Chapter 10 Exercise 6 The following data are taken from the statement of affairs of the Monroe Company. (Assume that the realizable values of assets are accurate.)
Assets pledged with fully secured creditors (realizable value, $190,000) $240,000
Assets pledged with partially secured creditors (realizable value, $90,000) $110,000
Free assets (realizable value, $102,000) $160,000
Fully secured creditor claims $91,000
Partially secured creditor claims $120,000
Unsecured creditor claims with priority $30,000
General unsecured creditor claims $350,000
Compute the amount that will be paid to each class of creditor.
Click here for the solution: The following data are taken from the statement of affairs of the Monroe Company
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Wednesday, April 13, 2016
Wednesday, November 11, 2015
The following data were taken from the balance sheet accounts of Masefield Corporation on December 31, 2007
E15-15 (Dividend Entries) The following data were taken from the balance sheet accounts of Masefield Corporation on December 31, 2007.
Current Assets $540,000
Investments $624,000
Common Stock (par value $10) $500,000
Paid in Capital in excess of par $150,000
Retained Earnings $840,000
Instructions
Prepare the required journal entries for the following unrelated items.
a.) A 5% stock dividend is declared and distributed at a time when the market value of the shares is $39 per share.
b.) The par value of the capital stock is reduced to $2 with a 5-for-1 stock split.
c.) A dividend is declared January 5, 2008, and paid January 25, 2008 in bonds held as an investment. The bonds have a book value of $100,000 and a fair market value of $135,000.
Click here for the solution: The following data were taken from the balance sheet accounts of Masefield Corporation on December 31, 2007
Current Assets $540,000
Investments $624,000
Common Stock (par value $10) $500,000
Paid in Capital in excess of par $150,000
Retained Earnings $840,000
Instructions
Prepare the required journal entries for the following unrelated items.
a.) A 5% stock dividend is declared and distributed at a time when the market value of the shares is $39 per share.
b.) The par value of the capital stock is reduced to $2 with a 5-for-1 stock split.
c.) A dividend is declared January 5, 2008, and paid January 25, 2008 in bonds held as an investment. The bonds have a book value of $100,000 and a fair market value of $135,000.
Click here for the solution: The following data were taken from the balance sheet accounts of Masefield Corporation on December 31, 2007
Sunday, September 27, 2015
Eastman Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken
P9-4 (Gross Profit Method) Eastman Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. Corporate records disclose the following.
Inventory (beginning) $ 80,000 Sales $415,000
Purchases 290,000 Sales returns 21,000
Purchase returns 28,000 Gross profit % based on net selling price 35%
Merchandise with a selling price of $30,000 remained undamaged after the fire, and damaged merchandise has a salvage value of $8,150. The company does not carry fire insurance on its inventory.
Instructions
Prepare a formal labeled schedule computing the fire loss incurred. (Do not use the retail inventory method.)
Click here for the solution: Eastman Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken
Inventory (beginning) $ 80,000 Sales $415,000
Purchases 290,000 Sales returns 21,000
Purchase returns 28,000 Gross profit % based on net selling price 35%
Merchandise with a selling price of $30,000 remained undamaged after the fire, and damaged merchandise has a salvage value of $8,150. The company does not carry fire insurance on its inventory.
Instructions
Prepare a formal labeled schedule computing the fire loss incurred. (Do not use the retail inventory method.)
Click here for the solution: Eastman Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken
Wednesday, September 23, 2015
The following items were taken from the balance sheet of Nike, Inc
The following items were taken from the balance sheet of Nike, Inc.
1. Cash $828.0
2. Accounts receivable 2,120.2
3. Common stock 890.6
4. Notes payable 146.0
5. Other assets 1,722.9
6. Other liabilities 2,081 .9
7. Inventories 1,633.6
8. Income taxes payable 118.2
9. Property, plant, and equipment 1,586.9
10. Retained earnings 3,891.1
11. Accounts payable 763.8
Instruction
a. Classify each of these items as an asset, liability, or stockholder equity.
b. Determine Nike's accounting equation by calculating the value of total assets, total liabilities, and total stockholders equity.
c. To what extent does Nike rely on debt versus equity financing?
