Question: During 2019 (its first year of operations)
During 2019 (its first year of operations) and 2020, Fieri Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2021, Fieri decided to change to the average method for both financial reporting and tax purposes. Income components before income tax for 2019, 2020, and 2021 were as follows: 
Dividends of $20 million were paid each year. Fieri ’s fiscal year ends December 31. Required: 1. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle. (Ignore income taxes.) 2. Prepare the 2021–2020 comparative income statements. 3. Determine the balance in retained earnings at January 1, 2020, as Fieri reported previously using the FIFO method. 4. Determine the adjustment to the January 1, 2020, balance in retained earnings that Fieri would include in the 2021–2020 comparative statements of retained earnings or retained earnings column of the statements of shareholders’ equity to revise it to the amount it would have been if Fieri had used the average method.
> The Eldorado Corporation’s controller prepares adjusting entries only at the end of the reporting year. The following adjusting entries were prepared on December 31, 2021: Additional information: 1. The company borrowed $120,000 on Marc
> On January 1, 2021, JPS Industries borrowed $300,000 from Austin Bank by issuing a three-year, floating rate note based on LIBOR, with interest payable semi-annually on June 30 and December of each year. JPS entered into a three-year interest rate swap a
> Cleveland Company is a U.S. firm with a U.S. dollar functional currency that manufactures copper-related products. It forecasts that it will sell 5,000 feet of copper tubing to one of its largest customers at a price of ¥50,000,000. Although t
> Arlington Steel Company is a producer of raw steel and steel-related products. On January 3, 2022, Arlington enters into a firm commitment to purchase 10,000 tons of iron ore pellets from a supplier to satisfy spring production demands. The purchase is t
> On January 1, 2021, LLB Industries borrowed $200,000 from Trust Bank by issuing a two-year, 10% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value he
> On January 1, 2021, LLB Industries borrowed $200,000 from Trust Bank by issuing a two-year, 10% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value he
> LLB Industries borrowed $200,000 from Trust Bank by issuing a two-year, 10% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. Its intent was
> Refer to the data provided in E 21–27 for Red, Inc. Required: Prepare the statement of cash flows (direct method) for Red, Inc. Use the T-account method to assist in your analysis. Data from E 21-27: Comparative balance sheets for 2021
> Assume the same facts as in BE 6–5 but that Tulane Tires reports under IFRS. How much revenue should Tulane recognize under IFRS? Data from BE 6-5: Tulane Tires wrote a contract for a $100,000 sale of tires to the new Garden District Tour Company. Tulan
> Refer to the data provided in E 21–27 for Red, Inc. Required: Prepare the statement of cash flows for Red, Inc., using the indirect method to report operating activities. Data from E 21-27: Comparative balance sheets for 2021 and 2020,
> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Determine the specific eight-digit Codification citation (XXX-XX-XX-X) for accounting for each of the following items: 1. Disclosure of interest and income tax paid if
> The statement of cash flows (as well as the balance sheet) includes within cash the notion of cash equivalents. The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally accepted accounting principles. Requir
> Mayer Corporation has a defined benefit pension plan. Mayer’s policy is to fund the plan annually, cash payments being made at the end of each year. Data relating to the pension plan for 2021 are as follows: Required: Recreate the journ
> Comparative balance sheets for 2021 and 2020, a statement of income for 2021, and additional information from the accounting records of Red, Inc., are provided below. Additional information from the accounting records: a. During 2021, $230 million of equ
> Refer to the data provided in E 21–25 for Clear Transmissions Company. Required: Prepare the cash flows from operating activities section of the statement of cash flows for Clear Transmissions Company using the indirect method. Data fr
> Portions of the financial statements for Clear Transmissions Company are provided on the next page. Required: Prepare the cash flows from operating activities section of the statement of cash flows for Clear Transmissions Company using the direct method.
> Refer to the data provided in E 21–23 for Myriad Products Company. Required: Prepare the cash flows from the operating activities section of the statement of cash flows for Myriad Products Company using the indirect method. Data from E
> Portions of the financial statements for Myriad Products are provided below. Required: Prepare the cash flows from operating activities section of the statement of cash flows for Myriad Products Company using the direct method.
