The following financial information is obtained regarding Ellish Company:
12/31/19 12/31/18
Current Assets:
Cash 180,000 46,000
Accounts Receivable (net) 140,000 90.000
Merchandise Inventory 130,000 150,000
Prepaid Expenses 7,000 2,000
Supplies 3,000 4,000
Non-Current Assets:
Land 100,000 -0-
Plant Assets 200,000 200,000
Accumulated Depreciation (60,000) (40,000)
Total Assets 700,000 452,000
Current Liabilities:
Accounts Payable 25,000 33,000
Accrued Liabilities 15,000 9,000
Non-current Liabilities:
Notes Payable 100,000 20,000
Total Liabilities: 140,000 62,000
Common Stock ($1 Par Value) 200,000 140,000
Common Stock-APIC 50,000 10,000
Retained Earnings 310,000 240,000
Total Stockholders’ Equity 560,000 390,000
Additional Data:
A) 2019 Net Income was $170,000
B) Land was acquired by taking out a Notes Payable for $90,000 and paying Cash for the balance .
C) All Common Stock was issued for Cash.
REQUIRED:
Prepare the Statement of Cash Flow for Ellish Company under the Indirect Method.
In: Accounting
Mills Corporation acquired as a long-term investment $225 million of 8% bonds, dated July 1, on July 1, 2021. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Mills paid $250 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $240 million.
Required:
1. & 2. Prepare the journal entry to record Mills’ investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the effective (market) rate.
3. At what amount will Mills report its investment in the December 31, 2021, balance sheet?
4. Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2, 2022, for $266 million. Prepare the journal entries required on the date of sale.
PLEASE HELP WRITE OUT JOURNAL ENTRIES WITH WORK
In: Accounting
Which of the following statements is true about asset retirement obligations related to natural resources that have been developed:
a) GAAP requires that an existing legal obligation associated with the retirement of a tangible, long-lived asset be recognized as a liability and measured at fair value.
b) Asset retirement obligations may arise from legal obligations associated with the retirement of any intangible asset.
c) A retirement obligation may only arise at the inception of an asset's life, but never during its operating life.
d) GAAP requires the company to recognize the fair value of an asset retirement obligation when it is incurred.
Which of the following statements is incorrect?
a) The acquisition of assets through donation is credited to revenue.
b) When a company loses a patent infringement suit and pays the plaintiff $9,000, the payment of $9,000 should be expensed as incurred.
c) If an exchange of nonmonetary assets lack commercial substance, a gain can never be recorded even when cash is received through this exchange.
d) The initial valuation of an asset acquired with a $40,000 noninterest-bearing note that is payable in two years is less than $40,000.
In: Accounting
A manager is explaining to a staff auditor how various situations might affect the audit opinion. For each of the following scenarios, identify the appropriate reporting option by matching the scenario with the opinion type from the list provided. Assume that any financial statement effect is material, unless otherwise noted and that US auditing standards are followed.
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The scope of the auditor’s examination is affected by conditions that preclude the application of a necessary auditing procedure it IS very material and pervasive to the financial statements. |
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The financial statements are affected by an alternative accounting treatment that is a departure from GAAP. The use of GAAP would cause the statements to be misleading. |
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The company changed its method of accounting for long-term construction contracts, but management was justified in making the change. The new method is acceptable under GAAP, and the change was accounted or prospectively. |
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The company changed its method of valuing inventory, but management did not have appropriate justification for the change. The change is properly disclosed in the financial statements but is material and pervasive to the overall financial statements. |
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In: Accounting
On June 10, 20X8, Game Corporation acquired 70 percent of Amber Company’s common stock. The fair value of the noncontrolling interest was $24,000 on that date. Summarized balance sheet data for the two companies immediately after the stock purchase are as follows:
|
Game Corp. |
Amber Company |
|||||||
|
Item |
Book Value |
Book Value |
Fair Value |
|||||
|
Cash |
$ |
27,800 |
$ |
9,000 |
$ |
9,000 |
||
|
Accounts Receivable |
38,000 |
14,000 |
14,000 |
|||||
|
Inventory |
89,000 |
24,000 |
29,000 |
|||||
|
Buildings & Equipment (net) |
126,000 |
54,000 |
74,000 |
|||||
|
Investment in Amber Stock |
56,000 |
|||||||
|
Total |
$ |
336,800 |
$ |
101,000 |
$ |
126,000 |
||
|
Accounts Payable |
$ |
16,000 |
$ |
2,000 |
2,000 |
|||
|
Bonds Payable |
206,800 |
44,000 |
44,000 |
|||||
|
Common Stock |
47,000 |
19,000 |
||||||
|
Retained Earnings |
67,000 |
36,000 |
||||||
|
|
||||||||
|
Total |
$ |
336,800 |
$ |
101,000 |
$ |
46,000 |
||
a. Record the consolidation entries required to prepare a consolidated balance sheet immediately after the purchase of Amber Company shares. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1. Record the basic consolidation entry.
