Arness Woodcrafters sells $250,000 of receivables to Commercial Factors, Inc. on a with recourse basis. Commercial assesses a finance charge of 5% and retains an amount equal to 4% of accounts receivable. Arness estimates the fair value of the recourse liability to be $8,000. Prepare the journal entry for Arness to record the sale.
> Presented below is information related to James Garfield Corp. July 1 James Garfield Corp. sold to Warren Harding Co. merchandise having a sales price of $8,000 with terms 2/10, net/60. Garfield records its sales and receivables net. 5 Accounts recei
> Danica Patrick, Inc. includes the following account among its trade receivables. Instructions Age the balance and specify any items that apparently require particular attention at year-end.
> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marks-and-Spencer-Annual-report-and-financial-statements-20
> As the new staff person in your company’s treasury department, you have been asked to conduct research related to a proposed transfer of receivables. Your supervisor wants the authoritative sources for the following items that are discussed in th
> On December 31, 2014, Firth Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest-rate note. The note was issued to yield 10% interest. Unfortunately, during 2016, Firth began to experience financial difficulty. As a result
> What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed?
> Briefly describe the impairment evaluation process and assessment of receivables on an individual or collective basis.
> On October 1, 2014, Arden Farm Equipment Company sold a pecan-harvesting machine to Valco Brothers Farm, Inc. In lieu of a cash payment Valco Brothers Farm gave Arden a 2-year, $120,000, 8% note (a realistic rate of interest for a note of this type). T
> Marvin Company is a subsidiary of Hughes Corp. The controller believes that the yearly allowance for doubtful accounts for Marvin should be 2% of net credit sales. Given the recession and the high interest rate environment, the president, nervous that
> Salen Company finances some of its current operations by assigning accounts receivable to a finance company. On July 1, 2014, it assigned, under guarantee, specific accounts amounting to $150,000. The finance company advanced to Salen 80% of the accoun
> Horizon Outfitters Company includes in its trial balance for December 31 an item for Accounts Receivable $789,000. This balance consists of the following items: Illustrate how these items should be shown in the balance sheet as of December 31. &n
> What is the theoretical justification of the allowance method is as contrasted with the direct write-off method of accounting for bad debts?
> What are the basic problems that occur in the valuation of accounts receivable?
> The chief accountant for Dickinson Corporation provides you with the following list of accounts receivable written off in the current year. Dickinson Corporation follows the policy of debiting Bad Debt Expense as accounts are written off. The chie
> What are two methods of recording accounts receivable transactions when a cash discount situation is involved? Which is more theoretically correct? Which is used in practice more of the time? Why?
> The trial balance before adjustment of Reba McIntyre Inc. shows the following balances. Instructions Give the entry for estimated bad debts assuming that the allowance is to provide for doubtful accounts on the basis of (a) 4% of gross accounts
> At the end of 2014, Aramis Company has accounts receivable of $800,000 and an allowance for doubtful accounts of $40,000. On January 16, 2015, Aramis Company determined that its receivable from Ramirez Company of $6,000 will not be collected, and manag
> Use the information from BE7-2, assuming Restin Co. uses the net method to account for cash discounts. Prepare the required journal entries for Restin Co. In BE7-2 On June 1, 2014, it made sales of $50,000 with terms 3/15, n/45. On June 12, 2014, Res
> On January 1, 2014, Lombard Co. sells property for which it had paid $690,000 to Sargent Company, receiving in return Sargent’s zero-interest-bearing note for $1,000,000 payable in 5 years. What entry would Lombard make to record the sale, assumi
> On June 3, Arnold Company sold to Chester Company merchandise having a sale price of $3,000 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $90, terms n/30, was received by Chester on June 8 from John Booth Transport Service for th
> Your accounts receivable clerk, Mitra Adams, to whom you pay a salary of $1,500 per month, has just purchased a new Acura. You decided to test the accuracy of the accounts receivable balance of $82,000 as shown in the ledger. The following information
> Jim Carrie Company shows a balance of $181,140 in the Accounts Receivable account on December 31, 2013. The balance consists of the following. Instructions Illustrate how the information above should be shown on the balance sheet of Jim Carrie Co
> Presented below are a number of independent situations. 1. Checking account balance $925,000; certificate of deposit $1,400,000; cash advance to subsidiary of $980,000; utility deposit paid to gas company $180. 2. Checking account balance $600,000; a
> The controller for Clint Eastwood Co. is attempting to determine the amount of cash to be reported on its December 31, 2014, balance sheet. The following information is provided. 1. Commercial savings account of $600,000 and a commercial checking acco
> Dold Acrobats lent $16,529 to Donaldson, Inc., accepting Donaldson’s 2-year, $20,000, zero-interestbearing note. The implied interest rate is 10%. Prepare Dold’s journal entries for the initial transaction, recognition of interest each year
> Define a “compensating balance.” How should a compensating balance be reported?
