1. Nu Company reported the following pretax data for its first year of operations

MULTIPLE CHOICE

1. Nu Company reported the following pretax data for its first year of operations.
Net sales 2,800 Cost of goods available for sale 2,500 Operating expenses 880 Effective tax rate 40% Ending inventories: If LIFO is elected 820 If FIFO is elected 1,060
What is Nu's gross profit percentage if it elects LIFO? (Points : 1)

2. The use of LIFO during a long inflationary period can result in: (Points : 1)

3. The primary reason for the popularity of LIFO is that it gives: (Points : 1)

4. In determining the cost-to-retail percentage for the current year,: (Points : 1)

5. Inventory does not include: (Points : 1)

6. So. California Inc., through no fault of its own, lost an entire plant due to an earthquake on May 1, 2006. In preparing their insurance claim on the inventory loss, they developed the following data: Inventory January 1, 2006, $300,000; sales and purchases from January 1, 2006, to May 1, 2006, $1,300,000 and $875,000, respectively. So. California consistently reports a 40% gross profit. The estimated inventory on May 1, 2006, is: (Points : 1)

7. In a period when prices are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of: (Points : 1)

8. To determine the value of a LIFO layer, using dollar-value LIFO retail: (Points : 1)

9. When using the gross profit method to estimate ending inventory, it is not necessary to know: (Points : 1)

10. The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be: (Points : 1)

Click here for the solution: 1. Nu Company reported the following pretax data for its first year of operations

On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease

P21-1 Determining Type of Lease and Subsequent Accounting

On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease. Superior Equipment Company, the lessor, agrees to pay $70,000 annually at the beginning of each year under the non-cancelable lease. Superior Equipment Company, the lessor, agrees to pay all executor costs, estimated to be $3,450 per year. The cost and also fair value of the equipment is 305,000. Its estimated life is 10 years. The estimated residual value at the end of five years is $64,000 and is not guaranteed by Alice; at the end of 10 years, it is $5,000. There is no bargain purchase option in the lease or any agreement to transfer ownership at the end of the lease to the lessee. The implicit interest rate is 12%. During 2010, Superior Equipment pays property taxes of $650, maintenance costs of $1,600, and insurance of $1,200. There are no important uncertainties surrounding the amount of un-reimbursable costs yet to be incurred by the lessor. Straight-line depreciation is considered the appropriate method both companies.

REQUIRED:
1.Identify the type of lease involved for Alice Company and Superior Equipment Company and give reasons for your classifications.
2.Prepare appropriate journal entries for 2010 for the lessee and lessor.
3.If the residual value at the end of five years is guaranteed by Alice, identify the type of lease. Prepare journal entries for 2010 and 2011 for the lessee and lessor. Also prepare the journal entries for the lessee and the lessor when the lessee pays the guaranteed residual value.

Click here for the solution: On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease

On January 1, 2007, Gottlieb Corporation issued $4,000,000 of 10-year, 8% convertible debentures at 102

E16-6 (Conversion of Bonds) On January 1, 2007, Gottlieb Corporation issued $4,000,000 of 10-year, 8% convertible debentures at 102. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into eight shares of Gottlieb Corporation $100 par value common stock after December 31, 2008. On January 1, 2009, $400,000 of debentures are converted into common stock, which is then selling at $110. An additional $400,000 of debentures are converted on March 31, 2009. The market price of the common stock is then $115. Accrued interest at March 31 will be paid on the next interest date. Bond premium is amortized on a straight-line basis.

Instructions
Make the necessary journal entries for:
(a) December 31, 2008.
(b) January 1, 2009.
(c) March 31, 2009.
(d) June 30, 2009.

Record the conversions using the book value method.

Click here for the solution: On January 1, 2007, Gottlieb Corporation issued $4,000,000 of 10-year, 8% convertible debentures at 102

Assume that on January 1, 2008, Kimberly Clark Corp. signs a 10 year noncancelable lease agreement to lease a storage building from Sheffield Storage Company

E21-3 (Lessee Entries; Capital Lease with Executory Costs) Assume that on January 1, 2008, Kimberly Clark Corp. signs a 10 year noncancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement.

