compute the corrected cost of goods sold and net income for 2006 2007 and 2008 615123

Aug 30, 2021 | Uncategorized

The financial effects of inventory errors

The following information was taken from the records of Eli Lilly, a major pharmaceutical (dollars in millions).

Assume that ending inventory was overstated by $500 in 2006, understated by $150 in 2007, and overstated by $320 in 2008.

REQUIRED:

Compute the corrected cost of goods sold and net income for 2006, 2007, and 2008.

which of the three assumptions gives rise to the highest net income and ending inven 615124

Aug 30, 2021 | Uncategorized

The financial statement and income tax effects of averaging, FIFO, and LIFO

The purchase schedule for Lumbermans and Associates is as follows:

The inventory balance as of the beginning of the year was $15,000 (15,000 units @ $1), and an inventory count at year-end indicated that 11,000 items were on hand. Sales and expenses (excluding cost of goods sold) totaled $55,000 and $15,000, respectively. The federal income tax is 30 percent of taxable income.

REQUIRED:

a. Prepare three income statements, one under each of the assumptions: FIFO, average, and LIFO.

b. How many tax dollars would be saved by using LIFO instead of FIFO?

c. Assume that the market value of an inventory item dropped to $1.35 as of year-end. Apply the lower-of-cost-or-market rule, and provide the appropriate journal entry (if necessary) under the FIFO, averaging, and LIFO assumptions.

d. Repeat (a) above assuming that the costs per item were as follows:

Which of the three assumptions gives rise to the highest net income and ending inventory amounts now? Why?

assume that the magic teddy bear toy company accounts for purchase cash discounts un 615126

Aug 30, 2021 | Uncategorized

The gross method, and the LIFO and FIFO cost flow assumptions

The Magic Teddy Bear Toy Company entered into the following transactions during January 2011:

The Magic Teddy Bear Toy Company has 5,000 teddy bears on hand at $19 each as of January 1, 2011.

REQUIRED:

Assume that The Magic Teddy Bear Toy Company accounts for purchase cash discounts under the gross method. Prepare all necessary entries, including adjusting journal entries, during January 2011, if the company uses the following:

a. LIFO cost flow assumption

b. FIFO cost flow assumption

(Hint: Compute the total cost per unit in order to calculate ending inventory and cost of goods sold.)

discuss some of the disadvantages associated with the change to lifo 615127

Aug 30, 2021 | Uncategorized

Using LIFO and saving tax dollars

Financial statements as of December 31, 2008, for Johnson & Johnson are as follows. The company used the FIFO inventory cost flow assumption to prepare these statements (dollars in millions).

Assume that on December 30, 2008, Johnson & Johnson decided to change from the FIFO to the LIFO inventory cost flow assumption. Assume that the ending inventory value under the LIFO assumption is $4,000.

REQUIRED:

a. Compute the change in Johnson & Johnson”s current ratio associated with the change from FIFO to LIFO. Round to two decimal places.

b. Compute the change in Johnson & Johnson”s gross profit and net income associated with the change from FIFO to LIFO. Assume that the dollar amount of the change is reflected in cost of goods sold.

c. How many tax dollars would be saved by the change from FIFO to LIFO?

d. Discuss some of the disadvantages associated with the change to LIFO.

assume that ruhe auto supplies was able to purchase an additional 10 500 units of in 615128

Aug 30, 2021 | Uncategorized

LIFO liquidations, income tax implications, and year-end purchases

Ruhe Auto Supplies began operations in 1998. The company”s inventory purchases and sales in the first and subsequent years of operations are as follows:

The company”s federal income tax rate is 30 percent. For the year ended December 31, 2011, Ruhe Auto Supplies generated $3,000,000 in revenues and incurred $800,000 in expenses (exclusive of cost of goods sold). Ruhe Auto Supplies uses the LIFO cost flow assumption to account for inventory.

REQUIRED:

a. Compute ending inventory as of December 31, 2011. Identify the number of units in ending inventory and the costs attached to each unit.

b. Compute the company”s 2011 income tax liability and net income after taxes for the year ended December 31, 2011.

c. Assume that Ruhe Auto Supplies was able to purchase an additional 10,500 units of inventory on December 31, 2011, for $95 per unit. Would you advise the company to purchase these additional units? Explain your answer.

would it be advisable for brady to change its cost flow assumption from lifo to fifo 615129

Aug 30, 2021 | Uncategorized

Using the LIFO reserve

You are a financial analyst currently reviewing the financial statements of Danner International and Brady Enterprises, two companies of similar size within the same industry. Net incomes of $39,300 and $42,700 were reported for 2011 by Danner and Brady, respectively. After a thorough comparison of the accounting methods used by the two companies, you find that they are similar except for the inventory cost flow assumption—Danner uses FIFO and Brady uses LIFO. You conduct a further review of Brady”s footnotes and discover the following. Inventories declined during 2011, causing a LIFO liquidation, which accounted for $8,000 of the before-tax net income reported in 2011.

Brady”s effective tax rate is 35 percent.

REQUIRED:

a. Restate Brady”s net income assuming there was no LIFO liquidation in 2011. How does the restated amount compare to Danner”s net income?

b. Restate Brady”s 2011 reported net income as if the company had always been a FIFO user. Is Brady”s restated reported income higher or lower than Danner”s reported net income? Explain.

c. As of the end of 2011, how much accumulated income tax had Brady saved due to its choice of LIFO instead of FIFO? How much as of the end of 2010? Does LIFO save taxes in every year? Explain.

d. Would it be advisable for Brady to change its cost flow assumption from LIFO to FIFO? Discuss.

compare the two income statements and discuss why it might have been wise for ibt to 615130

Aug 30, 2021 | Uncategorized

Avoiding LIFO liquidations

IBT has used the LIFO inventory cost flow assumption for five years. As of December 31, 2010, IBT had 700 items in its inventory, and the $9,000 inventory dollar amount reported on the balance sheet consisted of the following costs:

During 2011, IBT sold 900 items for $75 each and purchased 350 items at $30 each. Expenses other than cost of goods sold totaled $20,000, and the federal income tax rate is 30 percent of taxable income.

REQUIRED:

a. Prepare IBT”s income statement for the year ending December 31, 2011.

b. Assume that IBT purchased an additional 550 items on December 20, 2011, for $30 each. Prepare IBT”s income statement for the year ending December 31, 2011.

c. Compare the two income statements, and discuss why it might have been wise for IBT to purchase the additional items on December 20. Discuss some of the disadvantages of such a strategy.

early in 2012 styles appeared to change and the average market price of the inventor 615131

Aug 30, 2021 | Uncategorized

Inventory accounting under IFRS

The 2011 inventory activity for Helio Brothers, a discount retailer that prepares financial statements under IFRS using the FIFO cost flow assumption, is provided below.

Many of the items in the company”s inventory at the end of 2011 were judged to be outdated, and on average the market value of the remaining inventory was estimated at $1.50 per item.

REQUIRED:

a. Compute Helio”s ending inventory and net income for 2011.

b. Early in 2012 styles appeared to change, and the average market price of the inventory written down at the end of 2011 rebounded to $2.80 per item. Record the entry made by Helio to recognize the inventory recovery. What entry would Helio record if it used U.S. GAAP instead of IFRS?

applying the lower of cost or market rule in this case would cause tii to recognize 615135

Aug 30, 2021 | Uncategorized

The lower-of-cost-or-market rule and the recognition of loss/income

TII Industries makes over-voltage protectors, power systems, and electronic products primarily for use in the communications industry. Several years ago, the company reported that it took “a substantial inventory write-down,” resulting in a loss for its third quarter ending June 24. The write-down was estimated to be $12 million and stems from customers” changes in product specifications.

REQUIRED:

a. Provide the journal entry to record the write-down.

b. Assume that the original cost of the inventory was $52 million and that it was written down to its market value of $40 million. If TII Industries sells it for $48 million cash in the following period, what journal entries would be recorded? Assume that TII uses the perpetual inventory method.

c. Applying the lower-of-cost-or-market rule in this case would cause TII to recognize a loss in the period of the write-down and income in the subsequent period. Does such recognition seem appropriate? Why or why not?

does lifo provide a better matching of current costs to revenues in times of inflati 615137

Aug 30, 2021 | Uncategorized

Interpreting the inventory footnote

The 2008 annual report of Sherwin Williams, a manufacturer of paint products, contained the following footnote (dollars in thousands).

Note 4-Inventories

Inventories were stated at the lower of cost or market with cost determined principally on the last-in, first-out (LIFO) method. The following presents the effect on inventories, net income, and net income per share had the Company used the first-in, first-out (FIFO) inventory valuation method adjusted for income taxes at the statutory rate and assuming no other adjustments. Management believes that the use of LIFO results in a better matching of costs and revenues. The information is presented to enable the reader to make comparisons with companies using the FIFO method of inventory valuation.

REQUIRED:

a. Sherwin Williams reported inventories on the balance sheet at $864,200 (2008), $887,465 (2007), and $825,179 (2006). Compute the company”s ending inventory had it shifted to FIFO at the end of 2008 (dollars in thousands).

b. Estimate the taxes saved by Sherwin Williams because it uses LIFO instead of FIFO. Assume a tax rate of 33 percent.

c. Does LIFO provide a better matching of current costs to revenues in times of inflation? Why? Is the same true in times of deflation?

why might supervalu use fifo for ldquo highly perishable inventories rdquo 615140

Aug 30, 2021 | Uncategorized

Different inventory disclosures

JCPenney Company, Inc. discloses its inventory in the following manner on the balance sheet itself (dollars in millions).

SUPERVALU, Inc., on the other hand, disclosed information about its LIFO and FIFO values in a footnote to its 2009 financial statements. The balance sheet inventory values (in millions) were $2,709 and $2,776 for 2009 and 2008, respectively.

Approximately 81 percent and 82 percent of the company”s inventories were valued using the last-in, first-out (LIFO) method inventories for fiscal 2009 and 2008, respectively. The first-in, first-out (FIFO) method is primarily used to determine cost for some of the remaining highly perishable inventories. If the FIFO method had been used to determine cost of inventories for which the LIFO method is used, the company”s inventories would have been higher by approximately $258 million at February 28, 2009, and $180 million at February 23, 2008.

REQUIRED:

a. For which of the two companies is the difference between LIFO and FIFO larger as a percent of total inventories?

b. Compute ending inventory as of the end of 2008, assuming the FIFO method, for JCPenney and as of the end of 2009 for SUPERVALU.

c. Estimate the tax savings enjoyed by the two companies due to their use of LIFO instead of FIFO.

d. Why might SUPERVALU use FIFO for “highly perishable inventories”?

what is the primary cost associated with nike s cost of sales and how did this accou 615142

Aug 30, 2021 | Uncategorized

Nike SEC Form 10-K

The Nike SEC Form 10-K is reproduced in Review it and answer the following questions.

REQUIRED:

a. How large is inventory compared to the other assets on NIKE”s balance sheet? Did inventory increase, decrease, or remain the same as a percent of total assets from 2008 to 2009?

b. What is the primary cost associated with NIKE”s cost of sales, and how did this account vary as a percent of sales from 2007 to 2009?

c. Did NIKE appear to pay off its suppliers faster or slower during 2009 compared to 2008?

d. Review the operating section of NIKE”s statement of cash flows and comment on the cash flow implications associated with the changes in the primary working capital accounts during 2009.

e. See Note 1. Does NIKE use the LIFO, FIFO, or averaging assumption? See Note 2. Why are NIKE”s inventories predominantly finished goods?

compute the actual write offs recognized by jpmorgan chase in 2006 2007 and 2008 com 615060

Aug 30, 2021 | Uncategorized

Analyzing the activity in the allowance account

The information below was taken from the footnotes of JPMorgan Chase”s 2008 annual report. The December 31, 2008, balance in the allowance account was $23,164 (dollars in millions).

REQUIRED:

Compute the actual write-offs recognized by JPMorgan Chase in 2006, 2007, and 2008. Comment on JPMorgan Chase”s annual estimates. Discuss the reasons underlying the 2008 amounts.

hadley s chief financial officer claims that no bad debt expense should be recorded 615061

Aug 30, 2021 | Uncategorized

Ignoring potential bad debts can lead to serious overstatements

The following financial information represents Hadley Company”s first year of operations, 2011:

After reading Hadley”s financial statements, you conclude that the company had a very successful first year of operations. However, after further examination, you note that the sales figure on the income statement was not adjusted for a bad debt expense. You also realize that a large percentage of Hadley”s sales were to three customers, one of which, Litzenberger Supply, is in very questionable financial health, although still in business. Litzenberger owes Hadley $50,000 as of the end of 2011.

REQUIRED:

a. Adjust the financial statements of Hadley Company to reflect a more conservative reporting with respect to bad debts. That is, establish a provision for the uncollectibility of Litzenberger”s account. Recompute net income. How does this adjustment affect your assessment of Hadley”s first year of operations?

b. Why would auditors probably require that Hadley choose the more conservative reporting?

c. Hadley”s chief financial officer claims that no bad debt expense should be recorded, because Litzenberger is still conducting operations as of the end of 2011. How would you respond to this claim?

assume that finley has a loan agreement with a bank requiring it to maintain a curre 615062

Aug 30, 2021 | Uncategorized

Estimating uncollectibles, financial ratios, and loan agreements

Excerpts from the 2011 financial statements of Finley, Ltd., a service company, follow:

Auditors from Price and Company reviewed the financial records of Finley and found that a credit sale of $10,000 (for services rendered), which was included in the fees earned amount above, should not have been recognized until January 20, 2012. The auditors also noted that a more reasonable estimate of future bad debts would be 10 percent of the accounts receivable balance. The auditors have informed Finley”s management that the audit opinion will be qualified if Finley does not adjust the financial statements accordingly.

REQUIRED:

a. Compute the effect of the auditors” recommended adjustment on the 2011 fees earned, accounts receivable, allowance for doubtful accounts, current ratio, working capital, and net income reported by Finley.

b. Assume that Finley has a loan agreement with a bank, requiring it to maintain a current ratio of 1.5 and limiting its annual dividend payment to 50 percent of net income. How might these restrictions have influenced the reporting decisions of Finley”s managers?

compute the total bad debt expense over the five year period under the two methods w 615063

Aug 30, 2021 | Uncategorized

Uncollectibles: Ignoring an allowance

Fine Linen Service began operations on January 28, 2008. The company does not establish an allowance for doubtful accounts. It simply recognizes a bad debt expense when an account is deemed uncollectible. The company has written off the following items over the past five years:

Over the period 2008 to 2012, Fine Linen Service realized the following sales and reported the following ending balances in accounts receivable.

At the beginning of operations, a consultant had informed Fine Linen Service that the company should expect not to collect 8 percent of total sales.

REQUIRED:

a. List the bad debt expense and the balance sheet value of accounts receivable for each year over the five-year period under both Fine Linen”s current method and the allowance method. Use the following format:

b. Compute the total bad debt expense over the five-year period under the two methods. Why is the allowance method preferred to Fine Linen”s current method?

explain why ticheley may be using the strategy you mentioned above and support your 615065

Aug 30, 2021 | Uncategorized

Inferring reporting strategies

Excerpts from the financial statements of Ticheley Enterprises are as follows.

On December 27, 2011, Ticheley sent merchandise with a sales price of $8,500 to a major customer. The merchandise was in transit as of December 31. The cost of the inventory shipped was $2,900, and the company chose to record the sale and outflow of inventory on January 4, 2012, when the customer received the shipment. Ticheley”s management is compensated partially on an annual bonus, where all managers share equally in a $10,000 bonus pool if reported net income exceeds 20 percent of shareholders” equity.

REQUIRED:

a. Ticheley”s president recently stated in a letter to the shareholders that the company has reported profit increases consistently over the last three years. Comment on this statement.

b. Why would a company establish a management compensation system where a bonus is paid if reported income exceeds a certain percentage of shareholders” equity?

c. Identify any reporting strategy that Ticheley may be using, and support your position with calculations.

d. Explain why Ticheley may be using the strategy you mentioned above, and support your position with calculations.

why do fluctuating exchange rates give rise to exchange gains and losses 615066

Aug 30, 2021 | Uncategorized

Exchange gains and losses

Hughes International is a U.S. company that conducts business throughout the world. Listed below are selected transactions entered into by the company during 2011.

1. Sold merchandise to Royal Equipment Company (a United Kingdom company) in exchange for an account receivable in the amount of 320,000 pounds. At the time, the exchange rate was 0.50 British pound per U.S. dollar.

2. Sold merchandise to Honda Automobile Company (a Japanese company) in exchange for a note receivable that calls for a payment of 350,000 yen. The exchange rate was 125 yen to the U.S. dollar.

3. Purchased inventory from Venice Leathers (an Italian company) in exchange for a note payable that calls for a payment of 500 euros. The exchange rate was 0.75 euro to the U.S. dollar.

4. Purchased inventory from B. C. Lumber (a Canadian company) in exchange for an account payable in the amount of 200,000 Canadian dollars. The exchange rate was 1.10 Canadian dollars per U.S. dollar.

On December 31, 2011, the exchange rates were as follows:

REQUIRED:

a. Convert each transaction above to the equivalent amount in U.S. dollars.

b. Prepare journal entries to record each transaction.

c. Assume that the receivables and payables are still outstanding as of December 31, 2011. Compute the amount of exchange gain or loss for each transaction.

d. Why do fluctuating exchange rates give rise to exchange gains and losses?

how might the disclosure of such a restriction affect the calculation of working cap 615068

Aug 30, 2021 | Uncategorized

Restricted cash and solvency ratios

Safeguard Scientifics, Inc. reported the following in its 2008 financial statements.

Note 7: Long-Term Debt.

The credit facility required the company to maintain cash collateral equal to the company”s borrowings (amounts in thousands).

REQUIRED:

a. Why would a potential investor or creditor want to know about restrictions on cash?

b. Assume that the loans under the credit facility are expected to remain outstanding for two years. Should the restricted cash be disclosed as current or noncurrent? Discuss.

c. How might the disclosure of such a restriction affect the calculation of working capital, the current ratio, and the quick ratio?

discuss the effect of ldquo reserves for loan losses rdquo on the financial statemen 615072

Aug 30, 2021 | Uncategorized

Managing reserves for uncollectible receivables

The Wall Street Journal (March 12, 2007) reported that an analyst with the Center for Financial Research and Analysis found an interesting item in an earnings report from New Century Financial Corporation, a mortgage lending company specializing in “subprime” loans to borrowers with checkered credit histories. The analyst discovered that New Century had for the first time combined two categories of reserves for losses. New Century combined the reserve for losses on defaulted loans with a reserve for losses on real estate that had been acquired through foreclosure. By putting the two reserve accounts together, New Century could show that total reserves for losses had increased only slightly from the prior period. Hidden, though, was the fact that the reserve for losses on bad loans actually dropped by 8.7 percent. The Center for Financial Research and Analysis pointed out the discrepancy of a drop in reserves at a time when defaults on subprime mortgages were increasing across the country.

REQUIRED:

Discuss the effect of “reserves for loan losses” on the financial statements and why a company such as New Century might be reluctant to increase the reserve. Discuss what economic factors influence loan defaults (and especially loans in the subprime mortgage market).

discuss the implications of a weakened real estate market on bank profitability how 615073

Aug 30, 2021 | Uncategorized

Provisions for loan losses and profits

Publicly traded companies release financial statements (unaudited) on a quarterly basis. For the quarter ended December 31, 2009, MarketWatch reported that Bank of America (B of A) and Wells Fargo had improved their results over the same period in 2008 but that “lingering signs of credit trouble” still existed for the banks. B of A reported a smaller loss than in 2008, but past-due loans in home mortgages, home equity loans, and commercial real estate loans all grew, as did past-due loans in its business loan portfolio. At Wells, the company showed a quarterly profit versus the prior year”s loss, but its net write-offs as a percentage of loans rose to 2.71 percent from 2.11 percent for the same period a year earlier. MarketWatch quoted an analyst who follows the banking industry as saying that he believes the problem loan situation is worse than what the banks have been disclosing.

REQUIRED:

Discuss the implications of a weakened real estate market on bank profitability. How would high unemployment, in addition to soft housing prices, affect banks” earnings? How does the provision for loan loss affect the balance sheet and the income statement of banks? Why do banks adjust the provision when market conditions change, and why do analysts sometimes question the amount of the reserve set aside by the banks?

does it look like u s gaap and ifrs account for bad debts much differently explain 615074

Aug 30, 2021 | Uncategorized

Bad debts, statement of cash flows, and U.S. GAAP vs. IFRS

Excerpts from the operating sections of the 2008 statement of cash flows for Target and Toyota are provided below. Target publishes U.S. GAAP-based financial statements and Toyota publishes IFRS-based financial statements (dollars in millions).

