Showing posts with label BRIEF EXERCISES. Show all posts
Showing posts with label BRIEF EXERCISES. Show all posts
5 Balance Sheet and Statement of Cash Flows BRIEF EXERCISES 5
BRIEF EXERCISES
BE5-1 (L03) Harding Corporation has the following accounts included in its December 31, 2017, trial balance: Accounts Receivable $110,000, Inventory $290,000, Allowance for Doubtful Accounts $8,000, Patents $72,000, Prepaid Insurance $9,500, Accounts Payable $77,000, and Cash $30,000. Prepare the current assets section of the balance sheet, listing the accounts in proper sequence.
BE5-2 (L03) Koch Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2017: Cash $7,000, Land $40,000, Patents $12,500, Accounts Receivable $90,000, Prepaid Insurance $5,200, Inventory $30,000, Allowance for Doubtful Accounts $4,000, and Equity Investments (trading) $11,000. Prepare the current assets section of the balance sheet, listing the accounts in proper sequence.
BE5-3 (L03) Included in Outkast Company’s December 31, 2017, trial balance are the following accounts: Prepaid Rent $5,200, Debt Investments (to be held to maturity until 2020) $56,000, Unearned Fees $17,000, Land (held for investment) $39,000, and Notes Receivable (long-term) $42,000. Prepare the long-term investments section of the balance sheet.
BE5-4 (L03) Lowell Company’s December 31, 2017, trial balance includes the following accounts: Inventory $120,000, Buildings $207,000, Accumulated Depreciation—Equipment $19,000, Equipment $190,000, Land (held for investment) $46,000, Accumulated Depreciation—Buildings $45,000, Land $71,000, and Timberland $70,000. Prepare the property, plant, and equipment section of the balance sheet.
BE5-5 (L03) Crane Corporation has the following accounts included in its December 31, 2017, trial balance: Equity Investments (trading) $21,000, Goodwill $150,000, Prepaid Insurance $12,000, Patents $220,000, and Franchises $130,000. Prepare the intangible assets section of the balance sheet.
BE5-6 (L03) Patrick Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2017: Prepaid Rent $12,000, Goodwill $50,000, Franchise Fees Receivable $2,000, Franchises $47,000, Patents $33,000, and Trademarks $10,000. Prepare the intangible assets section of the balance sheet.
BE5-7 (L03) Thomas Corporation’s adjusted trial balance contained the following liability accounts at December 31, 2017: Bonds Payable (due in 3 years) $100,000, Accounts Payable $72,000, Notes Payable (due in 90 days) $22,500, Salaries and Wages Payable $4,000, and Income Taxes Payable $7,000. Prepare the current liabilities section of the balance sheet.
BE5-8 (L03) Included in Adams Company’s December 31, 2017, trial balance are the following accounts: Accounts Payable $220,000, Pension Liability $375,000, Discount on Bonds Payable $29,000, Unearned Rent Revenue $41,000, Bonds Payable $400,000, Salaries and Wages Payable $27,000, Interest Payable $12,000, and Income Taxes Payable $29,000. Prepare the current liabilities section of the balance sheet.
BE5-9 (L03) Use the information presented in BE5-8 for Adams Company to prepare the long-term liabilities section of the balance sheet.
BE5-10 (L03) Hawthorn Corporation’s adjusted trial balance contained the following accounts at December 31, 2017: Retained Earnings $120,000, Common Stock $750,000, Bonds Payable $100,000, Paid-in Capital in Excess of Par—Common Stock $200,000, Goodwill $55,000, Accumulated Other Comprehensive Loss $150,000, and Noncontrolling Interest $35,000. Prepare the stockholders’ equity section of the balance sheet.
BE5-11 (L03) Stowe Company’s December 31, 2017, trial balance includes the following accounts: Investment in Common Stock $70,000, Retained Earnings $114,000, Trademarks $31,000, Preferred Stock $152,000, Common Stock $55,000, Deferred Income Taxes $88,000, Paid-in Capital in Excess of Par—Common Stock $174,000, and Noncontrolling Interest $63,000. Prepare the stockholders’ equity section of the balance sheet.
BE5-12 (L05) Keyser Beverage Company reported the following items in the most recent year.
Compute net cash provided by operating activities, the net change in cash during the year, and free cash flow.
BE5-13 (L05) Ames Company reported 2017 net income of $151,000. During 2017, accounts receivable increased by $13,000 and accounts payable increased by $9,500. Depreciation expense was $44,000. Prepare the cash flows from operating activities section of the statement of cash flows.
BE5-14 (L05) Martinez Corporation engaged in the following cash transactions during 2017.
Sale of land and building $191,000
Compute the net cash provided (used) by investing activities.
BE5-15 (L05) Use the information presented in BE5-14 for Martinez Corporation to compute the net cash used (provided) by financing activities.
BE5-16 (L06) Using the information in BE5-14, determine Martinez’s free cash flow, assuming that it reported net cash provided by operating activities of $400,000.
6 Accounting and the Time Value of Money BRIEF EXERCISES 6
BRIEF EXERCISES
BE6-1 (L02) Chris Spear invested $15,000 today in a fund that earns 8% compounded annually. To what amount will the investment grow in 3 years? To what amount would the investment grow in 3 years if the fund earns 8% annual interest compounded semiannually?
BE6-2 (L02) Tony Bautista needs $25,000 in 4 years. What amount must he invest today if his investment earns 12% compounded annually? What amount must he invest if his investment earns 12% annual interest compounded quarterly?
BE6-3 (L02) Candice Willis will invest $30,000 today. She needs $150,000 in 21 years. What annual interest rate must she earn?
BE6-4 (L02) Bo Newman will invest $10,000 today in a fund that earns 5% annual interest. How many years will it take for the fund to grow to $17,100?
BE6-5 (L03) Sally Medavoy will invest $8,000 a year for 20 years in a fund that will earn 6% annual interest. If the first payment into the fund occurs today, what amount will be in the fund in 20 years? If the first payment occurs at year-end, what amount will be in the fund in 20 years?
BE6-6 (L03) Steve Madison needs $250,000 in 10 years. How much must he invest at the end of each year, at 5% interest, to meet his needs?
BE6-7 (L02) John Fillmore’s lifelong dream is to own his own fishing boat to use in his retirement. John has recently come into an inheritance of $400,000. He estimates that the boat he wants will cost $300,000 when he retires in 5 years. How much of his inheritance must he invest at an annual rate of 8% (compounded annually) to buy the boat at retirement?
BE6-8 (L02) Refer to the data in BE6-7. Assuming quarterly compounding of amounts invested at 8%, how much of John
Fillmore’s inheritance must be invested to have enough at retirement to buy the boat?
BE6-9 (L03) Morgan Freeman is investing $9,069 at the end of each year in a fund that earns 5% interest. In how many years will the fund be at $100,000?
BE6-10 (L04) Henry Quincy wants to withdraw $30,000 each year for 10 years from a fund that earns 8% interest. How much must he invest today if the first withdrawal is at year-end? How much must he invest today if the first withdrawal takes place immediately?
BE6-11 (L04) Leon Tyler’s VISA balance is $793.15. He may pay it off in 12 equal end-of-month payments of $75 each. What interest rate is Leon paying?
BE6-12 (L04) Maria Alvarez is investing $300,000 in a fund that earns 4% interest compounded annually. What equal amounts can Maria withdraw at the end of each of the next 20 years?
BE6-13 (L03) Adams Inc. will deposit $30,000 in a 6% fund at the end of each year for 8 years beginning December 31, 2017.
What amount will be in the fund immediately after the last deposit?
BE6-14 (L04) Amy Monroe wants to create a fund today that will enable her to withdraw $25,000 per year for 8 years, with the first withdrawal to take place 5 years from today. If the fund earns 8% interest, how much must Amy invest today?
BE6-15 (L05) Clancey Inc. issues $2,000,000 of 7% bonds due in 10 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 8%. What amount will Clancey receive when it issues the bonds?
BE6-16 (L04) Zach Taylor is settling a $20,000 loan due today by making 6 equal annual payments of $4,727.53. Determine the interest rate on this loan, if the payments begin one year after the loan is signed.
BE6-17 (L04) Consider the loan in BE6-16. What payments must Zach Taylor make to settle the loan at the same interest rate but with the 6 payments beginning on the day the loan is signed?
7 Cash and Receivables BRIEF EXERCISES 7
BRIEF EXERCISES
BE7-1 (L01) Kraft Enterprises owns the following assets at December 31, 2017.
Cash in bank—savings account 68,000 Checking account balance 17,000
Cash on hand 9,300 Postdated checks 750
Cash refund due from IRS 31,400 Certificates of deposit (180-day) 90,000
What amount should be reported as cash?
BE7-2 (L02) Restin Co. uses the gross method to record sales made on credit. On June 1, 2017, it made sales of $50,000 with terms 3/15, n/45. On June 12, 2017, Restin received full payment for the June 1 sale. Prepare the required journal entries for Restin Co.
BE7-3 (L02) Use the information from BE7-2, assuming Restin Co. uses the net method to account for cash discounts. Prepare the required journal entries for Restin Co.
