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ACC 423 Final Exam Guide (New 2019, With
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Week 5 Final Exam
CPA Question 01
CPA Question 02
CPA Question 05
Question 29

Brief Exercise 15-4
Exercise 15-1
CPA Question 04
CPA Question 06
Brief Exercise 16-2
Brief Exercise 16-7
Brief Exercise 17-1
Brief Exercise 17-9
Brief Exercise 17-13

Exercise 17-3
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Exercise 17-10
Question 8
Brief Exercise 19-3
Exercise 19-2
CPA Question 08
CPA Question 02

Brief Exercise 20-8
Exercise 20-1
Exercise 20-5
Exercise 20-12
CPA Question 03
Question is selected.
Exercise 22-19
CPA Question 01

On September 1, 2017, Hyde Corp., a newly formed company, had the
following stock issued and outstanding:
• Common stock, no par, $1 stated value, 5,000 shares originally issued
at $15 per share.
• Preferred stock, $10 par value, 1,500 shares originally issued for $25
per share.
Hyde's September 1, 2017 statement of stockholders' equity should
report
Common stock
Preferred stock
Additional Paid-in capital
CPA Question 02
Beck Corp. issued 200,000 shares of common stock when it began
operations in year 1 and issued an additional 100,000 shares in year 2.
Beck also issued preferred stock convertible to 100,000 shares of
common stock. In year 3, Beck purchased 75,000 shares of its common
stock and held it in Treasury. At December 31, year 3, how many shares
of Beck's common stock were outstanding?

CPA Question 05
Jones Co. had 50,000 shares of $5 par value common stock outstanding
at January 1. On August 1, Jones declared a 5% stock dividend followed
by a two-for-one stock split on September 1. What amount should Jones
report as common shares outstanding at December 31?
Question 29
Grouper Corp. had $100,000 of 7%, $20 par value preferred stock and
12,000 shares of $25 par value common stock outstanding throughout
2017.
Assuming that total dividends declared in 2017 were $64,000, and that
the preferred stock is not cumulative but is fully participating, common
stockholders should receive 2017 dividends of what amount?
Assuming that total dividends declared in 2017 were $64,000, and that
the preferred stock is fully participating and cumulative with preferred
dividends in arrears for 2016, preferred stockholders should receive
2017 dividends totaling what amount?
Assuming that total dividends declared in 2017 were $30,000, that the
preferred stock is cumulative, nonparticipating, and was issued on
January 1, 2016, and that $5,000 of preferred dividends were declared
and paid in 2016, the common stockholders should receive 2017
dividends totaling what amount?

Brief Exercise 15-4
Kingbird Corporation issued 384 shares of $10 par value common stock
and 144 shares of $50 par value preferred stock for a lump sum of
$19,872. The common stock has a market price of $20 per share, and the
preferred stock has a market price of $100 per share.
Prepare the journal entry to record the issuance.
Exercise 15-1
During its first year of operations, Metlock Corporation had the
following transactions pertaining to its common stock.
Jan. 10
Issued 80,500 shares for cash at $6 per share.
Mar. 1
Issued 5,000 shares to attorneys in payment of a bill for $37,700 for
services rendered in helping the company to incorporate.
July 1
Sept. 1

(a)
Prepare the journal entries for these transactions, assuming that the
common stock has a par value of $5 per share.
(b)
Prepare the journal entries for these transactions, assuming that the
common stock is no-par with a stated value of $2 per share.
CPA Question 04
A restricted stock award was granted at the beginning of 2015 calling for
3,000 shares of stock to be awarded to executives at the beginning of
2019. The fair value of one option was $20 at grant date. During 2017,
100 shares were forfeited because an executive left the firm.
What amount of compensation expense is recognized for 2017?
CPA Question 06
A company had the following outstanding shares as of January 1, year 2:
Preferred stock, $60 par, 4%, cumulative
10,000 shares

Common stock, $3 par
50,000 shares
On April 1, year 2, the company sold 8,000 shares of previously
unissued common stock. No dividends were in arrears on January 1, year
2, and no dividends were declared or paid during year 2. Net income for
year 2 totaled $236,000. What amount is basic earnings per share for the
year ended December 31, year 2?
Brief Exercise 16-2
Oriole Corporation has outstanding 2,100 $1,000 bonds, each
convertible into 60 shares of $10 par value common stock. The bonds
are converted on December 31, 2017, when the unamortized discount is
$26,200 and the market price of the stock is $21 per share.
Record the conversion using the book value approach.
Brief Exercise 16-7
On January 1, 2017, Larkspur Corporation granted 2,000 shares of
restricted $5 par value common stock to executives. The market price
(fair value) of the stock is $66 per share on the date of grant. The period
of benefit is 2 years.
Prepare Larkspur’s journal entries for January 1, 2017, and December
31, 2017 and 2018.

Brief Exercise 17-1
Teal Company purchased, on January 1, 2017, as a held-to-maturity
investment, $81,000 of the 8%, 5-year bonds of Chester Corporation for
$74,859, which provides an 10% return.
Prepare Teal’s journal entries for (a) the purchase of the investment, and
(b) the receipt of annual interest and discount amortization. Assume
effective-interest amortization is used.
BE 17-3
Brief Exercise 17-9
The following information relates to Culver Co. for the year ended
December 31, 2017: net income 1,321 million; unrealized holding loss
of $11.7 million related to available-for-sale debt securities during the
year; accumulated other comprehensive income of $56.3 million on
December 31, 2016. Assuming no other changes in accumulated other
comprehensive income.
Determine (a) other comprehensive income for 2017, (b) comprehensive
income for 2017, and (c) accumulated other comprehensive income at
December 31, 2017

Exercise 17-3
On January 1, 2017, Carla Company purchased 8% bonds having a
maturity value of $360,000, for $390,329.57. The bonds provide the
bondholders with a 6% yield. They are dated January 1, 2017, and
mature January 1, 2022, with interest receivable January 1 of each year.
Carla Company uses the effective-interest method to allocate
unamortized discount or premium. The bonds are classified in the held-
to-maturity category.
Question 8
Skysong financial income for Lake Inc. is $290,000, and its taxable
income is $100,000 for 2018. Its only temporary difference at the end of
the period relates to a $100,000 difference due to excess depreciation for
tax purposes. If the tax rate is 39% for all periods, compute the amount
of income tax expense to report in 2018. No deferred income taxes
existed at the beginning of the year.
Brief Exercise 19-3

Marigold Corporation began operations in 2017 and reported pretax
financial income of $206,000 for the year. Marigold’s tax depreciation
exceeded its book depreciation by $33,000. Marigold’s tax rate for 2017
and years thereafter is 30%. Assume this is the only difference between
Marigold’s pretax financial income and taxable income.
Prepare the journal entry to record the income tax expense, deferred
income taxes, and income taxes payable
Blossom Corporation had the following tax information.
Year
Taxable Income
Tax Rate
Taxes Paid
2015
$306,000

34%
$104,040
2016
324,000
29%
93,960
2017
393,000
29%
113,970
In 2018, Blossom suffered a net operating loss of $488,000, which it
elected to carry back. The 2018 enacted tax rate is 28%.

