On July 1, 2012, Moresan Company sold special-order merchandise on credit and received in return an interest-bearing note receivable from the customer. Moresan will receive interest at the prevailing rate for a note of this type. Both the principal and interest are due in one lump sum on June 30, 2013. On September 1, 2012, Moresan sold special-order merchandise on credit and received in return a zero-interest-bearing note receivable from the customer. The prevailing rate of interest for a note of this type is determinable. The note receivable is due in one lump sum on August 31, 2014. Moresan also has significant amounts of trade accounts receivable as a result of credit sales to its customers. On October 1, 2012, some trade accounts receivable were assigned to Indigo Finance Company on a non-notification (Moresan handles collections) basis for an advance of 75% of their amount at an interest charge of 8% on the balance outstanding. On November 1, 2012, other trade accounts receivable were sold on a without-recourse basis. The factor withheld 5% of the trade accounts receivable factored as protection against sales returns and allowances and charged a finance charge of 3%. Instructions (a) How should Moresan determine the interest revenue for 2012 on the: (1) Interest-bearing note receivable? Why? (2) Zero-interest-bearing note receivable? Why? (b) How should Moresan report the interest-bearing note receivable and the zero-interest-bearing note receivable on its balance sheet at December 31, 2012? (c) How should Moresan account for subsequent collections on the trade accounts receivable assigned on October 1, 2012, and the payments to Indigo Finance? Why? (d) How should Moresan account for the trade accounts receivable factored on November 1, 2012? Why?
> Diego, age 28, married Dolores, age 27, in 2016. Their salaries for the year amounted to $47,230 and they had interest income of $3,500. Diego and Dolores’ deductions for adjusted gross income amounted to $2,000, their itemized deductions were $11,800, a
> What is the formula for computing taxable income as summarized in the textbook?
> In 2016, Lou has a salary of $53,300 from her job. She also has interest income of $1,600 and dividend income of $400. Lou is single and has no dependents. During the year, Lou sold silver coins held as an investment for a $7,000 loss. Calculate the foll
> Leslie is a single taxpayer who is under age 65 and in good health. For 2016, she has a salary of $24,000 and itemized deductions of $1,000. Leslie is entitled to one exemption on her tax return. a. How much is Leslie’s adjusted gross income? b. What am
> 1. Arthur is 65 years old. He supports his father, who is 90 years old, blind, and has no income. For 2016, how many exemptions should Arthur claim on his tax return? a. 1 b. 2 c. 3 d. 4 e. 5 2. Taxpayers who are 65 or older get the benefit of: a. An ad
> 1. The current income tax system was: a. Designed solely to raise money to run the government b. Authorized by the founding fathers when the government was formed c. Not designed with social objectives in mind d. Initiated by the Sixteenth Amendment to t
> Rachel is single and has wages of $150,000 and dividend income of $90,000. She has no investment expenses. Calculate the amount of the 3.8 percent net investment income tax she must pay.
> Describe the difference between the standard deduction and itemized deductions. How should a taxpayer decide whether to take the standard deduction or claim itemized deductions?
> Marc’s brother, Phillip, who is a 20-year-old French citizen, lives in France for the full year. Marc supports Phillip while he attends college. Can Marc claim Phillip as a dependent? Why or why not?
> If Charles, a 16-year-old child model, earns $50,000 a year and is completely selfsupporting even though he lives with his parents, can his parents claim him as a dependent? Why or why not?
> What is the total dollar amount of personal and dependency exemptions which a married couple with one child and $80,000 of adjusted gross income would claim in 2016?
> Indicate, in each of the following situations, the number of exemptions the taxpayers are entitled to claim on their 2016 income tax returns. Number of Exemptions a. Donna, a 20-year-old single taxpayer, supports her mother, who lives in her own home. He
> Mary is single and supports her 30-year-old son who has income of $2,000 and lives in his own apartment. a. Can she claim him as a dependent? b. Can she claim head of household filing status? Why or why not?