BE7-4 (L02) Roeher Company sold $9,000 of its specialty shelving to Elkins Office Supply Co. on account. Prepare the entries when (a) Roeher makes the sale, (b) Roeher grants an allowance of $700 when some of the shelving does not meet exact specifications but still could be sold by Elkins, and (c) at year-end; Roeher estimates that an additional $200 in allowances will be granted to Elkins.
BE7-5 (L03) Wilton, Inc. had net sales in 2017 of $1,400,000. At December 31, 2017, before adjusting entries, the balances in selected accounts were Accounts Receivable $250,000 debit, and Allowance for Doubtful Accounts $2,400 credit. If Wilton estimates that 8% of its receivables will prove to be uncollectible, prepare the December 31, 2017, journal entry to record bad debt expense.
BE7-6 (L03) Use the information presented in BE7-5 for Wilton, Inc.
(a) Instead of an Allowance for Doubtful Accounts Balance of $2,400 credit, the balance was $1,900 debit. Assume that 10% of accounts receivable will prove to be uncollectible. Prepare the entry to record bad debt expense.
(b) Instead of estimating uncollectibles based on a percentage of receivables, assume Wilton prepares an aging schedule that estimates total uncollectible accounts at $24,600. (Assume an allowance of $2,400 credit.) Prepare the entry to record bad debt expense.
BE7-7 (L04) Milner Family Importers sold goods to Tung Decorators for $30,000 on November 1, 2017, accepting Tung’s $30,000, 6-month, 6% note. Prepare Milner’s November 1 entry, December 31 annual adjusting entry, and May 1 entry for the collection of the note and interest.
BE7-8 (L04) Dold Acrobats lent $16,529 to Donaldson, Inc., accepting Donaldson’s 2-year, $20,000, zero-interest-bearing note.
The implied interest rate is 10%. Prepare Dold’s journal entries for the initial transaction, recognition of interest each year, and the collection of $20,000 at maturity.
BE7-9 (L06) On October 1, 2017, Chung, Inc. assigns $1,000,000 of its accounts receivable to Seneca National Bank as collateral for a $750,000 note. The bank assesses a finance charge of 2% of the receivables assigned and interest on the note of 9%. Prepare the October 1 journal entries for both Chung and Seneca.
BE7-10 (L06) Wood Incorporated factored $150,000 of accounts receivable with Engram Factors Inc. on a without-recourse basis. Engram assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments. Prepare the journal entry for Wood Incorporated and Engram Factors to record the factoring of the accounts receivable to Engram.
BE7-11 (L06) Use the information in BE7-10 for Wood. Assume that the receivables are sold with recourse. Prepare the journal entry for Wood to record the sale, assuming that the recourse liability has a fair value of $7,500.
BE7-12 (L06) Arness Woodcrafters sells $250,000 of receivables to Commercial Factors, Inc. on a with recourse basis. Commercial assesses a finance charge of 5% and retains an amount equal to 4% of accounts receivable. Arness estimates the fair value of the recourse liability to be $8,000. Prepare the journal entry for Arness to record the sale.
BE7-13 (L06) Use the information presented in BE7-12 for Arness Woodcrafters but assume that the recourse liability has a fair value of $4,000, instead of $8,000. Prepare the journal entry and discuss the effects of this change in the value of the recourse liability on Arness’s financial statements.
BE7-14 (L07) 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. Compute General Mills’ accounts receivable turnover. Compute General Mills’ average collection period for accounts receivable in days.
*BE7-15 (L08) Finman Company designated Jill Holland as petty cash custodian and established a petty cash fund of $200.
The fund is reimbursed when the cash in the fund is at $15, which it is. Petty cash receipts indicate funds were disbursed for office supplies $94 and miscellaneous expense $87. Prepare journal entries for the establishment of the fund and the reimbursement.
*BE7-16 (L08) Horton Corporation is preparing a bank reconciliation and has identified the following potential reconciling items. For each item, indicate if it is
(1) added to balance per bank statement,
(2) deducted from balance per bank statement,
(3) added to balance per books, or (4) deducted from balance per books.
(a) Deposit in transit $5,500. (d) Outstanding checks $7,422.
(b) Bank service charges $25. (e) NSF check returned $377.
(c) Interest credited to Horton’s account $31.
* BE7-17 (L08) Use the information presented in BE7-16 for Horton Corporation. Prepare any entries necessary to make Horton’s accounting records correct and complete.
* BE7-18 (L09) Assume that Toni Braxton Company has recently fallen into financial difficulties. By reviewing all available evidence on December 31, 2017, one of Toni Braxton’s creditors, the National American Bank, determined that Toni Braxton would pay back only 65% of the principal at maturity. As a result, the bank decided that the loan was impaired. If the loss is estimated to be $225,000, what entry(ies) should National American Bank make to record this loss?
8 Valuation of Inventories: A Cost-Basis Approach BRIEF EXERCISES 8
BRIEF EXERCISES
BE8-1 (L01) Included in the December 31 trial balance of Rivera Company are the following assets.
Cash $ 190,000 Work in process $200,000
Equipment (net) 1,100,000 Accounts receivable (net) 400,000
Prepaid insurance 41,000 Patents 110,000
Raw materials 335,000 Finished goods 170,000
Prepare the current assets section of the December 31 balance sheet.
BE8-2 (L01) Matlock Company uses a perpetual inventory system. Its beginning inventory consists of 50 units that cost $34 each. During June, the company purchased 150 units at $34 each, returned 6 units for credit, and sold 125 units at $50 each.
Journalize the June transactions.
BE8-3 (L02) Stallman Company took a physical inventory on December 31 and determined that goods costing $200,000 were on hand. Not included in the physical count were $25,000 of goods purchased from Pelzer Corporation, f.o.b. shipping point, and $22,000 of goods sold to Alvarez Company for $30,000, f.o.b. destination. Both the Pelzer purchase and the Alvarez sale were in transit at year-end. What amount should Stallman report as its December 31 inventory?
BE8-4 (L03) Amsterdam 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 250 $10 $ 2,500
April 15 purchase 400 12 4,800
April 23 purchase 350 13 4,550
1,000 $11,850
Compute the April 30 inventory and the April cost of goods sold using the average-cost method.
BE8-5 (L03) Data for Amsterdam Company are presented in BE8-4. Compute the April 30 inventory and the April cost of goods sold using the FIFO method.
BE8-6 (L03) Data for Amsterdam Company are presented in BE8-4. Compute the April 30 inventory and the April cost of goods sold using the LIFO method.
BE8-7 (L04) Trout Company uses the LIFO method for financial reporting purposes but FIFO for internal reporting purposes.
At January 1, 2017, the LIFO reserve has a credit balance of $1,300,000. At December 31, 2017, Trout’s internal reports indicated that the FIFO inventory balance was $2,900,000 and for external reporting purposes the LIFO inventory balance was $1,500,000.
What is the amount of the LIFO reserve and the LIFO effect related to 2017? What is the journal entry needed to record the LIFO effect at December 31, 2017?
BE8-8 (L04) Midori Company had ending inventory at end-of-year prices of $100,000 at December 31, 2016; $119,900 at December 31, 2017; and $134,560 at December 31, 2018. The year-end price indexes were 100 at 12/31/16, 110 at 12/31/17, and 116 at 12/31/18. Compute the ending inventory for Midori Company for 2016 through 2018 using the dollar-value LIFO method.
BE8-9 (L04) Arna, Inc. uses the dollar-value LIFO method of computing its inventory. Data for the past 3 years follow.
Year Ended December 31 Inventory at Current-Year Cost Price Index
2016 $19,750 100
2017 22,140 108
2018 25,935 114
Compute the value of the 2017 and 2018 inventories using the dollar-value LIFO method.
BE8-10 (L05) Bienvenu Enterprises reported cost of goods sold for 2017 of $1,400,000 and retained earnings of $5,200,000 at December 31, 2017. Bienvenu later discovered that its ending inventories at December 31, 2016 and 2017, were overstated by $110,000 and $35,000, respectively. Determine the corrected amounts for 2017 cost of goods sold and December 31, 2017, retained earnings.
9 Inventories: Additional Valuation Issues BRIEF EXERCISES 9
BRIEF EXERCISES
BE9-1 (L01) Presented below is information related to Rembrandt Inc.’s inventory…
Determine the following: (a) the net realizable value for each item, and (b) the carrying value of each item under LCNRV.
BE9-2 (L01) Floyd Corporation has the following four items in its ending inventory…
Determine the following: (a) the LCNRV for each item, and (b) the amount of write-down, if any, using (1) an item-by-item LCNRV evaluation and (2) a total category LCNRV evaluation.
BE9-3 (L01) Kumar Inc. uses a perpetual inventory system. At January 1, 2017, inventory was $214,000,000 at both cost and net realizable value. At December 31, 2017, the inventory was $286,000,000 at cost and $265,000,000 at net realizable value. Prepare the entry under (a) the cost-of-goods-sold method and (b) the loss method.
BE9-4 (L02) Presented below is information related to Rembrandt Inc.’s inventory, assuming Rembrandt uses lower-of-LIFO cost-or-market…
Determine the following:
(a) the two limits to market value (i.e., the ceiling and the floor) that should be used in the lower-of-cost- or-market computation for skis,
(b) the cost amount that should be used in the lower-of-cost-or-market comparison of boots, and
(c) the market amount that should be used to value parkas on the basis of the lower-of-cost-or-market.