Prepare Blossom’s entry to record the effect of the loss carryback.
Exercise 19-2
The following information is available for Pronghorn Corporation for
2016 (its first year of operations).
1.
Excess of tax depreciation over book depreciation, $40,800. This
$40,800 difference will reverse equally over the years 2017–2020.
2.
Deferral, for book purposes, of $21,400 of rent received in advance. The
rent will be recognized in 2017.
3.
Pretax financial income, $319,400.
4.
Tax rate for all years, 30%.

CPA Question 08
Brass Co. reported income before income tax expense of $60,000 for
2017. Brass had no permanent or temporary timing differences for tax
purposes. Brass has an effective tax rate of 30% and a $40,000 net
operating loss carry-forward from 2016. What is the maximum income
tax benefit that Brass can realize from the loss carry-forward for 2017?
Brief Exercise 20-8
Windsor Corporation has the following balances at December 31, 2017.
Projected benefit obligation
$2,705,000
Plan assets at fair value
2,099,000
Accumulated OCI (PSC)
995,000
What is the amount for pension liability that should be reported on
Windsor's balance sheet at December 31, 2017?

Exercise 20-1
The following information is available for the pension plan of Marigold
Company for the year 2017.
Actual and expected return on plan assets
$ 16,300
Benefits paid to retirees
38,400
Contributions (funding)
94,400
Interest/discount rate
11
%
Prior service cost amortization
8,800

Projected benefit obligation, January 1, 2017
510,000
Service cost
63,300
Exercise 20-12
Shamrock Company received the following selected information from
its pension plan trustee concerning the operation of the company’s
defined benefit pension plan for the year ended December 31, 2017.
January 1, 2017
December 31, 2017
Projected benefit obligation
$1,499,000

$1,527,000
Market-related and fair value of plan assets
802,000
1,127,200
Accumulated benefit obligation
1,622,000
1,742,500
Accumulated OCI (G/L)—Net gain
0
(199,900
)
The service cost component of pension expense for employee services
rendered in the current year amounted to $78,000 and the amortization
of prior service cost was $120,500. The company’s actual funding

(contributions) of the plan in 2017 amounted to $245,000. The expected
return on plan assets and the actual rate were both 10%; the
interest/discount (settlement) rate was 10%. Accumulated other
comprehensive income (PSC) had a balance of $1,205,000 on January 1,
2017. Assume no benefits paid in 2017.
CPA Question 03
Your answer has been saved and sent for grading. See Gradebook for
score details.
During 2017, Orca Corp. decided to change from the FIFO method of
inventory valuation to the weighted-average method. Inventory balances
under each method were as follows:
FIFO
Weighted-average
January 1, 2017
$71,000
$77,000

December 31, 2017
$79,000
$83,000
Orca's income tax rate is 30%.
In its 2017 financial statements, what amount should Orca report as the
cumulative effect of this accounting change?
Exercise 22-18
Pina Tool Company’s December 31 year-end financial statements
contained the following errors.
December 31, 2017
December 31, 2018
Ending inventory
$10,500 understated
$7,400 overstated

Depreciation expense
$2,100 understated
—
An insurance premium of $70,200 was prepaid in 2017 covering the
years 2017, 2018, and 2019. The entire amount was charged to expense
in 2017. In addition, on December 31, 2018, fully depreciated machinery
was sold for $13,500 cash, but the entry was not recorded until 2019.
There were no other errors during 2017 or 2018, and no corrections have
been made for any of the errors. (Ignore income tax considerations.)
Exercise 22-19
A partial trial balance of Bramble Corporation is as follows on
December 31, 2018.
Dr.
Cr.
Supplies
$2,600

Salaries and wages payable
$1,500
Interest Receivable
4,600
Prepaid Insurance
86,200
Unearned Rent
0
Interest Payable
14,100
Additional adjusting data:
1.
A physical count of supplies on hand on December 31, 2018, totaled
$1,100.

2.
Through oversight, the Salaries and Wages Payable account was not
changed during 2018. Accrued salaries and wages on December 31,
2018, amounted to $4,700.
3.
The Interest Receivable account was also left unchanged during 2018.
Accrued interest on investments amounts to $3,700 on December 31,
2018.
4.
The unexpired portions of the insurance policies totaled $68,300 as of
December 31, 2018.
5.
$26,500 was received on January 1, 2018, for the rent of a building for
both 2018 and 2019. The entire amount was credited to rent revenue.
6.
Depreciation on equipment for the year was erroneously recorded as
$5,200 rather than the correct figure of $52,000.
7.

A further review of depreciation calculations of prior years revealed that
equipment depreciation of $7,500 was not recorded. It was decided that
this oversight should be corrected by a prior period adjustment.
Exercise 22-5
Presented below are income statements prepared on a LIFO and FIFO
basis for Novak Company, which started operations on January 1, 2016.
The company presently uses the LIFO method of pricing its inventory
and has decided to switch to the FIFO method in 2017. The FIFO
income statement is computed in accordance with the requirements of
GAAP. Novak’s profit-sharing agreement with its employees indicates
that the company will pay employees 10% of income before profit-
sharing. Income taxes are ignored.
Question 18
In January 2017, installation costs of $5,800 on new machinery were
charged to Maintenance and Repairs Expense. Other costs of this
machinery of $29,000 were correctly recorded and have been
depreciated using the straight-line method with an estimated life of 10
years and no salvage value. At December 31, 2018, it is decided that the
machinery has a remaining useful life of 20 years, starting with January
1, 2018. What entries should be made in 2018 to correctly record
transactions related to machinery, assuming the machinery has no
salvage value? The books have not been closed for 2018 and
depreciation expense has not yet been recorded for 2018.
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ACC 423 Week 1 Coca-Cola and PepsiCo
Presentation
Create a 10- to 12-slide presentation that addresses each question within
the Comparative Analysis Case, pp. 824-825.
Click the Assignment Files tab to submit your assignment.
The Coca-Cola Company and PepsiCo, Inc. The financial statements of
Coca-Cola and PepsiCo are presented in Appendices C and D,
respectively. The companies' complete annual reports, including the
notes to the financial statements, are available online. Instructions Use
the companies' financial information to answer the following questions.
(a) What is the par or stated value of Coca-Cola's and PepsiCo's
common or capital stock?
(b) What percentage of authorized shares was issued by Coca-Cola at
December 31, 2014, and by PepsiCo at December 31, 2014?
(c) How many shares are held as treasury stock by Coca-Cola at
December 31, 2014, and by PepsiCo at December 31, 2014?
(d) How many Coca-Cola common shares are outstanding at December
31, 2014? How many PepsiCo shares of capital stock are outstanding at
December 31, 2014?
(e) What amounts of cash dividends per share were declared by Coca-
Cola and PepsiCo in 2014? What were the dollar amount effects of the
cash dividends on each company's stockholders' equity?