> The income statement and a schedule reconciling cash flows from operating activities to net income are provided below ($ in thousands) for Peach Computers. Required: 1. Calculate each of the following amounts for Peach Computers: a. Cash received from cu
> GoodBuy sells gift cards redeemable for GoodBuy products either in store or online. During 2021, GoodBuy sold $1,000,000 of gift cards, and $840,000 of the gift cards were redeemed for products. As of December 31, 2021, $30,000 of the remaining gift card
> The income statement and the cash flows from the operating activities section of the statement of cash flows are provided below for Syntric Company. The merchandise inventory account balance neither increased nor decreased during the reporting period. Sy
> The following schedule relates the income statement with cash flows from operating activities, derived by both the direct and indirect methods, in the format illustrated by Illustration 21–11 in the chapter. The amounts for income state
> The statement of retained earnings of Gary Larson Publishers is presented below. Required: For the transactions that affected Larson’s retained earnings, reconstruct the journal entries that can be used to determine cash flows to be rep
> On January 1, 2021, Beilich Enterprises bought 20% of the outstanding common stock of Wolfe Construction Company for $600 million cash. Wolfe’s net income for the year ended December 31, 2021, was $300 million. During 2021, Wolfe declar
> Wilson Foods Corporation leased a commercial food processor on September 30, 2021. The five-year finance lease agreement calls for Wilson to make quarterly lease payments of $195,774, payable each September 30, December 31, March 31, June 30, with the fi
> In preparation for developing its statement of cash flows for the year ended December 31, 2021, Millennium Solutions, Inc. collected the following information: Required: 1. In Millennium’s statement of cash flows, what were net cash inf
> In preparation for developing its statement of cash flows for the year ended December 31, 2021, Rapid Pac, Inc., collected the following information: Required: 1. In Rapid Pac’s statement of cash flows, what were net cash inflows (or ou
> National Food Services, Inc., borrowed $4 million from its local bank on January 1, 2021, and issued a 4-year installment note to be paid in four equal payments at the end of each year. The payments include interest at the rate of 10%. Installment paymen
> Most Solutions, Inc., issued 10% bonds, dated January 1, with a face amount of $640 million on January 1, 2021. The bonds mature in 2031 (10 years). For bonds of similar risk and maturity the market yield is 12%. Interest expense is recorded at the effec
> Wolfgang Kitchens has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2021, Wolfgang decided to change to the LIFO method. Net income in 2021 was correctly stated as $90 million. If the com
> On May 1, 2021,Varga Tech Services signed a $6,000 consulting contract with Shaffer Holdings. The contract requires Varga to provide computer technology support services whenever requested over the period from May 1, 2021, to April 30, 2022, with Shaffer
> Flay Foods has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2021, Flay decided to change to the LIFO method. As a result of the change, net income in 2021 was $80 million. If the company
> Millington Materials is a leading supplier of building equipment, building products, materials, and timber for sale, with over 200 branches across the Mid-South. On January 1, 2021, management decided to change from the average inventory costing method t
> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Determine the specific eight-digit Codification citation (XXX-XX-XX-X) for accounting for each of the following items: 1. Reporting most changes in accounting principle
> Companies often invest in the common stock of other corporations. The way we report these investments depends on the nature of the investment and the investor’s motivation for the investment. The FASB Accounting Standards Codification represents the sing
> The Crump Companies, Inc. has ownership interests in several public companies. At the beginning of 2021, the company’s ownership interest in the common stock of Silken Properties increased to the point that it became appropriate to begin using the equity
> In keeping with a modernization of corporate statutes in its home state, UMC Corporation decided in 2021 to discontinue accounting for reacquired shares as treasury stock. Instead, shares repurchased will be viewed as having been retired, reassuming the