> Milner Family Importers sold goods to Tung Decorators for $30,000 on November 1, 2014, accepting Tung’s $30,000, 6-month, 6% note. Prepare Milner’s November 1 entry, December 31 annual adjusting entry, and May 1 entry for the collection of
> Duncan Company reports the following financial information before adjustments. Instructions Prepare the journal entry to record Bad Debt Expense assuming Duncan Company estimates bad debts at (a) 1% of net sales and (b) 5% of accounts receivabl
> Use the information presented in BE7-4 for Wilton, Inc. In BE7-4 Wilton, Inc. had net sales in 2014 of $1,400,000. At December 31, 2014, before adjusting entries, the balances in selected accounts were: Accounts Receivable $250,000 debit, and Allowan
> Because of calamitous earthquake losses, Bernstein Company, one of your client’s oldest and largest customers, suddenly and unexpectedly became bankrupt. Approximately 30% of your client’s total sales have been made to Bernstein Company du
> Moon Hardware is planning to factor some of its receivables. The cash received will be used to pay for inventory purchases. The factor has indicated that it will require “recourse” on the sold receivables. Explain to the controller of Moon
> When is the financial components approach to recording the transfers of receivables used? When should a transfer of receivables be recorded as a sale?
> Indicate three reasons why a company might sell its receivables to another company.
> Wilton, Inc. had net sales in 2014 of $1,400,000. At December 31, 2014, before adjusting entries, the balances in selected accounts were: Accounts Receivable $250,000 debit, and Allowance for Doubtful Accounts $2,400 credit. If Wilton estimates that 2%
> What is the fair value option? Where do companies that elect the fair value option report unrealized holding gains and losses?
> What is “imputed interest”? In what situations is it necessary to impute an interest rate for notes receivable? What are the considerations in imputing an appropriate interest rate?
> Of what merit is the contention that the allowance method lacks the objectivity of the direct write-off method? Discuss in terms of accounting’s measurement function.
> Indicate how well the percentage-of-sales method and the aging method accomplish the objectives of the allowance method of accounting for bad debts.
> Presented below is information from Perez Computers Incorporated. July 1 Sold $20,000 of computers to Robertson Company with terms 3/15, n/60. Perez uses the gross method to record cash discounts. 10 Perez received payment from Robertson for the full
> Assume that Toni Braxton Company has recently fallen into financial difficulties. By reviewing all available evidence on December 31, 2014, one of Toni Braxton’s creditors, the National American Bank, determined that Toni Braxton would pay back o
> What are the reasons that a company gives trade discounts? Why are trade discounts not recorded in the accounts like cash discounts?
> Restin Co. uses the gross method to record sales made on credit. On June 1, 2014, it made sales of $50,000 with terms 3/15, n/45. On June 12, 2014, Restin received full payment for the June 1 sale. Prepare the required journal entries for Restin Co. &
> Use the information presented in BE7-15 for Horton Corporation. Prepare any entries necessary to make Horton’s accounting records correct and complete. In BE7-15 (a) Deposit in transit $5,500. (b) Bank service charges $25. (c) Interest credit
> Horton Corporation is preparing a bank reconciliation and has identified the following potential reconciling items. For each item, indicate if it is (1) added to balance per bank statement, (2) deducted from balance per bank statement, (3) added to bal
> Finman Company designated Jill Holland as petty cash custodian and established a petty cash fund of $200. The fund is reimbursed when the cash in the fund is at $15. Petty cash receipts indicate funds were disbursed for office supplies $94 and miscella
> What is the normal procedure for handling the collection of accounts receivable previously written off using the direct write-off method? The allowance method?