(f) What are Coca-Cola's and PepsiCo's return on common/capital
stockholders' equity for 2014 and 2013? Which company gets the higher
return on the equity of its shareholders?
(g) What are Coca-Cola's and PepsiCo's payout ratios for 2014? (h)What
was the market price range (high/low) for Coca-Cola's common stock
and PepsiCo's capital stock during the fourth quarter of 2014? Which
company's (Coca-Cola's or PepsiCo's) stock price increased more (%)
during 2014?
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ACC 423 Week 1 Discussion Question 1
Why do companies offer stock options? What is the experience of either
your organization or an organization that you are familiar with when it
comes to stock option compensation? Should stock option
compensation be included as an expense when calculating an
organization’s net income? Explain why or why not. If so, how should
the amount of expense be calculated?
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What are the differences between basic and diluted earnings per share?
What are the differences between the numerator and the denominator in
the basic and diluted earnings per share calculations? What actions can
an organization take in order to improve their earnings per share? What
is the experience of either your organization or an organization that you
are familiar with when it comes to any of these actions? As an investor,
do you evaluate a company as a potential investment using basic or
diluted earnings per share? Explain why.
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ACC 423 Week 1 DQ
hy do companies offer stock options? Should stock-option compensation
be included as an expense when calculating an organization's net
income? Explain why or why not. if so, how should the amount of
expense be calculated?
What is the experience of either your organization or an organization
that you are familiar with when it comes to stock option compensation?
Should stock option compensation be included as an expense when
calculating an organization’s net income? Explain why or why not. If so,
how should the amount of expense be calculated?
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ACC 423 Week 1 Wileyplus With Excel File New
Syllabus
This Tutorial contains Excel File which can be used for any Values
• Brief Exercise 15-9
• Exercise 15-6
• Exercise 15-7
• Exercise 15-10
• Exercise 15-12
• Exercise 15-17
• Exercise 15-21
• Exercise 16-4
• Exercise 16-10
• Exercise 16-14
• Exercise 16-18
• Exercise 16-24
Brief Exercise 15-9
Oriole Corporation has outstanding 22,000 shares of $5 par value
common stock. On August 1, 2017, Oriole reacquired 190 shares at $82
per share. On November 1, Oriole reissued the 190 shares at $71 per
share. Oriole had no previous treasury stock transactions.

Prepare Oriole’s journal entries to record these transactions using the
cost method.
Swifty Mining Company declared, on April 20, a dividend of $442,000
payable on June 1. Of this amount, $108,000 is a return of capital.
Prepare the April 20 and June 1 entries for Swifty. Ex 15-10
Exercise 15-6
Whispering Corporation is authorized to issue 49,000 shares of $5 par
value common stock. During 2017, Whispering took part in the
following selected transactions.
1. Issued 4,900 shares of stock at $42 per share, less costs related to the
issuance of the stock totaling $7,400.
2. Issued 1,200 shares of stock for land appraised at $49,000. The stock
was actively traded on a national stock exchange at approximately $43
per share on the date of issuance.
3. Purchased 520 shares of treasury stock at $42 per share. The treasury
shares purchased were issued in 2013 at $39 per share.
(a) Prepare the journal entry to record item 1.
(b) Prepare the journal entry to record item 2.
(c) Prepare the journal entry to record item 3 using the cost method.
Exercise 15-7
Joe Dumars Company has outstanding 40,000 shares of $5 par common
stock which had been issued at $30 per share. Joe Dumars then entered
into the following transactions.
1. Purchased 5,000 treasury shares at $45 per share.

2. Resold 2,000 of the treasury shares at $49 per share.
3. Resold 500 of the treasury shares at $40 per share.
Indicate the effect each of the three transactions has on the financial
statement categories listed in the table below, assuming Joe Dumars
Company uses the cost method.
For a recent 2-year period, the balance sheet of Flint Company showed
the following stockholders’ equity data at December 31 (in millions).
Exercise 15-12
Kingbird Corporation has 11.50 million shares of common stock issued
and outstanding. On June 1, the board of directors voted an 79 cents per
share cash dividend to stockholders of record as of June 14, payable
June 30.
Prepare the journal entries for each of the dates above assuming the
dividend represents a distribution of earnings.
Exercise 15-17
Carla Corporation’s post-closing trial balance at December 31, 2017, is
shown as follows.
The dividends on preferred stock are $4 cumulative. In addition, the
preferred stock has a preference in liquidation of $50 per share.
Prepare the stockholders’ equity section of Carla’s balance sheet at
December 31, 2017.
Exercise 15-21

The outstanding capital stock of Windsor Corporation consists of 2,000
shares of $100 par value, 8% preferred, and 4,900 shares of $50 par
value common.
Assuming that the company has retained earnings of $92,500, all of
which is to be paid out in dividends, and that preferred dividends were
not paid during the 2 years preceding the current year, state how much
each class of stock should receive under each of the following
conditions.
(a) The preferred stock is noncumulative and nonparticipating.
(b) The preferred stock is cumulative and nonparticipating.
(c) The preferred stock is cumulative and participating.
Cullumber Corporation had 318,000 shares of common stock
outstanding on January 1, 2017. On May 1, Cullumber issued 31,500
shares.
(a) Compute the weighted-average number of shares outstanding if the
31,500 shares were issued for cash.
Weighted-average number of shares outstanding
(b) Compute the weighted-average number of shares outstanding if the
31,500 shares were issued in a stock dividend.
Weighted-average number of shares outstanding $
Exercise 16-4
On January 1, 2016, when its $30 par value common stock was selling
for $80 per share, Indigo Corp. issued $11,100,000 of 8% convertible
debentures due in 20 years. The conversion option allowed the holder of
each $1,000 bond to convert the bond into five shares of the
corporation’s common stock. The debentures were issued for

$11,988,000. The present value of the bond payments at the time of
issuance was $9,435,000, and the corporation believes the difference
between the present value and the amount paid is attributable to the
conversion feature. On January 1, 2017, the corporation’s $30 par value
common stock was split 2 for 1, and the conversion rate for the bonds
was adjusted accordingly. On January 1, 2018, when the corporation’s
$15 par value common stock was selling for $135 per share, holders of
30% of the convertible debentures exercised their conversion options.
The corporation uses the straight-line method for amortizing any bond
discounts or premiums.
(a) Prepare the entry to record the original issuance of the convertible
debentures.
Exercise 16-10
On November 1, 2017, Larkspur Company adopted a stock-option plan
that granted options to key executives to purchase 28,500 shares of the
company’s $10 par value common stock. The options were granted on
January 2, 2018, and were exercisable 2 years after the date of grant if
the grantee was still an employee of the company. The options expired 6
years from date of grant. The option price was set at $30, and the fair
value option-pricing model determines the total compensation expense
to be $427,500.
All of the options were exercised during the year 2020: 19,000 on
January 3 when the market price was $67, and 9,500 on May 1 when the
market price was $77 a share.
Prepare journal entries relating to the stock option plan for the years
2018, 2019, and 2020. Assume that the employee performs services
equally in 2018 and 2019.
Exercise 16-14

