E7-2 Presented below are some business transactions that occurred during 2008 for Vicki Prowitz Company.
(a) Merchandise inventory with a cost of $208,000 is reported at its market value of $260,000.The following entry was made.
Merchandise Inventory 52,000
Gain 52,000
(b) Equipment worth $62,000 was acquired at a cost of $41,000 from a
company that had water damage in a flood.The following entry was made.
Equipment 62,000
Cash 41,000
Gain on Purchase of Equipment 21,000
(c) The president of Vicki Prowitz Company, Mark Nabke, purchased a
truck for personal use and charged it to his expense account.The
following entry was made.
Travel Expense 18,000
Cash 18,000
(d) An electric pencil sharpener costing $50 is being depreciated over 5 years. The following entry was made.
Depreciation Expense—Pencil Sharpener 10
Accumulated Depreciation—Pencil Sharpener 10
Instructions
In each of the situations above, identify the assumption, principle, or
constraint that has been violated, if any. Discuss the appropriateness
of the journal entries, and give the correct journal entry, if
necessary.
Click here for the solution: Presented below are some business transactions that occurred during 2008 for Vicki Prowitz Company
Showing posts with label some. Show all posts
Showing posts with label some. Show all posts
Friday, September 25, 2015
Wednesday, September 23, 2015
Ben Chase needs to pay off some of his debts over the next few months
1) Ben Chase needs to pay off some of his debts over the next few
months. Which item on his balance sheet would help him decide what
amounts are due in the near future?
2) A family with $45,000 in assets and $22,000 of liabilities would have a net worth of
3) A budget deficit would result when a person's or family's
4) The tax base for an individual tax return is
5) All of the following are for AGI deductions EXCEPT
6) Which of the following series of inequalities is generally most accurate?
7) Which of the following has the lowest authoritative weight?
8) Josephine is considering taking a 6-month rotation in Paris for her job. Which type of authority may be especially helpful in determining the tax consequences of Josephine's job in Paris?
9) Which of the following has the highest authoritative weight?
10) Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI) because
11) Hector is a married self-employed taxpayer, and this year he paid $3,000 for his health insurance premiums. Under which of the following alternative conditions can Hector deduct the cost of the premiums for AGI?
12) Graham has accepted an offer to do graduate work in the chemistry department at State University. The chemistry department offered Graham a scholarship that will pay $5,000 toward his tuition, $500 toward his university fees, and $3,500 toward the cost of room and meals. Under the terms of the scholarship, Graham must work in the chemistry labs during the summer. What amount must Graham include in his gross income?
13) After a meeting with a prospective client, Holly paid for dinner. After dinner, Holly took the prospective client to the theatre. Holly paid $290 for the meal and $250 for the tickets, amounts that were reasonable under the circumstances. What amount of these expenditures can Holly deduct as a business expense?
14) Rhianna and Jay are married filing jointly in 2009. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2009 tax return?
15) Which of the following taxes will not qualify as an itemized deduction?
16) Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss?
17) The sale of machinery for more than the original cost basis (before depreciation), used in a trade or business, and held for more than one year results in the following types of gain or loss:
18) Winchester LLC sold the following business assets during the current year: (1) automobile, $30,000 cost basis, $12,000 depreciation, proceeds $20,000; (2) machinery, $25,000 cost basis, $20,000 depreciation, proceeds $10,000; (3) furniture, $15,000 cost basis, $10,000 depreciation, proceeds $4,000; (4) computer equipment, $25,000 cost basis, $6,000 depreciation, proceeds $10,000; (5) Winchester had unrecaptured Section 1231 losses of $3,000 in the prior 5 years. What is the amount and character of Winchester's gains and losses before the 1231 netting process?
19) On the sale of a passive activity, any suspended losses can be used to offset income from
20) Which of the following would be considered passive income?
21) Which of the following would be considered active income?
