Tips for Excelling in Accounting Discussion Posts

Published: 9 months ago

Tips for Excelling in Accounting Discussion Posts

37. Capitalization of Interest

Greig Landscaping began construction of a new plant on Dec 1,2014. On this date, the company purchased a parcel of land for $139,000 in cash. In addition it paid $2,000 in surveying costs and $4,000 for a title insurance policy. An old dwelling on the premises was demolished at a cost of $3,000 with $1,000 being received from the sale of material.

Architectural plans were also formalized on December 1, 2014, whenthe architect was paid $30,000. The necessary building permits costing $3,000 were obtained from the city and paid for on Dec 1 as well. The excavation work began during the first week in Dec with payments made to the contractor as follows:

March 1 - $240,000

May 1 - $330,000

July 1 - $60,000

The building was completed on July 1, 2015.

To finance construction on this plant, Grieg borrowed $600,000 from the bank on December 1, 2014. Grieg had no other borrowings. The $600,000 was a 10-year loan bearing interest at 8%.

Using Excel, develop a well labeled spreadsheet that you could submit to your boss showing:

• A spreadsheet with appropriate formulas (flexible design); everything can be placed on one sheet or multiple sheets depending on your design


• The calculation for the capitalization of interest


• The Land total for both Dec. 31, 2014 and Dec. 31, 2015


• The Buildings total for both Dec. 31, 2014 and Dec. 31, 2015


• The Interest Expense total for both Dec. 31, 2014 and Dec. 31, 2015

38. On December 31, the trial balance indicates that the supplies

On December 31, the trial balance indicates that the supplies account has a balance, prior to the adjusting entry, of $320. A physical count of the supplies inventory shows that $90 of supplies remain. Analyze this adjustment for supplies using T accounts, and then formally enter this adjustment in the general journal.

39. Problem 5-1A Kern's Book Warehouse distributes hardcover books to retail stores and extends credi...

Problem 5-1A Kern's Book Warehouse distributes hardcover books to retail stores and extends credit terms of 1/10, n/30 to all of its customers. At the end of May, Kern's inventory consisted of books purchased for S2,200. During lune, the following merchandising transactions occurred. June 1 Purchased books on account for s2,100 from Binsfeld Publishers, FoB destination, terms 2/10, nV30. The appropriate party also made a cash payment of $60 for the freight on this date. 3 Sold books on accou nt to Reading Rainbow for $3,000. The cost of the books sold was $1,500. $100 credit for books returned to Binsfeld Publishers, 9 Paid Binsfeld Publishers in full, less discount. 15 Received payment in full from Reading Rainbow. 17 Sold books on account to Rapp Books for $1,500. The cost of the books sold was $1,140. sn Purchased books on account for $1,900 from McGinn Publishers, FOB destination, terms 1/15, n/30. The appropriate party also made a cash payment of $40 for the freight on this date. 24 Received payment in full from Rapp Books. 26 Paid McGinn Publishers in full, less discount. 28 Sold books on accout nt to Baeten Bookstore for $1,300. The cost of the books sold was $970. 30 Granted Baeten Bookstore $100 credit for books returned costing $60. Kern's Book Warehouse's chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 nventory, No. 201 Accounts Payable, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. SOS Cost of Goods Sold Journalize the transactions for the month of June for Kern's Book warehouse using a perpetual inventory system. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanatian Debit record credit sale) To record cost of merchandise sold) record credit sale

40. Inventoriable Costs

In your audit of Garza Company, you find that a physical inventory on December 31, 2010, showed merchandise with a cost of $441,000 was on hand at that date. You also discover the following items were all excluded from the $441,000.



1. Merchandise of $61,000 which is held by Garza on consignment. The...

41. Five-step decision-making process, service firm. Sizemore Landscaping is a firm that provides...

Five-step decision-making process, service firm. Sizemore Landscaping is a firm that provides commercial landscaping and grounds maintenance services. Derek Sizemore, the owner, is trying to find new ways to increase revenues. Mr. Sizemore performs the following actions, not in the order listed.

a. Mr. Sizemore decides to buy power tilling equipment rather than hire additional landscape workers. b. Mr. Sizemore discusses with his employees the possibility of using power equipment instead of manual processes to increase productivity and thus profits.

c. Mr. Sizemore learns details about a large potential job that is about to go out for bids.

d. Mr. Sizemore compares the expected cost of buying power equipment to the expected cost of hiring more workers and estimates profits from both alternatives.

e. Mr. Sizemore estimates that using power equipment will reduce tilling time by 20%.

f. Mr. Sizemore researches the price of power tillers online. Classify each of the actions (a–f) according to its step in the five-step decision-making process (identify the problem and uncertainties; obtain information; make predictions about the future; make decisions by choosing among alternatives; implement the decision, evaluate performance, and learn).

