ACC 422 Enhance teaching - tutorialrank.com

ACC 422 Final Exam Guide (New 2019, With EXCEL
FILE, Score 29/30)
For more course tutorials visit
www.tutorialrank.com
This Tutorial contains excel File which can be used to solve for any
change in values
Brief Exercise 7-1
Brief Exercise 7-7
Brief Exercise 7-14
Brief Exercise 7-15
Brief Exercise 8-4 (Part Level Submission)
Brief Exercise 8-5

Brief Exercise 8-6
Multiple Choice Question 21
Question 14
Brief Exercise 9-4
Exercise 9-4
Brief Exercise 10-6
Brief Exercise 10-8
Exercise 10-1
Question 9
Brief Exercise 11-8

Brief Exercise 12-2
Brief Exercise 12-8
Exercise 12-3
Brief Exercise 13-2
Brief Exercise 13-5
Brief Exercise 13-10
Brief Exercise 14-3

Exercise 21-1
Brief Exercise 7-1
Your answer is correct.
Vaughn Enterprises owns the following assets at December 31, 2017.
Cash in
bank—
savings
account
69,000
Checking
account balance
17,600
Cash on hand 9,030 Postdated checks 770
Cash refund
due from IRS
35,600 Certificates of
deposit (180-
94,570

day)
What amount should be reported as cash?
Brief Exercise 7-7
Larkspur Family Importers sold goods to Tung Decorators for
$40,800 on November 1, 2017, accepting Tung’s $40,800, 6-month, 6%
note.
Prepare Larkspur’s November 1 entry, December 31 annual adjusting
entry, and May 1 entry for the collection of the note and interest.
Brief Exercise 7-14
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.
Brief Exercise 7-15
Indigo Company designated Jill Holland as petty cash custodian and
established a petty cash fund of $290. The fund is reimbursed when the
cash in the fund is at $26, which it is. Petty cash receipts indicate funds
were disbursed for office supplies $92 and miscellaneous expense $169.

Prepare journal entries for the establishment of the fund and the
reimbursement.
Brief Exercise 8-4 (Part Level Submission)
Pharoah Company uses a periodic inventory system. For April, when the
company sold 500 units, the following information is available.
Units Unit Cost Total Cost
April 1 inventory 290 $32 $ 9,280
April 15 purchase 430 38 16,340
1,000 $37,380
Brief Exercise 8-6
Your answer is correct.
Sandhill Company uses a periodic inventory system. For April, when the
company sold 600 units, the following information is available.
Units Unit Cost Total Cost
April 1 inventory 270 $30 $ 8,100

1,000 $35,250
Compute the April 30 inventory and the April cost of goods sold using
the LIFO method.
Which of the following inventories carried by a manufacturer is similar
to the merchandise inventory of a retailer?
Question 14
A fire destroys all of the merchandise of Shamrock Company on
February 10, 2017. Presented below is information compiled up to the
date of the fire.
Inventory, January 1, 2017 $432,200
Sales revenue to February 10, 2017 1,935,200
Purchases to February 10, 2017 1,104,580
Freight-in to February 10, 2017 59,180
Rate of gross profit on selling price 35%
What is the approximate inventory on February 10, 2017?

Exercise 9-4
Martinez Company began operations in 2017 and determined its ending
inventory at cost and at LCNRV at December 31, 2017, and December
31, 2018. This information is presented below.
Cost
Net
Realizable
Value
12/31/17 $322,170 $299,520
12/31/18 409,250 390,440
(a) Prepare the journal entries required at December 31, 2017, and
December 31, 2018, assuming inventory is recorded at LCNRV and a
perpetual inventory system using the cost-of-goods-sold method.
Brief Exercise 10-6
Waterway Inc. purchased land, building, and equipment from Laguna
Corporation for a cash payment of $327,600. The estimated fair values
of the assets are land $62,400, building $228,800, and equipment
$83,200. At what amounts should each of the three assets be recorded?
Brief Exercise 10-8
Pearl Corporation traded a used truck (cost $29,600, accumulated
depreciation $26,640) for a small computer with a fair value of $4,884.
Pearl also paid $740 in the transaction.

Prepare the journal entry to record the exchange. (The exchange has
commercial substance.)
Exercise 10-1
The expenditures and receipts below are related to land, land
improvements, and buildings acquired for use in a business enterprise.
The receipts are enclosed in parentheses.
(a)
Money borrowed to pay building
contractor (signed a note)
$(285,400)
(b)
Payment for construction from note
proceeds
285,400
(c) Cost of land fill and clearing 11,790
(d)
Delinquent real estate taxes on property
assumed by purchaser
7,300
(e)
Premium on 6-month insurance policy
during construction
8,580
(f)
Refund of 1-month insurance premium
because construction completed early
(1,430 )
(g) Architect’s fee on building 26,200
(h)
Cost of real estate purchased as a plant
site (land $209,100 and building
$52,900)
262,000
(i) Commission fee paid to real estate 8,970

agency
(j) Installation of fences around property 3,770
(k) Cost of razing and removing building 11,710
(l)
Proceeds from salvage of demolished
building
(4,550 )
(m)
Interest paid during construction on
money borrowed for construction
13,150
(n) Cost of parking lots and driveways 20,050
(o)
Cost of trees and shrubbery planted
(permanent in nature)
14,440
(p) Excavation costs for new building 2,700
Identify each item by letter and list the items in columnar form, using
the headings shown below. All receipt amounts should be reported in
parentheses. For any amounts entered in the Other Accounts column,
also indicate the account title.
Question 9
Sage Company purchased machinery for $174,300 on January 1, 2017. It
is estimated that the machinery will have a useful life of 20 years,
salvage value of $14,700, production of 81,900 units, and working hours
of 44,000. During 2017, the company uses the machinery for 11,440
hours, and the machinery produces 9,009 units. Compute depreciation
under the straight-line, units-of-output, working hours, sum-of-the-
years’-digits, and double-declining-balance methods.

Brief Exercise 11-8
Carla Company owns equipment that cost $1,008,000 and has
accumulated depreciation of $425,600. The expected future net cash
flows from the use of the asset are expected to be $560,000. The fair
value of the equipment is $448,000.
Prepare the journal entry, if any, to record the impairment loss.
Brief Exercise 12-8
Concord Corporation purchased Johnson Company 3 years ago and at
that time recorded goodwill of $330,000. The Johnson Division’s net
assets, including the goodwill, have a carrying amount of $700,000. The
fair value of the division is estimated to be $668,000 and the implied
goodwill is $298,000.
Prepare Concord journal entry to record impairment of the goodwill.
Exercise 12-3
Joni Marin Inc. has the following amounts reported in its general ledger
at the end of the current year.
Organization costs $24,400
Trademarks 16,900
Discount on bonds payable 37,400

Deposits with advertising agency for
ads to promote goodwill of company
12,400
Excess of cost over fair value of net
identifiable assets of acquired
subsidiary
77,400
Cost of equipment acquired for
research and development projects;
the
equipment has an alternative future
use
87,400
Costs of developing a secret formula
for a product that is expected to
be marketed for at least 20 years 83,800
(a)
On the basis of this information, compute the total amount to be reported
by Marin for intangible assets on its balance sheet at year-end.
Brief Exercise 13-2
Ivanhoe Company borrowed $30,000 on November 1, 2017, by signing
a $30,000, 8%, 3-month note. Prepare Ivanhoe’s November 1, 2017,
entry; the December 31, 2017, annual adjusting entry; and the February
1, 2018, entry.
Brief Exercise 13-5

Riverbed Corporation made credit sales of $19,800 which are subject
to 7% sales tax. The corporation also made cash sales which totaled
$28,462 including the 7% sales tax.
Prepare the entry to record Riverbed’s credit sales.
Windsor Inc. is involved in a lawsuit at December 31, 2017.
Prepare the December 31 entry assuming it is probable that Windsor will
be liable for $862,200 as a result of this suit.
Martinez Factory provides a 2-year warranty with one of its products
which was first sold in 2017. Martinez sold $930,400 of products subject
to the warranty. Martinez expects $124,050 of warranty costs over the
next 2 years. In that year, Martinez spent $70,460 servicing warranty
claims. Prepare Martinez’s journal entry to record the sales (ignore cost
of goods sold) and the December 31 adjusting entry, assuming the
expenditures are inventory costs.
Brief Exercise 14-3
The Skysong Company issued $260,000 of 10% bonds on January 1,
2017. The bonds are due January 1, 2022, with interest payable each
July 1 and January 1. The bonds were issued at 98.

Prepare the journal entries for (a) January 1, (b) July 1, and (c)
December 31. Assume The Skysong Company records straight-line
amortization semiannually.
Vaughn Corporation issued a 4-year, $55,000, 5% note to Greenbush
Company on January 1, 2017, and received a computer that normally
sells for $44,762. The note requires annual interest payments each
December 31. The market rate of interest for a note of similar risk
is 11%.
Prepare Vaughn’s journal entries for (a) the January 1 issuance and (b)
the December 31 interest.
On June 30, 2018, Sheridan Co. sold equipment to an unaffiliated
company for $2250000. The equipment had a book value of $1205000
and a remaining useful life of 10 years. That same day, Sheridan leased
back the equipment at $12500 per month for 5 years with no option to
renew the lease or repurchase the equipment. Sheridan’s rent expense for
this equipment for the year ended December 31, 2018, should be
==============================================
ACC 422 Final Exam Guide 1

Here to Buy the Tutorial
1. Kraft Enterprises owns the following assets at December 31, 2012.
Cash in bank–savings account
67,516
Checking account balance
26,445
Cash on hand
9,478
Postdated checks
753
Cash refund due from IRS
40,324
Certificates of deposit (180-day)
94,754

Question 2
Presented below is information related to Rembrandt Inc.’s inventory.
(per unit) Skis Boots
Parkas
Historical Cost 273.79 152.75
76.37
Selling Price 312.70 208.95
106.27
Cost to distribute 27.38 11.53 3.60
Current replacement cost 292.52 151.31
73.49
Normal profit margin 46.11 41.79
30.62
Determine the following:
Question 3
Matlock Company uses a perpetual inventory system. Its beginning
inventory consists of 67 units that cost $40 each. During June, the
company purchased 202 units at $40 each, returned 8 units for credit,
and sold 168 units at $67 each. Journalize the June transactions.
Question 4
Amsterdam Company uses a periodic inventory system. For April, when
the company sold 700 units, the following information is available.

the average cost method.
Question 5
the FIFO method.
Question 6
(FIFO, LIFO, Average Cost Inventory)
Esplanade Company was formed on December 1, 2011. The following
information is available from Esplanade’s inventory records for Product
BAP.
Purchases Units Unit Cost
January 1, 2012(beginning inventory) 762 8.00
January 5, 2012 1,524 9.00
January 25, 2012 1,651 10.00
February 16, 2012 1,061 11.00
March 26, 2012 762 12.00
A physical inventory on March 31, 2012, shows 2,032 units on hand.
Prepare schedules to compute the ending inventory at March 31, 2012,
under each of the following inventory methods. Assume Esplanade
Company uses the periodic inventory method.

