Final

ch 8 #19 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 $130,000. 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 ROU asset for?A.$1,136,998.B.$1,061,013.C.$897,674.D.$1,034,910.

1048522

Ch 2 #19 AAA is involved with innovative approaches to finding energy reserves. AAA recently built a facility to extract natural gas at a cost of $12 million. However, AAA is also legally responsible to remove the facility at the end of its useful life of twenty years. This cost is estimated to be $17 million (the present value of which is $6.5 million). What is the journal entry required to record the asset retirement obligation? A.Debit Natural Gas Facility for $6,500,000 and credit Asset Retirement Obligation for $6,500,000. B.No journal entry required .C.Debit Natural Gas Facility for $17,000,000 and credit Asset Retirement Obligation for $17,000,000. D.Debit Natural Gas Facility for $5,000,000 and credit Asset Retirement Obligation for $5,000,000.

A

ch 2 #18 In 2020, AAA began selling a new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to dollar sales are as follows:First year of warranty : 3%Second year of warranty : 5%Sales and actual warranty expenditures for 2020 and 2021 are presented below:Sales Actual warranty expenditures2020 $750,000 45,0002021 $1,050,000 75,000What is the estimated warranty liability at the end of 2021? A.$24,000. B.$96,000. C.$144,000. D.$30,000.

A

ch 5 Litke Corporation issued at a premium of $10,000 a $200,000 bond issue convertible into 4,000 shares of common stock (par value $20). At the time of the conversion, the unamortized premium is $4,000, the market value of the bonds is $220,000, and the stock is quoted on the market at $60 per share.If the bonds are converted into common, what is the amount of paid-in capital in excess of par to be recorded on the conversion of the bonds?A.$124,000B.$130,000C.$144,000D.$120,000

A

ch 7#17 Kraft Company made the following journal entry in late 2021 for rent on property it leases to Danford Corporation.Cash 150,000Unearned Rent Revenue 150,000The payment represents rent for the years 2022 and 2023, the period covered by the lease. Kraft Company is a cash basis taxpayer. Kraft has income tax payable of $230,000 at the end of 2021, and its tax rate is 25%.Assuming the income taxes payable at the end of 2022 is $255,000, what amount of income tax expense would Kraft Company record for 2022?A.$273,750B.$236,250C.$292,500D.$217,500

A

CH 1 #11 Crawford Company started the year with $60000 in its Common Stock account and a credit balance in Retained Earnings of $44000. During the year, the company earned net income of $48000 and declared and paid $20000 of dividends. In addition, the company sold additional common stock amounting to $28000. As a result, the amount of its retained earnings at the end of the year would be A.$72,000.B.$132,000.C.$160,000.D.$100,000.

A. $72,000.

ch 3 A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2020. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14,703,108. Using effective-interest amortization, how much interest expense will be recognized in 2020?A.$1,170,000 B.$1,176,373 C.$1,176,249 D.$585,000

B

ch 3 #16 On July 1, 2019, Noble, Inc. issued 9% bonds in the face amount of $10,000,000, which mature on July 1, 2025. The bonds were issued for $9,560,000 to yield 10%, resulting in a bond discount of $440,000. Noble uses the effective-interest method of amortizing bond discount. Interest is payable annually on June 30. At June 30, 2021, Noble's unamortized bond discount should be A.$352,000. B.$322,400. C.$310,000. D.$340,000.

B

CH 1 #14 During February 2017, its first month of operations, the owner of Schwenn Enterprises invested cash of $100,000. Schwenn had cash sales of $20,000 and paid expenses of $35,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28? A.$15,000 credit B.$85,000 debit C.$65,000 credit D.$120,000 debit

B.$85,000 debit

ch 3 #12 On January 1, 2020, Ellison Co. issued eight-year bonds with a face value of $6,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. The issue price of the bonds is A.$5,308,920. B.$5,997,600 .C.$5,300,862. D.$5,337,360.