42. Schnusenberg Corporation just paid a dividend of D0 = $0.75 per share, and that dividend is expected...

Schnusenberg Corporation just paid a dividend of D0 = $0.75 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company's beta is 1.65, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company's current stock price?

A. 10.92

B. 7.99

C. 9.30

D. 10.11

E. 10.41

43. The stockholders' equity accounts of Karp Company at January 1, 2017, areas follow. Preferred Sto...

The stockholders' equity accounts of Karp Company at January 1, 2017, areas follow. Preferred Stock, 6%, $50 par $600,000 Common Stock, $5 par 800,000 Paid-in Capital in Excess of Par-Preferred Stock 200,000 Paid-in Capital in Excess of Par-Common Stock 300,000 Retained Earnings 800,000 There were no dividends in arrears on preferred stock. During 2017, the company had the following transactions and events. July, I Declared a $0.60 cash dividend per share on common stock. Aug. 1 Discovered $25,000 understatement of depreciation expense in 2016 (Ignore income taxes.) Sept. 1 Paid the cash dividend declared on July 1. Dec. 1 Declared a 15% stock dividend on common stock when the ma, keel p. u, ¦ stock was $ 18 per share. 31 Declared a 6% cash dividend on preferred payable January 15, 2018 Determined that net income for the year was $355 000 Recognized a $200,000 restriction of retained earnings for plan, expansion Journalize the transactions, events and closing entries for net income and dividends. Enter the beginning balances in the accounts, and post to the stockholders' equity accounts. Prepare a retained earnings statement for the year. The post-closing trial ton frill

44. choose the correct answer: The overriding criterion by which accounting information can be judged is

choose the correct answer:

The overriding criterion by which accounting information can be judged is that of

1. comparability.


2. usefulness for decision making.


3. freedom from bias.


4. timeliness.

Which of the following is true about understandability as a qualitative characteristic of financial statements?

1. The onus to prepare understandable statements and to be able to understand them lies with the preparer and the user.


2. Where the underlying transactions or economic events are more complex, the user is expected to understand them without the assistance of an advisor.


3. Users with no knowledge of business and financial accounting matters are expected to understand the financial statements.


4. The onus to prepare understandable statements and to be able to understand them lies with the preparer.

Representational faithfulness includes

1. relevance, completeness and freedom from material error.


2. completeness, neutrality and comparability.


3. neutrality, completeness and freedom from material error.


4. neutrality, completeness, and understandability.

Comparability allows any financial statement user to

1. understand all the information presented.


2. verify all the data provided.


3. make timely decisions.


4. identify the real similarities and differences in economic phenomena.

Timeliness is increased by

1. comparative financial statements.


2. annual reporting.


3. representational faithfulness.


4. quarterly reporting.

Which of the following does not represent an essential characteristic of an asset?

1. The entity has control over the economic benefit.


2. There is some economic benefit to the entity.


3. The benefits result from a past transaction or event.


4. The entity is able to transfer the economic benefit if it so chooses.

Which of the following statements regarding liabilities is true?

45. 91.Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of.

91.Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 parcommon stock.  The following amounts were distributed as dividends:

Determine the dividends per share for preferred and common stock for the first year.

a. $0.50 and $0.10

b. $0.00 and $0.10

c. $0.50 and $0.00

d. $2.00 and $0.00

92.When Wisconsin Corporation was formed on January 1, the corporate charter provided for 100,000 share of $10par value common stock.  The following transaction was among those engaged in by the corporation during its firstmonth of operation: The corporation issued 8,500 shares of stock at a price of $16 per share.