Question 7
Floyd Corporation has the following four items in its ending inventory.
Determine the final lower of cost or market inventory value for each
item.
Question 8
Kumar Inc. uses a perpetual inventory system. At January 1, 2013,
inventory was $320,786 at both cost and market value. At December 31,
2013, the inventory was $428,714 at cost and $403,231 at market value.
Prepare the necessary December 31 entry under:
Question 9
Boyne Inc. had beginning inventory of $15,000 at cost and $25,000 at
retail. Net purchases were $150,000 at cost and $212,500 at retail. Net
markups were $12,500; net markdowns were $8,750; and sales were
$196,250. Compute ending inventory at cost using the conventional
retail method.
Question 10
(Gross Profit Method)
Astaire Company uses the gross profit method to estimate inventory for
monthly reporting purposes. Presented below is information for the
month of May.
Question 11
Previn Brothers Inc. purchased land at a price of $30,400. Closing costs
were $1,820. An old building was removed at a cost of $14,850. What
amount should be recorded as the cost of the land?
Question 12

Garcia Corporation purchased a truck by issuing an $108,000, 4-year,
zero-interest-bearing note to Equinox Inc. The market rate of interest for
obligations of this nature is 10%. Prepare the journal entry to record the
purchase of this truck.
Question 13
Mohave Inc. purchased land, building, and equipment from Laguna
Question 14
Fielder Company obtained land by issuing 2,000 shares of its $12 par
value common stock. The land was recently appraised at $103,700. The
common stock is actively traded at $50 per share. Prepare the journal
entry to record the acquisition of the land.
Question 15
Navajo Corporation traded a used truck (cost $23,600, accumulated
depreciation $21,240) for a small computer worth $4,366. Navajo also
paid $1,180 in the transaction. Prepare the journal entry to record the
exchange.
Question 16
Mehta Company traded a used welding machine (cost $10,080,
accumulated depreciation $3,360) for office equipment with an
estimated fair value of $5,600. Mehta also paid $3,360 cash in the
transaction. Prepare the journal entry to record the exchange.
Question 17
Depreciation is normally computed on the basis of the nearest

A). full month and to the nearest dollar.
B). day and to the nearest cent.
C). day and to the nearest dollar.
D). full month and to the nearest cent.
Question 18
Fernandez Corporation purchased a truck at the beginning of 2012 for
$54,180. The truck is estimated to have a salvage value of $2,580 and a
useful life of 206,400 miles. It was driven 29,670 miles in 2012 and
39,990 miles in 2013. Compute depreciation expense for 2012 and 2013.
Question 19
Lockhard Company purchased machinery on January 1, 2012, for
$79,200. The machinery is estimated to have a salvage value of $7,920
after a useful life of 8 years.
(a) Compute 2012 depreciation expense using the double-declining
balance method.
(b) Compute 2012 depreciation expense using the double-declining
balance method assuming the machinery was purchased on October 1,
2012.
Question 20
Jurassic Company owns machinery that cost $1,145,700 and has
value of the equipment is $509,200. Prepare the journal entry, if any, to
record the impairment loss.

Question 21
Everly Corporation acquires a coal mine at a cost of $501,600.
Intangible development costs total $125,400. After extraction has
occurred, Everly must restore the property (estimated fair value of the
obligation is $100,320), after which it can be sold for $200,640. Everly
estimates that 5,016 tons of coal can be extracted. If 878 tons are
extracted the first year, prepare the journal entry to record depletion.
Question 22
Francis Corporation purchased an asset at a cost of $58,200 on March 1,
2012. The asset has a useful life of 8 years and a salvage value of
$5,820. For tax purposes, the MACRS class life is 5 years. Compute tax
depreciation for each year 2012–2017.
Question 23
Celine Dion Corporation purchases a patent from Salmon Company on
January 1, 2012, for $50,820. 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 record the purchase of the patent and
2012 amortization.
Question 24
Karen Austin Corporation has capitalized software costs of $768,500,
and sales of this product the first year totaled $390,630. Karen Austin
anticipates earning $911,470 in additional future revenues from this
product, which is estimated to have an economic life of 4 years.
Compute the amount of software cost amortization for the first year.
(a) Compute the amount of software cost amortization for the first year
using the percent of revenue approach.

(b) Compute the amount of software cost amortization for the first year
using the straight-line approach.
Question 25
Jeff Beck is a farmer who owns land which borders on the right-of-way
of the Northern Railroad. On August 10, 2012, due to the admitted
negligence of the Railroad, hay on the farm was set on fire and burned.
Beck had had a dispute with the Railroad for several years concerning
the ownership of a small parcel of land. The representative of the
Railroad has offered to assign any rights which the Railroad may have in
the land to Beck in exchange for a release of his right to reimbursement
for the loss he has sustained from the fire. Beck appears inclined to
accept the Railroad’s offer. The Railroad’s 2012 financial statements
should include the following related to the incident:
A). recognition of a loss only.
B). creation of a liability only.
C). disclosure in note form only.
D). recognition of a loss and creation of a liability for the value of the
land.
Question 26
Roley Corporation uses a periodic inventory system and the gross
method of accounting for purchase discounts. On July 1, Roley
purchased $66,000 of inventory, terms 2/10, n/30, FOB shipping point.
Roley paid freight costs of $1,210. On July 3, Roley returned damaged
goods and received credit of $6,600. On July 10, Roley paid for the
goods. Prepare all necessary journal entries for Roley.
Question 27

Takemoto Corporation borrowed $93,000 on November 1, 2012, by
signing a $95,093, 3-month, zero-interest-bearing note. Prepare
Takemoto’s November 1, 2012, entry; the December 31, 2012, annual
adjusting entry; and the February 1, 2013, entry. (For multiple
debit/credit en tries, list amounts from largest to smallest, e.g. 10, 8, 6.
Round all answers to 0 decimal places, e.g. 11,150.)
Question 28
Whiteside Corporation issues $629,000 of 9% bonds, due in 14 years,
with interest payable semiannually. At the time of issue, the annual
market rate for such bonds is 10%. Compute the issue price of the
bonds.(Use the present value tables in the text.
Question 29
Indiana Jones Company enters into a 6-year lease of equipment on
January 1, 2012, which requires 6 annual payments of $37,560 each,
beginning January 1, 2012. In addition, the lessee guarantees a residual
value of $20,870 at lease-end. The equipment has a useful life of 6
years. Assume that for Lost Ark Company, the lessor, collectibility is
reasonably predictable, there are no important uncertainties concerning
costs, and the carrying amount of the machinery is $191,722. Prepare
Lost Ark’s January 1, 2012, journal entries.
Question 30
On January 1, 2012, Irwin Animation sold a truck to Peete Finance for
$26,050 and immediately leased it back. The truck was carried on
Irwin’s books at $20,800. The term of the lease is 5 years, and title
transfers to Irwin at lease-end. The lease requires five equal rental
payments of $7,048 at the end of each year. The appropriate rate of
interest is 11%, and the truck has a useful life of 5 years with no salvage
value. Prepare Irwin’s 2012 journal entries.

==============================================
SET 2
1) Which of the following is considered cash?
2) Bank overdrafts, if material, should be
3) Which of the following is NOT considered cash for financial
reporting purposes?
4) If a company employs the gross method of recording accounts
receivable from customers, then sales discounts taken should be reported
as
5) Which of the following methods of determining annual bad debt
expense best achieves the matching concept?
6) The advantage of relating a company's bad debt expense to its
outstanding accounts receivable is that this approach

7) The failure to record a purchase of mer¬chandise on account even
though the goods are properly included in the physical inven¬tory
results in
8) Belle Co. received merchandise on consignment. As of March 31,
Belle had recorded the transaction as a purchase and included the goods
in inventory. The effect of this on its financial statements for March 31
9) Eller Co. received merchandise on consignment. As of January 31,
Eller included the goods in inventory, but did NOT record the
transaction. The effect of this on its financial statements for January 31
10) The use of a Purchase Discounts account implies that the recorded
cost of a purchased inventory item is its
11) Which method of inventory pricing best approximates specific
identification of the actual flow of costs and units in most manufacturing
situations?
12) When using the periodic inventory system, which of the following
generally would NOT be separately accounted for in the computation of
cost of goods sold?
13) An item of inventory purchased this period for $15.00 has been
incorrectly written down to its current replacement cost of $10.00. It
sells during the following period for $30.00, its normal selling price,
with disposal costs of $3.00 and normal profit of $12.00. Which of the
following statements is NOT true?
14) Designated market value
15) In no case can "market" in the lower-of-cost-or-market rule be more
than
16) A major advantage of the retail inventory method is that it

17) The gross profit method of inventory valuation is invalid when
18) The retail inventory method is based on the assumption that the
19) Which of the following is NOT a major characteristic of a plant
asset?
20) Cotton Hotel Corporation recently purchased Holiday Hotel and the
land on which it is located with the plan to tear down the Holiday Hotel
and build a new luxury hotel on the site. The cost of the Holiday Hotel
should be
21) If a corporation purchases a lot and building and subsequently tears
down the building and uses the property as a parking lot, the proper
accounting treatment of the cost of the building would depend on
22) The period of time during which interest must be capitalized ends
when
23) To be consistent with the historical cost principle, overhead costs
incurred by an enterprise constructing its own building should be
24) When computing the amount of interest cost to be capitalized, the
concept of "avoidable interest" refers to
25) The King-Kong Corporation exchanges one plant asset for a similar
plant asset and gives cash in the exchange. The exchange is NOT
expected to cause a material change in the future cash flows for either
entity. If a gain on the disposal of the old asset is indicated, the gain will
26) When funds are borrowed to pay for construction of assets that
qualify for capitalization of interest, the excess funds NOT needed to
pay for construction may be temporarily invested in interest-bearing
securities. Interest earned on these temporary investments should be

27) Which of the following is NOT a condition that must be satisfied
before interest capitalization can begin on a qualifying asset?
28) Which of the following most accurately reflects the concept of
depreciation as used in accounting?
29) Which of the following principles best describes the conceptual
rationale for the methods of matching depreciation expense with
revenues?
30) The major difference between the service life of an asset and its
physical life is that
31) Starr Company purchased a depreciable asset for $150,000. The
estimated salvage value is $10,000, and the estimated useful life is 8
years. The double-declining balance method will be used for
depreciation. What is the depreciation expense for the second year on
this asset?
32) Bigbie Company purchased a depreciable asset for $600,000. The
estimated salvage value is $30,000, and the estimated useful life is
10,000 hours. Bigbie used the asset for 1,100 hours in the current year.
The activity method will be used for depreciation. What is the
depreciation expense on this asset?
33) Harrison Company purchased a depreciable asset for $100,000. The
years. The straight-line method will be used for depreciation. What is the
depreciation base of this asset?
34) Costs incurred internally to create intangibles are
35) The cost of purchasing patent rights for a product that might
otherwise have seriously competed with one of the purchaser's patented
products should be

