Question & Answer

Jana Kingston Corporation enters into a lease on January 1, 2014, that does not transfer ownership or contain a bargain-purchase option. It covers 3 years of the equipment’s 8-year useful life, and the present value of the minimum lease payments is less than 90% of the fair value of the asset leased. Prepare Jana Kingston’s journal entry to record its January 1, 2014, annual lease payment of $35,000.

Make out a case from a deep green perspective for rejecting the ‘social efficiency’ approach to the environment.

On January 1, 2014, Novotna Company purchased $400,000, 8% bonds of Aguirre Co. for $369,114. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2019. Novotna Company uses the effective-interest method to amortize discount or premium. On January 1, 2016, Novotna Company sold the bonds for $370,726 after receiving interest to meet its liquidity needs. Instructions (a) Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as available-for-sale. (b) Prepare the amortization schedule for the bonds. (c) Prepare the journal entries to record the semiannual interest on July 1, 2014, and December 31, 2014. (d) If the fair value of Aguirre bonds is $372,726 on December 31, 2015, prepare the necessary adjusting entry. (Assume the fair value adjustment balance on January 1, 2015, is a debit of $3,375.) (e) Prepare the journal entry to record the sale of the bonds on January 1, 2016.

Use the information from IFRS18-6, but assume Turner uses the cost-recovery method. Prepare the company’s 2014 journal entries.

On January 1, 2014, Ellen Greene Company makes the two following acquisitions. 1. Purchases land having a fair value of $200,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $337,012. 2. Purchases equipment by issuing a 6%, 8-year promissory note having a maturity value of $250,000 (interest payable annually). The company has to pay 11% interest for funds from its bank. Instructions (Round answers to the nearest cent.) (a) Record the two journal entries that should be recorded by Ellen Greene Company for the two purchases on January 1, 2014. (b) Record the interest at the end of the first year on both notes using the effective-interest method.

Burke Company has purchased two tracts of land. One tract will be the site of its new manufacturing plant, while the other is being purchased with the hope that it will be sold in the next year at a profit. How should these two tracts of land be reported in the balance sheet?

Why would the adjustable peg system have been less suitable in the world of the mid-1970s than it was back in the 1950s?

Callaway Corp. has a deferred tax asset account with a balance of $150,000 at the end of 2014 due to a single cumulative temporary difference of $375,000. At the end of 2015, this same temporary difference has increased to a cumulative amount of $500,000. Taxable income for 2015 is $850,000. The tax rate is 40% for all years. Instructions (a) Record income tax expense, deferred income taxes, and income taxes payable for 2015, assuming that it is probable that the deferred tax asset will be realized. (b) Assuming that it is probable that $30,000 of the deferred tax asset will not be realized, prepare the journal entry at the end of 2015 to recognize this probability.

Joni Hyde Inc. has the following amounts reported in its general ledger at the end of the current year. Organization costs $24,000 Trademarks 15,000 Discount on bonds payable 35,000 Deposits with advertising agency for ads to promote goodwill of company 10,000 Excess of cost over fair value of net identifi able assets of acquired subsidiary 75,000 Cost of equipment acquired for research and development projects; the equipment has an alternative future use 90,000 Costs of developing a secret formula for a product that is expected to be marketed for at least 20 years 80,000 Instructions (a) On the basis of the information above, compute the total amount to be reported by Hyde for intangible assets on its balance sheet at year-end. (b) If an item is not to be included in intangible assets, explain its proper treatment for reporting purposes.

Bandung Corporation began 2014 with a $92,000 balance in the Deferred Tax Liability account. At the end of 2014, the related cumulative temporary difference amounts to $350,000, and it will reverse evenly over the next 2 years. Pretax accounting income for 2014 is $525,000, the tax rate for all years is 40%, and taxable income for 2014 is $405,000. Instructions (a) Compute income taxes payable for 2014. (b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2014. (c) Prepare the income tax expense section of the income statement for 2014 beginning with the line “Income before income taxes.”

Jonah has the choice of paying Rita $10,000 today or $40,000 in ten years. Assume Jonah can earn a 12 percent after-tax rate of return. Which should he choose?

In examining financial statements, financial analysts often write off goodwill immediately. Comment on this procedure.

Where, if at all, should the following items be classified on a balance sheet? (a) Goods out on approval to customers. (b) Goods in transit that were recently purchased f.o.b. destination. (c) Land held by a realty firm for sale. (d) Raw materials. (e) Goods received on consignment. (f) Manufacturing supplies.

What are the two ways that other comprehensive income may be displayed (reported)?

In which of the following industries is collusion likely to occur: bricks, beer, margarine, cement, crisps, washing powder, blank DVDs, carpets?

Describe the ideal mutual fund for investors who wish to generate tax-free income but also maintain a low degree of interest rate risk. (LO2)

Draw another two indifference curves on Figure 4.5, one outward from and one inward from the original curve. Read off various combinations of pears and oranges along these two new curves and enter them on a table like Table 4.2.

Inventory information for Part 311 of Monique Aaron Corp. discloses the following information for the month of June. June 1 Balance 300 units @ $10 June 10 Sold 200 units @ $24 11 Purchased 800 units @ $12 15 Sold 500 units @ $25 20 Purchased 500 units @ $13 27 Sold 300 units @ $27 Instructions (a) Assuming that the periodic inventory method is used, compute the cost of goods sold and ending inventory under (1) LIFO and (2) FIFO. (b) Assuming that the perpetual inventory method is used and costs are computed at the time of each withdrawal, what is the value of the ending inventory at LIFO? (c) Assuming that the perpetual inventory method is used and costs are computed at the time of each withdrawal, what is the gross profit if the inventory is valued at FIFO? (d) Why is it stated that LIFO usually produces a lower gross profit than FIFO?

Dover Company began operations in 2014 and determined its ending inventory at cost and at LCNRV at December 31, 2014, and December 31, 2015. This information is presented below. Cost Net Realizable Value 12/31/14 $346,000 $322,000 12/31/15 410,000 390,000 (a) Prepare the journal entries required at December 31, 2014, and December 31, 2015, assuming that the inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method is used. (b) Prepare journal entries required at December 31, 2014, and December 31, 2015, assuming that the inventory is recorded at cost and a perpetual system using the loss method is used. (c) Which of the two methods above provides the higher net income in each year?

Green Day Corporation has outstanding 400,000 shares of $10 par value common stock. The corporation declares a 5% stock dividend when the fair value of the stock is $65 per share. Prepare the journal entries for Green Day Corporation for both the date of declaration and the date of distribution.

How does pulforming differ from pultrusion?

Sosa Excavating Inc. is purchasing a bulldozer. The equipment has a price of $100,000. The manufacturer has offered a payment plan that would allow Sosa to make 10 equal annual payments of $16,274.53, with the first payment due one year after the purchase. Instructions (a) How much total interest will Sosa pay on this payment plan? (b) Sosa could borrow $100,000 from its bank to finance the purchase at an annual rate of 9%. Should Sosa borrow from the bank or use the manufacturer’s payment plan to pay for the equipment?

Explain how savings institutions could use interest rate futures to reduce interest rate risk. (LO4)

How rivalrous in consumption are each of the following: (a) a can of drink; (b) public transport; (c) a radio broadcast; (d) the sight of flowers in a public park?

Electrodes in arc welding are divided into two categories. Name and define the two types.