Click here for the solution: The following items were taken from the balance sheet of Nike, Inc
1. Cash $828.0
2. Accounts receivable 2,120.2
3. Common stock 890.6
4. Notes payable 146.0
5. Other assets 1,722.9
6. Other liabilities 2,081 .9
7. Inventories 1,633.6
8. Income taxes payable 118.2
9. Property, plant, and equipment 1,586.9
10. Retained earnings 3,891.1
11. Accounts payable 763.8
Instruction
a. Classify each of these items as an asset, liability, or stockholder equity.
b. Determine Nike's accounting equation by calculating the value of total assets, total liabilities, and total stockholders equity.
c. To what extent does Nike rely on debt versus equity financing?
Click here for the solution: The following items were taken from the balance sheet of Nike, Inc
Sunday, September 13, 2015
The following conclusions were taken from a staff auditor’s summary worksheet for fixed assets and the worksheet for prepaid insurance
13-33 (Audit Evidence and Conclusions) The following conclusions were taken from a staff auditor’s summary worksheet for fixed assets and the worksheet for prepaid insurance.
Audit Conclusions or Situations
1. The choice of eight years for straight-line depreciation of the company’s trucks appears unreasonable. I would suggest that the client change to a six-year life and use DDB depreciation.
2. Insurance coverage appears to be inadequate, because the client has chosen to carry only liability insurance on the cement trucks. There is no provision for collision or damage done to the trucks.
3. The client acquired a substantial piece of real estate from the town of Baraboo to build a warehouse in the town’s new industrial complex. The land was donated to the company provided it maintains operations for a minimum of ten years and pays real estate taxes on its appraised
value. The land is carried on the books at the fair market value at the time of donation of $250,000.
4. Several pieces of idle equipment were noted. It is recommended that the equipment be written down to the scrap value of $50,000 from the current net book value of $185,000.
5. The company has self-constructed the warehouse located in the town of Baraboo.
It has capitalized all payroll expense directly related to construction of the project. The adjusting entry debited Building for $73,000 and credited Payroll Expense for the same amount.
6. The company completely overhauled ten of its trucks at a significant cost. The overhaul should extend the life of the trucks by at least three years. Because the company performs similar overhauls each year, the cost has been properly charged to repairs and maintenance.
7. The company sold 15 of its old trucks to Virgin Distributors, a new company owned by the brother of the company’s chief executive officer. The equipment was old, and a gain of $70,000 on the sale was credited to income.
Required
a. For each conclusion or situation listed, identify the type of audit evidence needed to support the auditor’s conclusion.
b. Briefly indicate the audit implications if the auditor’s conclusion is justified.
Click here for the solution: The following conclusions were taken from a staff auditor’s summary worksheet for fixed assets and the worksheet for prepaid insurance
Audit Conclusions or Situations
1. The choice of eight years for straight-line depreciation of the company’s trucks appears unreasonable. I would suggest that the client change to a six-year life and use DDB depreciation.
2. Insurance coverage appears to be inadequate, because the client has chosen to carry only liability insurance on the cement trucks. There is no provision for collision or damage done to the trucks.
3. The client acquired a substantial piece of real estate from the town of Baraboo to build a warehouse in the town’s new industrial complex. The land was donated to the company provided it maintains operations for a minimum of ten years and pays real estate taxes on its appraised
value. The land is carried on the books at the fair market value at the time of donation of $250,000.
4. Several pieces of idle equipment were noted. It is recommended that the equipment be written down to the scrap value of $50,000 from the current net book value of $185,000.
5. The company has self-constructed the warehouse located in the town of Baraboo.
It has capitalized all payroll expense directly related to construction of the project. The adjusting entry debited Building for $73,000 and credited Payroll Expense for the same amount.
6. The company completely overhauled ten of its trucks at a significant cost. The overhaul should extend the life of the trucks by at least three years. Because the company performs similar overhauls each year, the cost has been properly charged to repairs and maintenance.
7. The company sold 15 of its old trucks to Virgin Distributors, a new company owned by the brother of the company’s chief executive officer. The equipment was old, and a gain of $70,000 on the sale was credited to income.
Required
a. For each conclusion or situation listed, identify the type of audit evidence needed to support the auditor’s conclusion.
b. Briefly indicate the audit implications if the auditor’s conclusion is justified.
Click here for the solution: The following conclusions were taken from a staff auditor’s summary worksheet for fixed assets and the worksheet for prepaid insurance
The following trial balance was taken from the records of Wheaton Manufacturing Company at the beginning of 2012
11-18A The following trial balance was taken from the records of Wheaton Manufacturing Company at the beginning of 2012.