22) Sue invested $5,000 in the ABC Limited Partnership and received a 10 percent interest in the partnership. The partnership had $20,000 of qualified nonrecourse debt and $20,000 of debt she is not responsible to repay because she is a limited partner. Sue is allocated a 10 percent share of both types of debt. During the year, ABC LP generated a ($90,000) loss. How much of Sue's loss is disallowed due to her tax basis or at-risk amount?
23) Harvey rents his second home. During 2009, Harvey reported a net loss of $35,000 from the rental. If Harvey is an active participant in the rental and his AGI is $80,000, how much of the loss can he deduct against ordinary income in 2009?
24) What happens when a taxpayer experiences a net loss from a rental home?
25) What is the minimum ownership percentage an owner must have in the entity to avoid gain recognition when property is contributed?
26) What is the tax impact to a taxable corporation or an S corporation when it makes a property distribution to a shareholder?
27) What item(s) affect the tax basis of a shareholder in a taxable corporation?
28) Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral under Section 351. The corporation assumed a liability of $50 on the property transferred. What is Antoine's tax basis in the stock received in the exchange?
29) Which of the following requirements do not have to be met in a Section 351 transaction?
30) Inez transfers property with a tax basis of $200 and a fair market value of $300 to a corporation in exchange for stock with a fair market value of $250 in a transaction that qualifies for deferral under Section 351. The corporation assumed a liability of $50 on the property transferred. What is the corporation's tax basis in the property received in the exchange?
31) Au Sable Corporation reported taxable income of $800,000 in 2010 and paid federal income taxes of $272,000. Not included in the computation was a disallowed penalty of $25,000, life insurance proceeds of $100,000, and an income tax refund from 2009 of $50,000. Au Sable is an accrual basis taxpayer. The corporation's current earnings and profits for 2010 would be
32) BTW Corporation has taxable income in the current year that can be offset with an NOL from a previous year. What is the nature of the book-tax difference created by the net operating loss deduction in the current year?
33) A calendar-year corporation has negative current E&P of $(500) and accumulated positive E&P of $1,000. The corporation makes a $600 distribution to its sole shareholder. Which of the following statements is true?
34) El Toro Corporation declared a common stock dividend to all shareholders of record on June 30, 2010. Shareholders will receive 1 share of El Toro stock for each 2 shares of stock they already own. Raoul owns 300 shares of El Toro stock with a tax basis of $60 per share. The fair market value of the El Toro stock was $100 per share on June 30, 2010. What are the tax consequences of the stock dividend to Raoul?
35) Which of the following stock dividends would be tax-free to the shareholder?
36) Which of the following individuals is not considered "family" for purposes of applying the stock attribution rules to a stock redemption?
37) Which of the following statements is true when property is contributed in exchange for a partnership interest?
38) Which of the following are prohibited from being an S corporation shareholder?
39) Under which of the following circumstances will a partner recognize a loss from an operating distribution?
40) Suppose at the beginning of 2010, Jamaal's basis in his S corporation stock was $27,000 and that Jamaal has loaned the S corporation $10,000. During 2010, the S corporation reported an $80,000 ordinary business loss and no separately stated items. How much of the ordinary loss is deductible by Jamaal if he owns 50% of the S corporation?
41) Clampett, Inc. has been an S corporation since its inception. On July 15, 2011, Clampett, Inc. distributed $50,000 to J.D. His basis in his Clampett, Inc. stock on January 1, 2011, was $45,000. For 2011, J.D. was allocated $10,000 of ordinary income from Clampett, Inc. and no separately stated items. What is J.D.'s basis in his Clampett, Inc. stock after all transactions in 2011?
42) Clampett, Inc. has been an S corporation since its inception. On July 15, 2011, Clampett, Inc. distributed $50,000 to J.D. His basis in his Clampett, Inc. stock on January 1, 2011, was $45,000. For 2011, J.D. was allocated $10,000 of ordinary income from Clampett, Inc. and no separately stated items. What is the amount of income J.D. recognizes related to Clampett, Inc. in 2011?