REQUIRED:

a. What is the bad debt provision, and on which other financial statement would you find it?

b. Explain why the bad debt provision and the change in accounts receivable appear in the operating section of the statement of cash flows.

c. Provide several reasons why net cash from operations is so much larger than net earnings for both companies.

d. Does it look like U.S. GAAP and IFRS account for bad debts much differently? Explain.

if problems arose with some of these customers explain how it might affect hp s fina 615076

Aug 30, 2021 | Uncategorized

Concentrations of credit risk

The following quote was taken from the 2009 annual report of Hewlett-Packard.

HP sells a significant portion of its products through third-party distributors and resellers and, as a result, maintains individually significant receivable balances with these parties.

If the financial condition or operations of these distributors and resellers deteriorates substantially, HP”s operating results could be adversely affected. The ten largest distributor and reseller receivable balances collectively, which were concentrated primarily in North America, represented approximately 22% of gross accounts receivable at October 31, 2009 and 18% at October 31, 2008. No single customer accounts for more than 10% of accounts receivable.

REQUIRED:

a. Why would an investor or other user of HP”s financial statements be concerned that certain individual customers represent a large portion of the receivables balance?

b. If problems arose with some of these customers, explain how it might affect HP”s financial statements.

how could an analyst following the global construction markets use a company s discl 615078

Aug 30, 2021 | Uncategorized

Macroeconomic conditions and uncollectibles

In its November, 2009, press release discussing third quarter financial results, the construction management and consulting firm Hill International specifically cited an increase in bad debt expense as a drag on otherwise improved operating profits. Hill provides its services globally to companies involved in large construction projects.

REQUIRED:

Discuss the effects of an international real estate recession on construction projects and why this macroeconomic event would affect a company”s bad debt expense. Who is on the other side of a company”s bad debt expense? How does this expense affect the income statement and the balance sheet? How could an analyst following the global construction markets use a company”s disclosure on bad debts to better understand the industry?

explain how the strategy in b works specifically how might it be used to reduce the 615079

Aug 30, 2021 | Uncategorized

Accounting for foreign currencies—An economic consequence

An article in Forbes noted that “accounting rules . . . can often change the way companies do business.” Under the accounting rule covering receivables and payables denominated in foreign currencies, for example, “it is very important for companies to monitor their currency dealings.” A case in point is RJ. Reynolds Industries, which “opened regional treasury offices in London and Hong Kong to keep tabs on worldwide cash flow and direct local borrowings.” In that same article, a partner from a major accounting firm indicated that “more and more companies are centralizing their treasury-management function. Those that don”t may be operating at a disadvantage.”

REQUIRED:

a. Explain why the methods of accounting for foreign currencies might cause a company to centralize its treasury-management function and why those that don”t may be operating at a disadvantage.

b. What is one of the main strategies used by U.S. companies to reduce the risks of holding receivables or payables denominated in non-U.S. currencies?

c. Explain how the strategy in (b) works. Specifically, how might it be used to reduce the possibility of violating a covenant on an outstanding debt?

why is the increase in accounts receivable listed in the operating section of the st 615080

Aug 30, 2021 | Uncategorized

The SEC Form 10-K of NIKE

REQUIRED:

Review the SEC 10-K Form for NIKE, and answer the following questions.

a. Compute the change in NIKE”s current ratio and working capital from 2008 to 2009. Which accounts are the most important in explaining that change?

b. What is included in NIKE”s balance sheet cash account?

c. How large are NIKE”s receivables relative to current assets and total assets? How important is receivables management to NIKE”s operations? How large is the reserve (allowance) for bad debts? Explain.

d. What percent of revenue and accounts receivable results from international sales? What strategies does NIKE employ to mitigate risks related to foreign currency?

e. Why is the increase in accounts receivable listed in the operating section of the statement of cash flows?

is intel a retailer or a manufacturer what dollar amount appeared in the inventory a 615087

Aug 30, 2021 | Uncategorized

The footnotes to the 2008 financial statements of Intel Corporation contained the following information (dollars in millions):

Is Intel a retailer or a manufacturer? What dollar amount appeared in the inventory account on the 2008 balance sheet? Provide several examples of the kinds of costs included in work in process and finished goods.

why would a weak market for steel and related products affect the inventory on the b 615101

Aug 30, 2021 | Uncategorized

Olympic Steel, stock symbol ZEUS, announced early in April 2009 that it would record a $30 million charge to reduce the carrying cost of its inventory to market prices. The company had seen a 43 percent decline in its shipments during the 2008-2009 recession, and adjusted its inventory to reflect current market conditions. The $30 million expense represented approximately 12 percent of the value of the inventory on its March 31 balance sheet, and appeared in the operating section of the company”s statement of cash flows as an add-back to net earnings in the calculation of net cash from operations. Why would a weak market for steel and related products affect the inventory on the balance sheet of a company like Olympic Steel, and why would the write-down appear as both an expense on the income statement and an add-back on the statement of cash flows?

discuss what business risks a company such as toyota takes when it minimizes the inv 615102

Aug 30, 2021 | Uncategorized

The popularity and success of just-in-time inventory methods are often credited to Toyota, the Japanese car manufacturer. Companies following a JIT plan minimize their investment in idle inventory, purchasing inventory only as it is needed for production. Nick Koletic, an economics specialist at UCLA, published an article in Inventory Management Review (10/17/2005) that cited some risks associated with JIT inventory practices. In early 2010, Toyota suffered a quality control problem with accelerator pedals in many of its popular brands, leading to a massive recall; at the same time, Toyota”s popular hybrid car, the Prius, faced problems with its brake system. Discuss what business risks a company, such as Toyota, takes when it minimizes the inventory it keeps on hand.

under u s gaap no entry is recorded for the recovery because the write down is consi 615103

Aug 30, 2021 | Uncategorized

If Jane prepared financial reports using IFRS and the market price of rice rebounded in the next period from $1.20 to $1.50 per pound, $0.10 above the original $1.40 cost, she would record a recovery of $28 ([$1.40 — $1.20] X 140 lbs.) with the following adjusting journal entry. This entry would increase net income, but only to the extent of the recovery ($0.20), not the entire market price increase ($0.30).

Under U.S. GAAP, no entry is recorded for the recovery because the write-down is considered permanent.

from information in the footnote alone indicate whether johnson amp johnson uses the 615105

Aug 30, 2021 | Uncategorized

Inventory

The following information was taken from the footnotes in the 2008 annual report of Johnson & Johnson.

a. From information in the footnote alone, indicate whether Johnson & Johnson is a retailer, manufacturer, or service firm. Explain.

b. From information in the footnote alone, indicate whether Johnson & Johnson uses the LIFO or FIFO inventory cost flow assumption. Explain. (Hint: What disclosures are required under LIFO? under FIFO?)

assume that dallas included in inventory 12 31 11 all items from the five cases abov 615107

Aug 30, 2021 | Uncategorized

Goods in transit as of the end of the accounting period

Dallas Manufacturing engaged in five transactions involving inventory at the end of 2011:

1. Ordered $50,000 of inventory on December 29, 2011. The goods were shipped on December 30, 2011, with the terms FOB shipping point. Dallas received the inventory on January 4, 2012.
2. Received an order to sell inventory with a cost of $40,000. The goods were shipped to the customer on December 31, 2011, and received on January 3, 2012. The terms of the sale were FOB shipping point.
3. Received an order to sell inventory with a cost of $15,000. The goods were shipped to the customer on December 29, 2011, and received on January 2, 2012. The terms of the sale were FOB destination.
4. Ordered $10,000 of inventory on December 27, 2011. The inventory was shipped on December 27, 2011, with the terms FOB destination. Dallas received the inventory on December 31, 2011.
5. Ordered $75,000 of inventory on December 30, 2011. The inventory was shipped on December 31, 2011, with the terms FOB destination. Dallas received the inventory on January 3, 2012.

Assume that Dallas included in inventory (12/31/11) all items from the five cases above. Explain how the resulting financial statements would be misstated.

controlling interest in consolidated net income for 2011 using the t account approac 614668

Aug 30, 2021 | Uncategorized

Computing Carrying Value, Interest Revenue and Expense, Controlling and Noncontrolling Income

On January 2, 2011, Peoples, Inc. acquired an 80% interest in Schmidt Corporation for $900,000. Schmidt reported total stockholders” equity of $1,000,000 on this date. An examination of Schmidt”s books revealed that book value was equal to fair value for all assets and liabilities except for inventory, which was undervalued by $60,000. All of the undervalued inventory was sold during 2011.

Peoples also purchased 30% of the $500,000 par value outstanding bonds of Schmidt Corporation for $140,000 on January 2, 2011. The bonds mature in 10 years, carry an 11% annual interest rate payable on June 30 and December 31, and had a carrying value of $505,000 on the date of purchase. Both companies use the straight-line method to amortize bond discounts and premiums.

Peoples reported net income of $300,000 for 2011 and paid dividends of $130,000 during 2011. Schmidt Corporation reported net income of $320,000 for 2011 and paid dividends of $90,000 during the year.

Required:

Compute the following items at December 31, 2011:

1. Carrying value of the debt.
2. Interest revenue reported by Peoples, Inc.
3. Interest expense reported by Schmidt Corporation
4. Balance in the Investment in Schmidt Bonds account.
5. Controlling interest in consolidated net income for 2011 using the t-account approach.
6. Noncontrolling interest in consolidated income for 2011.

compute the proceeds received by the parent company from discounting the note 614669

Aug 30, 2021 | Uncategorized

Discounting a Note, Computing Proceeds, and Workpaper Eliminating Entry

Wyatt Corporation, an 80%-owned subsidiary, accepted a $60,000, 12%, 90-day note from a customer for services performed. On that same date, because Wyatt Corporation was in need of cash for operations, the subsidiary endorsed the note over to its parent company in exchange for $60,000. After holding the note for 30 days, the parent discounted the note with an independent bank. The discount rate was 13%. Both companies record discounted notes in a Discounted Notes Receivable account.

Required:

1. Compute the proceeds received by the parent company from discounting the note.
2. Prepare the workpaper entry, if any, needed to eliminate the note. If none is needed, explain why.

how would the entry in part a change if the cost method was used to account for the 614671

Aug 30, 2021 | Uncategorized

Liquidating Dividend

On January 1, 2011, Pacelli Company acquired a 90% interest in Swartz Corporation for $720,000. On this date, Swartz Corporation reported common stock of $500,000 and retained earnings of $200,000. Any difference between implied and book value interest acquired is attributable to the under- or overvaluation of land.

Other information pertaining to Swartz Corporation follows:

Pacelli Company uses the partial equity method to account for its investment in Swartz Corporation.

Required:

1. Prepare the general journal entries for 2011 and 2012 to record the receipt of the cash dividends.
2. Prepare all determinable workpaper entries that would be made in the preparation of 2011 consolidated statements workpaper.
3. Prepare all determinable workpaper entries that would be made in the preparation of consolidated statements for 2012.
4. How would the entry in part A change if the cost method was used to account for the investment?

on january 1 2011 perez company acquired 80 of serrano company s 300 000 par value c 614672

Aug 30, 2021 | Uncategorized

Various Preferred Stock Characteristics—Compute Consolidated Income

On January 1, 2011, Perez Company acquired 80% of Serrano Company”s $300,000 par value common stock for $200,000 and 40% of Serrano Company”s 8%, $100,000 par value preferred stock for $86,000. During 2011, Serrano Company reported net income of $80,000 and declared cash dividends of $45,000. Perez Company reported net income (including dividends from subsidiary) of $200,000 in 2011.

Required:

In each of the following independent cases, compute consolidated net income for 2011.

Case 1: The preferred stock is noncumulative and nonparticipating.

Case 2: The preferred stock is cumulative and nonparticipating. Dividends were in arrears two years as of January 1, 2011.

Case 3: The preferred stock is noncumulative and fully participating.

Case 4: The preferred stock is cumulative and fully participating. Dividends were in arrears one year as of January 1, 2011.

do you think that you would ever resort to filing for bankruptcy relief yourself why 614683

Aug 30, 2021 | Uncategorized

From an ethical perspective, some believe that it is never justifiable for an individual or business to declare bankruptcy. Others believe that some actions are appropriate only in extreme circumstances. Without question, as stated in the Journal of Accountancy, November 2005, page 51, “the ease with which debtors have been able to walk away from debt has frustrated creditors for years.”

1. Describe the differences between (liquidations) and (reorganizations) from an ethical standpoint. Who is most likely to be hurt by a bankruptcy?
2. Discuss the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Do you believe the changes wrought by this act will serve to protect creditors?
3. The Protection Act of 2005 requires individuals, but not businesses, to undergo a “means” test before they can seek relief. Do you believe this change should be applied to businesses as well? Why or why not?
4. Do you think that you would ever resort to filing for bankruptcy relief yourself? Why or why not?

compute the walbright fund s money weighted rate of return 614714

Aug 30, 2021 | Uncategorized

Time-Weighted and Money-Weighted Rates of Return Side by Side.

Your task is to compute the investment performance of the Walbright Fund during 2003. The facts are as follows:

• On 1 January 2003, the Walbright Fund had a market value of $100 million.
• During the period 1 January 2003 to 30 April 2003, the stocks in the fund showed a capital gain of $10 million.
• On 1 May 2003, the stocks in the fund paid a total dividend of $2 million. All dividends were reinvested in additional shares.
• Because the fund”s performance had been exceptional, institutions invested an additional $20 million in Walbright on 1 May 2003, raising assets under management to $132 million ($100 + $10 + $2 + $20).
• On 31 December 2003, Walbright received total dividends of $2.64 million. The fund”s market value on 31 December 2003, not including the $2.64 million in dividends, was $140 million.
• The fund made no other interim cash payments during 2003.

Based on the information given, address the following.

1. Compute the Walbright Fund”s time-weighted rate of return.

2. Compute the Walbright Fund”s money-weighted rate of return.

3. Interpret the differences between the time-weighted and money-weighted rates of return.

calculate this proposal s npv 614717

Aug 30, 2021 | Uncategorized

Waldrup Industries is considering a proposal for a joint venture that will require an investment of C$13 million. At the end of the fifth year, Waldrup”s joint venture partner will buy out Waldrup”s interest for C$10 million. Waldrup”s chief financial officer has estimated that the appropriate discount rate for this proposal is 12 percent. The expected cash flows are given below.

A. Calculate this proposal”s NPV.

B. Make a recommendation to the CFO (chief financial officer) concerning whether Waltham should enter into this joint venture.

calculate the internal rate of return of this project 614720

Aug 30, 2021 | Uncategorized

Trilever is planning to establish a new factory overseas. The project requires an initial investment of $15 million. Management intends to run this factory for six years and then sell it to a local entity. Trilever”s finance department has estimated the following yearly cash flows:

Trilever”s CFO decides that the company”s cost of capital of 19 percent is an appropriate hurdle rate for this project.

A. Calculate the internal rate of return of this project.

B. Make a recommendation to the CFO concerning whether to undertake this project.

calculate the time weighted rate of return on wilson s portfolio 614722

Aug 30, 2021 | Uncategorized

John Wilson buys 150 shares of ABM on 1 January 2002 at a price of $156.30 per share. A dividend of $10 per share is paid on 1 January 2003. Assume that this dividend is not reinvested. Also on 1 January 2003, Wilson sells 100 shares at a price of $165 per share. On 1 January 2004, he collects a dividend of $15 per share (on 50 shares) and sells his remaining 50 shares at $170 per share.

A. Write the formula to calculate the money-weighted rate of return on Wilson”s portfolio.

B. Using any method, compute the money-weighted rate of return.

C. Calculate the time-weighted rate of return on Wilson”s portfolio.

D. Describe a set of circumstances for which the money-weighted rate of return is an appropriate return measure for Wilson”s portfolio.

Describe a set of circumstances for which the time-weighted rate of return is an appropriate return measure for Wilson”s portfolio.

briefly explain any similarities and differences between the performance of luongo s 614723

Aug 30, 2021 | Uncategorized

Mario Luongo and Bob Weaver both purchase the same stock for €100. One year later, the stock price is €110 and it pays a dividend of €5 per share. Weaver decides to buy another share at €110 (he does not reinvest the €5 dividend, however). Luongo also spends the €5 per share dividend but does not transact in the stock. At the end of the second year, the stock pays a dividend of €5 per share but its price has fallen back to €100. Luongo and Weaver then decide to sell their entire holdings of this stock. The performance for Luongo and Weaver”s investments are as follows:

Briefly explain any similarities and differences between the performance of Luongo”s and Weaver”s investments.

would you consider ge to be a manufacturing retail or service company discuss 615042

Aug 30, 2021 | Uncategorized

Uncollectible accounts expense

General Electric”s financing subsidiary (GE Capital Services—GECS) provides financing services for GE”s customers. If you purchase a GE appliance, for example, you could finance it through GECS. In 2008, GECS generated over $71 billion in revenue and reported profits of over $7 billion. These numbers represented approximately 40 percent of the company”s total revenues ($182 billion) and 40 percent of the company”s profits ($17.4 billion). In 2008, the bad debt provision reported on GE”s income statement was $7.5 billion.

a. Compute bad debts as a percentage of revenues. Should you use GE overall revenues or revenues generated by GECS? Why?

b. If GECS prepared its own balance sheet, what would you expect to be the largest accounts?

c. Would you consider GE to be a manufacturing, retail, or service company? Discuss.

analyze the activity in the allowance for doubtful accounts t account and comment on 615047

Aug 30, 2021 | Uncategorized

Bad debts under the allowance method

Arlington Cycle Company began operations on January 1, 2011. The company reported the following selected items in its 2012 financial report:

Arlington estimates bad debts at 2 percent of gross sales.

Analyze the activity in the allowance for doubtful accounts T-account, and comment on whether the bad debt estimate has been sufficient to cover the write-offs.

assume that all sales were on credit and cash collections from customers during 2011 615048

Aug 30, 2021 | Uncategorized

Accounting for uncollectibles

In its 2011 financial report, Sound Unlimited reported the following items:

1. A credit balance of $200,000 in allowance for doubtful accounts.

2. A debit balance of $7,500,000 in accounts receivable.

3. Sales of $3,250,000.

During 2011, the company was involved in the following transactions that affected allowance for doubtful accounts.

1. Wrote off accounts considered uncollectible totaling $195,000.

2. Recovered $45,000 that had previously been written off.

Assume that historically 5 percent of sales has proven to be uncollectible.

a. Compute the December 31, 2010, balance in allowance for doubtful accounts.

b. Assume that all sales were on credit and cash collections from customers during 2011 totaled $4,200,000. Compute the 12/31/10 balance in accounts receivable.

infer the journal entries that explain the activity in accounts receivable and the r 615050

Aug 30, 2021 | Uncategorized

Inferring bad debt write-offs and reconstructing related journal entries

The 2012 annual report of Johnson Services reveals the following information. The dollar amounts are end-of-year balances.

Johnson estimates bad debts each year at 2 percent of credit sales.

a. Compute the actual amount of write-offs during 2012.

b. Infer the journal entries that explain the activity in accounts receivable and the related allowance account during 2012.

compute total receivables and expected bad debts as of december 31 2012 615052

Aug 30, 2021 | Uncategorized

Preparing an aging schedule

Potter Stables uses the aging method to estimate its bad debts. Sherman Potter, the company president, has given you the following aging of accounts receivable as of December 31, 2009, along with the historical probabilities that the account balances will not be collected.

Compute total receivables and expected bad debts as of December 31, 2012.

do you agree with this classification should any other factors be considered in the 615055

Aug 30, 2021 | Uncategorized

Classifying cash on the balance sheet

On September 30, 2011, Print-O-Matic Inc. entered into an arrangement with its bank to borrow $250,000. The principal is due on October 1, 2016, and the note has a stated annual interest rate of 10 percent. Under the borrowing agreement, Print-O-Matic agreed to maintain a compensating balance of $60,000 in a non-interest-bearing account. As of December 31, 2011, Print-O-Matic has an additional $225,000 in various savings and checking accounts that earn an annual rate of 6 percent. The controller intends to classify the entire $285,000 in cash as a current asset.

REQUIRED:

a. Do you agree with the classification of the $285,000 of cash as a current asset? Explain your answer.

b. Print-O-Matic reported interest expense associated with this note for the year ended December 31, 2011, in the amount of $6,250 [($250,000 X 10%) × 1/4]. Do you agree with this classification? Should any other factors be considered in the interest cost? Explain.

compute the annual interest rate bbb paid for the use of the 800 for that ten day pe 615056

Aug 30, 2021 | Uncategorized

Cash discounts

During the month of March, QNI Corporation made the following credit sales and had the following related collections. QNI prepares financial statements for the first quarter of operations at the end of March.

