Exam 25: Appendix

Current Liabilities.Moon Company includes 1 coupon in each box of soap powder that it packs, 10 coupons being redeemable for a premium consisting of a kitchen utensil. In 2014, Moon Company purchased 36,000 premiums at $1.00 each and sold 540,000 boxes of soap powder @ $4.00 per box. Based on past experience, it is estimated that 60% of the coupons will be redeemed. During 2014, 144,000 coupons were presented for redemption.During 2015, 29,000 premiums were purchased at $1.10. The company sold 1,200,000 boxes of soap at $4.00 and 495,000 coupons were presented for redemption. InstructionsPrepare all the entries that would be made relative to sales of soap powder and to the premium plan in both 2014 and 2015. Assume a FIFO inventory flow.

The par (or stated value) of the stock is unchanged.

When should the loss on an uncollectible account receivable be recorded as an expense for accrual accounting purposes?

Use the following data to answer questions 5 through 9: Davis Company purchased a new piece of equipment on July 1, 2014 at a cost of $1,800,000. The equipment has an estimated useful life of 5 years and an estimated salvage value of $150,000. The current year end is 12/31/15. Davis records depreciation to the nearest month. -What is straight-line depreciation for 2015?

Problem D-I — Treasury Stock The stockholders' equity section of Carey Co.'s balance sheet at December 31, 2014, was as follows: Instructions Prepare journal entries (1, 2, and 4) and show proper disclosure (3) to reflect the following treasury stock transactions showing how each is accounted for under the cost method. (Show computations.) -Show the proper disclosures in the stockholders' equity section of the balance sheet issued at the end of the first quarter, March 31, 2015. Assume net income of $100,000 during the first quarter.

Use the following data for questions 10 through 17. Each question is independent of the other questions. Sawyer Corporation has a machine (Machine A) that it acquired on 1/1/14 for $540,000. On 12/31/14 such machines have a selling price and fair value of $621,000. When used in production, such machines have an estimated useful life of 10 years with no salvage value. Use the straight-line method. Brown Corporation has a machine (Machine B) that it acquired on 1/1/14 for $729,000. On 12/31/14 such machines have a selling price and fair value of $540,000. When used in production, such machines have an estimated useful life of 10 years with no salvage value. Use the straight-line method. On 12/31/14 Brown gave Machine B plus $81,000 cash to Sawyer in return for Machine A. -Assume that instead of dealers, both Sawyer and Brown are machine manufacturers and use the machines in production. Assume the exchange lacks commercial substance. At what amount will Brown record Machine A?

FIFO vs. LIFO.In comparing and contrasting FIFO vs. LIFO inventory procedures, the following listing was developed. You are to complete the tabulation with an answer of "YES" or "NO" as demonstrated by the first item. Any combination of yes-no answers is possible in each situation.

Most methods of pricing inventories are in accord with generally accepted accounting principles and generally are permissible for income tax purposes. The method that must be used for financial reporting purposes if used for tax purposes is

Use the following data for questions 10 through 17. Each question is independent of the other questions. Sawyer Corporation has a machine (Machine A) that it acquired on 1/1/14 for $540,000. On 12/31/14 such machines have a selling price and fair value of $621,000. When used in production, such machines have an estimated useful life of 10 years with no salvage value. Use the straight-line method. Brown Corporation has a machine (Machine B) that it acquired on 1/1/14 for $729,000. On 12/31/14 such machines have a selling price and fair value of $540,000. When used in production, such machines have an estimated useful life of 10 years with no salvage value. Use the straight-line method. On 12/31/14 Brown gave Machine B plus $81,000 cash to Sawyer in return for Machine A. -Jim Dolan and Matt Stine, maintenance repairmen, spent five days in unloading and setting up a new $30,000 precision machine in the plant. Their wages earned in this five-day period totaled $800.

Use the following data for questions 10 through 17. Each question is independent of the other questions. Sawyer Corporation has a machine (Machine A) that it acquired on 1/1/14 for $540,000. On 12/31/14 such machines have a selling price and fair value of $621,000. When used in production, such machines have an estimated useful life of 10 years with no salvage value. Use the straight-line method. Brown Corporation has a machine (Machine B) that it acquired on 1/1/14 for $729,000. On 12/31/14 such machines have a selling price and fair value of $540,000. When used in production, such machines have an estimated useful life of 10 years with no salvage value. Use the straight-line method. On 12/31/14 Brown gave Machine B plus $81,000 cash to Sawyer in return for Machine A. -Long-Term Debt."1. On March 31, 2011, Hanson Corporation sold $9,000,000 of its 8%, 10-year bonds for $8,653,500 including accrued interest. The bonds were dated January 1, 2011. Interest is paid semiannually on January 1 and July 1. On April 1, 2015, Hanson purchased 1/2 of the bonds on the open market at 99 plus accrued interest and canceled them. Hanson uses the straight-line method for amortization of bond premiums and discounts.(a) What was the amount of the gain or loss on retirement of the bonds?(b) Prepare the journal entry needed at April 1, 2015 to record retirement of the bonds. Assume that interest and premium or discount amortization have been recorded through January 1, 2015. Record interest and amortization on only the bonds retired.(c) Prepare the journal entry needed at July 1, 2015 to record interest and premium or discount amortization.""2. On January 1 of the current year, Feller Corporation issued $5,000,000 of 10% debenture bonds on a basis to yield 9%, receiving $5,224,300. Interest is payable annually on December 31 and the bonds mature in 6 years. The effective-interest method is used.(a) What is the interest expense for the first year?(b) What is the interest expense for the second year?""3. On October 1, 2014, Noller Company issued $6,000,000 par value, 10%, 10-year bonds dated July 1, 2014, with interest payable semiannually on January 1 and July 1. The bonds are issued at $6,813,000 (to yield 8%) plus accrued interest. The effective interest method is used.(a) Prepare the journal entry at the date the bonds are issued.(b) Prepare the adjusting entry at December 31, 2014, the end of the fiscal year.(c) Prepare the entry for the interest payment on January 1, 2015."