1.) The agreement requires equal rental payments of $72,000 beginning on January 1, 2008.
2.) The fair value of the building on January 1, 2008 is $440,000
3.) The building has an estimated economic life of 12 years, with an unguaranteed residual value of $10,000. Kimberly Clark depreciates similar buildings on the straight line method.
4.) The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor.
5.) Kimberly Clark's incremental borrowing rate is 12% per year. The lessor’s implicit rate is not known by Kimberly Clark.
6.) The yearly rental payment includes $2,470.51 of executory costs related to taxes on property.

Instructions
Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record payments and expenses related to this lease for the years 2008 and 2009, Kimberly Clark's corporate year end is December 31.

Click here for the solution: Assume that on January 1, 2008, Kimberly Clark Corp. signs a 10 year noncancelable lease agreement to lease a storage building from Sheffield Storage Company

During its first year of operations, Collin Raye Corporation had the following transactions pertaining to its common stock

E15-1 (Recording the Issuances of Common Stock) During its first year of operations, Collin Raye Corporation had the following transactions pertaining to its common stock.

Jan 10 Issued 80,000 shares for case at $6 per share
Mar 1 Issued 5,000 shares to attorneys in payment of a bill for $35,000 for services rendered in helping the company to incorporate.
July 1 Issued 30,000 shares for cash at $8 per share

Instructions
a.) Prepare the journal entries for these transactions, assuming that the common stock has a par value of $5 per share.
b.) Prepare the journal entries for these transactions assuming that the common stock is no par with a stated value of $3 per share.

Click here for the solution: During its first year of operations, Collin Raye Corporation had the following transactions pertaining to its common stock

Soundgarden Company sold 200 copymaking machines in 2008 for $4,000 apiece together with a one year warranty

E13-10 (Warranties) Soundgarden Company sold 200 copymaking machines in 2008 for $4,000 apiece together with a one year warranty. Maintenance on each machine during the warranty period averages $330.

a.) Prepare entries to record the sale of the machines and the related warranty costs, assuming that the accrual method is used. Actual warranty costs incurred in 2008 were $17,000.
b.) Prepare 2008 entries for Crow assuming that the warranties are not an integral part of the sale. Assume that of the sales total, $150,000 relates to sales warranty contracts. Crow estimates the total cost of servicing the warranties will be $120,000 for 2 years. Estimate revenues earned on the basis of costs incurred and estimated costs.

Click here for the solution: Soundgarden Company sold 200 copymaking machines in 2008 for $4,000 apiece together with a one year warranty

(ACC 423 Week 5) The following defined pension data of Doreen Corp. apply to the year 2008

ACC 423 Week Five (Week 5)

Exercise 20-7 (E20-7) (Basic Pension Worksheet) The following defined pension data of Doreen Corp. apply to the year 2008.

Projected benefit obligation, 1/1/08 (before amendment) $560,000
Plan assets, 1/1/08 546,200
Prepaid/accrued pension cost (credit) 13,800

On January 1, 2008, Doreen Corp., through plan amendment, grants prior service benefits having a present value of 100,000

Settlement rate 9%
Service cost 58,000
Contributions (funding) 55,000
Actual (expected) return on plan assets 52,280
Benefits paid to retirees 40,000
Prior service cost amortization for 2008 17,000

Instructions
For 2008, prepare a pension worksheet for Doreen Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.

Click here for the solution: (ACC 423 Week 5) The following defined pension data of Doreen Corp. apply to the year 2008

Use the financial data shown below to calculate the following ratios for the current year

Use the financial data shown below to calculate the following ratios for the current year:

(a) Current ratio.
(b) Acid-test ratio.
(c) Accounts receivable turnover.
(d) Days' sales uncollected.
(e) Inventory turnover.
(f) Days' sales in inventory.

Income statement data
Sales (all on credit)……………………………………………….. $650,000
Cost of goods sold…………………………………………………. 425,000
Income before taxes……………………………………………. 78,000
Net Income…………………………………………………………… 54,000

Ending Beginning
Balances Balances
Cash…………………………………………………………….. $ 19,500 $ 15,000
Accounts receivable (net)………………………….. 65,000 60,000
Inventory…………………………………………………… 71,500 64,500
Plant and equipment (net) ………………………… 195,000 183,900
Total assets………………………………………………… $351,000 $323,400

Current liabilities…………………………………………. $ 62,400 $ 52,700
Long-term notes payable ……………………………. 97,500 100,000

Click here for the solution: Use the financial data shown below to calculate the following ratios for the current year

Jack Shellenkamp owns and manages a computer repair service, which had the following trial balance on December 31, 2007 (the end of its fiscal year)

P2-3A Jack Shellenkamp owns and manages a computer repair service, which had the following trial balance on December 31, 2007 (the end of its fiscal year).

