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INTERMEDIATE ACCOUNTING II WEEK 2 ASSIGNMENT EXERCISES

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Question;INTERMEDIATE ACCOUNTING II WEEK 2 ASSIGNMENT EXERCISES;E 14-16 Error in amortization schedule;Wilkins Food Products, Inc. acquired a packaging machine;from Lawrence Specialists Corporation. Lawrence completed construction of the;machine on January 1, 2009. In payment for the machine Wilkins issued a;three-year installment note to be paid in three equal payments at the end of;each year. The payments include interest at the rate of 10%.;Lawrence made a conceptual error in preparing the;amortization schedule, which Wilkins failed to discover until 2011. The error;had caused Wilkins to understate interest expense by 45,000 in 2009 and 40,000;in 2010.;Required;1. Determine;which accounts are incorrect as a result of these errors at January 1, 2011;before adjustments. Explain your answer. (Ignore income taxes);2. Prepare a;journal entry to correct the error.;3. What;other step(s) would be taken in connection with the error.;E 14-18 Installment note, amortization schedule;American Food Services, Inc. acquired a packaging machine;from Barton and Barton Corporation. Barton and Barton completed construction of;the machine on January 1, 2011. In payment for the 4 million machine, American;Food Services issued a four-year installment note to be paid in four equal;monthly payments at the end of each month. The payments include interest at the;rate of 12%.;Required;1. Prepare;the journal entry for American Food Services? purchase of the machine on January;1, 2011.;2. Prepare;an amortization schedule for the four-year term of the installment note.;3. Prepare;the journal entry for the first installment payment on December 31, 2011.;4. Prepare;the journal entry for the third installment payment on December 31, 2011.;P 14-21 Report bonds at fair value, quarterly reporting;Appling Enterprises issued 8% bonds with a face amount of;400,000 on January 1, 2011. The bonds sold for 331,364 and mature in 2030 (20;years). For bonds of similar risk and maturity the market yield was 10%.;Interest is paid semiannually on June 30 and December 31. Appling determines;interest expense at the effective rate. Appling elected the option to report;these bonds at their fair value. The fair values of the bonds at the end of each;quarter during 2011 as determined by their market values in the over-the-;counter market were the following;March 31 $350,000;June 30 340,000;September 30 335,000;December 31 342,000;Required;1. By how;much will Appling?s earnings be increased or decreased by the bon ds (ignoring;taxes) in the March 31 quarterly financial statements?;2. By how;much will Appling?s earnings be increased or decreased by the bonds (ignoring;taxes) in the June 30 quarterly financial statements?;3. By how;much will Appling?s earnings be increased or decreased by the bonds (ignoring;taxes) in the September 30 quarterly financial statements?;4. By how;much will Appling?s earnings be increased or decreased by the bonds (ignoring;taxes) in the December 31 annual financial statements?;P 15-3 Direct financing and sales-type lease, lessee and;lessor;Rand Medical manufactures lithotripters. Lithotripsy uses;shock waves instead of surgery to eliminate kidney stones. Physicians? Leasing;purchased a lithotripter from Rand for 2,000,000 and leased it to Mid-South;Urologists Group, Inc. on January 1, 2011.;Lease Description;Quarterly lease payments $130,516-beginning of each period;Lease term 5 years (20 quarters);No residual value, no BPO;Economic life of lithotripter 5 years;Implicit interest rate and lessee?s incremental borrowing;rate 12 %;Fair Value of asset $2,000,000;Collectively of the lease payments is reasonably assured;and there are no lessor costs yet to be incurred.;Required;1. How;should this lease be classified by Mid-South Urologist Group and by Physicians?;Leasing?;2. Prepare;appropriate entries for both Mid ?South Urologist Group and Physicians? Leasing;from the inception of the lease through the second rental on April 1, 2011.;Depreciation is recorded at the end of each fiscal year (December 31).

 

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