> For each of the following inventory errors occurring in 2021, determine the effect of the error on 2021’s cost of goods sold, net income, and retained earnings. Assume that the error is not discovered until 2022 and that a periodic inve
> Below are three independent and unrelated errors. a. On December 31, 2020, Wolfe-Bache Corporation failed to accrue salaries expense of $1,800. In January 2021, when it paid employees for the December 27–January 2 workweek, Wolfe-Bache made the following
> At the end of 2020, Majors Furniture Company failed to accrue $61,000 of interest expense that accrued during the last five months of 2020 on bonds payable. The bonds mature in 2032. The discount on the bonds is amortized by the straight-line method. The
> Wilkins Food Products Inc. acquired a packaging machine from Lawrence Specialists Corporation. Lawrence completed construction of the machine on January 1, 2019. In payment for the machine Wilkins issued a three-year installment note to be paid in three
> Kerianne paints landscapes, and in late 2021 placed four paintings with a retail price of $250 each in the Holmstrom Gallery. Kerianne’s arrangement with Holmstrom is that Holmstrom will earn a 20% commission on paintings sold to gallery patrons. As of D
> On December 12, 2021, an investment in equity securities costing $80,000 was sold for $100,000. The total of the sale proceeds was credited to the investment in equity securities account. Required: 1. Prepare the journal entry to correct the error, assum
> Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning of 2021. The inventory as reported at the end of 2020 using LIFO would have been $60,000 higher using FIFO. Retained earnings
> During 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts: 2019 understated by $120,000 2020 overstated by 150,000 WMC uses the periodic inventory system and the FIFO
> The Commonwealth of Virginia filed suit in October 2019, against Northern Timber Corporation seeking civil penalties and injunctive relief for violations of environmental laws regulating forest conservation. When the financial statements were issued in 2
> Dreighton Engineering Group receives royalties on a technical manual written by two of its engineers and sold to William B. Irving Publishing, Inc. Royalties are 10% of net sales, receivable on October 1 for sales in January through June and on April 1 f
> The Canliss Milling Company purchased machinery on January 2, 2019, for $800,000. A five-year life was estimated and no residual value was anticipated. Canliss decided to use the straight-line depreciation method and recorded $160,000 in depreciation in
> For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2018 for $2,560,000. Its useful life was estimated to be six years with a $160,000 residual value. At
> SSG Cycles manufactures and distributes motorcycle parts and supplies. Employees are offered a variety of share-based compensation plans. Under its nonqualified stock option plan, SSG granted options to key officers on January 1, 2021. The options permit
> Walters Audio Visual Inc. offers an incentive stock option plan to its regional managers. On January 1, 2021, options were granted for 40 million $1 par common shares. The exercise price is the market price on the grant date—$8 per share. Options cannot
> Dowell Fishing Supply, Inc., sold $50,000 of Dowell Rods on December 15, 2021, to Bassadrome. Because of a shipping backlog, Dowell held the inventory in Dowell’s warehouse until January 12, 2022 (having assured Bassadrome that it would deliver sooner if
> On January 1, 2021, Adams-Meneke Corporation granted 25 million incentive stock options to division managers, each permitting holders to purchase one share of the company’s $1 par common shares within the next six years, but not before December 31, 2023
> Heidi Software Corporation provides a variety of share-based compensation plans to its employees. Under its executive stock option plan, the company granted options on January 1, 2021, that permit executives to acquire 4 million of the company’s $1 par c
> On January 1, 2021, David Mest Communications granted restricted stock units (RSUs) representing 30 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within three years. After the recipients of the RSUs
> Magnetic-Optical Corporation offers a variety of share-based compensation plans to employees. Under its restricted stock unit plan, the company on January 1, 2021, granted restricted stock units (RSUs) representing 4 million of its $1 par common shares t
> As part of its stock-based compensation package, on January 1, 2021, International Electronics granted restricted stock units (RSUs) representing 50 million $1 par common shares. At exercise, holders of the RSUs are entitled to receive cash or stock equa