> List each alternative filing status available to unmarried individual taxpayers and the circumstances under which the alternatives can be used.
> Jason and Mary are married taxpayers in 2016. They are both under age 65 and in good health. For this tax year, they have a total of $41,000 in wages and $700 in interest income. Jason and Mary’s deductions for adjusted gross income amount to $5,000 and
> Maggie is single and supports her 85-year-old parents who have no income and live in a home rented for them by Maggie. What is Maggie’s filing status and why?
> Jessica and Carl were married on July 1, 2016. What are their options for filing status for their 2016 taxes?
> Melissa and Aaron are married taxpayers with taxable income of $105,000. a. When you calculate their tax liability are you required to use the tax tables or the tax rate schedules, or does it matter? b. What is their 2016 tax liability?
> For each of the following cases, indicate the filing status for the taxpayer(s) for 2016 using the following legend: A – Single B – Married filing a joint return C – Married filing separate returns D – Head of household E – Qualifying widow(er) Case F
> Determine from the tax table in Appendix A, the amount of the income tax for each of the following taxpayers for 2016: Taxpayer(s) Filing Status Taxable Income Income Tax Allen Single $21,000 $______________ Boyd MFS 24,545 $__________
> For each of the following situations (none of the taxpayers claim dependents), indicate whether the taxpayer(s) is (are) required to file a tax return for 2016. Explain your answer. a. Helen is a single taxpayer with interest income in 2016 of $8,750. b.
> Nicoula is a server at a La Jolla restaurant. Nicoula received $1,200 in unreported tips during 2016 and owes Social Security and Medicare taxes on these tips. Her total income for the year, including the tips, is $4,300. Is Nicoula required to file an i
> Christine is a single 50-year-old taxpayer with no dependents. Her only income is $40,750 of wages. Calculate her taxable income and her tax liability. Please show your work.
> Frank, age 35, and Joyce, age 34, are married and file a joint income tax return for 2016. Their salaries for the year total $84,600 and they have taxable interest income of $3,900. They have no deductions for adjusted gross income. Their itemized deduct
> Jim (age 50) and Martha (age 49) are married with three dependent children. They file a joint return for 2016. Their income from salaries totals $49,500, and they received $10,125 in taxable interest, $5,000 in royalties, and $3,000 in other ordinary inc
> List three major purposes the tax system is meant to serve:
> Kross Company purchased a machine at a price of $100,000 by signing a note payable, which requires a single payment of $118,810 in 2 years. Assuming annual compounding of interest, what rate of interest is being paid on the loan?
> Using the appropriate interest table, compute the present values of the periodic amounts, shown below, due at the end of the designated periods. (a) $50,000 receivable at the end of each period for 8 periods compounded at 12%. (b) $50,000 payments to be
> Consider the loan in BE6-16. What payments must Zach Taylor make to settle the loan at the same interest rate but with the 6 payments beginning on the day the loan is signed? In BE6-16 Zach Taylor is settling a $20,000 loan due today by making 6 equal
> Zach Taylor is settling a $20,000 loan due today by making 6 equal annual payments of $4,727.53. Determine the interest rate on this loan, if the payments begin one year after the loan is signed.
> Adams Inc. will deposit $30,000 in a 12% fund at the end of each year for 8 years beginning December 31, 2012. What amount will be in the fund immediately after the last deposit?
> Amos Excavating Inc. is purchasing a bulldozer. The equipment has a price of $100,000. The manufacturer has offered a payment plan that would allow Amos to make 10 equal annual payments of $15,582, with the first payment due one year after the purchase.
> What would you pay for a $100,000 debenture bond that matures in 15 years and pays $10,000 a year in interest if you wanted to earn a yield of: (a) 8%? (b) 10%? (c) 12%?
