at:

$267.

$296.

$288.

$215.

Bottom of Form

Data related to the inventories of Costco Medical Supply are presented below:

	Surgical Equipment	Surgical Supplies	Rehab Equipment	Rehab Supplies
Selling price	$266	$123	$357	$161
Cost	164	100	251	162
Costs to sell	24	13	25	6

In applying the lower of cost and net realizable value rule, the inventory of rehab supplies would be valued at:

$162.

$107.

$158.

$155.

Data related to the inventories of Alpine Ski Equipment and Supplies is presented below:

	Skis	Boots	Apparel	Supplies
Selling price	$165,000	$142,000	$119,000	$77,000
Cost	139,000	140,000	83,300	50,050
Replacement cost	111,000	115,000	103,300	46,050
Sales commission	10%	10%	10%	10%

In applying the lower of cost and net realizable value rule, the inventory of boots would be valued at:

$127,800.

$92,300.

$115,000.

$140,000.

Top of Form

On July 8, a fire destroyed the entire merchandise inventory on hand of Larrenaga Wholesale Corporation. The following information is available:

Sales, January 1 through July 8	$694,000
Inventory, January 1	136,000
Purchases, January 1 through July 8	644,000
Gross profit ratio	25%

What is the estimated inventory on July 8 immediately prior to the fire?

$161,000.

$260,100.

$520,500.

$259,500.

Top of Form

Fad City sells novel clothes that are subject to a great deal of price volatility. A recent item that cost $20.80 was marked up $13.00, marked down for a sale by $5.40 and then had a markdown cancellation of $3.30. The latest selling price is:

$35.70.

$26.20.

$31.70.

$37.10.

Data below for the year ended December 31, 2016, relates to Houdini Inc. Houdini started business January 1, 2016, and uses the LIFO retail method to estimate ending inventory.

	Cost	Retail
Beginning inventory	$76,000	$115,000
Net purchases	362,610	530,000
Net markups		31,000
Net markdown		51,000
Net sales		474,000

Estimated ending inventory at cost is (Do not round intermediate calculations):

$101,596.

$106,486.

$110,770.

None of these answer choices are correct.

Top of Form

Willie Nelson’s Boots uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below:

	Cost	Retail
Beginning inventory	$48,000	$65,000
Net purchases	156,000	219,000
Net markups		20,000
Net markdowns		37,000
Net sales		222,000

The conventional cost-to-retail percentage (rounded) is:

76.4%.

67.1%.

84.3%.

71.8%.

Bottom of Form

Top of Form

Willie Nelson’s Boots uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below:

	Cost	Retail
Beginning inventory	$32,000	$69,000
Net purchases	151,000	201,000
Net markups		30,000
Net markdowns		35,000
Net sales		220,000

To the nearest thousand, estimated ending inventory using the conventional retail method is (Do not round intermediate calculations):

$40,000.

$28,000.

$27,000.

$12,000.

Bottom of Form

Top of Form

Poppy Co. uses a periodic inventory system. Beginning inventory on January 1 was understated by $31,000, and its ending inventory on December 31 was understated by $17,000. In addition, a purchase of merchandise costing $21,700 was incorrectly recorded as a $2,170 purchase. None of these errors were discovered until the next year. As a result, Poppy’s cost of goods sold for this year was:

Overstated by $33,530.

Overstated by $5,530.

Understated by $50,530.

Understated by $33,530.

Bottom of Form

On July 10, 2016, Johnson Corporation signed a purchase commitment to purchase inventory for $360,000 on or before February 15, 2017. The company’s fiscal year-end is December 31. The contract was exercised on February 1, 2017 and the inventory was purchased for cash at the contract price. On the purchase date of February 1, the market price of the inventory was $368,000. The market price of the inventory on December 31, 2016, was $332,000. The company uses a perpetual inventory system.

How much loss on purchase commitment will Johnson recognize in 2016?

$8,000.

$28,000.

$36,000.

None.

On July 10, 2016, Johnson Corporation signed a purchase commitment to purchase inventory for $214,000 on or before February 15, 2017. The company’s fiscal year-end is December 31. The contract was exercised on February 1, 2017, and the inventory was purchased for cash at the contract price. On the purchase date of February 1, the market price of the inventory was $224,000. The market price of the inventory on December 31, 2016, was $187,000. The company uses a perpetual inventory system.

At what amount will Johnson record the inventory purchased on February 1, 2017?