BE9-5 (L02) Kumar Inc. uses LIFO inventory costing. At January 1, 2017, inventory was $214,000 at both cost and market value. At December 31, 2017, the inventory was $286,000 at cost and $265,000 at market value. Prepare the necessary December 31 entry under (a) the cost-of-goods-sold method and (b) the loss method.
BE9-6 (L03) Bell, Inc. buys 1,000 computer game CDs from a distributor who is discontinuing those games. The purchase price for the lot is $8,000. Bell will group the CDs into three price categories for resale, as indicated below…
Determine the cost per CD for each group, using the relative sales value method.
BE9-7 (L03) Kemper Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2018 at a cost of $1,000,000. At December 31, 2017, the raw materials to be purchased have a market value of $950,000. Prepare any necessary December 31, 2017, entry.
BE9-8 (L03) Use the information for Kemper Company from BE9-7. In 2018, Kemper paid $1,000,000 to obtain the raw materials which were worth $950,000. Prepare the entry to record the purchase.
BE9-9 (L04) Fosbre Corporation’s April 30 inventory was destroyed by fire. January 1 inventory was $150,000, and purchases for January through April totaled $500,000. Sales revenue for the same period was $700,000. Fosbre’s normal gross profit percentage is 35% on sales. Using the gross profit method, estimate Fosbre’s April 30 inventory that was destroyed by fire.
BE9-10 (L05) Boyne Inc. had beginning inventory of $12,000 at cost and $20,000 at retail. Net purchases were $120,000 at cost and $170,000 at retail. Net markups were $10,000, net markdowns were $7,000, and sales revenue was $147,000. Compute ending inventory at cost using the conventional retail method.
BE9-11 (L06) In its 2015 annual report, Gap Inc. reported inventory of $1,889 million on January 31, 2015, and $1,928 million on February 1, 2014, cost of goods sold of $10,146 million for 2015, and net sales of $16,435 million. Compute Gap’s inventory turnover and the average days to sell inventory for the fiscal year 2015.
*BE9-12 (L07) Use the information for Boyne Inc. from BE9-10. Compute ending inventory at cost using the LIFO retail method.
*BE9-13 (L07) Use the information for Boyne Inc. from BE9-10, and assume the price level increased from 100 at the beginning of the year to 115 at year-end. Compute ending inventory at cost using the dollar-value LIFO retail method.
10 Acquisition and Disposition of Property, Plant, and Equipment BRIEF EXERCISES 10
BRIEF EXERCISES
BE10-1 (L01) Previn Brothers Inc. purchased land at a price of $27,000. Closing costs were $1,400. An old building was removed at a cost of $10,200. What amount should be recorded as the cost of the land?
BE10-2 (L03) Hanson Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,800,000 on March 1, $1,200,000 on June 1, and $3,000,000 on December 31. Compute Hanson’s weighted-average accumulated expenditures for interest capitalization purposes.
BE10-3 (L03) Hanson Company (see BE10-2) borrowed $1,000,000 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 5-year, $2,000,000 note payable and an 11%, 4-year, $3,500,000 note payable. Compute the weighted-average interest rate used for interest capitalization purposes.
BE10-4 (L03) Use the information for Hanson Company from BE10-2 and BE10-3. Compute avoidable interest for Hanson
Company.
BE10-5 (L04) Garcia Corporation purchased a truck by issuing an $80,000, 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.
BE10-6 (L04) Mohave Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $315,000. The estimated fair values of the assets are land $60,000, building $220,000, and equipment $80,000. At what amounts should each of the three assets be recorded?
BE10-7 (L04) Fielder Company obtained land by issuing 2,000 shares of its $10 par value common stock. The land was recently appraised at $85,000. The common stock is actively traded at $40 per share. Prepare the journal entry to record the acquisition of the land.
BE10-8 (L04) Navajo Corporation traded a used truck (cost $20,000, accumulated depreciation $18,000) for a small computer with a fair value of $3,300. Navajo also paid $500 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.)
BE10-9 (L04) Use the information for Navajo Corporation from BE10-8. Prepare the journal entry to record the exchange, assuming the exchange lacks commercial substance.
BE10-10 (L04) Mehta Company traded a used welding machine (cost $9,000, accumulated depreciation $3,000) for office equipment with an estimated fair value of $5,000. Mehta also paid $3,000 cash in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.)
BE10-11 (L04) Cheng Company traded a used truck for a new truck. The used truck cost $30,000 and has accumulated depreciation of $27,000. The new truck is worth $37,000. Cheng also made a cash payment of $36,000. Prepare Cheng’s entry to record the exchange. (The exchange lacks commercial substance.)
BE10-12 (L04) Slaton Corporation traded a used truck for a new truck. The used truck cost $20,000 and has accumulated depreciation of $17,000. The new truck is worth $35,000. Slaton also made a cash payment of $33,000. Prepare Slaton’s entry to record the exchange. (The exchange has commercial substance.)
BE10-13 (L05) Indicate which of the following costs should be expensed when incurred.
(a) $13,000 paid to rearrange and reinstall machinery.
(b) $200,000 paid for addition to building.
(c) $200 paid for tune-up and oil change on delivery truck.
(d) $7,000 paid to replace a wooden floor with a concrete floor.
(e) $2,000 paid for a major overhaul on a truck, which extends the useful life.
BE10-14 (L06) Ottawa Corporation owns machinery that cost $20,000 when purchased on July 1, 2014. Depreciation has been recorded at a rate of $2,400 per year, resulting in a balance in accumulated depreciation of $8,400 at December 31, 2017. The machinery is sold on September 1, 2018, for $10,500. Prepare journal entries to (a) update depreciation for 2018 and (b) record the sale.
BE10-15 (L06) Use the information presented for Ottawa Corporation in BE10-14, but assume the machinery is sold for $5,200 instead of $10,500. Prepare journal entries to (a) update depreciation for 2018 and (b) record the sale.
11 Depreciation, Impairments, and Depletion BRIEF EXERCISES 11
BRIEF EXERCISES
(Unless otherwise instructed, round all answers to the nearest dollar.)
BE11-1 (L01) Fernandez Corporation purchased a truck at the beginning of 2017 for $50,000. The truck is estimated to have a salvage value of $2,000 and a useful life of 160,000 miles. It was driven 23,000 miles in 2017 and 31,000 miles in 2018. Compute depreciation expense for 2017 and 2018.
BE11-2 (L01) Lockard Company purchased machinery on January 1, 2017, for $80,000. The machinery is estimated to have a salvage value of $8,000 after a useful life of 8 years. (a) Compute 2017 depreciation expense using the straight-line method.
(b) Compute 2017 depreciation expense using the straight-line method assuming the machinery was purchased on September 1, 2017.
BE11-3 (L01) Use the information for Lockard Company given in BE11-2. (a) Compute 2017 depreciation expense using the sum-of-the-years’-digits method. (b) Compute 2017 depreciation expense using the sum-of-the-years’-digits method, assuming the machinery was purchased on April 1, 2017.
BE11-4 (L01) Use the information for Lockard Company given in BE11-2. (a) Compute 2017 depreciation expense using the double-declining-balance method. (b) Compute 2017 depreciation expense using the double-declining-balance method, assuming the machinery was purchased on October 1, 2017.
BE11-5 (L01) Cominsky Company purchased a machine on July 1, 2018, for $28,000. Cominsky paid $200 in title fees and county property tax of $125 on the machine. In addition, Cominsky paid $500 shipping charges for delivery, and $475 was paid to a local contractor to build and wire a platform for the machine on the plant floor. The machine has an estimated useful life of 6 years with a salvage value of $3,000. Determine the depreciation base of Cominsky’s new machine. Cominsky uses straightline depreciation.
BE11-6 (L02) Dickinson Inc. owns the following assets.
Asset Cost Salvage Estimated Useful Life
A $70,000 $7,000 10 years
B 50,000 5,000 5 years
C 82,000 4,000 12 years
Compute the composite depreciation rate and the composite life of Dickinson’s assets.
BE11-7 (L02) Holt Company purchased a computer for $8,000 on January 1, 2016. Straight-line depreciation is used, based on a 5-year life and a $1,000 salvage value. In 2018, the estimates are revised. Holt now feels the computer will be used until December 31, 2019, when it can be sold for $500. Compute the 2018 depreciation.
BE11-8 (L03) Jurassic Company owns equipment that cost $900,000 and has accumulated depreciation of $380,000. The expected future net cash flows from the use of the asset are expected to be $500,000. The fair value of the equipment is $400,000.
Prepare the journal entry, if any, to record the impairment loss.
BE11-9 (L04) Everly Corporation acquires a coal mine at a cost of $400,000. Intangible development costs total $100,000. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $80,000), after which it can be sold for $160,000. Everly estimates that 4,000 tons of coal can be extracted. If 700 tons are extracted the first year, prepare the journal entry to record depletion.
BE11-10 (L05) In its 2014 annual report, Campbell Soup Company reports beginning-of-the-year total assets of $8,113 million, end-of-the-year total assets of $8,323 million, total sales of $8,268 million, and net income of $807 million. (a) Compute
Campbell’s asset turnover. (b) Compute Campbell’s profit margin on sales. (c) Compute Campbell’s return on assets using
(1) asset turnover and profit margin and (2) net income. (Round to two decimal places.)