C

ch 2 #17 AAA manufactures high-end whole home electronic systems. The company provides a one-year warranty for all products sold. The company estimates that the warranty cost is $300 per unit sold and reported a liability for estimated warranty costs $10.4 million at the beginning of this year. If during the current year, the company sold 60,000 units for a total of $324 million and paid warranty claims of $12,000,000 on current and prior year sales, what amount of liability would the company report on its balance sheet at the end of the current year? A.$3,733,333. B.$18,000,000. C.$16,400,000. D.$6,000,000.

C.$16,400,000.

CH 1 The Vintage Laundry Company purchased $8,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $1,500 on hand. The adjusting entry that should be made by the company on June 30 is :A.debit Supplies, $7,000; credit Supplies Expense, $7,000. B.debit Supplies Expense, $1,500; credit Supplies, $1,500. C.debit Supplies Expense, $7,000; credit Supplies, $7,000. D.debit Supplies, $1,500; credit Supplies Expense, $1,500.

C.debit Supplies Expense, $7,000; credit Supplies, $7,000.

Ch 2 #20 A company buys an oil rig for $3,000,000 on January 1, 2021. The life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is $600,000 (present value at 10% is $231,330). 10% is an appropriate interest rate for this company. What expense should be recorded for 2021 as a result of these events? A.Depreciation expense of $300,000 and interest expense of $60,000 B.Depreciation expense of $360,000 C.Depreciation expense of $300,000 and interest expense of $23,133 D.Depreciation expense of $323,133 and interest expense of $23,133

D

ch 3 On January 1, Martinez Inc. issued $6,000,000, 11% bonds for $6,390,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Martinez uses the effective-interest method of amortizing bond premium. At the end of the first year, Martinez should report unamortized bond premium of: A.$330,000 B.$347,000 C.$370,260 D.$369,000

D

ch 3 #13 A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2019. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14,703,108. Using straight-line amortization, what is the carrying value of the bonds on December 31, 2021? A.$14,955,466 B.$14,725,374 C.$14,752,672 D.$14,747,642

D

ch 2 AAA borrowed $700,000 on October 1, 2020 and is required to pay $720,000 on March 1, 2021. How much interest is recognized from October 1 to December 31, 2020? A.$0 B.$18,000 C.$20,000 D.$12,000

D.$12,000

ch 4 #16 Gannon Company acquired 20,000 shares of its own common stock at $20 per share on February 5, 2020, and sold 10,000 of these shares at $27 per share on August 9, 2021. The fair value of Gannon's common stock was $24 per share at December 31, 2020, and $25 per share at December 31, 2021. The cost method is used to record treasury stock transactions. What account(s) should Gannon credit in 2021 to record the sale of 10,000 shares? A.Treasury Stock for $200,000 and Paid-in Capital from Treasury Stock for $70,000. B.Treasury Stock for $200,000 and Retained Earnings for $70,000. C.Treasury Stock for $240,000 and Retained Earnings for $30,000. D.Treasury Stock for $270,000.

a

ch 4 #20 Hernandez Company has 560,000 shares of $10 par value common stock outstanding. During the year, Hernandez declared a 15% stock dividend when the market price of the stock was $30 per share. Four months later Hernandez declared a $.50 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased byA.$ 2,842,000.B.$ 462,000.C.$ 420,000.D.$ 1,260,000.

a

ch 5 #19 The following information is available for Barone Corporation:-January 1, 2021 Shares outstanding 4,000,000-April 1, 2021 Shares issued 640,000-July 1, 2021 Treasury shares purchased 240,000-October 1, 2021 Shares issued in a 100% stock dividend 4,400,000The number of shares to be used in computing earnings per common share for 2021 isA.8,720,000.B.8,760,000.C.9,041,600.D.5,460,000.

a

ch 6 #14 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?A.$47,698B.$47,890C.$53,208D.$50,000

a

ch 6 #15 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?A.$30,744B.$8,640C.$22,104D.$0

a

ch 7 Horner 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:A.$100,000B.$30,000C.$40,000D.$35,000

a

ch 7 #15 Lyons 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. Lyons 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.Assuming that income taxes payable for 2022 is $240,000, the income tax expense for 2022 would be what amount?A.$226,000B.$282,000C.$254,000D.$240,000

a

ch 8 #12 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.(d) 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.From the lessee's viewpoint, what type of lease in this?A.Finance leaseB.Operating leaseC.Sale-leasebackD.Sales-type lease

a

ch 8 #13 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.(d) 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.Yancey, Inc. would record depreciation expense on this asset in 2021 ofA.$600,000.B.$0.C.$976,471.D.$495,000.