> Recent financial statements of General Mills, Inc. report net sales of $12,442,000,000. Accounts receivable are $912,000,000 at the beginning of the year and $953,000,000 at the end of the year. Compute General Mills’ accounts receivable turnover
> Use the information presented in BE7-11 for Arness Woodcrafters but assume that the recourse liability has a fair value of $4,000, instead of $8,000. Prepare the journal entry and discuss the effects of this change in the value of the recourse liabilit
> Use the information in BE7-9 for Wood. Assume that the receivables are sold with recourse. Prepare the journal entry for Wood to record the sale, assuming that the recourse liability has a fair value of $7,500. In BE7-9 Wood Incorporated factored $15
> Wood Incorporated factored $150,000 of accounts receivable with Engram Factors Inc. on a without recourse basis. Engram assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possi
> On October 1, 2014, Chung, Inc. assigns $1,000,000 of its accounts receivable to Seneca National Bank as collateral for a $750,000 note. The bank assesses a finance charge of 2% of the receivables assigned and interest on the note of 9%. Prepare the Oc
> Kraft Enterprises owns the following assets at December 31, 2014. What amount should be reported as cash?
> What are the general rules for measuring and recognizing gain or loss by both the debtor and the creditor in an impairment?
> Distinguish among the following: (1) A general checking account, (2) An imprest bank account, and (3) A lockbox account.
> You are evaluating Woodlawn Racetrack for a potential loan. An examination of the notes to the financial statements indicates restricted cash at year-end amounts to $100,000. Explain how you would use this information in evaluating Woodlawn’s liq
> What is the accounts receivable turnover, and what type of information does it provide?
> In what accounts should the following items be classified? (a) Coins and currency. (b) U.S. Treasury (government) bonds. (c) Certificate of deposit. (d) Cash in a bank that is in receivership. (e) NSF check (returned with bank statement). (f) Dep
> Explain how the accounting for bad debts can be used for earnings management.
> What may be included under the heading of “cash”?
> During 2010, George Winston Corporation spent $170,000 in research and development costs. As a result, a new product called the New Age Piano was patented. The patent was obtained on October 1, 2010, and had a legal life of 20 years and a useful life o
> Horace Greeley Corporation was organized in 2013 and began operations at the beginning of 2014. The company is involved in interior design consulting services. The following costs were incurred prior to the start of operations. Instructions (a) C
> In early January 2013, Outkast Corporation applied for a trade name, incurring legal costs of $16,000. In January 2014, Outkast incurred $7,800 of legal fees in a successful defense of its trade name. Instructions (a) Compute 2013 amortization, 12/31
> Rolanda Marshall Company, organized in 2013, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2014. Instructions Prepare the necessary entries to clear the Int
> Presented below is selected information for Alatorre Company. 1. Alatorre purchased a patent from Vania Co. for $1,000,000 on January 1, 2012. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2022. During
> Joni Hyde Inc. has the following amounts reported in its general ledger at the end of the current year. Instructions (a) On the basis of the information above, compute the total amount to be reported by Hyde for intangible assets on its balance s
> Presented below is selected information related to Martin Burke Inc. at year-end. All these accounts have debit balances. Instructions Identify which items should be classified as an intangible asset. For those items not classified as an intangib
> Why does the accounting profession make a distinction between internally created intangibles and purchased intangibles?
> Presented below is a list of items that could be included in the intangible assets section of the balance sheet. 1. Investment in a subsidiary company. 2. Timberland. 3. Cost of engineering activity required to advance the design of a product to the
> Sinise Industries acquired two copyrights during 2014. One copyright related to a textbook that was developed internally at a cost of $9,900. This textbook is estimated to have a useful life of 3 years from September 1, 2014, the date it was published.
> Nieland Industries had one patent recorded on its books as of January 1, 2014. This patent had a book value of $288,000 and a remaining useful life of 8 years. During 2014, Nieland incurred research and development costs of $96,000 and brought a patent
> Indicate whether the following items are capitalized or expensed in the current year. (a) Purchase cost of a patent from a competitor. (b) Research and development costs. (c) Organizational costs. (d) Costs incurred internally to create goodwill.
> Treasure Land Corporation incurred the following costs in 2014. Prepare the necessary 2014 journal entry or entries for Treasure Land.