REQUIRED:

a. Prepare the journal entries to record these transactions.

b. Note that BBB missed the discount period by ten days. Compute the annual interest rate BBB paid for the use of the $800 for that ten-day period. Assuming that BBB can borrow money from the bank at 9 percent, what should BBB have done differently?

comment on the sufficiency of the bad debt expense and allowance over the three year 615057

Aug 30, 2021 | Uncategorized

Bad debts over time

Financial information for CNG Inc. follows:

The company estimates bad debts for financial reporting purposes at 3 percent of credit sales. The balance in allowance for doubtful accounts as of January 1, 2010, was $10,000.

REQUIRED:

a. Provide the journal entries related to allowance for doubtful accounts for 2010, 2011, and 2012.

b. Compute the balance in allowance for doubtful accounts as of December 31, 2012.

c. Comment on the sufficiency of the bad debt expense and allowance over the three-year period. How did you come to your conclusion?

what is the december 31 2012 balance in allowance for doubtful accounts assume that 615058

Aug 30, 2021 | Uncategorized

Accounting for uncollectibles over two periods

Glacier Ice Company uses a percentage-of-net-sales method to account for estimated bad debts. Historically, 3 percent of net sales have proven to be uncollectible. During 2011 and 2012, the company reported the following:

REQUIRED:

a. Prepare the necessary adjusting entry on December 31, 2011, to record the estimated bad debt expense for 2011.

b. Assume that the January 1, 2011 balance in allowance for doubtful accounts was $65,000 (credit) and that $70,000 in bad debts were written off the books during 2011. What is the December 31, 2011, balance in this account after adjustments?

c. Prepare the necessary adjusting entry on December 31, 2012, to record the estimated bad debt expense for 2012.

d. What is the December 31, 2012, balance in allowance for doubtful accounts? Assume that $85,000 in bad debts was written off the books during 2012.

what is the balance of the allowance for uncollectibles account as of the end of 201 615059

Aug 30, 2021 | Uncategorized

Accounting for uncollectibles over three periods

Albertson”s Locksmith Corporation started operations on January 1, 2010. Albertson”s estimates uncollectibles using the percentage-of-credit-sales method. The following information pertains to the company”s sales, receivables, and collections for the first three years of operation:

Albertson”s estimates uncollectible accounts at 4 percent of credit sales.

REQUIRED:

a. What is the balance of the allowance for uncollectibles account as of the end of 2010, 2011, and 2012?

b. What is the (net) balance of the accounts receivable account as of the end of 2010, 2011, and 2012?

c. Comment on Albertson”s annual estimates.

prepare in general journal form all entries necessary on the consolidated financial 614569

Aug 30, 2021 | Uncategorized

Upstream Sales

Shell Company, an 85% owned subsidiary of Plaster Company, sells merchandise to Plaster Company at a markup of 20% of selling price. During 2011 and 2012, intercompany sales amounted to $442,500 and $386,250, respectively. At the end of 2011, Plaster had one-half of the goods that it purchased that year from Shell in its ending inventory. Plaster”s 2012 ending inventory contained one-fifth of that year”s purchases from Shell. There were no intercompany sales prior to 2011.

Plaster had net income in 2011 of $750,000 from its own operations and in 2012 its independent income was $780,000. Shell reported net income of $322,500 and $335,400 for 2011 and 2012, respectively.

Required:

1. Prepare in general journal form all entries necessary on the consolidated financial statement workpapers to eliminate the effects of the intercompany sales for each of the years 2011 and 2012.
2. Calculate the amount of noncontrolling interest to be deducted from consolidated income in the consolidated income statement for 2012.
3. Calculate controlling interest in consolidated income for 2012.

prepare in general journal form all entries necessary in the consolidated financial 614570

Aug 30, 2021 | Uncategorized

Downstream Sales

Peer Company owns 80% of the common stock of Seacrest Company. Peer Company sells merchandise to Seacrest Company at 25% above its cost. During 2011 and 2012 such sales amounted to $265,000 and $475,000, respectively. The 2011 and 2012 ending inventories of Seacrest Company included goods purchased from Peer Company for $125,000 and $170,000, respectively.

Peer Company reported net income from its independent operations (including intercompany profit on inventory sales to affiliates) of $450,000 in 2011 and $480,000 in 2012. Seacrest reported net income of $225,000 in 2011 and $275,000 in 2012 and did not declare dividends in either year. There were no intercompany sales prior to 2011.

Required:

1. Prepare in general journal form all entries necessary in the consolidated financial statements workpapers to eliminate the effects of the intercompany sales for each of the years 2011 and 2012.
2. Calculate the amount of noncontrolling interest to be deducted from consolidated income in the consolidated income statements for 2011 and 2012.
3. Calculate controlling interest in consolidated income for 2012.

calculate the amount of noncontrolling interest to be reported in the consolidated i 614571

Aug 30, 2021 | Uncategorized

Deferred Taxes and Intercompany Sales of Inventory

Pearson Company owns 80% of the common stock of Sedbrook Company. Pearson Company sells merchandise to Sedbrook Company at 25% above its cost. During 2011 and 2012, such sales amounted to $265,000 and $475,000, respectively. The 2011 and 2012 ending inventories of Sedbrook Company included goods purchased from Pearson Company for $150,000 and $195,000, respectively.

Pearson Company reported net income from its independent operations (including sales to affiliates) of $450,000 in 2011 and $480,000 in 2012. Sedbrook reported net income of $225,000 in 2011 and $275,000 in 2012 and did not declare dividends in either year. There were no intercompany sales prior to 2011. The affiliated companies file separate income tax returns and have marginal income tax rates of 30%. Ignore the income tax consequences of undistributed subsidiary income.

Required:

1. Prepare in general journal form all entries necessary in the consolidated financial statements workpapers to eliminate the effects of the intercompany sales for each of the years 2011 and 2012.
2. Calculate the amount of noncontrolling interest to be reported in the consolidated income statements for 2011 and 2012.
3. Calculate the controlling interest in consolidated net income for 2012.

prepare in general journal form the workpaper entries relating to the intercompany s 614588

Aug 30, 2021 | Uncategorized

Workpaper Entries—Intercompany Sale of Equipment

Pearson Company owns 90% of the outstanding common stock of Spring Company. On January 1, 2011, Spring Company sold equipment to Pearson Company for $200,000. Spring Company had purchased the equipment for $300,000 on January 1, 2006, and had depreciated it using a 10% straight-line rate. The management of Pearson Company estimated that the equipment had a remaining useful life of five years on January 1, 2011. In 2012, Pearson Company reported $150,000 and Spring Company reported $100,000 in net income from their independent operations (including sales to affiliates).

Required:

1. Prepare in general journal form the workpaper entries relating to the intercompany sale of equipment that are necessary in the December 31, 2011, and December 31, 2012, consolidated financial statements workpapers.
2. Calculate controlling interest in consolidated income for 2012.

the consolidated financial statements workpaper for the year ended december 31 2012 614589

Aug 30, 2021 | Uncategorized

Entries—Intercompany Sale of Land

Procter Company owns 90% of the outstanding stock of Silex Company. On January 1, 2011, Silex Company sold land to Procter Company for $350,000. Silex had originally purchased the land on June 30, 2007, for $200,000.

Procter Company plans to construct a building on the land bought from Silex in which it will house new production machinery. The estimated useful life of the building and the new machinery is 15 years.

Required:

1. Prepare the entries on the books of Procter related to the intercompany sale of land for the years ended December 31, 2011, and December 31, 2012.
2. Prepare in general journal form the workpaper entries necessary because of the intercompany sale of land in:

(1) The consolidated financial statements workpaper for the year ended December 31, 2011.

(2) The consolidated financial statements workpaper for the year ended December 31, 2012.

prepare in general journal form the workpaper entries necessary because of the inter 614591

Aug 30, 2021 | Uncategorized

Calculating Gain on Sale

P Company owns 90% of the outstanding common stock of S Company. On January 1, 2012, S Company sold land to P Company for $600,000. S Company originally purchased the land for $400,000.

On January 1, 2013, P Company sold the land purchased from S Company to a company outside the affiliated group for $700,000.

Required:

1. Calculate the amount of gain on the sale of the land that is recognized on the books of P Company in 2013.
2. Calculate the amount of gain on the sale of the land that should be recognized in the consolidated financial statements in 2013.
3. Prepare in general journal form the workpaper entries necessary because of the intercompany sale of land in the consolidated financial statements workpaper for the year ended December 31, 2013.

calculate controlling interest in consolidated net income for the year ended decembe 614593

Aug 30, 2021 | Uncategorized

Controlling Interest in Income

On January 1, 2012, P Company acquired a 90% interest in S Company. During 2013, S Company sold merchandise to P Company at 25% above cost in the amount (selling price) of $225,000. At the end of the year, P Company had in its inventory one-third of the amount of goods purchased from S Company.

On January 1, 2013, P Company sold equipment that had a book value of $80,000 to S Company for $120,000. The equipment had an estimated remaining life of four years.

S Company reported net income of $120,000, and P Company reported net income of $300,000 from their independent operations (including sales to affiliates) for the year ended December 31, 2013.

Required:

Calculate controlling interest in consolidated net income for the year ended December 31, 2013.

determine the consolidated gain or loss on the sale of the equipment and prepare in 614604

Aug 30, 2021 | Uncategorized

P Company Entries and Determining Gain or Loss on Sale

On January 1, 2012, P Company purchased equipment from its 80% owned subsidiary for $600,000. The carrying value of the equipment on the books of S Company was $450,000. The equipment had a remaining useful life of six years on January 1, 2012. On January 1, 2013, P Company sold the equipment to an outside party for $550,000.

Required:

1. Prepare in general journal form the entries necessary in 2012 and 2013 on the books of P Company to account for the purchase and sale of the equipment.
2. Determine the consolidated gain or loss on the sale of the equipment and prepare in general journal form the entry necessary on the December 31, 2013, consolidated statements workpaper to properly reflect this gain or loss.

calculate noncontrolling interest in consolidated income for the year ended december 614607

Aug 30, 2021 | Uncategorized

Entries and Computation of Income and Retained Earnings

Platt Company acquired an 80% interest in Sloane Company when the retained earnings of Sloane Company were $300,000. On January 1, 2011, Sloane Company recorded a $250,000 gain on the sale to Platt Company of equipment with a remaining life of five years. On January 1, 2012, Platt Company recorded a $180,000 gain on the sale to Sloane Company of equipment with a remaining life of six years. Sloane Company reported net income of $180,000 and declared dividends of 60,000 in 2012. It reported retained earnings of $520,000 on January 1, 2012, and $640,000 on December 31, 2012. Platt Company reported net income from independent operations of $400,000 in 2012 and retained earnings of $1,800,000 on December 31, 2012.

Required:

1. Prepare in general journal form the entries necessary in the December 31, 2012, consolidated statements workpaper to eliminate the effects of the intercompany sales.
2. Calculate controlling interest in consolidated net income for the year ended December 31, 2012.
3. Calculate consolidated retained earnings on December 31, 2012.
4. Calculate noncontrolling interest in consolidated income for the year ended December 31, 2012.

calculate the noncontrolling interest in consolidated income for the year ended dece 614608

Aug 30, 2021 | Uncategorized

Deferred Tax Consequences of Intercompany Inventory and Equipment

Peer Company acquired an 80% interest in Sells Company on January 1, 2011, for $1,600,000. On this date, the common stock and retained earnings balances were $1,500,000 and $500,000, respectively. During the year, Peer Company sold merchandise to Sells Company for $200,000. Only one-fourth of this merchandise was in Sells Company”s 2011 ending inventory, and $10,000 of this amount is unrealized profit.

On January 2, 2011, Sells Company sold equipment with a book value of $300,000 to Peer Company for $400,000. The equipment has a remaining useful life of four years. Sells Company”s net income for 2011 was $300,000, while Peer Company”s was $800,000. Neither company declared dividends in 2011. The affiliated companies file separate income tax returns, the dividends received exclusion is 80%, and the prior, current, and expected future marginal income tax rates for both companies are 40%.

Required:

1. Prepare in general journal form all consolidated statements workpaper entries necessary for 2011.
2. Calculate the controlling interest in consolidated net income for the year ended December 31, 2011.
3. Calculate the noncontrolling interest in consolidated income for the year ended December 31, 2011.

proper company purchased the outstanding common stock of silly company in increments 614615

Aug 30, 2021 | Uncategorized

Proper Company purchased the outstanding common stock of Silly Company in increments as follows:

January 1, 2008, Purchased 15%

June 1, 2008, Additional 20%

August 1, 2008, Additional 30%

September 30, 2008, Remaining 35%

Both Proper and Silly have fiscal years ending on September 30. Silly”s stock was acquired at book value. The controlling interest in net income for the consolidated entity for the fiscal year ending September 30, 2008, should include which of the following percentages of subsidiary earnings?

1. 100%, January–September 2008.
2. 65%, January–September 2008.
3. 15%, January–May 2008; 20%, June–July 2008; and 30%, August–September 2008.
4. None of the above.

assume the same situation as in b except that the cost of the shares is greater than 614623

Aug 30, 2021 | Uncategorized

P Company holds an 80% interest in S Company. Determine the effect (that is, increase, decrease, no change, not determinable) on both the total book value of the noncontrolling interest and the noncontrolling interest”s percentage of ownership in the net assets of S Company for each of the following situations:

1. P Company acquires additional shares directly from S Company at a price equal to the book value per share of the S Company stock immediately prior to the issuance.
2. S Company acquires its own shares on the open market. The cost of these shares is less than their book value.
3. Assume the same situation as in (b) except that the cost of the shares is greater than their book value.
4. P Company and a noncontrolling stockholder each acquire 100 shares directly from S Company at a price below the book value per share.

prepare the workpaper eliminating entries necessary to prepare a consolidated statem 614626

Aug 30, 2021 | Uncategorized

Multiple Stock Purchases—Journal Entries

Peck Company purchased Sanno Company common stock in a series of open-market cash purchases from 2009 through 2011 as follows:

Sanno Company had 18,000 shares of $20 par value common stock outstanding during the entire period. Retained earnings balances for Sanno Company on relevant dates were

Dividends in the amount of $50,000 were distributed by Sanno Company only in 2011. Any difference between implied and book values is assigned to goodwill. Peck Company uses the cost method to account for its investment in Sanno Company.

Required:

1. Prepare the journal entries that Peck Company would record on its books during 2011 to account for its investment in Sanno Company.
2. Prepare the workpaper eliminating entries necessary to prepare a consolidated statements workpaper on December 31, 2011.

prepare the journal entries papke company would record on its books during 2011 to a 614627

Aug 30, 2021 | Uncategorized

Parent Company Entries—Multiple Stock Purchase and Sale of Stock, Cost Method

Papke Company acquired 85% of the common stock of Serbin Company in two separate cash transactions. The first purchase of 72,000 shares (60%) on January 1, 2010, cost $490,000. The second purchase, on January 1, 2011, of 30,000 shares (25%) cost $220,000. Serbin Company”s stockholders” equity was as follows:

On April 1, 2011, after a significant rise in the market price of Serbin Company”s stock, Papke Company sold 21,600 of its Serbin Company shares for $260,000. Serbin Company notified Papke Company that its net income for the first three months was $15,000. The shares sold were identified as those obtained in the first purchase. Any difference between implied and book values relates to goodwill. Papke uses the cost method to account for its investment in Serbin Company.

Required:

Prepare the journal entries Papke Company would record on its books during 2011 to account for its investment in Serbin Company.

prepare the journal entry on pace company s books to record the purchase of the addi 614631

Aug 30, 2021 | Uncategorized

Parent Company and Workpaper Entries—New Shares Issued by Subsidiary

On January 1, 2011, Pace Company purchased 250,000 shares of common stock directly from its subsidiary, Sime Company, for $1.50 per share. Noncontrolling stockholders elected not to participate in the new issue.

Pace Company acquired its initial 92.5% interest in Sime Company by purchasing on the open market 462,500 shares of Sime”s common stock for $578,125 on January 1, 2007. Sime Company”s stockholders” equity just before each of the two purchases was as follows:

During 2011 Sime Company reported $90,000 net income and declared a dividend in the amount of $30,000. Any difference between implied and book values relates to subsidiary land. Pace uses the cost method to account for its investment.

Required:

1. Prepare the journal entry on Pace Company”s books to record the purchase of the additional shares on January 1, 2011.
2. Prepare the eliminating entries needed for the preparation of a consolidated statements workpaper on December 31, 2011.

prepare the journal entries needed on pyle company s books to record the transaction 614637

Aug 30, 2021 | Uncategorized

Workpaper—Sale of Shares by Parent, Cost Method—Loss of Control

The accounts of Pyle Company and its subsidiary, Stern Company, are summarized below as of December 31, 2011:

Pyle Company made the following open-market purchase and sale of Stern Company common stock:

January 2, 2009, purchased 51,000 shares (85% of Stern), cost $510,000, $10/share;

January 1, 2011, sold 40,000 shares (two-thirds of Stern), proceeds, $480,000, $12/share.

The book value of Stern Company”s net assets on January 2, 2009, $600,000, approximated the fair value of those net assets, including retained earnings of $120,000. Subsequent changes in book value of the net assets are entirely attributable to earnings of Stern Company. Stern Company earns its income evenly throughout the year.

Required:

Prepare the journal entries needed on Pyle Company”s books to record the transactions regarding the investment in Stern Company account assuming that the cost method is used to account for the investment.

prepare a consolidated financial statements workpaper as of december 31 2011 begin t 614639

Aug 30, 2021 | Uncategorized

Workpaper—Purchase and Sale of Shares, Cost Method

Trial balances for Porter Company and its subsidiary, Spitz Company, as of December 31, 2011, follow:

Porter Company made the following open-market purchase and sate of Spitz Company common stock: January 1, 2007, purchased 45,000 shares for $135,000; May 1, 2011, sold 4,500 shares for $28,000.

The book value of Spitz Company”s net assets on January 1, 2007, was $140,000; the excess of cost over net assets acquired relates to land. Subsequent changes in the book value of Spitz Company”s net assets are entirely attributable to earnings retained in the business. Spitz Company earns its income evenly throughout the year. Porter Company uses the cost method to account for its investment.

Required:

Prepare a consolidated financial statements workpaper as of December 31, 2011. Begin the income statement section of the workpaper with “Net Income Before Dividend Income” which is $63,200 for Porter Company and $60,000 for Spitz Company.

assuming that the market value of the new shares issued was 34 per share repeat requ 614641

Aug 30, 2021 | Uncategorized

New Subsidiary Shares Issued to Outsider

On January 1, 2010, Purdy Company acquired 84% of the capital stock of Sally Company for $840,000. On that date, Sally Company”s stockholders” equity was:

The difference between implied and book values relates to land owned by Sally Company.

On January 2, 2012, Sally Company issued 6,000 shares of its authorized capital stock, with a market value of $55 per share, to Marcy Smith in exchange for a patent. Sally Company”s retained earnings balance on this date was $400,000, capital stock and other contributed capital balances had not changed during 2010 and 2011.

Required:

1. Prepare (1) the entry on Purdy”s books to record the effect of the issuance, and (2) the elimination entries for the preparation of a consolidated balance sheet workpaper immediately after the new issue of shares assuming use of the cost method.
2. Assuming that the market value of the new shares issued was $34 per share, repeat requirement A above.

assume that the two companies reported net income 614664

Aug 30, 2021 | Uncategorized

Computing the Constructive Gain or Loss on Retirement of Debt

Pacelli Company issued 10-year, 10% bonds with a par value of $1,000,000 on January 2, 2010, for $940,000. Interest is paid semiannually on June 30 and December 31. On December 31, 2011, $800,000 of the par value bonds were purchased by Salez Company for $820,000. Salez Company is an 80%-owned subsidiary of Pacelli Company. Both companies use the straight-line method to amortize bond discounts and premiums.

Salez Company declared cash dividends of $60,000 each year during the period 2011–2012.

Required:

1. Compute the total gain or loss on the constructive retirement of debt.
2. Allocate the total gain or loss between Pacelli Company and Salez Company.
3. Prepare the book entries related to the bonds made by the individual companies during 2012.
4. Assume that the two companies reported net income

prepare the book entries related to the bonds made by the individual companies in 20 614666

Aug 30, 2021 | Uncategorized

Computing the Constructive Gain or Loss on Debt Retirement and Book Entries

Weber Company issued five-year, 10% bonds on January 2, 2011, for 105. Par value is $850,000. Interest is paid semiannually on June 30 and December 31. Weber Company is a 90%-owned subsidiary of Fairfield Company. On December 31, 2011, Fairfield Company purchased $510,000 of Weber Company”s par value bonds at 90 after the semiannual interest payment had been made. Weber Company declared dividends of $60,000 in 2011 and $80,000 in 2012. Both companies use the straight-line method to amortize bond discount and premium.

