ACCT 3312 final exam uta

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Ziegler Corporation purchased 25,000 shares of common stock of the Sherman Corporation for $40 per share on January 2, 2020. Sherman Corporation had 100,000 shares of common stock outstanding during 2021, paid cash dividends of $150,000 during 2021, and reported net income of $500,000 for 2021. Ziegler Corporation should report revenue from investment for 2021 in the amount of

(500000*25000)/100000= 125,000

Equipment was purchased at the beginning of 2019 for $850,000. At the time of its purchase, the equipment was estimated to have a useful life of six years and a salvage value of $100,000. The equipment was depreciated using the straight-line method of depreciation through 2021. At the beginning of 2022, the estimate of useful life was revised to a total life of eight years and the expected salvage value was changed to $62,500. The amount to be recorded for depreciation for 2022, reflecting these changes in estimates, is

(850k-100k)/6= 125k * 3 = 375k 850k - 375k = 475k =(475k -62.5k)/(3+2) = 82,500

Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Container Corporation purchased computer equipment, installation and training for a total cost of $144,000 on March 15, 2021. Estimated standalone fair values of the equipment, installation, and training are $90,000, $60,000, and $30,000 respectively. The transaction price allocated to equipment, installation and training is

(90,000/180,000 )*144,000 = 72k (60,000/180,000) * 144,000 = 48k (30,000/ 180,000) * 144,000 = 24k

Treasury stock. (7 points)Agler Corporation's balance sheet reported the following: Capital stock outstanding, 5,000 shares, par $30 per share$150,000Paid-in capital in excess of par80,000Retained earnings100,000The following transactions occurred this year: (a) Purchased 400 shares of capital stock to be held as treasury stock, paying $60 per share. (b) Sold 300 of the shares of treasury stock at $65 per share. (c) Sold the remaining shares of treasury stock at $50 per share.

(a) Treasury Stock 24,000 Cash 24,000 (b) Cash19,500 Treasury Stock18,000 Paid-in Capital from Treasury Stock1,500 (c) Cash5,000Paid-in Capital from Treasury Stock1,000Treasury Stock6,000

Stine Inc. had 1,000,000 shares of common stock issued and outstanding at December 31, 2020. On July 1, 2021 an additional 1,000,000 shares were issued for cash. Stine also had stock options outstanding at the beginning and end of 2021 which allow the holders to purchase 300,000 shares of common stock at $28 per share. The average market price of Stine's common stock was $35 during 2021. The number of shares to be used in computing diluted earnings per share for 2021 is

1,000,000 * 6/12 + 2,000,000 * 6/12 + [(35-28)/35 *300k] = 1,560,000

Marle Construction enters into a contract with a customer to build a warehouse for $950,000 on March 30, 2021 with a performance bonus of $50,000 if the building is completed by July 31, 2021. The bonus is reduced by $10,000 each week that completion is delayed. Marle commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability July 31, 2021 65% August 7, 2021 25% August 14, 2021 5% August 21, 2021 5% The transaction price for this transaction is

1,000,000*.65+ 990,000*.25+ 980,000*.05 + 970,000* .05= 995,000

Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 6% preferred stock with a stated value of $5. Dividends have been paid in every year except the past two years and the current year. Assuming that $270,000 will be distributed, and the preferred stock is cumulative and participating, how much will the common stockholders receive?

1,200,000*.06 = 72k current year 1,200,000* .05 participating = 60k+72k = 132k

Anderson Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income$ 1,200,000 Estimated litigation expense3,000,000 Installment sales(2,400,000) Taxable income$ 1,800,000 The estimated litigation expense of $3,000,000 will be deductible in 2022 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $1,200,000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1,200,000 current and $1,200,000 noncurrent. The income tax rate is 20% for all years. The income tax expense is

1,200,000*.20 = 240k

Gibbs Corporation owned 20,000 shares of Oliver Corporation's $5 par value common stock. These shares were purchased in 2017 for $225,000. On September 15, 2021, Gibbs declared a property dividend of one share of Oliver for every ten shares of Gibbs held by a stockholder. On that date, when the market price of Oliver was $35 per share, there were 180,000 shares of Gibbs outstanding. What NET reduction in retained earnings would result from this property dividend?

180k/10 * 35 = 630k 630k- [630k-(225k*18/20)] = 202,500

On January 1, 2019, Lake Co. purchased a machine for $1,980,000 and depreciated it by the straight-line method using an estimated useful life of eight years with no salvage value. On January 1, 2022, Lake determined that the machine had a useful life of six years from the date of acquisition and will have a salvage value of $180,000. An accounting change was made in 2022 to reflect these additional data. The accumulated depreciation for this machine should have a balance at December 31, 2022 of

1980000/8 = 247,500 247,500* 3 = 742,500 1,980,000-742,500 = 1,237,500 1,237,500 - 180,000 = 1,057,500/ 3 = 352,500 742,500+ 352,500 = 1,095,000

2,400,000*.20= 480k

On December 31, 2021, Kuhn Corporation leased a plane from Bell Company for a seven-year period expiring December 31, 2028. Equal annual payments of $450,000 are due on December 31 of each year, beginning with December 31, 2021. The lease is properly classified as a finance lease on Kuhn's books. The present value at December 31, 2021 of the eight lease payments over the lease term discounted at 10% is $2,640,792. Assuming the first payment is made on time, the amount that should be reported by Kuhn Corporation as the lease liability on its December 31, 2021 balance sheet is

2,640,792-450,000 = 2,290,792

Luther Inc., has 4,000 shares of 5%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2021, and December 31, 2020. The board of directors declared and paid an $8,000 dividend in 2020. In 2021, $40,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2021?