Coronado Company issues 9,700 shares of restricted stock to its CFO,
Mary Tokar, on January 1, 2017. The stock has a fair value of $485,000
on this date. The service period related to this restricted stock is 5 years.
Vesting occurs if Tokar stays with the company until December 31,
2021. The par value of the stock is $10. At December 31, 2017, the fair
value of the stock is $379,000.
(a) Prepare the journal entries to record the restricted stock on January 1,
2017 (the date of grant), and December 31, 2018.
(b) On July 25, 2021, Tokar leaves the company. Prepare the journal
entry to account for this forfeiture.
Exercise 16-18
Pearl Inc. presented the following data.
Net income $2,550,000
Preferred stock: 51,000 shares outstanding, $100 par, 8% cumulative,
not convertible 5,100,000
Common stock: Shares outstanding 1/1 816,000
Issued for cash, 5/1 318,000
Acquired treasury stock for cash, 8/1 162,000
2-for-1 stock split, 10/1
Exercise 16-24
The Concord Corporation issued 10-year, $4,890,000 par, 7% callable
convertible subordinated debentures on January 2, 2017. The bonds have
a par value of $1,000, with interest payable annually. The current
conversion ratio is 14:1, and in 2 years it will increase to 16:1. At the
date of issue, the bonds were sold at 96. Bond discount is amortized on a
straight-line basis. Concord’s effective tax was 35%. Net income in
2017 was $8,550,000, and the company had 1,980,000 shares
outstanding during the entire year.
(a) Compute both basic and diluted earnings per share.

Week 2
Brief Exercise 116
On April 1, 2018, West Company purchased $472,000 of 6.50% bonds
for $490,630 plus accrued interest as an available-for-sale security.
Interest is paid on July 1 and January 1 and the bonds mature on July 1,
2023.
Prepare the journal entry on April 1, 2018.
Exercise 121
Fill in the dollar changes caused in the Investment account and Dividend
Revenue or Investment Revenue account by each of the following
transactions, assuming Crane Company uses (a) the fair value method
and (b) the equity method for accounting for its investments in Hudson
Company.
1. At the beginning of Year 1, Crane bought 25% of Hudson's common
stock at its book value. Total book value of all Hudson's common stock
was $750,000 on this date.
2. During Year 1, Hudson reported $69,000 of net income and paid
$34,500 of dividends.
3. During Year 2, Hudson reported $29,000 of net income and paid
4. During Year 3, Hudson reported a net loss of $9,000 and paid $4,000
of dividends.
5. Indicate the Year 3 ending balance in the Investment account, and
cumulative totals for Years 1, 2, and 3 for dividend revenue and
investment revenue.
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What are the differences between traditional and derivative instruments?
Why do companies use derivative instruments? Explain whether or not
derivatives are a good investment. What experience do you have with
either traditional or derivative instruments in your organization or an
organization that you are familiar with?
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Why do companies make investments in other companies? What are the
differences between debt and equity investments? What is the
experience of either your organization or an organization that you are
familiar with when it comes to debt and/or equity investments? What
would influence a company to choose equity or debt as an investment?
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ACC 423 Week 2 Individual WileyPLUS
Assignment E15-13 (a,b) , P15-1 , E16-20 , P16-7
Resource:Intermediate Accounting
Preparewritten responses to the following assignments from the text:
· Ch.15: Excercise E15-13 (a&b) and Problem P15-1
Ch.16: Exercise E16-20 and Problem P16-7
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ACC 423 Week 2 Signature Assignment
Codification Research Paper (2 Papers)
This Tutorial contains 2 Papers
What is a Signature Assignment?
A signature assignment is designed to align with specific program
student learning outcome(s) for a program. Program Student Learning

Outcomes are broad statements that describe what students should know
and be able to do upon completion of their degree. The signature
assignments are graded with an automated rubric that allows the
University to collect data that can be aggregated across a location or
college/school and used for program improvements.
Resource: FASB Codification Link.
Write a 700- to 1,050-word paper.
Your client, Cascade Company, is planning to invest some of its excess
cash in 5-year revenue bonds issued by the county and in the stock of
one of its suppliers, Teton Co. Teton's shares trade on the over-the-
counter market. The company would like you to conduct some research
on the accounting for these investments.
Instructions:
Access the FASB Codification.
Once you login using the username and password provided from the link
above "login instructions" click on Education (from the menu across the
top) > select FASB & GARS > click on FASB User Login and use the
same credentials given for the initial login page. That will get you to the
FASB Accounting Standards Codification (professional view) page.
Review the log-in instructions.
Provide Codification references for your responses below.
Incorporate your review of the FASB link to determine when the fair
value of a security "readily determinable".
Since the Teton shares do not trade on one of the large stock markets,
Cascade argues that the fair value of this investment is not readily
available.
Describe how an impairment of a security is accounted for.
Determine how close to maturity Cascade could sell an investment and
still classify it as held-to-maturity.
To avoid volatility in their financial statements due to fair value
adjustments, Cascade debated whether the bond investment could be
classified as held-to-maturity; Cascade is pretty sure it will hold the
bonds for five years.
List disclosures that must be made for any sale or transfer from
securities classified as held-to-maturity.

Format your paper consistent with APA standards.
Submit your assignment to the Assignment Files tab.
Assignment Deliverables Summary:
1. How can the shares investment in Teton Inc. fair value be determined
according to GAAP, provide FASB codification reference?
2. How should the bond investment in a County Government be
classified if Cascade Company does not plan to hold the bond to its
maturity? can the management change its intention in later years?
3. Under what condition and factors for an equity investment to be
considered as "impaired", provide FASB codification reference?
4. What are the disclosure requirements for reclassification of sale or
transfer of security from one category to another?
******************************************
ACC 423 Week 2 WileyPLUS Assignment (New
Syllabus/With Excel File)
This Tutorial contains Excel File which can be used to solve for any
change in values
Complete the following in WileyPLUS:
• Brief Exercise 116
• Exercise 121
• Exercise 122

• Exercise 123
• Exercise 17-3
• Exercise 17-9
• Exercise 17-12
• Exercise 17-18
• Exercise 17-27
Brief Exercise 116
On April 1, 2018, West Company purchased $472,000 of 6.50% bonds
for $490,630 plus accrued interest as an available-for-sale security.
Interest is paid on July 1 and January 1 and the bonds mature on July 1,
2023.
Prepare the journal entry on April 1, 2018.
The bonds are sold on November 1, 2019 at 103 plus accrued interest.
Amortization was recorded when interest was received by the straight-
line method. Prepare all entries required to properly record the sale
Exercise 121
Fill in the dollar changes caused in the Investment account and Dividend
Revenue or Investment Revenue account by each of the following
transactions, assuming Crane Company uses (a) the fair value method
and (b) the equity method for accounting for its investments in Hudson
Company.
At the beginning of Year 1, Crane bought 25% of Hudson's common
stock at its book value. Total book value of all Hudson's common stock
was $750,000 on this date.
During Year 1, Hudson reported $69,000 of net income and paid