*BE11-11 (L06) Francis Corporation purchased an asset at a cost of $50,000 on March 1, 2017. The asset has a useful life of 8 years and a salvage value of $4,000. For tax purposes, the MACRS class life is 5 years. Compute tax depreciation for each year 2017–2022.
12 Intangible Assets BRIEF EXERCISES 12
BRIEF EXERCISES
BE12-1 (L01,2) Taylor Swift Corporation purchases a patent from Salmon Company on January 1, 2017, for $54,000. The patent has a remaining legal life of 16 years. Taylor Swift feels the patent will be useful for 10 years. Prepare Taylor Swift’s journal entries to record the purchase of the patent and 2017 amortization.
BE12-2 (L01,2) Use the information provided in BE12-1. Assume that at January 1, 2019, the carrying amount of the patent on Taylor Swift’s books is $43,200. In January, Taylor Swift spends $24,000 successfully defending a patent suit. Taylor Swift still feels the patent will be useful until the end of 2026. Prepare the journal entries to record the $24,000 expenditure and 2019 amortization.
BE12-3 (L01,2) Stephan Curry, Inc., spent $68,000 in attorney fees while developing the trade name of its new product, the Mean
BEan Machine. Prepare the journal entries to record the $68,000 expenditure and the first year’s amortization, using an 8-year life.
BE12-4 (L01,2) Gershwin Corporation obtained a franchise from Sonic Hedgehog Inc. for a cash payment of $120,000 on April 1, 2017. The franchise grants Gershwin the right to sell certain products and services for a period of 8 years. Prepare
Gershwin’s April 1 journal entry and December 31 adjusting entry.
BE12-5 (L03) On September 1, 2017, Winans Corporation acquired Aumont Enterprises for a cash payment of $700,000. At the time of purchase, Aumont’s balance sheet showed assets of $620,000, liabilities of $200,000, and owners’ equity of $420,000.
The fair value of Aumont’s assets is estimated to be $800,000. Compute the amount of goodwill acquired by Winans.
BE12-6 (L04) Kenoly Corporation owns a patent that has a carrying amount of $300,000. Kenoly expects future net cash flows from this patent to total $210,000. The fair value of the patent is $110,000. Prepare Kenoly’s journal entry, if necessary, to record the loss on impairment.
BE12-7 (L04) Waters Corporation purchased Johnson Company 3 years ago and at that time recorded goodwill of $400,000.
The Johnson Division’s net assets, including the goodwill, have a carrying amount of $800,000. The fair value of the division is estimated to be $1,000,000. Prepare Waters’ journal entry, if necessary, to record impairment of the goodwill.
BE12-8 (L04) Use the information provided in BE12-7. Assume that the fair value of the division is estimated to be $750,000 and the implied goodwill is $350,000. Prepare Waters’ journal entry, if necessary, to record impairment of the goodwill.
BE12-9 (L01,2,5) Nieland Industries had one patent recorded on its books as of January 1, 2017. This patent had a book value of $288,000 and a remaining useful life of 8 years. During 2017, Nieland incurred research and development costs of $96,000 and brought a patent infringement suit against a competitor. On December 1, 2017, Nieland received the good news that its patent was valid and that its competitor could not use the process Nieland had patented. The company incurred $85,000 to defend this patent. At what amount should patent(s) be reported on the December 31, 2017, balance sheet, assuming monthly amortization of patents?
BE12-10 (L01,2,5) Sinise Industries acquired two copyrights during 2017. One copyright related to a textbook that was developed internally at a cost of $9,900. This textbook is estimated to have a useful life of 3 years from September 1, 2017, the date it was published. The second copyright (a history research textbook) was purchased from University Press on December 1, 2017, for $24,000. This textbook has an indefinite useful life. How should these two copyrights be reported on Sinise’s balance sheet as of December 31, 2017?
BE12-11 (L05) R. Wilson Corporation commenced operations in early 2017. The corporation incurred $60,000 of costs such as fees to underwriters, legal fees, state fees, and promotional expenditures during its formation. Prepare journal entries to record the $60,000 expenditure and 2017 amortization, if any.
BE12-12 (L05) Treasure Land Corporation incurred the following costs in 2017.
Cost of laboratory research aimed at discovery of new knowledge $120,000
Cost of testing in search for product alternatives 100,000
Cost of engineering activity required to advance the design of a product to the manufacturing stage 210,000 $430,000
Prepare the necessary 2017 journal entry or entries for Treasure Land.
BE12-13 (L05) Indicate whether the following items are capitalized or expensed in the current year.
(a) Purchase cost of a patent from a competitor. (c) Organizational costs.
(b) Research and development costs. (d) Costs incurred internally to create goodwill.
14 Long-Term Liabilities BRIEF EXERCISES 13
BRIEF EXERCISES
BE13-1 (L01) Roley Corporation uses a periodic inventory system and the gross method of accounting for purchase discounts. On July 1, Roley purchased $60,000 of inventory, terms 2/10, n/30, FOB shipping point. Roley paid freight costs of $1,200. On July 3, Roley returned damaged goods and received credit of $6,000. On July 10, Roley paid for the goods. Prepare all necessary journal entries for Roley.
BE13-2 (L01) Upland Company borrowed $40,000 on November 1, 2017, by signing a $40,000, 9%, 3-month note. Prepare Upland’s November 1, 2017, entry; the December 31, 2017, annual adjusting entry; and the February 1, 2018, entry.
BE13-3 (L01) Takemoto Corporation borrowed $60,000 on November 1, 2017, by signing a $61,350, 3-month, zero-interestbearing note. Prepare Takemoto’s November 1, 2017, entry; the December 31, 2017, annual adjusting entry; and the February 1, 2018, entry.
BE13-4 (L01) Sport Pro Magazine sold 12,000 annual subscriptions on August 1, 2017, for $18 each. Prepare Sport Pro’s August 1, 2017, journal entry and the December 31, 2017, annual adjusting entry, assuming the magazines are published and delivered monthly.
BE13-5 (L01) Dillons Corporation made credit sales of $30,000 which are subject to 6% sales tax. The corporation also made cash sales which totaled $20,670 including the 6% sales tax. (a) Prepare the entry to record Dillons’ credit sales. (b) Prepare the entry to record Dillons’ cash sales.
BE13-6 (L01) Lexington Corporation’s weekly payroll of $24,000 included FICA taxes withheld of $1,836, federal taxes withheld of $2,990, state taxes withheld of $920, and insurance premiums withheld of $250. Prepare the journal entry to record Lexington’s payroll.
BE13-7 (L01) Kasten Inc. provides paid vacations to its employees. At December 31, 2017, 30 employees have each earned 2 weeks of vacation time. The employees’ average salary is $500 per week. Prepare Kasten’s December 31, 2017, adjusting entry.
BE13-8 (L01) Mayaguez Corporation provides its officers with bonuses based on net income. For 2017, the bonuses total $350,000 and are paid on February 15, 2018. Prepare Mayaguez’s December 31, 2017, adjusting entry and the February 15, 2018, entry.
BE13-9 (L02) At December 31, 2017, Burr Corporation owes $500,000 on a note payable due February 15, 2018. (a) If Burr refinances the obligation by issuing a long-term note on February 14 and using the proceeds to pay off the note due February 15, how much of the $500,000 should be reported as a current liability at December 31, 2017? (b) If Burr pays off the note on February 15, 2018, and then borrows $1,000,000 on a long-term basis on March 1, how much of the $500,000 should be reported as a current liability at December 31, 2017, the end of the fiscal year?
BE13-10 (L03) Scorcese Inc. is involved in a lawsuit at December 31, 2017. (a) Prepare the December 31 entry assuming it is probable that Scorcese will be liable for $900,000 as a result of this suit. (b) Prepare the December 31 entry, if any, assuming it is not probable that Scorcese will be liable for any payment as a result of this suit.
BE13-11 (L03) Buchanan Company recently was sued by a competitor for patent infringement. Attorneys have determined that it is probable that Buchanan will lose the case and that a reasonable estimate of damages to be paid by Buchanan is $300,000. In light of this case, Buchanan is considering establishing a $100,000 self-insurance allowance. What entry(ies), if any, should Buchanan record to recognize this loss contingency?
BE13-12 (L03) Calaf’s Drillers erects and places into service an off-shore oil platform on January 1, 2018, at a cost of $10,000,000. Calaf is legally required to dismantle and remove the platform at the end of its useful life in 10 years. Calaf estimates it will cost $1,000,000 to dismantle and remove the platform at the end of its useful life in 10 years. (The fair value at January 1, 2018, of the dismantle and removal costs is $450,000.) Prepare the entry to record the asset retirement obligation.
BE13-13 (L03) Streep Factory provides a 2-year warranty with one of its products which was first sold in 2017. Streep sold $1,000,000 of products subject to the warranty. Streep expects $125,000 of warranty costs over the next 2 years. In that year, Streep spent $70,000 servicing warranty claims. Prepare Streep’s journal entry to record the sales (ignore cost of goods sold) and the
December 31 adjusting entry, assuming the expenditures are inventory costs.
BE13-14 (L03) Leppard Corporation sells DVD players. The corporation also offers its customers a 4-year warranty contract.