36) Riser Corporation was granted a patent on a product on January 1,
1998. To protect its patent, the corporation purchased on January 1,
2007 a patent on a competing product which was originally issued on
January 10, 2003. Because of its unique plant, Riser Corporation does
NOT feel the competing patent can be used in producing a product. The
cost of the competing patent should be
37) Twilight Corporation acquired End-of-the-World Products on
January 1, 2008 for $2,000,000, and recorded goodwill of $375,000 as a
result of that purchase. At December 31, 2008, the End-of-the-World
Products Division had a fair value of $1,700,000. The net identifiable
assets of the Division (excluding goodwill) had a fair value of
$1,450,000 at that time. What amount of loss on impairment of goodwill
should Twilight record in 2008?
38) Fleming Corporation acquired Out-of-Sight Products on January 1,
2008 for $4,000,000, and recorded goodwill of $750,000 as a result of
that purchase. At December 31, 2008, the Out-of-Sight Products
Division had a fair value of $3,400,000. The net identifiable assets of the
Division (excluding goodwill) had a fair value of $2,900,000 at that
time. What amount of loss on impairment of goodwill should Fleming
record in 2008?
39) Malrom Manufacturing Company acquired a patent on a
manufacturing process on January 1, 2006 for $10,000,000. It was
expected to have a 10 year life and no residual value. Malrom uses
straight-line amortization for patents. On December 31, 2007, the
expected future cash flows expected from the patent were expected to be
$800,000 per year for the next eight years. The present value of these
cash flows, discounted at Malrom’s market interest rate, is $4,800,000.
At what amount should the patent be carried on the December 31, 2007
balance sheet?
40) Goodwill

41) Easton Company and Lofton Company were combined in a purchase
transaction. Easton was able to acquire Lofton at a bargain price. The
sum of the market or appraised values of identifiable assets acquired less
the fair value of liabilities assumed exceeded the cost to Easton. After
revaluing noncurrent assets to zero, there was still some "negative
goodwill." Proper accounting treatment by Easton is to report the
amount as
42) The reason goodwill is sometimes referred to as a master valuation
account is because
43) Which of the following items is a current liability?
44) Which of the following statements is false?
45) Stock dividends distributable should be classified on the
46) Simson Company has 35 employees who work 8-hour days and are
paid hourly. On January 1, 2006 the company began a program of
granting its employees 10 days of paid vacation each year. Vacation
days earned in 2006 may first be taken on January 1, 2007. Information
relative to these employees is as follows:
Year Hourly Wages Vacation Days Earned by Each Employee Vacation
Dayse Used by Each Employee
2006 $28.50 10 0
2007 $27.00 10 8
2008 $28.50 10 10
What is the amount of expense relative to compensated absences that
should be reported on Simson’s income statement for 2006?

47) A company buys an oil rig for $1,000,000 on January 1, 2007. The
life of the rig is 10 years and the expected cost to dismantle the rig at the
end of 10 years is $200,000 (present value at 10% is $77,110). 10% is an
appropriate interest rate for this company. What expense should be
recorded for 2007 as a result of these events?
48) A company offers a cash rebate of $1 on each $4 package of
batteries sold during 2007. Historically, 10% of customers mail in the
rebate form. During 2007, 6,000,000 packages of batteries are sold, and
210,000 $1 rebates are mailed to customers. What is the rebate expense
and liability, respectively, shown on the 2007 financial statements dated
December 31?
49) A contingency can be accrued when
50) Which of the following sets of conditions would give rise to the
accrual of a contingency under current generally accepted accounting
principles?
51) Mark Ward is a farmer who owns land which borders on the right-
of-way of the Northern Railroad. On August 10, 2007, due to the
admitted negligence of the Railroad, hay on the farm was set on fire and
burned. Ward had had a dispute with the Railroad for several years
concerning the ownership of a small parcel of land. The representative
of the Railroad has offered to assign any rights which the Railroad may
have in the land to Ward in exchange for a release of his right to
reimbursement for the loss he has sustained from the fire. Ward appears
inclined to accept the Railroad's offer. The Railroad's 2007 financial
statements should include the following related to the incident:
52) An example of an item which is NOT a liability is
53) The covenants and other terms of the agreement between the issuer
of bonds and the lender are set forth in the

54) Bonds for which the owners' names are NOT registered with the
issuing corporation are called
55) Minimum lease payments may include a
56) What impact does a bargain purchase option have on the present
value of the minimum lease payments computed by the lessee?
57) Which of the following is a correct statement of one of the
capitalization criteria?
58) In order to properly record a direct-financing lease, the lessor needs
to know how to calculate the lease receivable. The lease receivable in a
direct-financing lease is best defined as
59) In the earlier years of a lease, from the lessee's perspective, the use
of the
60) In a lease that is appropriately recorded as a direct-financing lease
by the lessor, unearned income
==============================================

SET 3
reporting purposes?
2) What is the preferable presentation of accounts receivable from
officers, employees, or affiliated companies on a balance sheet?
3) Which of the following items should NOT be included in the Cash
caption on the balance sheet?
5) Which of the following is a generally accepted method of determining
the amount of the adjustment to bad debt expense?
6) Assuming that the ideal measure of short-term receivables in the
balance sheet is the discounted value of the cash to be received in the
future, failure to follow this practice usually does NOT make the balance
sheet misleading because
would be
8) If the beginning inventory for 2006 is overstated, the effects of this
error on cost of goods sold for 2006, net income for 2006, and assets at
December 31, 2007, respectively, are
9) The accountant for the Orion Sales Company is preparing the income
statement for 2007 and the balance sheet at December 31, 2007. Orion
uses the periodic inventory system. The January 1, 2007 merchandise
inventory balance will appear

10) The use of a Discounts Lost account implies that the recorded cost of
a purchased inventory item is its
cost of goods sold?
than
14) When the direct method is used to record inventory at market
17) In 2006, Lucas Manufacturing signed a contract with a supplier to
purchase raw materials in 2007 for $700,000. Before the December 31,
2006 balance sheet date, the market price for these materials dropped to
$510,000. The journal entry to record this situation at December 31,
2006 will result in a credit that should be reported
asset?
20) The cost of land does NOT include

when
25) Construction of a qualifying asset is started on April 1 and finished
on December 1. The fraction used to multiply an expenditure made on
April 1 to find weighted-average accumulated expenditures is
27) When a plant asset is acquired by issuance of common stock, the
cost of the plant asset is properly measured by the
28) If an industrial firm uses the units-of-production method for
computing depreciation on its only plant asset, factory machinery, the
credit to accumulated depreciation from period to period during the life
of the firm will
29) The term "depreciable cost," or "depreciable base," as it is used in
accounting, refers to
31) Prentice Company purchased a depreciable asset for $200,000. The

32) Pine Company purchased a depreciable asset for $360,000. The
this asset?
products should be
36) Which of the following methods of amortization is normally used for
intangible assets?
37) General Products Company bought Special Products Division in
2006 and appropriately booked $250,000 of goodwill related to the
purchase. On December 31, 2007, the fair value of Special Products
Division is $2,000,000 and it is carried on General Product’s books for a
total of $1,700,000, including the goodwill. An analysis of Special
Products Division’s assets indicates that goodwill of $200,000 exists on
December 31, 2007. What goodwill impairment should be recognized by
General Products in 2007?

record in 2008?
40) When a patent is amortized, the credit is usually made to
account is because
amount as

December 31?
48) A company offers a cash rebate of $1 on each $4 package of light
bulbs sold during 2007. Historically, 10% of customers mail in the
rebate form. During 2007, 4,000,000 packages of light bulbs are sold,
and 140,000 $1 rebates are mailed to customers. What is the rebate
expense and liability, respectively, shown on the 2007 financial
statements dated December 31?

principles?
52) If bonds are issued initially at a premium and the effective-interest
method of amortization is used, interest expense in the earlier years will
be
56) Which of the following best describes current practice in accounting
for leases?
57) While only certain leases are currently accounted for as a sale or
purchase, there is theoretic justification for considering all leases to be
sales or purchases. The principal reason that supports this idea is that
58) The amount to be recorded as the cost of an asset under capital lease
is equal to the
of the
60) If the residual value of a leased asset is guaranteed by a third party
==============================================
ACC 422 Final Exam Guide All 3 Sets

Details of All 180 Questions Given Below
SET 1
1. Kraft Enterprises owns the following assets at December 31, 2012.
Cash in bank–savings account 67,516 Checking account balance 26,445
Cash on hand 9,478 Postdated checks 753
Cash refund due from IRS 40,324 Certificates of deposit (180-day)
94,754
Question 2
Presented below is information related to Rembrandt Inc.’s inventory.
(per unit) Skis Boots
Parkas
Historical Cost 273.79 152.75
76.37
Selling Price 312.70 208.95
106.27

Cost to distribute 27.38 11.53 3.60
Current replacement cost 292.52 151.31
73.49
Normal profit margin 46.11 41.79
30.62
Determine the following:
Question 3
Matlock Company uses a perpetual inventory system. Its beginning
inventory consists of 67 units that cost $40 each. During June, the
company purchased 202 units at $40 each, returned 8 units for credit,
and sold 168 units at $67 each. Journalize the June transactions.
Question 4
the average cost method.
Question 5
the FIFO method.
Question 6
(FIFO, LIFO, Average Cost Inventory)

Esplanade Company was formed on December 1, 2011. The following
information is available from Esplanade’s inventory records for Product
BAP.
Purchases Units Unit Cost
January 1, 2012(beginning inventory) 762 8.00
January 5, 2012 1,524 9.00
January 25, 2012 1,651 10.00
February 16, 2012 1,061 11.00
March 26, 2012 762 12.00
A physical inventory on March 31, 2012, shows 2,032 units on hand.
Prepare schedules to compute the ending inventory at March 31, 2012,
under each of the following inventory methods. Assume Esplanade
Company uses the periodic inventory method.
Question 7
Floyd Corporation has the following four items in its ending inventory.
Determine the final lower of cost or market inventory value for each
item.
Question 8
Kumar Inc. uses a perpetual inventory system. At January 1, 2013,
inventory was $320,786 at both cost and market value. At December 31,
2013, the inventory was $428,714 at cost and $403,231 at market value.
Prepare the necessary December 31 entry under:
Question 9

Boyne Inc. had beginning inventory of $15,000 at cost and $25,000 at
retail. Net purchases were $150,000 at cost and $212,500 at retail. Net
markups were $12,500; net markdowns were $8,750; and sales were
$196,250. Compute ending inventory at cost using the conventional
retail method.
Question 10
(Gross Profit Method)
Astaire Company uses the gross profit method to estimate inventory for
monthly reporting purposes. Presented below is information for the
month of May.
Question 11
Previn Brothers Inc. purchased land at a price of $30,400. Closing costs
were $1,820. An old building was removed at a cost of $14,850. What
amount should be recorded as the cost of the land?
Question 12
Garcia Corporation purchased a truck by issuing an $108,000, 4-year,
zero-interest-bearing note to Equinox Inc. The market rate of interest for
obligations of this nature is 10%. Prepare the journal entry to record the
purchase of this truck.
Question 13
Mohave Inc. purchased land, building, and equipment from Laguna
Question 14

