Listed below are several information characteristics and accounting principles and assumptions

1. (TCO A) Listed below are several information characteristics and accounting principles and assumptions. Match the letter of each with the appropriate phrase that states its application. (Points: 30)

1: Stable dollar assumption
2: Notes as part of necessary information to a fair presentation.
3: Earnings process completed and realized or realizable.
4: Valuing assets at amounts originally paid for them.
5: the impact of an item on the overall financial operations of a company.
6: Accruals and deferrals in adjusting and closing process (Do not use going concern).
7: Affairs of the business distinguished from those of its owners.
8: Presentation of error-free information with representational faithfulness
9: Business enterprise assumed to have a long life.
10: Cost of providing financial information versus the benefits derived from its use.

: Historical cost principle
: Going concern principle
: Matching principle
: Monetary unit
: Revenue recognition principle
: Full disclosure principle
: Reliability characteristic
: Cost-benefit relationship
: Materiality constraint
: Economic entity assumption

Click here for the solution: Listed below are several information characteristics and accounting principles and assumptions

Listed below are the transactions that affected the shareholders' equity of Branch-Rickie Corporation during the period 2011–2013

P 18-5 Shareholders' equity transactions; statement of shareholders' equity

Listed below are the transactions that affected the shareholders' equity of Branch-Rickie Corporation during the period 2011–2013. At December 31, 2010, the corporation's accounts included:

($ in 000s)
Common stock, 105 million shares at $1 par $105,000
Paid-in capital-excess of par 630,000
Retained earnings 970,000

a. November 1, 2011, the board of directors declared a cash dividend of $.80 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.
b. On March 1, 2012, the board of directors declared a property dividend consisting of corporate bonds of Warner Corporation that Branch-Rickie was holding as an investment. The bonds had a fair value of $1.6 million, but were purchased two years previously for $1.3 million. Because they were intended to be held to maturity, the bonds had not been previously written up. The property dividend was payable to shareholders of record March 13, to be distributed April 5.
c. On July 12, 2012, the corporation declared and distributed a 5% common stock dividend (when the market value of the common stock was $21 per share). Cash was paid in lieu of fractional shares representing 250,000 equivalent whole shares.
d. On November 1, 2012, the board of directors declared a cash dividend of $.80 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.
e. On January 15, 2013, the board of directors declared and distributed a 3-for-2 stock split effected in the form of a 50% stock dividend when the market value of the common stock was $22 per share.
f. On November 1, 2013, the board of directors declared a cash dividend of $.65 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.

Required:
1. Prepare the journal entries that Branch-Rickie recorded during the three-year period for these transactions.
2. Prepare comparative statements of shareholders' equity for Branch-Rickie for the three-year period ($ in 000s). Net income was $330 million, $395 million, and $455 million for 2011, 2012, and 2013, respectively.

Click here for the solution: Listed below are the transactions that affected the shareholders' equity of Branch-Rickie Corporation during the period 2011–2013

Indicate (by letter) the way each of the items listed below should be reported in a balance sheet at December 31, 2011

Indicate (by letter) the way each of the items listed below should be reported in a balance sheet at December 31, 2011.

1. Commercial paper.
2. Noncommitted line of credit.
3. Customer advances.
4. Estimated warranty cost.
5. Accounts payable.
6. Long-term bonds that will be callable by the creditor in ther upcoming year unless an existing violation is not corrected (there is a reasonable possibility the violation will be corrected within the grace period).
7. Note due March 3, 2012.
8. Interest accrued on note, Dec. 31, 2011.
9. Short-term bank loan to be paid with proceeds of sale of common stock.
10. A determinable gain that is contingent on a future event that appears extremely likely to occur in three months.
11. Unasserted assessment of back taxes that probably will be asserted, in which case there would probably be a loss in six months.
12. Unasserted assessment of back taxes with a reasonable possibility of being asserted, in which case there would probably be a loss in 13 months.
13. A determinable loss from a past event that is contingent on a future event that appears extremely likely to occur in three months.
14. Bond sinking fund.
15. Long-term bonds callable by the creditor in the upcoming year that are not expected to be called.

