Accounting Expert Answers & Study Resources : Page 449

113.On January 1, 2016 Kefauver Company purchased a piece of equipment for $375,000. The equipment had a useful life of 10 years and a residual value of $10,000. The company initially starts recording depreciation on a straight-line method. The following independent situations occur at the beginning of 2018: a. The life of.

137.Paolo, Inc. (the lessor) entered into a sales-type lease with another company on January 1, 2016. The lease was for five years with $40,000 due at the end of each year. The cost of the equipment on Paolo's books was $140,000. Paolo uses an interest rate of 8%. ? Required:(Round all answers.

41.Betty Company began operations in 2016 and uses the average cost method in costing its inventory. In 2017, Betty is investigating a change to the LIFO method. Before making that determination, Betty desires to determine what effect such a change will have on net income. Betty has compiled the following.

122.What are the two methods for reporting changes as approved by GAAP provide a brief explanation of each? 123.According to GAAP how should items be reported in order that information is reported in a relevant manner? 124.When is a retrospective adjustment considered impractical to make? 125.Provide three examples of changes in principle. .

88. Jamison Company is preparing its statement of cash flows for the current year. During the year, the company retired two issuances of debt and properly recorded the transactions. These transactions were as follows: ? 1) Paid cash of $115,000 to retire bonds payable with a face value of $120,000 and a book.

73. A statement of cash flows contains the following sections: a. net cash flow from operating activities b. cash flows from investing activities c. cash flows from financing activities d. investing and financing activities not affecting cash ? A list of items that appear on the statement is provided below: ____ 1. Depreciation expense ____ 2. Proceeds from sale of land at a gain ____ 3. Decrease in accounts payable ____ 4. Conversion.

139.One Republic Company leased equipment to Maps Company on January 1, 2016. The lease term is for a four-year period. The annual lease payments must be made on January 1 of each year, with the first payment due on January 1, 2016. Additional information relating to the lease is as.

12.?The present value of an amount decreases as the discount rate increases. a. True b. False 13.?The present value factors for any discount rate increase as the number of periods increases. a. True b. False 14.?To determine an unstated interest rate, divide the future amount by the present value then divide by the number of periods. a. True b. False 15.An annuity isthe same amount.

118.The Laura Company has the following errors on its books as of December 31, 2017. The books for 2017 have not yet been closed. a. In 2017, fully depreciated equipment (with no residual value) that originally cost $8,000 was sold for $700 as scrap. The company credited the $700 proceeds to Equipment. b. On.

62. A company's unearned rental revenue account increases from the beginning to the end of the year. In the statement of cash flows using the direct method, the cash collected from tenants would be a. rent revenue plus unearned rent revenue at the beginning of the year. b. rent revenue plus the increase in unearned.

1.?One type of compensation provided by the time value of money is compensation for expected consumption. a. True b. False 2.?One type of compensation provided by the time value of money is compensation for risk. a. True b. False 3.Compounding is the conversion of future cash flow amounts to their present value. a. True b. False 4.?Discounting is the conversion of future cash flow amounts.

127.What is the GAAP requirement of accounting for a change in estimates? 128.What is a change in reporting entity and how is an adjustment handled? 129.What are the 4 steps involved in the basic framework for the analysis and correction of an error? 130.What is the difference between counterbalancing errors and noncounterbalancing errors? 131.Most.

99. What working paper information does a company need for its statement of cash flows under the direct method? 100. Why do companies use the spreadsheet method to prepare the statements of cash flows? 101. What are the four steps necessary to complete the statement of cash flows using the visual inspection method? 102. What is the.

1.An advantage of retrospective adjustment method is that it achieves comparability and consistency between accounting periods. a.True b.False 2.A change in a reporting entity is accounted for by a prospective adjustment so that all financial statements are presented for the same entity. a.True b.False 3.Correction of an error involves corrections to reported financial statements similar to.

