E12-3 (Classification Issues - Intangible Asset) Joni Hyde Inc. has the following amounts included in its general ledger at December 31, 2008.
Organization costs $24,000
Trademarks $15,000
Discount on bonds payable $35,000
Deposits with advertising agency for ads to promote goodwill of company $10,000
Excess of cost over fair value of net identifiable assets of acquired subsidiary $75,000
Cost of equipment acquired for research and development projects; the equipment has an alternative future use $90,000
Costs of developing a secret formula for a product that is expected to be marketed for at least 20 years. $80,000
Instructions
a.) On the basis of the information above, compute the total amount to be reported by Hyde for intangible assets on its balance sheet at December 31, 2008.
b.) If an item is not to be included in intangible assets, explain its proper treatment for reporting purposes.
Click here for the solution: Joni Hyde Inc. has the following amounts included in its general ledger at December 31, 2008
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Wednesday, November 11, 2015
Monday, October 5, 2015
Selected accounts included in the property, plant, and equipment section of Lobo Corporation’s balance sheet at December 31, 2009
P10-2 (Classification of Acquisition Costs) Selected accounts included in the property, plant, and equipment section of Lobo Corporation’s balance sheet at December 31, 2009, had the following balances.
Land $ 300,000
Land improvements 140,000
Buildings 1,100,000
Machinery and equipment 960,000
During 2010 the following transactions occurred.
1. A tract of land was acquired for $150,000 as a potential future building site.
2. A plant facility consisting of land and building was acquired from Mendota Company in exchange for 20,000 shares of Lobo’s common stock. On the acquisition date, Lobo’s stock had a closing market price of $37 per share on a national stock exchange. The plant facility was carried on Mendota’s books at $110,000 for land and $320,000 for the building at the exchange date. Current appraised values for the land and building, respectively, are $230,000 and $690,000.
3. Items of machinery and equipment were purchased at a total cost of $400,000. Additional costs were incurred as follows.
Freight and unloading $13,000
Sales taxes 20,000
Installation 26,000
4. Expenditures totaling $95,000 were made for new parking lots, streets, and sidewalks at the corporation’s various plant locations. These expenditures had an estimated useful life of 15 years.
5. A machine costing $80,000 on January 1, 2002, was scrapped on June 30, 2010. Double-declining balance depreciation has been recorded on the basis of a 10-year life.
6. A machine was sold for $20,000 on July 1, 2010. Original cost of the machine was $44,000 on January 1, 2007, and it was depreciated on the straight-line basis over an estimated useful life of 7 years and a salvage value of $2,000.
Instructions
(a) Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2010.
Land
Land improvements
Buildings
Machinery and equipment
(Hint: Disregard the related accumulated depreciation accounts.)
(b) List the items in the fact situation that were not used to determine the answer to (a), showing the pertinent amounts and supporting computations in good form for each item. In addition, indicate where, or if, these items should be included in Lobo’s financial statements.
(AICPA adapted)
Click here for the solution: Selected accounts included in the property, plant, and equipment section of Lobo Corporation’s balance sheet at December 31, 2009
Land $ 300,000
Land improvements 140,000
Buildings 1,100,000
Machinery and equipment 960,000
During 2010 the following transactions occurred.
1. A tract of land was acquired for $150,000 as a potential future building site.
2. A plant facility consisting of land and building was acquired from Mendota Company in exchange for 20,000 shares of Lobo’s common stock. On the acquisition date, Lobo’s stock had a closing market price of $37 per share on a national stock exchange. The plant facility was carried on Mendota’s books at $110,000 for land and $320,000 for the building at the exchange date. Current appraised values for the land and building, respectively, are $230,000 and $690,000.
3. Items of machinery and equipment were purchased at a total cost of $400,000. Additional costs were incurred as follows.
Freight and unloading $13,000
Sales taxes 20,000
Installation 26,000
4. Expenditures totaling $95,000 were made for new parking lots, streets, and sidewalks at the corporation’s various plant locations. These expenditures had an estimated useful life of 15 years.
5. A machine costing $80,000 on January 1, 2002, was scrapped on June 30, 2010. Double-declining balance depreciation has been recorded on the basis of a 10-year life.
6. A machine was sold for $20,000 on July 1, 2010. Original cost of the machine was $44,000 on January 1, 2007, and it was depreciated on the straight-line basis over an estimated useful life of 7 years and a salvage value of $2,000.
Instructions
(a) Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2010.
Land
Land improvements
Buildings
Machinery and equipment
(Hint: Disregard the related accumulated depreciation accounts.)
(b) List the items in the fact situation that were not used to determine the answer to (a), showing the pertinent amounts and supporting computations in good form for each item. In addition, indicate where, or if, these items should be included in Lobo’s financial statements.
