- •108. On July 1, 2006, Jekel & Hyde Inc. Purchased land and incurred other costs relative to the construction of a new warehouse. A summary of economic activities is listed below:
- •Required:
- •Indicate the accounts that would be affected by the above transactions and the resulting balance in each account. Apply the interest on the construction loan to the cost of the building only.
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •In its 2004 annual report to shareholders, Boston Beer Co. Disclosed the following footnote:
- •E. Property, Plant and Equipment
- •128. Use a t- account to show the balances and changes during 2004 in Boston Beer's: Property, Plant and Equipment account and its Accumulated depreciation—Property, Plant & equipment account.
- •Required:
- •130. Use a t- account to show the balances and changes during 2004 in Plank Breweries:
- •Note 4 Property, Plant and Equipment
- •100. A summary of Klugman Company's December 31, 2006, accounts receivable aging schedule is presented below along with the estimated percent uncollectible for each age group:
- •101. A summary of London Fashion's December 31, 2006, accounts receivable aging schedule is presented below along with the estimated percent uncollectible for each age group:
- •114. Is there any evidence in Winchester's disclosures above that are consistent with earnings management?
- •Required:
- •121. Is there any evidence in hp's disclosures above that are consistent with earnings management?
- •100. Required:
- •101. Required:
- •104. Required:
- •105. Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •127. In its 2004 annual report to shareholders, Martin Marietta Materials, Inc. Included the following in its financial statement footnotes:
- •Note e: property, plant and equipment, net
- •In another footnote, the company reported:
Required:
Prepare the journal entry to record the exchange.
Answer:
|
Equipment - new |
58,500 |
|
|
|
Cash |
12,000 |
|
|
|
Accumulated depreciation |
21,700 |
|
|
|
Equipment - old |
|
|
76,200 |
|
Gain |
|
|
16,000 |
|
|
|
|
|
Learning Objective: 6 Level of Learning: 3
124. Agasse Industries took out a $1,500,000, 8% construction loan on January 1, 2006, to build a new production facility. Construction started on April 1. Agasse made payments to the general contractor of $400,000 on June 30, $900,000 on August 31, and $500,000 on December 31.
Required:
Compute the amount of interest that Agasse would capitalize in 2006.
Answer:
|
|
Expenditures |
|
|
6/30 |
$400,000 x 6/12= |
$200,000 |
|
8/31 |
900,000 x 4/12= |
300,000 |
|
Average accumulated expenditures for 2006 |
|
$500,000 |
|
|
|
|
|
Interest capitalized in 2006 = $500,000 x 8% = |
$40,000 |
|
|
|
|
|
Learning Objective: 6 Level of Learning: 3
125. Montgomery Industries spent $600,000 in 2005 on a construction project to build a library. Montgomery also capitalized $30,000 of interest on the project in 2005. Montgomery financed 100% of the construction with a 10% construction loan. The project was completed on September 30, 2006. Additional expenditures in 2006 were as follows:
|
Feb. 28 |
90,000 |
|
Apr. 30 |
180,000 |
|
Jul. 1 |
36,000 |
|
Sept. 30 |
64,000 |
Required:
Determine the completed cost of the library. Show well labeled supporting computations.
Answer:
Expenditures
|
Accumulated expenditures 12/31/2005 |
$630,000 |
x 9/9 |
= |
$ 630,000 |
|
2/28/2006 |
90,000 |
x 7/9 |
= |
70,000 |
|
4/30/2006 |
180,000 |
x 5/9 |
= |
100,000 |
|
7/1/2006 |
36,000 |
x 3/9 |
= |
12,000 |
|
9/30/2006 |
64,000 |
x 0/9 |
= |
0 |
|
Average accumulated expenditures for 2006 |
|
|
|
$812,000 |
|
|
|
|
|
|
|
Interest capitalized in 2006 ($812,000 x 10% x 9/12) |
60,900 |
|
|
|
|
Completed cost of the library |
$1,060,900 |
|
|
|
|
|
|
|
|
|
Learning Objective: 6 Level of Learning: 3
126. During the current year, Peterson Data Corporation purchased all of the outstanding common stock of Junior Jackson Inc. (JJI), paying $36 million in cash. Peterson recorded the assets acquired as follows:
|
Accounts receivable |
$2,500,000 |
|
Inventory |
9,000,000 |
|
Property, plant, and equipment |
25,500,000 |
|
Goodwill |
6,000,000 |
The book value of JJI's assets and owners' equity before the acquisition were $22 million and $18 million, respectively.
Required: Compute the fair value of JJI's liabilities that Peterson incurred in the acquisition.
Answer:
Fair value of assets – Fair value of liabilities = Cash paid
Therefore, Fair value of liabilities = Fair value of assets – Cash paid = $43 million – 36 million
= $7 million.
Learning Objective: 7 Level of Learning: 3
127. During the current year, Compton Crate Corporation purchased all of the outstanding common stock of Little Lacy Ltd. (LLL), paying $60 million in cash. Compton recorded the assets acquired as follows:
|
Accounts receivable |
$5,500,000 |
|
Inventory |
18,000,000 |
|
Property, plant, and equipment |
45,500,000 |
|
Goodwill |
22,000,000 |
The book value of LLL's assets and owners' equity before the acquisition were $50 million and $30 million, respectively.
Required: Compute the fair value of LLL's liabilities that Compton incurred in the acquisition.
Answer:
Fair value of assets – Fair value of liabilities = Cash paid
Therefore, Fair value of liabilities = Fair value of assets – Cash paid = $91 million – 60 million
= $31 million.
Learning Objective: 7 Level of Learning: 3
Use the following to answer questions 128-129: