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Study Resources (Accounting)

Ex. 8-142Impact of accounting errors on financial statement items and ratios Cayman Corporation makes the following errors during the current year.Each error is an independent case. Ending inventory is overstated by $1,120, but purchases are recorded correctly. Both ending inventory and a purchase on account are understated in the same amount. (Assume this.
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Ex. 9-100Types of companies that have investments Two types of companies that carry significant amounts of investments are banks and pension plans.Explain how these companies use their investment holdings to add value for their customers. Ex. 9-101Application of cost/amortized cost method Luke Corporation purchased $60,400 of 6-year, 7% bonds of Reed Inc. for.
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Ex. 9-116 In early January 2017, Janus Inc., a private enterprise that applies ASPE, purchased 40% of the common shares of Keqing Corp. for $484,000.Janus was now able to exercise considerable influence in decisions made by Keqing’s management.Keqing Corp.’s statement of financial position reported the following information at the date of.
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Ex. 8-152FIFO and LIFO inventory methods During June, the following changes in inventory item 27 took place: June1Balance1,400 units @ $24 14Purchased800 units @ $36 24Purchased700 units @ $30 8Sold400 units @ $50 10Sold1,000 units @ $40 29Sold500 units @ $44 Perpetual inventories are maintained. Instructions What is the cost of the ending inventory for item 27 under the following.
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Ex. 8-139Accounting definition Define inventory from an accounting perspective Ex. 8-140Items to be included in ending inventory During the year, the following transactions took places for Blades Corporation.For each transaction, indicate whether the inventory should be included in Blades’ inventory for the end of the year. a)On December 31, the last day of the.
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Pr. 8-173Analysis of errors Indicate in each of the spaces provided the effect of the described errors on the various elements of a company's financial statements. Use the following codes: O = amount is overstated; U = amount is understated; NE = no effect. Assume a periodic inventory system and that all sales and purchases.
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Ex. 9-108Fair Value through other comprehensive income investments – entries Lekan Corp provided you with the following information about its investment in AdoweyeInc shares purchased May 2017 and accounted for using the FV–OCI method Cost$29,500 Fair value, December 31, 2017$30,900 Fair value, December 31, 2018$23,800 Fair value, December 31, 2019$26,900 Instructions a)Prepare the adjusting journal entries needed.
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Ex. 8-166Interpretation of inventory ratios Explain the meaning of each ratio you calculated in the previous question. What do these ratios say about the company’s performance? What additional information would you require to improve your assessment? *Ex. 8-167Retail method of accounting for inventory Presented below is information related to Westtown Company: CostRetail Beginning inventory$225,000$310,500 Purchases1,514,0002,090,000 Markups107,700 Markup cancellations17,700 Markdowns35,400 Markdown.
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Pr. 8-174Accounting for purchase discounts Texas Corp. purchased merchandise during 2017 on credit for $200,000; terms 2/10, n/30. All of the gross liability except $30,000 was paid within the discount period. The remainder was paid within the 30-day term. At the end of the annual accounting period, December 31, 2017, 90%.
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Ex. 9-104 Investments in debt securities Presented below are unrelated cases involving investments in debt securities: Case 1: A company owns another firm's debt securities in the form of bonds. The bonds were acquired at a discount and are accounted for under the amortized cost model. Case 2: An investment in notes receivable that had.
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Ex. 8-148FIFO cost formula The Malibu Shop shows the following data related to item Y27: Inventory, February 1100 units @ $7.00 Purchase, February 9200 units @ $7.60 Purchase, February 19150 units @ $7.90 Inventory, February 28200 units Instructions Using the FIFO cost formula, what value should be assigned to the ending inventory of item Y27? Ex. 8-149Perpetual FIFO A.
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Ex. 9-109Incurred loss, expected loss, and impairment Tyne Corporation owns corporate bonds at December 31, 2017, accounted for using the amortized cost model.These bonds have a par value of $864,000 and an amortized cost of $851,000.After an impairtment review was triggered, Tyne determined that the discounted impaired cash flows are $796,500.
