Question 1

Gross profit method An inventory taken the morning after a large theft (March 12)discloses $27,500 of goods on hand.The following additional data is available from the books:  Past records indicate that sales are made at 50% above cost. Instructions Estimate the inventory of goods on hand at the close of business on March 11 by the gross profit method and determine the amount of the theft loss.Show appropriate titles for all amounts in your presentation.

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Question 2

Asset exchange - no commercial substance Turkey Corp.has a computer that they purchased on March 30, 2010 for $106,000.This computer had an estimated life of ten years and a residual value of $6,000.On December 31, 2014, the old computer is exchanged for a similar computer with a fair value of $58,000.Turkey also received $2,000 cash.Assume that the last fiscal period ended on December 31, 2013, and that straight-line depreciation is used. Instructions Prepare all entries that are necessary on December 31, 2014.

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Question 3

Plant asset accounting During 2014 and 2015, Mauritius Corporation experienced several transactions involving plant assets.A number of errors were made in recording some of these transactions.For each item listed below, indicate the effect of the error (if any)in the blanks provided by using the following  codes:

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Question 4

Costs included in assets Burkina Ltd.is expanding its operations.Due to the expansion, they incurred the following costs during the fiscal period when they constructed a new factory:  Instructions Which of these costs should be included in the cost of the new factory?

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Question 5

Nonmonetary transaction without commercial substance Malawi Auto traded one of its used trailers (cost $40,000, accumulated depreciation $36,000) for another used trailer with a fair value of $6,400.Malawi also paid $600 to complete the transaction. Instructions Assuming the transaction lacks commercial substance, prepare the journal entry to record the exchange.

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Question 6

Conventional retail inventory method The records of Little Hawaii Stores included the following data:  Instructions Calculate the estimated inventory at May 31 under the conventional retail inventory method. (Carry the cost ratio to two decimal places, e.g.12.34%.)Show your calculations in good form and label all amounts.

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Question 7

Gross profit method On January 1, Jasper Store had inventory valued at $124,000.January purchases were $78,000 and January sales were $220,000.On February 1, a fire destroyed most of the inventory.The rate of gross profit was 25% of cost.Merchandise with a selling price of $10,000 remained undamaged after the fire. Inventory 8 - 45 Instructions Calculate the amount of the fire loss.Show appropriate titles for all amounts in your presentation.

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Question 8

Gross profit method Kiowa Ltd.prepares monthly financial statements.Inventory is counted only at year end; thus, month-end inventories must be estimated.All sales are made on account.The rate of mark-up on cost is 25%.The following information relates to the month of May:  Instructions Calculate the estimated cost of the inventory on May 31.

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Question 9

Nonmonetary exchange Athens Inc.exchanged machinery with an appraised value of $1,170,000, a recorded cost of $1,800,000 and accumulated depreciation of $900,000, for machinery that Sparta Corp.owns. Sparta's machinery has an appraised value of $1,140,000, a recorded cost of $2,160,000, and accumulated depreciation of $1,188,000.Sparta also gave Athens $30,000 in the exchange. Assume depreciation has been updated to the date of exchange. Instructions
a)Prepare the entries on both companies' books assuming that the transaction has
commercial substance.
b)Prepare the entries on both companies' books assuming that the transaction lacks
commercial substance.

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Question 10

Accounting for purchase discounts Texas Corp.purchased merchandise during 2014 on credit for $200,000; terms 2/10, n/30.All of the gross liability except $30,000 was paid within the discount period.The remainder was paid within the 30-day term.At the end of the annual accounting period, December 31, 2014, 90% of the merchandise had been sold and 10% remained in inventory.The company uses the periodic inventory system. Instructions
a)Assuming that the net method is used for recording purchases, prepare the entries for the
purchase and two subsequent payments.
b)What dollar amounts should be reported for the ending inventory and cost of goods sold
Inventory 8 - 49
under the (1)net method and (2)gross method? Assume that there was no beginning
inventory.