Fielder Company obtained land by issuing 2,000 shares of its $12 par
value common stock. The land was recently appraised at $103,700. The
common stock is actively traded at $50 per share. Prepare the journal
entry to record the acquisition of the land.
Question 15
Navajo Corporation traded a used truck (cost $23,600, accumulated
depreciation $21,240) for a small computer worth $4,366. Navajo also
paid $1,180 in the transaction. Prepare the journal entry to record the
exchange.
Question 16
Mehta Company traded a used welding machine (cost $10,080,
estimated fair value of $5,600. Mehta also paid $3,360 cash in the
transaction. Prepare the journal entry to record the exchange.
Question 17
Depreciation is normally computed on the basis of the nearest
A). full month and to the nearest dollar.
B). day and to the nearest cent.
C). day and to the nearest dollar.
D). full month and to the nearest cent.
Question 18
Fernandez Corporation purchased a truck at the beginning of 2012 for
$54,180. The truck is estimated to have a salvage value of $2,580 and a

useful life of 206,400 miles. It was driven 29,670 miles in 2012 and
39,990 miles in 2013. Compute depreciation expense for 2012 and 2013.
Question 19
Lockhard Company purchased machinery on January 1, 2012, for
$79,200. The machinery is estimated to have a salvage value of $7,920
after a useful life of 8 years.
(a) Compute 2012 depreciation expense using the double-declining
balance method.
(b) Compute 2012 depreciation expense using the double-declining
balance method assuming the machinery was purchased on October 1,
2012.
Question 20
Jurassic Company owns machinery that cost $1,145,700 and has
value of the equipment is $509,200. Prepare the journal entry, if any, to
record the impairment loss.
Question 21
Everly Corporation acquires a coal mine at a cost of $501,600.
Intangible development costs total $125,400. After extraction has
occurred, Everly must restore the property (estimated fair value of the
obligation is $100,320), after which it can be sold for $200,640. Everly
estimates that 5,016 tons of coal can be extracted. If 878 tons are
extracted the first year, prepare the journal entry to record depletion.
Question 22

Francis Corporation purchased an asset at a cost of $58,200 on March 1,
2012. The asset has a useful life of 8 years and a salvage value of
$5,820. For tax purposes, the MACRS class life is 5 years. Compute tax
depreciation for each year 2012–2017.
Question 23
Celine Dion Corporation purchases a patent from Salmon Company on
January 1, 2012, for $50,820. 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 record the purchase of the patent and
2012 amortization.
Question 24
Karen Austin Corporation has capitalized software costs of $768,500,
and sales of this product the first year totaled $390,630. Karen Austin
anticipates earning $911,470 in additional future revenues from this
product, which is estimated to have an economic life of 4 years.
Compute the amount of software cost amortization for the first year.
(a) Compute the amount of software cost amortization for the first year
using the percent of revenue approach.
(b) Compute the amount of software cost amortization for the first year
using the straight-line approach.
Question 25
Jeff Beck is a farmer who owns land which borders on the right-of-way
of the Northern Railroad. On August 10, 2012, due to the admitted
negligence of the Railroad, hay on the farm was set on fire and burned.
Beck had had a dispute with the Railroad for several years concerning
the ownership of a small parcel of land. The representative of the
Railroad has offered to assign any rights which the Railroad may have in

the land to Beck in exchange for a release of his right to reimbursement
for the loss he has sustained from the fire. Beck appears inclined to
accept the Railroad’s offer. The Railroad’s 2012 financial statements
should include the following related to the incident:
A). recognition of a loss only.
B). creation of a liability only.
C). disclosure in note form only.
D). recognition of a loss and creation of a liability for the value of the
land.
Question 26
Roley Corporation uses a periodic inventory system and the gross
method of accounting for purchase discounts. On July 1, Roley
purchased $66,000 of inventory, terms 2/10, n/30, FOB shipping point.
Roley paid freight costs of $1,210. On July 3, Roley returned damaged
goods and received credit of $6,600. On July 10, Roley paid for the
goods. Prepare all necessary journal entries for Roley.
Question 27
Takemoto Corporation borrowed $93,000 on November 1, 2012, by
signing a $95,093, 3-month, zero-interest-bearing note. Prepare
Takemoto’s November 1, 2012, entry; the December 31, 2012, annual
adjusting entry; and the February 1, 2013, entry. (For multiple
debit/credit en tries, list amounts from largest to smallest, e.g. 10, 8, 6.
Round all answers to 0 decimal places, e.g. 11,150.)
Question 28
Whiteside Corporation issues $629,000 of 9% bonds, due in 14 years,
with interest payable semiannually. At the time of issue, the annual

market rate for such bonds is 10%. Compute the issue price of the
bonds.(Use the present value tables in the text.
Question 29
Indiana Jones Company enters into a 6-year lease of equipment on
January 1, 2012, which requires 6 annual payments of $37,560 each,
beginning January 1, 2012. In addition, the lessee guarantees a residual
value of $20,870 at lease-end. The equipment has a useful life of 6
years. Assume that for Lost Ark Company, the lessor, collectibility is
reasonably predictable, there are no important uncertainties concerning
costs, and the carrying amount of the machinery is $191,722. Prepare
Lost Ark’s January 1, 2012, journal entries.
Question 30
On January 1, 2012, Irwin Animation sold a truck to Peete Finance for
$26,050 and immediately leased it back. The truck was carried on
Irwin’s books at $20,800. The term of the lease is 5 years, and title
transfers to Irwin at lease-end. The lease requires five equal rental
payments of $7,048 at the end of each year. The appropriate rate of
interest is 11%, and the truck has a useful life of 5 years with no salvage
value. Prepare Irwin’s 2012 journal entries.
SET 2
1) Which of the following is considered cash?
2) Bank overdrafts, if material, should be
reporting purposes?
4) If a company employs the gross method of recording accounts
receivable from customers, then sales discounts taken should be reported
as

5) Which of the following methods of determining annual bad debt
expense best achieves the matching concept?
7) The failure to record a purchase of mer¬chandise on account even
though the goods are properly included in the physical inven¬tory
results in
8) Belle Co. received merchandise on consignment. As of March 31,
Belle had recorded the transaction as a purchase and included the goods
in inventory. The effect of this on its financial statements for March 31
11) Which method of inventory pricing best approximates specific
identification of the actual flow of costs and units in most manufacturing
situations?
cost of goods sold?
13) An item of inventory purchased this period for $15.00 has been
incorrectly written down to its current replacement cost of $10.00. It
sells during the following period for $30.00, its normal selling price,
with disposal costs of $3.00 and normal profit of $12.00. Which of the
following statements is NOT true?

than
16) A major advantage of the retail inventory method is that it
asset?
20) Cotton Hotel Corporation recently purchased Holiday Hotel and the
land on which it is located with the plan to tear down the Holiday Hotel
and build a new luxury hotel on the site. The cost of the Holiday Hotel
should be
when
25) The King-Kong Corporation exchanges one plant asset for a similar
plant asset and gives cash in the exchange. The exchange is NOT
expected to cause a material change in the future cash flows for either
entity. If a gain on the disposal of the old asset is indicated, the gain will

27) Which of the following is NOT a condition that must be satisfied
before interest capitalization can begin on a qualifying asset?
29) Which of the following principles best describes the conceptual
rationale for the methods of matching depreciation expense with
revenues?
30) The major difference between the service life of an asset and its
physical life is that
31) Starr Company purchased a depreciable asset for $150,000. The
this asset?
33) Harrison Company purchased a depreciable asset for $100,000. The

34) Costs incurred internally to create intangibles are
products should be
record in 2008?
39) Malrom Manufacturing Company acquired a patent on a
manufacturing process on January 1, 2006 for $10,000,000. It was
expected to have a 10 year life and no residual value. Malrom uses
straight-line amortization for patents. On December 31, 2007, the
expected future cash flows expected from the patent were expected to be
$800,000 per year for the next eight years. The present value of these

cash flows, discounted at Malrom’s market interest rate, is $4,800,000.
At what amount should the patent be carried on the December 31, 2007
balance sheet?
40) Goodwill
amount as
account is because
Year Hourly Wages Vacation Days Earned by Each Employee Vacation
Dayse Used by Each Employee
2006 $28.50 10 0
2007 $27.00 10 8

2008 $28.50 10 10
47) A company buys an oil rig for $1,000,000 on January 1, 2007. The
life of the rig is 10 years and the expected cost to dismantle the rig at the
end of 10 years is $200,000 (present value at 10% is $77,110). 10% is an
appropriate interest rate for this company. What expense should be
recorded for 2007 as a result of these events?
December 31?
principles?

54) Bonds for which the owners' names are NOT registered with the
issuing corporation are called
55) Minimum lease payments may include a
56) What impact does a bargain purchase option have on the present
value of the minimum lease payments computed by the lessee?
58) In order to properly record a direct-financing lease, the lessor needs
to know how to calculate the lease receivable. The lease receivable in a
direct-financing lease is best defined as
of the
60) In a lease that is appropriately recorded as a direct-financing lease
by the lessor, unearned income
SET 3
reporting purposes?
2) What is the preferable presentation of accounts receivable from
officers, employees, or affiliated companies on a balance sheet?
3) Which of the following items should NOT be included in the Cash
caption on the balance sheet?

5) Which of the following is a generally accepted method of determining
the amount of the adjustment to bad debt expense?
6) Assuming that the ideal measure of short-term receivables in the
balance sheet is the discounted value of the cash to be received in the
future, failure to follow this practice usually does NOT make the balance
sheet misleading because
would be
8) If the beginning inventory for 2006 is overstated, the effects of this
error on cost of goods sold for 2006, net income for 2006, and assets at
December 31, 2007, respectively, are
9) The accountant for the Orion Sales Company is preparing the income
statement for 2007 and the balance sheet at December 31, 2007. Orion
uses the periodic inventory system. The January 1, 2007 merchandise
inventory balance will appear
10) The use of a Discounts Lost account implies that the recorded cost of
a purchased inventory item is its
cost of goods sold?

than
14) When the direct method is used to record inventory at market
17) In 2006, Lucas Manufacturing signed a contract with a supplier to
purchase raw materials in 2007 for $700,000. Before the December 31,
2006 balance sheet date, the market price for these materials dropped to
$510,000. The journal entry to record this situation at December 31,
2006 will result in a credit that should be reported
asset?
20) The cost of land does NOT include
when

25) Construction of a qualifying asset is started on April 1 and finished
on December 1. The fraction used to multiply an expenditure made on
April 1 to find weighted-average accumulated expenditures is
27) When a plant asset is acquired by issuance of common stock, the
cost of the plant asset is properly measured by the
28) If an industrial firm uses the units-of-production method for
computing depreciation on its only plant asset, factory machinery, the
credit to accumulated depreciation from period to period during the life
of the firm will
29) The term "depreciable cost," or "depreciable base," as it is used in
accounting, refers to
31) Prentice Company purchased a depreciable asset for $200,000. The
32) Pine Company purchased a depreciable asset for $360,000. The
this asset?

products should be
36) Which of the following methods of amortization is normally used for
intangible assets?
37) General Products Company bought Special Products Division in
2006 and appropriately booked $250,000 of goodwill related to the
purchase. On December 31, 2007, the fair value of Special Products
Division is $2,000,000 and it is carried on General Product’s books for a
total of $1,700,000, including the goodwill. An analysis of Special
Products Division’s assets indicates that goodwill of $200,000 exists on
December 31, 2007. What goodwill impairment should be recognized by
General Products in 2007?

record in 2008?
40) When a patent is amortized, the credit is usually made to
account is because
amount as

December 31?
48) A company offers a cash rebate of $1 on each $4 package of light
bulbs sold during 2007. Historically, 10% of customers mail in the
rebate form. During 2007, 4,000,000 packages of light bulbs are sold,
and 140,000 $1 rebates are mailed to customers. What is the rebate
expense and liability, respectively, shown on the 2007 financial
statements dated December 31?
principles?

