On September 30, 2013, 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 practices.
After receiving the first of two equal annual installments on September 30, 2014, Rolen immediately sold the note with recourse. On October 9, 2015, Rolen received notice that the note was dishonored, and it paid all amounts due. At all times prior to default, the note was reasonably expected to be paid in full.
(a) (1) How should Rolen determine the sales price of the machine?
(2) How should Rolen report the effects of the zero-interest-bearing note on its income statement for the year ended December 31, 2013? Why is this accounting presentation appropriate?
(b) What are the effects of the sale of the note receivable with recourse on Rolen’s income statement for the year ended December 31, 2014, and its balance sheet at December 31, 2014?
(c) How should Rolen account for the effects of the note being dishonored?
> Presented below is information related to Blowfish radios for the Hootie Company for the month of July. Instructions (a) Assuming that the periodic inventory method is used, compute the inventory cost at July 31 under each of the following cost f
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> Inventory information for Part 311 of Monique Aaron Corp. discloses the following information for the month of June. Instructions (a) Assuming that the periodic inventory method is used, compute the cost of goods sold and ending inventory under (
> The net income per books of Linda Patrick Company was determined without knowledge of the errors indicated. Instructions Prepare a worksheet to show the adjusted net income figure for each of the 6 years after taking into account the inventory er
> How might a company obtain a price index in order to apply dollar-value LIFO?
> At December 31, 2013, Stacy McGill Corporation reported current assets of $370,000 and current liabilities of $200,000. The following items may have been recorded incorrectly. 1. Goods purchased costing $22,000 were shipped f.o.b. shipping point by a
> Ann M. Martin Company makes the following errors during the current year. (Evaluate each case independently and assume ending inventory in the following year is correctly stated.) 1. Ending inventory is overstated, but purchases and related accounts p
> Fong Sai-Yuk Company sells one product. Presented below is information for January for Fong Sai-Yuk Company. Fong Sai-Yuk uses the FIFO cost flow assumption. All purchases and sales are on account. Instructions (a) Assume Fong Sai-Yuk uses a per
> Cruise Industries purchased $10,800 of merchandise on February 1, 2014, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $2,500 (gross price before trade or cash discount) on February 4. The invoice was paid on Februa
> Presented below are transactions related to Tom Brokaw, Inc. May 10 Purchased goods billed at $15,000 subject to cash discount terms of 2/10, n/60. 11 Purchased goods billed at $13,200 subject to terms of 1/15, n/30. 19 Paid invoice of May 10. 24 P
> Two or more items are omitted in each of the following tabulations of income statement data. Fill in the amounts that are missing.
> Craig Company asks you to review its December 31, 2014, inventory values and prepare the necessary adjustments to the books. The following information is given to you. 1. Craig uses the periodic method of recording inventory. A physical count reveals
> Colin Davis Machine Company maintains a general ledger account for each class of inventory, debiting such accounts for increases during the period and crediting them for decreases. The transactions below relate to the Raw Materials inventory account, w
> Assume that in an annual audit of Harlowe Inc. at December 31, 2014, you find the following transactions near the closing date. 1. A special machine, fabricated to order for a customer, was finished and specifically segregated in the back part of the
> In your audit of Jose Oliva Company, you find that a physical inventory on December 31, 2014, showed merchandise with a cost of $441,000 was on hand at that date. You also discover the following items were all excluded from the $441,000. 1. Merchandis
> FIFO, average-cost, and LIFO methods are often used instead of specific identification for inventory valuation purposes. Compare these methods with the specific identification method, discussing the theoretical propriety of each method in the determina
> Presented below is a list of items that may or may not be reported as inventory in a company’s December 31 balance sheet. 1. Goods out on consignment at another company’s store. 2. Goods sold on an installment basis (bad debts can be reas
> Arna, Inc. uses the dollar-value LIFO method of computing its inventory. Data for the past 3 years follow. Instructions Compute the value of the 2014 and 2015 inventories using the dollar-value LIFO method.
> Midori Company had ending inventory at end-of-year prices of $100,000 at December 31, 2013; $119,900 at December 31, 2014; and $134,560 at December 31, 2015. The year-end price indexes were 100 at 12/31/13, 110 at 12/31/14, and 116 at 12/31/15. Compute
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> Data for Amsterdam Company are presented in BE8-5. Compute the April 30 inventory and the April cost of goods sold using the FIFO method. In BE8-5
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> Bienvenu Enterprises reported cost of goods sold for 2014 of $1,400,000 and retained earnings of $5,200,000 at December 31, 2014. Bienvenu later discovered that its ending inventories at December 31, 2013 and 2014, were overstated by $110,000 and $35,0
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> Matlock Company uses a perpetual inventory system. Its beginning inventory consists of 50 units that cost $34 each. During June, the company purchased 150 units at $34 each, returned 6 units for credit, and sold 125 units at $50 each. Journalize the Ju
> Included in the December 31 trial balance of Rivera Company are the following assets. Prepare the current assets section of the December 31 balance sheet.
> Specific identification is sometimes said to be the ideal method of assigning cost to inventory and to cost of goods sold. Briefly indicate the arguments for and against this method of inventory valuation.
> On July 1, 2014, Brigham Corporation purchased Young Company by paying $250,000 cash and issuing a $100,000 note payable to Steve Young. At July 1, 2014, the balance sheet of Young Company was as follows. The recorded amounts all approximate curre
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> On January 1, 2014, 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 2015 Botosan fell into financial trouble due to increased
> Presented below is information related to Haselhof Inc. Balance per books at October 31, $41,847.85; receipts $173,523.91; disbursements $164,893.54. Balance per bank statement November 30, $56,274.20. The following checks were outstanding at November
> The cash account of Aguilar Co. showed a ledger balance of $3,969.85 on June 30, 2014. The bank statement as of that date showed a balance of $4,150. Upon comparing the statement with the cash records, the following facts were determined. 1. There wer
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> Corrs Wholesalers Co. sells industrial equipment for a standard 3-year note receivable. Revenue is recognized at time of sale. Each note is secured by a lien on the equipment and has a face amount equal to the equipment’s list price. Each note&rs
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> Francis Equipment Co. closes its books regularly on December 31, but at the end of 2014 it held its cash book open so that a more favorable balance sheet could be prepared for credit purposes. Cash receipts and disbursements for the first 10 days of Ja
> On December 31, 2014, 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, becau
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> Presented below is information for Jones Company. 1. Beginning-of-the-year Accounts Receivable balance was $15,000. 2. Net sales (all on account) for the year were $100,000. Jones does not offer cash discounts. 3. Collections on accounts receivable
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> 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
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> 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.
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