During 2017, Leppard sold 20,000 warranty contracts at $99 each. The corporation spent $180,000 servicing warranties during
2017. Prepare Leppard’s journal entries for (a) the sale of contracts, (b) the cost of servicing the warranties, and (c) the recognition of warranty revenue. Assume the service costs are inventory costs.
BE13-15 (L03) Wynn Company offers a set of building blocks to customers who send in 3 UPC codes from Wynn cereal, along with 50¢. The block sets cost Wynn $1.10 each to purchase and 60¢ each to mail to customers. During 2017, Wynn sold
1,200,000 boxes of cereal. The company expects 30% of the UPC codes to be sent in. During 2017, 120,000 UPC codes were redeemed. Prepare Wynn’s December 31, 2017, adjusting entry.
14 Long-Term Liabilities BRIEF EXERCISES
BRIEF EXERCISES
BE14-1 (L01) Whiteside Corporation issues $500,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds.
BE14-2 (L01) The Colson Company issued $300,000 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 are issued at face value. Prepare Colson’s journal entries for (a) the January issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.
BE14-3 (L01) Assume the bonds in BE14-2 were issued at 98. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Colson Company records straight-line amortization semiannually.
BE14-4 (L01) Assume the bonds in BE14-2 were issued at 103. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Colson Company records straight-line amortization semiannually.
BE14-5 (L01) Devers Corporation issued $400,000 of 6% bonds on May 1, 2017. The bonds were dated January 1, 2017, and mature January 1, 2020, with interest payable July 1 and January 1. The bonds were issued at face value plus accrued interest. Prepare Devers’s journal entries for (a) the May 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.
BE14-6 (L01) On January 1, 2017, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds were issued for $559,224, and pay interest each July 1 and January 1. JWS uses the effective-interest method. Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Assume an effective-interest rate of 8%.
BE14-7 (L01) Assume the bonds in BE14-6 were issued for $644,636 and the effective-interest rate is 6%. Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.
BE14-8 (L01) Teton Corporation issued $600,000 of 7% bonds on November 1, 2017, for $644,636. The bonds were dated November 1, 2017, and mature in 10 years, with interest payable each May 1 and November 1. Teton uses the effective-interest method with an effective rate of 6%. Prepare Teton’s December 31, 2017, adjusting entry.
BE14-9 (L02) On January 1, 2017, Henderson Corporation redeemed $500,000 of bonds at 99. At the time of redemption, the unamortized premium was $15,000. Prepare the corporation’s journal entry to record the reacquisition of the bonds.
BE14-10 (L03) Coldwell, Inc. issued a $100,000, 4-year, 10% note at face value to Flint Hills Bank on January 1, 2017, and received $100,000 cash. The note requires annual interest payments each December 31. Prepare Coldwell’s journal entries to record (a) the issuance of the note and (b) the December 31 interest payment.
BE14-11 (L03) Samson Corporation issued a 4-year, $75,000, zero-interest-bearing note to Brown Company on January 1, 2017, and received cash of $47,664. The implicit interest rate is 12%. Prepare Samson’s journal entries for (a) the January 1 issuance and (b) the December 31 recognition of interest.
BE14-12 (L03) McCormick Corporation issued a 4-year, $40,000, 5% note to Greenbush Company on January 1, 2017, and received a computer that normally sells for $31,495. The note requires annual interest payments each December 31. The market rate of interest for a note of similar risk is 12%. Prepare McCormick’s journal entries for (a) the January 1 issuance and (b) the December 31 interest.
BE14-13 (L03) Shlee Corporation issued a 4-year, $60,000, zero-interest-bearing note to Garcia Company on January 1, 2017, and received cash of $60,000. In addition, Shlee agreed to sell merchandise to Garcia at an amount less than regular selling price over the 4-year period. The market rate of interest for similar notes is 12%. Prepare Shlee Corporation’s January 1 journal entry.
BE14-14 (L04) Shonen Knife Corporation has elected to use the fair value option for one of its notes payable. The note was issued at an effective rate of 11% and has a carrying value of $16,000. At year-end, Shonen Knife’s borrowing rate (credit risk) has declined; the fair value of the note payable is now $17,500. (a) Determine the unrealized holding gain or loss on the note.
(b) Prepare the entry to record any unrealized holding gain or loss.
BE14-15 (L05) At December 31, 2017, Hyasaki Corporation has the following account balances:
Bonds payable, due January 1, 2026 $2,000,000
Discount on bonds payable 88,000
Interest payable 80,000
Show how the above accounts should be presented on the December 31, 2017, balance sheet, including the proper classifications.
15 Stockholders’ Equity BRIEF EXERCISES 15
BRIEF EXERCISES
BE15-1 (L01) Buttercup Corporation issued 300 shares of $10 par value common stock for $4,500. Prepare Buttercup’s journal entry.
BE15-2 (L01) Swarten Corporation issued 600 shares of no-par common stock for $8,200. Prepare Swarten’s journal entry if
(a) the stock has no stated value, and (b) the stock has a stated value of $2 per share.
BE15-3 (L01,2) Wilco Corporation has the following account balances at December 31, 2017.
…
Prepare Wilco’s December 31, 2017, stockholders’ equity section.
BE15-4 (L01) Ravonette Corporation issued 300 shares of $10 par value common stock and 100 shares of $50 par value preferred stock for a lump sum of $13,500. The common stock has a market price of $20 per share, and the preferred stock has a market price of $90 per share. Prepare the journal entry to record the issuance.
BE15-5 (L01) On February 1, 2017, Buffalo Corporation issued 3,000 shares of its $5 par value common stock for land worth $31,000. Prepare the February 1, 2017, journal entry.
BE15-6 (L01) Moonwalker Corporation issued 2,000 shares of its $10 par value common stock for $60,000. Moonwalker also incurred $1,500 of costs associated with issuing the stock. Prepare Moonwalker’s journal entry to record the issuance of the company’s stock.
BE15-7 (L01) Hinges Corporation issued 500 shares of $100 par value preferred stock for $61,500. Prepare Hinges’s journal entry.
BE15-8 (L02) Sprinkle Inc. has outstanding 10,000 shares of $10 par value common stock. On July 1, 2017, Sprinkle reacquired
100 shares at $87 per share. On September 1, Sprinkle reissued 60 shares at $90 per share. On November 1, Sprinkle reissued 40 shares at $83 per share. Prepare Sprinkle’s journal entries to record these transactions using the cost method.
BE15-9 (L02) Arantxa Corporation has outstanding 20,000 shares of $5 par value common stock. On August 1, 2017,
Arantxa reacquired 200 shares at $80 per share. On November 1, Arantxa reissued the 200 shares at $70 per share. Arantxa had no previous treasury stock transactions. Prepare Arantxa’s journal entries to record these transactions using the cost method.
BE15-10 (L03) Woolford Inc. declared a cash dividend of $1.00 per share on its 2 million outstanding shares. The dividend was declared on August 1, payable on September 9 to all stockholders of record on August 15. Prepare all journal entries necessary on those three dates.
BE15-11 (L03) Cole Inc. owns shares of Marlin Corporation stock. At December 31, 2017, the securities were carried in Cole’s accounting records at their cost of $875,000, which equals their fair value. On September 21, 2018, when the fair value of the securities was $1,200,000, Cole declared a property dividend whereby the Marlin securities are to be distributed on October 23,
2018, to stockholders of record on October 8, 2018. Prepare all journal entries necessary on those three dates.
BE15-12 (L03) Graves Mining Company declared, on April 20, a dividend of $500,000 payable on June 1. Of this amount, $125,000 is a return of capital. Prepare the April 20 and June 1 entries for Graves.
BE15-13 (L03) Green Day Corporation has outstanding 400,000 shares of $10 par value common stock. The corporation declares a 5% stock dividend when the fair value of the stock is $65 per share. Prepare the journal entries for Green Day Corporation for both the date of declaration and the date of distribution.
BE15-14 (L03) Use the information from BE15-13, but assume Green Day Corporation declared a 100% stock dividend rather than a 5% stock dividend. Prepare the journal entries for both the date of declaration and the date of distribution.
*BE15-15 (L05) Nottebart Corporation has outstanding 10,000 shares of $100 par value, 6% preferred stock and 60,000 shares of $10 par value common stock. The preferred stock was issued in January 2017, and no dividends were declared in 2017 or 2018. In 2019, Nottebart declares a cash dividend of $300,000. How will the dividend be shared by common and preferred stockholders if the preferred is (a) noncumulative and (b) cumulative?
16 Dilutive Securities and Earnings per Share BRIEF EXERCISES 16
BRIEF EXERCISES
BE16-1 (L01) Archer Inc. issued $4,000,000 par value, 7% convertible bonds at 99 for cash. If the bonds had not included the conversion feature, they would have sold for 95. Prepare the journal entry to record the issuance of the bonds.
BE16-2 (L01) Petrenko Corporation has outstanding 2,000 $1,000 bonds, each convertible into 50 shares of $10 par value common stock. The bonds are converted on December 31, 2017, when the unamortized discount is $30,000 and the market price of the stock is $21 per share. Record the conversion using the book value approach.
BE16-3 (L01) Pechstein Corporation issued 2,000 shares of $10 par value common stock upon conversion of 1,000 shares of $50 par value preferred stock. The preferred stock was originally issued at $60 per share. The common stock is trading at $26 per share at the time of conversion. Record the conversion of the preferred stock.