During Year 2, Hudson reported $29,000 of net income and paid
During Year 3, Hudson reported a net loss of $9,000 and paid $4,000 of
dividends.
Indicate the Year 3 ending balance in the Investment account, and
cumulative totals for Years 1, 2, and 3 for dividend revenue and
investment revenue.
Exercise 122 (Part Level Submission)
The following information is available for Irwin Company for 2018:
Net Income $117,000
Realized gain on sale of available-for-sale debt securities 11,000
Unrealized holding gain arising during the period on available-for-sale
debt securities 34,000
Reclassification adjustment for gains included in net income 7,500
a) Determine other comprehensive income for 2018.
b) Compute comprehensive income for 2018.
Exercise 123
On January 2, 2018, Tylor Company issued a 4-year, $550,000 note at
8% fixed interest, interest payable semiannually. Tylor now wants to
change the note to a variable rate note. As a result, on January 2, 2018,
Tylor Company enters into an interest rate swap where it agrees to
receive 8% fixed and pay LIBOR of 5.7% for the first 6 months on
$550,000. At each 6-month period, the variable interest rate will be
reset. The variable rate is reset to 6.6% on June 30, 2018.

Brief Exercise 17-2
Blossom Company purchased, on January 1, 2017, as an available-for-
sale security, $82,000 of the 11%, 5-year bonds of Chester Corporation
for $76,231, which provides an 13% return.
Prepare Blossom’s journal entries for (a) the purchase of the investment,
(b) the receipt of annual interest and discount amortization, and (c) the
year-end fair value adjustment. (Assume a zero balance in the Fair Value
Adjustment account.) The bonds have a year-end fair value of $77,900.
Brief Exercise 17-5
Tamarisk Corporation purchased 360 shares of Sherman Inc. common
stock for $10,800 (Tamarisk does not have significant influence). During
the year, Sherman paid a cash dividend of $3.50 per share. At year-end,
Sherman stock was selling for $32.50 per share.
Prepare Tamarisk’ journal entries to record (a) the purchase of the
investment, (b) the dividends received, and (c) the fair value adjustment.
(Assume a zero balance in the Fair Value Adjustment account.)
Brief Exercise 17-7
Bonita Corporation purchased for $285,000 a 25% interest in Murphy,
Inc. This investment enables Bonita to exert significant influence over
Murphy. During the year, Murphy earned net income of $185,000 and
paid dividends of $54,000.
Prepare Bonita’s journal entries related to this investment.
Monty Company invests $10,600,000 in 5% fixed rate corporate bonds
on January 1, 2017. All the bonds are classified as available-for-sale and
are purchased at par. At year-end, market interest rates have declined,
and the fair value of the bonds is now $11,253,000. Interest is paid on
January 1.

Prepare journal entries for Monty Company to (a) record the transactions
related to these bonds in 2017, assuming Monty does not elect the fair
option; and (b) record the transactions related to these bonds in 2017,
assuming that Monty Company elects the fair value option to account for
these bonds.
Exercise 17-3 (Part Level Submission)
On January 1, 2017, Bramble Company purchased 10% bonds having a
maturity value of $340,000, for $367,149.34. The bonds provide the
bondholders with a 8% yield. They are dated January 1, 2017, and
mature January 1, 2022, with interest receivable January 1 of each year.
Bramble Company uses the effective-interest method to allocate
unamortized discount or premium. The bonds are classified in the held-
to-maturity category.
a) Prepare the journal entry at the date of the bond purchase.
b) Prepare a bond amortization schedule
c) Prepare the journal entry to record the interest revenue and the
amortization at December 31, 2017.
d) Prepare the journal entry to record the interest revenue and the
amortization at December 31, 2018.
At December 31, 2017, the available-for-sale debt portfolio for
Tamarisk, Inc. is as follows.
On January 20, 2018, Tamarisk, Inc. sold security A for $30,955. The
sale proceeds are net of brokerage fees.
Prepare the adjusting entry at December 31, 2017, to report the portfolio
at fair value.
Exercise 17-12

The following are two independent situations.
Situation 1
Pronghorn Cosmetics acquired 10% of the 182,000 shares of common
stock of Martinez Fashion at a total cost of $12 per share on March 18,
2017. On June 30, Martinez declared and paid $76,700 cash dividend to
all stockholders. On December 31, Martinez reported net income of
$113,500 for the year. At December 31, the market price of Martinez
Fashion was $13 per share.
Situation 2
Stellar, Inc. obtained significant influence over Seles Corporation by
buying 30% of Seles’s 28,900 outstanding shares of common stock at a
total cost of $9 per share on January 1, 2017. On June 15, Seles declared
and paid cash dividends of $35,400. On December 31, Seles reported a
net income of $92,300 for the year.
Prepare all necessary journal entries in 2017 for both situations.
Presented below are two independent cases related to available-for-sale
debt investments.
Exercise 17-18
Vaughn Corporation has municipal bonds classified as a held-to-
maturity at December 31, 2017. These bonds have a par value of
$801,000, an amortized cost of $801,000, and a fair value of $729,000.
The company believes that impairment accounting is now appropriate
for these bonds.
Prepare the journal entry to recognize the impairment.
Exercise 17-27

On August 15, 2016, Riverbed Co. invested idle cash by purchasing a
call option on Counting Crows Inc. common shares for $648. The
notional value of the call option is 720 shares, and the option price is
$72. The option expires on January 31, 2017. The following data are
available with respect to the call option.
******************************************
Why are there differences between taxable and financial income? What
are some examples of permanent and temporary differences? Why do
these differences exist? How do they affect the financial statements?
What experience do you have with either taxable and financial income
and/or permanent and temporary differences in your organization or an
organization that you are familiar with?
******************************************
How are the tax benefits of net operating losses (NOL) disclosed on
financial statements? Which is more beneficial to an organization, an

NOL carryforward or an NOL carryback? Explain why. What
experience do you have with NOL in your organization or an
organization that you are familiar with? When would a company decide
to forego a NOL carryback?
******************************************
ACC 423 Week 3 DQ
Why are there between taxable and financial income? What are some
example of payment and temporary differences? Why do these
differences exist? How do they affect financial statements.”
“How they deferred tax assets and deferred tax liabilities derived?
How do they relate to the difference between tax expenses and tax
payable? How could an organization have a tax receivable? Why is tax
expenses reported on the income statement comprised of current and
deferred tax?”
How are the tax benefits of net operating losses (NOL) disclosed on
financial statements? Which is more beneficial to the organization, an
NOL carryforward or NOL carryback? Why. When would a company
decide to forego on carryback?
******************************************
ACC 423 week 3 SEC 10-K Analysis (Ford
Motors)