43) Erica and Brett decide to form their new motorcycle business as an LLC. Each will receive an equal profits (loss) interest by contributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $50,000 nonrecourse loan from First Bank at the time it is formed. Brett contributes cash of $5,000 and a building he bought as a storefront for the motorcycles. The building has an FMV of $45,000, an adjusted basis of $30,000, and is secured by a $35,000 nonrecourse mortgage that the business LLC will assume. What is Brett's outside tax basis in his LLC interest?
44) Under general circumstances, debt is allocated from the partnership to each partner in the following manner:
45) Which of the following statements is true when property is contributed in exchange for a partnership interest?
46) Frank and Bob are equal members in Soxy Socks, LLC. When forming the LLC, Frank contributed $50,000 in cash and $50,000 worth of equipment. Frank's adjusted basis in the equipment was $35,000. Bob contributed $50,000 in cash and $50,000 worth of land. Bob's adjusted basis in the land was $30,000. On 3/15/04, Soxy Socks sells the land Bob contributed for $60,000. How much gain (loss) related to this transaction will Bob report on his X4 return?
47) What form does a partnership use when filing an annual informational return?
48) Vanessa contributed $20,000 of cash and land with a fair market value of $100,000 and an adjusted basis of $40,000 to Cook, Inc. (an S corporation) when it was formed. The land was encumbered by a $30,000 mortgage executed two years before. What is Vanessa's tax basis in Cook, Inc. after formation?
49) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes?
50) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes?
51) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes?
52) This year Samantha gave each of her three nephews birthday gifts of $10,000 in cash. At Christmas, Samantha gave each of her three nephews Christmas gifts of an additional $5,000 in cash. What is the amount of the taxable gifts, if any, made by Samantha this year?
53) Jonathan transferred $90,000 of cash to a trust this year for the benefit of Hannah, age 10. The trustee has the discretion to distribute income or corpus (principal) for Hannah's benefit and is required to distribute all assets to Hannah (or her estate) not later than Hannah's 21st birthday. What is the amount of the taxable gift?
54) This year Natalie transferred $500,000 of bonds to a revocable trust with directions to the trustee to pay income to her aunt for five years, after which the corpus is to be distributed to Natalie's niece. At year-end, the trustee paid $14,000 of income to the aunt. Which of the following is a true statement?
Click here for the solution: Ben Chase needs to pay off some of his debts over the next few months
2) A family with $45,000 in assets and $22,000 of liabilities would have a net worth of
3) A budget deficit would result when a person's or family's
4) The tax base for an individual tax return is
5) All of the following are for AGI deductions EXCEPT
6) Which of the following series of inequalities is generally most accurate?
7) Which of the following has the lowest authoritative weight?
8) Josephine is considering taking a 6-month rotation in Paris for her job. Which type of authority may be especially helpful in determining the tax consequences of Josephine's job in Paris?
9) Which of the following has the highest authoritative weight?
10) Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI) because
11) Hector is a married self-employed taxpayer, and this year he paid $3,000 for his health insurance premiums. Under which of the following alternative conditions can Hector deduct the cost of the premiums for AGI?
12) Graham has accepted an offer to do graduate work in the chemistry department at State University. The chemistry department offered Graham a scholarship that will pay $5,000 toward his tuition, $500 toward his university fees, and $3,500 toward the cost of room and meals. Under the terms of the scholarship, Graham must work in the chemistry labs during the summer. What amount must Graham include in his gross income?
13) After a meeting with a prospective client, Holly paid for dinner. After dinner, Holly took the prospective client to the theatre. Holly paid $290 for the meal and $250 for the tickets, amounts that were reasonable under the circumstances. What amount of these expenditures can Holly deduct as a business expense?
14) Rhianna and Jay are married filing jointly in 2009. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2009 tax return?
15) Which of the following taxes will not qualify as an itemized deduction?
16) Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss?
17) The sale of machinery for more than the original cost basis (before depreciation), used in a trade or business, and held for more than one year results in the following types of gain or loss:
18) Winchester LLC sold the following business assets during the current year: (1) automobile, $30,000 cost basis, $12,000 depreciation, proceeds $20,000; (2) machinery, $25,000 cost basis, $20,000 depreciation, proceeds $10,000; (3) furniture, $15,000 cost basis, $10,000 depreciation, proceeds $4,000; (4) computer equipment, $25,000 cost basis, $6,000 depreciation, proceeds $10,000; (5) Winchester had unrecaptured Section 1231 losses of $3,000 in the prior 5 years. What is the amount and character of Winchester's gains and losses before the 1231 netting process?
19) On the sale of a passive activity, any suspended losses can be used to offset income from
20) Which of the following would be considered passive income?
21) Which of the following would be considered active income?
22) Sue invested $5,000 in the ABC Limited Partnership and received a 10 percent interest in the partnership. The partnership had $20,000 of qualified nonrecourse debt and $20,000 of debt she is not responsible to repay because she is a limited partner. Sue is allocated a 10 percent share of both types of debt. During the year, ABC LP generated a ($90,000) loss. How much of Sue's loss is disallowed due to her tax basis or at-risk amount?
23) Harvey rents his second home. During 2009, Harvey reported a net loss of $35,000 from the rental. If Harvey is an active participant in the rental and his AGI is $80,000, how much of the loss can he deduct against ordinary income in 2009?
24) What happens when a taxpayer experiences a net loss from a rental home?
25) What is the minimum ownership percentage an owner must have in the entity to avoid gain recognition when property is contributed?
26) What is the tax impact to a taxable corporation or an S corporation when it makes a property distribution to a shareholder?
27) What item(s) affect the tax basis of a shareholder in a taxable corporation?
28) Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral under Section 351. The corporation assumed a liability of $50 on the property transferred. What is Antoine's tax basis in the stock received in the exchange?
29) Which of the following requirements do not have to be met in a Section 351 transaction?
30) Inez transfers property with a tax basis of $200 and a fair market value of $300 to a corporation in exchange for stock with a fair market value of $250 in a transaction that qualifies for deferral under Section 351. The corporation assumed a liability of $50 on the property transferred. What is the corporation's tax basis in the property received in the exchange?
31) Au Sable Corporation reported taxable income of $800,000 in 2010 and paid federal income taxes of $272,000. Not included in the computation was a disallowed penalty of $25,000, life insurance proceeds of $100,000, and an income tax refund from 2009 of $50,000. Au Sable is an accrual basis taxpayer. The corporation's current earnings and profits for 2010 would be
32) BTW Corporation has taxable income in the current year that can be offset with an NOL from a previous year. What is the nature of the book-tax difference created by the net operating loss deduction in the current year?
33) A calendar-year corporation has negative current E&P of $(500) and accumulated positive E&P of $1,000. The corporation makes a $600 distribution to its sole shareholder. Which of the following statements is true?
34) El Toro Corporation declared a common stock dividend to all shareholders of record on June 30, 2010. Shareholders will receive 1 share of El Toro stock for each 2 shares of stock they already own. Raoul owns 300 shares of El Toro stock with a tax basis of $60 per share. The fair market value of the El Toro stock was $100 per share on June 30, 2010. What are the tax consequences of the stock dividend to Raoul?
35) Which of the following stock dividends would be tax-free to the shareholder?
36) Which of the following individuals is not considered "family" for purposes of applying the stock attribution rules to a stock redemption?
37) Which of the following statements is true when property is contributed in exchange for a partnership interest?
38) Which of the following are prohibited from being an S corporation shareholder?
39) Under which of the following circumstances will a partner recognize a loss from an operating distribution?