BE16-4 (L02) Eisler Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 98, and the warrants had a market price of $40. Use the proportional method to record the issuance of the bonds and warrants.
BE16-5 (L02) McIntyre Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling separately at 98. The market price of the warrants without the bonds cannot be determined. Use the incremental method to record the issuance of the bonds and warrants.
BE16-6 (L03) On January 1, 2017, Barwood Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share of Barwood’s $5 par value common stock at $50 per share at any time during the next 5 years. The market price of the stock is $65 per share on the date of grant. The fair value of the options at the grant date is $150,000. The period of benefit is 2 years. Prepare Barwood’s journal entries for January 1, 2017, and December 31, 2017 and 2018.
BE16-7 (L03) Refer to the data for Barwood Corporation in BE16-6. Repeat the requirements assuming that instead of options, Barwood granted 2,000 shares of restricted stock.
BE16-8 (L03) On January 1, 2017 (the date of grant), Lutz Corporation issues 2,000 shares of restricted stock to its executives. The fair value of these shares is $75,000, and their par value is $10,000. The stock is forfeited if the executives do not complete 3 years of employment with the company. Prepare the journal entry (if any) on January 1, 2017, and on December 31, 2017, assuming the service period is 3 years.
BE16-9 (L04) Kalin Corporation had 2017 net income of $1,000,000. During 2017, Kalin paid a dividend of $2 per share on 100,000 shares of preferred stock. During 2017, Kalin had outstanding 250,000 shares of common stock. Compute Kalin’s 2017 earnings per share.
BE16-10 (L04) Douglas Corporation had 120,000 shares of stock outstanding on January 1, 2017. On May 1, 2017, Douglas issued 60,000 shares. On July 1, Douglas purchased 10,000 treasury shares, which were reissued on October 1. Compute Douglas’s weighted-average number of shares outstanding for 2017.
BE16-11 (L04) Tomba Corporation had 300,000 shares of common stock outstanding on January 1, 2017. On May 1, Tomba issued 30,000 shares. (a) Compute the weighted-average number of shares outstanding if the 30,000 shares were issued for cash. (b) Compute the weighted-average number of shares outstanding if the 30,000 shares were issued in a stock dividend.
BE16-12 (L04) The 2017 income statement of Wasmeier Corporation showed net income of $480,000 and a loss from discontinued operations of $120,000. Wasmeier had 100,000 shares of common stock outstanding all year. Prepare Wasmeier’s income statement presentation of earnings per share.
BE16-13 (L05) Rockland Corporation earned net income of $300,000 in 2017 and had 100,000 shares of common stock outstanding throughout the year. Also outstanding all year was $800,000 of 9% bonds, which are convertible into 16,000 shares of common. Rockland’s tax rate is 40%. Compute Rockland’s 2017 diluted earnings per share.
BE16-14 (L05) DiCenta Corporation reported net income of $270,000 in 2017 and had 50,000 shares of common stock outstanding throughout the year. Also outstanding all year were 5,000 shares of cumulative preferred stock, each convertible into 2 shares of common. The preferred stock pays an annual dividend of $5 per share. DiCenta’s tax rate is 40%. Compute DiCenta’s 2017 diluted earnings per share.
BE16-15 (L05) Bedard Corporation reported net income of $300,000 in 2017 and had 200,000 shares of common stock outstanding throughout the year. Also outstanding all year were 45,000 options to purchase common stock at $10 per share. The average market price of the stock during the year was $15. Compute diluted earnings per share.
BE16-16 (L06) Ferraro, Inc. established a stock-appreciation rights (SARs) program on January 1, 2017, which entitles executives to receive cash at the date of exercise for the difference between the market price of the stock and the pre-established price of $20 on 5,000 SARs. The required service period is 2 years. The fair value of the SARs are determined to be $4 on December 31, 2017, and $9 on December 31, 2018. Compute Ferraro’s compensation expense for 2017 and 2018.
17 Investments BRIEF EXERCISES
BRIEF EXERCISES
BE17-1 (L01) Garfield Company purchased, on January 1, 2017, as a held-to-maturity investment, $80,000 of the 9%, 5-year bonds of Chester Corporation for $74,086, which provides an 11% return. Prepare Garfield’s journal entries for (a) the purchase of the investment, and (b) the receipt of annual interest and discount amortization. Assume effective-interest amortization is used.
BE17-2 (L01) Use the information from BE17-1 but assume the bonds are purchased as an available-for-sale security. Prepare Garfield’s journal entries for (a) the purchase of the investment, (b) the receipt of annual interest and discount amortization, and (c) the year-end fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) The bonds have a year-end fair value of $75,500.
BE17-3 (L01) Carow Corporation purchased on January 1, 2017, as a held-to-maturity investment, $60,000 of the 8%, 5-year bonds of Harrison, Inc. for $65,118, which provides a 6% return. The bonds pay interest semiannually. Prepare Carow’s journal entries for (a) the purchase of the investment, and (b) the receipt of semiannual interest and premium amortization. Assume effective-interest amortization is used.
BE17-4 (L01) Hendricks Corporation purchased trading investment bonds for $50,000 at par. At December 31, Hendricks received annual interest of $2,000, and the fair value of the bonds was $47,400. Prepare Hendricks’ journal entries for (a) the purchase of the investment, (b) the interest received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.)
BE17-5 (L02) Fairbanks Corporation purchased 400 shares of Sherman Inc. common stock for $13,200 (Fairbanks does not have significant influence). During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $34.50 per share. Prepare Fairbanks’ journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.)
BE17-6 (L02) Use the information from BE17-5 but assume the stock is nonmarketable. Prepare Fairbanks’ journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment, if any.
BE17-7 (L03) Zoop Corporation purchased for $300,000 a 30% interest in Murphy, Inc. This investment enables Zoop to exert significant influence over Murphy. During the year, Murphy earned net income of $180,000 and paid dividends of $60,000. Prepare Zoop’s journal entries related to this investment.
BE17-8 (L02) Cleveland Company has a stock portfolio valued at $4,000. Its cost was $3,300. If the Fair Value Adjustment account has a debit balance of $200, prepare the journal entry at year-end.
BE17-9 (L02,4) The following information relates to Moran Co. for the year ended December 31, 2017: net income $1,245.7 million; unrealized holding loss of $10.9 million related to available-for-sale debt securities during the year; accumulated other comprehensive income of $57.2 million on December 31, 2016. Assuming no other changes in accumulated other comprehensive income, determine (a) other comprehensive income for 2017, (b) comprehensive income for 2017, and (c) accumulated other comprehensive income at December 31, 2017.
BE17-10 (L04) Hillsborough Co. has a held-to-maturity investment in the bonds of Schuyler Corp. with a carrying value of $70,000. Hillsborough determined that due to poor economic prospects for Schuyler, the bonds have decreased in value to $60,000. It is determined that this loss in value is uncollectible. Prepare the journal entry, if any, to record the reduction in value.
BE17-11 (L04) Stave Company invests $10,000,000 in 5% fixed rate corporate bonds on January 1, 2017. All the bonds are classified as available-for-sale and are purchased at par. At year-end, market interest rates have declined, and the fair value of the bonds is now $10,600,000. Interest is paid on January 1. Prepare journal entries for Stave Company to (a) record the transactions related to these bonds in 2017, assuming Stave does not elect the fair option; and (b) record the transactions related to these bonds in 2017, assuming that Stave Company elects the fair value option to account for these bonds.
BE17-12 (L04) Michek Company loans Sarasota Company $2,000,000 at 6% for 3 years on January 1, 2017. Michek intends to hold this loan to maturity. The fair value of the loan at the end of each reporting period is as follows.
December 31, 2017 $2,050,000
December 31, 2018 2,020,000
December 31, 2019 2,000,000
Prepare the journal entry(ies) at December 31, 2017, and December 31, 2019, for Michek related to these bonds, assuming (a) it does not use the fair value option, and (b) it uses the fair value option. Interest is paid on January 1.
BE17-13 (L04) Presented below are two independent cases related to available-for-sale debt investments.
Case 1 Case 2
Amortized cost $40,000 $100,000
Fair value 30,000 110,000
Expected credit losses 25,000 92,000
For each case, determine the amount of impairment loss, if any.
18 Revenue Recognition BRIEF EXERCISES 18
BRIEF EXERCISES
BE18-1 (L01) Leno Computers manufactures tablet computers for sale to retailers such as Fallon Electronics. Recently, Leno sold and delivered 200 tablet computers to Fallon for $20,000 on January 5, 2017. Fallon has agreed to pay for the 200 tablet computers within 30 days. Fallon has a good credit rating and should have no difficulty in making payment to Leno. (a) Explain whether a valid contract exists between Leno Computers and Fallon Electronics. (b) Assuming that Leno Computers has not yet delivered the tablet computers to Fallon Electronics, what might cause a valid contract not to exist between Leno and Fallon?
BE18-2 (L01) On May 10, 2017, Cosmo Co. enters into a contract to deliver a product to Greig Inc. on June 15, 2017. Greig agrees to pay the full contract price of $2,000 on July 15, 2017. The cost of the goods is $1,300. Cosmo delivers the product to Greig on June 15, 2017, and receives payment on July 15, 2017. Prepare the journal entries for Cosmo related to this contract. Either party may terminate the contract without compensation until one of the parties performs.