52) If bonds are issued initially at a premium and the effective-interest
method of amortization is used, interest expense in the earlier years will
be
56) Which of the following best describes current practice in accounting
for leases?
57) While only certain leases are currently accounted for as a sale or
purchase, there is theoretic justification for considering all leases to be
sales or purchases. The principal reason that supports this idea is that
58) The amount to be recorded as the cost of an asset under capital lease
is equal to the
of the
60) If the residual value of a leased asset is guaranteed by a third party
==============================================
ACC 422 Week 1 DQ 1 (UOP Course)

Consider how an organization must manage cash, receivables, and
inventory. Which of the three variables is the most important to manage?
Is one more susceptible to fraud and errors than the others? Explain your
answer.
How would a misstatement in each affect the organization?
==============================================
What is the perpetual method of tracking inventory?
How does it differ from the periodic method of tracking
inventory?
Why would a company choose one method over the other
method?

Which is the best method? Why?
==============================================
What are the different ways to estimate bad debt?
How does this affect net income?
What does Generally Accepted Accounting Principles (GAAP)
require? Why?
Should all companies have bad debt? Explain your answer.
==============================================
ACC 422 Week 1 Individual Assignment Disclosure Analysis
Paper (2 Papers)

This Tutorial contains 2 Papers
Resource: Internet
Select a publicly held company to use as the basis for this
assignment.
Research your selected company and acquire the company’s
most recent financial statements using the Internet.
Prepare a 700- to 1,050-word paper analyzing the disclosures
contained within the notes to the financial statements related to
cash and cash equivalents, receivables, and inventories. Include
a list identifying the components of the organization’s cash and
cash equivalents.
Format your paper consistent with APA guidelines.
==============================================
ACC 422 Week 1 Team Assignment Audited Financial
Statements (Nordstrom Inc.)

Each team is assigned a publically traded company that they will
use to answer the questions in the Financial Scavenger Hunt
assigned each week.
Team A: Nordstrom Inc.
Team B: Macy's Inc.
Locate your assigned company's latest audited financial
statements and post them on the assignment tab.
Review the financial statements, including any notes and
supplemental information, and answer the following questions.
Indicate where you found the answer to the questions. If
calculations are required, show your work. Post your answers to
the assignment tab.
Who are the auditors and have the auditors changed in the past 2
years? If yes, who were the previous auditors and why was there
a change?
What kind of opinion did the auditors issue on
The company as a whole

The internal control system
What is the date of the audit opinion? This is the date that fixes
the auditor's liability.
Have the financials been restated in the past 2 years?
Have there been any changes in the following positions in the
past 2 years?
Chief Executive Officer
Chief Financial Officer
==============================================
ACC 422 Week 1 Wileyplus BE 7-1, BE 7-7, Ex 7-4, Ex 7-9, Ex
7-22, Ex 7-24, CA 7-2, Pr 7-4 (with Excel File)
This Tutorial contains Excel File which can be used to solve for
any values
Complete the following assignments in WileyPLUS:

· Brief Exercise 7-1
· Brief Exercise 7-7
· Exercise 7-4
· Exercise 7-9
· Exercise 7-22
· Exercise 7-24 (Part Level Submission)
· Concept for Analysis 7-2 (Essay)
· Problem 7-4 (Part Level Submission)
Brief Exercise 7-1
Marin Enterprises owns the following assets at December 31,
2017.
Cash in bank—savings account 65,800
Checking account balance 23,800
Cash on hand 8,920 Postdated checks
900
Cash refund due from IRS 36,000 Certificates
of deposit (180-day) 90,240
Cash to be reported

Brief Exercise 7-7
Your answer is partially correct. Try again.
Blossom Family Importers sold goods to Tung Decorators for
$34,200 on November 1, 2017, accepting Tung’s $34,200, 6-
month, 5% note.
Prepare Blossom’s November 1 entry, December 31 annual
adjusting entry, and May 1 entry for the collection of the note
and interest. (If no entry is required, select "No Entry" for the
account titles and enter 0 for the amounts. Credit account titles
are automatically indented when the amount is entered. Do not
indent manually. Record journal entries in the order presented in
the problem.)
Exercise 7-4
Your accounts receivable clerk, Mitra Adams, to whom you pay
a salary of $3,255 per month, has just purchased a new Acura.
You decide to test the accuracy of the accounts receivable
balance of $177,940 as shown in the ledger.
The following information is available for your first year in
business.
(1) Collections from customers $429,660
(2) Merchandise purchased 694,400
(3) Ending merchandise inventory
195,300

(4) Goods are marked to sell at 40% above cost
Compute an estimate of the ending balance of accounts
receivable from customers that should appear in the ledger and
any apparent shortages. Assume that all sales are made on
account.
Exercise 7-9
The trial balance before adjustment of Buffalo Inc. shows the
following balances.
Give the entry for estimated bad debts assuming that the
allowance is to provide for doubtful accounts on the basis of (a)
5% of gross accounts receivable and (b) 6% of gross accounts
receivable and Allowance for Doubtful Accounts has a $1,731
credit balance. Exercise 7-22
Sheridan, 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
$249.
2. A summary of the petty cash expenditures made by the petty
cash custodian as of April 10 is as follows.
Delivery charges paid on merchandise purchased $73
Supplies purchased and used 38
Postage expense 46

I.O.U. from employees 30
Miscellaneous expense 49
The petty cash fund was replenished on April 10. The balance in
the fund was $7.
3. The petty cash fund balance was increased by $113 to $362
on April 20.
Prepare the journal entries to record transactions related to petty
cash for the month of April.
Exercise 7-24 (Part Level Submission)
Swifty Lansbury Company deposits all receipts and makes all
payments by check. The following information is available from
the cash records.
Prepare a bank reconciliation going from balance per bank and
balance per book to correct cash balance. Concept for Analysis
7-2 (Essay)
Kimmel Company uses the net method of accounting for sales
discounts. Kimmel also offers trade discounts to various groups
of buyers.
On August 1, 2017, Kimmel sold some accounts receivable on a
without recourse basis. Kimmel incurred a finance charge.
Kimmel also has some notes receivable bearing an appropriate
rate of interest. The principal and total interest are due at
maturity. The notes were received on October 1, 2017, and

mature on September 30, 2019. Kimmel’s operating cycle is less
than one year.
Using the net method, how should Kimmel account for the sales
discounts at the date of sale? What is the rationale for the
amount recorded as sales under the net method?
Using the net method, what is the effect on Kimmel’s sales
revenues and net income when customers do not take the sales
discounts?
What is the effect of trade discounts on sales revenues and
accounts receivable? Why?
How should Kimmel account for the accounts receivable
factored on August 1, 2017? Why?
How should Kimmel account for the note receivable and the
related interest on December 31, 2017? Why?
Problem 7-4 (Part Level Submission) (2 parts)
From inception of operations to December 31, 2017, Vaughn
Corporation provided for uncollectible accounts receivable
under the allowance method. The provisions are recorded, based
on analyses of customers with different risk characteristics. Bad
debts written off were charged to the allowance account;
recoveries of bad debts previously written off were credited to
the allowance account, and no year-end adjustments to the
allowance account were made. Vaughn’s usual credit terms are
net 30 days.

The balance in Allowance for Doubtful Accounts was $147,500
at January 1, 2017. During 2017, credit sales totaled $9,175,300,
the provision for doubtful accounts was determined to be
$183,506, $91,753 of bad debts were written off, and recoveries
of accounts previously written off amounted to $19,230. Vaughn
installed a computer system in November 2017, and an aging of
accounts receivable was prepared for the first time as of
December 31, 2017. A summary of the aging is as follows.
Based on the review of collectibility of the account balances in
the ―prior to 1/1/17‖ aging category, additional receivables
totaling $63,700 were written off as of December 31, 2017. The
81% uncollectible estimate applies to the remaining $97,700 in
the category. Effective with the year ended December 31, 2017,
Vaughn adopted a different method for estimating the allowance
for doubtful accounts at the amount indicated by the year-end
aging analysis of accounts receivable.
==============================================
Under what circumstances would a company need to estimate its
inventory?

What are the differences between using the gross profit method
and retail inventory method for estimating inventory?
Which method of estimation, gross profit or retail inventory, is
best? Explain your answer.
==============================================
How do we account for the disposition of fixed assets?
What are the differences in how the exchanges of assets are
handled, pending on whether they are similar or dissimilar?
What is the rationale for these differences?
What is the impact to the companies’ financial statements?
==============================================

How do we account for the disposition of fixed assets?
What are the differences in how the exchanges of assets are
handled, pending on whether they are similar or dissimilar?
What is the rationale for these differences?
What is the impact to the companies’ financial statements?
==============================================
ACC 422 Week 2 Learning Team Assignment (New Syllabus)

Complete the following three deliverables for this assignment as a team:
1. The Financial Reporting, Procter & Gamble Company, p. 379.
2. The Financial Statement Analysis Cases, Case 1: Occidental
Petroleum Corporation, p. 379.
3. Problem 7-6, p. 374
Compile all team member’s input.
Click the Assignment Files tab to submit your assignment.
Financial Reporting
The Procter & Gamble Company (P&G)
The financial statements of P&G are presented in Appendix B. The
company’s complete annual report, including the notes to the financial
statements, is available online.
Instructions
Refer to P&G’s financial statements and the accompanying notes to
answer the following questions.

(a) What criteria does P&G use to classify ―Cash and cash equivalents‖
as reported in its balance sheet?
(b) As of June 30, 2014, what balances did P&G have in cash and cash
equivalents? What were the major uses of cash during the year?
(c) P&G reports no allowance for doubtful accounts, suggesting that bad
debt expense is not material for this company. Is it reasonable that a
company like P&G would not have material bad debt expense? Explain.
P7-6 (LO2,3) (Journalize Various Accounts Receivable Transactions)
The balance sheet of Starsky Company at December 31, 2016, includes
the following.
Notes receivable
$ 36,000
Accounts receivable
182,100

Less: Allowance for doubtful accounts
17,300
$200,800
Transactions in 2017 include the following.
1. Accounts receivable of $138,000 were collected including accounts of
$60,000 on which 2% sales discounts were allowed.
2. $5,300 was received in payment of an account which was written off
the books as worthless in 2016.
3. Customer accounts of $17,500 were written off during the year.
4. At year-end, Allowance for Doubtful Accounts was estimated to need
a balance of $20,000. This estimate is based on an analysis of aged
accounts receivable.

Financial Statement Analysis Cases
Case 1: Occidental Petroleum Corporation
Occidental Petroleum Corporation reported the following information in
a recent annual report.
What items other than coin and currency may be included in ―cash‖?
(b) What items may be included in ―cash equivalents‖?
(c) What are compensating balance arrangements, and how should they
be reported in financial statements?
(d) What are the possible differences between cash equivalents and
short-term (temporary) investments?
(e) Assuming that the sale agreement meets the criteria for sale
accounting, cash proceeds were $345 million, the carrying value of the
receivables sold was $360 million, and the fair value of the recourse
liability was $15 million, what was the effect on income from the sale of
receivables?