40) Suppose at the beginning of 2010, Jamaal's basis in his S corporation stock was $27,000 and that Jamaal has loaned the S corporation $10,000. During 2010, the S corporation reported an $80,000 ordinary business loss and no separately stated items. How much of the ordinary loss is deductible by Jamaal if he owns 50% of the S corporation?
41) Clampett, Inc. has been an S corporation since its inception. On July 15, 2011, Clampett, Inc. distributed $50,000 to J.D. His basis in his Clampett, Inc. stock on January 1, 2011, was $45,000. For 2011, J.D. was allocated $10,000 of ordinary income from Clampett, Inc. and no separately stated items. What is J.D.'s basis in his Clampett, Inc. stock after all transactions in 2011?
42) Clampett, Inc. has been an S corporation since its inception. On July 15, 2011, Clampett, Inc. distributed $50,000 to J.D. His basis in his Clampett, Inc. stock on January 1, 2011, was $45,000. For 2011, J.D. was allocated $10,000 of ordinary income from Clampett, Inc. and no separately stated items. What is the amount of income J.D. recognizes related to Clampett, Inc. in 2011?
43) Erica and Brett decide to form their new motorcycle business as an LLC. Each will receive an equal profits (loss) interest by contributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $50,000 nonrecourse loan from First Bank at the time it is formed. Brett contributes cash of $5,000 and a building he bought as a storefront for the motorcycles. The building has an FMV of $45,000, an adjusted basis of $30,000, and is secured by a $35,000 nonrecourse mortgage that the business LLC will assume. What is Brett's outside tax basis in his LLC interest?
44) Under general circumstances, debt is allocated from the partnership to each partner in the following manner:
45) Which of the following statements is true when property is contributed in exchange for a partnership interest?
46) Frank and Bob are equal members in Soxy Socks, LLC. When forming the LLC, Frank contributed $50,000 in cash and $50,000 worth of equipment. Frank's adjusted basis in the equipment was $35,000. Bob contributed $50,000 in cash and $50,000 worth of land. Bob's adjusted basis in the land was $30,000. On 3/15/04, Soxy Socks sells the land Bob contributed for $60,000. How much gain (loss) related to this transaction will Bob report on his X4 return?
47) What form does a partnership use when filing an annual informational return?
48) Vanessa contributed $20,000 of cash and land with a fair market value of $100,000 and an adjusted basis of $40,000 to Cook, Inc. (an S corporation) when it was formed. The land was encumbered by a $30,000 mortgage executed two years before. What is Vanessa's tax basis in Cook, Inc. after formation?
49) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes?
50) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes?
51) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes?
52) This year Samantha gave each of her three nephews birthday gifts of $10,000 in cash. At Christmas, Samantha gave each of her three nephews Christmas gifts of an additional $5,000 in cash. What is the amount of the taxable gifts, if any, made by Samantha this year?
53) Jonathan transferred $90,000 of cash to a trust this year for the benefit of Hannah, age 10. The trustee has the discretion to distribute income or corpus (principal) for Hannah's benefit and is required to distribute all assets to Hannah (or her estate) not later than Hannah's 21st birthday. What is the amount of the taxable gift?
54) This year Natalie transferred $500,000 of bonds to a revocable trust with directions to the trustee to pay income to her aunt for five years, after which the corpus is to be distributed to Natalie's niece. At year-end, the trustee paid $14,000 of income to the aunt. Which of the following is a true statement?
Click here for the solution: Ben Chase needs to pay off some of his debts over the next few months
Sunday, September 20, 2015
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
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
Tuesday, September 8, 2015
On December 31, 2009 Berry Corporation sold some of its product to Flynn Company, accepting a 3%, four-year promissory note
On December 31, 2009 Berry Corporation sold some of its product to Flynn Company, accepting a 3%, four-year promissory note having a maturity value of $900,000 (interest payable annually on December 31). Berry Corporation pays 6% for its borrowed funds. Flynn Company, however, pays 8% for its borrowed funds. The product sold is carried on the books of Berry at a manufactured cost of $570,000. Assume Berry uses a perpetual inventory system.