a

ch 8 #14 Metcalf Company leases a machine from Vollmer Corp. under an agreement which meets the criteria to be a finance lease for Metcalf. The six-year lease requires payment of $170,000 at the beginning of each year. The incremental borrowing rate for the lessee is 10%; the lessor's implicit rate is 8% and is known by the lessee. Metcalf should record the leased asset atA.$848,761.B.$814,435.C.$723,943.D.$694,665.

a

ch 8 #20 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 $130,000. Foley's incremental borrowing rate is 10%, however it knows that Hanson's implicit interest rate is 8%.The actual residual value of the asset at the end of the lease term was $120,000. The journal entry Foley makes at January 2, 2026 includes a debit to lease liability for?A.$20,000.B.$30,000.C.$150,000.D.$50,000.

a

ch 3 At the beginning of 2020, Winston Corporation issued 10% bonds with a face value of $4,000,000. These bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $3,705,600 to yield 12%. Winston uses a calendar-year reporting period. Using the effective-interest method of amortization, what amount of interest expense should be reported for 2020? A.$444,666 B.$446,012 C.$443,334 D.$458,880

b

ch 3 Kant Corporation retires its $500,000 face value bonds at 102 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $481,250. The entry to record the redemption will include a A.debit of $10,000 to Premium on Bonds Payable. B.credit of $18,750 to Discount on Bonds Payable. C.credit of $18,750 to Loss on Bond Redemption. D.debit of $28,750 to Gain on Bond Redemption.

b

ch 4 #17 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 A.$750,000. B.$150,000. C.$450,000. D.$215,000.

b

ch 5 At December 31, 2020 Pine Company had 200,000 shares of common stock and 10,000 shares of 6%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2020 or 2021. On February 10, 2022, prior to the issuance of its financial statements for the year ended December 31, 2021, Pine declared a 100% stock dividend on its common stock. Net income for 2021 was $960,000. In its 2021 financial statements, Pine's 2021 earnings per common share should beA.$4.54.B.$2.25.C.$1.33.D.$4.27. B.$2.25.

b

ch 5 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 isA.851,000.B.872,000.C.914,000.D.893,000.

b

ch 5 On January 1, 2021 Reese Company granted Jack Buchanan, an employee, an option to buy 300 shares of Reese Co. stock for $40 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 $4,800. Buchanan exercised his option on September 1, 2021, and sold his 300 shares on December 1, 2021. Quoted market prices of Reese Co. stock during 2021 were:-January 1 $40 per share-September 1 $48 per share-December 1 $54 per shareThe service period is for two years beginning January 1, 2021. As a result of the option granted to Buchanan, using the fair value method, Reese should recognize compensation expense for 2021 on its books in the amount ofA.$5,600.B.$2,400.C.$4,800.D.$0.

b

ch 5 On June 30, 2018, Norman Corporation granted compensatory stock options for 75,000 shares of its $20 par value common stock to certain of its key employees. The market price of the common stock on that date was $36 per share and the option price was $30. The Black-Scholes option pricing model determines total compensation expense to be $900,000. The options are exercisable beginning January 1, 2021, provided those key employees are still in Norman's employ at the time the options are exercised. The options expire on June 30, 2022. On January 4, 2021, when the market price of the stock was $42 per share, all 75,000 options were exercised.What should be the amount of compensation expense recorded by Norman Corporation for the calendar year 2020 using the fair value method?A.$0.B.$360,000.C.$900,000.D.$450,000.