> Using the appropriate interest table, answer each of the following questions. (Each case is independent of the others.) (a) What is the future value of $9,000 at the end of 5 periods at 8% compounded interest? (b) What is the present value of $9,000 due
> For each of the following cases, indicate (a) To what rate columns, and (b) To what number of periods you would refer in looking up the interest factor. 1. In a future value of 1 table: 2. In a present value of an annuity of 1 table: Annual Number
> Your client, Wyeth Leasing Company, is preparing a contract to lease a machine to Souvenirs Corporation for a period of 25 years. Wyeth has an investment cost of $421,087 in the machine, which has a useful life of 25 years and no salvage value at the end
> Chris Spear invested $15,000 today in a fund that earns 8% compounded annually. To what amount will the investment grow in 3 years? To what amount would the investment grow in 3 years if the fund earns 8% annual interest compounded semiannually?
> 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 the securi
> The Flatiron Pub provides catering services to local businesses. The following information was available for The Flatiron for the years ended December 31, 2011 and 2012. Flatiron management is preparing for a meeting with its bank concerning renewal of
> Occidental Petroleum Corporation reported the following information in a recent annual report. Notes to Consolidated Financial Statements Cash and Cash Equivalents. Cash equivalents consist of highly liquid investments. Cash equivalents totaled approxi
> Microsoft is the leading developer of software in the world. To continue to be successful Microsoft must generate new products, which requires significant amounts of cash. Shown below is the current asset and current liability information from Microsoft&
> Go to the book’s companion website and use the information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc. (a) What were the cash and cash equivalents reported by Coca-Cola and PepsiCo at the end of 2009?
> The financial statements of P&G are presented in Appendix 5B or can be accessed at the book’s companion website, www.wiley.com/college/kieso. Instructions Refer to P&G’s financial statements and the accompanying notes to answer the following questions.
> On September 30, 2011, Rolen Machinery Co. sold a machine and accepted the customer’s zero-interest-bearing note. Rolen normally makes sales on a cash basis. Since the machine was unique, its sales price was not determinable using Rolen’s normal pricing
> Valasquez Company sells office equipment and supplies to many organizations in the city and surrounding area on contract terms of 2/10, n/30. In the past, over 75% of the credit customers have taken advantage of the discount by paying within 10 days of t
> Part 1 On July 1, 2012, Wallace Company, a calendar-year company, sold special-order merchandise on credit and received in return an interest-bearing note receivable from the customer. Wallace Company will receive interest at the prevailing rate for a no
> 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. The president, nervous that the parent company might expect the subsidiary to sustain its
> Brubaker Inc., a manufacturer of high-sugar, low-sodium, low-cholesterol frozen dinners, would like to increase its market share in the Sunbelt. In order to do so, Brubaker has decided to locate a new factory in the Panama City, Florida, area. Brubaker w
> As the manager of the accounts receivable department for Beavis Leather Goods, Ltd., you recently noticed that Kelly Collins, your accounts receivable clerk who is paid $1,200 per month, has been wearing unusually tasteful and expensive clothing. (This i
> Presented below is information related to the Accounts Receivable accounts of Gulistan Inc. during the current year 2012. 1. An aging schedule of the accounts receivable as of December 31, 2012, is as follows. 2. The Accounts Receivable control account
> From inception of operations to December 31, 2012, Fortner Corporation provided for uncollectible accounts receivable under the allowance method: provisions were made monthly at 2% of credit sales; bad debts written off were charged to the allowance acco
> Presented below are a series of unrelated situations. 1. Halen Company’s unadjusted trial balance at December 31, 2012, included the following accounts. Halen Company estimates its bad debt expense to be 1½% of net sales
> On January 1, 2012, Botosan Company issued a $1,200,000, 5-year, zero-interest-bearing note to National Organization Bank. The note was issued to yield 8% annual interest. Unfortunately, during 2013 Botosan fell into financial trouble due to increased co