4000*50*.05= 10,000 (10,000-8,000)=10,000 = 12,000

Berry Corporation has 100,000 shares of $10 par common stock authorized. The following transactions took place during 2020, the first year of the corporation's existence :Sold 20,000 shares of common stock for $13.50 per share. Issued 20,000 shares of common stock in exchange for a patent valued at $300,000.At the end of the Berry's first year, total paid-in capital amounted to

APIC= (13.5-10)+ 300k = 570k

On August 1, 2021, Dambro Company acquired 1,200, $1,000, 9% bonds at 97 plus accrued interest. The bonds were dated May 1, 2018, and mature on April 30, 2027, with interest paid each October 31 and April 30. The bonds will be added to Dambro's available-for-sale portfolio. The preferred entry to record the purchase of the bonds on August 1, 2021 is

Debt Investments 1,164,000 Interest Revenue 27,000 Cash 1,191,000 1,164,000= 1000*1200*.97 27000=1000*12000*.09*1/4 1,191,000=1,164,000+27,000

Fingerling Co. had a deferred tax liability balance due to a temporary difference at the beginning of 2020 related to $1,500,000 of excess depreciation. In December of 2020, a new income tax act is signed into law that lowers the corporate rate from 30% to 25%, effective January 1, 2022. If taxable amounts related to the temporary difference are scheduled to be reversed by $750,000 for both 2021 and 2022, Fingerling should increase or decrease deferred tax liability by what amount?

Decrease by 37,500 750000*.30 = 225,000 750,000 *.25 = 187,500 225,000-187,500 = 37,500

At December 31, 2021, Atlanta Company has an equity portfolio valued at $160,000. Its cost was $132,000. If the Securities Fair Value Adjustment has a debit balance of $8,000, which of the following journal entries is required at December 31, 2021?

Fair Value Adjustment 20,000 Unrealized Holding Gain or Loss-Equity 20,000

On January 1, 2021, Yancey, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement. (a)The agreement requires equal rental payments at the beginning each year. (b)The fair value of the building on January 1, 2021 is $6,000,000; however, the book value to Holt is $4,950,000. (c)The building has an estimated economic life of 10 years, with no residual value. Yancey depreciates similar buildings using the straight-line method. (d)At the termination of the lease, the title to the building will be transferred to the lessee. (e)Yancey's incremental borrowing rate is 11% per year. Holt Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yancey, Inc.(f) The yearly rental payment includes $15,000 of executory costs related to taxes on the property PV Annuity Due PV Ordinary Annuity PV Single Sum 10%, 10 periods 6.75902 6.14457 .38554 11%, 10 periods 6.53705 5.88923 .35218 From the lessee's viewpoint, what type of lease in this?

Finance lease

Cooper Construction Company had a contract starting April 2021, to construct a $24,000,000 building that is expected to be completed in September 2023, at an estimated cost of $22,000,000. At the end of 2021, the costs to date were $10,120,000 and the estimated total costs to complete had not changed. The progress billings during 2021 were $4,800,000 and the cash collected during 2021 was 3,200,000. Cooper uses the percentage-of-completion method. For the year ended December 31, 2021, Cooper would recognize gross profit on the building of

b. $ 920,000 ($24,000,000 - $22,000,000) × ($10,120,000 ÷ $22,000,000) = $920,000.

Cooper Construction Company had a contract starting April 2021, to construct a $24,000,000 building that is expected to be completed in September 2023, at an estimated cost of $22,000,000. At the end of 2021, the costs to date were $10,120,000 and the estimated total costs to complete had not changed. The progress billings during 2021 were $4,800,000 and the cash collected during 2021 was 3,200,000. Cooper uses the percentage-of-completion method. At December 31, 2021 Cooper would report Construction in Process in the amount of

c. $11,040,000 $10,120,000 + $920,000 = $11,040,000.

When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the

par value of the shares issued.

At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of the

payment in full of subscribed stock.

Hager Company sold some of its plant assets during 2021. The original cost of the plant assets was $900,000 and the accumulated depreciation at date of sale was $840,000. The proceeds from the sale of the plant assets were $90,000. The information concerning the sale of the plant assets should be shown on Hager's statement of cash flows (indirect method) for the year ended December 31, 2021, as a(n)

subtraction from net income of $30,000 and a $90,000 increase in cash flows from investing activities. $90,000 - ($900,000 - $840,000) = $30,000, $90,000 (proceeds).

On January 1, 2019, Knapp Corporation acquired machinery at a cost of $1,250,000. Knapp adopted the double-declining balance method of depreciation for this machinery and had been recording depreciation over an estimated useful life of ten years, with no residual value. At the beginning of 2022, a decision was made to change to the straight-line method of depreciation for the machinery. The depreciation expense for 2022 would be

{$1,250,000 - [($1,250,000 × .2) + ($1,000,000 × .2) + ($800,000 × .2)]} ÷ 7 = $91,429.

The net cash provided by operating activities is

$288,000 + $48,000 + ($320,000 + $64,000 - $304,000) - $144,000 + $96,000 + $80,000 - $40,000 = $408,000.

What was the amount of depreciation expense for the year?