b

ch 6 #16 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?A.($26,244)B.($4,500)C.($35,244)D.$0

b

ch 6 #17 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?A.($7,500)B.($2,500)C.$12,500D.($20,000)

b

ch 6 #20 Harrison Company owns 20,000 of the 50,000 outstanding shares of Taylor, Inc. common stock. During 2021, Taylor earns $1,200,000 and pays cash dividends of $960,000. If the beginning balance in the investment account was $750,000, the balance at December 31, 2021 should beA.$1,230,000B.$846,000C.$990,000D.$750,000

b

ch 8 #11 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.(d) 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.What is the annual lease payment?A.$272,703B.$887,703C.$872,703D.$902,703

b

ch 8 #15 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 $200,000 at the beginning of each year for five years beginning on January 1, 2021. The equipment has an estimated useful life of 7 years and no salvage value. Sauder uses the straight-line method of depreciation for all of its fixed assets. Sauder accordingly accounts for this lease transaction as a finance lease. The implicit interest rate is 10%.The lease payments were determined to have a present value ofA.$ 1,16,604.B.$ 833,972.C.$ 1,400,000.D.$ 200,000.

b

ch 8 #16 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. 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 implicit interest rate is 10%.In 2021, Sauder should record interest expense ofA.$83,396.B.$63,397.C.$136,604.D.$116,604.

b

ch 4 #15 On July 1, 2021, Nall Co. issued 2,500 shares of its $10 par common stock and 5,000 shares of its $10 par convertible preferred stock for a lump sum of $140,000. At this date Nall's common stock was selling for $24 per share and the convertible preferred stock for $18 per share. The amount of the proceeds allocated to Nall's preferred stock should be A.$77,000. B.$70,000. C.$84,000. D.$90,000.

c

ch 4 #18 Percy Corporation was organized on January 1, 2021, with an authorization of 1,200,000 shares of common stock with a par value of $6 per share. During 2021, the corporation had the following capital transactions:-January 5 issued 600,000 shares @ $10 per share-July 28 purchased 80,000 shares @ $11 per share-December 31 sold the 80,000 shares held in treasury @ $18 per sharePercy used the cost method to record the purchase and reissuance of the treasury shares. What is the total amount of additional paid-in capital as of December 31, 2021?A.$1,840,000.B.$2,400,000.C.$2,960,000.D.$-0-.

c

ch 5 #11 On March 1, 2021, Ruiz Corporation issued $2,000,000 of 8% nonconvertible bonds at 104, which are due on February 28, 2041. In addition, each $1,000 bond was issued with 25 detachable stock warrants, each of which entitled the bondholder to purchase for $50 one share of Ruiz common stock, par value $25. The bonds without the warrants would normally sell at 95. On March 1, 2021, the fair value of Ruiz's common stock was $40 per share and the fair value of the warrants was $2.00.What amount should Ruiz record on March 1, 2021 as paid-in capital from stock warrants?A.$100,000B.$85,200C.$104,000D.$73,600

c

ch 5 #12 On December 31, 2020, Gonzalez Company granted some of its executives options to purchase 180,000 shares of the company's $10 par common stock at an option price of $50 per share. The Black-Scholes option pricing model determines total compensation expense to be $1,350,000. The options become exercisable on January 1, 2021, and represent compensation for executives' services over a three-year period beginning January 1, 2021. At December 31, 2021 none of the executives had exercised their options. What is the impact on Gonzalez's net income for the year ended December 31, 2021 as a result of this transaction under the fair value method? A.$ 450,000 increase.B.$ 0.C.$ 450,000 decrease.D.$1,350,000 decrease.

c

ch 5 #9 On July 1, 2021, an interest payment date, $150,000 of Parks Co. bonds were converted into 3,000 shares of Parks Co. common stock each having a par value of $45 and a market value of $54. There is $6,000 unamortized discount on the bonds. Using the book value method, Parks would record A.no change in paid-in capital in excess of par. B.a $12,000 increase in paid-in capital in excess of par .C.a $9,000 increase in paid-in capital in excess of par. D.a $18,000 increase in paid-in capital in excess of par.