Required:

1. Compute the total gain or loss on the constructive retirement of the debt.
2. Allocate the total gain or loss between Weber Company and Fairfield Company.
3. Prepare the book entries related to the bonds made by the individual companies in 2012.
4. Assume that the two companies reported net income

how would your answer differ if program 2 was classified as high risk 614505

Aug 30, 2021 | Uncategorized

Audit concerns. The city of Cedar expended federal awards from the following programs during 20X3.

Assume the auditor has given an unqualified opinion on the financial statements and reports no material weaknesses or reportable conditions in internal control at the financial statement level. Also, assume the auditor has given an unqualified opinion on the schedule of expenditures of federal awards. Programs 2 and 4 are classified as low risk, and Program 6 was not assessed for risk due to its small size.

1.Which programs should the auditor audit as major programs for the purpose of internal control evaluation and compliance testing for the year 20X3?

2.How would your answer differ if Program 2 was classified as high risk?

temporarily restricted net assets totaled 30 000 on january 1 the unrestricted net a 614515

Aug 30, 2021 | Uncategorized

VHWO, statement of activities. The Better Life Clinic is a VHWO that has three main programs:

Drug rehabilitation

Alcohol recovery

Weight control

Unrestricted public support received during the period was $35,000; revenues from membership services were $12,000. The following expenses and allocations to program and supporting services are shown for 20X0. Better Life elects to release donor restrictions for property, plant, and equipment over the useful life of the asset.

Temporarily restricted net assets totaled $30,000 on January 1; the unrestricted net asset balance was $12,000. Prepare a statement of activities for the year.

in her will a leading citizen left a bequest of 200 000 to the clinic stipulations w 614518

Aug 30, 2021 | Uncategorized

VHWO, journal entries. Record the following events of Mercy Health Clinic, a VHWO:

a. In her will, a leading citizen left a bequest of $200,000 to the clinic. Stipulations were that the amount was to become the corpus of a permanent endowment. Any income received would be used first to cover any loss of principal, with the remaining revenue to be used for an educational program on mental problems. The total amount was received and invested in 8% municipal bonds purchased at face value on an interest date.

b. Three months later, half of the bond investment was sold at 101, plus $2,500 of accrued interest.

c. The remaining endowment bond investments earned $6,000. The amount is not subject to any limitations.

d. At year-end, the remaining endowment bond investments have a fair value of $103,500.

donation of equipment to be sold proceeds are to be used to support education progra 614519

Aug 30, 2021 | Uncategorized

VHWO, funds, contributions. The Health Awareness Club is a not-for-profit organization that conducts meetings and special programs dedicated to promoting etter health for members of the community. Members participate in regularly scheduled classes and exercise programs. There are also a variety of community services available to the general population. During the year, various funds flow to the organization. A list of receipts follows. For each item, indicate which of the following funds records the item, and indicate the category within which the item is recorded in that fund.

The transactions were as follows:

a. General membership dues.

b. Receipts for pancake breakfast open to public.

c. Donation of equipment to be used in exercise room. Restrictions are released when assets are placed in service.

d. Donation of equipment to be sold; proceeds are to be used to support education program.

e. Share of federated national fund drive.

f. Sale of educational books produced by the organization.

g. Auction of donated services to be used to acquire additional land for expansion.

h. Receipt of endowment from former president of organization.

i. Income on endowment that supports youth health program.

j. Pledge of $5,000 from local corporation for youth health program. The pledge is conditional, in that the organization must match the grant with funds raised from other corporate sponsors.

which of the following is not a criterion that must be met under fasb no 116 for con 614522

Aug 30, 2021 | Uncategorized

contributions. Select the best answer for each of the following multiple-choice items dealing with not-for-profit organizations.

1. Under FASB No. 117, which of the following statements is true?

a. All not-for-profit organizations must include a statement of functional expenses.

b. Donor-restricted contributions whose restrictions have been met in the reporting period may be reported as unrestricted support.

c. Statements should focus on the individual unrestricted and restricted funds of the organization.

d. FASB No. 117 contains requirements that are generally more stringent than those relating to for-profit organizations.

2. Which of the following factors, if present, would indicate that a transaction is not a contribution under FASB No. 116?

a. The resource provider entered into the transaction voluntarily.

b. The resource provider received value in exchange.

c. The transfer of assets was unconditional.

d. The organization has discretion in the use of the assets received.

3. Securities donated to voluntary health and welfare organizations should be recorded

a. at the donor’s recorded amount.

b. at fair value at the date of the gift.

c. at fair value at the date of the gift or the donor’s recorded amount, whichever is lower.

d. at fair value at the date of the gift or the donor’s recorded amount, whichever is higher.

4. Which of the following is not a criterion that must be met under FASB No. 116 for contributed services?

a. They are provided by persons possessing required skills.

b. They are provided by licensed professionals.

c. They create or enhance nonfinancial assets.

d. They would typically have to be purchased if not provided by the donors/volunteers.

5. Which of the following criteria would suggest that a not-for-profit capitalize its works of art, historical treasures, or similar assets?

a. They are held for public inspection, education, or research in furtherance of public service rather than financial gain.

b. They are protected, kept unencumbered, cared for, and preserved.

c. They are subject to be used in the acquisition of other items for the collection.

d. They are held primarily to be resold for financial gain.

vhwo accounting and reporting select the best answer for each of the following multi 614523

Aug 30, 2021 | Uncategorized

VHWO, accounting and reporting. Select the best answer for each of the following multiple-choice items. Items 1 through 3 are based on the following: The Bay Ridge Humane Society, a VHWO caring for lost animals, had the following financial inflows and outflows for the year ended December 31, 20X5:

1. In the humane society’s statement of activities for the year ended December 31, 20X5, what amount should be reported under the classification of public support—unrestricted?

a. $740,000

b. $762,000

c. $770,000

d. $825,000

2. In the humane society’s statement of activities for the year ended December 31, 20X5, what amount should be reported under the classification of program services expense?

a. $770,000

b. $450,000

c. $550,000

d. $500,000

3. In the humane society’s balance sheet as of December 31, 20X5, what amount should be reported under the classification of public support—temporarily restricted?

a. $55,000

b. $30,000

c. $25,000

d. $0

4. Arbor Haven, a voluntary welfare organization funded by contributions from the general public, received unrestricted pledges of $500,000 during 20X6. It was estimated that 12% of these pledges would be uncollectible. By the end of 20X6, $400,000 of the pledges had been collected, nd it was expected that $40,000 more would be collected in 20X7, with the balance of $60,000 to be written off as uncollectible. Donors did not specify any periods during which the donations were to be used. What amount should Arbor Haven include under public support in 20X6 for contributions?

a. $500,000

b. $452,000

c. $440,000

d. $400,000

5. The following expenditures were among those incurred by a voluntary welfare organization during 20X7:

What amount should be classified as fund-raising costs in the society’s statement of activities?

a. $0

b. $10,000

c. $20,000

d. $30,000

6. Apex Inc. donated a computer to Bird Shelter, a voluntary welfare organization. The computer cost Apex $40,000. On the date of donation, it had a book value of $25,000 and a fair value of $20,000. Bird Shelter’s depreciation expense should be based on

a. $40,000.

b. $25,000.

c. $20,000.

d. $15,000.

expenses select the best answer for each of the following multiple choice items 614524

Aug 30, 2021 | Uncategorized

Expenses. Select the best answer for each of the following multiple-choice items.

1. In the statement of activities of a not-for-profit, depreciation expense should

a. be included as an element of expense.

b. be included as an element of other changes in fund balances.

c. be included as an element of support.

d. not be included.

2. Environs, a community foundation, incurred $10,000 in management and general expnses

during 20X1. In Environs’ statement of activities for the year ended December 31, 20X1, the

$10,000 should be reported as

a. a direct reduction of unrestricted net assets.

b. part of supporting services expense.

c. part of program services expense.

d. a contra account to offset revenue and support.

3. Super Seniors is a not-for-profit organization that provides services to senior citizens. Super employs a full-time staff of 10 people at an annual cost of $150,000. In addition, two volunteers work as part-time secretaries replacing last year’s full-time secretary who earned $10,000.

Services performed by other volunteers for special events had an estimated value of $15,000.

These volunteers were employees of local businesses, and they received small-value items for their participation. What amount should Super report for salary and wage expenses related to the above items?

a. $150,000

b. $160,000

c. $165,000

d. $175,000

4. The League, a not-for-profit organization, received the following pledges:

All pledges are legally enforceable; however, the League’s experience indicates that 10% of all ledges prove to be uncollectible. What amount should the League report as pledges receivable net of any required allowance account?

a. $135,000

b. $180,000

c. $315,000

d. $350,000

5. When a nonprofit organization combines fund raising efforts with bona fide educational efforts or program services, the total combined costs incurred are

a. reported as program services expenses.

b. allocated between fund-raising and program services expenses using an appropriate allocation basis.

c. reported as fund-raising costs.

d. reported as management and general expenses.

appendix mapleton volunteers mv has cash available for investments in several diffe 614525

Aug 30, 2021 | Uncategorized

Assets. Select the best answer for each of the following multiple-choice questions.

1. A VHWO receives a donation that is restricted to its endowment and another donation that is restricted to use in acquiring a child care center. How should these donations be reported in the year received, assuming neither donation is expended in that year?

2. Donor-restricted contributions that have been given to a VHWO for the purpose of purchasing fixed assets should be recorded as increases to

a. Unrestricted Net Assets.

b. Temporarily Restricted Net Assets.

c. Permanently Restricted Net Assets.

d. Fund Balance—Restricted.

3. The following correct entry is found on the books of a VHWO:

From the entry, one should conclude that the board of directors has

a. designated a portion of the unrestricted net assets for a future AIDS research program.

b. designated a portion of the restricted net assets for a future AIDS research program.

c. transferred resources to an AIDS research program.

d. directed that unused resources previously assigned to an AIDS research program be returned to unrestricted net asset classification.

4. Friends of the Forest received a donation of marketable equity securities from a member. The securities had appreciated in value after they were purchased by the donor, and they continued to appreciate through the end of Friends of the Forest’s fiscal year. At what amount should Friends of the Forest report its investment in marketable equity securities in its year-end balance sheet?

a. Donor’s cost

b. Fair value at the date of receipt

c. Fair value at the balance sheet date

d. Fair value at either the date of receipt or the balance sheet date

5. The investments of a VHWO are carried at fair value. At the end of the period, there is a decrease in total fair value. The fair value decrease should

a. not be recorded until the loss is realized.

b. be debited to Realized Loss on Pooled Investments.

c. be debited to Endowment Fund Balance.

d. be debited to Net Decrease in Carrying Value of Investments.

6. (Appendix) Mapleton Volunteers (MV) has cash available for investments in several different accounting funds. The organization’s policy is to maximize its financial resources. How may MV pool its investments?

a. MV may not pool its investments.

b. MV may pool all investments but must equitably allocate realized and unrealized gains and losses among participating funds.

c. MV may pool only unrestricted investments but must equitably allocate realized and unrealized gains and losses among participating funds.

d. MV may pool only restricted investments but must equitably allocate realized and unrealized gains and losses among participating funds.

7. (Appendix) Which of the following VHWO funds does not have a counterpart in governmental accounting?

a. Land, Building, and Equipment

b. Current Unrestricted

c. Custodian

d. Endowment

journal entries statement of activities the following selected events relate to the 614526

Aug 30, 2021 | Uncategorized

Journal entries, statement of activities. The following selected events relate to the 20X7 activities of Aires Nursing Home Inc., a not-for-profit agency:

a. Gross patient service revenue totaled $2,200,000. The provision for uncollectible accounts was estimated at $92,000. The allowance for contractual adjustments was increased by $120,000.

b. After a conference with representatives of Gold Star Insurance Company, differences between the amounts accrued and subsequent settlements reduced receivables by $60,000.

c. A grateful patient donated securities with a cost of $20,000 and a fair value at date of donation of $75,000. The donation was restricted to expenditure for modernization of equipment.

The donation was accepted.

d. Cash of $37,000 that had been restricted by a donor for the purchase of furniture was used this year. Aires chose to release the donor restriction over the useful life of the asset.

e. The board voluntarily transferred $50,000 of cash to add to the resources held for capital improvements.

f. Pledges of $60,000 and cash of $20,000 were received to defer operating expenses. Of the pledges, 10% are considered uncollectible. Term endowments of $10,000 matured and were released to cover operations.

g. Equipment costing $250,000 was purchased on account. Restricted resources held for that purpose will be released from restriction over the useful life of the asset.

h. The nursing home uses functional operating expense control accounts. Expenses for the year were as follows:

1. Omitting explanations, prepare journal entries for the foregoing events.

2. Prepare a statement of activities for the year ended December 31, 20X7.

what is the minimum price per kilogram it should charge to produce the hard cheese 614533

Aug 30, 2021 | Uncategorized

Short-run pricing, capacity constraints. Colorado Mountains Dairy, maker of specialty cheeses, produces a soft cheese from the milk of Holstein cows raised on a special corn-based diet. One kilogram of soft cheese, which has a contribution margin of $10, requires 4 liters of milk. A well-known gourmet restaurant has asked Colorado Mountains to produce 2,600 kilograms of a hard cheese from the same milk of Holstein cows. Knowing that the dairy has sufficient unused capacity, Elise Princiotti, owner of Colorado Mountains, calculates the costs of making one kilogram of the desired hard cheese:

1. Suppose Colorado Mountains can acquire all the Holstein milk that it needs. What is the minimum price per kilogram it should charge for the hard cheese?

2. Now suppose that the Holstein milk is in short supply. Every kilogram of hard cheese produced by Colorado Mountains will reduce the quantity of soft cheese that it can make and sell. What is the minimum price per kilogram it should charge to produce the hard cheese?

if the price of a room night determined in requirement 1 is reduced by 10 the expect 614535

Aug 30, 2021 | Uncategorized

Cost-plus target return on investment pricing. John Blodgett is the managing partner of a business that has just finished building a 60-room motel. Blodgett anticipates that he will rent these rooms for 15,000 nights next year (or 15,000 room-nights). All rooms are similar and will rent for the same price. Blodgett estimates the following operating costs for next year:

The capital invested in the motel is $900,000. The partnership’s target return on investment is 25%. Blodgett expects demand for rooms to be uniform throughout the year. He plans to price the rooms at full cost plus a markup on full cost to earn the target return on investment.

1. What price should Blodgett charge for a room-night? What is the markup as a percentage of the full cost of a room-night?

2. Blodgett’s market research indicates that if the price of a room-night determined in requirement 1 is reduced by 10%, the expected number of room-nights Blodgett could rent would increase by 10%. Should Blodgett reduce prices by 10%? Show your calculations.

what is the target variable cost per unit 614536

Aug 30, 2021 | Uncategorized

Cost-plus, target pricing, working backward. Road Warrior manufactures and sells a model of motorcycle, XR500. In 2011, it reported the following:

1. What was Road Warrior’s operating income on XR500 in 2011? What was the full cost per unit? What was the selling price? What was the percentage markup on variable cost?

2. Road Warrior is considering increasing the annual spending on advertising for the XR500 by $500,000. The company believes that the investment will translate into a 10% increase in unit sales. Should the investment be made? Show your calculations.

3. Refer back to the original data. In 2012, Road Warrior believes that it will only be able to sell 1,400 units at the price calculated in requirement 1. Management has identified $125,000 in fixed cost that can be eliminated. If Road Warrior wants to maintain a 9% markup on full cost, what is the target variable cost per unit?

using the same markup percentage as in requirement 1 calculate the new selling price 614537

Aug 30, 2021 | Uncategorized

Cost-plus, target pricing, working backward. The new CEO of Radco Manufacturing has asked for a variety of information about the operations of the firm from last year. The CEO is given the following information, but with some data missing:

1. Find (a) total sales revenue, (b) selling price, (c) rate of return on investment, and (d) markup percentage on full cost for this product.

2. The new CEO has a plan to reduce fixed costs by $200,000 and variable costs by $0.60 per unit while continuing to produce and sell 500,000 units. Using the same markup percentage as in requirement 1, calculate the new selling price.

3. Assume the CEO institutes the changes in requirement 2 including the new selling price. However, the reduction in variable cost has resulted in lower product quality resulting in 10% fewer units being sold compared to before the change. Calculate operating income (loss).

if garrison rsquo s objective is to maximize profits which option would he recommend 614539

Aug 30, 2021 | Uncategorized

Cost-plus, time and materials, ethics. R & C Mechanical sells and services plumbing, heating, and air conditioning systems. R & C’s cost accounting system tracks two cost categories: direct labor and direct materials. R & C uses a time-and-materials pricing system, with direct labor marked up 100% and direct materials marked up 60% to recover indirect costs of support staff, support materials, and shared equipment and tools, and to earn a profit.

R & C technician Greg Garrison is called to the home of Ashley Briggs on a particularly hot summer day to investigate her broken central air conditioning system. He considers two options: replace the compressor or repair it. The cost information available to Garrison follows:

1. If Garrison presents Briggs with the replace or repair options, what price would he quote for each?

2. If the two options were equally effective for the three years that Briggs intends to live in the home, which option would she choose?

3. If Garrison’s objective is to maximize profits, which option would he recommend to Briggs? What would be the ethical course of action?

if best test rsquo s competition all charge 20 per hour for arctic testing what can 614541

Aug 30, 2021 | Uncategorized

Cost-plus and market-based pricing. (CMA, adapted) Best Test Laboratories evaluates the reaction of materials to extreme increases in temperature. Much of the company’s early growth was attributable to government contracts, but recent growth has come from expansion into commercial markets. Two types of testing at Best Test are Heat Testing (HTT) and Arctic-condition Testing (ACT). Currently, all of the budgeted operating costs are collected in a single overhead pool. All of the estimated testing-hours are also collected in a single pool. One rate per test-hour is used for both types of testing. This hourly rate is marked up by 45% to recover administrative costs and taxes, and to earn a profit. Rick Shaw, Best Test’s controller, believes that there is enough variation in the test procedures and cost structure to establish separate costing rates and billing rates at a 45% mark up. He also believes that the inflexible rate structure currently being used is inadequate in today’s competitive environment. After analyzing the company data, he has divided operating costs into the following three cost pools:

Rick Shaw budgets 106,000 total test-hours for the coming period. This is also the cost driver for labor and supervision. The budgeted quantity of cost driver for setup and facility costs is 800 setup hours. The budgeted quantity of cost driver for utilities is 10,000 machine-hours.

Rick has estimated that HTT uses 60% of the testing hours, 25% of the setup hours, and half the machine-hours.

1. Find the single rate for operating costs based on test-hours and the hourly billing rate for HTT and ACT.

2. Find the three activity-based rates for operating costs.

3. What will the billing rate for HTT and ACT be based on the activity-based costing structure? State the rates in terms of testing hours. Referring to both requirements 1 and 2, which rates make more sense for Best Test?

4. If Best Test’s competition all charge $20 per hour for arctic testing, what can Best Test do to stay competitive?

how might air eagle implement price discrimination that is what plan could the airli 614542

Aug 30, 2021 | Uncategorized

Airline pricing, considerations other than cost in pricing. Air Eagle is about to introduce a daily round-trip flight from New York to Los Angeles and is determining how it should price its round-trip tickets. The market research group at Air Eagle segments the market into business and pleasure travelers. It provides the following information on the effects of two different prices on the number of seats expected to be sold and the variable cost per ticket, including the commission paid to travel agents:

Pleasure travelers start their travel during one week, spend at least one weekend at their destination, and return the following week or thereafter. Business travelers usually start and complete their travel within the same work week. They do not stay over weekends.

Assume that round-trip fuel costs are fixed costs of $24,000 and that fixed costs allocated to the round trip flight for airplane-lease costs, ground services, and flight-crew salaries total $188,000.

1. If you could charge different prices to business travelers and pleasure travelers, would you? Show your computations.

2. Explain the key factor (or factors) for your answer in requirement 1.

3. How might Air Eagle implement price discrimination? That is, what plan could the airline formulate so that business travelers and pleasure travelers each pay the price desired by the airline?

compare the total operating income on the 200 tables for requirements 2 and 3 what d 614543

Aug 30, 2021 | Uncategorized

Value engineering, target pricing, and locked-in costs. Pacific Décor, Inc., designs, manufactures, and sells contemporary wood furniture. Ling Li is a furniture designer for Pacific. Li has spent much of the past month working on the design of a high-end dining room table. The design has been well-received by Jose Alvarez, the product development manager. However, Alvarez wants to make sure that the table can be priced competitively. Amy Hoover, Pacific’s cost accountant, presents Alvarez with the following cost data for the expected production of 200 tables:

1. Alvarez thinks that Pacific can successfully market the table for $2,000. The company’s target operating income is 10% of revenue. Calculate the target full cost of producing the 200 tables. Does the cost estimate developed by Hoover meet Pacific’s requirements? Is value engineering needed?