304,000 - 64,000 - 320,000 = $80,000 depreciation expense

Watt Company purchased $300,000 of bonds for $315,000. If Watt intends to hold the securities to maturity, the entry to record the investment includes

A debit to Debt Investments at $315,000

On April 7, 2021, Kegin Corporation sold a $6,000,000, twenty-year, 8 percent bond issue for $6,360,000. Each $1,000 bond has two detachable warrants, each of which permits the purchase of one share of the corporation's common stock for $30. The stock has a par value of $25 per share. Immediately after the sale of the bonds, the corporation's securities had the following market values: 8% bond without warrants$1,008 Warrants 21 Common stock28

Bonds Payable$6,000,000 Premium on Bonds Payable105,600Paid-in Capital—Stock Warrants254,400

An investor has a long-term investment in stocks. Regular cash dividends received by the investor are recorded as Fair Value Method Equity Method

Income, A reduction of the investment

The cost-to-cost basis measures progress towards completion by

comparing costs incurred to date with total costs to complete the contract

Seadrill Engineering licensed software to oil-drilling firms for 5 years. In addition to providing the software, the company also provides consulting services and support to ensure smooth operation of the software. The total transaction price is $420,000. Based on standalone values, the company estimates the consulting services and support have a value of $120,000 and the software license has a value of $300,000. Assuming the performance obligations are not interdependent, the journal entry to record the transaction includes

a credit to Sales Revenue for $300,000 and a credit to Unearned Service Revenue of $120,000.

The following information is available for Barone Corporation: January 1, 2021 Shares outstanding4,000,000 April 1, 2021 Shares issued 640,000 July 1, 2021 Treasury shares purchased240,000 October 1, 2021 Shares issued in a 100% stock dividend 4,400,000 The number of shares to be used in computing earnings per common share for 2021 is

[(4,000,000*3*2)+4,640,000*3*2 + 4,400,000* 3 * 2 , 8,800,000 * 3] /12 = 8,720,000

Vernon Corporation offered detachable 5-year warrants to buy one share of common stock (par value $5) at $20 (at a time when the stock was selling for $32). The price paid for 800, $1,000 bonds with the warrants attached was $820,000. The market price of the Vernon bonds without the warrants was $720,000, and the market price of the warrants without the bonds was $80,000. What amount should be allocated to the warrants?

[80,000/(80,000+720,00)]* 820,000= 82,000

The balance in retained earnings at December 31, 2020 was $1,440,000 and at December 31, 2021 was $1,164,000. Net income for 2021 was $1,000,000. A stock dividend was declared and distributed which increased common stock $500,000 and paid-in capital $220,000. A cash dividend was declared and paid.The amount of the cash dividend was

$1,440,000 + $1,000,000 - ($500,000 + $220,000) - X = $1,164,000X = $556,000.

Equipment that cost $875,000 and had a book value of $390,000 was sold for $450,000. Data from the comparative balance sheets are: 12/31/21. 12/31/20 Equipment. $5,400,000 $4,875,000 Accumulated Depreciation 1,650,000 1,425,000 Depreciation expense for 2021 was

$1,650,000 - $1,425,000 + ($875,000 - $390,000) = $710,000

Patton Company purchased $1,500,000 of 10% bonds of Scott Company on January 1, 2021, paying $1,410,375. The bonds mature January 1, 2031; interest is payable each July 1 and January 1. The discount of $89,625 provides an effective yield of 11%. Patton Company uses the effective-interest method and plans to hold these bonds to maturity. For the year ended December 31, 2021, Patton Company should report interest revenue from the Scott Company bonds of

$155,283. Explanation: On Dec. 31, 2021 to recognize accrued interest revenue Dr. Interest Receivable $75,000 Dr. Debt Investments $2,712 Cr. Interest Revenue 77,712 Thus, Interest Revenue for 2021 = $77,571 + $77,712 = $155,283

Patton Company purchased $1,500,000 of 10% bonds of Scott Company on January 1, 2021, paying $1,410,375. The bonds mature January 1, 2031; interest is payable each July 1 and January 1. The discount of $89,625 provides an effective yield of 11%. Patton Company uses the effective-interest method and plans to hold these bonds to maturity. On July 1, 2021, Patton Company should increase its Debt Investments account for the Scott Company bonds by

$2,571. 10% bonds purchased to yield 11% Date Cash received Interest Revenue Bond discount amortization Carrying amount of bonds 1/1/21 $1,410,375 7/1/21 $75,000 $77,571 $2,571 $1,412,946 1/1/22 $75,000 $77,712 $2,712 $1,415,658 On July 1, 2021 Dr. Cash $75,000 Dr. Debt Investments $2,571

Lindsay Corporation had net income for 2021 of $3,000,000. Additional information is as follows: Depreciation of plant assets $1,200,000 Amortization of intangibles. 240,000 Increase in accounts receivable 420,000 Increase in accounts payable 540,000 Lindsay's net cash provided by operating activities for 2021 was

$3,000,000 + $1,200,000 + $240,000 - $420,000 + $540,000 = $4,560,000.

Pember Corporation started business in 2015 by issuing 200,000 shares of $20 par common stock for $27 each. In 2020, 25,000 of these shares were purchased for $39 per share by Pember Corporation and held as treasury stock. On June 15, 2021, these 25,000 shares were exchanged for a piece of property that had an assessed value of $760,000. Pember's stock is actively traded and had a market price of $45 on June 15, 2021. The cost method is used to account for treasury stock. The amount of paid-in capital from treasury stock transactions resulting from the above events would be

(45-39)*25k= 150k

Richman Company purchased $1,200,000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $1,249,896 at an effective interest rate of 7%. Using the effective interest method, Richman Company decreased the Available-for-Sale Debt Securities account for the Carlin, Inc. bonds on July 1, 2021 and December 31, 2021 by the amortized premiums of $4,248 and $4,392, respectively. At December 31, 2021, the fair value of the Carlin, Inc. bonds was $1,272,000. What should Richman Company report as other comprehensive income and as a separate component of stockholders' equity?