The entry to record the above transaction would include a

a.debit to Cash for $85,000

b.credit to Common Stock for $136,000

c.credit to Paid in Capital in Excess of Par for $51,000

d.debit to Common Stock for $85,000

93.The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000shares were originally issued and 10,000 were subsequently reacquired. What is the amount of cash dividends tobe paid if a $2 per share dividend is declared?

a. $60,000

b. $20,000

c. $120,000

d. $100,000

94.The charter of a corporation provides for the issuance of 100,000 shares of common stock.  Assume that 45,000shares were originally issued and 5,000 were subsequently reacquired.  What is the amount of cash dividends to bepaid if a $2 per share dividend is declared?

a. $80,000

b. $10,000

c. $90,000

d. $100,00

95.The date on which a cash dividend becomes a binding legal obligation is on the

a.declaration date

b.date of record

c.payment date

d.last day of fiscal year

96.The cumulative effect of the declaration and payment of a cash dividend on a company’s financial statements is to

a.decrease total liabilities and stockholders' equity

b.increase total expenses and total liabilities

c.increase total assets and stockholders' equity

d.decrease total assets and stockholders' equity

97.Which of the following is the appropriate general journal entry to record the declaration of cash dividends?

a.Retained Earnings

Cash

b.Cash Dividends Payable

Cash

c.Paid­In Capital

Cash Dividends Payable

d.Cash Dividends

Cash Dividends Payable

98.Texas Inc. has 10,000 shares of 6%, $125 par value, cumulative preferred stock and 50,000 shares of $1 par valuecommon stock outstanding at December 31. What is the annual dividend on the preferred stock?

a.$75 per share

b.$75,000 in total

c.$10,000 in total

d.$0.75 per share

99.Which of the following is nota prerequisite to paying a cash dividend?

a.formal action by the board of directors

b.market value in excess of par value per share

c.sufficient cash

d.sufficient retained earnings

100.The liability for a dividend is recorded on which of the following dates?

a.the date of record

b.the date of payment

c.the last day of the fiscal year

d.the date of declaration

46. P5-19 The CPA firm of Bigelow, Barton, and Brown was expanding rapidly

Auditing P 5-19

The CPA firm of Bigelow, Barton, and Brown was expanding rapidly. Consequently it hired several junior accountants, including a man named Small. The partners of the firm eventually became dissatisfied with Small's production and warned him they would be forced to discharge him unless his output increased significantly.



At that time, Small was engaged in audits of several clients. He decided that to avoid being fired, he would reduce or omit some to the standard auditing procedures listed in audit programs prepared by the partners. One of the CPA firm's clients, Newell Corporation, was in serious financial difficulty and had adjusted several of the accounts being audited by Small to appear financially sound. Small prepared fictitious audit documentation in his home at night to support purported completion of auditing procedures assigned to him, although he in fact did not examine the adjusting entries. The CPA firm rendered an unqualified opinion on Newell's financial statements, which were grossly misstated. Several creditors, relying on the audited financial statements, subsequently extended large sums of money to Newell Corporation.



Will the CPA firm be liable to the creditors who extended the money because of their reliance on the erroneous financial statements if Newell Corporation should fail to pay them? Explain.

47. Compute the amount of goodwill actually recorded, assuming the negotiations result in a final...

Estimating Goodwill and Valuation

Alpha Company is considering the purchase of Beta Company. Alpha has collected the following data about Beta:

Cumulative total net cash earnings for the past five years of $850,000 includes extraordinary cash gains of $67,000 and nonrecurring cash losses of $48,000.

Alpha Company expects a return on its investment of 15%. Assume that Alpha prefers to use cash earnings rather than accrual-based earnings to estimate its offering price, and that it estimates the total valuation of Beta to be equal to the present value of cash-based earnings (rather than excess earnings) discounted over five years. (Goodwill is then computed as the amount implied by the excess of the total valuation over the identifiable net assets valuation.)

Required:

1. Compute (a) an offering price based on the information above that Alpha might be willing to pay, and (b) the amount of goodwill included in that price.


2. Compute the amount of goodwill actually recorded, assuming the negotiations result in a final purchase price of $625,000 cash.

48. Suppose your first job pays you $28,000 annually. What percentage should your cash reserve contain?...

Suppose your first job pays you $28,000 annually. What percentage should your cash reserve contain? How much life insurance should you carry if you are unmarried? If you are married with two young children?

49. Aspen Technologies has the following budget data: Estimated direct labor hours 15,000 Estimated d...

Aspen Technologies has the following budget data: Estimated direct labor hours 15,000 Estimated direct labor dollars $90,000 Estimated factory overhead costs $198,000 If factory overhead is to be applied based on direct labor hours, the predetermined overhead rate is

If factory overhead is to be applied based on direct labor hours, the predetermined overhead rate is

a. $2.20 b. $16.50 c. $13.20 d. $7.50?