Cash 9,400
Raw Material inventory $750
Work in process inventory $1,200
Finished goods inventory $2,100
Property, plant, and equip.$7,500
Accumulated depreciation $3,000
Common Stocks $7,800
Retained earnings $10,150
Total $20,950 $20,950
a. Open T-accounts with the beginning balance shown from the list above and record all transactions for the year including closing entries in the t-account
b. Prepare a schedule of cost of goods manufactured and sold, and income statement, and balance sheet.
1. Wheaton Purchased $5,700 of direct raw materials and $300 of indirect raw material on account. The indirect materials are capitalized in the Production Supplies account. Materials requisitions showed that $5,400 of direct raw materials had been used for production during the period. The use of indirect materials is determined at the end of the year by physically counting the supplies on hand.
2. By the end of the year, $5,250 of the accounts payable had been paid in cash
3. During the year. direct labor amounted to 950 hours recorded in the wages payable account at $10.50 per hour
4. By the end of the year $9,000 of wages payable had been in cash
5. At the beginning of the year, the company expected overhead cost for the period to be $6,300 and 1,000 direct labor hours to be worked. Overhead is allocated based on direct labor hours, which as indicated in event 3 amounted to 950 for the year.
6. Selling and administrative expense for the year amounted to $900 paid in cash
7. Utilities and rent for production facilities amounted to $4,650 paid in cash
8. Depreciation on the plant and equip. used in production amounted to $1,500
9. There was $12,000 of goods completed during the year
10. There was $12,750 of finished goods inventory sold for $18,000 cash
11. A count of the production supplies revealed a balance of $89 on hand at the end of the year
12. Any over or under-applied overhead is considered to be insignificant.
Click here for the solution: The following trial balance was taken from the records of Wheaton Manufacturing Company at the beginning of 2012
Cash 9,400
Raw Material inventory $750
Work in process inventory $1,200
Finished goods inventory $2,100
Property, plant, and equip.$7,500
Accumulated depreciation $3,000
Common Stocks $7,800
Retained earnings $10,150
Total $20,950 $20,950
a. Open T-accounts with the beginning balance shown from the list above and record all transactions for the year including closing entries in the t-account
b. Prepare a schedule of cost of goods manufactured and sold, and income statement, and balance sheet.
1. Wheaton Purchased $5,700 of direct raw materials and $300 of indirect raw material on account. The indirect materials are capitalized in the Production Supplies account. Materials requisitions showed that $5,400 of direct raw materials had been used for production during the period. The use of indirect materials is determined at the end of the year by physically counting the supplies on hand.
2. By the end of the year, $5,250 of the accounts payable had been paid in cash
3. During the year. direct labor amounted to 950 hours recorded in the wages payable account at $10.50 per hour
4. By the end of the year $9,000 of wages payable had been in cash
5. At the beginning of the year, the company expected overhead cost for the period to be $6,300 and 1,000 direct labor hours to be worked. Overhead is allocated based on direct labor hours, which as indicated in event 3 amounted to 950 for the year.
6. Selling and administrative expense for the year amounted to $900 paid in cash
7. Utilities and rent for production facilities amounted to $4,650 paid in cash
8. Depreciation on the plant and equip. used in production amounted to $1,500
9. There was $12,000 of goods completed during the year
10. There was $12,750 of finished goods inventory sold for $18,000 cash
11. A count of the production supplies revealed a balance of $89 on hand at the end of the year
12. Any over or under-applied overhead is considered to be insignificant.
Click here for the solution: The following trial balance was taken from the records of Wheaton Manufacturing Company at the beginning of 2012
Friday, September 11, 2015
The following data (in thousands of dollars) have been taken from the accounting records of the Maroon Corporation for the just completed year
The following data (in thousands of dollars) have been taken from the accounting records of the Maroon Corporation for the just completed year.
Sales 1,200
Raw materials inventory, beginning 25
Raw materials inventory, ending 50
Purchases of raw materials 180
Direct labor 230
Manufacturing overhead 250
Administrative expenses 400
Selling expenses 200
Work in process inventory, beginning 150
Work in process inventory, ending 120
Finished goods inventory, beginning 100
Finished goods inventory, ending 110
Use the above data to prepare (in thousands of dollars) a schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold for the year. In addition, what is the impact on the financial statements if the ending finished goods inventory is overstated or understated?
Click here for the solution: The following data (in thousands of dollars) have been taken from the accounting records of the Maroon Corporation for the just completed year
Sales 1,200
Raw materials inventory, beginning 25
Raw materials inventory, ending 50
Purchases of raw materials 180
Direct labor 230
Manufacturing overhead 250
Administrative expenses 400
Selling expenses 200
Work in process inventory, beginning 150
Work in process inventory, ending 120
Finished goods inventory, beginning 100
Finished goods inventory, ending 110
Use the above data to prepare (in thousands of dollars) a schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold for the year. In addition, what is the impact on the financial statements if the ending finished goods inventory is overstated or understated?
Click here for the solution: The following data (in thousands of dollars) have been taken from the accounting records of the Maroon Corporation for the just completed year
Tuesday, September 8, 2015
ACC 225 P07-05A You have just taken over the accounting for Choi Enterprises, whose annual accounting period ends December 31
ACC 225 P07-05A
You have just taken over the accounting for Choi Enterprises, whose annual accounting period ends December 31. The company’s previous accountant journalized its transactions through December 15 and posted all items that required posting as individual amounts (see the journals and ledgers in the Working Papers). The company’s transactions beginning on December 16 follow (terms for all its credit sales are 2/10, n/30):
Dec. 16 Sold merchandise on credit to Hanna Seppa, Invoice No. 916, for $7,700 (cost is $4,600).
17 Received a $1,040 credit memorandum from Funk Company for the return of merchandise received on December 15.
AND SO ON
31 Issued Check No. 626 to Jamie Inman, the company’s only sales employee, in payment of her $2,020 salary for the last half of December.
31 Issued Check No. 627 to Access Electric Company in payment of its $710 December electric bill.
31 Cash sales for the last half of the month are $29,600 (cost is $11,200). (Cash sales are recorded daily but are recorded only twice in this problem to reduce repetitive entries.)
Required
1. Record these transactions in the journals provided in the working papers.
2. Verify that amounts that should be posted as individual amounts to the general ledger accounts have been posted, including posting to the customer and creditor accounts. (Such items are immediately posted.) Foot and crossfoot the journals and make the month-end postings.
3. Prepare a December 31 trial balance and prove the accuracy of the subsidiary ledgers by preparing schedules of both accounts receivable and accounts payable.
Click here for the solution: ACC 225 P07-05A You have just taken over the accounting for Choi Enterprises, whose annual accounting period ends December 31
You have just taken over the accounting for Choi Enterprises, whose annual accounting period ends December 31. The company’s previous accountant journalized its transactions through December 15 and posted all items that required posting as individual amounts (see the journals and ledgers in the Working Papers). The company’s transactions beginning on December 16 follow (terms for all its credit sales are 2/10, n/30):
Dec. 16 Sold merchandise on credit to Hanna Seppa, Invoice No. 916, for $7,700 (cost is $4,600).
17 Received a $1,040 credit memorandum from Funk Company for the return of merchandise received on December 15.
AND SO ON
31 Issued Check No. 626 to Jamie Inman, the company’s only sales employee, in payment of her $2,020 salary for the last half of December.
31 Issued Check No. 627 to Access Electric Company in payment of its $710 December electric bill.
31 Cash sales for the last half of the month are $29,600 (cost is $11,200). (Cash sales are recorded daily but are recorded only twice in this problem to reduce repetitive entries.)
Required
1. Record these transactions in the journals provided in the working papers.
2. Verify that amounts that should be posted as individual amounts to the general ledger accounts have been posted, including posting to the customer and creditor accounts. (Such items are immediately posted.) Foot and crossfoot the journals and make the month-end postings.
3. Prepare a December 31 trial balance and prove the accuracy of the subsidiary ledgers by preparing schedules of both accounts receivable and accounts payable.
Click here for the solution: ACC 225 P07-05A You have just taken over the accounting for Choi Enterprises, whose annual accounting period ends December 31
Friday, August 21, 2015
The following information has been taken from the ledger accounts of Isaac Stern Corporation
E15-16 (Computation of Retained Earnings) The following information has been taken from the ledger accounts of Isaac Stern Corporation
Total income since incorporation $317,000
Total cash dividends paid 60,000
Total value of stock dividends distributed 30,000
Gains on treasury stock transactions 18,000
Unamortized discount on bonds payable 32,000
Instructions: Determine the current balance of retained earnings.