$30,744 Explanation: Available for Sale Debt Securities => Companies report available-for-sale securities at fair value, with unrealized holding gains and losses reported as other comprehensive income, a separate component of stockholder's equity, until realized. Fair Value Adjustment account is used to record the difference between fair value and amortized cost (the carrying value of bonds). The carrying value of bonds at 12/31/21 = $1,249,896 - $4,248 - $4,392 = $1,241,256. Unrealized holding gains (The fair value is greater than the amortized cost) = $1,272,000 - $1,241,256 = $30,744 Dr. Unrealized Holding Gain or Loss—Equity $30,744 Cr. Fair Value Adjustment $30,744

The following information was taken from the 2021 financial statements of Dunlop Corporation: Bonds payable, January 1, 2021$ 800,000 Bonds payable, December 31, 2021 4,800,000 During 2021 •A $720,000 payment was made to retire bonds payable with a face amount of $800,000. •Bonds payable with a face amount of $320,000 were issued in exchange for equipment. In its statement of cash flows for the year ended December 31, 2021, what amount should Dunlop report as proceeds from issuance of bonds payable?

$4,800,000 - $800,000 + $800,000 - $320,000 = $4,480,000.

On January 3, 2020, Moss Company acquires $500,000 of Adam Company's 10-year, 10% bonds at a price of $532,090 to yield 9%. Interest is payable each December 31. The bonds are classified as held-to-maturity. Assuming that Moss Company uses the effective-interest method, what is the amount of interest revenue that would be recognized in 2021 related to these bonds?

$47,698 Explanation: 10% bonds purchased to yield 9% Date Cash received Interest Revenue Bond premium amortization Carrying amount of bonds 1/3/20 $532,090 12/31/20 $50,000 $47,888 $2,112 $529,978 12/31/21 $50,000 $47,698 $2,302 $527,676 On Dec. 31, 2021 Dr. Interest Receivable $50,000 Cr. Debt Investments $2,302 Cr. Interest Revenue $47,698

Equipment that cost $875,000 and had a book value of $390,000 was sold for $450,000. Data from the comparative balance sheets are: 12/31/2112/31/20 Equipment $5,400,000 $4,875,000 Accumulated Depreciation 1,650,000 1,425,000 Equipment purchased during 2021 was

$5,400,000 - $4,875,000 + $875,000 = $1,400,000.

The net cash provided (used) by financing activities is

($192,000) + ($240,000) = ($432,000).

During 2021 Logic Company purchased 10,000 shares of Midi, Inc. for $30 per share. During the year Logic Company sold 2,500 shares of Midi, Inc. for $35 per share. At December 31, 2021 the market price of Midi, Inc.'s stock was $28 per share. What is the total amount of gain/(loss) that Logic Company will report in its income statement for the year ended December 31, 2021 related to its investment in Midi, Inc. stock?

($2,500) Explanation: Acquisition cost = $30 x 10,000 shares = $300,000 Sales of 2,500 shares Dr. Cash $87,500 Cr. Equity Investment $75,000 Cr. Realized Gain $12,500 [=($35- $30) x 2,500]

Richman Company purchased $1,200,000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $1,249,896 at an effective interest rate of 7%. Using the effective interest method, Richman Company decreased the Available-for-Sale Debt Securities account for the Carlin, Inc. bonds on July 1, 2021 and December 31, 2021 by the amortized premiums of $4,248 and $4,392, respectively. At February 1, 2022, Richman Company sold the Carlin bonds for $1,236,000. After accruing for interest, the carrying value of the Carlin bonds on February 1, 2022 was $1,240,500. Assuming Richman Company has a portfolio of available-for-sale debt investments, what should Richman Company report as a gain (or loss) on the bonds?

($4,500). Explanation: Sale of available-for-sale debt investments If company sells bonds before maturity date: It must make entries to remove from the Debt Investments account the amortized cost of bonds sold. Any realized gain or loss on sale is reported in the income statement. Amortized cost = $1,240,500 Selling price of bonds = $1,236,000 Realized loss on sale of bond = $1,236,000 - $1,240,500 = ($4,500)

Arrow Company reported the following results for the year ended December 31, 2021, its first year of operations: 2021 Income (per books before income taxes)$ 2,000,000 Taxable income3,200,000 The disparity between book income and taxable income is attributable to a temporary difference which will reverse in 2022. What should Arrow record as a net deferred tax asset or liability for the year ended December 31, 2021, assuming that the enacted tax rates in effect are 30% in 2021 and 25% in 2022?

(3,200,000-2,000,000)*.25= 300,000 DTA

Pye Company leased equipment to the Polan Company on July 1, 2021, for a ten-year period expiring June 30, 2031. Equal annual payments under the lease are $240,000 and are due on July 1 of each year. The first payment was made on July 1, 2021. The rate of interest contemplated by Pye and Polan is 9%. The lease receivable before the first payment is $1,680,000 and the cost of the equipment on Pye's accounting records was $1,488,000. Assuming that the lease is appropriately recorded as a sale for accounting purposes by Pye, what is the amount of profit on the sale and the interest revenue that Pye would record for the year ended December 31, 2021?