22. Which statement best defines a company's operating cash inflows? a. collections from customers and shareholders b. collections from customers and shareholders and earnings from investments c. collections from customers and earnings from investments d. collections from customers 23. According to current GAAP, cash flow per share statistics a. are required disclosures only if EPS information is disclosed. b. are not allowed disclosures. c. are required disclosures for.

143.What are the four capitalization criteriaevaluatedto determine whether to record a lease as operating or capital lease? 144.What items are included in the determination of minimum lease payment? 145.What are the five capitalization criteria under IFRS? .

81. Accounting information from the records of the Sarah Jane's Clothing Corporation at the end of 2016 is shown below: Net income $100,000 Proceeds from sale of long-term investment in marketable securities 20,000 Proceeds from sale of building 80,000 Gain on sale of building 35,000 Increase in accounts receivable 5,000 Increase in accounts payable 7,000 Cash dividends declared 5,000 Depreciation expense 18,000 Patent amortization expense 1,000 Amortization of premium on.

89. Your friend is in business and wants your advice on preparing and interpreting the statement of cash flows for 2016. Information regarding the business is as follows: Cash received from customers $ 175,000 Cash paid to vendors 75,000 Cash paid to employees 140,000 Cash paid for interest 35,000 Depreciation expense 40,000 Cash paid in acquiring equipment 375,000 Cash received from issuing bonds 250,000 Cash received.

135.South Bend Corporation purchased equipment in December 2015 for $150,000. South Bend leased the equipment to the Kansas Company on January 1, 2016. Lease payments of $43,000 are to be made at the end of each year for six years. The present value of the minimum lease payments at 14%.

31.When disclosing the impact of a retrospective adjustment for the change from LIFO to FIFO in 2017, which of the following impacts is not expected to be reported in the comparative financial statements when two-year comparative statements are presented? a.impact on beginning inventory for 2016 b.impact on 2016 net income c.impact on ending.

21.Change in an accounting principle is accounted for a.prospectively. b.by a prior period adjustment. c.by a retrospective application of a new accounting principle. d.by constructive application of a new accounting principle. 22.A retrospective adjustment requires a change in the a.prior period financial statements to look like the current period financial statements. b.current period income to reflect the.

Exhibit 21-2In preparation for completing the statement of cash flows using the spreadsheet method, Williams Company provided the following information relating to patents for 2016: Balance, 1/1/2016 $4,800 Purchase of 10-year life patent for cash 2,000 Sale of patent at book value (1,400) Amortization of patents   (290) Balance, 12/31/2016 $5,110 ? 52. Refer to Exhibit 21-2. The Cash Flows from Operating Activities.

1. Receipts of dividends from investments in equity securities would be reported in the financing activities section of the cash flow statement. a. True b. False 2. Generating positive cash flows from operations is one of the most important cash flow activities of a company. a. True b. False 3. GAAP allows the use of either.

104. Current GAAP permits two methods of calculating and reporting a company's net cash flow from operating activities on its statement of cash flows. ? Required: ?Identify the two methods. Which method does the FASB prefer? Which method do most companies use and why? 105. The statement of cash flows classifies cash inflows and outflows into.

155.In certain respects, IFRS provide more principles-based guidance in accounting for lease transactions. Describe the differences between IFRS and GAAP in lease capitalization criteria that demonstrate the more principles-based approach of the IFRS. 156.Lessees may try to avoid having a lease be classified as a capital lease. Explain why a lessee.

92.Exceptions exist in the retrospective restatement requirements when accounting for errors under GAAP IFRS I. No No II. No Yes III. Yes Yes IV. Yes No ? a. I b. II c. III d. IV 93.IFRS differ from U.S. GAAP regarding the indirect effects of a change in accounting principle in that IFRS a. do not specify when the indirect effects should be reported or what disclosures are required. b. do not specify when the indirect effects should.