> As part of its stock-based compensation package, International Electronics granted 24 million stock appreciation rights (SARs) to top officers on January 1, 2021. At exercise, holders of the SARs are entitled to receive cash or stock equal in value to th
> Facebook Inc. included the following disclosure note in an annual report: Share-Based Compensation (in part) Compensation expense related to these grants is based on the grant date fair value of the RSUs and is recognized on a straight-line basis over th
> As part of its stock-based compensation package, International Electronics (IE) granted 24 million stock appreciation rights (SARs) to top officers on January 1, 2021. At exercise, holders of the SARs are entitled to receive stock equal in value to the e
> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Determine the specific seven-, eight-, or nine-digit Codification citation (XXX-XX-XX-X) for accounting for each of the following items: 1. Initial measurement of stock
> During 2021, its first year of operations, McCollum Tool Works entered into the following transactions relating to shareholders’ equity. The corporation was authorized to issue 100 million common shares, $1 par per share. Jan. 2 Issued 35 million common
> TopChop sells hairstyling franchises. TopChop receives $50,000 from a new franchisee for providing initial training, equipment, and furnishings that have a stand-alone selling price of $50,000. TopChop also receives $30,000 per year for use of the TopCho
> PHN Foods granted 18 million of its no-par common shares to executives, subject to forfeiture if employment is terminated within three years. The common shares have a market price of $5 per share on January 1, 2020, the grant date. Required: 1. What jour
> As part of its executive compensation plan, Vertovec Inc. granted 54,000 of its no-par common shares to executives, subject to forfeiture if employment is terminated within three years. Vertovec’s common shares have a market price of $5 per share on Janu
> Information from the financial statements of Ames Fabricators, Inc., included the following: Ames’s net income for the year ended December 31, 2021, is $500,000. The income tax rate is 25%. Ames paid dividends of $5 per share on its pre
> Stanley Department Stores reported net income of $720,000 for the year ended December 31, 2021. Additional Information: Common shares outstanding at Jan. 1, 2021 80,000 Incentive stock options (vested in 2020) outstanding throughout 2021 24,000 (Each opt
> On January 1, 2021, Tru Fashions Corporation awarded restricted stock units (RSUs) representing 12 million of its $1 par common shares to key personnel, subject to forfeiture if employment is terminated within three years. After the recipients of the RSU
> On December 31, 2020, Berclair Inc. had 200 million shares of common stock and 3 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2021, Berclair purchased 24 million shares of its common stock as treasur
> On December 31, 2020, Berclair Inc. had 200 million shares of common stock and 3 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2021, Berclair purchased 24 million shares of its common stock as treasur
> On December 31, 2020, Berclair Inc. had 200 million shares of common stock and 3 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2021, Berclair purchased 24 million shares of its common stock as treasur
> At December 31, 2020, Albrecht Corporation had outstanding 373,000 shares of common stock and 8,000 shares of 9.5%, $100 par value cumulative, nonconvertible preferred stock. On May 31, 2021, Albrecht sold for cash 12,000 shares of its common stock. No c
> At December 31, 2020, Albrecht Corporation had outstanding 373,000 shares of common stock and 8,000 shares of 9.5%, $100 par value cumulative, nonconvertible preferred stock. On May 31, 2021, Albrecht sold for cash 12,000 shares of its common stock. No c
> Assume the same facts as in BE 6–25. How much revenue will Saar recognize in 2021 under this arrangement if Saar reports under IFRS? Data from BE 6-25: Assume the same facts as in BE 6–24 except that the trade name “Saar Associates” is not well known in
> Hardaway Fixtures’ balance sheet at December 31, 2020, included the following: Shares issued and outstanding: Common stock, $1 par $800,000 Nonconvertible preferred stock, $50 par 20,000 On July 21, 2021, Hardaway issued a 25% stock dividend on its commo
> The Alford Group had 202,000 shares of common stock outstanding at January 1, 2021. The following activities affected common shares during the year. There are no potential common shares outstanding. 2021: Feb. 28 Purchased 6,000 shares of treasury stock.