1,680,000-1,488,000 = 192,000 and 1,488,000* .09 * 6/12 = 64,800

On January 1, 2019, Hess Co. purchased a patent for $1,904,000. The patent is being amortized over its remaining legal life of 15 years expiring on January 1, 2034. During 2022, Hess determined that the economic benefits of the patent would not last longer than ten 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, 2022?

1,904,000/15= 126,933* 3 = 380,800 1,904,000- 380,800 = 1,523,200/7 =217,600 =1,523,200- 217,600 = 1,305,600

Parson Corp. prepared the following reconciliation of income per books with income per tax return for the year ended December 31, 2021: Book income before income taxes$2,700,000 Add temporary difference Construction contract revenue which will reverse in 2022240,000 Deduct temporary difference Depreciation expense which will reverse in equal amounts in each of the next four years(960,000) Taxable income$1,980,000 Parson's effective income tax rate is 25% for 2021. What amount should Parson report in its 2021 income statement as the current provision for income taxes?

1,980,000 *.25 = 495,000

Layne Corporation had the following information in its financial statements for the years ended 2020 and 2021:Cash dividends for the year 2021$ 10,000Net income for the year ended 202193,000Market price of stock, 12/31/2010Market price of stock, 12/31/21 12Common stockholders' equity, 12/31/20 1,600,000Common stockholders' equity, 12/31/21 1,980,000Outstanding shares, 12/31/21 160,000Preferred dividends for the year ended 2021 15,000What is the book value per share for Layne Corporation for the year ended 2021?

1,980,000/160k = 12.38

Manning Company issued 10,000 shares of its $5 par value common stock having a fair value of $25 per share and 15,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $520,000. How much of the proceeds would be allocated to the common stock? A) $276,250 B) $250,000 C) $283,636 D) $236,364

10,000*25+ 15,000*20= 550,000 (250k/550k)*520k = 236,364

On June 1, 2021, Johnson & Sons sold equipment to James Landscaping Service in exchange for a zero-interest bearing note with a face value of $110,000, with payment due in 12 months. The fair value of the equipment on the date of sale was $100,000. The amount of revenue to be recognized on this transaction in 2021 iS

100,000 sales revenue and 5,833 interest revenue 5833= 10,000 *7/12

Geary Co. leased a machine to Dains Co. Assume the lease payments were made on the basis that the residual value was guaranteed and Geary gets to recognize all the profits. At the end of the lease term, before the lessee transfers the asset to the lessor, the leased asset and liability accounts have the following balances: Right-of-Use Asset$400,000 Less accumulated depreciation-finance lease384,000 $ 16,000 Interest payable$ 1,520 Lease liability14,480 $16,000 If, at the end of the lease, the fair value of the residual value is $11,800, what gain or loss should Dains record?

11,800-16,000 = 4,200 loss

The stockholders' equity of Howell Company at July 31, 2021 is presented below: Common stock, par value $20, authorized 400,000 shares; issued and outstanding 160,000 shares$3,200,000Paid-in capital in excess of par160,000Retained earnings 650,000$4,010,000On August 1, 2021, the board of directors of Howell declared a 15% stock dividend on common stock, to be distributed on September 15th. The market price of Howell's common stock was $70 on August 1, 2021, and $76 on September 15, 2021. What is the amount of the debit to retained earnings as a result of the declaration and distribution of this stock dividend?

160k* .15* 70= 1,680,000

Hormesly Corporation's partial income statement after its first year of operations is as follows: Income before income taxes$3,750,000 Income tax expense Current$1,035,000 Deferred90,0001,125,000 Net income$2,625,000 Hormesly uses the straight-line method of depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The amount charged to depreciation expense on its books this year was $2,800,000. No other differences existed between book income and taxable income except for the amount of depreciation. Assuming a 20% tax rate, what amount was deducted for depreciation on the corporation's tax return for the current year?

2,800,000 + 90,000 * 100/20 = 3,250,000

On December 31, 2021, Lang Corporation leased a ship from Fort Company for an eight-year period expiring December 30, 2029. Equal annual payments of $500,000 are due on December 31 of each year, beginning with December 31, 2021. The lease is properly classified as a finance lease on Lang 's books. The present value at December 31, 2021 of the eight lease payments over the lease term discounted at 10% is $2,934,213. Assuming all payments are made on time, the amount that should be reported by Lang Corporation as the total liability for finance leases on its December 31, 2022 balance sheet is

2,934,213 -500,000 = 2,434,213 2,434,213 + (2,434,213*.10) -500,000 = 2,177,634

Fultz Company had 300,000 shares of common stock issued and outstanding at December 31, 2020. During 2021, no additional common stock was issued. On January 1, 2021, Fultz issued 400,000 shares of nonconvertible preferred stock. During 2021, Fultz declared and paid $180,000 cash dividends on the common stock and $150,000 on the nonconvertible preferred stock. Net income for the year ended December 31, 2021, was $960,000. What should be Fultz's 2021 earnings per common share, rounded to the nearest penny?

2.70

Hill Corp. had 600,000 shares of common stock outstanding on January 1, issued 900,000 shares on July 1, and had income applicable to common stock of $2,940,000 for the year ending December 31, 2021. Earnings per share of common stock for 2021 would be

2.80

Granbury Corporation has a deferred tax asset at December 31, 2022 of $200,000 due to the recognition of potential tax benefits of an operating loss carryforward. The enacted tax rates are as follows: 30% for 2019-2021; 25% for 2022; and 20% for 2023 and thereafter. Assuming that management expects that only 50% of the related benefits will actually be realized, a valuation account should be established in the amount of

200,000*.50 =100k

Cheetah Company deducts insurance expense of $210,000 for tax purposes in 2021, but the expense is not yet recognized for accounting purposes. In 2022, 2023, and 2024, no insurance expense will be deducted for tax purposes, but $70,000 of insurance expense will be reported for accounting purposes in each of these years. Cheetah Company has a tax rate of 20% and income taxes payable of $180,000 at the end of 2021. There were no deferred taxes at the beginning of 2021.What is the amount of the deferred tax liability at the end of 2021?

