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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?
******************************************************
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
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.
******************************************************

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?
******************************************************
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?
******************************************************
ACC 423 Week 2 Individual WileyPLUS
AssignmentE15-13 (a,b) , P15-1 , E16-20 , P16-
7

To Purchase This Material Click below Link
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?
******************************************************
To Purchase This Material Click below Link
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
 Brief Exercise 19-2
 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
Basis
Tax
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 $3,030 $3,030 $3,030 $3,030
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
11,500
Cash 11,500
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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