BYTE REPAIR SERVICE, INC.
Trial Balance
December 31, 2007
Cash $8,000
Accounts Receivable 15,000
Parts Inventory 13,000
Prepaid Rent 3,000
Shop Equipment 21,000
Accounts Payable $19,000
Common Stock 30,000
Retained Earnings 11,000
$60,000 $60,000

Summarized transactions for January 2008 were as follows:
1. Advertising costs, paid in cash, $1,000.
2. Additional repair parts inventory acquired on account $4,000.
3. Miscellaneous expenses, paid in cash, $2,000.
4. Cash collected from customers in payment of accounts receivable $14,000.
5. Cash paid to creditors for accounts payable due $15,000.
6. Repair parts used during January $4,000. (Hint: Debit this to Repair Parts Expense.)
7. Repair services performed during January: for cash $6,000; on account $9,000.
8. Wages for January, paid in cash, $3,000.
9. Dividends paid in January were $3,000.

Instructions
(a) Prepare journal entries to record each of the January transactions.
(b) Open T accounts for each of the accounts listed in the trial balance, and enter the opening balances for 2008. Post the journal entries to the accounts in the ledger.
(c) Prepare a trial balance as of January 31, 2008.

Click here for the solution: Jack Shellenkamp owns and manages a computer repair service, which had the following trial balance on December 31, 2007

The trial balances before and after adjustment for Garcia Company at the end of its fiscal year is presented below

E3-13 The trial balances before and after adjustment for Garcia Company at the end of its fiscal year is presented below.

GARCIA COMPANY
Trial Balance
August 31, 2008
Before Adjustment After Adjustment
Dr. Cr. Dr. Cr.
Cash $10,400 $10,400
Accounts Receivable 8,800 9,800
Office Supplies 2,300 700
Prepaid Insurance 4,000 2,500
Office Equipment 14,000 14,000
Accumulated Depreciation–Office Equipment $3,600 $4,500
Accounts Payable 5,800 5,800
Salaries Payable -0- 1,100
Unearned Rent 1,500 600
Common Stock 10,000 10,000
Retained Earnings 5,600 5,600
Service Revenue 34,000 35,000
Rent Revenue 11,000 11,900
Salaries Expense 17,000 18,100
Office Supplies Expense -0- 1,600
Rent Expense 15,000 15,000
Insurance Expense -0- 1,500
Depreciation Expense -0- 900
$71,500 $71,500 $74,500 $74,500

Instructions
Prepare the adjusting entries that were made.

Click here for the solution: The trial balances before and after adjustment for Garcia Company at the end of its fiscal year is presented below

An analysis of comparative balance sheets, the current year’s income statement, and the general ledger accounts of Conard Corp

An analysis of comparative balance sheets, the current year’s income statement, and the general ledger accounts of Conard Corp. uncovered the following items. Assume all items involve cash unless there is information to the contrary. Indicate how each item should be classified in the statement of cash flows using the four major classifications listed to the right.

a. Payment of interest on notes payable
b. Exchange of land for patent
c. Sale of building at book value
d. Payment of dividends
e. Depreciation
f. Receipt of dividends on investment in stock
g. Receipt of interest on notes receivable
h. Issuance of capital stock
i. Amortization of patent
j. Issuance of bonds for land
k. Purchase of land
l. Conversion of bonds into common stock
m. Loss on sale of land
n. Retirement of bonds

Click here for the solution: An analysis of comparative balance sheets, the current year’s income statement, and the general ledger accounts of Conard Corp

Waren Sports Supply, Year-End Worksheet, December 31, 2009

WAREN SPORTS SUPPLY, YEAR-END WORKSHEET, DECEMBER 31, 2009
TRANSACTIONS LIST A
(Accounts with no activity in this worksheet are excluded in this solution.)