Click here for the solution: Indicate (by letter) the way each of the items listed below should be reported in a balance sheet at December 31, 2011

Listed below are several terms and phrases associated with leases

E 15-25 Concepts; terminology

Listed below are several terms and phrases associated with leases. Pair each item from List A with the item from List B (by letter) that is most appropriately associated with it.

List A
___ 1. Effective rate times balance.
___ 2. Realization principle.
___ 3. Minimum lease payments plus unguaranteed residual value.
___ 4. Periodic lease payments plus lessee-guaranteed residual value.
___ 5. PV of minimum lease payments plus PV of unguaranteed residual value.
___ 6. Initial direct costs.
___ 7. Rent revenue.
___ 8. Bargain purchase option.
___ 9. Leasehold improvements.
___10. Cash to satisfy residual value guarantee.
___11. Capital lease expense.
___12. Deducted in lessor’s computation of lease payments.
___13. Title transfers to lessee.
___14. Contingent rentals.
___15. Lease payments plus lessee-guaranteed and third-part-guaranteed residual value.

List B
a. PV of BPO price.
b. Lessor’s net investment.
c. Lessor’s gross investment.
d. Operating lease.
e. Depreciable assets.
f. Loss to lessee.
g. Executory costs.
h. Depreciation longer than lessee term.
i. Disclosure only.
j. Interest expense.
k. Additional lessor conditions.
l. Lessee’s minimum lease payments.
m. Purchase price less than fair value.
n. Sales-type lease selling expense.
o. Lessor’s minimum lease payments.

Click here for the solution: Listed below are several terms and phrases associated with leases

Accounts are listed below for a foreign subsidiary that maintains its books in its local currency

Exercise 13-1 Identifying the Exchange Rate

Accounts are listed below for a foreign subsidiary that maintains its books in its local currency. The equity interest in the subsidiary was acquired in a purchase transaction. In the space provided, indicate the exchange rate that would be used to translate the accounts into dollars assuming that the functional currency was identified (a) as the U.S. dollar and (b) as the foreign entity’s local currency. Use the following letters to identify the exchange rate:

H—historical exchange rate
C—current exchange rate
A—average exchange rate for the current period
Exchange Rate if the
Functional Currency Is:
Account U.S. Dollar Local Currency

Cash _____ __________
Accounts receivable _____ __________
Inventory carried at cost _____ __________
Inventory carried at market _____ __________
Prepaid rent _____ __________
Property, plant, and equipment _____ __________
Goodwill _____ __________
Accounts payable _____ __________
Bonds payable _____ __________
Unamortized premium on bonds payable _____ __________
Preferred stock carried at issuance price _____ __________
Common stock _____ __________
Sales _____ __________
Cost of goods sold _____ __________
Depreciation expense

Click here for the solution: Accounts are listed below for a foreign subsidiary that maintains its books in its local currency

Listed Below are six technical accounting terms introduced or emphasized in this chapter

Problem 18.1 Listed Below are six technical accounting terms introduced or emphasized in this chapter.

Job order costing
Process Costing
Conversion Costs
Equivalent Units
Cost of Finished Goods Manufactured
Production Cost Report

Each of the following statements may (or may not) describe these technical terms. For each statement, indicate the term described, or answer "none" if the statement does not correctly describe any of the terms.

a. The type of cost accounting method likely to be used in a Coca-Cola bottling plant.
b. Direct Labor and overhead consumed in a production process
c. A measure of the quantity of production work done during a time period, including work on partially completed units.
d. Process cost information for the period, including physical flow and total cost to account for.
e. The type of cost accounting method likely to be used by a construction company.

