Prepare an answer sheet with the column headings shown here. For each of the following transactions or adjustments, indicate the effect of the transaction or adjustment on the appropriate balance sheet category and on net income by selecting for each account affected the account name and amount and indicating whether it is an addition (+) or a subtraction (?). Transaction a has been done as an illustration. Net income is not affected by every transaction. In some cases only one column may be affected because all of the specific accounts affected by the transaction are included in that category.;a. Accrued interest income of $34 on a note receivable.;b.;Paid $3,300 in cash as an advance rent payment for a short-term lease that covers the next four months.;c.;Recorded an adjustment at the end of the first month (in b) to show the amount of rent "used" in the month.;d. Inventory was acquired on account and recorded for $850. Perpetual inventory is maintained.;e.;It was later determined that the amount of inventory acquired on account (in d) was erroneously recorded. The actual amount purchased was only $580. No payments have been made. Record the correction of this error.;f.;Purchased 30 units of inventory at a cost of $54 each and then 18 more units of the same inventory item at $60 each. Perpetual inventory is maintained.;g.;Sold 32 of the items purchased (in f) for $84 each and received the entire amount in cash. Record the sales transaction and the cost of goods sold using the LIFO cost flow assumption. Perpetual inventory is maintained.;h.;Assume the same facts (in g) except that the company uses the FIFO cost flow assumption. Record only the cost of goods sold.;i.;Assume the same facts (in g) except that the company uses the weighted average cost flow assumption. Record only the cost of goods sold.;Q2. A portion of the current assets section of the December 31, 2013, balance sheet for Gibbs Co. is presented here;Accounts receivable $ 20,600;Less: Allowance for bad debts;(3,600;$ 17,000;The company's accounting records revealed the following information for the year ended December 31, 2014;Sales (all on account) $ 169,000;Cash collections from customers 139,000;Accounts written off 3,700;Bad debts expense (accrued at 12/31/14) 5,500;Required;Calculate the net realizable value of accounts receivable at December 31, 2014, and prepare the appropriate balance sheet presentation for Gibbs Co., as of that point in time. (Hint: Use T-accounts to analyze the Accounts Receivable and Allowance for Bad Debts accounts.) (Amounts to be deducted should be indicated with minus sign.);Q3.;Porter, Inc., acquired a machine that cost $372,000 on October 1, 2013. The machine is expected to have a five-year useful life and an estimated salvage value of $34,000 at the end of its life. Porter, Inc., uses the calendar year for financial reporting. Depreciation expense for one-fourth of a year was recorded in 2013.;Required;a.;Using the straight-line depreciation method, calculate the depreciation expense to be recognized in the income statement for the year ended December 31, 2015, and the balance of the Accumulated Depreciation account as of December 31, 2015. (Note: This is the third calendar year in which the asset has been used.);b.;b.;Using the double-declining-balance depreciation method, calculate the depreciation expense for the year ended December 31, 2015, and the net book value of the machine at that date.;Q4.;For each of the following transactions or adjustments, indicate the effect of the transaction or adjustment on assets, liabilities, and net income by entering for each account affected the account name and amount and indicating whether it is an addition (+) or a subtraction (?). Transaction a has been done as an illustration. Net income is not affected by every transaction. In some cases, only one column may be affected because all of the specific accounts affected by the transaction are included in that category.;a. Recorded $200 of depreciation expense.;b. Sold land that had originally cost $9,000 for $13,000 in cash.;c. Acquired a new machine under a capital lease. The present value of future lease payments, discounted at 10%, was $11,000.;d. Recorded the first annual payment of $2,100 for the leased machine (in part c).;e. Recorded a $5,200 payment for the cost of developing and registering a trademark.;f. Recognized periodic amortization for the trademark (in part e) using a 42-year useful life.;g.;Sold used production equipment for $17,000 in cash. The equipment originally cost $43,000, and the accumulated depreciation account has an unadjusted balance of $23,100. It was determined that a $1,300 year-to-date depreciation entry must be recorded before the sale transaction can be recorded. Record the adjustment and the sale.;Q5.;Dorsey Co. has expanded its operations by purchasing a parcel of land with a building on it from Bibb Co. for $99,000. The appraised value of the land is $21,000, and the appraised value of the building is $106,000.;1.;value;Required;a.;Assuming that the building is to be used in Dorsey Co.?s business activities, what cost should be recorded for the land? (Do not round your intermediate calculations.);Q6.;value;b.;Explain why, for income tax purposes, management of Dorsey Co. would want as little of the purchase price as possible allocated to land. (Select all that apply.);Land is a current asset;Land is not a depreciable asset.;Land value will not reduce taxable income.;Land is a depreciable asset.;Land value reduces taxable income.;Q7.;c.;Assuming that the building is razed at a cost of $11,000 so the land can be used for employee parking, what cost should Dorsey Co. record for the land?
Paper#20755 | Written in 18-Jul-2015Price : $57