(f) Briefly discuss the impact of the transaction in (e) on Occidental’s
liquidity.
==============================================
ACC 422 Week 2 Wileyplus Ex 8-2, Ex 8-9, Ex 8-12, Ex 9-2, Ex
9-7, Ex 9-17, Ex 9-18, Ex 9-20, Ex 9-22 (with Excel File)
This Tutorial contains Excel File which can be used to solve for
any values
Complete the following assignments i
• Exercise 8-2
• Exercise 8-9 (Part Level Submission)
• Exercise 9-2

• Exercise 9-7
• Exercise 9-17
• Exercise 9-18
• Exercise 9-20
• Exercise 9-22
Exercise 8-2
In your audit of Leon Company, you find that a physical
inventory on December 31, 2017, showed merchandise with a
cost of $400,500 was on hand at that date. You also discover the
following items were all excluded from the $400,500.
Based on the above information, calculate the amount that
should appear on Leon’s balance sheet at December 31, 2017,
for inventory.
Cullumber Company sells one product. Presented below is
information for January for Cullumber Company.Cullumber
uses the FIFO cost flow assumption. All purchases and sales are
on account.
(a) – (this has 4 parts)
Assume Cullumber uses a periodic system. Prepare all
necessary journal entries, including the end-of-month closing

entry to record cost of goods sold. A physical count indicates
that the ending inventory for January is 107 units.
Marigold Company was formed on December 1, 2016. The
following information is available from Marigold’s inventory
records for Product BAP.A physical inventory on March 31,
2017, shows 1,808 units on hand.Prepare schedule to compute
the ending inventory at March 31, 2017, under FIFO inventory
method.
Exercise 9-2
Coronado Company uses the LCNRV method, on an individual-
item basis, in pricing its inventory items. The inventory at
December 31, 2017, consists of products D, E, F, G, H, and I.
Relevant per unit data for these products appear below.Using the
LCNRV rule, determine the proper unit value for balance sheet
reporting purposes at December 31, 2017, for each of the
inventory items above.
Exercise 9-7
Blue Company follows the practice of pricing its inventory at
the lower-of-cost-or-market, on an individual-item basis.From
the information above, determine the amount of Blue Company
inventory.
Exercise 9-17

You are called by Tim Duncan of Ivanhoe Co. on July 16 and
asked to prepare a claim for insurance as a result of a theft that
took place the night before. You suggest that an inventory be
taken immediately. The following data are available.Your client
reports that the goods on hand on July 16 cost $32,800, but you
determine that this figure includes goods of $6,000 received on a
consignment basis. Your past records show that sales are made
at approximately 25% over cost. Duncan’s insurance covers
only goods owned.
Compute the claim against the insurance company.
Exercise 9-18
Marigold Lumber Company handles three principal lines of
merchandise with these varying rates of gross profit on cost.On
August 18, a fire destroyed the office, lumber shed, and a
considerable portion of the lumber stacked in the yard. To file a
report of loss for insurance purposes, the company must know
what the inventories were immediately preceding the fire. No
detail or perpetual inventory records of any kind were
maintained. The only pertinent information you are able to
obtain are the following facts from the general ledger, which
was kept in a fireproof vault and thus escaped
destruction.Submit your estimate of the inventory amounts
immediately preceding the fire.
Exercise 9-22
The records of Grouper’s Boutique report the following data for
the month of April.Compute the ending inventory by the
conventional retail inventory method.

Exercise 9-20
Presented below is information related to Marigold Company.
Compute the ending inventory at retail.
Which of the methods in (b) above does the following?
Compute ending inventory at lower-of-cost-or-market
Compute cost of goods sold based on (d).
Compute gross margin based on (d).
==============================================
What is the purpose of depreciation?
Does the book value of a fixed asset (cost minus accumulated
depreciation) communicate to a user what the asset is worth? Explain why
or why not.

Should the financial statements reflect the value of fixed assets? Explain
why or why not.
==============================================
What are the different methods used to calculate depreciation?
How does a company decide which method it should utilize?
How does its choice affect the financial statements?
Should companies standardize the method of depreciation to enhance
comparability? Explain your answer.
==============================================

What is an intangible asset?
Should all intangible assets be subject to amortization? Explain why or why
not.
Why are some intangible assets not amortized?
What is the implication to the financial statements?
==============================================
ACC 422 Week 3 DQ 4
ACC 422 Week 3 DQ 4
==============================================
ACC 422 Week 3 Team Assignment (Case 3, CA 8-10, Problem
9-3, Problem 9-13)

Complete the following four deliverables for this assignment as a team:
1. Case 3: The Kroger Company, p. 440
Complete the following individually and discuss your individual
answers as a team:
1. CA 8-10, p. 437
2. Problem 9-3, p. 483
3. Problem 9-13, p. 487
After discussing your answers, compile each into a team response.
The Kroger Company reported the following data in its annual report (in
millions).
(a) Compute Kroger’s inventory turnovers for fiscal years ending
January 31, 2015, and February 1, 2014, using:

(1) Cost of sales and LIFO inventory.
(2) Cost of sales and FIFO inventory.
(b) Some firms calculate inventory turnover using sales rather than cost
of goods sold in the numerator. Calculate Kroger’s fiscal years ending
January 31, 2015, and February 1, 2014, turnover, using:
(1) Sales and LIFO inventory.
(2) Sales and FIFO inventory.
(c) State which method you would choose to evaluate Kroger’s
performance. Justify your choice.
CA8-10 WRITING (FIFO and LIFO) Harrisburg Company is
considering changing its inventory valuation method from FIFO to LIFO
because of the potential tax savings. However, management wishes to
consider all of the effects on the company, including its reported
performance, before making the final decision.

The inventory account, currently valued on the FIFO basis, consists of
1,000,000 units at $8 per unit on January 1, 2017. There are 1,000,000
shares of common stock outstanding as of January 1, 2017, and the cash
balance is $400,000.
The company has made the following forecasts for the period 2017–
2019.
Instructions
(a) Prepare a schedule that illustrates and compares the following data
for Harrisburg Company under the FIFO and the LIFO inventory
method for 2017–2019. Assume the company would begin LIFO at the
beginning of 2017.
(1) Year-end inventory balances.
(2) Annual net income after taxes.
(3) Earnings per share.
(4) Cash balance.

Assume all sales are collected in the year of sale and all purchases,
operating expenses, and taxes are paid during the year incurred.
(b) Using the data above, your answer to (a), and any additional issues
you believe need to be considered, prepare a report that recommends
whether or not Harrisburg Company should change to the LIFO
inventory method. Support your conclusions with appropriate
arguments.
P9-3 (LO1) (LCNRV--Cost-of-Goods-Sold and Loss) Malone Company
determined its ending inventory at cost and at LCNRV at December 31,
2017, December 31, 2018, and December 31, 2019, as shown below.
(a)Prepare the journal entries required at December 31, 2018, and at
December 31, 2019, assuming that a perpetual inventory system and the
cost-of-goods-sold method of adjusting to LCNRV is used.
(b)Prepare the journal entries required at December 31, 2018, and at
December 31, 2019, assuming that a perpetual inventory is recorded at
cost and reduced to LCNRV using the loss method.
P9-13 (LO7) GROUPWORK (Retail, LIFO Retail, and Inventory
Shortage) Late in 2014, Joan Seceda and four other investors took the
chain of Becker Department Stores private, and the company has just
completed its third year of operations under the ownership of the
investment group. Andrea Selig, controller of Becker Department Stores,
is in the process of preparing the year-end financial statements. Based on
the preliminary financial statements, Seceda has expressed concern over

inventory shortages, and she has asked Selig to determine whether an
abnormal amount of theft and breakage has occurred. The accounting
records of Becker Department Stores contain the following amounts on
November 30, 2017, the end of the fiscal year.
(a)Describe the circumstances under which the retail inventory method
would be applied and the advantages of using the retail inventory
method
(b) Assuming that prices have been stable, calculate the value, at cost, of
Becker Department Stores' ending inventory using the last-in, first-out
(LIFO) retail method. Be sure to furnish supporting calculations.
(c) Estimate the amount of shortage, at retail, that has occurred at Becker
Department Stores during the year ended November 30, 2017.
(d) Complications in the retail method can be caused by such items as
(1) freight-in costs, (2) purchase returns and allowances, (3) sales returns
and allowances, and (4) employee discounts. Explain how each of these
four special items is handled in the retail inventory method.
==============================================
ACC 422 Week 3 Wileyplus BE 10-10, Ex 10-3, Ex 10-13, Ex
11-6 Ex 11-15, Ex 11-24, Ex 12-1, Ex 12-4, Ex 12-14 (with
Excel File)

This Tutorial contains Excel File which can be used to solve for any
values
• Brief Exercise 10-10
• Exercise 10-3
• Exercise 10-13
• Exercise 11-6
• Exercise 11-15
• Exercise 11-15 (Essay)
• Exercise 11-24
• Exercise 12-1
• Exercise 12-4

Larkspur Company traded a used welding machine (cost $10,620,
estimated fair value of $5,900. Larkspur also paid $3,540 cash in the
transaction.
Prepare the journal entry to record the exchange. (The exchange has
commercial substance.)
Exercise 10-3
Whispering Corporation operates a retail computer store. To improve
delivery services to customers, the company purchases four new trucks
on April 1, 2017. The terms of acquisition for each truck are described
below.
1. Truck #1 has a list price of $31,350 and is acquired for a cash
payment of $29,051.
2. Truck #2 has a list price of $33,440 and is acquired for a down
payment of $4,180 cash and a zero-interest-bearing note with a face
amount of $29,260. The note is due April 1, 2018. Whispering would
normally have to pay interest at a rate of 9% for such a borrowing, and
the dealership has an incremental borrowing rate of 8%.
3. Truck #3 has a list price of $33,440. It is acquired in exchange for a
computer system that Whispering carries in inventory. The computer
system cost $25,080 and is normally sold by Whispering for $31,768.
Whispering uses a perpetual inventory system.

4. Truck #4 has a list price of $29,260. It is acquired in exchange for
1,030 shares of common stock in Whispering Corporation. The stock has
a par value per share of $10 and a market price of $13 per share.
Prepare the appropriate journal entries for the above transactions for
Whispering Corporation.
Exercise 10-13
Presented below is information related to Pronghorn Company.
1. On July 6, Pronghorn Company acquired the plant assets of
Doonesbury Company, which had discontinued operations. The
appraised value of the property is:
Land $419,000
Buildings 1,257,000
Equipment 838,000
Total $2,514,000
Pronghorn Company gave 12,500 shares of its $100 par value common
stock in exchange. The stock had a market price of $205 per share on the
date of the purchase of the property.

2. Pronghorn Company expended the following amounts in cash
between July 6 and December 15, the date when it first occupied the
building. (Prepare consolidated entry for all transactions below.)
Repairs to building $114,890
Construction of bases for equipment to be installed later 141,980
Driveways and parking lots 124,400
Remodeling of office space in building, including new partitions and
walls 147,440
Special assessment by city on land 17,540
3. On December 20, the company paid cash for equipment, $305,900,
subject to a 2% cash discount, and freight on equipment of $10,100.
Exercise 11-6
Sage Company purchased equipment for $231,080 on October 1, 2017.
It is estimated that the equipment will have a useful life of 8 years and a
salvage value of $13,080. Estimated production is 40,000 units and
estimated working hours are 20,300. During 2017, Sage uses the
equipment for 520 hours and the equipment produces 1,000 units.
Compute depreciation expense under each of the following methods.
Sage is on a calendar-year basis ending December 31.

Exercise 11-15
Compute the depreciation charge on this equipment for 2012, for 2019,
and the total charge for the period from 2013 to 2018, inclusive, under
each of the six following assumptions with respect to partial periods.
Your answer has been saved and sent to the instructor. See Gradebook
for score details.
On March 10, 2019, Lost World Company sells equipment that it
purchased for $192,000 on August 20, 2012. It was originally estimated
that the equipment would have a life of 12 years and a salvage value of
$16,800 at the end of that time, and depreciation has been computed on
that basis. The company uses the straightline method of depreciation.
Following are the assumptions with respect to partial periods:
(1) Depreciation is computed for the exact period of time during which
the asset is owned. (Use 365 days for the base and record depreciation
through March 9, 2019.)
(2) Depreciation is computed for the full year on the January 1 balance
in the asset account.
(3) Depreciation is computed for the full year on the December 31
balance in the asset account.
(4) Depreciation for one-half year is charged on plant assets acquired or
disposed of during the year.