Preparation of Unadjusted Trial Balance on worksheet

Check Figures:
Post Closing Trial Balance, December 31, 2008
-Cash 11,025.19
-Accounts Receivable 11,065

Adjusted Trial Balance, December 31, 2009
-Cash 103,141.67
-Accounts Receivable 47,421

Click here for the solution: Waren Sports Supply, Year-End Worksheet, December 31, 2009

The following events were recorded on the books of Mercy Hospital for the year ended December 31, 2008

CH19 - Problem 1 -- Statement of Activities—Hospital

The following events were recorded on the books of Mercy Hospital for the year ended December 31, 2008.


1. Revenue from patient services totaled $16,000,000. The allowance for uncollectibles was established at $3,400,000. Of the $16,000,000 revenue, $6,000,000 was recognized under cost reimbursement agreements. This revenue is subject to audit and retroactive adjustment by third-party payers (estimated adjustments are included in the allowance account).

2. Patient service revenue is accounted for at established rates on the accrual basis.

3. Other operating revenue totaled $346,000, of which $160,000 was from specific purpose funds.

4. Mercy received $410,000 in unrestricted gifts and bequests. They are recorded at fair market value when received.

5. Endowment funds earned $160,000 in unrestricted income.

6. Board designated funds earned $82,000 in income.

7. Mercy’s operating expenses for the year amounted to $13,370,000. This included $500,000 in straight-line depreciation.

Prepare a statement of activities for Mercy Hospital for the year ended December 31, 2008.

Click here for the solution: The following events were recorded on the books of Mercy Hospital for the year ended December 31, 2008

The units of an item available for sale during the year were as follows

Ex 6-8 The units of an item available for sale during the year were as follows:

Jan 1 Inventory 27 units at $120
Feb 17 Purchase 54 units at $138
July 21 Purchase 63 units at $156
Nov 23 Purchase 36 units at $165

There are 50 units of the item in the physical inventory at December 31. The periodic inventory system is used.

Determine the inventory cost by (a) the first-in, first-out method, (b) the last-in, first-out method, and (c) the average cost method.

Click here for the solution: The units of an item available for sale during the year were as follows

Water Corporation reports $500,000 of taxable income for the current year

Water Corporation reports $500,000 of taxable income for the current year. The following additional information is available:

• For the current year, Water reports an $80,000 long-term capital loss and no capital gains.
• Taxable income includes $80,000 of dividends from a 10%-owned domestic corporation.
• Water paid fines and penalties of $6,000 that were not deducted in computing taxable income.
• In computing this year’s taxable income, Water deducted a $20,000 NOL carryover
from a prior tax year.
• Water claimed a $10,000 U.S. production activities deduction.
• Taxable income includes a deduction for $40,000 of depreciation that exceeds the depreciation allowed for E&P purposes.

Assume a 34% corporate tax rate. What is Water’s current E&P for this year?

Click here for the solution: Water Corporation reports $500,000 of taxable income for the current year

White Lightning Inc. reported income from continuing operations before income taxes of $626,000 for the year ended December 31, 2004

1. White Lightning Inc. reported income from continuing operations before income taxes of $626,000 for the year ended December 31, 2004. During October of 2004, White Lightning elected to phase out a segment of its business. That segment reported a net loss prior to the measurement date of $74,000. White Lightning expects to incur additional losses of $35,000 during the phase out period. Management estimates a loss on the sale of the assets associated with the segment of $85,000. The income tax rate for White Lightning is 30 percent. Prepare the portion of the income statement beginning with "income from continuing operations before income tax" for the year ended December 31, 2004.

Click here for the solution: White Lightning Inc. reported income from continuing operations before income taxes of $626,000 for the year ended December 31, 2004

The following differences between financial and taxable income were reported by Dider Corporation for the current year

2. The following differences between financial and taxable income were reported by Dider Corporation for the current year.

(a) Excess of tax depreciation over book depreciation $60,000
(b) Interest revenue on municipal bonds $9,000
(c) Excess of estimated warranty expense over actual expenditures $54,000
(d) Unearned rent received $12,000
(e) Amortization of goodwill $30,000
(f) Excess of income reported under percentage-of-completion accounting for financial reporting over competed-contract accounting used for tax reporting $45,000
(g) Interest on indebtedness incurred to purchase tax-exempt securities $3,000
(h) Unrealized losses on marketable securities recognized for financial reporting $18,000

Assume that Dider corp. had pretax accounting income [before considering items (a) through (h)] of $900,000 for the current year. Compute the taxable income for the current year. Write your figures in the form attached and show all your work

Click here for the solution: The following differences between financial and taxable income were reported by Dider Corporation for the current year

Disney Amusement Park, Inc. has a fiscal year ending on September 30

P4-4A Disney Amusement Park, Inc. has a fiscal year ending on September 30. Selected data from the September 30 worksheet are presented below.