$197,000

$187,000

$224,000

$214,000

Top of Form

Haskell Corporation has determined its year-end inventory on a FIFO basis to be $803,000. Information pertaining to that inventory is as follows:

Selling price	$832,000
Costs to sell	44,000
Replacement cost	774,000

What should be the reported value of Haskell’s inventory if the company prepares its financial statements according to International Financial Reporting Standards (IFRS)?

$709,000.

$774,000.

$788,000.

$803,000.

Bottom of Form

Top of Form

Bottom of Form

Intermediate Accounting

January 20, 2023/in Accounting /by Rose

Intermediate Accounting

ORDER A PLAGIARISM FREE PAPER NOW

E7-1 (Determining Cash Balance) The controller for Clint Eastwood Co. is attempting to determine the

amount of cash to be reported on its December 31, 2014, balance sheet. The following information is provided.

1. Commercial savings account of $600,000 and a commercial checking account balance of $900,000 are

held at First National Bank of Yojimbo

2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Eastwood to

write checks on this balance, $5,000,000.

3. Travel advances of $180,000 for executive travel for the first quarter of next year (employee to reimburse

through salary reduction).

4. A separate cash fund in the amount of $1,500,000 is restricted for the retirement of long-term debt.

5. Petty cash fund of $1,000.

6. An I.O.U. from Marianne Koch, a company customer, in the amount of $190,000.

7. A bank overdraft of $110,000 has occurred at one of the banks the company uses to deposit its cash

receipts. At the present time, the company has no deposits at this bank.

8. The company has two certificates of deposit, each totaling $500,000. These CDs have a maturity of

120 days.

9. Eastwood has received a check that is dated January 12, 2015, in the amount of $125,000.

10. Eastwood has agreed to maintain a cash balance of $500,000 at all times at First National Bank of

Yojimbo to ensure future credit availability.

11. Eastwood has purchased $2,100,000 of commercial paper of Sergio Leone Co. which is due in 60 days.

12. Currency and coin on hand amounted to $7,700.

Instructions

(a) Compute the amount of cash to be reported on Eastwood Co.’s balance sheet at December 31, 2014.

(b) Indicate the proper reporting for items that are not reported as cash on the December 31, 2014,

balance sheet.

E7-3 (Financial Statement Presentation of Receivables) Jim Carrie Company shows a balance of $181,140

in the Accounts Receivable account on December 31, 2013. The balance consists of the following.

Installment accounts due in 2014 $23,000

Installment accounts due after 2014 34,000

Overpayments to vendors 2,640

Due from regular customers, of which $40,000 represents

accounts pledged as security for a bank loan 79,000

Advances to employees 1,500

Advance to subsidiary company (due in 2015) 81,000

Instructions

Illustrate how the information above should be shown on the balance sheet of Jim Carrie Company on

December 31, 2013.

E7-5 (Recording Sales Gross and Net) On June 3, Arnold Company sold to Chester Company merchandise

having a sale price of $3,000 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $90,

terms n/30, was received by Chester on June 8 from John Booth Transport Service for the freight cost. On

June 12, the company received a check for the balance due from Chester Company.

Instructions

(a) Prepare journal entries on the Arnold Company books to record all the events noted above under

each of the following bases.

(1) Sales and receivables are entered at gross selling price.

(2) Sales and receivables are entered at net of cash discounts.

(b) Prepare the journal entry under basis 2, assuming that Chester Company did not remit payment

until July 29

E7-6 (Recording Sales Transactions) Presented below is information from Perez Computers Incorporated.

July 1 Sold $20,000 of computers to Robertson Company with terms 3/15, n/60. Perez uses the gross

method to record cash discounts.

10 Perez received payment from Robertson for the full amount owed from the July transactions.

17 Sold $200,000 in computers and peripherals to The Clark Store with terms of 2/10, n/30.

30 The Clark Store paid Perez for its purchase of July 17.

Instructions

Prepare the necessary journal entries for Perez Computers

E7-7 (Recording Bad Debts) Duncan Company reports the following financial information before

adjustments.

4

5

Instructions

Give the entry for estimated bad debts assuming that the allowance is to provide for doubtful accounts on

the basis of (a) 4% of gross accounts receivable and (b) 1% of net sales.

E7-10 (Bad-Debt Reporting) The chief accountant for Dickinson Corporation provides you with the

following list of accounts receivable written off in the current year.

5

Instructions

Prepare the journal entry to record Bad Debt Expense assuming Duncan Company estimates bad debts at

(a) 1% of net sales and (b) 5% of accounts receivable.