ACC 423 week 3 SEC 10-K Analysis
Below are the instructions.
Read the SEC 10-K for Ford Motor Company. Alternatively, you can
use Securities and Exchange Commission's (SEC) Edgar filing system to
view this information.
Write a 350- to 700-word paper describing the amounts of current and
deferred income taxes.
Explain the items that affect both these classifications.
Provide details of the current and long-term portion of the deferred
taxes. Be sure to list the Note number where you found your
information.
Format your paper consistent with APA standards.
******************************************
ACC 423 Week 3 Team Assignment (CA 15-2,
CA 15-6, CA 16-2, CA 16-4, CA 17-6)

Complete the following for this assignment as a team:
• Concepts for Analysis 15-2, p. 823
Compile all team members' input.
******************************************
ACC 423 Week 3 WileyPLUS Assignment (With
Excel Sheet)
This Tutorial contains Excel Sheet, which can be used for any
change in values
• Exercise 19-6
• Exercise 19-8
• Exercise 19-17

• Exercise 19-20
• Exercise 19-24
Brief Exercise 19-2
Pina Corporation began operations in 2017 and reported pretax financial
income of $228,000 for the year. Pina’s tax depreciation exceeded its
book depreciation by $38,000. Pina’s tax rate for 2017 and years
thereafter is 30%. In its December 31, 2017, balance sheet, what amount
of deferred tax liability should be reported?
Brief Exercise 19-6
At December 31, 2017, Sandhill Inc. had a deferred tax asset of $30,200.
At December 31, 2018, the deferred tax asset is $57,200. The
corporation’s 2018 current tax expense is $59,100.
What amount should Sandhill report as total 2018 income tax expense?
At December 31, 2017, Sarasota Corporation had a deferred tax liability
of $746,200, resulting from future taxable amounts of $1,820,000 and an
enacted tax rate of 41%. In May 2018, a new income tax act is signed
into law that raises the tax rate to 46% for 2018 and future years.
Prepare the journal entry for Sarasota to adjust the deferred tax liability.
Bridgeport Inc. incurred a net operating loss of $483,000 in 2017.
Combined income for 2015 and 2016 was $324,000. The tax rate for all
years is 30%. Bridgeport elects the carryback option. Assume that it is
more likely than not that the entire net operating loss carryforward will
not be realized in future years.
Prepare all the journal entries necessary at the end of 2017.
Exericse 19-6
Listed below are items that are commonly accounted for differently
for financial reporting purposes than they are for tax purposes.
For each item below, indicate whether it involves:

(1) A temporary difference that will result in future deductible
amounts and, therefore, will usually give rise to a deferred income
tax asset.
(2) A temporary difference that will result in future taxable
amounts and, therefore, will usually give rise to a deferred income
tax liability.
(3) A permanent difference.
Cheyenne Company has the following two temporary differences
between its income tax expense and income taxes payable.
Assuming there were no temporary differences prior to 2017,
prepare the journal entry to record income tax expense, deferred
income taxes, and income taxes payable for 2017, 2018, and 2019.
Indicate how deferred taxes will be reported on the 2019 balance
sheet. Cheyenne’s product warranty is for 12 months
Exercise 19-17
Novak Co. establishes a $126,000,000 liability at the end of 2017 for the
estimated site-cleanup costs at two of its manufacturing facilities. All
related closing costs will be paid and deducted on the tax return in 2018.
Also, at the end of 2017, the company has $63,000,000 of temporary
differences due to excess depreciation for tax purposes, $8,820,000 of
which will reverse in 2018.
The enacted tax rate for all years is 40%, and the company pays taxes of
$80,640,000 on $201,600,000 of taxable income in 2017. Novak expects
to have taxable income in 2018.
The differences between the book basis and tax basis of the assets and
liabilities of Crane Corporation at the end of 2016 are presented below.
Book Tax

Basis Basis
Accounts
receivable
$45,600 $0
Litigation
liability
29,600 0
It is estimated that the litigation liability will be settled in 2017. The
difference in accounts receivable will result in taxable amounts of
$32,200 in 2017 and $13,400 in 2018. The company has taxable income
of $325,000 in 2016 and is expected to have taxable income in each of
the following 2 years. Its enacted tax rate is 34% for all years. This is the
company’s first year of operations. The operating cycle of the business
is 2 years.
Bramble Inc. reports the following pretax income (loss) for both book
and tax purposes. (Assume the carryback provision is used where
possible for a net operating loss.)
a)
Prepare the journal entries for years 2015–2018 to record income tax
expense (benefit) and income taxes payable (refundable), and the tax
effects of the loss carryback and loss carryforward, assuming that based
on the weight of available evidence, it is more likely than not that one-
half of the benefits of the loss carryforward will not be realized.
Prepare the income tax section of the 2017 income statement beginning
with the line “Operating loss before income taxes.”
******************************************

What are the differences and similarities between a defined contribution
plan and a defined benefit plan? As an employee, explain why you
would rather have a defined contribution plan or a defined benefit plan?
What experience do you have with pension plans in your organization or
an organization that you are familiar with? As an employer, explain
why you would rather offer a defined contribution plan or a defined
benefit plan to your employees?
******************************************
What are the components of pension expense? How do the components
of pension expense differ among the various types of contribution and
benefit plans? How is the interest rate determined? Why are prior
service costs amortized? Based on your knowledge of the components of
pension, what would make you more or less likely to invest in a
company?
******************************************
ACC 423 Week 4 DQ

What are the differences and similarities between a defined contribution
plan and a defined benefit plan? As an employee, would you rather have
defined contribution plan or a defined benefit plan? Explain your
answer. As an employer, would you rather offer a defined contribution
plan or a defined benefit plan? Explain answer.
What are the components of pension expense? How is the interest rate
determined? Why are prior service costs amortized? How do the
components of pension expense differ among the various types of
contribution and benefit Plans?
How does a pension plan differ from a 401(k) plan? As an
employee,.would you rather have a pension plan or a 401(k) plan?
Explain your answer. If you were an employer, would your decision
change? Why or why not.”
******************************************
CA 19-7, Ch 19 Comparative Analysis Case)

• Ch. 19: Comparative Analysis Case, p.1108
******************************************
ACC 423 Week 4 WileyPLUS Assignment (New
Syllabus/ With Excel File)
This Tutorial contains Excel Sheet, which can be used for any change in
values
• Question 16
• Exercise 20-3
• Exercise 20-11
• Exercise 20-19

• Exercise 20-21
• Exercise 20-23
Question 16
Given the following items and amounts, compute the actual return on
plan assets: fair value of plan assets at the beginning of the period
$9,480,000; benefits paid during the period $1,500,000; contributions
made during the period $910,000; and fair value of the plan assets at the
end of the period $10,110,000.
Brief Exercise 20-1
AMR Corporation (parent company of American Airlines) reported the
following (in millions).
Service cost $366
Interest on P.B.O. 737
Return on plan assets 593
Amortization of prior service cost 13
Amortization of net loss 154
Brief Exercise 20-5
Bonita Corporation amended its pension plan on January 1, 2017, and
granted $153,180 of prior service costs to its employees. The employees
are expected to provide 2,070 service years in the future, with 380
service years in 2017.
Compute prior service cost amortization for 2017.
Brief Exercise 20-6
At December 31, 2017, Buffalo Corporation had a projected benefit
obligation of $596,500, plan assets of $301,800, and prior service cost of
$128,900 in accumulated other comprehensive income.