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Ex. 8-141 Terminology In the space provided at right, write the word or phrase that is defined or indicated. 1.An approach whereby a company __________ finances its inventory without reporting either the liability or the inventory asset on its statement of financial position. 2.The method of initially recording purchases at the full invoice amount.__________ 3.The method of.
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Pr. 9-119Year-end adjustments for temporary investments Mercury Corp. has the following portfolio of common shares (without significant influence) at December 31, 2017: Investment CostFair value Albania Inc.$480,000$570,000 Bulgaria Ltd.90,000620,000 Czech Corp.   120,000  220,000 Total$690,000$1,410,000 Instructions Provide the entry to record the year-end adjustment for these investments, assuming Mercury uses one control account and has adopted the FV–NI model. Pr..
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Ex. 9-113 Investment in equity securities On January 1, 2017, Sally Corp. acquired 30% of Wally Ltd.’s common shares for $500,000. At that time, Wally had 1 million no par common shares issued and outstanding. During 2017, Wally paid total cash dividends of $220,000, and later declared and issued a 5%.
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Pr. 8-178Retail inventory method California Corp. is preparing the financial statements at its fiscal year end, January 31, 2018. The following information is available: At CostAt Retail Inventory, February 1, 2017...........$83,400$  103,400 Markdowns........................47,000 Markups...........................71,000 Markdown cancellations..............22,000 Markup cancellations................9,000 Purchases.........................241,200294,300 Sales.............................329,000 Purchases returns and allowances......5,1506,700 Sales returns and allowances..........9,000 Instructions Calculate the ending inventory at cost at January 31, 2018, using the retail method.
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MULTIPLE CHOICE—Conceptual 1.              Which of the following is NOT included in the IAS16 definition of property, plant, and equipment (PPE)? a) PPE will be used over more than one accounting period. b) PPE is held for use in the production of goods and services. c) PPE can be tangible or intangible. d) PPE is tangible. 2.             .
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Ex. 9-115 Hanuman Corp is a medium sized corporation who has long dominated their market.With a strong cash-flow position, they have decided to invest excess cash strategically.In particular, Hanuman made periodic investments with their main supplier, Shiva.Although Hanuman currently owns 18% of the common shares of Shiva, it does not yet.
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31. The fair value through other comprehensive income (FV–OCI) model is sometimes referred to as a) the fair value through profit or loss (FVTPL). b) held for trading. c) discontinued operations. d) available for sale. 32. Salmon Corporation purchased an investment in 2017 (an equity investment without significant influence). The purchase price of $94,000 included.
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11.When a closely held corporation issues preferred shares for land, the land should be recorded at the a) total value of the shares issued. b) total book value of the shares issued. c) total liquidating value of the shares issued. d) fair market value of the land. 12.When an enterprise is the recipient of a.
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MULTIPLE CHOICE—Conceptual 1.Which of the following is NOT a debt security? a) convertible bonds b) commercial paper c) loans receivable d) governmenttreasury bills 2.An investment in an entity's debt instruments makes that investor a(n) a) owner of the issuing entity. b) creditor of the issuing entity. c) parent company. d) subsidiary. 3.Which of the following is NOT an equity instrument? a) common.
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Ex. 8-168Retail method of accounting for inventory Laver Inc. had beginning inventory of $25,100 at cost and $35,800 at retail. Net purchases were $132,500 at cost and $167,900 at retail. Net markups were $14,000, net markdowns were $5,300, and sales were $188,000. Instructions Calculate the ending inventory at cost using the conventional retail.
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Ex. 8-160Gross profit method Ohana Company uses the gross profit method to estimate inventory for monthly reports.Information follows for the month of November: Inventory, Nov 1$978,000 Purchases691,000 Freight-in47,000 Sales1,450,000 Sales returns67,600 Purchase discounts14,100 Instructions a)Calculate the estimated inventory at November 30, assuming that the gross profit is 30% of sales. b)Calculate the estimated inventory at November 30, assuming that the.