2. Alvarez discovers that Li has designed the table two inches wider than the standard size of wood normally used by Pacific. Reducing the table’s size by two inches will lower the cost of direct materials by 40%. However, the redesign will require an additional $6,000 of design cost, and the table will be sold for $1,950. Will this design change allow the table to meet its target cost? Are the costs of materials a locked-in cost?

3. Li insists that the two inches are an absolute necessity in terms of the table’s design. She believes that spending an additional $7,000 on better marketing will allow Pacific to sell the tables for $2,200. If this is the case, will the table’s target cost be achieved without any value engineering?

4. Compare the total operating income on the 200 tables for requirements 2 and 3. What do you recommend Pacific do, based solely on your calculations? Explain briefly.

in 1995 congress passed the private securities litigation reform act this act reduce 614557

Aug 30, 2021 | Uncategorized

Business Ethics

One issue concerning Enron”s collapse centered on the amount of non-audit fees paid by Enron to its external auditor, Arthur Andersen. For each of the following items, discuss the potential ethical issues between the firm and its auditor. For each item, list at least one reason why the statement might be viewed as a threat to the auditor”s independence, and at least one reason why it might not be viewed as such a threat.

1. The firm”s auditor is heavily involved in non-audit services.
2. The audit partner”s compensation depends on both audit and non-audit fees from the same client.
3. In 1995, Congress passed the Private Securities Litigation Reform Act. This act reduced plaintiffs” ability to sue auditors.

did green mountain beat the analysts expectations of earnings before and after the r 614558

Aug 30, 2021 | Uncategorized

AFS6-2 Green Mountain Coffee Roasters

Assessing whether an accounting error is material is addressed in FASB ASC paragraph 250–10-S55-1 (also paragraph 250-10-S99-1) and in FASB Concepts Statement No. 2. In concept 2, FASB states:

The omission or misstatement of an item in a financial report is material if, in the light of surrounding circumstances, the magnitude of the item is such that it is probable that the judgment of a reasonable person relying upon the report would have been changed or influenced by the inclusion or correction of the item.

In the Codification, FASB states that materiality cannot be reduced to a numerical formula. The SEC argues that evaluation of materiality requires a registrant and its auditor to consider all relevant circumstances and believes that qualitative factors may cause misstatements of relatively small amounts to be material. The SEC lists several considerations that may cause a small misstatement to be material. Some of these include whether the misstatement hides a failure to meet analysts” consensus expectations or whether the misstatement changes a loss into income. Furthermore, the SEC states that in determining whether multiple misstatements cause the financial statements to be materially misstated, registrants and its auditors should consider each misstatement separately and in the aggregate.

Green Mountain Coffee Roasters announced in an 8-K that the SEC was conducting an informal investigation of its financial statements. Initially, Green Mountain determined that the errors (primarily from failure to eliminate intercompany inventory correctly) were immaterial, but later decided to restate prior statements. The first error resulted in an overstatement of ending inventory in the first three quarters of 2010 or $5.792 million. A second error resulted in over-eliminating intercompany sales of $15.200 million.

Also, included in the second-quarter earnings ending on March 28, 2010, were acquisition-related expenses of $5 million, or $3,070 after tax. Earnings for the second quarter as reported were $24.702 million and the number of shares used for diluted earnings per share were 45.943 million. Diluted EPS is $0.54 per share. Second-quarter earnings, after the restatement, were $24.108 million.

Required:

1. Prepare journal entries to correct the two errors.
2. Generally, analysts forecast earnings excluding certain expenses. In the second quarter, the analysts” forecast of earnings, excluding the acquisition-related expenses, was $0.60 per share. Did Green Mountain beat the analysts” expectations of earnings before and after the restatement?

calculate the amount of noncontrolling interest to be deducted from consolidated inc 614568

Aug 30, 2021 | Uncategorized

Upstream Sales

Peel Company owns 90% of the common stock of Seacore Company. Seacore Company sells merchandise to Peel Company at 20% above cost. During 2011 and 2012, such sales amounted to $436,000 and $532,000, respectively. At the end of each year, Peel Company had in its inventory one-fourth of the goods purchased from Seacore Company during that year.

Peel Company reported $300,000 in net income from its independent operations in 2011 and 2012. Seacore Company reported net income of $130,000 in each year and did not declare any dividends in any year. There were no intercompany sales prior to 2011.

Required:

1. Prepare in general journal form all entries necessary on the consolidated financial statements workpaper to eliminate the effects of the intercompany sales for each of the years 2011 and 2012.
2. Calculate the amount of noncontrolling interest to be deducted from consolidated income in the consolidated income statement for 2012.
3. Calculate controlling interest in consolidated income for 2012.

prepare the year end statement of revenues expenditures and changes in fund balance 614457

Aug 30, 2021 | Uncategorized

Capital projects fund, financial statements. The pre-closing, year-end trial balance for a capital projects fund of the city of Craig as of December 31, 20X7, follows:

1. Prepare closing entries as of December 31, 20X7.

2. Prepare the year-end statement of revenues, expenditures, and changes in fund balance for this project that began on January 2, 20X7.

3. Prepare the balance sheet for this project as of December 31, 20X7.

prepare journal entries in the administration center capital projects fund to record 614458

Aug 30, 2021 | Uncategorized

Capital projects fund, effect on other funds/groups. The following information pertains to Arnold Township’s construction and financing of a new administration center:

Arnold’s fiscal year ended on June 30, 20X8. The following events occurred that affected the capital projects fund established to account for this project:

July 1, 20X8—The capital projects fund borrowed $250,000 from the general fund for preliminary expenses.

July 9, 20X8—Engineering and planning costs of $200,000, for which no encumbrance had been recorded, were paid to Krew Associates.

December 1, 20X8—The bonds were sold at 101. The premium is transferred to the debt service fund.

December 1, 20X8—The entitlement grant was formally approved by the state.

April 30, 20X9—A $7,000,000 contract was executed with Kimmel Construction Corporation, the general contractors for the major portion of the project. The contract provides that Arnold will withhold 4% of all billings pending satisfactory completion of the project.

May 9, 20X9—$1,000,000 of the state grant was received.

June 10, 20X9—The $250,000 borrowed from the general fund was repaid.

June 30, 20X9—Progress billing of $1,200,000 was received from Kimmel.

Arnold uses encumbrance accounting for budgetary control. Unencumbered appropriations lapse at the end of the year.

1. Prepare journal entries in the administration center capital projects fund to record the foregoing transactions.

2. Prepare the June 30, 20X9 closing entries for the administration center capital projects fund.

3. Prepare the Administration Center Capital Projects Fund balance sheet at June 30, 20X9.

4. Prepare entries needed in other funds and groups.

special assessments capital projects fund debt service fund effect on other funds gr 614459

Aug 30, 2021 | Uncategorized

Special assessments, capital projects fund, debt service fund, effect on other funds/groups. You are given the following post-closing trial balance for the Special Assessment Capital Projects Fund of the city of Stone Bank as of January 1, 20X2.

The project was started last year and should be completed in June of 20X2.

The special assessments are collected by the debt service fund, which also makes payments of principal and interest. The city has guaranteed payment of the debt in the event of nonpayment by the special assessment property owners. The debt service fund has the following balances on

January 1, 20X2:

The following events occurred during 20X2:

January 2—The city adopted an operating budget for 20X2 construction activities. Expenditures are estimated at $223,400, including amounts encumbered in the prior year. Budgetary accounts are used.

January 5—Prior-year encumbrances are restored, and new encumbrances of $138,000 are recorded.

February 1—$220,000 of special assessments are collected, along with interest of $17,600. Interest of $2,400 was billed on the uncollected current assessments, which were classified as delinquent.

February 28—$115,000 was paid on outstanding special assessment bonds, including interest of $15,000.

March 14—Delinquent special assessments and interest thereon of $2,650 were collected.

May 1—Expenditures of $220,000 were vouchered to Contracts Payable. The usual 5% retained percentage was entered. The project is now complete at a total cost of $896,000.

May 10—A check for $100,000 was issued to the contractor.

Prepare journal entries to record each of the preceding events in the proper funds and groups of accounts using the following format:

determine whether each item would be included in the following funds and account gro 614461

Aug 30, 2021 | Uncategorized

Bonds, various funds/groups. During 20X1, Krona City issued bonds for financing the construction of a civic center and bonds for financing improvements in the environmental controls for its water and sewer enterprise. The latter bonds require a sinking fund for their retirement. Items 1–4 represent items Krona should report in its 20X1 financial statements. Determine whether each item would be included in the following funds and account groups.

A. General fund.

B. Enterprise funds.

C. Capital projects funds.

D. Debt service funds.

E. General fixed assets account group.

F. General long-term debt account group.

1. Bonds payable.

2. Accumulated depreciation.

3. Amounts identified for the repayment of the two bond issues.

4. Reserved for encumbrances.

for the period july 1 20×3 through june 30 20×4 prepare journal entries to record th 614464

Aug 30, 2021 | Uncategorized

Internal service fund, statement of cash flows. Prepare a statement of cash flows for the internal service fund of the city of Cleveville from the following information:

The following information applies to the year ended June 30, 20X4:

a. Materials and supplies were purchased on account for $72,000.

b. The inventory of materials and supplies at June 30, 20X4, was $65,000.

c. Salaries paid totaled $235,000, including related costs.

d. A billing from the Utility Enterprise Fund for $40,000 was received and paid.

e. Depreciation on the building and on the equipment was $6,500 and $133,000, respectively.

f. Billings to other departments for service were as follows:

g. Unpaid interfund receivable balances at June 30, 20X4, were as follows:

h. Vouchers payable at June 30, 20X4, were $19,000.

1. For the period July 1, 20X3, through June 30, 20X4, prepare journal entries to record the transactions in the Computer Internal Service Fund. The city uses control accounts for revenues and expenses.

2. Prepare closing entries at June 30, 20X4.

suppose the city accounts for the landfill in the general fund how would the above e 614465

Aug 30, 2021 | Uncategorized

Enterprise fund, general fund. In 20X8, a city opens a municipal landfill, which it will account for in an enterprise fund. It estimates capacity to be six million cubic feet and usable life to be 20 years. To close the landfill, the municipality expects to incur labor, material, and equipment costs of $4 million. Thereafter, it expects to incur an additional $6 million of cost to monitor and maintain the site.

1. In 20X8, the city uses 300,000 cubic feet of the landfill. Prepare the journal entry to record the expense for closure and post-closure care.

2. In 20X9, it again uses 300,000 cubic feet of the landfill. It revises its estimate of available volume to 5.8 million cubic feet and closure and post-closure costs to $10.2 million. Prepare the journal entry to record the expense for closure and post-closure care.

3. Suppose the city accounts for the landfill in the general fund. How would the above entries for 20X8 and 20X9 differ?

prepare a statement of net assets and a statement of changes in net assets of the em 614466

Aug 30, 2021 | Uncategorized

Trust fund, financial statements. The following trial balance of the Employee’s Retirement System Fund for Redford City was prepared by a clerk who used only balance sheet accounts in recording the events for the fiscal year ended June 30, 20X8:

Prepare a statement of net assets and a statement of changes in net assets of the Employees’ Retirement System Fund for the fiscal year ended June 30, 20X8.

the following composite property tax rate per 100 of net assessed valuation was deve 614467

Aug 30, 2021 | Uncategorized

Agency fund, effect on various funds/groups. In compliance with a newly enacted state law, Hayward County assumed the responsibility of collecting all property taxes levied within its boundaries as of July 1, 20X3. The following composite property tax rate per $100 of net assessed valuation was developed for the fiscal year ending June 30, 20X4:

All property taxes are due in quarterly installments and, after being collected, are distributed to the governmental units represented in the composite rate. To administer the collection and distribution of such taxes, Hayward County has established a tax agency fund. Additional information:

a. To reimburse itself for estimated administrative expenses of operating the tax agency fund, the county is to deduct 2% from the tax collections for Reed City and Newbury Township. The total amount deducted is to be remitted to the Hayward County general fund.

b. Current-year tax levies to be collected by the tax agency fund are as follows:

c. In its original computation of the gross levy, Newbury Township made an error that will reduce both the gross and estimated amounts to be collected by $10,000.

d. As of September 30, 20X3, the tax agency fund has received $1,440,000 in first-quarter payments. On October 1, the agency fund made a distribution to the three governmental units on the basis of the composite property tax rate.

For the period July 1, 20X3, through October 1, 20X3, prepare journal entries to record the preceding transactions, using the following format:

various funds and account groups a selected list of transactions for the city of but 614468

Aug 30, 2021 | Uncategorized

Various funds and account groups. A selected list of transactions for the city of Butler for the fiscal year ending June 30, 20X8, follows:

1. The city government authorized a budget with estimated revenues of $2,500,000 and appropriations of $2,450,000.

2. The city’s share of state gasoline taxes is estimated to be $264,500. These taxes are to be used only for highway maintenance. Appropriations are authorized in the amount of $250,000.

3. Property taxes of $1,400,000 are levied by the city. In the past, uncollectible taxes have averaged 2% of the gross levy.

4. A $1,000,000 term bond issue for construction of a school is authorized and sold at 102. The bond premium is transferred to the debt service fund to be used for payment of interest.

5. Contracts are signed for the construction of the school at an estimated cost of $1,000,000.

6. The school is constructed at a cost of $990,000.

7. The debt service fund will need $150,000 from the general fund for estimated interest and principal payments for the year.

8. A transfer of $100,000 is made by the general fund to the debt service fund.

9. Earnings of the debt service fund amount to $3,050. Interest of $45,000 is paid.

10. Land with a fair value of $100,000 is donated to the city.

11. The city received $205,000 in partial payment of its share of state gasoline taxes, with an additional $60,000 due from the state government in 60 days.

12. Vouchers totaling $210,000, which represent highway labor maintenance costs, are approved for payment by the special revenue fund.

For each event, prepare the journal entries for all of the funds and groups of accounts involved, using the following format:

various funds and account groups the village of dexter was recently incorporated and 614469

Aug 30, 2021 | Uncategorized

Various funds and account groups. The village of Dexter was recently incorporated and began financial operations on July 1, 20X8, the beginning of its fiscalyear.

The following transactions occurred during this first fiscal year from July 1, 20X8, to June 30, 20X9:

1. The village council adopted a budget for general operations during the fiscal year ending June 30, 20X9. Revenues were estimated at $400,000. Legal authorizations for expenditures were $394,000.

2. Property taxes were levied for $390,000. It was estimated that 2% of this amount would prove to be uncollectible. These taxes were available on the date of the levy to finance current expenditures.

3. During the year, a resident of the village donated marketable securities, valued at $50,000, to the village under the terms of a trust agreement. The agreement stipulated that the principal is to be kept intact. The use of revenue generated by the securities is to be restricted to financing college scholarships for needy students. Revenue earned and received on these marketable securities amounted to $5,500 through June 30, 20X9.

4. A general fund transfer of $5,000 was made to establish an Intragovernmental Service Fund to provide for a permanent investment in inventory.

5. The village decided to install lighting in the village park. A special assessment project was authorized to install the lighting at a cost of $75,000. The appropriation was formally recorded.

To finance the project, $3,000 is to be transferred from the general fund, and the balance is

from special assessments.

6. Assessments were levied for $72,000, with the village contributing $3,000 from the general

fund. All assessments and the village contributions were collected during the year.

7. A contract for $75,000 was let for the installation of lighting. At June 30, 20X9, the contract was completed for $75,000. The contractor was paid all but 5%, which was retained to ensure compliance with the terms of the contract. Encumbrances and other budgetary accounts are maintained.

8. During the year, the internal service fund purchased various supplies at a cost of $1,900.

9. Cash collections recorded by the general fund during the year were as follows:

10. The village council decided to build a village hall, at an estimated cost of $500,000, to replace space occupied in rented facilities. The village does not record project authorizations. It was decided that general obligation bonds bearing interest at 6% would be issued. On June 30, 20X9, the bonds were issued at their face value of $500,000, payable in 20 years. No contracts have been signed for this project, and no expenditures have been made. 11. A fire truck was purchased for $150,000, and the voucher was approved. Payment was made through the general fund. This expenditure was previously encumbered for $145,000.

Prepare journal entries to properly record each of the preceding transactions in the appropriate fund(s) or group of accounts of Dexter for the fiscal year ended June 30, 20X9. Use the following funds and groups of accounts:

a. General fund

b. Capital projects fund

c. Internal service fund

d. Private purpose principal fund

e. Private purpose earnings fund

f. General long-term debt account group

g. General fixed assets account group

Journal entries should be numbered to correspond with the appropriate transactions. Do not prepare closing entries for any fund. Your answer sheet should be organized as follows:

on october 31 20×7 to finance the construction of a city hall annex dane issued 8 10 614470

Aug 30, 2021 | Uncategorized

Various funds and account groups. The following information relates to Dane City during its fiscal year ended December 31, 20X7:

a. On October 31, 20X7, to finance the construction of a city hall annex, Dane issued 8%, 10-year general obligation bonds at their face value of $600,000. Construction expenditures during the period equaled $364,000.

b. Dane reported $109,000 from hotel room taxes, restricted for tourist promotion, in a special revenue fund. The fund paid $81,000 for general promotions and $22,000 for a motor vehicle.

c. 20X7 general fund revenues of $104,500 were transferred to a debt service fund and used to repay $100,000 of 9%, 15-year term bonds and $4,500 of interest. The bonds were used to acquire a citizens’ center.

d. At December 31, 20X7, as a consequence of past services, city firefighters had accumulated entitlements to compensated absences valued at $86,000. General fund resources available at December 31, 20X7, are expected to be used to settle $17,000 of this amount, and $69,000 is expected to be paid out of future general fund resources.

e. At December 31, 20X7, Dane was responsible for $83,000 of outstanding general fund encumbrances, including $8,000 for the following supplies.

f. Dane uses the purchases method to account for supplies. The following information relates to supplies:

1. The amount of 20X7 general fund operating transfers-out is ___________ .

2. The 20X7 general fund liabilities from entitlements for compensated absences are ___________ .

3. The 20X7 reserved amount of the general fund balance is ___________ .

4. The 20X7 capital projects fund balance is ___________ .

5. The 20X7 fund balance on the special revenue fund for tourist promotion is ___________ .

6. The amount of 20X7 debt service fund expenditures is ___________ .

7. The amount to be included in the general fixed asset account group for the cost of assets acquired in 20X7 is ___________ .

8. The amount by which 20X7 transactions and events decreased the general long-term debt account group is ___________ .

9. The amount of 20X7 supplies expenditures using the purchases method is ___________ .

10. The total amount of 20X7 supplies encumbrances is _______________ .

prepare a statement of revenues expenditures and changes in fund balance for 20×8 fo 614471

Aug 30, 2021 | Uncategorized

Various funds and account groups, capital projects fund financial statement. Port Washington’s citizens authorized the construction of a new library. As a result of this project, the city had the following transactions during 20X8:

a. On January 3, 20X8, a $600,000 serial bond issue having a stated interest rate of 8% was authorized for the acquisition of land and the construction of a library building. The bonds are to be redeemed in 10 equal annual installments beginning February 1, 20X9.

b. On January 10, 20X8, the city made a $50,000 down payment deposit on the purchase of land, which is to be the site of the library. The contracted price for the land is $150,000, which is $40,000 below what the city estimated it would have to spend to acquire a site.

c. On March 1, 20X8, the city issued serial bonds having a $450,000 face value at 102. The bond indenture requires any premium to be set aside for servicing bond interest.

d. On March 10, 20X8, the city paid the remaining amount on the land contract and took title to the land.

e. On March 17, 20X8, the city signed a $400,000 construction contract with Rower Construction Company.

f. On July 10, 20X8, the contractor was paid $200,000 based on work completed to date.

g. On September 1, 20X8, a semiannual interest payment was made on the outstanding bonds. [The general fund transferred funds to supplement the cash received from the premium in item (c).]

h. On December 1, 20X8, the city issued serial bonds having a $100,000 face value at par.

i. On December 2, 20X8, the contractor completed the library and submitted a final billing of $210,000, which includes $10,000 of additional work authorized by the city in October 20X8. The $210,000 was paid to the contractor on December 12, 20X8.

j. Through December 10, 20X8, the city had invested excess cash (from the bond offering) in short-term certificates of deposit. The amount collected on these investments totaled $12,000.

1. Prepare the journal entries in all fund/account groups.

2. Prepare any appropriate year-end adjusting and closing entries for the capital projects fund and the general fixed asset account group.