E7-11 (Bad Debts—Aging) Danica Patrick, Inc. includes the following account among its trade receivables.

Instructions

Age the balance and specify any items that apparently require particular attention at year-end.

E7-18 (Note Transactions at Unrealistic Interest Rates) On July 1, 2014, Agincourt Inc. made two sales.

1. It sold land having a fair value of $700,000 in exchange for a 4-year zero-interest-bearing promissory

note in the face amount of $1,101,460. The land is carried on Agincourt’s books at a cost of $590,000.

2. It rendered services in exchange for a 3%, 8-year promissory note having a face value of $400,000

(interest payable annually).

Agincourt Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The

customers in these two transactions have credit ratings that require them to borrow money at 12% interest.

Instructions

Record the two journal entries that should be recorded by Agincourt Inc. for the sales transactions above

that took place on July 1, 2014.

P7-3 (Bad-Debt Reporting—Aging) Manilow Corporation operates in an industry that has a high rate of

bad debts. Before any year-end adjustments, the balance in Manilow’s Accounts Receivable account was

$555,000 and Allowance for Doubtful Accounts had a credit balance of $40,000. The year-end balance

reported in the balance sheet for Allowance for Doubtful Accounts will be based on the aging schedule

shown below.

Instructions

(a) What is the appropriate balance for Allowance for Doubtful Accounts at year-end?

(b) Show how accounts receivable would be presented on the balance sheet.

(c) What is the dollar effect of the year-end bad debt adjustment on the before-tax income?

Intermediate Accounting

January 18, 2023/in Accounting /by Rose

Intermediate Accounting

ORDER A PLAGIARISM FREE PAPER NOW

1—Balance sheet computations.

(Balance Sheet) Presented below is the trial balance of Hightower Corporation at December 31, 2017.

	Debit	Credit
Cash	295,000
Sales Revenue		$12,150
Debt Investments (trading) (at cost, $218,000)	230,000
Cost of Goods Sold	7,200
Debt Investments (long-term)	448,000
Equity Investments (long-term)	416,000
Notes Payable (short-term)		135,000
Accounts Payable		682,000
Selling Expenses	3,000,000
Investment Revenue		95,000
Land	390,000
Buildings	1,560,000
Dividends Payable		204,000
Accrued Liabilities		144,000
Accounts Receivable	652,000
Accumulated Depreciation–Buildings		228,000
Allowance for Doubtful Accounts		38,000
Administrative Expenses	1,350,000
Interest Expense	317,000
Inventory	895,000
Gain		120,000
Notes Payable (long-term)		1,350,000
Equipment	900,000
Bonds Payable		1,500,000
Accumulated Depreciation–Equipment		90,000
Franchises	240,000
Common Stock ($5 par)		1,500,000
Treasury Stock	287,000
Patents	293,000
Retained Earnings		117,000
Paid-in Capital in Excess of Par		120,000
Totals	$18,473,000	$18,473,000

Instructions

Compute each of the following:

1. Total current assets

2. Total property, plant, and equipment

3. Total assets

4. Total liabilities

5. Total stockholders’ equity

2—Statement of cash flows.

A comparative balance sheet for Talkington Corporation is presented below.

	December 31
Assets	2017	2016
Cash
Accounts receivable	$ 68,100	$ 21,600
Inventory	82,800	33,000
Land	170,200	83,800
Equipment	71,400	74,000
Accumulated depreciation–equipment	280,500	212,400
Total	(74,000)	(42,000)
	$597,000	$545,000

Liabilities and Stockholders’ Equity

Accounts payable	$ 34,000	$ 47,000
Bonds payable	150,000	200,000
Common stock ($1 par)	164,000	164,000
Retained earnings	249,000	134,000
Total	$597,000	$545,000

Additional information:

1. Net income for 2017 was $155,000; there were no gains or losses.

2. Cash dividends of $400,000 were declared and paid.

3. Bonds payable of $50,000 were retired.

Instructions:

Compute each of the following:

1. Net cash provided by operating activities

2. Net cash provided (used) by investing activities

3. Net cash provided (used) by financing activities

3—Statement of cash flows ratios.

