Question: Hamilton Container Company reported the following

> True Image Copier Company leases a multifunction copier to Fabach Incorporated. The lease term is 4 years with no renewal options; the economic life of the copier is 7 years. The fair value of the copier is $14,000, and True Image Company’s equipment car

> Mr. Kay Food Mart Inc., as lessee, enters into a lease agreement on July 1, 2018, to lease nonspecialized mobile refrigeration equipment from Pollet Products. The cost of the equipment to Pollet is $180,000. The following information is relevant to the l

> In 2018, Thom Inc. discovered an error in its 2015 financial statements. The firm recorded $8,500,000 of depreciation expense on its equipment instead of recording $9,500,000. Thom has a constant tax rate of 40% and reports 3 years of comparative income

> IFRS. Using the information provided in E18-15, assume now that Stewart Standard and Kane Kite are IFRS reporters. Required: a. Determine the lessor’s classification of the lease. b. Measure the right-of-use asset and the lease liability at January

> On January 1, 2019, Kane Kite Company leased a nonspecialized fabric-cutting machine from Stewart Standard, Inc. Under the terms of the lease, Kane Kite must pay $200,000 on January 1 of each year, starting in 2019, over a 9-year term. The lease terms do

> Carrie-Ann Fashions, Inc. entered into a 5-year lease with Reese Rentals to occupy an office building. The economic life of the building is 30 years. The building had a fair value of $8,500,000 and Carrie-Ann has an option to purchase the building at the

> Seal Container Corporation (SCC) signed a lease agreement on January 1, 2018, to lease new forklift equipment. The terms of the lease follow. • The lease has a term of 10 years. There are no purchase or renewal options. • SCC makes the annual lease pay

> Vanity Jewelers Incorporated signed a lease agreement on July 1, 2020, to lease diamond-polishing equipment from Whitehead Industries. The following information is relevant to the lease agreement. • The term of the lease is 7 years with no renewal optio

> Kloth Fabric Store operates in Philadelphia, Pennsylvania, where sales taxes are 7% of sales. Kloth collected $27,860 on sales made this month, including the sales price and sales taxes. The company uses a periodic inventory system. Prepare the journal e

> On January 1, 2018, Lima Leasing Company (LLC) acquired an airplane to be leased to LA Sky Company. LLC paid $950,000 to acquire the plane, which is also its fair value. The lease terms follow. • Annual rental payments of $190,000 are due January 1 of e

> On January 1, 2018, Temple Leasing Company (TLC) acquired a fleet of stock vehicles to be leased to Delaware River Company. TLC paid $275,000 to acquire the vehicles, which is also the fair value of the fleet. The lease terms follow. • Annual rental pay

> SouthSide Services leases several computer servers from Sharpe Computing Company. The lease agreement includes consulting and training updates. The standalone prices charged by Sharpe for each separate component are $850,000 for the servers and $150,000

> Using the same information provided in E17-8, assume that Meyer-Swift invested in tax-free municipal bonds. The bonds pay interest of $1,000 each year. In addition, a new tax law enacted at the beginning of Year 2 reduced the corporate tax rate to 30%.

> On June 1 of the current year, Tedesco Publishers collected $432,000 for 4-year online subscriptions to its Houston Style Magazine. Tedesco has a December 31 year-end. Prepare the journal entries required on the date Tedesco collects the subscriptions an

> Meyer-Swift Construction Equipment Manufacturers engaged in an installment sale with one of its major customers. The firm negotiated the terms of the installment sale for a specialized piece of equipment; full payment is required within 3 years. We prese

> J.W. Jones Markets, Inc. accepts prepaid grocery orders for home and commercial delivery. This year, the company collected $160,000 in advance orders and delivered $48,000 of the advance orders. The company paid $15,000 in insurance premiums for a policy

> Fortunes Hotel Associates reported the following income information for the current year: Required: a. Prepare the journal entry to record the tax provision for the current year. b. Are there any differences between the federal income tax rate and For

> Oliver Starshine Group provided the following income information from its first 3 years of operation. Oliver offers a 1-year warranty on its commercial floor polishing system. The company estimates its warranty cost at 10% of sales. Required: a. Comp

> Blue Collar Clothing, Inc. acquired a new fabric-cutting machine at the beginning of the current year. The machine cost $600,000 with no residual value expected. Blue Collar uses the straight-line method for financial reporting assuming a 6-year useful l

> Synthia Manufacturing Corporation reported pre-tax book income of $3,250,000 for the current year. • The change in the difference in the basis of plant assets is $430,000. The book basis is higher than the tax basis. • Of the Synthia’s pre-tax book inc

> Roth Tile and Carpets, Incorporated operates in Blue Bay, Wisconsin, where sales taxes are 6% of sales. Roth’s sales this month amounted to $2,560,500. The company uses a periodic inventory system. Prepare the journal entry to record sales for the curren

> Based on the information provided in E17-19, assume that Lewis Eagle Corporation reported the following income levels for both book and tax purposes for the following year. Assume that Lewis Eagle passed the more-likely-than-not test. Based on an analys

> Andre Company reported a $192,640 balance in its deferred tax liability account at the beginning of Year 5. The deferred tax liability was the result of using the straight-line method on its books and an accelerated depreciation method for tax purposes.