(AICPA adapted)
Click here for the solution: Selected accounts included in the property, plant, and equipment section of Lobo Corporation’s balance sheet at December 31, 2009
Sunday, September 27, 2015
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
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
Thursday, September 10, 2015
The balance sheet of Consolidated Paper, Inc., included the following shareholders' equity accounts at December 31, 2010
E 18-23 Transactions affecting retained earnings
The balance sheet of Consolidated Paper, Inc., included the following shareholders' equity accounts at December 31, 2010:
During 2011, several events and transactions affected the retained earnings of Consolidated Paper.
Required:
1. Prepare the appropriate entries for these events:
a. On March 3 the board of directors declared a property dividend of 240,000 shares of Leasco International common stock that Consolidated Paper had purchased in January as an investment (book value: $700,000). The investment shares had a fair value of $3 per share and were distributed March 31 to shareholders of record March 15.
b. On May 3 a 5-for-4 stock split was declared and distributed. The stock split was effected in the form of a 25% stock dividend. The market value of the $1 par common stock was $11 per share.
c. On July 5 a 2% common stock dividend was declared and distributed. The market value of the common stock was $11 per share.
d. On December 1 the board of directors declared the 8.8% cash dividend on the 90,000 preferred shares, payable on December 28 to shareholders of record December 20.
e. On December 1 the board of directors declared a cash dividend of $.50 per share on its common shares, payable on December 28 to shareholders of record December 20.
2. Prepare the shareholders' equity section of the balance sheet for Consolidated Paper, Inc., for the year ended at December 31, 2011. Net income for the year was $810,000.
Click here for the solution: The balance sheet of Consolidated Paper, Inc., included the following shareholders' equity accounts at December 31, 2010
The balance sheet of Consolidated Paper, Inc., included the following shareholders' equity accounts at December 31, 2010:
During 2011, several events and transactions affected the retained earnings of Consolidated Paper.
Required:
1. Prepare the appropriate entries for these events:
a. On March 3 the board of directors declared a property dividend of 240,000 shares of Leasco International common stock that Consolidated Paper had purchased in January as an investment (book value: $700,000). The investment shares had a fair value of $3 per share and were distributed March 31 to shareholders of record March 15.
b. On May 3 a 5-for-4 stock split was declared and distributed. The stock split was effected in the form of a 25% stock dividend. The market value of the $1 par common stock was $11 per share.
c. On July 5 a 2% common stock dividend was declared and distributed. The market value of the common stock was $11 per share.
d. On December 1 the board of directors declared the 8.8% cash dividend on the 90,000 preferred shares, payable on December 28 to shareholders of record December 20.
e. On December 1 the board of directors declared a cash dividend of $.50 per share on its common shares, payable on December 28 to shareholders of record December 20.
2. Prepare the shareholders' equity section of the balance sheet for Consolidated Paper, Inc., for the year ended at December 31, 2011. Net income for the year was $810,000.
Click here for the solution: The balance sheet of Consolidated Paper, Inc., included the following shareholders' equity accounts at December 31, 2010
Wednesday, September 2, 2015
Information from the financial statements of Henderson-Niles Industries included the following at December 31, 2011
Information from the financial statements of Henderson-Niles Industries included the following at December 31, 2011:
Henderson-Niles' net income for the year ended December 31, 2011, is $520 million. The income tax rate is 40%. Henderson-Niles paid dividends of $2 per share on its preferred stock during 2011.
Required:
Compute basic and diluted earnings per share for the year ended December 31, 2011.
Click here for the solution: Information from the financial statements of Henderson-Niles Industries included the following at December 31, 2011
Henderson-Niles' net income for the year ended December 31, 2011, is $520 million. The income tax rate is 40%. Henderson-Niles paid dividends of $2 per share on its preferred stock during 2011.
Required:
Compute basic and diluted earnings per share for the year ended December 31, 2011.
Click here for the solution: Information from the financial statements of Henderson-Niles Industries included the following at December 31, 2011
Friday, August 21, 2015
The following account balances, among others, were included in the preclosing trial balance of the General Fund of the city of Madison on December 31, 2009
Problem 17-3 (Computing Unreserved Fund Balance and Closing Entries) The following account balances, among others, were included in the preclosing trial balance of the General Fund of the city of Madison on December 31, 2009.