Click here for the solution: The following information has been taken from the ledger accounts of Isaac Stern Corporation
Total income since incorporation $317,000
Total cash dividends paid 60,000
Total value of stock dividends distributed 30,000
Gains on treasury stock transactions 18,000
Unamortized discount on bonds payable 32,000
Instructions: Determine the current balance of retained earnings.
Click here for the solution: The following information has been taken from the ledger accounts of Isaac Stern Corporation
Saturday, August 1, 2015
The following information was taken from the records of Gibson Inc. for the year 2010
E4-16 (Various Reporting Formats) The following information was taken from the records of Gibson Inc. for the year 2010. Income tax applicable to income from continuing operations $119,000; income tax applicable to loss on discontinued operations $25,500; income tax applicable to extraordinary gain $32,300; income tax applicable to extraordinary loss $20,400; and unrealized holding gain on available-for-sale securities $15,000.
Extraordinary gain $ 95,000 Cash dividends declared $ 150,000
Loss on discontinued operations 75,000 Retained earnings January 1, 2010 600,000
Administrative expenses 240,000 Cost of goods sold 850,000
Rent revenue 40,000 Selling expenses 300,000
Extraordinary loss 60,000 Sales 1,700,000
Shares outstanding during 2010 were 100,000.
Instructions
(a) Prepare a single-step income statement for 2010.
(b) Prepare a retained earnings statement for 2010.
(c) Show how comprehensive income is reported using the second income statement format.
Click here for the solution: The following information was taken from the records of Gibson Inc. for the year 2010
Extraordinary gain $ 95,000 Cash dividends declared $ 150,000
Loss on discontinued operations 75,000 Retained earnings January 1, 2010 600,000
Administrative expenses 240,000 Cost of goods sold 850,000
Rent revenue 40,000 Selling expenses 300,000
Extraordinary loss 60,000 Sales 1,700,000
Shares outstanding during 2010 were 100,000.
Instructions
(a) Prepare a single-step income statement for 2010.
(b) Prepare a retained earnings statement for 2010.
(c) Show how comprehensive income is reported using the second income statement format.
Click here for the solution: The following information was taken from the records of Gibson Inc. for the year 2010
Sunday, July 19, 2015
The following data has been taken from Air-Tite Company in its first year of business
The following data has been taken from Air-Tite Company in its first year of business.
Units produced 100,000
Units sold 60,000
Units in ending inventory 40,000
Fixed manufacturing overhead $500,000
(a) Compute the amount of fixed manufacturing overhead that would be expensed in the current year if full absorption costing is used.
(b) Compute the amount of fixed manufacturing overhead that would be expensed in the current year if variable costing is used.
(c) Compute the amount of fixed manufacturing overhead that would be included in ending inventory under full absorption costing.
Click here for the solution: The following data has been taken from Air-Tite Company in its first year of business
Units produced 100,000
Units sold 60,000
Units in ending inventory 40,000
Fixed manufacturing overhead $500,000
(a) Compute the amount of fixed manufacturing overhead that would be expensed in the current year if full absorption costing is used.
(b) Compute the amount of fixed manufacturing overhead that would be expensed in the current year if variable costing is used.
(c) Compute the amount of fixed manufacturing overhead that would be included in ending inventory under full absorption costing.
Click here for the solution: The following data has been taken from Air-Tite Company in its first year of business
Wednesday, June 24, 2015
The following data are taken from the financial statements of Morino Company
Brief Exercise 15-11 (BE15-11) The following data are taken from the financial statements of Morino Company.
2009 2008
Accounts receivable (net), end of year $ 550,000 520,000
Net sales on account 3,960,000 3,100,000
Terms for all sales are 1/10, n/60.
(a) Compute for each year (1) the receivables turnover and (2) the average collection period. At the end of 2007, accounts receivable (net) was $480,000.
(b) What conclusions about the management of accounts receivable can be drawn from these data?
Click here for the solution: The following data are taken from the financial statements of Morino Company
2009 2008
Accounts receivable (net), end of year $ 550,000 520,000
Net sales on account 3,960,000 3,100,000
Terms for all sales are 1/10, n/60.
(a) Compute for each year (1) the receivables turnover and (2) the average collection period. At the end of 2007, accounts receivable (net) was $480,000.
(b) What conclusions about the management of accounts receivable can be drawn from these data?
Click here for the solution: The following data are taken from the financial statements of Morino Company
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