Question;Essay Questions;44. Iona Corporation is in the process of preparing;its financial statements for the first quarter of 2009 and has asked your;advice as to how to report several items. These items include the following;events which took place during the first quarter of 2009 (assume all amounts;are material);1) Iona redeemed bonds with a carrying value of $4,000,000 at a cost of;$3,760,000. This early extinguishment occurred because Iona wants to issue new;debt at lower interest rates.;2) Iona uses the LIFO method for its inventories. On January 1, 2009;inventories amounted to $10,000,000, while, on March 31, 2009, inventories;totaled $9,200,000. Iona expects to replace the liquidated inventory at the;beginning of the second quarter at a cost of $1,000,000.;3) Iona changed its depreciation method on $4,000,000 of its delivery trucks;from the declining balance method to the straight-line method. On January 1;2009, accumulated depreciation under the declining balance method was;$2,800,000. Had the straight-line method been used, accumulated depreciation on;January 1, 2009, would have been $2,300,000. The remaining life of the trucks;is two years.;4) Iona pays its top executives a bonus at year-end of 6 percent of operating;income before bonus and income taxes. Operating income before bonus and income;taxes for the three months ended March 31, 2009, was $10,000,000. Iona;estimates that its yearly operating income before bonus and income taxes will;be $60,000,000.;5) Iona closes its manufacturing operations in July of each year in order to;make its major annual repairs. Iona estimates that the cost of these repairs in;2009 will be $1,000,000.;Required;For each of the events numbered 1 through 5, indicate how that event should be;reported on Iona's income statement for the three months ended March 31, 2009;and the balance sheet accounts effects at March 31, 2009. Ignore income;taxes.
Paper#44960 | Written in 18-Jul-2015Price : $22