> Bill Jovi is reviewing the cash accounting for Nottleman, Inc., a local mailing service. Jovi’s review will focus on the petty cash account and the bank reconciliation for the month ended May 31, 2012. He has collected the following inf
> Sandburg Company requires additional cash for its business. Sandburg has decided to use its accounts receivable to raise the additional cash and has asked you to determine the income statement effects of the following contemplated transactions. 1. On Jul
> On December 31, 2012, Oakbrook Inc. rendered services to Begin Corporation at an agreed price of $102,049, accepting $40,000 down and agreeing to accept the balance in four equal installments of $20,000 receivable each December 31. An assumed interest ra
> On October 1, 2012, 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). The
> Consider the following independent situations. (a) Mark Yoders wishes to become a millionaire. His money market fund has a balance of $148,644 and has a guaranteed interest rate of 10%. How many years must Mark leave that balance in the fund in order to
> At the end of 2012, Sorter Company has accounts receivable of $900,000 and an allowance for doubtful accounts of $40,000. On January 16, 2013, Sorter Company determined that its receivable from Ordonez Company of $8,000 will not be collected, and managem
> Sandel Company reports the following financial information before adjustments. Instructions Prepare the journal entry to record bad debt expense assuming Sandel Company estimates bad debts at (a) 1% of net sales and (b) 5% of accounts receivable. D
> Presented below is information from Lopez Computers Incorporated. July 1 Sold $30,000 of computers to Smallwood Company with terms 3/15, n/60. Lopez uses the gross method to record cash discounts. 10 Lopez received payment from Smallwood for the full amo
> On June 3, Bolton Company sold to Arquette Company merchandise having a sale price of $2,000 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $90, terms n/30, was received by Arquette on June 8 from John Booth Transport Service for th
> Your accounts receivable clerk, Mary Herman, to whom you pay a salary of $1,500 per month, has just purchased a new Audi. You decided to test the accuracy of the accounts receivable balance of $117,000 as shown in the ledger. The following information is
> Patriot Company shows a balance of $241,140 in the Accounts Receivable account on December 31, 2012. The balance consists of the following. Installment accounts due in 2013 ……………………………………………………………….……….…… $23,00 Installment accounts due after 2013 ………………
> Presented below are a number of independent situations. Instructions For each individual situation, determine the amount that should be reported as cash. If the item(s) is not reported as cash, explain the rationale. 1. Checking account balance $925,000
> The controller for Weinstein Co. is attempting to determine the amount of cash and cash equivalents to be reported on its December 31, 2012, balance sheet. The following information is provided. 1. Commercial savings account of $600,000 and a commercial
> On December 31, 2012, Conchita Martinez Company signed a $1,000,000 note to Sauk City Bank. The market interest rate at that time was 12%. The stated interest rate on the note was 10%, payable annually. The note matures in 5 years. Unfortunately, because
> On December 31, 2012, Iva Majoli Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest-bearing note. The note was issued to yield 10% interest. Unfortunately, during 2014, Majoli began to experience financial difficulty. As a
> What are the primary characteristics of an annuity? Differentiate between an “ordinary annuity” and an “annuity due.”
> Aragon Company has just received the August 31, 2012, bank statement, which is summarized below. The general ledger Cash account contained the following entries for the month of August. Deposits in transit at August 31 are $3,800, and checks outstand
> Kipling Company deposits all receipts and makes all payments by check. The following information is available from the cash records. June 30 Bank Reconciliation Balance per bank ………â€
> The petty cash fund of Teasdale’s Auto Repair Service, a sole proprietorship, contains the following. The general ledger account Petty Cash has a balance of $300. Instructions Prepare the journal entry to record the reimbursement of
> McMann, Inc. decided to establish a petty cash fund to help ensure internal control over its small cash expenditures. The following information is available for the month of April. 1. On April 1, it established a petty cash fund in the amount of $200. 2.