3. Prepare a statement of revenues, expenditures, and changes in fund balance for 20X8 for the capital projects fund.

determining a major fund based on the information presented in the 1999 city of milw 614475

Aug 30, 2021 | Uncategorized

Determining a major fund. Based on the information presented in the 1999 city of Milwaukee, Wisconsin, financial statements in the student companion book, what mounts of which statement items should be used to determine whether a specific governmental fund is a major fund? Likewise, what minimum amounts of which statement items should be used to determine whether a specific enterprise fund is a major fund? Assume the following facts:

a. All fiduciary funds will still be fiduciary funds under GASB Statement 34 guidelines.

b. General fixed assets should be 30% depreciated at the balance sheet dates.

c. The present value of the general long-term debt equals its reported value in the statement at the balance sheet date.

d. Internal service funds primarily serve governmental activities.

present the column headings that elmwood city must use in its governmental fund stat 614477

Aug 30, 2021 | Uncategorized

Reporting major funds. Assume Elmwood City has the following fund structure:

General fund

Special revenue fund (4)

Capital projects fund (2)

Debt service fund (2)

Expendable trust funds (5)

Internal service funds (3)

Enterprise funds (6)

General fixed assets account group

General long-term debt account group

Elmwood City determined that Special Revenue Fund B, capital projects funds, Enterprise Fund D, and Enterprise Fund E are the only major funds.

a. Present the column headings that Elmwood City must use in its governmental fund statement of revenues, expenditures, and changes in fund balance.

b. Present the column headings that Elmwood City must use in its governmental fund statement of revenues, expenses, and changes in net assets.

which of the following is not part of the basic financial statements 614494

Aug 30, 2021 | Uncategorized

Reporting under GASB Statement No. 34. Select the best answer to the following multiple-choice questions.

1.Which of the following is not part of the basic financial statements?

a. Government-wide statement of net assets

b. Proprietary funds statement of revenues, expenses, and changes in fund net assets

c. Combining balance sheet—nonmajor governmental funds

d. Notes to the financial statements

2. Which of the following is true regarding the government-wide financial statements?

a. The government-wide financial statements include the statement of net assets and the statement of activities.

b. The government-wide financial statements are to be prepared using the economic resources measurement focus and the accrual basis of accounting.

c. The government-wide financial statements include information for governmental activities, business-type activities, the total primary government, and its component units.

d. All of the above are true.

3.In the statement of activities,

a. all expenses are subtracted from all revenues to get net income.

b. it is possible to determine the net program expense (revenue) for major functions and programs of the primary government and its component units.

c. some tax revenues are considered program revenues, and others are considered general revenues.

d. extraordinary items are those that are either unusual in nature or infrequent in occurrence.

4. Which of the following is true regarding financial reporting under GASB Statement 34?

a. A comparison of budget and actual revenues and expenditures for the general fund is required as part of the basic financial statements.

b. Infrastructure must be recorded and depreciated as part of the statement of activities in the basic financial statements.

c. Public colleges and universities are to report in exactly the same manner as private colleges and universities.

d. Special purpose governments that have only business-type activities are permitted to report only the financial statements required for enterprise funds.

5. Which of the following is not part of the basic financial statements?

a. Governmental funds statement of revenues, expenditures, and changes in fund balances

b. Budgetary comparison schedules—general and special revenue funds

c. Government-wide statement of activities

d. Notes to the financial statements

6. Which of the following is true regarding the organization of the comprehensive annual financial report (CAFR)?

a. The three major sections are introductory, financial, and statistical.

b. The management’s discussion and analysis (MD&A) is considered to be part of the introductory section.

c. The auditor’s report is considered to be part of the statistical section.

d. Basic financial statements include the government-wide statements, the budgetary statement, and the notes to the financial statements.

7. Which of the following is true regarding the government-wide financial statements?

a. The government-wide financial statements include the statement of net assets and the statement of activities.

b. The government-wide financial statements are prepared on the financial resources measurement focus for governmental activities and the economic resources measurement focus for business-type activities.

c. Prior-year data must be presented.

d. Works of art, historical treasures, and similar assets must be capitalized.

8. Under GASB Statement No. 34, which of the following are true of infrastructure?

a. Infrastructure must be recorded and depreciated unless a modified approach is used, in which case, depreciation is not required.

b. Infrastructure must be recorded and depreciated in all cases.

c. Infrastructure is not to be recorded and depreciated.

d. The state and local governments have the option, but are not required, to record and depreciate infrastructure.

9. Which statement is true regarding the “major” funds?

a. The general fund is always considered major.

b. Other funds are considered major if both of the following conditions exist: (1) total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund constitute 10% of the governmental or enterprise categories, and (2) total assets, liabilities, revenues, or expenditures/expenses are 5% of the total of the governmental and enterprise categories.

c. A government may choose to reflect a fund as major even if it does not meet the criteria for major funds.

d. All of the above are true.

10.Which of the following groups sets standards for audits of federal financial assistance recipients?

a. U.S. General Accounting Office

b. U.S. Office of Management and Budget

c. Governmental Accounting Standards Board

d. Financial Accounting Standards Board

11.OMB Circular A-133

a. applies only to state and local governmental units.

b. applies only to not-for-profit organizations.

c. applies to both state and local governments and not-for-profit organizations.

d. applies to neither state and local governments nor not-for-profit organizations.

12.The total amount of grant expenditures that must be covered in the audit of major programs Is 

a.$300,000.

b.50% of federal expenditures.

c.25% of federal expenditures.

d.50% of federal expenditures generally but only 25% if the government is considered to be a low-risk auditee.

its community college a separate legal entity is governed by a board of governors el 614496

Aug 30, 2021 | Uncategorized

Reporting entities. Based on the following very limited information, indicate whether and how the city should report its related entity.

1.Its school district, although not a legally separate government, is managed by a school board elected by city residents. The system is financed with general tax revenues of the city, and its budget is incorporated into that of the city at large (and thereby is subject to the same approval and appropriation process as other city expenditures).

2.Its fixed asset financing authority is a legally separate government that leases equipment to the city. To finance the equipment, the authority issues bonds that are guaranteed by the city and expected to be paid from the rents received from the city. The authority leases equipment exclusively to the city.

3.Its housing authority, which provides loans to low-income families within the city, is governed by a 5-person board appointed by the city’s mayor.

4.Its hospital is owned by the city but managed under contract by a private hospital management firm.

5.Its water purification plant is owned in equal shares by the city and two neighboring counties. The city’s interest in the plant was acquired with resources from its water utility (enterprise)

6.Its community college, a separate legal entity, is governed by a board of governors elected by city residents and has its own taxing and budgetary authority.

indicate whether or not the city should incorporate the authority into its own finan 614497

Aug 30, 2021 | Uncategorized

Reporting entity. A city’s urban development authority is a legally constituted government entity. It has a 10-person board, of which six members are appointed by the city’s common council and four others are selected by the other members of the board. The board members serve staggered terms of three years. Once appointed, the members can be removed from office only for illegal activities. The city provides 80% of the urban development authority’s resources and thereby can control the total amount spent by the system. However, the governing board adopts the authority’s budget, and the budget need not be approved by the city. The board also controls the day-to-day operations of the authority. Using the flowchart shown in Illustration 17-2, indicate whether or not the city should incorporate the authority into its own financial statements. If so, how would the city accomplish this?

statement of net assets from the following information prepare a statement of net as 614501

Aug 30, 2021 | Uncategorized

Statement of net assets. From the following information, prepare a statement of net assets for the city of Lester as of June 30, 20X2.

how is corona handling the new requirements for reporting and depreciating infrastru 614503

Aug 30, 2021 | Uncategorized

Reporting Under GASB Statement No. 34. . These statements were prepared adopting the new reporting model requirements as part of a group of cities that have chosen early adoption of GASB Statement No. 34. Provide brief answers to the following:

1.The financial section includes the basic financial statements, notes to the financial statements, required supplementary information, and supplementary information. Describe key features of each of these components of the financial statements. What key information do you see that was not included in the text? Compare the Corona statements with those of the city of Milwaukee found in the student companion book and on the text’s Web site.

2.Compare the information found in the letter of transmittal (in the Introductory Section) with hat found in the newly required management’s discussion and analysis (in the Financial Section).

3.Where do you find budgetary comparison information?

4.List the major governmental funds. How does Corona determine major funds? List the nonmajor governmental funds.

5.How is Corona handling the new requirements for reporting and depreciating infrastructure assets?

what should be included in the statement of net assets categories a invested in capi 614504

Aug 30, 2021 | Uncategorized

Measurement Focus: comparing statements. Under the reporting model required by GASB Statement No. 34, fund statements are required for governmental, proprietary, and fiduciary funds. Government-wide statements include the statement of net assets and the statement of activities.

1.Explain the measurement focus and basis of accounting for (a) governmental fund statements, (b) proprietary fund statements, (c) fiduciary fund statements, and (d) government-wide statements.

2.Explain some differences between fund financial statements and government-wide statements ith regard to (a) component units, (b) fiduciary funds, and (c) location of internal service

3.What should be included in the statement of net assets categories (a) Invested in capital assets, net of related debt, (b) restricted, and (c) unrestricted?

prepare a budgetary comparison schedule on january 1 20×7 the unreserved fund balanc 614408

Aug 30, 2021 | Uncategorized

Journal entries, Budgetary Comparison Schedule. A summary of the general fund transactions for the city of Wautoma for the year ended December 31, 20X7, is as follows:

a. A budget was approved, showing estimated revenues of $900,000, appropriations of $875,000, transfers-in of $27,000 from other funds, and required transfers of $20,000 to other funds.

b. The reserve for encumbrance at the end of 20X6 was $15,000. Amounts encumbered in the prior period are included in appropriations for 20X7.

c. Property taxes for $650,000 were levied. In past years, 1% of the property taxes levied proved uncollectible.

d. Encumbrances for $25,000 had not been liquidated by the end of 20X6. Invoices for all these items were received in 20X7 and totaled $24,000.

e. Collections from property taxes totaled $644,000, of which $20,000 represented collections on delinquent taxes. Delinquent taxes of $8,000 remain uncollected, on which a $3,000 allowance is carried. Remaining taxes receivable—current and taxes receivable—delinquent were converted into taxes receivable—delinquent and tax liens receivable, respectively.

f. Purchase orders totaling $700,000 were issued. Subsequently, invoices were received amounting to $685,000 for items estimated to cost $680,000. Included were supplies for $10,000.

g. An ending inventory of supplies amounted to $2,000, for which the fund balance should be reserved.

h. A tract of land was purchased for $250,000. Payment was made from the general fund, in whose appropriations the item had been included. The amount had not been encumbered.The purchase was made with the intent of reselling the land to a suitable developer.

i. Wautoma received $300,000 as its part of federal revenue-sharing programs. Grants-in-aid of $60,000 due from the state government are recorded. None of the grants is expenditure driven.

j. Required transfers of $20,000 are made to other funds.

k. A $50,000 payment is made on a mortgage payable. The payment includes $21,000 of interest and a principal payment of $29,000.

l. An offer was received from a land developer who will pay $380,000 for the land acquired by the city in item (h). The sale is approved. The developer remits $100,000 with a note due in 90 days, bearing 8% interest. Any gain is to be considered revenue.

m. Transfers received from other funds amount to $23,000.

n. The developer in item (l) remits payment for the note plus interest.

1. Prepare journal entries to record the general fund transactions.

2. Prepare closing entries for the general fund.

3. Prepare a budgetary comparison schedule. On January 1, 20X7, the unreserved fund balance showed a debit balance (deficit) of $180,000.

journal entries general fund the general fund trial balance of the city of oakwood a 614410

Aug 30, 2021 | Uncategorized

Journal entries, general fund. The general fund trial balance of the city of Oakwood at December 31, 20X3, was as follows:

The following data pertain to 20X4 general fund operations:

a. Budget adopted:

Encumbrances from 20X3 are included in the budget.

b. Taxes were assessed at an amount that would result in revenues of $220,800, after a deduction of 4% of the tax levy as uncollectible.

c. Orders placed for:

d. The city council designated $20,000 of the unreserved fund balance for possible appropriation for capital outlay.

e. Cash collections and transfer:

f. Vouchers approved for payment (all previously encumbered):

g. Additional vouchers approved (not previously encumbered):

h. A taxpayer overpaid 20X4 taxes by $2,000. (The taxes were credited to miscellaneous revenue upon receipt.) The taxpayer applied for a $2,000 credit against 20X5 taxes. The city council granted the request. The council instructed the city controller to adjust the estimated ncollectible current taxes to cover the remaining uncollected balance.

i. Vouchers paid amounted to $580,000.

j. Stores inventory on December 31, 20X4, amounted to $12,000.

Using control accounts, prepare journal entries to record the foregoing data. Omit explanations.

a snow plow was purchased with general fund cash for 68 000 which represented a cost 614412

Aug 30, 2021 | Uncategorized

Journal entries, capital assets. Prepare journal entries to record the following events using the general fund and the general fixed assets account group:

a. The general fund vouchered the purchase of trucks for $75,000. The purchase had been encumbered earlier in the year at $70,000.

b. Several years ago, equipment costing $15,000 was acquired with general fund revenues. It was sold for $5,000, with proceeds belonging to the general fund.

c. Early in the year, a citizen donated to the city land appraised at $100,000. She submitted plans for a new library and agreed to cover the total cost of construction, paying the company directly as work proceeded. At year-end, the building was two-thirds finished, with costs to date of $300,000. The expenditures are recorded in a capital projects fund.

d. A snow plow was purchased with general fund cash for $68,000, which represented a cost of $80,000 less trade-in of $12,000 for an old snow plow originally purchased for $35,000 from special revenue funds. As an emergency purchase, the acquisition of the new snow plow had not been encumbered.

journal entries general fund prepare the necessary journal entries to record the fol 614413

Aug 30, 2021 | Uncategorized

Journal entries, general fund. Prepare the necessary journal entries to record the following transaction for the city of Maineville during 20X7 in the general fund and account groups, and specify the account group used. Entries in the Debt Service Fund and Capital Projects Fund should be ignored.

a. General obligation term bonds with a face value of $2,700,000 were sold for $2,705,000. The proceeds from the bond issue were to be used to construct a new library and were received by the capital projects fund.

b. $200,000 was transferred from the general fund to the debt service fund to begin saving for the retirement of the bonds in transaction (a) at maturity.

c. $135,000 was transferred from the general fund to the debt service fund to retire a portion of

a serial bond due in 20X9.

d. A police car was purchased for $22,000 plus the trade-in of an old police car with a fair value of $3,000, originally purchased for $15,000 from the general fund.

e. The serial bonds funded in transaction (c) were retired on their maturity date.

f. By year-end, $450,000 of the work had been completed on the new library.

prepare journal entries only for those transactions that are to be accounted for in 614414

Aug 30, 2021 | Uncategorized

Journal entries, Schedule of Capital Assets. The following schedule of capital assets was obtained from the records of the city of Elmwood:

A summary of fixed asset transactions for 20X7 follows:

a. Construction on the new school, a capital project started during 20X6, was completed at a total cost of $850,000, which was financed by a serial bond issue. No other construction was in progress at the beginning of 20X7.

b. A citizen donated 400 acres of land to the city to be used as a park. The land had a fair value of $140,000 when donated.

c. The municipal waterworks constructed a new pumping plant at a cost of $120,000. The plant was financed from the water utility revenues. The water utility is accounted for in a proprietary fund.

d. The fire department traded in an old fire engine and $105,000 cash for a new model. The old equipment originally had cost $65,000, and $15,000 was allowed on the trade-in.

e. The city hall was refurbished at a cost of $40,000, which was paid from general fund revenues.

The refurbishing constituted a capital improvement.

f. Road-use taxes of $30,000 were collected by a special revenue fund, of which $20,000 has been used for improvements other than buildings.

g. Depreciation of $100,000 on buildings, $50,000 on machinery and equipment, and $25,000 on infrastructure was recorded.

1. Prepare journal entries only for those transactions that are to be accounted for in the general fixed assets account group. Use the city’s account titles.

2. Prepare a schedule of capital assets as of December 31, 20X7.

journal entries balance sheet the january 2 20×8 trial balance of croix township fol 614417

Aug 30, 2021 | Uncategorized

Journal entries, balance sheet. The January 2, 20X8 trial balance of Croix Township follows:

The following events occurred during the first six months of 20X8:

a. The adopted budget showed the following:

b. Six-month tax anticipation notes were issued in the amount of $120,000.

c. Property taxes of $430,000 were levied, with 2% of the gross levy considered uncollectible.

d. Tax liens proved uncollectible. The property was foreclosed and sold for $4,000.

e. Amounts encumbered totaled $250,000.

f. Cash collected:

g. Items vouchered totaled $186,000, representing $183,000 of encumbrances. Included in both were $26,000 for supplies, for which a perpetual inventory system is maintained.

h. Cash payments:

i. Supplies inventory on June 30 was $21,000.

1. Using the format below, complete the general fund worksheet for the six months ended June 30, 20X8. Ignore entries for any other fund or group. Label entries on the worksheet according to their corresponding events. Formal journal entries are not required.

2. Prepare a balance sheet as of June 30, 20X8.

prepare the adjusting entries for the general fund for the fiscal year ended june 30 614418

Aug 30, 2021 | Uncategorized

Journal entries, error correction. You have been engaged by the town of Rock Elm to examine its June 30, 20X8 balance sheet. You are the first CPA to be engaged by the town, and you find that acceptable methods of municipal accounting have not been employed. The town clerk stated that the books had not been closed and presented the following trial balance of the general fund as of June 30, 20X8:

Additional information is as follows:

a. The estimated uncollectible taxes of $18,000 for Taxes Receivable—Current Year were determined to be reasonably estimated, but for the prior year they should not exceed 100% of Taxes Receivable Delinquent.

b. Included in the revenues account is a credit of $27,000 representing the value of land donated by the state for construction of a municipal park.

c. The Expenditures—Building Addition Constructed balance is the cost of an addition to the town hall building. This addition was constructed and completed in June, 20X8. The general fund recorded the payment as authorized.

d. The Expenditures—Serial Bonds Paid balance reflects the transfer to the debt service fund for serial bond retirement. A transfer of $7,000 for interest payments on this bond issue is included in Other Expenditures.

e. Operating supplies ordered in the prior fiscal year and chargeable to that year were received and consumed in June 20X7. The vendors’ invoices amounting to $8,800 for these supplies were incorrectly charged to Other Expenditures when paid in July 20X7.

f. Outstanding purchase orders at June 30, 20X8, for operating supplies totaled $2,100. These purchase orders were not recorded on the books.

g. The balance in Revenues includes credits for $20,000 from a note issued to a bank to obtain cash in anticipation of tax collections and for $1,000 from the sale of scrap iron from the town’s water plant. The note was still outstanding at June 30, 20X8. Operations of the water plant are accounted for in the Water Fund (a proprietary fund), which is to receive the proceeds from the scrap sale.

h. At year-end, current taxes are to be reclassified as delinquent.

1. Prepare the adjusting entries for the general fund for the fiscal year ended June 30, 20X8. Account titles should be respected if acceptable, even though different. Closing entries are not required.

2. Prepare formal adjusting journal entries for the general fixed assets account group and for the general long-term debt account group.

gaffney city rsquo s serial bonds are serviced through a debt service fund with cash 614431

Aug 30, 2021 | Uncategorized

Gaffney City’s serial bonds are serviced through a debt service fund with cash provided by the general fund. In a debt service fund’s statements, how are cash receipts and cash payments reported?

general obligation bonds fixed asset construction select the best response for each 614444

Aug 30, 2021 | Uncategorized

General obligation bonds, fixed asset construction. Select the best response for each of the following multiple-choice questions which refer to the transactions of Finch City.

On March 2, 20X1, Finch City issued 10-year general obligation bonds at face amount, with interest payable on March 1 and September 1. The proceeds were to be used to finance the construction of a civic center over the period of April 1, 20X1, to March 31, 20X2. During the fiscal year ended June 30, 20X1, no resources had been provided to the debt service fund for the payment of principal and interest.

1. On June 30, 20X1, Finch’s debt service fund should include interest payable on the general obligation bonds for

a. zero months.

b. three months.

c. four months.

d. six months.

2. Proceeds from the general obligation bonds should be recorded in the

a. general fund.

b. capital projects fund.

c. general long-term debt account group.

d. debt service fund.

3. The liability for the general obligation bonds should be recorded in the

a. general fund.

b. capital projects fund.

c. general long-term debt account group.

d. debt service fund.