Determine the pension asset/liability at December 31, 2017. (Enter
liability using either a negative sign preceding the number e.g. -45 or
parentheses e.g. (45).)
Brief Exercise 20-8
Flounder Corporation has the following balances at December 31, 2017.
Projected benefit obligation $2,543,000
Plan assets at fair value 1,984,000
Accumulated OCI (PSC) 1,163,000
What is the amount for pension liability that should be reported on
Flounder's balance sheet at December 31, 2017?
Pension liability balance at December 31, 2017
Larkspur Corp. has three defined benefit pension plans as follows.
Pension Assets
(at Fair Value) Projected Benefit
Obligation
Plan X $604,000 $498,000
Plan Y 984,000 665,000
Plan Z 517,000 694,000
How will Larkspur report these multiple plans in its financial
statements?
Waterway Company provides the following information about its
defined benefit pension plan for the year 2017.
Service cost $91,200
Contribution to the plan 104,700
Prior service cost amortization 9,800
Actual and expected return on plan assets 62,800
Benefits paid 40,500
Plan assets at January 1, 2017 632,600

Projected benefit obligation at January 1, 2017 686,700
Accumulated OCI (PSC) at January 1, 2017 152,100
Interest/discount (settlement) rate 9 %
Skysong Company sponsors a defined benefit pension plan for its
employees. The following data relate to the operation of the plan for the
year 2017 in which no benefits were paid.
1. The actuarial present value of future benefits earned by employees for
services rendered in 2017 amounted to $55,500.
2. The company’s funding policy requires a contribution to the pension
trustee amounting to $136,360 for 2017.
3. As of January 1, 2017, the company had a projected benefit obligation
of $894,500, an accumulated benefit obligation of $806,900, and a debit
balance of $396,000 in accumulated OCI (PSC). The fair value of
pension plan assets amounted to $600,000 at the beginning of the year.
The actual and expected return on plan assets was $53,500. The
settlement rate was 8%. No gains or losses occurred in 2017 and no
benefits were paid.
4. Amortization of prior service cost was $49,800 in 2017. Amortization
of net gain or loss was not required in 2017.
Exercise 20-19
Marin Co. provides the following information about its postretirement
benefit plan for the year 2017.
Service cost $ 42,100
Accumulated postretirement benefit obligation at January 1, 2017
330,400

Discount rate 10 %
Compute the postretirement benefit expense for 2017.
Exercise 20-21
Pina Inc. provides the following information related to its postretirement
benefits for the year 2017.
$728,700
Discount rate 10 %
Service cost 76,300
Compute postretirement benefit expense for 2017.
Exercise 20-23
Sunland Co. provides the following information about its postretirement
benefit plan for the year 2017.
Service cost $81,300
747,500
Accumulated OCI (PSC) at January 1, 2017 92,800 Dr.
Discount rate 10 %
Prepare a worksheet inserting January 1, 2017, balances, showing
December 31, 2017, balances, and the journal entry recording
postretirement benefit expense. (Enter all amounts as positive.)
******************************************

What is a change in accounting principle? How do you determine if a
change in principle should be reported retroactively, currently, or
prospectively? How do these changes affect the financial statements?
What experience do you have with change in accounting principle in
your organization or an organization you are familiar with?
******************************************
What are the differences between counterbalancing and
noncounterbalancing errors? What are some examples of
counterbalancing and noncounterbalancing errors? How are each
handled? What experience do you have with counterbalancing and/or
noncounterbalancing errors in your organization or an organization that
you are familiar with? Does it matter if the books are closed? Explain
why or why not.
******************************************

ACC 423 Week 5 DQ
What is a change in accounting principle? How do you determinate if a
change in principle should be reported retroactively, currently or
prospectively? How do these changes affect financial statements?
Why do accountants make errors? What types of errors may occur? Why
is it necessary to correct them? Whit are the ramifications of not
correcting errors? What are some examples of counterbalancing errors?
What are some examples of noncounter balancing errors? What are the
differences between counterbalancing and noncounter balancing errors?
How are each handled? Does it matter if the books are closed? Why or
why not.
******************************************
CA 20-7, CA 22-1, CA 22-6)

******************************************
ACC 423 Week 5 WileyPLUS Assignment (With
Excel File, 100% Score )
This Tutorial contains Excel File which can be used for any Values
• Exercise 22-2
• Exercise 22-5
• Exercise 22-10
• Exercise 22-11
• Exercise 22-16

• Exercise 22-17
• Exercise 22-20
• Exercise 22-22
Brief Exercise 22-1
At the beginning of 2017, Sage Construction Company changed from
the completed-contract method to recognizing revenue over time
(percentage-of-completion) for financial reporting purposes. The
company will continue to use the completed-contract method for tax
purposes. For years prior to 2017, pretax income under the two methods
was as follows: percentage-of-completion $114,600, and completed-
contract $84,000. The tax rate is 40%.
Prepare Sage’s 2017 journal entry to record the change in accounting
principle.
Brief Exercise 22-4
Culver Company changed depreciation methods in 2017 from double-
declining-balance to straight-line. Depreciation prior to 2017 under
double-declining-balance was $87,900, whereas straight-line
depreciation prior to 2017 would have been $54,900. Culver’s
depreciable assets had a cost of $241,300 with a $43,800 salvage value,
and an 8-year remaining useful life at the beginning of 2017.
Prepare the 2017 journal entry related to Culver’s depreciable assets
(Equipment
Brief Exercise 22-7
At January 1, 2017, Coronado Company reported retained earnings of
$1,970,000. In 2017, Coronado discovered that 2016 depreciation
expense was understated by $436,000. In 2017, net income was
$878,000 and dividends declared were $243,000. The tax rate is 40%.
Prepare a 2017 retained earnings statement for Coronado Company.

