Exam 25: Appendix

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. -If Davis expensed the total cost of the equipment at 7/1/14, what was the effect on 2014 and 2015 income before taxes, assuming Davis uses straight-line depreciation?

Which of the following items is a current liability?

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. -Depreciation Methods.A high-speed multiple-bit drill press costing $960,000 has an estimated salvage value of $80,000 and a life of ten years. What is the annual depreciation for each of the first two full years under the following depreciation methods?1. Double-declining-balance method: a. Year one, $______________. b. Year two, $______________.2. Units of production (activity) method (lifetime output is estimated at 110,000 units; the press produced 12,000 units in year one and 18,000 in year two): a. Year one, $______________. b. Year two, $______________.3. Sum-of-the-years'-digits method: a. Year one, $______________. b. Year two, $______________.4. Straight-line depreciation method: a. Year one, $______________. b. Year two, $______________.

A company has been using the FIFO cost method of inventory valuation since it was started 10 years ago. Its 2014 ending inventory was $180,000, but it would have been $130,000 if LIFO had been used. Thus, if LIFO had been used, this company's income before taxes would have been

Notes to financial statements should not be used to

Trading SecuritiesThe information below relates to Milton Company's trading securities in 2014 and 2015.(a) Prepare the journal entries for the following transactions.January 1, 2014 Purchased $400,000 par value of GLF Company bonds at 97 plus accrued interest. The bonds pay interest annually at 9% each December 31. Broker's commission was $4,000.September 1, 2014 Sold $200,000 par value of GLF Company bonds at 94 plus accrued interest. Broker's commission, taxes, and fees were $2,000.September 5, 2014 Purchased 5,000 shares of Hayes, Inc. common stock for $30 per share. The broker's commission on the purchase amounted to $2,000.December 31, 2014 Make the appropriate entry for the GLF Company bonds.December 31, 2014 The market prices of the trading securities at December 31 were: Hayes, Inc. common stock, $31 per share; and GLF Company bonds, 99. Make the appropriate entry.July 1, 2015 Milton sold 1/2 of the Hayes, Inc. common stock at $33 per share. Broker's commissions, taxes, and fees were $1,000.December 1, 2015 Milton purchased 600 shares of Ramirez, Inc. common stock at $45 per share. Broker's commission was $500.December 31, 2015 Make the appropriate entry for the GLF Company bonds.December 31, 2015 The market prices of the trading securities at December 31 were: Hayes, Inc. common stock, $34 per share; GLF Company bonds, 98; and Ramirez, Inc. common stock, $47 per share. Make the appropriate entry.(b) Present the financial statement disclosure (balance sheet and income statement) of Milton Company's transactions in trading securities for each of the years 2014 and 2015. Appropriate financial statement subheadings must be disclosed.

Problem D-III — Stock Dividends and Stock Splits Stock dividends and stock splits are common forms of corporate stock distribution to stockholders. Consider each of the numbered statements. You are to decide whether it: -The retained earnings available for dividends are increased.

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 double-declining-balance depreciation for 2015?

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. -Given the assumption in 12 above, at what amount will Sawyer record Machine B?

Basic and Diluted Earnings Per ShareAssume that the following data relate to Rosen, Inc. for the year 2015: InstructionsCompute (a) basic earnings per share, and (b) diluted earnings per share.

Segment Reporting.Baden Company is a diversified company which has developed the following information about its five segments: InstructionsIdentify which segments are significant enough to warrant disclosure in accordance with FASB No. 131, "Reporting Disaggregated Information about a Business Enterprise," by applying the following quantitative tests: a. Revenue test b. Operating profit or loss test c. Identifiable assets test

The net income for the year ended December 31, 2015, for Tax Consultants INC. was $990,000. Additional information is as follows: Capital expenditures \ 1,200,000 Depreciation on plant assets 450,000 Cash dividends paid on common stock 180,000 Increase in noncurrent deferred tax liability 45,000 Amortization of patents 21,000 Based on the information given above, what should be the net cash provided by operating activities in the statement of cash flows for the year ended December 31, 2015?

On June 15, 2014 Stine Corporation accepted delivery of merchandise which it purchased on account. As of June 30 Stine had not recorded the transaction or included the merchandise in its inventory. The effect of this error on its balance sheet for June 30, 2014 would be

Which group of items listed below should be included in the cash account?

Leases.On January 1, 2015, Foley Company (as lessor) entered into a noncancelable lease agreement with Pinkley Company for machinery which was carried on the accounting records of Foley at $6,795,000 and had a market value of $7,200,000. Minimum lease payments under the lease agreement which expires on December 31, 2024, total $10,650,000. Payments of $1,065,000 are due each January 1. The first payment was made on January 1, 2015 when the lease agreement was finalized. The interest rate of 10% which was stipulated in the lease agreement is the implicit rate set by the lessor. The effective interest method of amortization is being used. Pinkley expects the machine to have a ten-year life with no salvage value, and be depreciated on a straight-line basis. Collectibility of the rentals is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. Instructions (a) From the lessee's viewpoint, what kind of lease is the above agreement? From the lessor's viewpoint, what kind of lease is the above agreement? (b) What should be the income before income taxes derived by Foley from the lease for the year ended December 31, 2015? (c) Ignoring income taxes, what should be the expenses incurred by Pinkley from this lease for the year ended December 31, 2015?(d) What journal entries should be recorded by Pinkley Company on January 1, 2015?(e) What journal entries should be recorded by Foley Company on January 1, 2015?

Which of the following transactions would be considered a financing activity in preparing a statement of cash flows?

Purchased goodwill represents

Conventional and LIFO Retail Method.Note to Instructor. Part B is based on Appendix 9-A.A. Landmark Book Store uses the conventional retail method. InstructionsGiven the following data, prepare a neat, labeled schedule showing the computation of the cost of inventory on hand at 12/31/14. B. Landmark Book Store has decided to switch to the LIFO retail method for the period beginning 1/1/15. InstructionsPrepare a schedule showing the computation of the 12/31/15 inventory under the LIFO retail method adjusted for price level changes (i.e., dollar-value LIFO Retail.) Without prejudice to your answer in requirement A above, assume that the 12/31/14 inventory computed under the LIFO Retail method was $40,000 and $27,500 at retail and cost, respectively, for purposes of this requirement. Data for 2015 follows:

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. -A replacement, which extended the life but did not increase the quality of units produced by the asset, cost $15,000.

Durler Company's account balances at December 31 for Accounts Receivable and the related Allowance for Doubtful Accounts are $1,200,000 and $19,500, respectively. From an analysis of accounts receivable, it is estimated that $42,000 of the December 31 receivables will be uncollectible. After adjustment for the above facts, the net realizable value of accounts receivable would be