Instructions
(a) Prepare the journal entries to record the transaction on the books of Berry Corporation at December 31, 2009. (Assume that the simple interest method is used.)
(b) Make all appropriate entries for 2010 on the books of Berry Corporation.
(c) Make all appropriate entries for 2011 on the books of Berry Corporation.
Click here for the solution: On December 31, 2009 Berry Corporation sold some of its product to Flynn Company, accepting a 3%, four-year promissory note
Instructions
(a) Prepare the journal entries to record the transaction on the books of Berry Corporation at December 31, 2009. (Assume that the simple interest method is used.)
(b) Make all appropriate entries for 2010 on the books of Berry Corporation.
(c) Make all appropriate entries for 2011 on the books of Berry Corporation.
Click here for the solution: On December 31, 2009 Berry Corporation sold some of its product to Flynn Company, accepting a 3%, four-year promissory note
Wednesday, September 2, 2015
In January 2010, the management of Noble Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities
P16-2A In January 2010, the management of Noble Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities. During the year, the following transactions occurred.
Feb. 1 Purchased 600 shares of Hiens common stock for $31,800, plus brokerage fees of $600.
Mar. 1 Purchased 800 shares of Pryce common stock for $20,000, plus brokerage fees of $400.
Apr. 1 Purchased 50 $1,000, 7% Roy bonds for $50,000, plus $1,000 brokerage fees. Interest is payable semiannually on April 1 and October 1.
July 1 Received a cash dividend of $0.60 per share on the Hiens common stock.
Aug. 1 Sold 200 shares of Hiens common stock at $58 per share less brokerage fees of $200.
Sept. 1 Received a $1 per share cash dividend on the Pryce common stock.
Oct. 1 Received the semiannual interest on the Roy bonds.
Oct. 1 Sold the Roy bonds for $50,000 less $1,000 brokerage fees.
At December 31, the fair value of the Hiens common stock was $55 per share. The fair value of the Pryce common stock was $24 per share.
Hint: Journalize investment transactions, prepare adjusting entry, and show statement presentation.
Instructions
(a) Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use the T-account form.)
Gain on stock sale $600
(b) Prepare the adjusting entry at December 31, 2010, to report the investment securities at fair value. All securities are considered to be trading securities.
(c) Show the balance sheet presentation of investment securities at December 31, 2010.
(d) Identify the income statement accounts and give the statement classification of each account.
Click here for the solution: In January 2010, the management of Noble Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities
Feb. 1 Purchased 600 shares of Hiens common stock for $31,800, plus brokerage fees of $600.
Mar. 1 Purchased 800 shares of Pryce common stock for $20,000, plus brokerage fees of $400.
Apr. 1 Purchased 50 $1,000, 7% Roy bonds for $50,000, plus $1,000 brokerage fees. Interest is payable semiannually on April 1 and October 1.
July 1 Received a cash dividend of $0.60 per share on the Hiens common stock.
Aug. 1 Sold 200 shares of Hiens common stock at $58 per share less brokerage fees of $200.
Sept. 1 Received a $1 per share cash dividend on the Pryce common stock.
Oct. 1 Received the semiannual interest on the Roy bonds.
Oct. 1 Sold the Roy bonds for $50,000 less $1,000 brokerage fees.
At December 31, the fair value of the Hiens common stock was $55 per share. The fair value of the Pryce common stock was $24 per share.
Hint: Journalize investment transactions, prepare adjusting entry, and show statement presentation.
Instructions
(a) Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use the T-account form.)
Gain on stock sale $600
(b) Prepare the adjusting entry at December 31, 2010, to report the investment securities at fair value. All securities are considered to be trading securities.
(c) Show the balance sheet presentation of investment securities at December 31, 2010.
(d) Identify the income statement accounts and give the statement classification of each account.
