At December 31, 2009, certain accounts included in the property, plant, and equipment section of Reagan Company's balance sheet

P10-1 (Classification of Acquisition and Other Asset Costs) At December 31, 2009, certain accounts included in the property, plant, and equipment section of Reagan Company's balance sheet had the following balances.

Land $230,000
Buildings 890,000
Leasehold improvements 660,000
Machinery and equipment 875,000

During 2010 the following transactions occurred.
1. Land site number 621 was acquired for $850,000. In addition, to acquire the land Reagan paid a $51,000 commission to a real estate agent. Costs of $35,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $13,000.

2. A second tract of land (site number 622) with a building was acquired for $420,000. The closing statement indicated that the land value was $300,000 and the building value was $120,000. Shortly after acquisition, the building was demolished at a cost of $41,000. A new building was constructed for $330,000 plus the following costs.

Excavation fees $38,000
Architectural design fees 11,000
Building permit fee 2,500
Imputed interest on funds used during construction (stock financing) 8,500

The building was completed and occupied on September 30, 2010.

3. A third tract of land (site number 623) was acquired for $650,000 and was put on the market for resale.

4. During December 2010 costs of $89,000 were incurred to improve leased office space. The related lease will terminate on December 31, 2012, and is not expected to be renewed. (Hint: Leasehold improvements should be handled in the same manner as land improvements.)

5. A group of new machines was purchased under a royalty agreement that provides for payment of royalties based on units of production for the machines. The invoice price of the machines was $87,000, freight costs were $3,300, installation costs were $2,400, and royalty payments for 2010 were $17,500.

Instructions
(a) Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2010.

Land Leasehold improvements
Buildings Machinery and equipment

Disregard the related accumulated depreciation accounts.

(b) List the items in the situation that were not used to determine the answer to (a) above, and indicate where, or if, these items should be included in Reagan's financial statements.

Click here for the solution: At December 31, 2009, certain accounts included in the property, plant, and equipment section of Reagan Company's balance sheet

Certain item descriptions and amounts are missing from the monthly schedule of cost of goods manufactured and the income statement of Pinta Manufacturing Company

P16-32B Certain item descriptions and amounts are missing from the monthly schedule of cost of goods manufactured and the income statement of Pinta Manufacturing Company.

Requirement

1. Fill in the missing words (___) and amounts (X).

Click here for the solution: Certain item descriptions and amounts are missing from the monthly schedule of cost of goods manufactured and the income statement of Pinta Manufacturing Company

Bunyon Lumber Company incurs a cost of $490 per hundred board feet in processing certain "rough-cut" lumber

EX 9-10 Bunyon Lumber Company incurs a cost of $490 per hundred board feet in processing certain "rough-cut" lumber, which it sells for $635 per hundred board feet. An alternative is to produce a "finished cut" at a total processing cost of $565 per hundred board feet, which can be sold for $840 per hundred board feet.

What is the amount of (a) the differential revenue, (b) differential cost, and (c) differential income for processing rough-cut lumber into finished cut?

Click here for the solution: Bunyon Lumber Company incurs a cost of $490 per hundred board feet in processing certain "rough-cut" lumber

The Baker Independent School District passed an appropriations ordinance for the General Fund for a certain fiscal year in the amount of $50 million

3–5. The Baker Independent School District passed an appropriations ordinance for the General Fund for a certain fiscal year in the amount of $50 million. Revenues were anticipated from sources other than the property tax in the amount of $24 million. The total assessed value of property in the school district amounts to $600 million. Owners of property have filed for and received household, old age, and other exemptions in the amount of $80 million. It is anticipated that 2 percent of the assessed taxes will not be collected.

a. Compute the amount to be raised from property taxes.
b. Compute the gross levy required to raise revenue in the amount you computed for requirement (a). Round the computation to the nearest dollar.
c. Compute the property tax rate per $100 net assessed valuation.
d. Compute the property tax rate per $1,000 net assessed valuation (this rate is often called the millage). Round fractional cents to the next higher whole cent.
e. You own a home with an assessed valuation of $60,000. You are eligible for a homestead exemption of $2,000; deduct this amount from the gross assessed valuation to determine the net assessed valuation (NAV) of your house. Multiply the NAV in thousands of dollars by the property tax rate computed in part (d) of this problem to determine the property tax payable
on your house.


Click here for the solution: The Baker Independent School District passed an appropriations ordinance for the General Fund for a certain fiscal year in the amount of $50 million

The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence

E11-18 (Impairment) The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2007. On December 31, 2007, management projected its future net cash flows from this equipment to be $300,000 and its fair value to be $230,000. The company intends to use this equipment in the future.