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PROBLEMS Pr. 8-170Theory What is the difference between an executory contract and andonerous contract? Pr. 8-171Inventorycut-off At December 31, 2017, Dakota Corp.’s perpetual inventory showed as $43,100 in the general ledger. Towards the end of 2017, a new approach for compiling inventory was used and apparently a satisfactory cut-off for preparation of financial statements.
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21.Under the fair value through net income model, holding gains are a) recognized in other comprehensive income only. b) recognized in either net income or other comprehensive income. c) recognized in net income only. d) ignored. 22.The fair value through net income model requires that a) investments are measured at fair value. b) transaction costs are expensed. c).
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Pr. 8-175 Year-end entries to update inventory under periodic system The accountant for the Oswego chain of retail stores is getting ready to prepare the 2017 year-end inventory entries for its periodic inventory system. Her assistant has provided the following information: Beginning inventory$88,000 Inventory purchases during year900,000 Ending inventory  62,000 Instructions Record the journal entry(ies) that.
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Pr. 9-124Equity method – IFRS Capricorn Corporation decided to purchase 35% of the outstanding shares of Aquarius Ltd. Capricorn’s CFO conducted an extensive evaluation of the financial statements of Aquarius and reported his findings to the board of directors in the following memo: Dear Board of Directors, Following your request, I conducted a.
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Exercise 8-158 Accounting for biological and agricultural assets Using the information from question 8-157, prepare the journal entry for the honey harvested by Woods during April 2017. Assume Woods sells the honey harvested at the local market and receives $3,100. Prepare the summary entry to record the sale of the honey for.
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Ex. 8-164Inventory presentation and disclosure under IFRS Briefly describe the additional disclosures required for inventories under IFRS (as compared to ASPE). Ex. 8-165Inventory analysis & ratios Avery Ltd. began the fiscal year with inventory of $2,142,560. The company’s ending inventory was $2,241.650, and cost of goods sold for the year was $14,320,400. Net.
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Multiple Choice—Computational 65.On August 1, 2017, Harley Inc. acquired $180,000 (face value) 10% bonds of Davidson Corporation at 104 plus accrued interest. The bonds were dated May 1, 2017, and mature on April 30, 2020, with interest payable each October 31 and April 30. The bonds will be held to maturity..
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Ex. 9-106fair value through net income method On October 1, Whiteside Ltd purchased 7% bonds with a face value of $1,000 for trading purposes, accounting for the investment at fair value through net income.The bonds were priced at 1.023 to yield Whiteside 5%, and pay interest annually each October 1.Whiteside has.
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Pr. 9-121Accounting for investments – FV–NI On December 31, 2017, Hubble Corp. has the following securities in its portfolio of temporary investments:   Cost  Market 5,000 common shares of Orion Corp.$ 80,000$ 69,500 10,000 common shares of Rigel Ltd.  91,000  92,500 $171,000$162,000 All of the securities had been purchased in 2017. In 2018, Hubble completed the.
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Ex8-146Inventory cost flow assumptions The following inventory transactions took place for NPR Corporation for the month of May: Date Event Quantity Cost/Selling Price May 1 Beginning Inventory 1,000 $3.55 May 5 Purchase 6,000 3.10 May 10 Purchase 2,000 3.75 May 15 Sale 3,000 6.00 May 20 Sale 2,000 6.00 May 22 Purchase 5,000 3.45 May 24 Purchase 2,000 3.75 May 25 Sale 7,000 6.00 Instructions Calculate the ending inventory balance for NPR Corporation, assuming the company uses a periodic inventory system and the weighted average cost formula. Ex. 8-147Year-end entries.
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Ex. 8-156Lower of cost and net realizable value (NRV) The December 31, 2017 inventory of Rhode Inc. consisted of four products, for which certain information is provided below: ReplacementEstimatedExpected ProductOriginal CostCostDisposal CostSelling Price A$29.00$22.00$6.50$40.00 B$44.00$40.00$8.00$48.00 C$145.00$125.00$25.00$190.00 D$21.00$15.80$3.00$28.00 Instructions Using the lower of cost and NRV approach applied on an individual-item basis, calculate the inventory valuation that should be reported.