BE18-3 (L02) Hillside Company enters into a contract with Sanchez Inc. to provide a software license and 3 years of customer support. The customer-support services require specialized knowledge that only Hillside Company’s employees can perform. How many performance obligations are in the contract?
BE18-4 (L02) Destin Company signs a contract to manufacture a new 3D printer for $80,000. The contract includes installation which costs $4,000 and a maintenance agreement over the life of the printer at a cost of $10,000. The printer cannot be operated without the installation. Destin Company as well as other companies could provide the installation and maintenance agreement. What are Destin Company’s performance obligations in this contract?
BE18-5 (L02) Ismail Construction enters into a contract to design and build a hospital. Ismail is responsible for the overall management of the project and identifies various goods and services to be provided, including engineering, site clearance, foundation, procurement, construction of the structure, piping and wiring, installation of equipment, and finishing. Does Ismail have a single performance obligation to the customer in this revenue arrangement? Explain.
BE18-6 (L02) Nair Corp. enters into a contract with a customer to build an apartment building for $1,000,000. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $150,000 to be paid if the building is ready for rental beginning August 1, 2018. The bonus is reduced by $50,000 each week that completion is delayed.
Nair commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:…
Determine the transaction price for this contract.
BE18-7 (L02) Referring to the revenue arrangement in BE18-6, determine the transaction price for the contract, assuming (a) Nair is only able to estimate whether the building can be completed by August 1, 2018, or not (Nair estimates that there is a 70% chance that the building will be completed by August 1, 2018), and (b) Nair has limited information with which to develop a reliable estimate of completion by the August 1, 2018, deadline.
BE18-8 (L02) Presented below are three revenue recognition situations.
(a) Groupo sells goods to MTN for $1,000,000, payment due at delivery.
(b) Groupo sells goods on account to Grifols for $800,000, payment due in 30 days.
(c) Groupo sells goods to Magnus for $500,000, payment due in two installments, the first installment payable in 18 months and the second payment due 6 months later. The present value of the future payments is $464,000.
Indicate the transaction price for each of these situations and when revenue will be recognized.
BE18-9 (L02) On January 2, 2017, Adani Inc. sells goods to Geo Company in exchange for a zero-interest-bearing note with face value of $11,000, with payment due in 12 months. The fair value of the goods at the date of sale is $10,000 (cost $6,000). Prepare the journal entry to record this transaction on January 2, 2017. How much total revenue should be recognized in 2017?
BE18-10 (L02) On March 1, 2017, Parnevik Company sold goods to Goosen Inc. for $660,000 in exchange for a 5-year, zerointerest- bearing note in the face amount of $1,062,937 (an inputed rate of 10%). The goods have an inventory cost on Parnevik’s books of $400,000. Prepare the journal entries for Parnevik on (a) March 1, 2017, and (b) December 31, 2017.
BE18-11 (L02,3) Telephone Sellers Inc. sells prepaid telephone cards to customers. Telephone Sellers then pays the telecommunications company, TeleExpress, for the actual use of its telephone lines related to the prepaid telephone cards. Assume that Telephone Sellers sells $4,000 of prepaid cards in January 2017. It then pays TeleExpress based on usage, which turns out to be 50% in February, 30% in March, and 20% in April. The total payment by Telephone Sellers for TeleExpress lines over the 3 months is $3,000. Indicate how much income Telephone Sellers should recognize in January, February, March, and April.
BE18-12 (L02,3) Manual Company sells goods to Nolan Company during 2017. It offers Nolan the following rebates based on total sales to Nolan. If total sales to Nolan are 10,000 units, it will grant a rebate of 2%. If it sells up to 20,000 units, it will grant a rebate of 4%. If it sells up to 30,000 units, it will grant a rebate of 6%. In the first quarter of the year, Manual sells 11,000 units to Nolan at a sales price of $110,000. Manual, based on past experience, has sold over 40,000 units to Nolan, and these sales normally take place in the third quarter of the year. What amount of revenue should Manual report for the sale of the 11,000 units in the first quarter of the year?
BE18-13 (L03) On July 10, 2017, Amodt Music sold CDs to retailers on account and recorded sales revenue of $700,000 (cost $560,000). Amodt grants the right to return CDs that do not sell in 3 months following delivery. Past experience indicates that the normal return rate is 15%. By October 11, 2017, retailers returned CDs to Amodt and were granted credit of $78,000. Prepare Amodt’s journal entries to record (a) the sale on July 10, 2017, and (b) $78,000 of returns on October 11, 2017, and on October 31, 2017. Assume that Amodt prepares financial statement on October 31, 2017.
BE18-14 (L03) Kristin Company sells 300 units of its products for $20 each to Logan Inc. for cash. Kristin allows Logan to return any unused product within 30 days and receive a full refund. The cost of each product is $12. To determine the transaction price, Kristin decides that the approach that is most predictive of the amount of consideration to which it will be entitled is the probability-weighted amount. Using the probability-weighted amount, Kristin estimates that (1) 10 products will be returned and (2) the returned products are expected to be resold at a profit. Indicate the amount of (a) net sales, (b) estimated liability for refunds, and (c) cost of goods sold that Kristen should report in its financial statements (assume that none of the products have been returned at the financial statement date).
BE18-15 (L03) On June 1, 2017, Mills Company sells $200,000 of shelving units to a local retailer, ShopBarb, which is planning to expand its stores in the area. Under the agreement, ShopBarb asks Mills to retain the shelving units at its factory until the new stores are ready for installation. Title passes to ShopBarb at the time the agreement is signed. The shelving units are delivered to the stores on September 1, 2017, and ShopBarb pays in full. Prepare the journal entries for this bill-and-hold arrangement (assuming that conditions for recognizing the sale as a bill-and-hold sale have been met) for Mills on June 1 and September 1, 2017. The cost of the shelving units to Mills is $110,000.
BE18-16 (L03) Travel Inc. sells tickets for a Caribbean cruise on ShipAway Cruise Lines to Carmel Company employees. The total cruise package price to Carmel Company employees is $70,000. Travel Inc. receives a commission of 6% of the total price. Travel Inc. therefore remits $65,800 to ShipAway. Prepare the journal entry to record the remittance and revenue recognized by Travel Inc. on this transaction.
BE18-17 (L03) Jansen Corporation shipped $20,000 of merchandise on consignment to Gooch Company. Jansen paid freight costs of $2,000. Gooch Company paid $500 for local advertising, which is reimbursable from Jansen. By year-end, 60% of the merchandise had been sold for $21,500. Gooch notified Jansen, retained a 10% commission, and remitted the cash due to Jansen. Prepare Jansen’s journal entry when the cash is received.
BE18-18 (L03) Talarczyk Company sold 10,000 Super-Spreaders on December 31, 2017, at a total price of $1,000,000, with a warranty guarantee that the product was free of any defects. The cost of the spreaders sold is $550,000. The assurance warranties extend for a 2-year period and are estimated to cost $40,000. Talarczyk also sold extended warranties (service-type warranties) related to 2,000 spreaders for 2 years beyond the 2-year period for $12,000. Given this information, determine the amounts to report for the following at December 31, 2017: sales revenue, warranty expense, unearned warranty revenue, warranty liability, and cash.
BE18-19 (L04) On May 1, 2017, Mount Company enters into a contract to transfer a product to Eric Company on September 30, 2017. It is agreed that Eric will pay the full price of $25,000 in advance on June 15, 2017. Eric pays on June 15, 2017, and Mount delivers the product on September 30, 2017. Prepare the journal entries required for Mount in 2017.
BE18-20 (L03) Nate Beggs signs a 1-year contract with BlueBox Video. The terms of the contract are that Nate is required to pay a nonrefundable initiation fee of $100. No annual membership fee is charged in the first year. After the first year, membership can be renewed by paying an annual membership fee of $5 per month. BlueBox determines that its customers, on average, renew their annual membership three times after the first year before terminating their membership. What amount of revenue should BlueBox recognize in its first year?
BE18-21 (L04) Stengel Co. enters into a 3-year contract to perform maintenance service for Laplante Inc. Laplante promises to pay $100,000 at the beginning of each year (the standalone selling price of the service at contract inception is $100,000 per year). At the end of the second year, the contract is modified and the fee for the third year of service, which reflects a reduced menu of maintenance services to be performed at Laplante locations, is reduced to $80,000 (the standalone selling price of the services at the beginning of the third year is $80,000 per year). Briefly describe the accounting for this contract modification.
BE18-22 (L05) Turner, Inc. began work on a $7,000,000 contract in 2017 to construct an office building. During 2017, Turner, Inc. incurred costs of $1,700,000, billed its customers for $1,200,000, and collected $960,000. At December 31, 2017, the estimated additional costs to complete the project total $3,300,000. Prepare Turner’s 2017 journal entries using the percentage-ofcompletion method.
BE18-23 (L06) Guillen, Inc. began work on a $7,000,000 contract in 2017 to construct an office building. Guillen uses the completed-contract method. At December 31, 2017, the balances in certain accounts were Construction in Process $1,715,000, Accounts Receivable $240,000, and Billings on Construction in Process $1,000,000. Indicate how these accounts would be reported in Guillen’s December 31, 2017, balance sheet.