Appropriations $3,488,000
Cash 270,000
Due to Other Fund 100,000
Due from Other Funds 250,000
Encumbrances 382,000
Estimated Revenue 3,720,000
Expenditures 3,020,000
Expenditures---2008 296,000
Reserve for Encumbrance 382,000
Reserve for Encumbrances---2008 310,000
Revenue 3,656,000
Taxes Receivable 600,000
Transfers from Other Funds 300,000
Transfers to Other Funds 520,000
Unreserved Fund Balance 422,000
Vouchers Payable 400,000
a. Prepare the necessary closing entries on December 31, 2009.
b. Calculate the amount of both the unreserved fund balance and the total fund balance in the balance sheet (1) on December 31, 2008 and (2) on December 31, 2009.
c. Prepare a schedule reconciling the December 31, 2008, total fund balance with the December 31, 2009, total fund balance by reference to actual inflows and outflow of financial resources
Click here for the solution: The following account balances, among others, were included in the preclosing trial balance of the General Fund of the city of Madison on December 31, 2009
Appropriations $3,488,000
Cash 270,000
Due to Other Fund 100,000
Due from Other Funds 250,000
Encumbrances 382,000
Estimated Revenue 3,720,000
Expenditures 3,020,000
Expenditures---2008 296,000
Reserve for Encumbrance 382,000
Reserve for Encumbrances---2008 310,000
Revenue 3,656,000
Taxes Receivable 600,000
Transfers from Other Funds 300,000
Transfers to Other Funds 520,000
Unreserved Fund Balance 422,000
Vouchers Payable 400,000
a. Prepare the necessary closing entries on December 31, 2009.
b. Calculate the amount of both the unreserved fund balance and the total fund balance in the balance sheet (1) on December 31, 2008 and (2) on December 31, 2009.
c. Prepare a schedule reconciling the December 31, 2008, total fund balance with the December 31, 2009, total fund balance by reference to actual inflows and outflow of financial resources
Click here for the solution: The following account balances, among others, were included in the preclosing trial balance of the General Fund of the city of Madison on December 31, 2009
In a working paper for combined financial statements of home office and branch, the branch's net income is included in
MULTIPLE CHOICE
1. In a working paper for combined financial statements of home office and branch, the branch's net income is included in: (Points : 1)
2. If both the home office and the branch of a business enterprise use the perpetual inventory system, a Shipments to Branch ledger account appears in the accounting records of: (Points : 1)
3. The following journal entry (explanation omitted) appeared in the accounting records of Marty Corporation's only branch:
Operating Expenses 600,000
Home Office 600,000
The journal entry indicates that: (Points : 1)
4. Direct out-of-pocket costs of a business combination that are part of the cost of the combinee do not include: (Points : 1)
5. The Income: Branch ledger account is maintained in the accounting records of: (Points : 1)
6. In a business combination, the appropriate accounting for an excess of current fair values the combinee's identifiable net assets over the combinor's cost is to: (Points : 1)
7. The Shipments to Branch ledger account in the accounting records of the home office of a business enterprise: (Points : 1)
8. The business enterprises that enter into a business combination are termed the: (Points : 1)
9. If at the end of an accounting period the balance of the Investment in Branch ledger account in the accounting records of the home office is $20,000 and the balance of the Home Office account in the accounting records of the branch (after the branch recorded closing entries) is $25,500, the most likely explanation for the discrepancy of $5,500 is a: (Points : 1)
10. The Home Office ledger account in the accounting records of a branch is best described as: (Points : 1)
Click here for the solution: In a working paper for combined financial statements of home office and branch, the branch's net income is included in
1. In a working paper for combined financial statements of home office and branch, the branch's net income is included in: (Points : 1)
2. If both the home office and the branch of a business enterprise use the perpetual inventory system, a Shipments to Branch ledger account appears in the accounting records of: (Points : 1)
3. The following journal entry (explanation omitted) appeared in the accounting records of Marty Corporation's only branch:
Operating Expenses 600,000
Home Office 600,000
The journal entry indicates that: (Points : 1)
4. Direct out-of-pocket costs of a business combination that are part of the cost of the combinee do not include: (Points : 1)
5. The Income: Branch ledger account is maintained in the accounting records of: (Points : 1)
6. In a business combination, the appropriate accounting for an excess of current fair values the combinee's identifiable net assets over the combinor's cost is to: (Points : 1)
7. The Shipments to Branch ledger account in the accounting records of the home office of a business enterprise: (Points : 1)
8. The business enterprises that enter into a business combination are termed the: (Points : 1)
9. If at the end of an accounting period the balance of the Investment in Branch ledger account in the accounting records of the home office is $20,000 and the balance of the Home Office account in the accounting records of the branch (after the branch recorded closing entries) is $25,500, the most likely explanation for the discrepancy of $5,500 is a: (Points : 1)
10. The Home Office ledger account in the accounting records of a branch is best described as: (Points : 1)
Click here for the solution: In a working paper for combined financial statements of home office and branch, the branch's net income is included in
Tuesday, August 18, 2015
The December 31, 2010 balance sheet of Wolfe Co. included the following items
The December 31, 2010 balance sheet of Wolfe Co. included the following items:
7.5% bonds payable due December 31, 2018 $1,200,000
Unamortized discount on bonds payable 48,000
The bonds were issued on December 31, 2008 at 95, with interest payable on June 30 and December 31. (Use straight-line amortization.)