22.The future value of an annuity due is lower if the discount rate is higher. a. True b. False 23.The present value of an annuity is the present value of a series of equal cash flows that occur in the future. a. True b. False 24.To calculate the present value of four annual installments of $1,000 at an 8% interest.

84. The following is a list of items to be included in the 2016 statement of cash flows for the Winter Company: Beginning cash balance $ 90,000 Decrease in accounts payable 4,000 Increase in accounts receivable 3,000 Payment of dividends 6,000 Loss on sale of equipment 3,000 Decrease in prepaid expenses 1,000 Proceeds from bonds 46,000 Depreciation expense 12,000 Purchase of building 80,000 Net loss 32,000 Decrease in inventory 6,000 Proceeds from sale of.

141.Merchant Company found themselves in need of cash. In an effort to shore up their financial situation they sold land to Natalie Company for $3.5 million and immediately leased it back. 1) The land was recorded on Merchant's book at $1.5 million 2) The term of the noncancelable lease is 20 years. 3).

132.Motor City, Inc. leased equipment from Des Moines Company on January 1, 2016. Annual December 31 payments of $15,000 were required. The present value of these payments, discounted at 9% for nine years, is $89,929 (rounded). The lease is a direct financing lease. ? Required: ?Prepare all December 31, 2016, entries for Des.

108.On January 1, Year 1, the Dole Company purchased an asset that cost $154,000. The asset had an expected useful life of seven years and no estimated residual value. The company initially decided to use sum-of-the-years'-digits (SYD) depreciation for both financial accounting and income tax purposes. Depreciation expense for the.

32. A company sold equipment for $5,000. The equipment originally cost $16,000 and had accumulated depreciation of $12,000. Which of the following statements is correct regarding the statement of cash flows prepared using the indirect method to report operating activities? a. $5,000 will be added to net income. b. Investing activities will reflect proceeds of.

130.San Juan Corp. leased some equipment to Glendale, Inc. on January 1, 2016. The lease required six annual payments, with the first payment due on December 31, 2016. The cost, and also fair value, of the equipment was $140,000, and there was no estimated residual value at the end of.

79. The following information relates to the Maxwell Company for 2016:   Gain on sale of land $ 800 Bond payable premium amortization 300 Decrease in accounts payable 700 Increase in prepaid expenses 100 Net income 9,400 Purchased equipment 15,000 Increase in salaries payable 400 Proceeds from sale of land 7,000 Decrease in inventories 2,100 Payment of dividends 1,600 Depreciation expense 1,000 ? Required: Compute net cash provided by operating activities for the Maxwell Company for 2016. .

92. The Percy's Landing Co. reported the following condensed income statement for 2016: Percy's Landing CO. Condensed Income Statement For the Year Ended December 31, 2016 Sales ? $305,000 Cost of goods sold ?  150,000 Gross profit ? $155,000 Operating expenses: ? ? ? Depreciation. $42,000 ? ? Insurance expense 5,000 ? ? Salaries expense 80,000 127,000 Income before taxes ? $ 28,000 Income taxes ?     6,000 Net income ? $ 22,000 ? Also during 2016, the company's current assets and current liabilities changed as follows: ? Increase (Decrease) Cash $49,500 Accounts.

147.How is the present value of the minimum lease payment computed? 148.What are the disclosure requirements for lessee’s of operating leases and what two disclosures are required for all leases? 149.In whatthree classifications can lessors categorize their leases? 150.What are the two components of net receivables for leases? .

11.A change in accounting entity is limited to presenting consolidated or combined financial statements in place of individual statements or a change in the subsidiaries that make up a group of companies in which one would report either as consolidated financial statements or changing the mix of companies included in.

105.In 2018, Bevins Company decided to change from LIFO to FIFO due to better representation of the flow of inventory and costs. Bevins started the business in 2016. Bevin’s tax rate is 35%. The following analysis was provided by management: Ending Inventory ? LIFO ? FIFO ? Net Income 12/31/2016 $375,650 $405,900 975,000 12/31/2017 $360,450 $410,750 1,350,000 12/31/2018 $365,975 $445,775 1,389,500   Required:1) Prepare the journal entry necessary to record the.