Instructions
(a) Prepare the journal entry (if any) to record the impairment at December 31, 2007.
(b) Where should the gain or loss (if any) on the write-down be reported in the income statement?
(c) At December 31, 2008, the equipment’s fair value increased to $260,000. Prepare the journal entry (if any) to record this increase in fair value.
(d) What accounting issues did management face in accounting for this impairment?


Click here for the solution: The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence

GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, does not apply to which of the following investment types

MULTIPLE CHOICE

1. GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, does not apply to which of the following investment types?

2. In the Statement of Net Assets for proprietary funds, GASB requires a classified format where current assets, noncurrent assets, current liabilities and noncurrent liabilities are presented:

3. Funds that are used to account for activities similar to those often engaged in by profit-seeking businesses are:

4. The operations of agency funds will be included in which of the following statements?


Click here for the solution: GASB Statement 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, does not apply to which of the following investment types

R&J Associates leased certain commercial real estate from T&C Associates, Inc., for a one-year period beginning May 1

R&J Associates leased certain commercial real estate from T&C Associates, Inc., for a one-year period beginning May 1. The lease required that T&C give R&J 10 days’ notice before canceling the lease. R&J operated the leased premises as a bar that featured seminude dancers but discontinued the business during the following March when it lost a necessary dance permit. In late March and early April, T&C noticed that the bar was not open and learned that R&J had lost its permit. R&J was behind on its rent at this time. Utility companies were seeking to shut off service to the premises because R&J was also behind on its utility bills. When T&C informed R&J that its monthly rent would be higher if it renewed the lease, R&J said it had no interest in renewing. For the above reasons, T&C took possession of the premises in April. T&C, however, did not give R&J the 10 days’ notice referred to in the lease. T&C leased the premises to a new tenant later that month. At approximately the same time, R&J demanded the return of certain personal property items it had left on the premises. T&C told R&J to contact the new tenant, adding that there should be no problem with the return of the items of personal property. R&J contacted the new tenant, who told R&J to submit a list of its personal property because other parties were also claiming rights to what had been left on the premises. R&J did not submit this list and did not contact T&C again about the personal property items. Later, R&J sued T&C for conversion of the personal property. Did R&J have a valid conversion claim?

Click here for the solution: R&J Associates leased certain commercial real estate from T&C Associates, Inc., for a one-year period beginning May 1

(Lessor and Lessee Accounting and Disclosures) Sylvan Inc. entered into a noncancelable lease arrangement with Breton Leasing Corporation for a certain machine

Case 21-2 (CA21-2) (Lessor and Lessee Accounting and Disclosures) Sylvan Inc. entered into a noncancelable lease arrangement with Breton Leasing Corporation for a certain machine. Breton's primary business is leasing; it is not a manufacturer or dealer. Sylvan will lease the machine for a period of 3 years, which is 50% of the machine's economic life. Breton will take possession of the machine at the end of the initial 3-year lease and lease it to another, smaller company that does not need the most current version of the machine. Sylvan does not guarantee any residual value of the machine and will not purchase the machine at the end of the lease term.

Sylvan's incremental borrowing rate is 10%, and the implicit rate in the lease is 9%. Sylvan has no way of knowing the implicit rate used by Brenton. Using either rate in the lease is 9%. Sylvan has no way of knowing the implicit rate used by Brenton. Using either rate, the present value of the minimum lease payments is between 90% and 100% of the fair value of the machine at the date of the lease agreement. Sylvan has agreed to pay all executor costs directly, and no allowance for the costs is included in the lease payments.

Brenton is reasonably certain that Sylvan will pay all lease payments, and because Sylvan has agreed to pay all executor cost, there are no important uncertainties regarding costs to be incurred by Breton. Assume that no indirect cost are involved.

Instructions:
(a) With respect to Sylvan (the lessee), answers the following.
(1) What type of lease has been entered into? Explain the reason for your reason.
(2) How should Sylvan compute the appropriate amount to be recorded for the else or asset acquired?
(3) What accounts will be created or affected by the transaction, and how will the lease or asst and other cost related to the transaction be matched with earnings.
(4) What disclosures must Sylvan make regarding the leased asset?
(b) With respect to Breton (the lessor). Answer the following:
(1) What type of leasing arrangement has been entered into? Explain the reason for your reason.
(2) How should the lease be recorded by Brenton, and how are the appropriate amounts determined?
(3) How should Breton determined the appropriate amount of earning to be recognized from each lease payment?
(4) What disclosures must Breton make regarding the lease?

Click here for the solution: (Lessor and Lessee Accounting and Disclosures) Sylvan Inc. entered into a noncancelable lease arrangement with Breton Leasing Corporation for a certain machine