BE18-24 (L07) Archer Construction Company began work on a $420,000 construction contract in 2017. During 2017, Archer incurred costs of $278,000, billed its customer for $215,000, and collected $175,000. At December 31, 2017, the estimated additional costs to complete the project total $162,000. Prepare Archer’s journal entry to record profit or loss, if any, using (a) the percentage-of-completion method and (b) the completed-contract method.
BE18-25 (L08) Frozen Delight, Inc. charges an initial franchise fee of $75,000 for the right to operate as a franchisee of Frozen Delight. Of this amount, $25,000 is collected immediately. The remainder is collected in four equal annual installments of $12,500 each. These installments have a present value of $41,402. As part of the total franchise fee, Frozen Delight also provides training (with a fair value of $2,000) to help franchisees get the store ready to open. The franchise agreement is signed on April 1, 2017, training is completed, and the store opens on July 1, 2017. Prepare the journal entries required by Frozen Delight in 2017.
19 Accounting for Income Taxes BRIEF EXERCISES 19
BRIEF EXERCISES
BE19-1 (L01) In 2017, Amirante Corporation had pretax financial income of $168,000 and taxable income of $120,000. The difference is due to the use of different depreciation methods for tax and accounting purposes. The effective tax rate is 40%. Compute the amount to be reported as income taxes payable at December 31, 2017.
BE19-2 (L01) Oxford Corporation began operations in 2017 and reported pretax financial income of $225,000 for the year. Oxford’s tax depreciation exceeded its book depreciation by $40,000. Oxford’s tax rate for 2017 and years thereafter is 30%. In its December 31, 2017, balance sheet, what amount of deferred tax liability should be reported?
BE19-3 (L01,2) Using the information from BE19-2, assume this is the only difference between Oxford’s pretax financial income and taxable income. Prepare the journal entry to record the income tax expense, deferred income taxes, and income taxes payable, and show how the deferred tax liability will be classified on the December 31, 2017, balance sheet.
BE19-4 (L01,2) At December 31, 2017, Appaloosa Corporation had a deferred tax liability of $25,000. At December 31, 2018, the deferred tax liability is $42,000. The corporation’s 2018 current tax expense is $48,000. What amount should Appaloosa report as total 2018 income tax expense?
BE19-5 (L01,2) At December 31, 2017, Suffolk Corporation had an estimated warranty liability of $105,000 for accounting purposes and $0 for tax purposes. (The warranty costs are not deductible until paid.) The effective tax rate is 40%. Compute the amount Suffolk should report as a deferred tax asset at December 31, 2017.
BE19-6 (L01,2) At December 31, 2017, Percheron Inc. had a deferred tax asset of $30,000. At December 31, 2018, the deferred tax asset is $59,000. The corporation’s 2018 current tax expense is $61,000. What amount should Percheron report as total 2018 income tax expense?
BE19-7 (L01,2) At December 31, 2017, Hillyard Corporation has a deferred tax asset of $200,000. After a careful review of all available evidence, it is determined that it is more likely than not that $60,000 of this deferred tax asset will not be realized. Prepare the necessary journal entry.
BE19-8 (L01,2) Mitchell Corporation had income before income taxes of $195,000 in 2017. Mitchell’s current income tax expense is $48,000, and deferred income tax expense is $30,000. Prepare Mitchell’s 2017 income statement, beginning with Income before income taxes.
BE19-9 (L01,2) Shetland Inc. had pretax financial income of $154,000 in 2017. Included in the computation of that amount is insurance expense of $4,000 which is not deductible for tax purposes. In addition, depreciation for tax purposes exceeds accounting depreciation by $10,000. Prepare Shetland’s journal entry to record 2017 taxes, assuming a tax rate of 45%.
BE19-10 (L01,2) Clydesdale Corporation has a cumulative temporary difference related to depreciation of $580,000 at December 31, 2017. This difference will reverse as follows: 2018, $42,000; 2019, $244,000; and 2020, $294,000. Enacted tax rates are 34% for 2018 and 2019, and 40% for 2020. Compute the amount Clydesdale should report as a deferred tax liability at December 31, 2017.
BE19-11 (L02) At December 31, 2017, Fell Corporation had a deferred tax liability of $680,000, resulting from future taxable amounts of $2,000,000 and an enacted tax rate of 34%. In May 2018, a new income tax act is signed into law that raises the tax rate to 40% for 2018 and future years. Prepare the journal entry for Fell to adjust the deferred tax liability.
BE19-12 (L03) Conlin Corporation had the following tax information.
Year Taxable Income Tax Rate Taxes Paid
2015 $300,000 35% $105,000
2016 325,000 30 97,500
2017 400,000 30 120,000
In 2018, Conlin suffered a net operating loss of $480,000, which it elected to carry back. The 2018 enacted tax rate is 29%. Prepare Conlin’s entry to record the effect of the loss carryback.
BE19-13 (L03) Rode Inc. incurred a net operating loss of $500,000 in 2017. Combined income for 2015 and 2016 was $350,000. The tax rate for all years is 40%. Rode elects the carryback option. Prepare the journal entries to record the benefits of the loss carryback and the loss carryforward. Rode expects to return to profitability in 2018.
BE19-14 (L03) Use the information for Rode Inc. given in BE19-13. Assume that it is more likely than not that the entire net operating loss carryforward will not be realized in future years. Prepare all the journal entries necessary at the end of 2017.
BE19-15 (L04) Youngman Corporation has temporary differences at December 31, 2017, that result in the following deferred taxes.
Deferred tax liability related to depreciation difference $38,000
Deferred tax asset related to warranty liability 62,000
Deferred tax liability related to revenue recognition 96,000
Deferred tax asset related to litigation accruals 27,000
Indicate how these balances would be presented in Youngman’s December 31, 2017, balance sheet.
20 Accounting for Pensions and Postretirement Benefits BRIEF EXERCISES 20
BRIEF EXERCISES
BE20-1 (L01) AMR Corporation (parent company of American Airlines) reported the following (in millions).
Service cost $366
Interest on P.B.O. 737
Return on plan assets 593
Amortization of prior service cost 13
Amortization of net loss 154
Compute AMR Corporation’s pension expense.
BE20-2 (L01) For Warren Corporation, year-end plan assets were $2,000,000. At the beginning of the year, plan assets were $1,780,000. During the year, contributions to the pension fund were $120,000, and benefits paid were $200,000. Compute Warren’s actual return on plan assets.
BE20-3 (L02) At January 1, 2017, Hennein Company had plan assets of $280,000 and a projected benefit obligation of the same amount. During 2017, service cost was $27,500, the settlement rate was 10%, actual and expected return on plan assets were $25,000, contributions were $20,000, and benefits paid were $17,500. Prepare a pension worksheet for Hennein Company for 2017.
BE20-4 (L02) Campbell Soup Company reported pension expense of $73 million and contributed $71 million to the pension fund. Prepare Campbell Soup Company’s journal entry to record pension expense and funding, assuming Campbell has no OCI amounts.
BE20-5 (L03) Mancuso Corporation amended its pension plan on January 1, 2017, and granted $160,000 of prior service costs to its employees. The employees are expected to provide 2,000 service years in the future, with 350 service years in 2017. Compute prior service cost amortization for 2017.
BE20-6 (L03) At December 31, 2017, Besler Corporation had a projected benefit obligation of $560,000, plan assets of $322,000, and prior service cost of $127,000 in accumulated other comprehensive income. Determine the pension asset/liability at December 31, 2017.
BE20-7 (L04) Shin Corporation had a projected benefit obligation of $3,100,000 and plan assets of $3,300,000 at January 1, 2017. Shin also had a net actuarial loss of $465,000 in accumulated OCI at January 1, 2017. The average remaining service period of Shin’s employees is 7.5 years. Compute Shin’s minimum amortization of the actuarial loss.
BE20-8 (L05) Hawkins Corporation has the following balances at December 31, 2017.
Projected benefit obligation $2,600,000
Plan assets at fair value 2,000,000
Accumulated OCI (PSC) 1,100,000
How should these balances be reported on Hawkins’ balance sheet at December 31, 2017?
BE20-9 (L05) Norton Co. had the following amounts related to its pension plan in 2017.
Actuarial liability loss for 2017 $28,000
Unexpected asset gain for 2017 18,000
Accumulated other comprehensive income (G/L) (beginning balance) 7,000 Cr.
Determine for 2017 (a) Norton’s other comprehensive income (loss) and (b) comprehensive income. Net income for 2017 is $26,000; no amortization of gain or loss is necessary in 2017.
BE20-10 (L05) Lahey Corp. has three defined benefit pension plans as follows.
Pension Assets Projected Benefit
(at Fair Value) Obligation
Plan X $600,000 $500,000
Plan Y 900,000 720,000
Plan Z 550,000 700,000
How will Lahey report these multiple plans in its financial statements?
BE20-11 (L06,7) Manno Corporation has the following information available concerning its postretirement benefit plan for 2017.
Service cost $40,000
Interest cost 47,400
Actual and expected return on plan assets 26,900
Compute Manno’s 2017 postretirement expense.
**BE20-12 (L06,7) For 2017, Sampsell Inc. computed its annual postretirement expense as $240,900. Sampsell’s contribution to the plan during 2017 was $180,000. Prepare Sampsell’s 2017 entry to record postretirement expense, assuming Sampsell has no OCI amounts.
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