Click here for the solution: In January 2010, the management of Noble Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities
Monday, August 31, 2015
Steinar loaned a friend $9,500 to buy some stock 3 years ago
Steinar loaned a friend $9,500 to buy some stock 3 years ago. In the current year the debt became worthless.
a. How much is Steinar's deduction for the bad debt for this year? (Assume he has no other capital gains or losses.)
b. What can Steinar do with the deduction not used this year?
Click here for the solution: Steinar loaned a friend $9,500 to buy some stock 3 years ago
a. How much is Steinar's deduction for the bad debt for this year? (Assume he has no other capital gains or losses.)
b. What can Steinar do with the deduction not used this year?
Click here for the solution: Steinar loaned a friend $9,500 to buy some stock 3 years ago
Sunday, August 23, 2015
A customer has asked Clougherty Corporation to supply 4,000 units of product M97, with some modifications, for $40.10 each
A customer has asked Clougherty Corporation to supply 4,000 units of product M97, with some modifications, for $40.10 each. The normal selling price of this product is $48.00 each. The normal unit product cost of product M97 is computed as follows:
Direct Materials..............$18.50
Direct Labor......................$1.20
Variable Manufacturing Overhead.......$8.40
Unit Product Cost= $32.00
Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product M97 that would increase the variable costs by $5.70 per unit and that would require a one-time investment of $31,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order.
Required:
Determine the effect on the company's total net operating income of accepting the special order.
Click here for the solution: A customer has asked Clougherty Corporation to supply 4,000 units of product M97, with some modifications, for $40.10 each
Direct Materials..............$18.50
Direct Labor......................$1.20
Variable Manufacturing Overhead.......$8.40
Unit Product Cost= $32.00
Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product M97 that would increase the variable costs by $5.70 per unit and that would require a one-time investment of $31,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order.
Required:
Determine the effect on the company's total net operating income of accepting the special order.
Click here for the solution: A customer has asked Clougherty Corporation to supply 4,000 units of product M97, with some modifications, for $40.10 each
Saturday, August 15, 2015
Some of the information found on a detail inventory card for Slatkin Inc. for the first month of operations is as follows
P8-5 (Compute FIFO, LIFO, and Average Cost) Some of the information found on a detail inventory card for Slatkin Inc. for the first month of operations is as follows.
Instructions
(a) From these data compute the ending inventory on each of the following bases. Assume that perpetual inventory records are kept in units only. Carry unit costs to the nearest cent and ending inventory to the nearest dollar.
1. First-in, first-out (FIFO).
2. Last-in, first-out (LIFO).
3. Average cost.
(b) If the perpetual inventory record is kept in dollars, and costs are computed at the time of each withdrawal, would the amounts shown as ending inventory in 1, 2, and 3 above be the same? Explain and compute.
Click here for the solution: Some of the information found on a detail inventory card for Slatkin Inc. for the first month of operations is as follows
Instructions
(a) From these data compute the ending inventory on each of the following bases. Assume that perpetual inventory records are kept in units only. Carry unit costs to the nearest cent and ending inventory to the nearest dollar.
1. First-in, first-out (FIFO).
2. Last-in, first-out (LIFO).
3. Average cost.
(b) If the perpetual inventory record is kept in dollars, and costs are computed at the time of each withdrawal, would the amounts shown as ending inventory in 1, 2, and 3 above be the same? Explain and compute.
Click here for the solution: Some of the information found on a detail inventory card for Slatkin Inc. for the first month of operations is as follows
Sunday, July 19, 2015
Briefly describe some of the similarities and differences between U.S. GAAP and iGAAP related to the accounting for pensions
1. Briefly describe some of the similarities and differences between U.S. GAAP and iGAAP related to the accounting for pensions.