On April 1, 2011, Wolfe retired $240,000 of these bonds at 101 plus accrued interest.
Prepare journal entries to record the following retirement. (Show computations and round to the nearest dollar.)
Click here for the solution: The December 31, 2010 balance sheet of Wolfe Co. included the following items
7.5% bonds payable due December 31, 2018 $1,200,000
Unamortized discount on bonds payable 48,000
The bonds were issued on December 31, 2008 at 95, with interest payable on June 30 and December 31. (Use straight-line amortization.)
On April 1, 2011, Wolfe retired $240,000 of these bonds at 101 plus accrued interest.
Prepare journal entries to record the following retirement. (Show computations and round to the nearest dollar.)
Click here for the solution: The December 31, 2010 balance sheet of Wolfe Co. included the following items
Thursday, August 13, 2015
Presented below is a list of items that could be included in the intangible assets section of the balance sheet
E12-1 Presented below is a list of items that could be included in the intangible assets section of the balance sheet.
a) Indicate which items on the list above would generally be reported as intangible assets in the balance sheet.
b) Indicate how, if at all, the items not reportable as intangible assets would be reported in the financial statements
1. Investment in a subsidiary company.
2. Timberland
3. Cost of engineering activity required to advance the design of a product to the manufacturing stage.
4. Lease prepayment (6 months' rent paid in advance)
5. Cost of equipment obtained.
6. Cost of searching for applications of new research findings.
7. Costs incurred in the formation of a corporation.
8. Operating losses incurred in the start-up of a business.
9. Training costs incurred in start-up of a business.
10. Purchase cost of a franchise.
11. Goodwill generated internally.
12. Cost of testing in search for product alternatives.
13. Goodwill acquired in the purchase of a business.
14. Cost of developing a patent.
15. Cost of purchasing a patent from an inventor.
16. Legal costs incurred in securing a patent.
17. Unrecovered costs of a successful legal suit to protect the patent.
18. Cost of conceptual formulation of possible product alternatives.
19. Cost of purchasing a copyright.
20. Research and development costs.
21. Long-term receivables.
22. Cost of developing a trademark.
23. Cost of purchasing a trademark.
Click here for the solution: Presented below is a list of items that could be included in the intangible assets section of the balance sheet
a) Indicate which items on the list above would generally be reported as intangible assets in the balance sheet.
b) Indicate how, if at all, the items not reportable as intangible assets would be reported in the financial statements
1. Investment in a subsidiary company.
2. Timberland
3. Cost of engineering activity required to advance the design of a product to the manufacturing stage.
4. Lease prepayment (6 months' rent paid in advance)
5. Cost of equipment obtained.
6. Cost of searching for applications of new research findings.
7. Costs incurred in the formation of a corporation.
8. Operating losses incurred in the start-up of a business.
9. Training costs incurred in start-up of a business.
10. Purchase cost of a franchise.
11. Goodwill generated internally.
12. Cost of testing in search for product alternatives.
13. Goodwill acquired in the purchase of a business.
14. Cost of developing a patent.
15. Cost of purchasing a patent from an inventor.
16. Legal costs incurred in securing a patent.
17. Unrecovered costs of a successful legal suit to protect the patent.
18. Cost of conceptual formulation of possible product alternatives.
19. Cost of purchasing a copyright.
20. Research and development costs.
21. Long-term receivables.
22. Cost of developing a trademark.
23. Cost of purchasing a trademark.
Click here for the solution: Presented below is a list of items that could be included in the intangible assets section of the balance sheet
Sunday, July 19, 2015
Cato, Inc. is a calendar-year corporation whose financial statements for 2009 and 2010 included errors as follows
Cato, Inc. is a calendar-year corporation whose financial statements for 2009 and 2010 included errors as follows:
Year Ending Inventory Depreciation Expense
2009 $162,000 overstated $135,000 overstated
2010 54,000 understated 45,000 understated
Assume that purchases were recorded correctly and that no correcting entries were made at December 31, 2009, or at December 31, 2010. Ignoring income taxes, by how much should Cato's retained earnings be retroactively adjusted at January 1, 2011?
Click here for the solution: Cato, Inc. is a calendar-year corporation whose financial statements for 2009 and 2010 included errors as follows
Year Ending Inventory Depreciation Expense
2009 $162,000 overstated $135,000 overstated
2010 54,000 understated 45,000 understated
Assume that purchases were recorded correctly and that no correcting entries were made at December 31, 2009, or at December 31, 2010. Ignoring income taxes, by how much should Cato's retained earnings be retroactively adjusted at January 1, 2011?
Click here for the solution: Cato, Inc. is a calendar-year corporation whose financial statements for 2009 and 2010 included errors as follows
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