11. Under the direct method of reporting operating cash flows, a company deducts its operating cash outflows from its operating cash inflows to determine its net cash provided by (or used) in operating activities. a. True b. False 12. Under the direct method of reporting operating cash flows, a company computes the cash.

61.Refer to Exhibit 22-3. If the revised estimated useful life of the truck is a total of eight years, what is the amount of depreciation expense that Katrina should report in its 2017 income statement? a.$14,000 b.$16,000 c.$17,500 d.$28,000 62.Lavender Company purchased a machine on January 1, 2016, for $80,000. The machine has an estimated.

51.A change in accounting estimate is always accounted for a.using a prior period adjustment. b.retrospectively. c.using the cumulative effect method. d.prospectively. 52.A change in accounting estimate affected by a change in accounting principle should be reported as a.a change in accounting principle. b.a change in accounting estimate and a change in accounting principle. c.a change in accounting estimate. d.neither.

71.A company accounts for the correction of a material error of a past period that it discovers in the current period as a.a retrospective accounting change. b.an adjustment to the current period. c.a prospective adjustment. d.a prior period restatement. 72.Which of the following errors normally would not be automatically corrected over two accounting periods? a.failure to.

94. Provide three examples of noncash investing and financing activities. 95. What are the five categories of operating cash outflows under the direct method of reporting cash flows? 96. What are the four steps necessary to prepare the spreadsheet and its statement of cash flows? 97. How should the sale of a depreciable asset be presented on the.

152.What three criteria must be met for the lessor to account for the lease of land as a sales-type lease? 153.Current GAAP requires a lessee to account for certain leases as capital leases. ? Required: What are the criteria and the rationale for requiring companies to account for leases as capital leases? .

76. The information below was taken from the records of the Piper Company for the year ended December 31, 2016: Acquisition of building $250,000 Amortization of premium on bonds payable 2,000 Decrease in deferred income tax liability 8,000 Decrease in inventories 6,000 Decrease in salaries payable 2,000 Depreciation expense 24,000 Dividends paid 11,000 Loss on sale of land 18,000 Increase in accounts payable 14,000 Increase in accounts receivable 5,000 Issuance of long-term.

42. The IFRS categories of cash flows are a. long-term changes and short-term changes. b. operating and other. c. operating, investing, and financing. d. operating and nonoperating. 43. Mayberry’s statement of cash flow is completed using the visual inspection method. Information regarding the Mayberry Company in 2016 appears below: Net income $140,000 Dividends paid 20,000 Decrease in inventory 15,000 Increase in accounts payable 30,000 Proceeds from issue of common stock 70,000 Depreciation.

110.In Western reviewed their estimated warranty costs which at that time were 5% of sales. This estimated was based upon the warranty accrual method. In 2016 net sales were $3,250,000 they recorded warranty expense of $162,500. Due to some pending changes in product improvement and certain economic factors the company.

81.All of the following would be reported retrospectively by restating prior period's financial results except a.change from the completed-contract method to the percentage-of-completion method for long-term construction contracts. b.correction of an error in previous periods. c.change from LIFO to FIFO. d.change from the straight-line depreciation method to the sum-of-the-years'-digits method. 82.Langley Company received merchandise on.

133.Explain the direct and indirect effects of a change in accounting principles. 134.Most errors are discovered automatically through proper use of the double-entry system or by the internal or external auditors. However, some errors escape detection until after they have been included in the published financial statements of a company.Required:Describe three.

115.On January 1, 2016, Sarah Company purchased for $60,000 a truck that had an estimated life of five years and no residual value at the end of its useful life. Sarah uses straight-line depreciation. The cost of the truck was charged to Repairs Expense when purchased in 2016. Required: a. Ignoring income taxes,.