c

ch 6 #12 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 byA.$5,140B.$8,970C.$2,571D.$4,485

c

ch 6 #13 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:A.$150,000B.$158,970C.$155,283D.$155,130

c

ch 6 #18 On January 2, 2021 Pod Company purchased 25% of the outstanding common stock of Jobs, Inc. and subsequently used the equity method to account for the investment. During 2021 Jobs, Inc. reported net income of $1,260,000 and distributed dividends of $540,000. The ending balance in the Investment in Pod Company account at December 31, 2021 was $960,000 after applying the equity method during 2021. What was the purchase price Pod Company paid for its investment in Jobs, Inc?A.$510,000B.$1,410,000C.$780,000D.$1,140,000

c

ch 6 #19 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 ofA.$137,500B.$87,500C.$125,000D.$37,500

c

ch 7 #19 Palmer 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, Palmer should increase or decrease deferred tax liability by what amount?A.Decrease by $75,000B.Increase by $75,000C.Decrease by $37,500D.Increase by $37,500

c

ch 7 #20 Dunn, Inc. uses the accrual method of accounting for financial reporting purposes and appropriately uses the installment method of accounting for income tax purposes. Installment income of $3,000,000 will be collected in the following years when the enacted tax rates are:Collection of Income Enacted Tax Rates2020 300,000 25%2021 600,000 20%2022 900,000 20%2023 1,200,000 15%The installment income is Dunn's only temporary difference. What amount should be included in the deferred income tax liability in Dunn's December 31, 2020 balance sheet?A.$675,000B.$750,000C.$480,000D.$555,000

c

ch 8 Emporia Corporation is a lessee with a finance lease. The asset is recorded at $900,000 and has an economic life of 8 years. The lease term is 5 years. The asset is expected to have a fair value of $300,000 at the end of 5 years, and a fair value of $100,000 at the end of 8 years. The lease agreement provides for the transfer of title of the asset to the lessee at the end of the lease term. What amount of amortization expense would the lessee record for the first year of the lease?A.$180,000.B.$160,000.C.$100,000.D.$120,000.

c

ch 8 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. 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 isA.$2,454,870.B.$2,640,792.C.$2,190,792.D.$2,376,714.

c

ch3 #18 Feller Company issues $20,000,000 of 10-year, 9% bonds on March 1, 2020 at 97 plus accrued interest. The bonds are dated January 1, 2020, and pay interest on June 30 and December 31. What is the total cash received on the issue date? A.$20,450,000 B.$19,100,000 C.$19,700,000 D.$19,400,000

c

ch 3 #20 On January 1, 2021, Doty Co. redeemed its 15-year bonds of $7,000,000 par value for 102. They were originally issued on January 1, 2009 at 92 with a maturity date of January 1, 2024. Doty amortizes discounts and premiums using the straight-line method. What amount of loss should Doty recognize on the redemption of these bonds (ignore taxes)? A.$0 B.$168,000 C.$140,000 D.$252,000

d

ch 4 #19 Winger Corporation owned 900,000 shares of Fegan Corporation stock. On December 31, 2021, when Winger's account "Equity Investments (Fegan Corporation") had a carrying value of $5 per share, Winger distributed these shares to its stockholders as a dividend. Winger originally paid $8 for each share. Fegan has 5,000,000 shares issued and outstanding, which are traded on a national stock exchange. The quoted market price for a Fegan share was $7 on the declaration date and $9 on the distribution date.What would be the reduction in Winger's stockholders' equity as a result of the above transactions?A.$8,100,000B.$3,600,000C.$7,200,000D.$4,500,000

d

ch 5 At December 31, 2021, Hancock Company had 500,000 shares of common stock issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 100,000 of which were issued on October 1, 2021. Net income for the year ended December 31, 2021, was $1,700,000.What should be Hancock's 2021 earnings per common share, rounded to the nearest penny?A.$3.78B.$4.25C.$36D.$4.00

d

ch 7 #13 Lyons 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. Lyons 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?A.$15,000B.$0C.$36,000D.$42,000

d

ch 7 #14 Lyons 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. Lyons 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 income tax expense for 2021?A.$180,000B.$234,000C.$210,000D.$222,000

d

ch 7 #16 Kraft Company made the following journal entry in late 2021 for rent on property it leases to Danford Corporation.Cash 150,000Unearned Rent Revenue 150,000The payment represents rent for the years 2022 and 2023, the period covered by the lease. Kraft Company is a cash basis taxpayer. Kraft has income tax payable of $230,000 at the end of 2021, and its tax rate is 25%.What amount of income tax expense should Kraft Company report at the end of 2021?A.$267,500B.$117,500C.$211,250D.$192,500

d