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HOMEWORK - Summer 2017 - ACT 3391

 

A.      Complete assignments using some type of computer software program, e.g., Microsoft Word, Excel.

B.      You will NOT receive ANY CREDIT FOR LATE HOMEWORK.

C.      When completing your homework assignments DO NOT use abbreviations.

D.      As discussed during class, you can work on these homework assignments in groups or as an individual.

E.      For ANY question that includes the phrase “Per our textbook”, make sure you indicate the textbook page number in which you got the answer.

F.       For ANY problem involving a calculation, CLEARLY SHOW HOW you performed the calculation.

G.      For ANY problem involving an entry, CLEARLY identify EACH account that you debited and EACH account that you credited as either a(an):

1)       Asset (includes contra-assets)                                          You can abbreviate with an A

2)       Liability (includes contra-liabilities)                            You can abbreviate with an L

3)       Equity (includes contra-equities)                                   You can abbreviate with an EQ

4)       Revenue (includes contra-revenues AND gains)         You can abbreviate with an R

5)       Expense (includes losses)                                  You can abbreviate with an EX

For example, if you make the following entry:

Cash                                       $100                                       Place an “A” to the left of “Cash”

                Sales revenue                      $100                       Place an “R” to the left of “Sales Revenue”

Thus, your final answer would look like this:

A             Cash                                       $100                                      

R                             Sales revenue                      $100                      

 

59.     (4 points) Wilson Service Company was incorporated on January 2, 2016. Wilson began its operations on August 15, 2016. During the period 01-02-16 to 08-15-16, Wilson entered into the following transactions:

a.        Incurred $100,000 of legal fees related to corporate organization.

b.        Purchased land for $4,650,000. Wilson’s corporate office building will sit on this land.

c.        Incurred $50,000 of legal fees for a title search related to the land.

d.        Paid $400,000 to level the land, $750,000 to remove toxic materials from the land, and $15,000 to tear down an old building on the land.

e.        Sold salvage from the old building for $45,000.

f.         Paid architect's fees of $100,000 for the office building.

g.        In erecting the building, incurred $200,000 of excavation costs, $20,000,000 of construction costs, and $1,250,000 of capitalized interest costs.

h.        Purchased for $36,000 a one-year insurance premium covering the office building.

 

·         What is the balance in Wilson’s land account?

·         What is the balance in Wilson’s building account?

 

 

60.     (1.5 points) Greg, a publicly-traded company, acquired a machine from Marsha. Greg gave Marsha 750 shares of Greg’s $1 par value common stock. At that time, Greg’s stock had a market value of $50 per share. Prepare the entry Greg should make to record its acquisition of the machine.

 

 

61.     (4 points) On 12-31-15, Acme purchased a machine. Acme signed a $950,000 zero-interest bearing note. The note is payable in full on 12-31-18. Assume an acceptable interest rate on similar notes was 5%. In addition, Acme paid on 12-31-15, $37,500 of sales tax on the purchase AND $50,000 of installation costs. Acme uses straight-line depreciation, assumes $0 salvage value, and an estimated useful life of 10 years. Prepare the entries Acme should make on:

a.        12-31-15.

b.        12-31-16.

c.        12-31-17.

d.        12-31-18.

 

 

62.     (5 points)  B constructed a warehouse for its own use. B started construction on January 1 and completed construction on December 31.  Construction expenditures were as follows:

·         $1,000,000 on January 1

·         $900,000 on March 31

·         $600,000 on September 30

·         $240,000 on December 1

During the entire year B had the following outstanding notes payable:

·         A 4.00%, 5-year $5,000,000 note payable

·         A 3.25%, 8-year $9,000,000 note payable

 

a)        What were B’s total interest costs for the year?

b)       What amount of interest should B capitalize on this construction project?

c)        What was B’s interest expense for the year?

 

When necessary, round any interest rate as follows:  4.873% = 4.9% while 3.314% = 3.3%.

 

63.     (2 points) For each of the items below, prepare the appropriate entry.

1.        A motor in one of Excel’s trucks was overhauled at a cost of $4,200. Excel expects this overhaul will make the truck operated on a more efficient basis, i.e., the truck will get better gas mileage.

 

2.        James, a maintenance worker at Excel, spent the entire week unloading and setting up a new machine in Excel’s factory.  James’ earned $2,000 that week, however, James will not be paid until the following week.  (Do not worry about any withholdings from James’ pay.)

 

3.        Excel incurred and paid $1,600 for ordinary repairs on one of its machines.

 

4.        Excel incurred and paid $4,000 for adjustments to one of its machines. The adjustments will increase the useful life of the machine.