Click here for the solution: Listed Below are six technical accounting terms introduced or emphasized in this chapter

Listed below are some information characteristics and accounting principles and assumptions

Listed below are some information characteristics and accounting principles and assumptions. Match the letter of each with the appropriate phrase that states its application

Answer Potential Matches

_______________ Consistency characteristic 1. Presentation of error-free information with representational faithfulness.
_______________ Historical cost principle 2. Money in the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis.

_______________ Going concern principle 3. Business enterprise assumed to have a long life

_______________ Periodicity assumption 4. Application of the same accounting principles as in the preceding year

_______________ Reliability characteristic 5. Valuing assets at amounts originally paid for them

_______________ Economic entity assumption 6. Implies that a company can divide its economic activities into artificial time periods.

_______________ Monetary unit assumption 7. Notes as part of necessary information to a fair presentation

_______________ Revenue recognition principle 8. Affairs of the business distinguished from those of its owners

_______________ Full disclosure principle 9. Economic activity can be identified with a particular unit of accountability

________________ Economic entity assumption 10. Earnings process completed and realized or realizable


Click here for the solution: Listed below are some information characteristics and accounting principles and assumptions

For each situation listed below, indicate by letter the appropriate qualitative characteristic(s) or accounting concept(s) applied

For each situation listed below, indicate by letter the appropriate qualitative characteristic(s) or accounting concept(s) applied. A letter may be used more than once, and more than one characteristic or concept may apply to a particular situation. Explain why you chose your answer.

1. Goodwill is recorded in the accounts only when it arises from the purchase of another entity at a price higher than the fair market value of the purchased entity's identifiable assets.
2. Land is valued at cost.
3. All payments out of petty cash are debited to Miscellaneous Expense.
4. Plant assets are classified separately as land or buildings, with an accumulated depreciation account for buildings.
5. Periodic payments of $1,500 per month for services of H. Hay, who is the sole proprietor of the company, are reported as withdrawals.
6. Small tools used by a large manufacturing firm are^ recorded as expenses when purchased.
7. Investments in equity securities are initially recorded at cost.
8. A retail store estimates inventory rather than taking a complete physical count for purposes of preparing monthly financial statements.
9. A note describing the company's possible liability in a lawsuit is included with the financial statements even though no formal liability exists at the balance sheet date.
10. Depreciation on plant assets is consistently computed each year by the straight-line method.

a) Understandability
b) Verifiability
c) Timeliness
d) Representational faithfulness
e) Neutrality
f) Relevance
g) Going concern
h) Economic entity
i) Historical cost
j) Measurability
k) Materiality
l) Comparability


Click here for the solution: For each situation listed below, indicate by letter the appropriate qualitative characteristic(s) or accounting concept(s) applied

Listed below are several misstatements of inventory, accounts payable, and accrued liabilities accounts

Problem 9-30 Listed below are several misstatements of inventory, accounts payable, and accrued liabilities accounts. Design a substantive audit procedure that provides reasonable assurance of detecting each misstatement.

1. A bonus earned by the president of the company has not been recorded.
2. Several accounts payable to vendors that the company has never purchased from before are omitted from the accounts payable listing.
3. When client employees counted the physical inventory, they included a number of items that were consigned to, but do not belong to, the company.
4. There is no disclosure in the financial statements that a large accounts payable is due to a related party.
5. Accrued payroll is understated.
6. One-third of the inventory of diamond jewelry is actually cubic zircona or white sapphires.
7. The client paid the same vendor invoice twice, although it is still shown as an account payable.
8. Client personnel informed the auditors that underground petroleum tanks contained an inventory of high-octane gasoline when they actually contained water.
9. The client failed to record warranty expenses incurred after year-end applicable to sales made before year-end.
10. Inventory in one corner of the warehouse is overlooked and not counted during the client’s physical inventory count.


Click here for the solution: Listed below are several misstatements of inventory, accounts payable, and accrued liabilities accounts

Listed are typical financial activities of a local governmental unit

Exercise 17-2 (General Fund Journal Entries) Listed are typical financial activities of a local governmental unit.