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Pr. 8-172 Inventory errors An audit of the inventory records of Missouri Inc. identified a number of errors. These errors are summarized in Exhibit A below: EXHIBIT A Year Net IncomeReported Description of Error 2013 $120,000 Overstatement of ending inventory $11,000 2014 $95,000 Understatement of ending inventory $1,500 2015 $99,000 Understatement of ending inventory $18,000 2016 $105,000 Overstatement of ending inventory $20,000 2017 $120,000 Overstatement of ending inventory $5,200 Instructions a)As financial accountant for Missouri, you have.
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Ex. 8-150Periodic FIFO Maine Corporation sells item A as part of its product line, using the periodic system. Information as to balances on hand, purchases, and sales of item A are given in the following table for the first six months of 2017: Quantities Unit Price DatePurchasedSoldBalanceof Purchase January 11——300$5.00 January 241,300—1,6005.20 February 8—3001,300— March 16—560740— June 11600—1,3405.60 Instructions Calculate the.
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Pr. 8-177Gross profit method In the early morning of January 1, 2018, Minnesota Corp.'s inventory was destroyed by fire. The following information was available for calendar 2017: Sales.......................$950,000 Net purchases................  600,000 Beginning inventory............  110,000 Minnesota’s gross profit on sales has averaged 35% for several years. Instructions a)Calculate the estimated cost of the inventory destroyed. b)Prepare entries at December.
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Ex. 8-154Adjustments to lower of cost and NRV The controller of Utah Corp. has provided you with the following information relating to its inventory: DateCostLower of cost and NRV Dec 31/17$457,000$410,000 Dec 31/18$615,000$555,000 Utah uses the periodic inventory system, and records its inventory at cost. An allowance account is adjusted at the end of each.
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Exercises Ex. 9-98 Motivation for investments List three reasons why an organization would make investments. Ex. 9-99Types of companies that have investments Consider the financial statements of a publishing house, a reinsurance provider and a charitable foundation.What types and proportions of investmnets would you expect to find on the financial statements of these companies? .
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51.When one corporation has control over another corporation, the investor corporation a) is referred to as an associate. b) is referred to as the subsidiary. c) can determine the investee’s strategic operating and financing policies. d) must have obtained at least 50% of the investee’s issued common shares. 52.An investor who has subsidiaries a) is required.
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Ex. 8-145Recording purchases at net amounts Mexico Inc. records purchases at net amounts and uses the periodic inventory system. Prepare entries for the following: May11Purchased merchandise on account, $16,000, terms 2/10, n/30. 15Returned part of May 11 purchase, $2,000, and received credit on account. 30Prepared the adjusting entry required for financial statements. .
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Ex. 9-111 Charles Inc. purchased 30% of Nassar Corporation’s 29,000 outstanding common shares at a cost of $15 per share on January 3, 2017.The purchase price of $15 per share was based solely on the book value of Nassar’s net assets.On September 21, Nassar declared and paid a cash dividend of.
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PROBLEMS Pr. 9-117Accounting for bonds – amortized cost model (IFRS) On January 1, 2017, on their issue date, Diogenes Inc. purchased 9%, $200,000, 10-year bonds. Interest is paid annually on December 31. Diogenes uses the amortized cost model and the effective-interest method for amortizing premium or discount. The current market rate was.
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11.Under the cost/amortized cost model, holding gains are a) recognized in net income only when realized. b) recognized in other comprehensive income. c) recognized depending on management's intention. d) not recognized at all. 12.Equity investments that are accounted for under the cost model will result in a) recognition of dividend income only when actually received. b) expensing.
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Pr. 9-123Equity method (ASPE) On January 1, 2013, Titanic Corp. bought 30,000 shares of the available 100,000 common shares of IcebergInc., a publicly traded firm. This acquisition provided Titanic with significant influence. Titanic paid $700,000 cash for the investment. At the time of the acquisition, Icebergreported assets of $2,500,000 and liabilities.
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