Indicate with the appropriate letter the nature of each situation described below

E 20-18 Classifying accounting changes

Indicate with the appropriate letter the nature of each situation described below

Type of change
PR change in principle reported retrospectively
PP change in principle reported prospectively
E change in estimate
EP change in estimate resulting from a change in principle
R change in reporting entity
N not an accounting change

1. Change from declining balance depreciation to straight-line
2. Change in the estimate useful life of office equipment
3. Technological advance that renders worthless a patent with an unamortized cost of $45,000.
4. Change from determining lower of cost or market for the inventories by the individual item approach to the aggregate approach.
5. Change from LIFO inventory costing to the weighted-average inventory costing.
6. Settling a lawsuit for less than the amount accrued previously as a loss contingency.
7. Including in the consolidated financial statements a subsidiary acquired several years earlier that was appropriately not included in previous years.
8. Change by the retail store from reporting bad debt expense on a pay-as-you-go basis to the allowance method.
9. A shift of certain manufacturing overhead cost to inventory that previously were expensed as incurred to more accurate measure cost of goods sold. (Either method is generally acceptable).
10. Pension plan assets for a defined benefit pension plan achieving a rate of return in excess of the amount anticipated.

Click here for the solution: Indicate with the appropriate letter the nature of each situation described below

Universal Foods sold the entire bond issue described in the previous exercise to Wang Communications

E 14-8 Investor; straight-line method

(Note: This is a variation of the previous exercise modified to consider the investor's perspective.) Universal Foods sold the entire bond issue described in the previous exercise to Wang Communications.

Required:
1. Prepare the journal entry to record the purchase of the bonds by Wang Communications on January 1, 2011.
2. Prepare the journal entry to record interest revenue on June 30, 2011.
3. Prepare the journal entry to record interest revenue on December 31, 2018.

Click here for the solution: Universal Foods sold the entire bond issue described in the previous exercise to Wang Communications

A lease agreement between Mooney Leasing Company and Rode Company is described in E21-8

E21-9 (Lessor Entries with Bargain Purchase Option) A lease agreement between Mooney Leasing Company and Rode Company is described in E21-8.

Instructions
(Round all numbers to the nearest cent.)
Refer to the data in E21-8 and do the following for the lessor.
(a) Compute the amount of the lease receivable at the inception of the lease.
(b) Prepare a lease amortization schedule for Mooney Leasing Company for the 5-year lease term.
(c) Prepare the journal entries to reflect the signing of the lease agreement and to record the receipts and income related to this lease for the years 2007, 2008, and 2009. The lessor’s accounting period ends on December 31. Reversing entries are not used by Mooney.


Click here for the solution: A lease agreement between Mooney Leasing Company and Rode Company is described in E21-8

The Sarbanes-Oxley Act of 2002 has been described as the most far-reaching legislation affecting business since the passage of the 1933 Securities Act

2-53. (Sarbanes-Oxley Act of 2002, LO 3) The Sarbanes-Oxley Act of 2002 has been described as the most far-reaching legislation affecting business since the passage of the 1933 Securities Act.

Required:
a. Identify the portions of the legislation that specifically affect the external audit profession and discuss how they affect the profession.
b. How does the legislation affect the internal audit profession? Identify activities that are implied in the legislation as well as activities that will likely emerge as companies implement various provisions of the Act.
c. Do you believe the legislation enhances the power and prestige of the audit profession or, alternatively, that it decreases both the power and prestige of the profession?


Click here for the solution: The Sarbanes-Oxley Act of 2002 has been described as the most far-reaching legislation affecting business since the passage of the 1933 Securities Act

In 2011, Western Transport Company entered into the treasury stock transactions described below

E 18-13 Treasury stock

In 2011, Western Transport Company entered into the treasury stock transactions described below. In 2009, Western Transport had issued 140 million shares of its $1 par common stock at $17 per share.

Required:
Prepare the appropriate journal entry for each of the following transactions:
1. On January 23, 2011, Western Transport reacquired 10 million shares at $20 per share.
2. On September 3, 2011, Western Transport sold 1 million treasury shares at $21 per share.
3. On November 4, 2011, Western Transport sold 1 million treasury shares at $18 per share.


Click here for the solution: In 2011, Western Transport Company entered into the treasury stock transactions described below

In 2011, Borland Semiconductors entered into the transactions described below

E 18-12 Retirement of shares

In 2011, Borland Semiconductors entered into the transactions described below. In 2008, Borland had issued 170 million shares of its $1 par common stock at $34 per share.

Required:
Assuming that Borland retires shares it reacquires, record the appropriate journal entry for each of the following transactions:
1. On January 2, 2011, Borland reacquired 10 million shares at $32.50 per share.
2. On March 3, 2011, Borland reacquired 10 million shares at $36 per share.
3. On August 13, 2011, Borland sold 1 million shares at $42 per share.
4. On December 15, 2011, Borland sold 2 million shares at $36 per share.


Click here for the solution: In 2011, Borland Semiconductors entered into the transactions described below

The April transactions of Wise Company are described in Problem 7-1A

ACC 225 Week 7

Problem 7-3A

The April transactions of Wise Company are described in Problem 7-1A.

Required
1. Prepare a general journal, a purchases journal like that in Exhibit 7.9, and a cash disbursements journal like that in Exhibit 7.11. Number all journal pages as page 3. Review the April transactions of Wise Company and enter those transactions that should be journalized in the general journal, the purchases journal, or the cash disbursements journal. Ignore any transactions that should be journalized in a sales journal or cash receipts journal.
2. Open the following general ledger accounts: Cash, Inventory, Office Supplies, Store Supplies, Store Equipment, Accounts Payable, Long-Term Notes Payable, Sales Salaries Expense, and Advertising Expense. Enter the March 31 balances of Cash ($85,000), Inventory ($125,000), and Long-Term Notes Payable ($210,000). Also open accounts payable subsidiary ledger accounts for Ned’s Supply, Negi Company, Price Company, and Madison, Inc.
3. Verify that amounts that should be posted as individual amounts from the journals have been
posted. (Such items are immediately posted.) Foot and crossfoot the journals and make the monthend postings.
4. Prepare a trial balance of the general ledger and a schedule of accounts payable.


Click here for the solution: The April transactions of Wise Company are described in Problem 7-1A

Described below are three independent and unrelated situations involving accounting changes

P11-10 Accounting changes; three accounting situations

Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2011 before any adjusting entries or closing entries are prepared.

a. On December 30, 2007, Rival Industries acquired its office building at a cost of $10,000,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2011, the estimate of useful life was revised to 28 years in total with no change in residual value.

b. At the beginning of 2007, the Hoffman Group purchased office equipment at a cost of $330,000. Its useful life was estimated to be 10 years with no residual value. The equipment has been depreciated by the sum-of-the-years'-digits method. On January 1, 2011, the company changed to the straight-line method.

c. At the beginning of 2011, Jantzen Specialties, which uses the sum-of-the-years'-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change increased current year net income by $445,000.


Click here for the solution: Described below are three independent and unrelated situations involving accounting changes