Determine the cash received from a $ 1,000,000 bond issue if the bonds were issued at each of the following prices: A. 93 7/8 B. 97 3/4 C. 102 3/8 D. 105 1/4
Compare the accounting for the effects of intercompany transactions for transactions between parent entities and subsidiaries and between companies and associates or joint ventures. View Solution:
Compare the accounting for the effects of intercompany transactions for
The current sections of Putzier Inc."s balance sheets at December 31, 2011 and 2012, are presented here. Putzier"s net income for 2012 was $153,000. Depreciation expense was $27,000.
2012
2011
Current assets
Cash
$105,000
$ 99,000
Accounts receivable
80,000
89,000
Inventory
168,000
172,000
Prepaid expenses
27,000
22,000
Total current assets
$380,000
$382,000
Current liabilities
Accrued expenses payable
$ 15,000
$ 5,000
Accounts payable
85,000
92,000
Total current liabilities
$100,000
$ 97,000
Instructions
Prepare the net cash provided by operating activities section of the company"s statement of cash flows for the year ended December 31, 2012, using the indirect method.
Computing the Future Value of an Annuity (Supplement C) – You plan to retire in 10 years. Would it be better for you to save $27,500 a year for the last five years before retirement or $16,250 for each of the 10 years? You are able to earn 9 percent interest on your investments.
A Vulcan model 016 single-acting hammer is used to drive a pile. The stroke of this hammer is 36 in. The average penetration per blow for the last 10 blows is i in., what will be the safe rated load using the Engineering News equation?
Comparing accrual and cash-basis accounting
The Johnny Flowers Law Firm uses a client database. Suppose Johnny Flowers paid $2,900 for a computer.
Requirements
1. Describe how the business should account for the $2,900 expenditure under
a. the cash basis.
b. the accrual basis.
2. State why the accrual basis is more realistic for this situation.
Computing and journalizing payroll amounts
Lenny Worthington is general manager of Crossroad Tanning Salons. During 2012, Worthington worked for the company all year at a $6,100 monthly salary. He also earned a year-end bonus equal to 5% of his salary. Worthington’s federal income tax withheld during 2012 was $810 per month, plus $928 on his bonus check. State income tax withheld came to $80 per month, plus $60 on the bonus. The FICA tax withheld was 7.65% of the first $106,800 in annual earnings. Worthington authorized the following payroll deductions: United Fund contribution of 1% of total earnings and life insurance of $15 per month. Crossroad incurred payroll tax expense on Worthington for FICA tax of 7.65% of the first $106,800 in annual earnings. The company also paid state unemployment tax of 5.4% and federal unemployment tax of 0.8% on the first $7,000 in annual earnings. In addition, Crossroad provides Worthington with health insurance at a cost of $110 per month. During 2012, Crossroad paid $7,000 into Worthington’s retirement plan.
Requirements
1. Compute Worthington’s gross pay, payroll deductions, and net pay for the full year 2012. Round all amounts to the nearest dollar.
2. Compute Crossroad’s total 2012 payroll expense for Worthington.
3. Make the journal entry to record Crossroad’s expense for Worthington’s total earnings for the year, his payroll deductions, and net pay. Debit Salary expense and Bonus expense as appropriate. Credit liability accounts for the payroll deductions and Cash for net pay. An explanation is not required.
Calculations for various depreciation methods. Alcoa acquires a machine for $88,800. It expects the machine to last six years and to operate for 30,000 hours during that time. Estimated salvage value is $4,800 at the end of the machine’s useful life. Calculate the depreciation charge for each of the first three years using each of the following methods:
a. The straight-line (time) method.
b. The straight-line (use) method, with the following operating times: first year, 4,500 hours; second year, 5,000 hours; third year, 5,500 hours.
Data for Zamora Inc. are presented in P12-5B.
Instructions
Prepare the operating activities section of the statement of cash flows using the direct method.
Joint-cost allocation with a byproduct. The Seattle Recycling Company (SRC) purchases old water and soda bottles and recycles them to produce plastic covers for outdoor furniture. The company processes the bottles in a special piece of equipment that first melts, then reforms the plastic into large sheets that are cut to size. The edges from the cut pieces are sold for use as package filler. The filler is considered a byproduct. SRC can produce 25 table covers, 75 chair covers, and 5 pounds of package filler from 100 pounds of bottles. In June, SRC had no beginning inventory. It purchased and processed 120,000 pounds of bottles at a cost of $600,000. SRC sold 25,000 table covers for $12 each, 80,000 chair covers for $8 each, and 5,000 pounds of package filler at $1 per pound.
1. Assume that SRC allocates the joint costs to table and chair covers using the sales value at splitoff method and accounts for the byproduct using the production method. What is the ending inventory cost for each product and gross margin for SRC?
2. Assume that SRC allocates the joint costs to table and chair covers using the sales value at splitoff method and accounts for the byproduct using the sales method. What is the ending inventory cost for each product and gross margin for SRC?
3. Discuss the difference between the two methods of accounting for byproducts, focusing on what conditions are necessary to use each method.
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