210,000* .20 = 42k

210,000*.2 = 42k + 180k = 220k

On August 5, 2021, Famous Furniture shipped 40 dining sets on consignment to Furniture Outlet, Inc. The cost of each dining set was $350 each. The cost of shipping the dining sets amounted to $3,600 and was paid for by Famous Furniture. On December 30, 2021, the consignee reported the sale of 30 dining sets at $850 each. The consignee remitted payment for the amount due after deducting a 6% commission, advertising expense of $600, and installation and setup costs of $780. The amount cash received by Famous furniture is Group of answer choices

22,590 30 x 850 * .94 - 600 -780

On January 2, 2021, Hanson Leasing Company leases equipment to Foley Co. with 5 equal annual payments of $240,000 each, payable beginning January 2, 2021. Foley Co. agrees to guarantee the $150,000 residual value of the asset at the end of the lease term. The expected value of the residual is $0. Foley's incremental borrowing rate is 10%, however it knows that Hanson's implicit interest rate is 8%. The journal entry Foley makes at January 2, 2021 includes a debit to right-of-use asset for

240,000 *4.31213 + 150,000* .68508 = 1,137,673

The net cash provided (used) by investing activities is

240k

Kramer Company's equity securities portfolio which is appropriately included in current assets is as follows: December 31, 2021 Cost Fair Value Unrealized Gain (Loss) Catlett Corp.$260,000 $215,000 $(45,000) Lyman, Inc. 245,000 265,000 20,000 Totals $505,000 $480,000 $(25,000) Ignoring income taxes, what amount should be reported as a charge against income in Kramer's 2021 income statement if 2021 is Kramer's first year of operation?

25000 Loss

3,000,000*.20=600k

On December 31, 2021, Burton, Inc. leased machinery with a fair value of $1,575,000 from Cey Rentals Co. The agreement is a six-year noncancelable lease requiring annual payments of $300,000 beginning December 31, 2021. The lease is appropriately accounted for by Burton as a finance lease. Burton's incremental borrowing rate is 11%. Burton knows the interest rate implicit in the lease payments is 10%.The present value of an annuity due of 1 for 6 years at 10% is 4.7908.The present value of an annuity due of 1 for 6 years at 11% is 4.6959.In its December 31, 2021 balance sheet, Burton should report a lease liability of

300,000 * 4.7908 = 1,437,240-300,000 = 1,137,240

The summarized balance sheets of Goebel Company and Dobbs Company as of December 31, 2021 are as follows: Goebel Company Balance Sheet December 31, 2021 Assets$2,400,000 Liabilities$ 300,000 Capital stock1,200,000 Retained earnings900,000 Total equities$2,400,000 Dobbs Company Balance Sheet December 31, 2021 Assets$1,800,000 Liabilities$410,000 Capital stock1,150,000 Retained earnings240,000 Total equities$1,800,000 If Goebel Company acquired a 30% interest in Dobbs Company on December 31, 2021 for $440,000 and during 2022 Dobbs Company had net income of $150,000 and paid a cash dividend of $60,000, applying the equity method would give a debit balance in the Equity Investments (Dobbs) account at the end of 2022 of

467k =440k+150k*.3-60k*.3

In its 2021 income statement, Martin Corp. reported depreciation of $3,700,000 and interest revenue on municipal obligations of $700,000. Martin reported depreciation of $5,500,000 on its 2021 income tax return. The difference in depreciation is the only temporary difference, and it will reverse equally over the next three years. Martin's enacted income tax rates are 25% for 2021, 20% for 2022, and 15% for 2023 and 2024. What amount should be included in the deferred income tax liability in Martin's December 31, 2021 balance sheet?

5,500,000-3,700,000 = 1,800,000 1,800,000/3 = 600,000 2022 600k*.20 = 120,000 2023 600k*.15= 90,000 2024 600k*.15= 90,000 = 300,000

Seasons Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1,550,000 each quarter. The total contract price is $18,600,000 and Seasons estimates total costs of $17,750,000. Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2021. At December 31, 2021, Seasons estimates that it is 30% complete with the construction, based on costs incurred. What is the total amount of Revenue from Long-Term Contracts recognized for 2021?

5,580,000 = 18,600,000*.30= 5,580,000

Armstrong Inc. is a calendar-year corporation. Its financial statements for the years ended 12/31/20 and 12/31/21 contained the following errors: 2020 2021 Ending inventory $50,000 overstatement $80,000 understatement Depreciation expense 20,000 understatement 40,000 overstatement Assume that the 2020 errors were not corrected and that no errors occurred in 2019. By what amount will 2020 income before income taxes be overstated or understated?