The current assets section of a balance sheet should never include

Problem D-VII -Available-for-Sale Equity InvestmentsOn January 2, 2014, Norwin Company purchased 2,000 shares of Oslo Company common stock for $60,000. The stock has a par value of $10 and is part of the total stock outstanding of 20,000 shares of Oslo Company. Norwin Company intends the stock to be available for sale. Total stockholders' equity of Oslo Company on January 2, 2014 was $600,000. InstructionsPrepare necessary journal entries on the books of Norwin Company for the following transactions. If no entry is required, write "none" in the space provided. (Round all calculations to the nearest cent.) (a) January 2, 2014: Norwin purchases the shares described above. (b) December 31, 2014: Norwin receives a $.75 per share dividend from Oslo, and Oslo announces a net income for 2014 of $250,000. (c) December 31, 2014: According to The Wall Street Journal, Oslo common is selling for $27 per share. Norwin's management views this decline as being only temporary in nature. Oslo's common is Norwin's only available-for-sale security.(d) February 15, 2015: Norwin sells 1,000 of the shares purchased on January 2, 2014 at $32 per share.

Certain information relative to the 2014 operations of Ball Co. follows: Accounts receivable, January 1,2014 \ 96,000 Accounts receivable collected during 2014 184,000 Cash sales during 2014 48,000 Inventory, January 1,2014 72,000 Inventory, December 31,2014 66,000 Purchases of inventory during 2014 160,000 Gross profit on sales 54,000 What is Ball's accounts receivable balance at December 31, 2014?

How should unearned discounts, finance charges, and interest included in the face amount of installment accounts receivable be presented in the balance sheet?

Use the following data for questions 10 through 17. Each question is independent of the other questions. Sawyer Corporation has a machine (Machine A) that it acquired on 1/1/14 for $540,000. On 12/31/14 such machines have a selling price and fair value of $621,000. When used in production, such machines have an estimated useful life of 10 years with no salvage value. Use the straight-line method. Brown Corporation has a machine (Machine B) that it acquired on 1/1/14 for $729,000. On 12/31/14 such machines have a selling price and fair value of $540,000. When used in production, such machines have an estimated useful life of 10 years with no salvage value. Use the straight-line method. On 12/31/14 Brown gave Machine B plus $81,000 cash to Sawyer in return for Machine A. -Property, plant, and equipment is usually presented in the balance sheet at

Problem D-I — Treasury Stock The stockholders' equity section of Carey Co.'s balance sheet at December 31, 2014, was as follows: Instructions Prepare journal entries (1, 2, and 4) and show proper disclosure (3) to reflect the following treasury stock transactions showing how each is accounted for under the cost method. (Show computations.) -On January 4, 2015, having idle cash, Carey Co. repurchased 25,000 shares of its out-standing stock for $500,000.

Use the following data to answer questions 5 through 9: Davis Company purchased a new piece of equipment on July 1, 2014 at a cost of $1,800,000. The equipment has an estimated useful life of 5 years and an estimated salvage value of $150,000. The current year end is 12/31/15. Davis records depreciation to the nearest month. -What is sum-of-the-years'-digits depreciation for 2015?

Notes Receivable.On December 31, 2013 Berry Corporation sold some of its product to Flynn Company, accepting a 3%, four-year promissory note having a maturity value of $800,000 (interest payable annually on December 31). Berry Corporation pays 6% for its borrowed funds. Flynn Company, however, pays 8% for its borrowed funds. The product sold is carried on the books of Berry at a manufactured cost of $495,000. Assume Berry uses a perpetual inventory system. Instructions (a) Prepare the journal entries to record the transaction on the books of Berry Corporation at December 31, 2013. (Assume that the effective interest method is used. Use the interest tables below and round to the nearest dollar.)(b) Make all appropriate entries for 2014 on the books of Berry Corporation. (c) Make all appropriate entries for 2015 on the books of Berry Corporation.

Why is it necessary to make adjusting entries?

Consistency is best demonstrated when