> Lewis Eagle Corporation concluded that it was able to exclude $2,500,000 in income from its current tax return. Income before the exclusion is $6,000,000. There are no book-tax differences. This income is subject to a 30% tax rate. Based on its technical

> In 2018, Meg Inc. discovered an error in its 2015 financial statements. The firm recorded $11,000,000 of depreciation expense on its equipment instead of recording $10,000,000. Meg has a constant tax rate of 40% and reports 3 years of comparative income

> On January 1, Jefferson Company acquired 25% of the outstanding voting shares of Tremont Corporation at a cost of $1,340,000 by acquiring 20,000 of the total 80,000 outstanding shares at a cost of $67 per share. During the year, Tremont reported $875,000

> IFRS. Prepare the journal entry needed to record the partial sale of the investment acquired in BE16-9. Assume that Turner sold 12,800 of the Fenwick shares for $47 per share in 2017 and the fair value of the remaining shares is $41 per share on December

> Using the information provided in E17-17, assume that in Year 8, DiVito determined that it is more likely than not that it will earn only $50,000 in the future to be used to offset the net operating loss carryforward. Required: a. Prepare the journal

> Sills Products acquired $2,960,000 face value, 5% bonds as a heldto-maturity investment on January 1 of the current year when the market rate of interest was 10%. Interest is paid annually each December 31. Sills purchased the bonds, which mature in 6 ye

> Ginger Spice Distributors acquired 14,500 shares of its own common shares at a cost of $64 per share. After 6 months, Ginger sold half of the shares in the open market at $70 per share. Prepare the journal entries to record the acquisition and sale of th

> Assume that Cornish Corporation has 2,500,000 shares of $3 par value common stock issued and outstanding. The company is authorized to issue 10 million shares. Due to increased share prices, the corporation decided to implement a 2-for-1 stock split. Pre

> Wonder Spring Water Company recently employed a consultant to revise its production and distribution procedures. In order to compensate the consultant, Wonder issued 1,000 shares of its $1 par value common stock. Those shares are not publicly traded, but

> Carlos Company decided to raise additional capital in the equity market. It engaged an underwriter to float a new common share issue. The issue consisted of 5,000 shares of $3 par value common stock. Carlos paid the underwriter 2% of the total issue pric

> At the beginning of the current year, Niles Corporation issued 1,600 shares of its own $2 par value common stock for $19 per share. Prepare the journal entry required to record the issuance of the shares.

> Perdido Products, Inc. issued 2,500 shares of its common stock. The common stock has a stated value of $10 per share and was issued at $24 per share. Prepare the journal entry required to record the issuance of the shares.

> On September 1, Year 1, Royal Corp., a newly formed company, had the following stock issued and outstanding: • Common stock, no par, $1 stated value, 5,000 shares originally issued for $15 per share. • Preferred stoc

> IFRS. Almonzo’s Flower Box, Inc., an IFRS reporter, operates a floral delivery service. The company has three delivery trucks. It recently signed a contract to make deliveries for two local florists. The delivery route for one of the florists has been un

> U.S. GAAP, IFRS. Match the U.S. GAAP term with the IFRS term. There may be more than one match, and responses may be repeated.

> DiVito Imported Provisions, Inc. reported pre-tax accounting income equal to its taxable income as follows: All tax changes are enacted into law as of the beginning of the year. No tax rate changes are known until the year of change. DiVito elects the c

> Using the information provided in BE15-13 and the following stockholders’ equity section of Oz Lollypop Company, adjust the balance sheet for the correction of the error. Data from BE15-13: In its audit of Oz Lollypop Company, Able and

> Is an annual impairment test required for all long-term operating assets? Explain

> Does recognizing an impairment loss on a long-term operating asset have the same effect on the financial statements as recording depreciation expense and amortization expense? Explain

> Can firms group all property, plant, and equipment for purposes of performing an impairment test? Explain

> Is the impairment test for tangible, long-term operating assets identical to the impairment test for intangible assets? Explain.

> How does a firm classify the acquisition of a plant asset by issuing common stock?

> In its audit of Oz Lollypop Company, Able and Ready, CPAs, discovered in 2018 that the firm had not recorded a $975,000 expense in 2014 (for both book and tax purposes). Oz never paid this amount due on the invoice it received. Assuming a constant tax ra

> Does the direct reporting format provide complete flexibility in terms of the line items to report in operating activities?

> How do firms classify interest paid and interest received on the statement of cash flows under IFRS?

> How do firms reclassify gains and losses on the disposal of property, plant, and equipment? Why is this reclassification appropriate?

> What are the two different reporting formats for preparing the operating activities section of the statement of cash flows?