(5) Depreciation is computed on additions from the beginning of the
month following acquisition and on disposals to the beginning of the
month following disposal.
(6) Depreciation is computed for a full period on all assets in use for
over one-half year, and no depreciation is charged on assets in use for
less than one-half year. (Use 365 days for base.)
Briefly evaluate the methods above, considering them from the point of
view of basic accounting theory as well as simplicity of application.
Exercise 11-24
The 2014 Annual Report of Tootsie Roll Industries contains the
following information.
(in millions)
December 31, 2014
December 31, 2013
Total assets $910.4
$888.4

Total liabilities 219.3
208.1
Net sales 539.9
539.6
Net income 63.2
60.8
Compute the following ratios for Tootsie Roll for 2014.
Exercise 12-4
Presented below is selected information for Cullumber Company.
Answer the questions asked about each of the factual situations.

1. Cullumber purchased a patent from Vania Co. for $1,230,000 on
January 1, 2015. The patent is being amortized over its remaining legal
life of 10 years, expiring on January 1, 2025. During 2017, Cullumber
determined that the economic benefits of the patent would not last longer
than 6 years from the date of acquisition. What amount should be
reported in the balance sheet for the patent, net of accumulated
amortization, at December 31, 2017?
2. Cullumber bought a franchise from Alexander Co. on January 1,
2016, for $365,000. The carrying amount of the franchise on
Alexander’s books on January 1, 2016, was $515,000. The franchise
agreement had an estimated useful life of 30 years. Because Cullumber
must enter a competitive bidding at the end of 2018, it is unlikely that
the franchise will be retained beyond 2025. What amount should be
amortized for the year ended December 31, 2017?
3. On January 1, 2017, Cullumber incurred organization costs of
$282,500. What amount of organization expense should be reported in
2017?
4. Cullumber purchased the license for distribution of a popular
consumer product on January 1, 2017, for $153,000. It is expected that
this product will generate cash flows for an indefinite period of time.
The license has an initial term of 5 years but by paying a nominal fee,
Cullumber can renew the license indefinitely for successive 5-year
terms. What amount should be amortized for the year ended December
31, 2017?

Presented below is net asset information related to the Skysong Division
of Santana, Inc.
The purpose of the Skysong Division is to develop a nuclear-powered
aircraft. If successful, traveling delays associated with refueling could be
substantially reduced. Many other benefits would also occur. To date,
management has not had much success and is deciding whether a write-
down at this time is appropriate. Management estimated its future net
cash flows from the project to be $425 million. Management has also
received an offer to purchase the division for $330 million. All
identifiable assets’ and liabilities’ book and fair value amounts are the
same.
==============================================
What are the criteria for classifying an item as a current liability?
What are some examples of current liabilities?

Why is it important to classify a portion of long-term debt on a yearly basis
as a current liability?
What is the implication of misclassifying a liability as current or long-term?
==============================================
What is a contingency?
Why are contingencies important to users of financial statements?
What are the criteria for recording contingencies?
Should companies record a liability for threatened litigation? Explain why or
why not.
==============================================

What is a bond? What are some features of a bond? How do you value
bonds? What factors can affect that value?
==============================================
ACC 422 Week 4 Team Assignment Problem 10-4, Problem 10-
6, CA 11-5, Problem 12-2
answers as a team:
• Problem 10-4, p. 543
• Problem 10-6, p. 544
• CA 11-5, p. 597
• Problem 12-2, p. 644

Problem 10-4-
Problem 10-4, p. 543
P10-4 (LO1,4,6) GROUPWORK (Dispositions, Including
Condemnation, Demolition, and Trade-In) Presented below is a schedule
of property dispositions for Hollerith Co.
Schedule of Property Dispositions
Cost Accumulated Depreciation Cash Proceeds Fair Value Nature of
Disposition
Land $40,000 -- $31,000 $31,000 Condemnation
Building 15,000 -- 3,600 -- Demolition
Warehouse 70,000 $16,000 74,000 74,000 Destruction by fire
Machine 8,000 2,800 900 7,200 Trade-in
Furniture 10,000 7,850 -- 3,100 Contribution
Automobile 9,000 3,460 2,960 2,960 Sale

The following additional information is available.
Land: On February 15, a condemnation award was received as
consideration for unimproved land held primarily as an investment, and
on March 31, another parcel of unimproved land to be held as an
investment was purchased at a cost of $35,000.
Building: On April 2, land and building were purchased at a total cost of
$75,000, of which 20% was allocated to the building on the corporate
books. The real estate was acquired with the intention of demolishing
the building, and this was accomplished during the month of November.
Cash proceeds received in November represent the net proceeds from
demolition of the building.
Warehouse: On June 30, the warehouse was destroyed by fire. The
warehouse was purchased January 2, 2014, and had depreciated $16,000.
On December 27, the insurance proceeds and other funds were used to
purchase a replacement warehouse at a cost of $90,000.
Machine: On December 26, the machine was exchanged for another
machine having a fair value of $6,300 and cash of $900 was received.
(The exchange lacks commercial substance.)
Furniture: On August 15, furniture was contributed to a qualified
charitable organization. No other contributions were made or pledged
during the year.
Automobile: On November 3, the automobile was sold to Jared Winger,
a stockholder.
Instructions
P10-6 (LO1,3) (Interest During Construction) Grieg Landscaping began
construction of a new plant on December 1, 2017. On this date, the
company purchased a parcel of land for $139,000 in cash. In addition, it

paid $2,000 in surveying costs and $4,000 for a title insurance policy.
An old dwelling on the premises was demolished at a cost of $3,000,
with $1,000 being received from the sale of materials. Architectural
plans were also formalized on December 1, 2017, when the architect was
paid $30,000. The necessary building permits costing $3,000 were
obtained from the city and paid for on December 1 as well. The
excavation work began during the first week in December with
payments made to the contractor in 2018 as follows.
CA 11-5
Jerry Prior, Beeler Corporation’s controller, is concerned that net
income may be lower this year. He is afraid upper-level management
might recommend cost reductions by laying off accounting staff,
including him.
Prior knows that depreciation is a major expense for Beeler. The
company currently uses the double-declining-balance method for both
financial reporting and tax purposes, and he’s thinking of selling
equipment that, given its age, is primarily used when there are periodic
spikes in demand. The equipment has a carrying value of $2,000,000
and a fair value of $2,180,000. The gain on the sale would be reported in
the income statement. He doesn’t want to highlight this method of
increasing income. He thinks, ―Why don’t I increase the estimated
useful lives and the salvage values? That will decrease depreciation
expense and require less extensive disclosure, since the changes are
accounted for prospectively. I may be able to save my job and those of
my staff.‖

Instructions:
a. Who are the stakeholders in this situation?
b. What are the ethical issues involved?
c. What should Prior do?
Problem 12-2
 P12-2 (LO1,2,4,5) EXCEL (Accounting for Patents) Fields
Laboratories holds a valuable patent (No. 758-6002-1A) on a
precipitator that prevents certain types of air pollution. Fields does not
manufacture or sell the products and processes it develops. Instead, it
conducts research and develops products and processes which it patents,
and then assigns the patents to manufacturers on a royalty basis.
Occasionally it sells a patent. The history of Fields patent number 758-
6002-1A is as follows.
Compute the carrying value of patent No. 758-6002-1A on each of the
following dates:
(a)December 31, 2011.
(b)December 31, 2015.
==============================================

ACC 422 Week 4 WileyPlus Ex 13-2, Ex 13-7, Ex 13-16, Ex 14-
4, Ex 14-6, Ex 14-9, Problem 14-2 (With Excel File)
This Tutorial contains Excel File which can be used to solve for any
values
• Exercise 13-16
• Exercise 14-4
• Exercise 14-6
• Problem 14-2 (Part Level submission)

The following are selected 2017 transactions of Riverbed Corporation.
Sept. 1 Purchased inventory from Encino Company on account for
$43,600. Riverbed records purchases gross and uses a periodic inventory
system.
Oct. 1 Issued a $43,600, 12-month, 8% note to Encino in payment of
account.
Oct. 1 Borrowed $43,600 from the Shore Bank by signing a 12-month,
zero-interest-bearing $48,600 note.
Prepare journal entries for the selected transactions above.
Prepare adjusting entries at December 31.
Compute the total net liability to be reported on the December 31
balance sheet for:
Pharoah Hardware Company’s payroll for November 2017 is
summarized below.
At this point in the year, some employees have already received wages
in excess of those to which payroll taxes apply. Assume that the state
unemployment tax is 2.5%. The FICA rate is 7.65% on an employee’s
wages to $118,500 and 1.45% in excess of $118,500. Of the $194,300
wages subject to FICA tax, $21,300 of the sales wages is in excess of
$118,500. Federal unemployment tax rate is 0.8% after credits. Income

tax withheld amounts to $16,800 for factory, $7,700 for sales, and
$6,800 for administrative.
Exercise 13-16
Presented below is a list of possible transactions.
Analyze the effect of the 18 transactions on the financial statement
categories indicated.
1. Purchased inventory for $80,000 on account (assume perpetual system
is used).
2. Issued an $80,000 note payable in payment on account (see item 1
above).
3. Recorded accrued interest on the note from item 2 above.
4. Borrowed $100,000 from the bank by signing a 6-month, $112,000,
zero-interest-bearing note.
5. Recognized 4 months’ interest expense on the note from item 4 above.
6. Recorded cash sales of $75,260, which includes 6% sales tax.
7. Recorded wage expense of $35,000. The cash paid was $25,000; the
difference was due to various amounts withheld.
8. Recorded employer’s payroll taxes.

9. Accrued accumulated vacation pay.
10. Recorded an asset retirement obligation.
11. Recorded bonuses due to employees.
12. Recorded a contingent loss on a lawsuit that the company will
probably lose.
13. Accrued warranty expense (assume expense warranty approach).
14. Paid warranty costs that were accrued in item 13 above.
15. Recorded sales of product and related service-type warranties.
16. Paid warranty costs under contracts from item 15 above.
17. Recognized warranty revenue (see item 15 above).
18. Recorded estimated liability for premium claims outstanding.
Exercise 14-4
Ivanhoe Company issued $444,000 of 10%, 20-year bonds on January 1,
2017, at 104. Interest is payable semiannually on July 1 and January 1.
Ivanhoe Company uses the straight-line method of amortization for bond
premium or discount.
Prepare the journal entries to record the following. (If no entry is
required, select "No Entry" for the account titles and enter 0 for the

amounts. Credit account titles are automatically indented when amount
is entered. Do not indent manually.)
(a) The issuance of the bonds.
(b) The payment of interest and the related amortization on July 1, 2017.
(c) The accrual of interest and the related amortization on December 31,
2017.
Exercise 14-6
Culver Company sells 9% bonds having a maturity value of $2,050,000
for $1,828,314. The bonds are dated January 1, 2017, and mature
January 1, 2022. Interest is payable annually on January 1.
Prepare the journal entries to record the following transactions. (Round
answer to 0 decimal
On June 30, 2017, Monty Company issued $3,200,000 face value of
13%, 20-year bonds at $3,440,734, a yield of 12%. Monty uses the
effective-interest method to amortize bond premium or discount. The
bonds pay semiannual interest on June 30 and December 31.