2. At the beginning of the year of adoption of Statement of Financial Accounting Standards No. 106, a transition amount is computed as the excess of the
expected postretirement benefit obligation over the fair value of plan assets or vice versa.
accumulated postretirement benefit obligation over the fair value of plan assets or vice versa.
expected postretirement benefit obligation over the fair value of plan assets, but not vice versa.
accumulated postretirement benefit obligation over the fair value of plan assets, but not vice versa.
Click here for the solution: Briefly describe some of the similarities and differences between U.S. GAAP and iGAAP related to the accounting for pensions
2. At the beginning of the year of adoption of Statement of Financial Accounting Standards No. 106, a transition amount is computed as the excess of the
expected postretirement benefit obligation over the fair value of plan assets or vice versa.
accumulated postretirement benefit obligation over the fair value of plan assets or vice versa.
expected postretirement benefit obligation over the fair value of plan assets, but not vice versa.
accumulated postretirement benefit obligation over the fair value of plan assets, but not vice versa.
Click here for the solution: Briefly describe some of the similarities and differences between U.S. GAAP and iGAAP related to the accounting for pensions
Saturday, July 11, 2015
In January 2012, the management of Sarah Company concludes that it has sufficient cash to purchase some short-term investments in debt and stock securities
PE-2 In January 2012, the management of Sarah Company concludes that it has sufficient cash to purchase some short-term investments in debt and stock securities. During the year, the following transactions occurred.
Feb. 1 Purchased 1,200 shares of NJF common stock for $50,600 plus brokerage fees of $1,000.
Mar. 1 Purchased 500 shares of SEK common stock for $18,000 plus brokerage fees of $500.
Apr. 1 Purchased 70 $1,000, 8% CRT bonds for $70,000 plus $1,200 brokerage fees. Interest is payable semiannually on April 1 and October 1.
July 1 Received a cash dividend of $0.80 per share on the NJF common stock.
Aug. 1 Sold 200 shares of NJF common stock at $42 per share less brokerage fees of $350.
Sept. 1 Received $2 per share cash dividend on the SEK common stock.
Oct. 1 Received the semiannual interest on the CRT bonds.
Oct. 1 Sold the CRT bonds for $77,000 less $1,300 brokerage fees.
At December 31, the fair values of the NJF and SEK common stocks were $39 and $30 per share, respectively.
Instructions
(a) Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use the T account form.)
(b) Prepare the adjusting entry at December 31, 2012, to report the investments at fair value. All securities are considered to be trading securities.
(c) Show the balance sheet presentation of investment securities at December 31, 2012.
(d) Identify the income statement accounts and give the statement classification of each account.
Click here for the solution: In January 2012, the management of Sarah Company concludes that it has sufficient cash to purchase some short-term investments in debt and stock securities
Feb. 1 Purchased 1,200 shares of NJF common stock for $50,600 plus brokerage fees of $1,000.
Mar. 1 Purchased 500 shares of SEK common stock for $18,000 plus brokerage fees of $500.
Apr. 1 Purchased 70 $1,000, 8% CRT bonds for $70,000 plus $1,200 brokerage fees. Interest is payable semiannually on April 1 and October 1.
July 1 Received a cash dividend of $0.80 per share on the NJF common stock.
Aug. 1 Sold 200 shares of NJF common stock at $42 per share less brokerage fees of $350.
Sept. 1 Received $2 per share cash dividend on the SEK common stock.
Oct. 1 Received the semiannual interest on the CRT bonds.
Oct. 1 Sold the CRT bonds for $77,000 less $1,300 brokerage fees.
At December 31, the fair values of the NJF and SEK common stocks were $39 and $30 per share, respectively.
Instructions
(a) Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use the T account form.)
(b) Prepare the adjusting entry at December 31, 2012, to report the investments at fair value. All securities are considered to be trading securities.
(c) Show the balance sheet presentation of investment securities at December 31, 2012.
(d) Identify the income statement accounts and give the statement classification of each account.
Click here for the solution: In January 2012, the management of Sarah Company concludes that it has sufficient cash to purchase some short-term investments in debt and stock securities
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