Wasp developed a new manufacturing process, incurring research and development costs of
$110,000.The company also purchased a patent for $50,000. In early January,Wasp capitalized
$160,000 as the cost of the patents. Patent amortization expense of $8,000 was recorded based
on a 20-year useful life.
What is the key difference between a static budget and a flexible budget?
The adjusted trial balance for Matthews Corporation at the end of the current year contained the following accounts.Interest Payable ………. $ 9,000Lease Liability ………. 59,500Bonds Payable, due 2019 ….. 180,000Premium on Bonds Payable …. 24,000InstructionsPrepare the long-term liabilities section of the balance sheet.View Solution:
The adjusted trial balance for Matthews Corporation at the end
Prepare the adjusting entry needed for Business Solutions to recognize bad debts expense on March 31, 2016, under each of the following independent assumptions (assume a zero unadjusted balance in the Allowance for Doubtful Accounts at March 31 Bad debts are estimated to be 1% of total revenues (Round amount to the dollar) Bad debts are estimated to be 2% of accounts receivable (Round amount to the dollar) Assume that Business Solutions’ Accounts Receivable balance at June 30 is $20,205 and that one account of $100 has been written off against the Allowance for Doubtful Accounts since March 31, 2016 If S Rey uses the method prescribed in part 1b, what is the adjusting journal entry must be made to recognize bad debts expense on June 30, 2016?
In late July 2014, Mona Ltd., a private company, paid $2 million to acquire all of the net assets of Lubello Corp., which then became a division of Mona. Lubello reported the following statement of financial position at the time of acquisition: Current assets ……………. $415,000 Non-current assets ………….. 1,335,000 $1,750,000 Current liabilities …………. $300,000 Long-term liabilities …………. 265,000 Shareholders’ equity ………… 1,185,000 $1,750,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Lubello was $1.7 million. Over the next six months of operations, the new division had operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2014, the fair value of the Lubello Division is S1,850,000, aod the division reports the following statement of financial position information: Current assets ……………………. $462,000 Non-current assets (including goodwill recognized in purchase) …… 2,400,000 Current liabilities …………………… (703,500) Long-term liabilities …………………… (530,000) Net assets ……………………….. $1,628,500 Assume that Mona Ltd. prepares financial statements in accordance with ASPE. Instructions (a) Calculate the amount of goodwill, if any, that should be recognized in late July 2014. (b) Determine the in1pairment loss, if any, to be recognized on December 3!, 2014. (c) Assume that the fair value of the Lubello Division on December 31,2014, is$1.5 million. Determine the impairment loss, if any, that would be recognized. (d) Prepare the journal entry to record the impairment loss, if any, in (b) and (c) and indicate where the loss would be reported in the income statement. (e) Explain how the accounting would differ under IFRS. View Solution:
In late July 2014 Mona Ltd a private company paid
Reporting current and long-term liabilities
Medical Dispensary borrowed $390,000 on January 2, 2012, by issuing a 10% serial bond payable that must be paid in three equal annual installments plus interest for the year. The first payment of principal and interest comes due January 2, 2013.
Requirement
1. Insert the appropriate amounts to show how Medical Dispensary should report its current and long-term liabilities.
Overview of general ledger relationships. Estevez Company uses normal costing in its job-costing system. The company produces kitchen cabinets. The beginning balances (December 1) and ending balances (as of December 30) in their inventory accounts are as follows:
Additional information follows:
a. Direct materials purchased during December were $132,600.
b. Cost of goods manufactured for December was $468,000.
c. No direct materials were returned to suppliers.
d. No units were started or completed on December 31 and no direct materials were requisitioned on December 31.
e. The manufacturing labor costs for the December 31 working day: direct manufacturing labor, $8,600, and indirect manufacturing labor, $2,800.
f. Manufacturing overhead has been allocated at 110% of direct manufacturing labor costs through December 31.
1. Prepare journal entries for the December 31 payroll.
2. Use T-accounts to compute the following:
a. The total amount of materials requisitioned into work in process during December
b. The total amount of direct manufacturing labor recorded in work in process during December
c. The total amount of manufacturing overhead recorded in work in process during December
d. Ending balance in work in process, December 31
e. Cost of goods sold for December before adjustments for under- or overallocated manufacturing overhead
3. Prepare closing journal entries related to manufacturing overhead. Assume that all under- or overallocated manufacturing overhead is closed directly to Cost of Goods Sold.
Customer-cost hierarchy, customer profitability. Louise Newman operates Interiors by Louise, an interior design consulting and window treatment fabrication business. Her business is made up of two different distribution channels, a consulting business in which Louise serves two architecture firms (Adams and Betz) and a commercial window treatment business in which Louise designs and constructs window treatments for three commercial clients (Chatham, Dedham, and Elm). Louise would like to evaluate the profitability of her two architecture firm clients and three commercial window treatment clients, as well as evaluate the profitability of each of the two channels and the business as a whole. Information about her most recent quarter follow:
Overhead costs total $340,400. Louise has determined that 25% of her overhead costs relate directly to her architectural business, 40% relate directly to her window treatment business, and the remainder are corporate overhead costs. On the revenues indicated above, Louise gave a 10% discount to Adams in order to lure it away from a competitor and gave a 5% discount to Elm for advance payment in cash.
1. Prepare a customer-cost hierarchy report for Interiors by Louise, using the format in Exhibit 14-6.
2. Prepare a customer-profitability analysis for the five customers, using the format in Exhibit 14-4.
3. Comment on the results of the preceding reports. What recommendations would you give Louise?
Paprocki Company sold $6,000,000, 7%, 15-year bonds on January 1, 2012. The bonds were dated January 1, 2012, and pay interest on December 31. The bonds were sold at 98.
Instructions
(a) Prepare the journal entry to record the issuance of the bonds on January 1, 2012.
(b) At December 31, 2012, $8,000 of the bond discount had been amortized. Show the long-term liability balance sheet presentation of the bond liability at December 31, 2012.
(c) At January 1, 2014, when the carrying value of the bonds was $5,896,000, the company redeemed the bonds at 102. Record the redemption of the bonds assuming that interest for the year had already been paid.
Journalizing bond transactions
Worthington Mutual Insurance Company issued a $50,000, 5%, 10-year bond payable at a price of 108 on January 1, 2012.
Requirements
1. Journalize the issuance of the bond payable on January 1, 2012.
2. Journalize the payment of semiannual interest and amortization of the bond discount or premium on July 1, 2012, using the straight-line method to amortize the bond discount or premium.
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