> For the year ended December 31, 2021, Norstar Industries reported net income of $655,000. At January 1, 2021, the company had 900,000 common shares outstanding. The following changes in the number of shares occurred during 2021: Apr. 30 Sold 60,000 share
> Tesla Motors’s disclosure notes for the year ending December 31, 2017, included the following regarding its $0.001 par common stock: EMPLOYEE STOCK PURCHASE PLAN—Our employees are eligible to purchase our common stock through payroll deductions of up to
> Allied Paper Products, Inc., offers a restricted stock award plan to its vice presidents. On January 1, 2021, the company granted 16 million of its $1 par common shares, subject to forfeiture if employment is terminated within two years. The common share
> When companies offer new equity security issues, they publicize the offerings in the financial press and on Internet sites. Assume the following were among the equity offerings reported in December 2021: New Securities Issues Equity American Materials Tr
> Ozark Distributing Company is primarily engaged in the wholesale distribution of consumer products in the Ozark Mountain regions. The following disclosure note appeared in the company’s 2021 annual report: Note 5. Convertible Preferred Stock (in part): T
> On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances: During January 2021, the following transactions occur: January 2: Issue an additional 2,000 shares of $1 par value common stock for $40,000. January 9: P
> Comparative balance sheets for Softech Canvas Goods for 2021 and 2020 are shown below. Softech pays no dividends and instead reinvests all earnings for future growth. Required: 1. Determine the return on shareholders’ equity for 2021. 2
> The balance sheet of Consolidated Paper, Inc., included the following shareholders’ equity accounts at December 31, 2020: During 2021, several events and transactions affected the retained earnings of Consolidated Paper. Required: 1. Pr
> Assume the same facts as in BE 6–24 except that the trade name “Saar Associates” is not well known in the marketplace and the owner provides no advertising or other benefits to a licensee of the Saar Associates trade name during the license period. How m
> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Determine the specific eight-digit Codification citation (XXX-XX-XX-X) for accounting for each of the following items: 1. Requirements to disclose within the financial
> Douglas McDonald Company’s balance sheet included the following shareholders’ equity accounts at December 31, 2020: On March 16, 2021, a 4% common stock dividend was declared and distributed. The market value of the co
> The shareholders’ equity of Core Technologies Company on June 30, 2020, included the following: Common stock, $1 par; authorized, 8 million shares; issued and outstanding, 3 million shares $ 3,000,000 Paid-in capital—excess of par 12,000,000 Retained ear
> The shareholders’ equity of ILP Industries includes the items shown below. The board of directors of ILP declared cash dividends of $8 million, $20 million, and $150 million in its first three years of operation—2021,
> Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2021. At January 1, 2021, the corporation had outstanding 105 million common shares, $1 par per share. Required: 1. From the information pr
> In keeping with a modernization of corporate statutes in its home state, UMC Corporation decided in 2021 to discontinue accounting for reacquired shares as treasury stock. Instead, shares repurchased will be viewed as having been retired, reassuming the
> At December 31, 2020, the balance sheet of Meca International included the following shareholders’ equity accounts: Required: Assuming that Meca International views its share buybacks as treasury stock, record the appropriate journal en
> In 2021, Western Transport Company entered into the treasury stock transactions described below. In 2019, Western Transport had issued 140 million shares of its $1 par common stock at $17 per share. Required: Prepare the appropriate journal entry for eac
> In 2021, Borland Semiconductors entered into the transactions described below. In 2018, Borland had issued 170 million shares of its $1 par common stock at $34 per share. Required: Assuming that Borland retires shares it reacquires, record the appropriat
> Borner Communications’ articles of incorporation authorized the issuance of 130 million common shares. The transactions described below effected changes in Borner’s outstanding shares. Prior to the transactions, Borner
> Saar Associates sells two licenses to Kim & Company on September 1, 2021. First, in exchange for $100,000, Saar provides Kim with a copy of its proprietary investment management software, which Saar does not anticipate updating and which Kim can use perm
> The following is from the 2021 annual report of Kaufman Chemicals, Inc.: Kaufman reports accumulated other comprehensive income in its balance sheet as a component of shareholders’ equity as follows: Required: 1. What is comprehensive i
> How might your answer differ if we assume Sterling Properties prepares its financial statements according to International Financial Reporting Standards (IFRS)? The interest rate on high-grade corporate bonds is 6%. Data from E 17-8: Pension data for St
> Pension data for Sterling Properties include the following: Required: Determine pension expense for 2021.
> Frazier Refrigeration amended its defined benefit pension plan on December 31, 2021, to increase retirement benefits earned with each service year. The consulting actuary estimated the prior service cost incurred by making the amendment retroactive to pr