Financial statements for Hilton Company are presented below:

Hilton Company

Balance Sheet

December 31, 2017

Assets Liabilities & Stockholders’ Equity

Cash $ 40,000 Accounts payable $ 20,000

Accounts receivable 35,000 Bonds payable 50,000

Buildings and equipment 150,000 Common stock 65,000

Accumulated depreciation— Retained earnings 60,000

buildings and equipment (50,000) $195,000

Patents 20,000

$195,000

Hilton Company

Statement of Cash Flows

For the Year Ended December 31, 2017

Cash flows from operating activities

Net income $50,000

Adjustments to reconcile net income to net cash

provided by operating activities:

Increase in accounts receivable $(16,000)

Increase in accounts payable 8,000

Depreciation—buildings and equipment 15,000

Gain on sale of equipment (6,000)

Amortization of patents 2,000 3,000

Net cash provided by operating activities 53,000

Cash flows from investing activities

Sale of equipment 12,000

Purchase of land (25,000)

Purchase of buildings and equipment (48,000)

Net cash used by investing activities (61,000)

Cash flows from financing activities

Payment of cash dividend (15,000)

Sale of bonds 30,000

Net cash provided by financing activities 15,000

Net increase in cash 7,000

Cash, January 1, 2017 33,000

Cash, December 31, 2017 $40,000

At the beginning of 2017, Accounts Payable amounted to $12,000 and Bonds Payable was $20,000.

Instructions

Calculate the following for Hilton Company:

a. Current cash debt coverage

b. Cash debt coverage

c. Free cash flow

d. Explain the purpose of free cash flow analysis.

4—Sales with returns and discounts.

On July 2, 2018, Lake Company sold to Sue Black merchandise having a sales price of $9,000 (cost $5,400) with terms of 2/10. n/30. f.o.b. shipping point. Lake estimates that merchandise with a sales value of $900 will be returned. An invoice totaling $120, terms n/30, was received by Black on July 6 from Pacific Delivery Service for the freight cost. Upon receipt of the goods, on July 3, Black notified Lake that $350 of merchandise contained flaws. The same day, Lake issued a credit memo covering the defective merchandise and asked that it be returned at Lake’s expense. Lake estimates the returned items to have a fair value of $140. The freight on the returned merchandise was $20 paid by Lake on July 7. On July 12, the company received a check for the balance due from Black.

Instructions

(a)Prepare journal entries for Lake Company to record all the events noted above assuming sales and receivables are entered at gross selling price.

(b) Prepare the journal entry assuming that Sue Black did not remit payment until August 5.

5—Warranty arrangement.

On December 31, 2017, Dieker Company sells equipment to Tabor Inc. for $125,000. Dieker includes a 1-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on December 31, 2017. Dieker estimates the prices to be $122,000 for the equipment and $3,000 for the cost of the warranty.

Instructions

(a) Prepare the journal entry to record this transaction on December 31, 2017.

(b) Repeat the requirements for (a), assuming that in addition to the assurance warranty, Dieker sold an extended warranty (service type warranty) for an additional 2 years (2019–2020) for $2,000.

6—Percentage-of-completion and completed-contract methods.

On February 1, 2017, Marsh Contractors agreed to construct a building at a contract price of $17,400,000. Marsh estimated total construction costs would be $12,000,000 and the project would be finished in 2019. Information relating to the costs and billings for this contract is as follows:

2017 2018 2019

Total costs incurred to date $4,500,000 $7,920,000 $13,800,000

Estimated costs to complete 7,500,000 5,280,000 -0-

Customer billings to date 6,600,000 12,000,000 16,800,000

Collections to date 6,000,000 10,500,000 16,500,000

Instructions

Fill in the correct amounts on the following schedule. For percentage-of-completion accounting and for completed-contract accounting, show the gross profit that should be recorded for 2017, 2018, and 2019.

Percentage-of-Completion Completed-Contract

Gross Profit Gross Profit

2017 ___________ 2017 ___________

2018 ___________ 2018 ___________

2019 ___________ 2019 ___________

7—Franchises.

Pasta Inn charges an initial fee of $2,400,000 for a franchise, with $480,000 paid when the agreement is signed and the balance in four annual payments. The present value of the annual payments, discounted at 10%, is $1,521,000. The franchisee has the right to purchase $90,000 of kitchen equipment and supplies for $75,000. An additional part of the initial fee is for advertising to be provided by Pasta Inn during the next five years. The value of the advertising is $1,000 a month. Collectibility of the payments is reasonably assured and Pasta Inn has performed all the initial services required by the contract.

Instructions

Prepare the entry to record the initial franchise fee. Show supporting computations in good form.

8—Future value of annuity. (Tables needed.)

Linda Ogleby wants to accumulate $40,000 to use for an around the world trip. She plans to accumulate the desired amount by depositing $5,500 annual-year-end payments into an account at the National Bank which pays 4% interest, compounded annually.