(Round answer to 0 decimal places, e.g. 38,548. If no entry is required,
select "No Entry" for the account titles and enter 0 for the amounts.
Credit account titles are automatically indented when amount is entered.
Do not indent manually.)
(1) The issuance of the bonds on June 30, 2017.
(2) The payment of interest and the amortization of the premium on
December 31, 2017.
(3) The payment of interest and the amortization of the premium on June
30, 2018.
(4) The payment of interest and the amortization of the premium on
December 31, 2018.
Set up a schedule of interest expense and discount amortization under
the straight-line method.
(b)
Show the proper balance sheet presentation for the liability for bonds
payable on the December 31, 2018, balance sheet.
(1) What amount of interest expense is reported for 2018? (Round
answer to 0 decimal places, e.g. 38,548.)

Interest expense reported for 2018
(2) Will the bond interest expense reported in 2018 be the same as,
greater than, or less than the amount that would be reported if the
straight-line method of amortization were used?
The bond interest expense reported in 2018 will be
(3) Determine the total cost of borrowing over the life of the bond.
(Round answer to 0 decimal places, e.g. 38,548.)
Total cost of borrowing over the life of the bond
(4) Will the total bond interest expense for the life of the bond be greater
than, the same as, or less than the total interest expense if the straight-
line method of amortization were used?
The total bond interest expense for the life of the bond will be
Problem 14-2 (Part Level Submission)
Swifty Co. is building a new hockey arena at a cost of $2,310,000. It
received a downpayment of $490,000 from local businesses to support
the project, and now needs to borrow $1,820,000 to complete the

project. It therefore decides to issue $1,820,000 of 12%, 10-year bonds.
These bonds were issued on January 1, 2016, and pay interest annually
on each January 1. The bonds yield 11%.
(a)
Prepare the journal entry to record the issuance of the bonds on January
1, 2016.
==============================================
What are the differences between a direct-financing and a sales-type lease
for a lessor?
Why would a lessor provide direct-financing to a lessee?
What types of organizations provide direct-financing leases?

==============================================
What are the criteria for classifying a lease as operating or capital?
Why is there a difference between the two?
What are the implications of an operating lease versus a capital lease on
an entity’s financial statements?
==============================================

What is residual value?
What is the implication to the lessee if the residual value is guaranteed or
unguaranteed?
What is the implication to the lessor?
==============================================
What are the advantages of operating and capital leases? What are the
disadvantages?
Why would a company pick one over the other?
==============================================
ACC 422 week 5 Learning Team Problem Presentation (UOP
Course)

Collaborate as a team to provide written responses to a
facilitator-assigned problem.
Prepare a 5- to 10-minute oral presentation accompanied by a 7-
to 9-slide Microsoft® PowerPoint® presentation illustrating
your team’s solution to the assigned problem.
Note. Each week, the facilitator assigns one Learning Team a
problem to present that the team must complete during the
succeeding Learning Team Meeting.
==============================================
ACC 422 Week 5 Signature Assignment Presentation (Procter
And Gamble)

Create a 5- to 10-slide presentation and use the same publicly traded
company selected in Week 2 to address the following:
• Be sure to use the most recent SEC 10-k or Annual report.
• Identify the Company's current liabilities for the past two years?
• Compare the current portion of long-term debt for the past two years?
• Discuss some of the items found in the current liability section.
• Describe any lease obligations the Company disclosed.
• Explain what contingency liabilities are disclosed in the financial
statements?
• Recommend, from the perspective of a bank, whether or not you would
support this company.
• Compute the Debt ratio and Debt to Equity ratio.
==============================================
ACC 422 Week 5 Team Assignment Problem 13-7, 13-11, CA
13-3, CA 14-1, CA 14-4, CA 21-4

answers as a team:
• Problem 13-7, p. 700
• Problem 13-11, p. 701
• CA 13-3, p. 703
• CA 14-1, p. 763
• CA 14-4, p. 765
• CA 21-4, p. 1252
P13-7 (LO3) (Warranties) Alvarado Company sells a machine for
$7,400 with a 12-month warranty agreement that requires the company
to replace all defective parts and to provide the repair labor at no cost to
the customers. With sales being made evenly throughout the year, the
company sells 600 machines in 2017 (warranty expense is incurred half
in 2017 and half in 2018). As a result of product testing, the company
estimates that the warranty cost is $390 per machine ($170 parts and
$220 labor).
Instructions

Assuming that actual warranty costs are incurred exactly as estimated,
what journal entries would be made relative to the following facts?
(a)Sale of machinery and warranty expense incurred in 2017.
(b)Warranty accrual on December 31, 2017.
(c)Warranty costs incurred in 2018.
(d)What amount, if any, is disclosed in the balance sheet as a liability for
future warranty costs as of December 31, 2017?
P13-11 (LO3) WRITING (Loss Contingencies: Entries and Essays)
Polska Corporation, in preparation of its December 31, 2017, financial
statements, is attempting to determine the proper accounting treatment
for each of the following situations.
1. As a result of uninsured accidents during the year, personal injury
suits for $350,000 and $60,000 have been filed against the company. It
is the judgment of Polska's legal counsel that an unfavorable outcome is
unlikely in the $60,000 case but that an unfavorable verdict
approximating $250,000 will probably result in the $350,000 case.
2.Polska owns a subsidiary in a foreign country that has a book value of
$5,725,000 and an estimated fair value of $9,500,000. The foreign
government has communicated to Polska its intention to expropriate the
assets and business of all foreign investors. On the basis of settlements
other firms have received from this same country, Polska expects to
receive 40% of the fair value of its properties as final settlement.
3.Polska's chemical product division consisting of five plants is
uninsurable because of the special risk of injury to employees and losses

due to fire and explosion. The year 2017 is considered one of the safest
(luckiest) in the division's history because no loss due to injury or
casualty was suffered. Having suffered an average of three casualties a
year during the rest of the past decade (ranging from $60,000 to
$700,000), management is certain that next year the company will
probably not be so fortunate.
Instructions
(a)Prepare the journal entries that should be recorded as of December
31, 2017, to recognize each of the situations above.
(b)Indicate what should be reported relative to each situation in the
financial statements and accompanying notes. Explain why.
CA13-3 WRITING (Refinancing of Short-Term Debt)
DumarsCorporation reports in the current liability section of its balance
sheet at December 31, 2017 (its year-end), short-term obligations of
$15,000,000, which includes the current portion of 12% long-term debt
in the amount of $10,000,000 (matures in March 2018). Management
has stated its intention to refinance the 12% debt whereby no portion of
it will mature during 2018. The date of issuance of the financial
statements is March 25, 2018.
(a)Is management's intent enough to support long-term classification of
the obligation in this situation?
(b)Assume that Dumars Corporation issues $13,000,000 of 10-year
debentures to the public in January 2018 and that management intends to
use the proceeds to liquidate the $10,000,000 debt maturing in March
2018. Furthermore, assume that the debt maturing in March 2018 is paid
from these proceeds prior to the issuance of the financial statements.

Will this have any impact on the balance sheet classification at
December 31, 2017? Explain your answer.
(c)Assume that Dumars Corporation issues common stock to the public
in January and that management intends to entirely liquidate the
$10,000,000 debt maturing in March 2018 with the proceeds of this
equity securities issue. In light of these events, should the $10,000,000
debt maturing in March 2018 be included in current liabilities at
December 31, 2017?
CA14-1 (Bond Theory: Balance Sheet Presentations, Interest Rate,
Premium) On January 1, 2017, Nichols Company issued for $1,085,800
its 20-year, 11% bonds that have a maturity value of $1,000,000 and pay
interest semiannually on January 1 and July 1. The following are three
presentations of the long-term liability section of the balance sheet that
might be used for these bonds at the issue date.
Instructions
(a)Discuss the conceptual merit(s) of each of the date-of-issue balance
sheet presentations shown above for these bonds.
(b)Explain why investors would pay $1,085,800 for bonds that have a
maturity value of only $1,000,000.
(c)Assuming that a discount rate is needed to compute the carrying
value of the obligations arising from a bond issue at any date during the
life of the bonds, discuss the conceptual merit(s) of using for this
purpose:

CA14-4 WRITING (Off-Balance-Sheet Financing) Matt Ryan
Corporation is interested in building its own soda can manufacturing
plant adjacent to its existing plant in Partyville, Kansas. The objective
would be to ensure a steady supply of cans at a stable price and to
minimize transportation costs. However, the company has been
experiencing some financial problems and has been reluctant to borrow
any additional cash to fund the project. The company is not concerned
with the cash flow problems of making payments, but rather with the
impact of adding additional long-term debt to its balance sheet.
The president of Ryan, Andy Newlin, approached the president of the
Aluminum Can Company (ACC), its major supplier, to see if some
agreement could be reached. ACC was anxious to work out an
arrangement, since it seemed inevitable that Ryan would begin its own
can production. The Aluminum Can Company could not afford to lose
the account.
After some discussion, a two-part plan was worked out. First, ACC was
to construct the plant on Ryan’s land adjacent to the existing plant.
Second, Ryan would sign a 20-year purchase agreement. Under the
purchase agreement, Ryan would express its intention to buy all of its
cans from ACC, paying a unit price which at normal capacity would
cover labor and material, an operating management fee, and the debt
service requirements on the plant. The expected unit price, if
transportation costs are taken into consideration, is lower than current
market. If Ryan did not take enough production in any one year and if
the excess cans could not be sold at a high enough prices on the open
market, Ryan agrees to make up any cash shortfall so that ACC could
make the payments on its debt. The bank will be willing to make a 20-
year loan for the plant, taking the plant and the purchase agreement as
collateral. At the end of 20 years, the plant is to become the property of
Ryan.

Instructions
(a)What are project financing arrangements using special-purpose
entities?
(b)What are take-or-pay contracts?
(c)Should Ryan record the plant as an asset together with the related
obligation?
(d)If not, should Ryan record an asset relating to the future
commitment?
(e)What is meant by off-balance-sheet financing?
CA21-4 (Comparison of Different Types of Accounting by Lessee and
Lessor)
Part 1: Capital leases and operating leases are the two classifications of
leases described in FASB pronouncements from the standpoint of the
lessee.
Instructions
(a)Describe how a capital lease would be accounted for by the lessee
both at the inception of the lease and during the first year of the lease,
assuming the lease transfers ownership of the property to the lessee by
the end of the lease
(b)Describe how an operating lease would be accounted for by the lessee
both at the inception of the lease and during the first year of the lease,
assuming equal monthly payments are made by the lessee at the
beginning of each month of the lease. Describe the change in
accounting, if any, when rental payments are not made on a straight-line
basis.

Part 2: Sales-type leases and direct-financing leases are two of the
classifications of leases described in FASB pronouncements from the
standpoint of the lessor.
Instructions
Compare and contrast a sales-type lease with a direct-financing lease as
follows.
(a)Lease receivable.
(b)Recognition of interest revenue.
(c)Manufacturer's or dealer's profit.
==============================================

ACC 422 Enhance teaching - tutorialrank.com

More Related Content

What's hot (19)

Similar to ACC 422 Enhance teaching - tutorialrank.com (12)

Recently uploaded (20)

ACC 422 Enhance teaching - tutorialrank.com