50k + 20k = 70k overstated

On January 1, 2021, Trent Company granted Dick Williams, an employee, an option to buy 400 shares of Trent Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $5,400. Williams exercised his option on September 1, 2021, and sold his 400 shares on December 1, 2021. Quoted market prices of Trent Co. stock during 2021 were: January 1 $30 per share September 1 $36 per share December 1 $40 per share The service period is for two years beginning January 1, 2021. As a result of the option granted to Williams, using the fair value method, Trent should recognize compensation expense for 2021 on its books in the amount of

5400/2= 2700

On January 1, 2021, Yancey, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement. (a)The agreement requires equal rental payments at the beginning each year. (b)The fair value of the building on January 1, 2021 is $6,000,000; however, the book value to Holt is $4,950,000. (c)The building has an estimated economic life of 10 years, with no residual value. Yancey depreciates similar buildings using the straight-line method. (d)At the termination of the lease, the title to the building will be transferred to the lessee. (e)Yancey's incremental borrowing rate is 11% per year. Holt Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yancey, Inc.(f) The yearly rental payment includes $15,000 of executory costs related to taxes on the property PV Annuity Due PV Ordinary Annuity PV Single Sum 10%, 10 periods 6.75902 6.14457 .38554 11%, 10 periods 6.53705 5.88923 .35218 Yancey, Inc. would record amortization expense on this asset in 2021 of (rounded to the nearest dollar) Group of answer choices

6,000,000 + 15,000*6.75902 = 6101385/10 = 610139

On January 1, 2021, Yancey, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement. (a)The agreement requires equal rental payments at the beginning each year. (b)The fair value of the building on January 1, 2021 is $6,000,000; however, the book value to Holt is $4,950,000. (c)The building has an estimated economic life of 10 years, with no residual value. Yancey depreciates similar buildings using the straight-line method. (d)At the termination of the lease, the title to the building will be transferred to the lessee. (e)Yancey's incremental borrowing rate is 11% per year. Holt Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yancey, Inc.(f) The yearly rental payment includes $15,000 of executory costs related to taxes on the property PV Annuity Due PV Ordinary Annuity PV Single Sum 10%, 10 periods 6.75902 6.14457 .38554 11%, 10 periods 6.53705 5.88923 .35218 What is the annual lease payment excluding executory costs? (Rounded to the nearest dollar)

6,000,000/10 = 600,000 600,000/ 6.75902 = 887703

6,000,000/10 = 600,000 600,000/ 6.75902 = 887703 887703 + 15,000 = 902,703

Windsor Company has the following cumulative taxable temporary differences: 12/31/2212/31/21 $3,600,000$2,560,000 The tax rate enacted for 2022 is 30%, while the tax rate enacted for future years is 20%. Taxable income for 2022 is $6,400,000 and there are no permanent differences. Windsor's pretax financial income for 2022 is

6,400,000 +(3,600,000-2,560,000) = 7,440,000

Dream Home Inc., a real estate developing company, was accounting for its long-term contracts using the completed contract method prior to 2021. In 2021, it changed to the percentage-of-completion method.The company decided to use the same for income tax purposes. The tax rate enacted is 20%.Income before taxes under both the methods for the past three years appears below. 2019 2020. 2021 Completed contract $450,000 $300,000 $150,000 Percentage-of-completion 750,000 375,000 270,000 What amount will be debited to Construction in Process account, to record the change at beginning of 2021?

750k-450k + (375k-300k) = 375k

Roche Pharmaceuticals entered into a licensing agreement with Zenith Lab for a new drug under development. Roche will receive $8,100,000 if the new drug receives FDA approval. Based on prior approval, Roche determines that it is 85% likely that the drug will gain approval. The transaction price of this arrangement should be

8,100,000

On December 1, 2021, Lester Company issued at 103, eight hundred of its 9%, $1,000 bonds. Attached to each bond was one detachable stock warrant entitling the holder to purchase 10 shares of Lester's common stock. On December 1, 2021, the market value of the bonds, without the stock warrants, was 95, and the market value of each stock purchase warrant was $50. The amount of the proceeds from the issuance that should be accounted for as the initial carrying value of the bonds payable would be

800,000* .95 + 800*50= 800,000, 800K * 1.03 = 824K , 824K* .95 = 782,800

Milo Co. had 800,000 shares of common stock outstanding on January 1, issued 126,000 shares on May 1, purchased 63,000 shares of treasury stock on September 1, and issued 54,000 shares on November 1. The weighted average shares outstanding for the year is

800,000+ (126,000*8/12) - 63,000*4/12 + 54K * 2/12 = 872K

On January 1, 2021, Sauder Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for Sauder to make annual payments of $200,000 at the beginning of each year for five years beginning on January 1, 2021 with the title passing to Sauder at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Sauder uses the straight-line method of depreciation for all of its fixed assets. Sauder accordingly accounts for this lease transaction as a finance lease. The lease payments were determined to have a present value of $833,972 at an effective interest rate of 10%.In 2021, Sauder should record interest expense of

833,972-200,000 = 633,972 * .10 = 63,397

In 2020, Eklund, Inc., issued for $103 per share, 90,000 shares of $100 par value convertible preferred stock. One share of preferred stock can be converted into three shares of Eklund's $25 par value common stock at the option of the preferred stockholder. In August 2021, all of the preferred stock was converted into common stock. The market value of the common stock at the date of the conversion was $30 per share. What total amount should be credited to additional paid-in capital from common stock as a result of the conversion of the preferred stock into common stock?

9,270,000- (90k*3*25) = 2,520,000

During 2021, a construction company that began operations in 2019 changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. Gross profit figures under both methods for the past three years appear below: Completed-Contract Percentage-of-Completion 2019. $ 475,000 $ 900,000 2020 625,000 950,000 2021 700,000 1,050,000 $1,800,000 $2,900,000 Assuming an income tax rate of 20% for all years, the effect of this accounting change on prior periods should be reported by a credit of

900k + 950k - 475k - 625k = 750k -(750k * .20) = 600k $600,000 on the 2021 retained earnings statement.