Brief Exercise 22-8
Indicate the effect—Understate, Overstate, No Effect—that each of the
following errors has on 2017 net income and 2018 net income.
a) Equipment purchased in 2015 was
expensed.
(b) Wages payable were not recorded at
12/31/17.
(c) Equipment purchased in 2017 was
expensed.
(d) 2017 ending inventory was
overstated.
(e) Patent amortization was not recorded in
2018.
Exercise 22-2
Metlock Company began operations on January 1, 2015, and uses the
average-cost method of pricing inventory. Management is contemplating
a change in inventory methods for 2018. The following information is
available for the years 2015–2017.
(a) Prepare the journal entry necessary to record a change from the
average cost method to the FIFO method in 2018.
(b) Determine net income to be reported for 2015, 2016, and 2017, after
giving effect to the change in accounting principle.
(c) Assume Metlock Company used the LIFO method instead of the
average cost method during the years 2015–2017. In 2018, Metlock
changed to the FIFO method. Prepare the journal entry necessary to
record the change in principle.
Presented below are income statements prepared on a LIFO and FIFO
basis for Riverbed Company, which started operations on January 1,
2016. The company presently uses the LIFO method of pricing its
inventory and has decided to switch to the FIFO method in 2017. The
FIFO income statement is computed in accordance with the

requirements of GAAP. Riverbed’s profit-sharing agreement with its
employees indicates that the company will pay employees 10% of
income before profit-sharing. Income taxes are ignored.
LIFO Basis FIFO Basis
2017 2016 2017 2016
Sales
$3,03
0
$3,03
0
$3,03
0
$3,03
0
Cost of
goods
sold
1,160 1,050 1,080 980
Operating
expenses
990 990 990 990
Income
before
profit-
sharing
880 990 960 1,060
Profit-
sharing
expense
88 99 103 99
Net
income
$792 $891 $857 $961
If comparative income statements are prepared, what net income should
Riverbed report in 2016 and 2017?
Assume that Riverbed has a beginning balance of retained earnings at
January 1, 2017, of $891 using the LIFO method. The company declared
and paid dividends of $520 in 2017. Prepare the retained earnings
statement for 2017, assuming that Riverbed has switched to the FIFO
method.
Exercise 22-10

Listed below are various types of accounting changes and errors.
For each change or error, indicate how it would be accounted for using
the following code:
1. Change in a plant asset’s salvage value.
2. Change due to overstatement of inventory.
3. Change from sum-of-the-years’-digits to straight-line
method of depreciation.
4. Change from presenting unconsolidated to consolidated
financial statements.
5. Change from LIFO to FIFO inventory
method.
6. Change in the rate used to compute warranty
costs.
7. Change from an unacceptable accounting principle to an
acceptable accounting principle.
8. Change in a patent’s amortization period.
9. Change from completed-contract to percentage-of-
completion method on construction contracts.
10. Change from FIFO to average-cost inventory
method.
Exercise 22-11
Sandhill Co. purchased a equipment on January 1, 2015, for $594,000.
At that time, it was estimated that the equipment would have a 10-year
life and no salvage value. On December 31, 2018, the firm’s accountant
found that the entry for depreciation expense had been omitted in 2016.
In addition, management has informed the accountant that the company
plans to switch to straight-line depreciation, starting with the year 2018.
At present, the company uses the sum-of-the-years’-digits method for
depreciating equipment.
Prepare the general journal entries that should be made at December 31,
2018, to record these events. (Ignore tax effects.)

Exercise 22-16
You have been engaged to review the financial statements of Larkspur
Corporation. In the course of your examination, you conclude that the
bookkeeper hired during the current year is not doing a good job. You
notice a number of irregularities as follows.
1
.
Year-end wages payable of $3,490 were not recorded because the
bookkeeper thought that “they were immaterial.”
2
.
Accrued vacation pay for the year of $28,400 was not recorded
because the bookkeeper “never heard that you had to do it.”
3
.
Insurance for a 12-month period purchased on November 1 of this
year was charged to insurance expense in the amount of $2,532
because “the amount of the check is about the same every year.”
4
.
Reported sales revenue for the year is $2,116,820. This includes all
sales taxes collected for the year. The sales tax rate is 6%. Because
the sales tax is forwarded to the state’s Department of Revenue, the
Sales Tax Expense account is debited. The bookkeeper thought that
“the sales tax is a selling expense.” At the end of the current year, the
balance in the Sales Tax Expense account is $102,020.
Prepare the necessary correcting entries, assuming that Larkspur uses a
calendar-year basis. The books for the current year have not been closed.
Exercise 22-17
The reported net incomes for the first 2 years of Windsor Products, Inc.,
were as follows: 2017, $139,100; 2018, $189,700. Early in 2019, the
following errors were discovered.
1
.
Depreciation of equipment for 2017 was overstated $15,900.
2
.
Depreciation of equipment for 2018 was understated $36,700.
3
.
December 31, 2017, inventory was understated $52,300.
4 December 31, 2018, inventory was overstated $16,300.

.
Prepare the correcting entry necessary when these errors are discovered.
Assume that the books are closed. (Ignore income tax considerations.)
Exercise 22-20
The before-tax income for Buffalo Co. for 2017 was $111,000 and
$75,100 for 2018. However, the accountant noted that the following
errors had been made:
1
.
Sales for 2017 included amounts of $37,400 which had been received
in cash during 2017, but for which the related products were delivered
in 2018. Title did not pass to the purchaser until 2018.
2
.
The inventory on December 31, 2017, was understated by $8,800.
3
.
The bookkeeper in recording interest expense for both 2017 and 2018
on bonds payable made the following entry on an annual basis.
Interest
Expense
11,50
0
Cash
11,50
0
The bonds have a face value of $230,000 and pay a stated interest rate
of 5%. They were issued at a discount of $16,000 on January 1, 2017,
to yield an effective-interest rate of 6%. (Assume that the effective-
yield method should be used.)
4
.
Ordinary repairs to equipment had been erroneously charged to the
Equipment account during 2017 and 2018. Repairs in the amount of
$9,200 in 2017 and $10,200 in 2018 were so charged. The company
applies a rate of 10% to the balance in the Equipment account at the
end of the year in its determination of depreciation charges.
Prepare a schedule showing the determination of corrected income
before taxes for 2017 and 2018.

Exercise 22-22
On January 1, 2017, Marin Co. purchased 22,000 shares (a 10% interest)
in Elton John Corp. for $1,480,000. At the time, the book value and the
fair value of John’s net assets were $12,100,000.
On July 1, 2018, Marin paid $3,340,000 for 44,000 additional shares of
John common stock, which represented a 20% investment in John. The
fair value of John’s identifiable assets net of liabilities was equal to their
carrying amount of $13,200,000. As a result of this transaction, Marin
owns 30% of John and can exercise significant influence over John’s
operating and financial policies. (Any excess fair value is attributed to
goodwill.)
John reported the following net income and declared and paid the
following dividends.
Net
Income
Dividend
per Share
Year ended
12/31/17
$630,000 None
Six months
ended
6/30/18
490,000 None
Six months
ended
12/31/18
754,000 $1.50
Determine the ending balance that Marin Co. should report as its
investment in John Corp. at the end of 2018.
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