> Use the information for Grant Company as presented in E7-20. Grant is planning to factor some accounts receivable at the end of the year. Accounts totaling $10,000 will be transferred to Credit Factors, Inc. with recourse. Credit Factors will retain 5% o
> Presented below is information for Grant Company. 1. Beginning-of-the-year Accounts Receivable balance was $15,000. 2. Net sales (all on account) for the year were $100,000. Grant does not offer cash discounts. 3. Collections on accounts receivable durin
> On December 31, 2011, Hurly Co. performed environmental consulting services for Cascade Co. Cascade was short of cash, and Hurly Co. agreed to accept a $300,000 zero-interest-bearing note due December 31, 2013, as payment in full. Cascade is somewhat of
> On July 1, 2012, Rentoul Inc. made two sales. 1. It sold land having a fair value of $900,000 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,416,163. The land is carried on Rentoul’s books at a cost of $590,000. 2
> SEK Corp. factors $400,000 of accounts receivable with Mays Finance Corporation on a without recourse basis on July 1, 2012. The receivables records are transferred to Mays Finance, which will receive the collections. Mays Finance assesses a finance char
> Gringo Corporation factors $250,000 of accounts receivable with Winkler Financing, Inc. on a with recourse basis. Winkler Financing will collect the receivables. The receivables records are transferred to Winkler Financing on August 15, 2012. Winkler Fin
> Will Smith will receive $80,000 on December 31, 2017 (5 years from now), from a trust fund established by his father. Assuming the appropriate interest rate for discounting is 12% (compounded semiannually), what is the present value of this amount today?
> Bryant Inc. factors receivables with a carrying amount of $200,000 to Warren Company for $190,000 on a with recourse basis. Instructions The recourse provision has a fair value of $2,000. This transaction should be recorded as a sale. Prepare the approp
> On April 1, 2012, Prince Company assigns $500,000 of its accounts receivable to the Third National Bank as collateral for a $300,000 loan due July 1, 2012. The assignment agreement calls for Prince Company to continue to collect the receivables. Third Na
> Presented below is information related to Sanford Corp. July 1 Sanford Corp. sold to Legler Co. merchandise having a sales price of $10,000 with terms 2/10, net/60. Sanford records its sales and receivables net. 5 Accounts receivable of $12,000 (gross) a
> Puckett, 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. Alstott Co. Cash (#1710) Cash (#2116) Cash (1/1 Balance) Cash (#2
> The chief accountant for Dollywood Corporation provides you with the following list of accounts receivable written off in the current year. Dollywood Corporation follows the policy of debiting Bad Debt Expense as accounts are written off. The chief acc
> The trial balance before adjustment of Estefan 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 receivable an
> Wilton, Inc. had net sales in 2012 of $1,400,000. At December 31, 2012, 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% o
> The 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’s accounts receivable turnover ratio. Co
> 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 liability
> On October 1, 2012, 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 Octo
> Presented below are three unrelated situations. (a) Ron Stein Company recently signed a lease for a new office building, for a lease period of 10 years. Under the lease agreement, a security deposit of $12,000 is made, with the deposit to be returned at
> 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 Restin Co. uses the gross method to record sales made on credit. On June 1, 2012, it made
> Kraft Enterprises owns the following assets at December 31, 2012. What amount should be reported as cash? Cash in bank-savings account 68,000 Checking account balance 17,000 Cash on hand Postdated checks 9,300 31,400 750 Cash refund due from IRS Ce
> 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 Horton Corporation is preparing a bank reconciliation and has identified the following pote
> 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 miscellane
> Springsteen Inc. reported in a recent annual report “Restricted cash for debt redemption.” What section of the balance sheet would report this item?
> On January 1, 2012, 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, assuming that
> 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 during each of th
> Indicate which of the following costs should be expensed when incurred. (a) $13,000 paid to rearrange and reinstall machinery. (b) $200,000 paid for addition to building. (c) $200 paid for tune-up and oil change on delivery truck. (d) $7,000 paid to repl
> Capriati Corporation commenced operations in early 2012. 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 expe