2. Record the excess value (differential) reclassification entry.
In: Accounting
Tanner-UNF Corporation acquired as a long-term investment $240
million of 6% bonds, dated July 1, on July 1, 2021. Company
management has the positive intent and ability to hold the bonds
until maturity. The market interest rate (yield) was 8% for bonds
of similar risk and maturity. Tanner-UNF paid $200 million for the
bonds. The company will receive interest semiannually on June 30
and December 31. As a result of changing market conditions, the
fair value of the bonds at December 31, 2021, was $210
million.
Required:
1. & 2. Prepare the journal entry to record
Tanner-UNF’s investment in the bonds on July 1, 2021 and interest
on December 31, 2021, at the effective (market) rate.
3. At what amount will Tanner-UNF report its
investment in the December 31, 2021, balance sheet?
4. Suppose Moody’s bond rating agency downgraded
the risk rating of the bonds motivating Tanner-UNF to sell the
investment on January 2, 2022, for $190 million. Prepare the
journal entry to record the sale.
In: Accounting
Tanner-UNF Corporation acquired as a long-term investment $200
million of 7% bonds, dated July 1, on July 1, 2018. The market
interest rate (yield) was 9% for bonds of similar risk and
maturity. Tanner-UNF paid $160 million for the bonds. The company
will receive interest semiannually on June 30 and December 31.
Company management is holding the bonds in its trading portfolio.
As a result of changing market conditions, the fair value of the
bonds at December 31, 2018, was $170 million.
Required:
1. & 2. Prepare the journal entry to record
Tanner-UNF’s investment in the bonds on July 1, 2018 and interest
on December 31, 2018, at the effective (market) rate.
3. Prepare any additional journal entry necessary
for Tanner-UNF to report its investment in the December 31, 2018,
balance sheet.
4. Suppose Moody’s bond rating agency downgraded
the risk rating of the bonds motivating Tanner-UNF to sell the
investment on January 2, 2019, for $150 million. Prepare the
journal entries to record the sale.
In: Accounting
Tanner-UNF Corporation acquired as a long-term investment $350
million of 7.0% bonds, dated July 1, on July 1, 2021. Company
management has the positive intent and ability to hold the bonds
until maturity. The market interest rate (yield) was 8% for bonds
of similar risk and maturity. Tanner-UNF paid $320.0 million for
the bonds. The company will receive interest semiannually on June
30 and December 31. As a result of changing market conditions, the
fair value of the bonds at December 31, 2021, was $330.0
million.
Required:
1. & 2. Prepare the journal entry to record
Tanner-UNF’s investment in the bonds on July 1, 2021 and interest
on December 31, 2021, at the effective (market) rate.
3. At what amount will Tanner-UNF report its
investment in the December 31, 2021, balance sheet?
4. Suppose Moody’s bond rating agency downgraded
the risk rating of the bonds motivating Tanner-UNF to sell the
investment on January 2, 2022, for $310.0 million. Prepare the
journal entry to record the sale.
In: Accounting
Tanner-UNF Corporation acquired as a long-term investment $350
million of 7.0% bonds, dated July 1, on July 1, 2018. Company
management has the positive intent and ability to hold the bonds
until maturity. The market interest rate (yield) was 8% for bonds
of similar risk and maturity. Tanner-UNF paid $320.0 million for
the bonds. The company will receive interest semiannually on June
30 and December 31. As a result of changing market conditions, the
fair value of the bonds at December 31, 2018, was $330.0
million.
Required:
1. & 2. Prepare the journal entry to record
Tanner-UNF’s investment in the bonds on July 1, 2018 and interest
on December 31, 2018, at the effective (market) rate.
3. At what amount will Tanner-UNF report its
investment in the December 31, 2018, balance sheet?
4. Suppose Moody’s bond rating agency downgraded
the risk rating of the bonds motivating Tanner-UNF to sell the
investment on January 2, 2019, for $310.0 million. Prepare the
journal entry to record the sale.
In: Accounting
Tanner-UNF Corporation acquired as a long-term investment $260 million of 7% bonds, dated July 1, on July 1, 2018. The market interest rate (yield) was 9% for bonds of similar risk and maturity. Tanner-UNF paid $220 million for the bonds. The company will receive interest semiannually on June 30 and December 31. Company management is holding the bonds in its trading portfolio. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $230 million. Required: 1. & 2. Prepare the journal entry to record Tanner-UNF’s investment in the bonds on July 1, 2018 and interest on December 31, 2018, at the effective (market) rate. 3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2018, balance sheet. 4. Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2019, for $200 million. Prepare the journal entries to record the sale.
In: Accounting