> Capriati Corporation commenced operations in early 2014. The corporation incurred $60,000 of costs such as fees to underwriters, legal fees, state fees, and promotional expenditures during its formation. Prepare journal entries to record the $60,000 ex
> Use the information provided in BE12-7. In BE12-7 Waters Corporation purchased Johnson Company 3 years ago and at that time recorded goodwill of $400,000. The Johnson Division’s net assets, including the goodwill, have a carrying amount of $800
> Kenoly Corporation owns a patent that has a carrying amount of $300,000. Kenoly expects future net cash flows from this patent to total $210,000. The fair value of the patent is $110,000. Prepare Kenoly’s journal entry, if necessary, to record th
> On September 1, 2014, Winans Corporation acquired Aumont Enterprises for a cash payment of $700,000. At the time of purchase, Aumont’s balance sheet showed assets of $620,000, liabilities of $200,000, and owners’ equity of $420,000. The fai
> Gershwin Corporation obtained a franchise from Sonic Hedgehog Inc. for a cash payment of $120,000 on April 1, 2014. The franchise grants Gershwin the right to sell certain products and services for a period of 8 years. Prepare Gershwin’s April 1
> Larry Byrd, Inc., spent $68,000 in attorney fees while developing the trade name of its new product, the Mean Bean Machine. Prepare the journal entries to record the $68,000 expenditure and the first year’s amortization, using an 8-year life. &n
> Use the information provided in BE12-1. Assume that at January 1, 2016, the carrying amount of the patent on Celine Dion’s books is $43,200. In January, Celine Dion spends $24,000 successfully defending a patent suit. Celine Dion still feels the
> Celine Dion Corporation purchases a patent from Salmon Company on January 1, 2014, for $54,000. The patent has a remaining legal life of 16 years. Celine Dion feels the patent will be useful for 10 years. Prepare Celine Dion’s journal entries to
> An intangible asset with an estimated useful life of 30 years was acquired on January 1, 2004, for $540,000. On January 1, 2014, a review was made of intangible assets and their expected service lives, and it was determined that this asset had an estim
> Recently, a group of university students decided to incorporate for the purposes of selling a process to recycle the waste product from manufacturing cheese. Some of the initial costs involved were legal fees and office expenses incurred in starting th
> In 2013, Austin Powers Corporation developed a new product that will be marketed in 2014. In connection with the development of this product, the following costs were incurred in 2013: research and development costs $400,000; materials and supplies con
> Research and development activities may include (a) personnel costs, (b) materials and equipment costs, and (c) indirect costs. What is the recommended accounting treatment for these three types of R&D costs?
> What is the nature of research and development costs?
> Simon Company determines that its goodwill is impaired. It finds that its implied goodwill is $360,000 and its recorded goodwill is $400,000. The fair value of its identifiable assets is $1,450,000. What is the amount of goodwill impaired?
> Explain how losses on impaired intangible assets should be reported in income.
> Braxton Inc. is considering the write-off of a limited-life intangible because of its lack of profitability. Explain to the management of Braxton how to determine whether a write-off is permitted.
> In examining financial statements, financial analysts often write off goodwill immediately. Comment on this procedure.
> What is goodwill? What is a bargain purchase?
> Explain the difference between artistic-related intangible assets and contract-related intangible assets.
> Izzy Inc. purchased a patent for $350,000 which has an estimated useful life of 10 years. Its pattern of use or consumption cannot be reliably determined. Prepare the entry to record the amortization of the patent in its first year of use.
> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marks-and-Spencer-Annual-report-and-financial-statements-2012.
> Matt Holmes recently joined Klax Company as a staff accountant in the controller’s office.Klax Company provides warehousing services for companies in several European cities. The location inKoblenz, Germany, has not been performing well due to incr
> Companies following international accounting standards are permitted to revalue fixed assets above the assets’ historical costs. Such revaluations are allowed under various countries’ standards and the standards issued by the IASB. Liberty In
> Falcetto Company acquired equipment on January 1, 2013, for $12,000. Falcetto elects to valuethis class of equipment using revaluation accounting. This equipment is being depreciated on a straightline basis over its 6-year useful life. There is no r
> Assume the same information as in IFRS11-11, except that Pujols intends to dispose of theequipment in the coming year. In IFRS11-11 Instructions (a) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014. (b) Prepar
> Assume the same information as in IFRS11-11, except that Pujols intends to dispose of the equipment in the coming year. In IFRS11-11 Instructions (a) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014.(b) Prepa
> Jurassic Company owns machinery that cost $900,000 and has accumulated depreciation of $380,000. The present value of expected future net cash flows from the use of the asset are expected to be $500,000. The fair value less cost of disposal of the equipm
> Brazil Group purchases a vehicle at a cost of $50,000 on January 2, 2014. Individual components of the vehicle and useful lives are as follows. Instructions (a) Compute depreciation expense for 2014, assuming Brazil depreciates the vehicle as a single u