 

 

64.     (11 points)  Diane’s balance sheets as of December 31, 2013 and 2014 are presented below:

                                                                                                2013                                        2014      

 

Cash                                                                                        $   500,000                              $   550,000

Accounts receivable                                                                     295,571                                   220,281

Long-term notes receivable                                                            60,000                                     75,000

Discount on long-term notes receivable                                  (           571)                            (           281)

Property, plant, and equipment – at cost                                       400,000                                   740,000

Accumulated depreciation                                                       (    155,000)                            (    185,000)

TOTAL ASSETS                                                                   $1,100,000                              $1,400,000

 

Accounts payable                                                                    $   200,000                              $   200,000

Accrued liabilities                                                                         100,000                                     82,000

Unearned revenues                                                                         65,000                                     18,000

Long-term debt                                                                             210,000                                   200,000

Common stock, $1 par value                                                          50,000                                     75,000

Additional paid-in-capital                                                             250,000                                   325,000

Retained earnings                                                                         225,000                                   500,000

TOTAL LIABILITIES & SE                                                  $1,100,000                              $1,400,000

 

SELECTED OTHER INFORMATION:

1.        During 2014, Diane reported net income of $400,000.

2.        During 2014, Diane declared and distributed a cash dividend.

3.        During 2014, Diane issued, in exchange for cash, 25,000 additional shares of her common stock.

4.        During 2014, Diane both borrowed on a long-term basis and paid back some long-term debt.  During 2014, Diane paid back $160,000.

5.        During 2014, Diane both bought and sold some PP&E. Diane’s PP&E sales related to two items:

a.        A machine. When Diane purchased the machine in 2008, she paid $15,000. At the time of the sale, the machine had a book value of $7,000. Diane sold the machine for $12,000.

b.        A building. When Diane purchased the building in 2000, she paid $150,000. Diane sold the building for $130,000. As a result of the sale, Diane recorded a gain of $75,000.

6.        On January 1, 2012, Diane provided services to a customer in exchange for a $60,000, 4% note receivable. Diane will collect the note principal in full on January 1, 2015. Diane will collect interest on the note every December 31 starting December 31, 2012. The market rate of interest at the time of the sale was 5%.

7.        On December 31, 2014, Diane provided services to a customer in exchange for a $15,000, 3.5% note receivable. Diane will collect the note principal in full on December 31, 2016. Diane will collect interest on the note every December 31 starting December 31, 2015. The market rate of interest at the time of the sale was 4.5%.

8.        During 2014, Diane did NOT enter into any non-cash investing or financing activities.

 

Prepare Diane’s Statement of Cash Flows (in good form) for the year ended December 31, 2014.  Diane uses the indirect method.

65.     (4 points)  Leia Company purchased a machine for $5,000,000 on January 1, 2014. Leia estimates the machine will have a ten- year useful life, salvage value of $100,000, production capability of 2,500,000 units of a product called Hoosier, and 25,000 working hours. During 2014, Leia used the machine for 2,000 hours and the machine produced 200,000 units. Compute Leia’s depreciation for 2014 assuming she uses the following depreciation methods:

a.        Straight-line

b.        Units-of-production

c.        Working hours

d.        Sum-of-the-years’ digits

e.        Double-declining balance

 

 

66.     (3 points)  Evan Company purchased a machine for $500,000 on August 1, 2010.  Evan estimates the machine will have a five-year useful life and a salvage value of $50,000. Evan calculates depreciation for a year to the nearest full month.  Compute Evan’s depreciation for 2012 assuming he uses the following depreciation methods:

a)        Sum-of-the-years’ digits

b)       Double-declining balance

 

 

67.     (1.5 points)  Shannon owns a machine it purchased for $800,000. As of 12-31-12, the machine’s accumulated depreciation balance is $700,000. Because of changes in its operating environment, Shannon is concerned that her machine has become impaired. As of 12-31-12, Shannon estimates the machine will generate $120,000 of future net cash inflows. As of 12-31-12, the fair value of Shannon’s machine is $54,000. Prepare the entry, if any, Shannon should make to reflect any impairment as of 12-31-12.

 

 

68.     (1.5 points)  Shannon owns a machine it purchased for $20,000,000. As of 12-31-12, the machine’s book value is $3,800,000. Because of changes in its operating environment, Shannon is concerned that her machine has become impaired. As of 12-31-12, Shannon estimates the machine will generate $3,000,000 of future net cash inflows. As of 12-31-12, the fair value of Shannon’s machine is $2,500,000. Prepare the entry, if any, Shannon should make to reflect any impairment as of 12-31-12.

 

 

69.     (1 point)  In 2015, Evan Company spent $275,000 for “goodwill visits” to its key customers. The purpose of the visits was to build on and enhance the solid working-relationship Evan already has with these customers. Prepare the entry Evan should make to reflect the $275,000 he spent.

 

 

70.     (3 points) During 2010, Salem Company spent $300,000 in research and development costs. As a result, Salem patented a new product. On November 1, Salem incurred $25,000 of legal costs related to its new patent. The patent had a ten-year legal life.

a.        Prepare the entries Salem made in 2010 and 2011 related to the patent transactions.

 

b.        On June 30, 2012, Salem spent $10,000 to successfully defend its patent rights. Prepare the entries Salem made in 2012 related to the patent transactions.