1. The legislative unit approved the budget for the general operating fund. Estimated revenues are $4,000,000, and appropriations for expenditures are $3,800,000.
2. Statements of property tax assessments totaling $3,000,000 were mailed to property owners. It is estimated that 4% of the assessed taxes will be uncollectible.
3. Notification was received from the state that this unit’s share of sales tax revenues from the fourth quarter of the previous year will be $500,000.
4. The manager signed a contract to purchase equipment costing $250,000.
5. The equipment ordered above was received and paid for.
6. Employees were paid their biweekly wages of $36,000.
7. Property taxes in the amount of $2,050,000 were collected.

Required:
Prepare the necessary journal entries to record the transactions listed above in the records of the General Fund


Click here for the solution: Listed are typical financial activities of a local governmental unit

The accounts listed below appeared in the December 31 trial balance of the Savard Theater

P3‑5 (Adjusting Entries) The accounts listed below appeared in the December 31 trial balance of the Savard Theater.

Debit Credit
Equipment $192,000
Accumulated Depreciation—Equipment $ 60,000
Notes Payable 90,000
Admissions Revenue 380,000
Advertising Expense 13,680
Salaries Expense 57,600
Interest Expense 1,400

(a) From the account balances listed above and the information given below, prepare the annual adjusting entries necessary on December 31. (Omit explanations.)
1. The equipment has an estimated life of 16 years and a salvage value of $24,000 at the end of that time. (Use straight-line method.)
2. The note payable is a 90-day note given to the bank October 20 and bearing interest at 8%. (Use 360 days for denominator.)
3. In December 2,000 coupon admission books were sold at $30 each. They could be used for admission any time after January 1.
4. Advertising expense paid in advance and included in Advertising Expense $1,100.
5. Salaries accrued but unpaid $4,700.
(b) What amounts should be shown for each of the following on the income statement for the year?
Interest expense
Admissions revenue
Advertising expense
Salaries expense

Click here for the solution: The accounts listed below appeared in the December 31 trial balance of the Savard Theater

From the information listed in the text, compute the average annual return, the variance, standard deviation, and coefficient of variation for each asset

P12-1 From the information listed in the text, compute the average annual return, the variance, standard deviation, and coefficient of variation for each asset.

P12-2 Based upon your answers to problem 1, which asset appears riskiest based on standard deviation? Based on coefficient of variation?

Click here for the solution: From the information listed in the text, compute the average annual return, the variance, standard deviation, and coefficient of variation for each asset

(Adjusting Entries) The accounts listed on the next page appeared in the December 31 trial balance of the Jane Alexander Theater

Exercise P3-5 (P3-5) (Adjusting Entries) The accounts listed on the next page appeared in the December 31 trial balance of the Jane Alexander Theater.

Debit Credit
Equipment $192,000
Accumulated Depreciation—Equipment $ 60,000
Notes Payable 90,000
Admissions Revenue 380,000
Advertising Expense 13,680
Salaries Expense 57,600
Interest Expense 1,400

Instructions
(a) From the account balances listed above and the information given below, prepare the annual adjusting entries necessary on December 31. (Omit explanations.)
(1) The equipment has an estimated life of 16 years and a salvage value of $40,000 at the end of that time. (Use straight-line method.)
(2) The note payable is a 90-day note given to the bank October 20 and bearing interest at 10%. (Use 360 days for denominator.)
(3) In December 2,000 coupon admission books were sold at $25 each. They could be used for admission any time after January 1.
(4) Advertising expense paid in advance and included in Advertising Expense $1,100.
(5) Salaries accrued but unpaid $4,700.
(b) What amounts should be shown for each of the following on the income statement for the year?
(1) Interest expense. (3) Advertising expense.
(2) Admissions revenue. (4) Salaries expense.

Click here for the solution: (Adjusting Entries) The accounts listed on the next page appeared in the December 31 trial balance of the Jane Alexander Theater