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Question 11

Asset exchange - no commercial substance Syria Corp.exchanged Building 24, which has an appraised value of $1,700,000, a cost of $2,800,000 and accumulated depreciation of $1,300,000, for Building M which belongs to Russia Ltd.Building M has an appraised value of $1,620,000, a cost of $3,100,000, and accumulated Depreciation of $1,750,000.Russia paid Syria the difference between the appraised values of the two buildings.Assume depreciation has been updated to the date of exchange. Instructions Prepare the entries on both companies' books, assuming the buildings are similar assets.

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Question 12

Asset exchange with commercial substance In 2015, Malawi Inc.exchanged equipment for two delivery trucks.The equipment had been purchased for $95,000 ten years ago and has since been fully depreciated.While the equipment was recently appraised at $22,000, a reliable valuation for the trucks was not available.This transaction has commercial substance. Instructions Prepare the journal entry to record the exchange.

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Question 13

Capitalization of interest In February 2015, Quorum Corp.began the construction of a 10 story building.The construction is expected to be completed by January 2016.  Instructions 
a)Calculate the weighted-average accumulated expenditures for the year ended December
31, 2015.
b)Calculate the weighted-average capitalization rate on Quorum's general-purpose debt for
the year ended December 31, 2015.
c)Calculate the avoidable borrowing costs.
d)Calculate the amount of Quorum's borrowing costs that should be capitalized.

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Question 14

Asset exchange Arabia Inc.traded its fleet of rental cars for a new fleet.Two thirds of the old fleet's original cost of $375,000 had been depreciated.The new fleet is valued at $500,000 and Arabia was required to make a cash payment of $400,000. Instructions Prepare the required entr(ies)to record the exchange.

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Question 15

Revaluation model Mongolia Inc.owns equipment that it purchased on January 1, 2015 for $4 Million. The following additional information is available: Dec 31, 2015 - Book value (after recording 2015 depreciation): $3,600,000 Dec 31, 2015 - Fair value: $4,100,000 The company uses the revaluation model (asset adjustment method)to account for its property, plant and equipment. Instructions Assuming the entry for the current year's depreciation has already been recorded, prepare the entr(ies)to adjust the asset's carrying amount to fair value.

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Question 16

Asset exchanges Bahrain Corporation follows a policy of a 10% depreciation charge per year on machinery and a 5% depreciation charge per year on buildings. The following transactions occurred in 2014:  Instructions Prepare all appropriate journal entries for Bahrain Corporation for the above dates.

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Question 17

Gross profit method In the early morning of January 1, 2015, Minnesota Corp.'s inventory was destroyed by fire.The following information was available for calendar 2014:  Minnesota's gross profit on sales has averaged 35% for several years. Inventory 8 - 51 Instructions 
a)Calculate the estimated cost of the inventory destroyed.
b)Prepare entries at December 31, 2014 to close the sales and merchandise accounts.

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Question 18

Componentization Explain the concept of componentization as it applies to the recognition of PP&E assets.

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Question 19

Application of the fair value model On January 20, 2015, Trail Corp.purchased a luxury apartment complex in British Columbia for  Instructions Prepare all required journal entries for 2015, 2016, and 2017.

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Question 20

Non-interest bearing note Togo Auto purchased several trucks by issuing a $40,000, 4 year, non interest bearing note to Rabat Motors.The market interest rate for this type of transaction is 8%. Property, Plant, and Equipment: Accounting Model Basics 10 - 29 Instructions Prepare the journal entry to record the purchase of these trucks.

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Quiz 1: Intermediate Accounting Volume 1

Costs included in assets Burkina Ltd.is expanding its operations.Due to the expansion, they incurred the following costs during the fiscal period when they constructed a new factory: Instructions Which of these costs should be included in the cost of the new factory?

Asset exchanges Bahrain Corporation follows a policy of a 10% depreciation charge per year on machinery and a 5% depreciation charge per year on buildings. The following transactions occurred in 2014: Instructions Prepare all appropriate journal entries for Bahrain Corporation for the above dates.

Componentization Explain the concept of componentization as it applies to the recognition of PP&E assets.

Application of the fair value model On January 20, 2015, Trail Corp.purchased a luxury apartment complex in British Columbia for Instructions Prepare all required journal entries for 2015, 2016, and 2017.