4. On June 30, 20X1, the balance sheet part of Finch’s fund financial statements should report the construction in progress for the civic center in the

general obligation bonds fixed asset construction prepare journal entries to record 614445

Aug 30, 2021 | Uncategorized

General obligation bonds, fixed asset construction. Prepare journal entries to record the following events. Identify every fund(s) or group of accounts in which an entry is made.

a. The city authorized the construction of a city hall to be financed by a $400,000 contribution of the general fund and the proceeds of a $2,000,000 general obligation serial bond issue. Both amounts are budgeted to be received in the current year. Expenditures during the current year are estimated to be $850,000. Budgetary accounts are used.

b. The general fund remits the $400,000.

c. The bonds are sold for 101; the premium is transferred to the debt service fund. The premium is to be used for interest payments.

d. A contract is signed with Rollins Construction Company for the construction of the city hall for an estimated contract cost of $2,300,000.

e. By year-end, $1,000,000 is paid against the contract with Rollins Construction Company.

except for 30 000 withheld on the contract until final approval all liabilities rela 614446

Aug 30, 2021 | Uncategorized

Special assessments levy, capital projects fund. In 20X7, the town of Waterview authorized the construction of two concrete roadways. The public works department estimates the project cost at $400,000, $40,000 of which is transferred from the general fund to the capital projects fund. The balance will be paid for through a special assessments levy on benefiting property owners. On January 1, 20X7, $360,000, 4-year, 10% special assessment bonds are issued at face value to finance the property owners’ portion. Payments of $45,000 plus interest are made each June 30 and December 31. The bonds were issued. The town guarantees payment of the debt.

Purchase orders totaling $80,000 are issued, and a contract is signed for the estimated $320,000 additional cost of the project. Invoices for all purchase orders total $74,000. The actual contract cost is $325,000. Liabilities for these amounts are entered. Except for $30,000 withheld on the contract until final approval, all liabilities related to the completed construction are paid. Waterview does not use budgetary accounts for these projects. Prepare entries in the capital projects fund for these events.

debt service fund serial bonds prepare journal entries required by a debt service fu 614448

Aug 30, 2021 | Uncategorized

Debt service fund, serial bonds. Prepare journal entries required by a debt service fund to record the following transactions:

a. On January 2, a $5,000,000, 6%, 10-year general obligation serial bond issue is sold at 99. Interest is payable annually on December 31, along with one-tenth of the original principal.

b. At year-end, the first serial bond matures, along with interest on the bond issue.

c. The general fund transfers cash to meet the matured items.

d. A check for the matured items is sent to First Bank, the agent handling the payments.

e. Later, the bank reports that the first serial bond has been redeemed. One check for interest of $9,000 was returned by the post office because the bond owner had moved. The bank will search for the new address.

enterprise fund prepare journal entries to record the following events in the city o 614449

Aug 30, 2021 | Uncategorized

Enterprise fund. Prepare journal entries to record the following events in the city of Rosewood’s Water Commission enterprise fund:

a. From its general fund revenues, the city transferred $300,000, which is restricted for the drilling of additional wells.

b. Billings for water consumption for the month totaled $287,000, including $67,000 billed to other funds within the city.

c. The Water Commission collected $42,000 from other funds and $190,000 from other users on billings in item (b).

d. To raise additional funds, the utility issued $700,000 of 5%, 10-year revenue bonds at face value. Proceeds are restricted to the development of wells.

e. The contract with the well driller showed an estimated cost of $930,000.

f. The well driller bills its cost plus normal profit amount of $360,000 at year-end.

g. The utility pays a $300,000 bill from the well driller.

the funds were fully invested in bonds purchased at a premium with a face value of 9 614450

Aug 30, 2021 | Uncategorized

Endowment trust fund, special revenue fund. On January 1, 20X8, Jack Kinn donated $100,000 to the city of Larkin to be set aside as a trust fund for water quality improvements made by the city. The funds were fully invested in bonds purchased at a premium with a face value of $94,000. During the year, cash received on investments was $7,500.

Premiums on the bonds purchased were amortized at $600 per year. All income earned is transferred to the endowment revenue fund. A total of $6,000 was transferred to a special revenue fund to carry out the purpose of the trust. The city uses a permanent fund and an endowment earnings fund. Prepare the journal entries to record these transactions. Prepare the balance sheet of the permanent fund as of December 31, 20X8.

impact of transactions on different funds indicate into which fund a city would reco 614451

Aug 30, 2021 | Uncategorized

Impact of transactions on different funds. Indicate into which fund a city would record each of the following transactions. (You need not make any entries.)

a. Fixed assets are purchased with general fund cash.

b. Long-term serial bonds are issued to finance the construction of a new art museum. The bonds are sold at a premium.

c. The general fund transfers a sufficient amount of money to cover principal and interest requirements of a debt issue.

d. The fund receiving the payment in item (c) makes the scheduled payment of principal and interest.

e. A special assessment project is one-half completed at year-end.

f. Income is earned by an endowment fund and is transferred to a recipient fund, which is restricted as to its expenditures by the trust agreement specified for a government program.

g. Possible depreciation entries on assets are recorded.

h. The government-owned water utility issues debt to purchase new equipment.

i. The new city prison is completed, and leftover funds are transferred to the fund responsible for repaying the debt used to finance the project. Use the following symbols and funds for your responses:

selection of appropriate debit or credit entry various funds 614452

Aug 30, 2021 | Uncategorized

Selection of appropriate debit or credit entry, various funds.

Match the appropriate letter indicating the recording of the following transactions:

1. General obligation bonds were issued at par.

2. Approved purchase orders were issued for supplies.

3. The above-mentioned supplies were received, and the related invoices were approved.

4. General fund salaries and wages were incurred.

5. The internal service fund had interfund billings.

6. Revenues were earned from a previously awarded grant.

7. Property taxes were collected in advance.

8. Appropriations were recorded on adoption of the budget.

9. Short-term financing was received from a bank and secured by the city’s taxing power.

10. There was an excess of estimated inflows over estimated outflows.

Recording of transactions:

A. Credit appropriations control.

B. Credit budgetary fund balance—unreserved.

C. Credit expenditures control.

D. Credit deferred revenues.

E. Credit interfund revenues.

F. Credit tax anticipation notes payable.

G. Credit other financing sources.

H. Credit other financing uses.

I. Debit appropriations control.

J. Debit deferred revenues.

K. Debit encumbrances control.

L. Debit expenditures control.

indentification of fund type identify the letter that best describes the accounting 614453

Aug 30, 2021 | Uncategorized

Indentification of fund type. Identify the letter that best describes the accounting and reporting by the following funds and account groups:

1. Enterprise fund fixed assets.

2. Capital projects fund.

3. General fixed assets.

4. Infrastructure fixed assets.

5. Enterprise fund cash.

6. General fund.

7. Agency fund cash.

8. General long-term debt.

9. Special revenue fund.

10. Debt services fund.

A. Accounted for in a fiduciary fund.

B. Accounted for in a proprietary fund.

C. Accounted for in a quasi-endowment fund.

D. Accounted for in a self-balancing account group and included in financial statements.

E. Accounted for in a special assessment fund.

F. Accounts for major construction activities.

G. Accounts for property tax revenues.

H. Accounts for payment of interest and principal on tax-supported debt.

I. Accounts for revenues from earmarked sources to finance designated activities.

J. Reporting is optional.

various funds and account groups select the best response for each of the following 614454

Aug 30, 2021 | Uncategorized

Various funds and account groups. Select the best response for each of the following multiple-choice questions.

1. Maple Township issued the following bonds during the year ended June 30, 20X7:

What amount of these bonds should be accounted for in Maple’s general long-term debt account group?

a. $0

b. $350,000

c. $500,000

d. $850,000

2. On December 31, 20X9, Elm Village paid a contractor $4,500,000 for the total cost of a new

Village Hall built in 20X9 on Elm-owned land. Financing for the capital project was provided by a $3,000,000 general obligation bond issue sold at face amount on December 31, 20X9, with the remaining $1,500,000 transferred from the general fund. What account and amount should be reported in Elm’s 20X9 fund financial statements for the general fund?

3. During 20X9, Spruce City reported the following receipts from self-sustaining activities paid for by users of the services rendered:

What amount should be accounted for in Spruce’s enterprise funds?

a. $0

b. $900,000

c. $5,000,000

d. $5,900,000

4. Through an internal service fund, Wood County operates a centralized data-processing center to provide services to Wood’s other governmental units. In 20X9, this internal service fund billed Wood’s Parks and Recreation Fund $75,000 for data-processing services. What account should Wood’s internal service fund credit to record this $75,000 billing to the Parks and Recreation Fund?

a. Operating Revenues (control)

b. Interfund Exchanges

c. Intergovernmental Transfers

d. Data-Processing Department Expenses

5. The following information pertains to Pine City’s special revenue fund in 20X9:

After Pine’s general fund accounts were closed at the end of 20X9, the fund balance increased by

a. $3,000,000.

b. $2,500,000.

c. $1,500,000.

d. $1,000,000.

6. Kew City received a $15,000,000 federal grant to finance the construction of a center for rehabilitation of drug addicts. The proceeds of this grant should be accounted for in the

a. special revenue funds.

b. general fund.

c. capital projects funds.

d. trust funds.

7. Lisa County issued $5,000,000 of general obligation bonds at 101 to finance a capital project.

The $50,000 premium was to be used for payment of interest. The transactions involving the premium should be accounted for in the

a. capital projects funds, debt service funds, and the general long-term debt account group.

b. capital projects funds and debt service funds only.

c. debt service funds and the general long-term debt account group only.

d. debt service funds only.

8. In 20X9, a state government collected income taxes of $8,000,000 for the benefit of one of its cities that imposes an income tax on its residents. The state periodically remitted these collections to the city. The state should account for the $8,000,000 in the

a. general fund.

b. agency funds.

c. internal service funds.

d. special assessment funds.

interest earned on investments held for employees rsquo retirement benefits 614455

Aug 30, 2021 | Uncategorized

Various funds and account groups.

1. The following revenues were among those reported by Ariba Township in 20X4:

What amount of the foregoing revenues should be accounted for in Ariba’s governmental funds?

a. $6,140,000

b. $6,100,000

c. $6,040,000

d. $6,000,000

Items 2 and 3 are based on the following information:

The events relating to the city of Albury’s debt service funds that occurred during the year ended December 31, 20X5, are as follows:

All principal and interest due in 20X5 were paid on time.

2. What is the total amount of expenditures that Albury’s debt service funds should record for the year ended December 31, 20X5?

a. $940,000

b. $950,000

c. $2,900,000

d. $2,500,000

3. How much revenue should Albury’s debt service funds record for the year ended December

31, 20X5?

a. $600,000

b. $1,600,000

c. $1,900,000

d. $2,500,000

4. The following assets are among those owned by the city of Foster:

What amount should be included in Foster’s general fixed assets account group?

a. Either $1,800,000 or $6,800,000

b. Either $2,000,000 or $7,000,000

c. Either $6,800,000 or $7,000,000

d. $7,000,000

5. Financing for the renovation of Fir City’s municipal park, begun and completed during 20X6, came from the following sources:

What amounts should be recorded as revenue and other financing sources?

6. On April 1, 20X6, Oak County incurred the following expenditures in issuing long-term bonds:

When Oak establishes the accounting for operating debt service, what amount should be deferred and amortized over the life of the bonds?

a. $0

b. $900,000

c. $400,000

d. $490,000

7. Lake County received the following proceeds that are legally restricted to expenditure for specified purposes:

What amount would be accounted for in Lake’s special revenue funds?

a. $1,400,000

b. $900,000

c. $500,000

d. $0

8. The initial contribution of cash from the general fund in order to establish an internal service fund would require the general fund to credit Cash and debit

a. Accounts Receivable.

b. Interfund Transfers-Out.

c. Interfund Loans Receivable.

d. Expenditure.

e. Residual Equity Transfers-Out.

general obligation bonds issued for the water and sewer fund which will service the 614456

Aug 30, 2021 | Uncategorized

Bonds, various funds/groups. Tyler City formally integrates budgetary accounts into its general fund. During the year ended December 31, 20X7, Tyler received a state grant to buy a bus and an additional grant for bus operation in 20X7. In 20X7, only 90% of the capital grant was used for the bus purchase, but 100% of the operating grant was disbursed. Tyler has incurred the following long-term obligations:

a. General obligation bonds issued for the water and sewer fund which will service the debt.

b. Revenue bonds to be repaid from admission fees collected from users of the municipal recreation center. These bonds are expected to be paid from enterprise funds and are secured by Tyler’s full faith, credit, and taxing power as further assurance that the obligations will be paid. Tyler’s 20X7 expenditures from the general fund include payments for structural alterations to a firehouse and furniture for the mayor’s office.

1. In reporting the state grants for the bus purchase and operation, what should Tyler include as grant revenues for the year ended December 31, 20X7?

2. Which of Tyler’s long-term obligations should be accounted for in the general long-term debt account group?

3. When Tyler records its annual budget, which of the following control accounts indicates the amount of authorized spending limitation for the year ending December 31, 20X7?

a. Reserved for Appropriations

b. Appropriations

c. Reserved for Encumbrances

d. Encumbrances

4. In Tyler’s general fund balance sheet presentation at December 31, 20X7, which of the following expenditures should be classified as capital assets?

reconstruct the journal entry to record the sale of equipment and comment on badger 614323

Aug 30, 2021 | Uncategorized

Account analysis

You are a credit analyst for First American Bank, and Badger Business has applied for a loan. The company claims to have more than tripled profits from 2011 to 2012 and believes that it should be given prime credit terms. In addition, you note that Badger has expanded its operations, recently paying $37,000 for new equipment that replaced older equipment, which was sold that same year. No other transactions affected the company”s equipment account. Excerpts from the company”s 2012 financial statements are provided below.

REQUIRED:

Reconstruct the journal entry to record the sale of equipment, and comment on Badger”s claim that profits more than tripled in 2012.

identify the financial statement accounts affected the direction of the effect and t 614324

Aug 30, 2021 | Uncategorized

A transaction and its effect on the accounting equation and balance sheet

When MCI Communications Corporation (now part of Verizon Communications) purchased Satellite Business Systems (SBS) from International Business Machines Corporation (IBM), it issued common stock to IBM, valued at $376 million, and signed a note payable for $104 million. MCI received miscellaneous assets valued at $52 million and the SBS system.

REQUIRED:

Respond to the following:

a. At what dollar amount was the SBS system recorded on MCI”s balance sheet?

b. Describe how this transaction affected the accounting equation from MCI”s point of view.

c. Describe how this transaction affected MCI”s balance sheet.

d. Identify the financial statement accounts affected, the direction of the effect, and the dollar amount of the effect on each account.

e. Prepare the journal entry MCI recorded when the transaction took place.

prepare the journal entry made by campbell soup to record the transaction 614325

Aug 30, 2021 | Uncategorized

The effect of a transaction on the basic accounting equation

When Campbell Soup purchased the European culinary business from Unilever, the acquisition was funded with available cash and a short-term notes payable. The $920 million purchase price was allocated: $100 million to fixed assets and inventory; $490 million to identifiable intangible assets (e.g., trademarks), and $330 representing the excess of the purchase price over the fair value of the individual assets acquired (goodwill).

REQUIRED:

a. How did the transaction affect the accounting equation from Campbell Soup”s perspective?

b. How did the transaction affect the accounting equation from Unilever”s perspective?

c. Describe how the transaction affected Campbell Soup”s balance sheet.

d. Prepare the journal entry made by Campbell Soup to record the transaction.

how could high quality internal controls have helped in avoiding these frauds 614328

Aug 30, 2021 | Uncategorized

Corporate frauds and the auditor

In “Behind the Wave of Corporate Fraud: A Change in How Auditors Work,” the Wall Street Journal detailed several of the recent accounting scandals and the techniques management used to deceive both the auditors and the investing public. The article focused on audit techniques that contributed to the ability of management to undertake deceptive practices. For example, WorldCom reclassified ordinary expenses as assets, which the auditors missed because there was “no supporting documentation”; Tyco International, charged with inflating profits by over $1 billion, left “warning signs” that were not followed up on by auditors; and HealthSouth Corporation pulled it off by inflating the dollar amounts of a large number of small revenue recognition transactions because they “knew the auditors did not look at increases of less than $5,000.”

REQUIRED:

a. Explain how WorldCom showed higher profits in the current period by inaccurately classifying expenses as assets. How would this technique affect the profits of future periods?

b. Explain why management may be tempted to inflate profits in the current period.

c. Explain why auditors might not check transactions below a certain dollar amount.

d. How could high-quality internal controls have helped in avoiding these frauds?

would bmw be allowed to make this change if it wished to issue stock on the new york 614330

Aug 30, 2021 | Uncategorized

Income statement classification and International Financial Reporting Standards

In January 2004, Munich-based automaker BMW switched how it classified certain expenses to match what it anticipates to be the format approved by International Financial Reporting Standards (IFRS). Previously, BMW classified these expenses as part of operating profit, and now it has decided to move them to the nonoperating section of the income statement in line with IFRS. As reported in the Wall Street Journal, a Goldman Sachs analyst commented that BMW”s action would significantly boost its operating income, and “if GM took BMW”s approach, it would boost operating income by over $7 billion.”

REQUIRED:

a. How would the change made by BMW affect net income, that is, its “bottom line”?

b. Provide several reasons why BMW might be interested in making this change.

c. Why would an analyst from Goldman Sachs be concerned about how operating profits are measured by BMW and GM?

d. Would BMW be allowed to make this change if it wished to issue stock on the New York Stock Exchange? Discuss.

The Associated Press reported:

discuss problems that might arise due to the significant weaknesses of the pentagon 614331

Aug 30, 2021 | Uncategorized

Problems with the federal government”s accounting systems

The military”s money managers last year made almost $7 trillion in adjustments to their financial ledgers in an attempt to make them add up, the Pentagon”s inspector general said in a report released yesterday. The Pentagon could not show receipts of $2.3 trillion of those changes, and half a trillion dollars of it was just corrections of mistakes made in earlier adjustments. . . . The magnitude of accounting entries required to compile the financial statements highlights the significant problems [the Pentagon] has producing accurate and reliable financial statements with existing systems and processes . . . the military can”t measure the results of closing a base; can”t rationally decide whether to contract out a service or keep it in government hands; and may inaccurately peg the cost of programs under debate, from national missile defense to retirees” health care.

REQUIRED:

Discuss problems that might arise due to the significant weaknesses of the Pentagon”s accounting systems.

discuss how the above transactions affect the basic accounting equation for the comp 614332

Aug 30, 2021 | Uncategorized

Debt transactions and the basic accounting equation

The Wall Street Journal (October 5, 2009) reported that analysts are worried about companies borrowing money to pay dividends and to repurchase outstanding shares of stock. Aircraft parts manufacturer TransDigm Group borrowed $360 million to pay dividends, while Intel Corporation borrowed $1.5 billion to buy back shares of stock. These concerns of analysts are not new; in March 2007 the Wall Street Journal reported two instances of bor-rowings-for-dividends (Rexnord Corporation and Scotts Miracle-Gro) that sparked concerns. Companies have defended the actions, often citing historically low borrowing costs.

REQUIRED:

Discuss how the above transactions affect the basic accounting equation for the companies involved. What risks are posed when a company pursues such a strategy? What are the benefits of such a decision?

what does it mean that information can be obtained on a real time basis what items o 614334

Aug 30, 2021 | Uncategorized

Real-time accounting

According to The Internal Auditor (April 2000):

In the past, credible financial reports could be produced, audited, and published only on a periodic basis, because the information needed to generate such reports was either impossible or too costly to obtain on a real-time basis. However, a growing number of important items on financial statements have come under real-time management, as information technology has made such practices both economically feasible and competitively necessary for survival.

REQUIRED:

What does it mean that information can be obtained on a real-time basis? What items on the financial statements do you think have come under real-time management, and what advantages might real-time accounting create?

why is depreciation added to net income in the operating section of the statement of 614335

Aug 30, 2021 | Uncategorized

The SEC Form 10-K of NIKE

The SEC Form 10-K of NIKE

REQUIRED:

Review the NIKE Form 10-K, and answer the following questions.

a. In terms of the basic accounting equation, explain how NIKE accounts for prepaid expenses. What is the dollar value of prepaid expenses on the 2009 and 2008 balance sheets?

b. In terms of the basic accounting equation, explain how NIKE accounts for accrued liabilities.

c. How much cash did NIKE spend for capital expenditures and dividends during the year ended May 31, 2009? How did these transactions affect the basic accounting equation? How much cash was collected from share issuances through stock options, and how did these transactions affect the basic accounting equation?

d. What is the balance of accounts payable on NIKE”s May 31, 2009, balance sheet, and how did it get there?

e. What does NIKE”s management say in its management letter about its system of internal controls?

f. Why is depreciation added to net income in the operating section of the statement of cash flows, and why is the increase in accounts receivable subtracted from net income?

a motor pool internal service fund was established by a transfer of 80 000 from the 614375

Aug 30, 2021 | Uncategorized

Accounting and reporting. Indicate the part of the general fund statement of revenues, expenditures, and changes in fund balance affected by the following transactions:

a. Revenues.

b. Expenditures.

c. Other financing sources and uses.

d. Residual equity transfers.

e. Statement of revenues, expenditures, and changes in fund balance is not affected.