1. Compute the account balance at the end of the sixth year.

2. Compute the amount of each payment that Linda must make at the end of each of the six years to accumulate the $40,000.

9-—Entries for bad debt expense.

A trial balance before adjustment included the following:

Debit Credit

Accounts receivable $140,000

Allowance for doubtful accounts 730

Sales $610,000

Sales returns and allowances 8,000

Give journal entries assuming that the estimate of uncollectible accounts is determined by taking (1) 5% of gross accounts receivable and (2) 3% of gross accounts receivable and assume a $730 debit allowance account balance.

Intermediate Accounting

January 17, 2023/in Accounting /by Rose

Intermediate Accounting

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The following is a December 31, 2016, post-closing trial balance for the Jackson Corporation.

Account Title	Debits	Credits
Cash	51,000
Accounts receivable	45,000
Inventories	86,000
Prepaid rent	27,000
Marketable securities (short term)	21,000
Machinery	200,000
Accumulated depreciation—machinery		22,000
Patent (net of amortization)	90,000
Accounts payable		13,500
Wages payable		9,500
Taxes payable		43,000
Bonds payable (due in 10 years)		250,000
Common stock		140,000
Retained earnings		42,000

Totals	520,000	520,000

Required:

Prepare a classified balance sheet for Jackson Corporation at December 31, 2016. (Amounts to be deducted should be indicated by a minus sign.)

Cone Corporation is in the process of preparing its December 31, 2016, balance sheet. There are some questions as to the proper classification of the following items:

a.	$67,000 in cash restricted in a savings account to pay bonds payable. The bonds mature in 2020.
b.	Prepaid rent of $41,000, covering the period January 1, 2017, through December 31, 2018.
c.	Note payable of $234,000. The note is payable in annual installments of $37,000 each, with the first installment payable on March 1, 2017.
d.	Accrued interest payable of $29,000 related to the note payable.
e.	Investment in marketable securities of other corporations, $114,000. Cone intends to sell one-half of the securities in 2017.

Required:
Prepare a partial classified balance sheet to show how each of the above items should be reported.

The current asset section of Guardian Consultant’s balance sheet consists of cash, accounts receivable, and prepaid expenses. The 2016 balance sheet reported the following: cash, $1,360,000; prepaid expenses, $420,000; noncurrent assets, $3,000,000; and shareholders’ equity, $3,100,000. The current ratio at the end of the year was 2.8 and the debt to equity ratio was 2.0.

Required:
Determine the following 2016 amounts and ratios: (Round your “The acid-test ratio” answer to 1 decimal place.)

The following is the ending balances of accounts at December 31, 2016, for the Vosburgh Electronics Corporation.

Account Title	Debits		Credits
Cash		103,000
Short-term investments		218,000
Accounts receivable		159,000
Long-term investments		53,000
Inventories		233,000
Loans to employees		58,000
Prepaid expenses (for 2017)		34,000
Land		298,000
Building		1,730,000
Machinery and equipment		655,000
Patent		170,000
Franchise		58,000
Note receivable		340,000
Interest receivable		30,000
Accumulated depreciation—building				638,000
Accumulated depreciation—equipment				228,000
Accounts payable				207,000
Dividends payable (payable on 1/16/17)				28,000
Interest payable				34,000
Taxes payable				58,000
Deferred revenue				78,000
Notes payable				336,000
Allowance for uncollectible accounts				26,000
Common stock				2,072,000
Retained earnings				434,000

Totals		4,139,000		4,139,000

Additional information:

1.	The common stock represents 1.5 million shares of no par stock authorized, 680,000 shares issued and outstanding.
2.	The loans to employees are due on June 30, 2017.
3.	The note receivable is due in installments of $68,000, payable on each September 30. Interest is payable annually.
4.	Short-term investments consist of marketable equity securities that the company plans to sell in 2017 and $68,000 in treasury bills purchased on December 15 of the current year that mature on February 15, 2017. Long-term investments consist of marketable equity securities that the company does not plan to sell in the next year.
5.	Deferred revenue represents customer payments for extended service contracts. Seventy five percent of these contracts expire in 2017, the remainder in 2018.
6.	Notes payable consists of two notes, one for $118,000 due on January 15, 2018, and another for $218,000 due on June 30, 2019.

Required:

Prepare a classified balance sheet for Vosburgh at December 31, 2016. (Amounts to be deducted should be indicated by a minus sign.)

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