> Does a firm classify the acquisition of a plant asset by common stock issuance as both an investing and a financing activity on the cash flow statement in the year of acquisition?

> To what does the total cash flow computed on the statement of cash flows reconcile?

> What is the primary purpose of the cash flow statement?

> Can financial analysts use the required disclosure of interest and taxes paid under the indirect reporting format to offset the inconsistent classification of interest expense and tax paid within the operating activities section of the cash flow statemen

> Are cash flow disclosure requirements the same for both the direct and indirect reporting formats?

> Do firms subtract pension expense from net income to determine operating cash flows?

> Sterzel Company declared its quarterly cash dividend on March 31 of the current year. The dividend of $.75 per share was to be paid on May 1 to the shareholders of record as of April 18. The company reported 120,000 shares issued with 15,500 shares held

> Under the indirect method, do firms subtract bond discount amortization from net income to determine operating cash flows?

> What approach is used in preparing the operating activities, investing activities, and financing activities sections of the statement of cash flows?

> Use the same information provided in E17-14. Now assume that in Year 4, taxable income is $280,000. This amount is higher than anticipated by management, and they now believe that they will be able to utilize the entire NOL carryforward. Required: a.

> Under the indirect method, do companies using IFRS begin the operating section with net income?

> Does the accounting equation explain the change in cash during the period?

> What is the cash flow statement?

> Do accounting errors that self-correct within two accounting periods require correcting entries?

> When does a change in reporting entity occur?

> What type of change would a change from LIFO to FIFO be considered?

> How do firms account for a change in depreciation method?

> What are the direct and indirect effects of changes in accounting principle on the financial statements?

> Using the information provided in BE15-10, assume that Chief Company retired all of the shares on July 5 (rather than holding shares in the treasury and reissuing them). Prepare the journal entries to record the acquisition and retirement of the treasury

> How do firms account for changes in accounting estimates and changes in accounting principles?

> Aurora Incorporated provided the following information Aurora reported no book-tax differences and elected the carryback/carryforward option for its Year 3 loss. Future tax rates are not expected to change. Required: a. Prepare any necessary journal

> Explain the two approaches that firms use to report accounting changes.

> How do firms report accounting changes under the retrospective method?

> Does a firm need to correct an error that misclassifies equipment as inventory if total assets are correct?

> Are accounting changes permitted in financial statements?

> When is a potentially dilutive security antidilutive?

> When can firms use the treasury stock method?

> Does the after-tax interest add-back for convertible debt require the amount of the coupon interest paid for the period of the earnings per share computation?

> Does a company with dilutive convertible debt and dilutive convertible preferred shares have to add the after-tax interest and after-tax preferred dividends back to net income in the numerator computation of diluted EPS?

> Can diluted earnings per share on bottom-line net income or net loss exceed basic earnings per share?

> On March 15, Chief Company acquired 20,000 shares of its own $2 par value common shares at a cost of $17 per share. Chief had originally issued the shares at $12 per share. On July 5, Chief sold 7,000 of the shares in the open market at $20 per share. On

> Loggins Lumber Company experienced net losses during the first 2 years of its operations. Year 3 was the company’s first profitable year. Loggins uses the same accounting methods for financial reporting and its tax returns. The company

> If all potentially dilutive securities are dilutive (as opposed to antidilutive), will diluted earnings per share be the same whether there are actual or hypothetical conversions of potentially dilutive securities?

> Does the if-converted assumption apply only to diluted earnings per share?

> Do firms adjust the numerator of the EPS ratio for preferred dividends if the dividends are declared?

> Do earnings per share disclosures include a reconciliation of the numbers used in the computation of EPS to the information provided in the financial statements?

> Is an entity required to present earnings per share on income from continuing operations and earning per share on discontinued operations on the face of its financial statements?

> How do financial statement analysts use earnings per share information?

> Do corporations report the projected benefit obligation and the plan assets as individual accounts on the sponsor corporation’s balance sheet?

> Does a company report the funded status of the defined-benefit plan as calculated by an actuary on the financial statement?

> The corridor method requires computing the amortization of net actuarial gains and losses under the straightline method. Will the amortization be the same each year?

> Does the going-concern concept justify the use of the projected benefit obligation in all pension calculations?

> Phlash Photo Labs, Ltd. provided you the following information for the 3 years ended December 31. Required: a. Assuming no book-tax differences and no uncertainty regarding the realization of the tax benefits of the net operating loss carryforward, prep

> ABC Toy Company earned $357 million of net income in 2019 and paid $45 million in dividends. It issued no new stock. Complete the stockholders’ equity section for ABC Toy Company:

> Does the employee always absorb the total risk of loss on pension plan assets?

> When accounting for employee stock options, will a reduction of compensation expense or compensation “income” occur in future periods?

> Do companies with equity-based compensation plans make adjustments for changes in the market price of the stock?

> How do companies account for stock-based compensation?

> Does aggregating the five components of pension cost always results in a reduction in income?

> What is the allocation period used to expense stock-based compensation?