1. An unrestricted state grant is received.

2. The general fund paid pension fund contributions that were recoverable (reimbursed) from an internal service fund.

3. The general fund paid $60,000 for electricity supplied by the electric utility enterprise fund.

4. General fund resources were used to subsidize the swimming pool enterprise fund.

5. $90,000 of general fund resources were loaned to an internal service fund.

6. A motor pool internal service fund was established by a transfer of $80,000 from the general fund. This amount will not be repaid unless the motor pool is disbanded.

7. General fund resources were used to pay amounts due on an operating lease.

additional estimated receipts include a 15 000 operating transfer from the special r 614376

Aug 30, 2021 | Uncategorized

Budgetary Accounting. Given the following information, you have been asked to record the budget for the general fund of the city of Monroe.

1. Inflows for 20X4 are expected to total $552,000 and include property tax revenue of $355,000, fines of $7,000, state grants of $90,000, and bond issue proceeds of $100,000.

2. Expenditures for general operations and equipment purchases for the year are estimated to be $500,000.

3. Authorized transfers include $30,000 to the debt service fund to pay interest on bond indebtedness and $15,000 to the capital projects fund to pay for cost overruns on construction of a new civic center.

4. Additional estimated receipts include a $15,000 operating transfer from the special revenue fund and a $50,000 payment from the Electric Utility Enterprise Fund for property taxes.

accounting for revenues and other inflows prepare journal entries in the general fun 614378

Aug 30, 2021 | Uncategorized

Accounting for revenues and other inflows. Prepare journal entries in the general fund for the following 20X4 transactions that represent inflows of financial resources to Bork City:

1. To pay the wages of part-time city maintenance employees, the Cemetery Expendable Trust

Fund transfers $45,000 to the general fund.

2. A resident donates land worth $75,000 for a park.

3. The city is notified by the state that it will receive $30,000 in road assistance grants this year.

4. A fire truck with an original cost of $36,000 is sold for $9,000.

5. Sales of license stickers for park use total $5,000. The fees cover this year and next year. Patrolmen are paid from these fees to check for cars in the park without stickers.

accounting for expenditures prepare entries in the general fund for the following tr 614379

Aug 30, 2021 | Uncategorized

Accounting for expenditures. Prepare entries in the general fund for the following transactions that represent outflows of financial resources to the city of Greene in 20X4: Vouchers are prepared for the following items and amounts:

2. A transfer of $57,000 is made to the debt service fund.

3. There was no inventory of supplies at the start of the year. The inventory of supplies at yearend is $2,500.

account for transactions prepare the entries to record the following general fund tr 614382

Aug 30, 2021 | Uncategorized

Account for transactions. Prepare the entries to record the following general fund transactions for the village of Spring Valley for the year ended September 30, 20X4:

a. Revenues are estimated at $520,000; expenditures are estimated at $515,000.

b. A tax levy is set at $378,788, of which 1% will likely be uncollectible.

c. Purchase orders amounting to $240,000 are authorized.

d. Tax receipts total $280,000.

e. Invoices totaling $225,000 are received and vouchered for orders originally estimated at $223,000.

f. Salaries amounting to $135,000 are approved for payment.

g. A state grant-in-aid of $100,000 is received.

h. Fines and penalties of $10,000 are collected.

i. Property for a village park is purchased, costing $120,000. No encumbrance had been made for this item.

j. Additional recreational property valued at $88,000 is donated.

k. Amounts of $12,000 due to other village funds are approved for payment. (Note: To establish the liability to other funds, credit Due to Other Funds.)

l. The village’s share of sales tax due from the state is $30,000. Payment will be received in 30 days.

m. Vouchers totaling $175,000 are paid.

n. Accounts are closed at year-end.

a central fire station financed by general obligation bonds was two thirds complete 614385

Aug 30, 2021 | Uncategorized

Journal entries, capital assets. For the following transactions, prepare the entries that would be recorded in the general fixed assets account group for the city of Evert.

a. From special revenue funds resources, the city purchased property costing $1,300,000, with three-fourths of the cost allocated to a building.

b. A mansion belonging to the great-granddaughter of the city’s founder was donated to the city. The land cost the original owner $600, and the house was built for an additional $50,000. At the time of donation, the property had an estimated fair value of $550,000, of which $330,000 was allocable to the land. The property was accepted and is to be used as a park and a museum.

c. A central fire station, financed by general obligation bonds, was two-thirds complete at yearend with costs to date of $800,000 that were recorded in the capital project fund.

d. A new fire engine was purchased for $165,000. The city traded a used fire engine originally purchased for $100,000. The trade-in value was $25,000. Both engines were purchased from general property tax revenues.

e. A new street was completed at a cost of $250,000, which is to be charged, through the capital projects fund’s special assessments, against property owners in the vicinity. The city follows GASB recommendations and records infrastructure assets.

the following transactions directly affected rose city rsquo s general fund and othe 614386

Aug 30, 2021 | Uncategorized

Journal entries, general long-term debt. The following transactions directly affected Rose City’s general fund and other governmental funds. Prepare journal entries to reflect their impact upon the general long-term debt account group.

1. Rose City employees earned $8.8 million in vacation pay during the year, of which they took only $6.6 million. They may take the balance in the following three years.

2. The employees took $0.4 million of vacation pay that they had earned in previous years.

3. Rose City settled a claim brought against it during the year by a building contractor. The city agreed to pay $7.5 million immediately and $11 million at the end of the following year.

4. Rose City issued $100 million in general obligation bonds at a price of $99.8 million—i.e., a discount of $0.2 million.

5. Rose City transferred $5 million from the general fund to the debt service fund. Of this, $4 million was for the first payment of interest; the balance was for repayment of principal.

6. Rose City earned $0.3 million in interest on investments held in the debt service fund. These investments have a fair value $4.5 million greater than at the end of last period. The funds are available for the repayment of debt principal.

journal entries general long term debt prepare the entries that would be made in the 614387

Aug 30, 2021 | Uncategorized

Journal entries, general long-term debt. Prepare the entries that would be made in the general long-term debt account group for the following events:

a. To finance the construction of an art center, $13,000,000 of general obligation term bonds were sold for $12,500,000.

b. The general fund allocated $1,300,000 to a debt service fund to begin providing for retirement of the bonds in item (a) at maturity.

c. To help finance an addition to the community health center, $6,000,000 of 6%, 10-year serial bonds were sold at 101. $960,000 was transferred from the general fund to the debt service fund to cover the annual interest and the first serial redemption.

d. Serial bonds of $600,000 matured and were retired through the debt service fund.

the 40 000 balance due for the may 20×1 installments was expected to be collected in 614403

Aug 30, 2021 | Uncategorized

Power City’s year-end is June 30. Power levies property taxes in January of each year for the calendar year. One-half of the levy is due in May, and one-half is due in October. Property tax revenue is budgeted for the period in which payment is due. The following information pertains to Power’s property taxes for the period from July 1, 20X0, to June 30, 20X1:

The $40,000 balance due for the May 20X1 installments was expected to be collected in August 20X1. What amount should Power recognize for property tax revenue for the year ended

June 30, 20X1?

a. $2,160,000

b. $2,200,000

c. $2,360,000

d. $2,400,000

what amount should spruce report for 20×2 claims and judgment expenditures 614404

Aug 30, 2021 | Uncategorized

Dodd Village received a gift of a new fire engine from a local civic group. The fair value of this fire engine was $400,000. Which of the following is the correct entry to be made in the general fixed assets account group for this gift?

10. The following information pertains to Spruce City’s liability for claims and judgments:

What amount should Spruce report for 20X2 claims and judgment expenditures?

a. $1,040,000

b. $940,000

c. $840,000

d. $800,000

journal entries omitting amounts prepare journal entries in the general fund to reco 614405

Aug 30, 2021 | Uncategorized

Journal entries. Omitting amounts, prepare journal entries in the general fund to record the following selected events:

a. The budget is approved. The city will float a bond issue to finance fixed assets. Inflows of resources are expected to exceed outflows.

b. Property taxes are levied, of which some percentage will be uncollectible.

c. Some of the delinquent property taxes from last year are collected. Others are written off as uncollectible, using the available allowance account.

d. Purchase orders are approved.

e. Payroll for the month is vouchered. Ignore payroll deductions.

f. An invoice is vouchered for an amount less than its encumbrance.

g. Bonds are sold at face value to finance the acquisition of new fixed assets.

h. Fixed assets are purchased.

i. Short-term tax anticipation notes are issued.

journalize each transaction and post it in the appropriate t accounts from this info 614292

Aug 30, 2021 | Uncategorized

Preparing statements from transactions

Ed”s Lawn Service entered into the following transactions during 2012, its first year of operations:

1. Collected $12,000 in cash from shareholders.
2. Borrowed $5,000 from a bank.
3. Purchased two parcels of land for a total of $10,000.
4. Paid $5,000 to rent lawn equipment for the remainder of the year.
5. Provided lawn services, receiving $10,000 in cash and $4,000 in receivables.
6. Paid miscellaneous expenses of $4,000.
7. Sold one parcel of land with a cost of $3,000 for $2,800.
8. Paid a $2,200 dividend to the shareholders.

a. In a manner similar to Figure 4–2, show how each transaction affected the fundamental accounting equation and prepare an income statement, a statement of shareholders” equity, a year-end balance sheet, and a statement of cash flows for 2012.

b. Journalize each transaction and post it in the appropriate T-accounts. From this information, prepare a year-end balance sheet, an income statement, a statement of shareholders” equity, and a statement of cash flows for 2012.

prepare a statement of cash flows direct method 614293

Aug 30, 2021 | Uncategorized

Preparing the statement of cash flows from the cash T-account

The following cash T-account for Holcomb Manufacturing summarizes all the transactions affecting cash during 2012.

a. Compute the ending cash balance.

b. Prepare a statement of cash flows (direct method).

hog heaven rib joint made the following journal entries on december 31 2011 614295

Aug 30, 2021 | Uncategorized

Classifying transactions

Hog Heaven Rib Joint made the following journal entries on December 31, 2011:

Place each of the transactions above in one of the following five categories: (1) operating cash flow, (2) investing cash flow, (3) financing cash flow, (4) accrual adjusting journal entry, and (5) cost expiration adjusting journal entry.

explain why the amounts shown as expenses do not equal the cash paid 614297

Aug 30, 2021 | Uncategorized

The difference between accrual and cash accounting

Washington Forest Products began operations on January 1, 2011. On December 31, 2011, the company”s accountant ascertains that the following amounts should be reported as expenses on the income statement:

A review of the company”s cash disbursements indicates that the company made related cash payments during 2011 as follows:

a. Explain why the amounts shown as expenses do not equal the cash paid.

b. For each expense account, compute the amount that should be in the related balance sheet account as of December 31, 2011. Hint: Note that Forest Products began operations on January 1, 2011.

prepare an income statement and a statement of cash flows for both year 1 and year 2 614300

Aug 30, 2021 | Uncategorized

Cash and accrual accounting: comparison of performance measures

Peters Company was in business for two years, during which time it entered into the following transactions:

Year 1:

1. The owners contributed $24,000 cash.
2. At the beginning of the year, rented a warehouse for two years with a prepaid rent payment of $12,000.
3. Purchased $10,000 of inventory on account.
4. Sold half the inventory for $24,000, receiving $20,000 in cash and an account receivable of $4,000.
5. Paid wages of $6,000 and also accrued wages payable of $4,000.

Year 2:

1. Paid the outstanding balance for the inventory purchased in Year 1.
2. Paid the outstanding wages payable balance.
3. Sold the remaining inventory for $30,000 cash.
4. Received full payment on the outstanding accounts receivable.
5. Incurred and paid wages of $12,000.
6. Returned the cash balance to the owners and shut down operations.

a. Prepare an income statement and a statement of cash flows for both Year 1 and Year 2.

b. Complete a chart like the following.

would you agree of disagree with the following statement depreciation is an importan 614303

Aug 30, 2021 | Uncategorized

Depreciation and cash flows

Your boss asks you to examine the following income statements of Hamilton Hardware and Watson Glass:

In the notes to the financial statements, you notice that Hamilton Hardware uses the straight-line method of depreciation and that Watson Glass uses the double-declining-balance method.

a. Assume that the dollar amounts for sales, cost of goods sold, and other expenses reflect total cash collections from customers, total cash paid for inventory, and total cash paid for other expenses, respectively. Compute cash provided (used) by operating activities for each company, using each of the following:

1. The direct method format
2. The indirect method format

b. Why is the cash provided (used) by operations different from net income? Which of the two methods shows this more clearly?

c. Would you agree of disagree with the following statement? Depreciation is an important source of cash for most companies. Explain your answer.

prepare a statement of cash flows using the indirect method but this time prepare it 614304

Aug 30, 2021 | Uncategorized

Preparing a statement of cash flows—direct and indirect method of presentation

Tony began a small retailing operation on January 1, 2012. During 2012, the following transactions occurred:

1. Tony contributed $20,000 of his own money to the business.
2. $60,000 was borrowed from the bank.
3. Long-lived assets were purchased for $25,000 cash.
4. Inventory was purchased: $25,000 cash and $15,000 on account.
5. Inventory with a cost of $25,000 was sold for $80,000: $20,000 cash and $60,000 on account.
6. Cash payments included $18,000 for operating expenses, $5,000 for loan principal, and a $2,000 dividend.
7. $15,000 in expenses were accrued at the end of the year, and depreciation expense of $1,000 was recorded.

a. Prepare journal entries for each economic event.

b. Prepare a balance sheet as of the end of 2012 and an income statement and statement of shareholders” equity for Tony”s business.

c. Prepare a cash T-account and a statement of cash flows using the direct method.

d. Prepare a statement of cash flows using the indirect method, but this time prepare it from the company”s two balance sheets, the income statement, and the statement of shareholders” equity earnings. Tony”s first balance sheet contains all zero balances.

prepare journal entries for each transaction and explain how each affects the accoun 614305

Aug 30, 2021 | Uncategorized

Journal entries and the accounting equation

Below are several transactions entered into by Vulcan Metal Corporation during 2012. Unless otherwise noted, all transactions involve cash.

1. Purchased equipment for $150,
2. Paid employees $30,000 in wages.
3. Collected $15,000 from customers as payments on open accounts.
4. Provided services for $24,000: $16,000 received in cash and the remainder on open account.
5. Paid $50,000 on an outstanding note payable: $10,000 for interest and $40,000 to reduce the principal.
6. Purchased a one-month ad in the local newspaper for $5,000.
7. Purchased a building valued at $250,000 in exchange for $130,000 cash and a long-term note payable.
8. Sold investments with a cost of $20,000 for $35,000.

REQUIRED:

Prepare journal entries for each transaction and explain how each affects the accounting equation.

prepare the operating section of the statement of cash flows under the indirect meth 614307

Aug 30, 2021 | Uncategorized

Preparing the four financial statements

The December 31, 2011, balance sheet for Morrison Home Services is summarized below.

During January of 2012, the following transactions were entered into:

1. Services were performed for $7,000 cash.
2. $3,000 cash was received from customers on outstanding accounts receivable.
3. $3,000 cash was paid for outstanding liabilities.
4. Long-term assets were purchased in exchange for a $6,000 note payable.
5. Expenses of $4,000 were paid in cash.
6. A dividend of $800 was issued to the owners.

REQUIRED:

a. Provide a journal entry for each transaction.

b. Treat each transaction independently and describe how each would affect the ratios of current assets divided by current liabilities, net income divided by shareholders” equity, and total liabilities divided by shareholders” equity; and Morrison”s current ratio, return on equity, and debt/equity ratio, respectively.

c. Prepare the income statement, statement of shareholders” equity, the January 31 balance sheet, and the statement of cash flows (direct method) for January.

d. (Appendix 4A) Prepare the operating section of the statement of cash flows under the indirect method.

for each one indicate what specific accounts are affected as well as the direction i 614309

Aug 30, 2021 | Uncategorized

Effects of transactions on the income statement and statement of cash flows

Ten transactions are listed below.

REQUIRED:

For each one, indicate what specific accounts are affected as well as the direction (increase or decrease) of the effect. Also indicate whether the transaction would increase or decrease both net income (revenues minus expenses) on the income statement and net cash flow from operations (operating cash inflows minus operating cash outflows) on the statement of cash flows. Use the following key: increase (+), decrease (–), and no effect (NE). The first one has been completed for you.

organize your answer in the following way the first journal entry has been done for 614310

Aug 30, 2021 | Uncategorized

The effects of adjusting journal entries on the accounting equation

Beta Alloys made the following adjusting journal entries on December 31, 2011.

REQUIRED:

Classify each adjusting entry as either an accrual adjustment (A) or a cost expiration adjustment (C), and indicate whether each entry increases ((), decreases (–), or has no effect (NE) on assets, liabilities, shareholders” equity, revenues, and expenses. Organize your answer in the following way. The first journal entry has been done for you.

prepare the adjusting journal entries that gave rise to the changes indicated 614312

Aug 30, 2021 | Uncategorized

Inferring adjusting journal entries from changes in T-account balances

The following information is available for Derrick Company:

REQUIRED:

Prepare the adjusting journal entries that gave rise to the changes indicated.

compute the missing amount in each case assuming that the loan described is burkhold 614313

Aug 30, 2021 | Uncategorized

Reconciling accrual and cash flow dollar amounts

Burkholder Corporation borrowed $28,000 from its bank on January 1, 2011, at an annual interest rate of 10 percent. The $28,000 principal is to be paid as a lump sum at the end of the period of the loan, which is after December 31, 2012. This is the only interest-bearing debt held by Burkholder.

REQUIRED:

The following chart below contains six independent cases, each related to the Burkholder Corporation. Compute the missing amount in each case, assuming that the loan described is Burkholder”s only outstanding loan.

assume that prustate insurance company recorded the 240 000 cash collection as a lia 614314

Aug 30, 2021 | Uncategorized

Revenue recognition, cost expiration, and cash flows

Prustate Insurance Company collected $240,000 from Jacobs Printing Corporation for a two-year fire insurance policy on May 31, 2011. The policy is in effect from June 1, 2011, to May 31, 2012.

REQUIRED:

a. Assume that Prustate Insurance Company recorded the $240,000 cash collection as a liability on May 31, 2011.

1. Prepare the entry to record the cash collection.
2. Prepare the adjusting entry necessary on December 31, 2011.
3. What was the purpose of the adjusting journal entry on December 31, 2011?
4. Complete a chart like the following:

incurred and paid 30 in interest on short term payables 614315

Aug 30, 2021 | Uncategorized

The effects of transactions on financial ratios

The balance sheet of Walgreens, a leading chain drugstore, as of August 31, 2009, appears as follows (dollars in millions):

REQUIRED:

Assume that the following eight transactions occurred the next year (dollars in millions). Indicate the effect of each transaction on net income (revenues minus expenses), the current ratio (current assets divided by current liabilities), working capital (current assets minus current liabilities), and the debt/equity ratio (total liabilities divided by total shareholders” equity) of Walgreens. Use the following key: increase (+), decrease (–), no effect (NE). Treat each transaction independently.

discuss some of the pros and cons associated with each of the three financing option 614316

Aug 30, 2021 | Uncategorized

Effects of different forms of financing on financial ratios

The following condensed balance sheet for December 31, 2012, comes from the records of Buzz and Associates:

Buzz and Associates is considering the purchase of a new piece of equipment for $30,000. The company does not have enough cash to purchase it outright, so it is considering alternative ways of financing. As management sees it, there are three basic options: (1) issue 3,000 ownership shares for $10 per share, (2) take out a long-term loan (12 percent annual interest) for $30,000 from the bank, or (3) purchase the equipment on open account (must be paid in full in thirty days). Presently Buzz has 12,000 ownership shares outstanding.

REQUIRED:

a. Compute the present current ratio (current assets/current liabilities), the debt/equity ratio (total liabilities/shareholders” equity), and the book value of Buzz”s outstanding ownership shares: (total assets minus total liabilities) divided by number of shares outstanding.

b. Compute the current ratio, debt/equity ratio, and book value per share under each of the three financing alternatives, and express your answers in the following format:

c. Discuss some of the pros and cons associated with each of the three financing options.

d. The chairman of the board of directors stated at a recent board meeting that with $50,000 in Retained Earnings, the company should be able to purchase the $30,000 piece of equipment. Comment on the chairman”s statement.