An analysis of stockholders' equity of Hahn Corporation as of January 1, 2021, is as follows: Common stock, par value $20; authorized 100,000 shares; issued and outstanding 90,000 shares$1,800,000 Paid-in capital in excess of par 900,000 Retained earnings 760,000Total$3,460,000Hahn uses the cost method of accounting for treasury stock and during 2021 entered into the following transactions :Acquired 2,500 shares of its stock for $75,000.Sold 2,000 treasury shares at $35 per share. Sold the remaining treasury shares at $20 per share. Assuming no other equity transactions occurred during 2021, what should Hahn report at December 31, 2021, as total additional paid-in capital?

900k+2,000*5-500*10= 905,000

Sealy Corporation had the following information in its financial statements for the years ended 2020 and 2021:Cash dividends for the year 2021 $ 5,000Net income for the year ended 2021 97,000Market price of stock, 12/31/2010Market price of stock, 12/31/2112Common stockholders' equity, 12/31/20 1,000,000Common stockholders' equity, 12/31/21 1,200,000Outstanding shares, 12/31/21 100,000Preferred dividends for the year ended 202115,000What is the rate of return on common stock equity for Sealy Corporation for the year ended 2021?

97k-15k / [(1,000,000+1,200,000)/2] = 7.5%

What was the amount of dividends paid for the year?

Beginning RE + NI - Div = Ending RE$240,000 +288,000 - Div = 336,000Dividends = $192,000

On July 1, 2021, Chen Company issued for $9,450,000 a total of 90,000 shares of $100 par value, 7% noncumulative preferred stock along with one detachable warrant for each share issued. Each warrant contains a right to purchase one share of Chen $10 par value common stock for $15 per share. The stock without the warrants would normally sell for $9,225,000. The market price of the rights on July 1, 2021, was $2.50 per right. On October 31, 2021, when the market price of the common stock was $19 per share and the market value of the rights was $3.00 per right, 36,000 rights were exercised. As a result of the exercise of the 36,000 rights and the issuance of the related common stock, what journal entry would Chen make?

Cash540,000Paid-in Capital-Stock Warrants90,000Common Stock360,000Paid-in Capital in Excess of Par-Common Stock270,000

What was the gain/loss recorded on the sale of the equipment?

Consideration received - Book Value = gain or loss 240,000 - 288,000 = (48,000) Loss since book value is great than the consideration received.

What amount of depreciation was associated with the asset that was sold?

Cost - Depreciation = Book ValueCost - Book Value = Depreciation$352,000 - $288,000 = $64,000

Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Container Corporation purchased computer equipment, installation and training for a total cost of $144,000 on March 15, 2021. Estimated standalone fair values of the equipment, installation and training are $90,000, $60,000 and $30,000 respectively. The journal entry to record the transaction on March 15, 2021 will include a

Cr. To unearned service revenue for 144,000

On January 1, 2021, Dean Corporation signed a ten-year noncancelable lease for certain machinery. The terms of the lease called for Dean to make annual payments of $220,000 at the end of each year for ten years with the title passing to Dean at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Dean uses the straight-line method of depreciation for all of its fixed assets. Dean accordingly accounted for this lease transaction as a finance lease. The lease payments were determined to have a present value of $1,342,016 at an effective interest rate of 8%. With respect to this lease, Dean should record for 2021

Interest expense of 107,361 and depr exp of 89,468 107,361 = 1342016 *.08 89,468 = 1342016/15 = 89468

Basic and diluted EPS. (6.75 points)Assume that the following data relative to Kane Company for 2021 is available: Net Income$2,100,000Transactions in Common Shares Change Cumulative Jan. 1, 2021, Beginning number700,000Mar. 1, 2021, Purchase of treasury shares (60,000) 640,000 June 1, 2021, Stock split 2-1 640,000 1,280,000 Nov. 1, 2021, Issuance of shares240,000 1,520,000 6% Cumulative Convertible Preferred Stock Sold at par, convertible into 200,000 shares of common(adjusted for split).$1,000,000 Stock Options Exercisable at the option price of $25 per share. Average market price in 2021, $30 (market price and option price adjusted for split).90,000 shares Instructions (a) Compute the basic earnings per share for 2021. (Round to the nearest penny.)__________________________ (b) Compute the diluted earnings per share for 2021. (Round to the nearest penny.)

January 1Outstanding700,000March 1Repurchase (5/6 × 60,000) (50,000) 650,000 June 12-for-1 split1,300,000November 1 Issued (1/6 × 240,000) 40,000 1,340,000 Additional shares for purposes of diluted earnings per share: Potentially dilutive securities6% convertible preferred stock200,000Stock options Proceeds from exercise of 90,000 options (90,000 × $25) $2,250,000 Shares issued upon exercise of options 90,000 Less: treasury stock purchasable with proceeds ($2,250,000 ÷ $30) 75,000 15,000 Dilutive securities—additional shares215,000 (a) Basic earnings per share: (2,100,000-60,000)/1,340,000 = $1.52 (b) Diluted earnings 2,100,000/(1,340,000+215,000) per share: = $1.35

On January 15, 2021, Bella Vista Company enters into a contract to build custom equipment for ABC Carpet Company. The contract specified a delivery date of March 1. The equipment was not delivered until March 31. The contract required full payment of $75,000 30 days after delivery. The revenue for this contract should be

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