DISNEY AMUSEMENT PARK, INC.
Worksheet
For the Year Ended September 30, 2008
Adjusted
Trial Balance Trial Balance
Dr. Cr. Dr. Cr.
Cash 41,400 41,400
Supplies 18,600 1,200
Prepaid Insurance 31,900 8,900
Land 80,000 80,000
Equipment 120,000 120,000
Accumulated Depreciation 36,200 42,200
Accounts Payable 14,600 14,600
Unearned Admissions Revenue 3,700 2,000
Mortgage Note Payable 50,000 50,000
Common Stock 100,000 100,000
Retained Earnings 9,700 9,700
Dividends 14,000 14,000
Admissions Revenue 277,500 279,200
Salaries Expense 105,000 105,000
Repair Expense 30,500 30,500
Advertising Expense 9,400 9,400
Utilities Expense 16,900 16,900
Property Taxes Expense 18,000 21,000
Interest Expense 6,000 10,000
Totals 491,700 491,700
Insurance Expense 23,000
Supplies Expense 17,400
Interest Payable 4,000
Depreciation Expense 6,000
Property Taxes Payable 3,000
Totals 504,700 504,700

Instructions
(a) Prepare a complete worksheet.
(b) Prepare a classified balance sheet. (Note: $10,000 of the mortgage note payable is due for payment in the next fiscal year.)
(c) Journalize the adjusting entries using the worksheet as a basis.
(d) Journalize the closing entries using the worksheet as a basis.
(e) Prepare a post-closing trial balance.

Click here for the solution: Disney Amusement Park, Inc. has a fiscal year ending on September 30

The following transactions were completed by The Bronze gallery during the current fiscal year ended December 31

PR 9-1A The following transactions were completed by The Bronze gallery during the current fiscal year ended December 31:

June 6: Reinstated the account of Ian Netti, which had been written off in the preceding year as uncollectible. Journalized the receipt of $1945 cash in full payment of Ian's account.

July 19: Wrote off the $11,150 balance owed by Rancho Rigging Co., which is bankrupt.

August 13: Received 35% of the $20,000 balance owed by Santori Co., a bankrupt business, and wrote off the remainder as uncollectible.

Sept 2: Reinstated the account for Sheryl Capers, which had been written off 2 years earlier as uncollectible. Recorded the receipt of $3,170 cash in full payment.

Dec 31: Wrote off the following accounts as uncollectible (compound entry): Jacoba Co., $8390; Garcia Co., $2500; Summit Furniture, $6400; Jill DePuy, $1800.

Dec 31: Based on an analysis of the $960,750 of accounts receivable, it was estimated that $4200 will be uncollectible. Journalized the adjusting entry.

Instructions
1. Record the January 1 credit balance of $40000 in a T account for allowances for doubtful accounts.
2. Journalize the transactions. Post each entry that affects the following T accounts and determine new balances:
(allowance for doubtful accounts and bad debt expense) --
3. Determine the expected net realizable value of the accounts receivable as of Dec 31. --
4. Assuming that instead of basing the provision for uncollectible accounts on an estimated expense of 3/4 of 1% of the net sales of $6,000,000 for the year, determine the following: (a) bad debt expense for the year (b) balance in the allowance account after the adjustment of Dec 31 (c) expected net realizable value of the accounts receivable as of December 31

Click here for the solution: The following transactions were completed by The Bronze gallery during the current fiscal year ended December 31

Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows

PR 10-6A Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows:

a. On December 31, the company determined that $20,000,000 of goodwill was impaired.
b. Governmental and legal costs of $675,000 were incurred on June 30 in obtaining a patent with an estimated economic life of 10 years. Amortization is to be for one-half year.
c. Timber rights on a tract of land were purchased for $1,665,000 on February 16. The stand of timber is estimated at 9,000,000 board feet. During the current year, 2,400,000 board feet of timber were cut and sold.

Instructions
1. Determine the amount of the amortization, depletion, or impairment for the current year for each of the foregoing items.
2. Journalize the adjusting entries to record the amortization, depletion, or impairment for each item.

Click here for the solution: Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows