Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 12, Problem 17E
Company is considering purchasing EKC Company. EKC’s
At December 31, 2019, Elm discovered the following about EKC:
- a. No allowance for uncollectible accounts has been established. An allowance of $5,000 is considered appropriate.
- b. The LIFO inventory method has been used. The FIFO inventory method would be used if EKC were purchased by Elm. The FIFO inventors-valuation of the December 31, 2019, ending inventors-would be $180,000.
- c. The fair value of the property, plant, and equipment (net) is $730,000.
- d. The company has an unrecorded patent that is worth $120,000.
- e. The book values of the current liabilities and bonds payable are the same as their market values.
Required:
1. Compute the value of the
2. Next Level Why would the book value of a company’s identifiable net assets differ from its market value?
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Toolum Corporation began operations on January 1, 2020, and uses the average-cost method of pricing inventory. Management is contemplating a change ininventory methods for 2023. The following information is available for the years2020–2022
Requirements:(Ignore all tax effects.)a. Prepare the journal entry necessary to record a change from the average-costmethod to the FIFO method in 2023. Show all workings
b. Determine net income to be reported for 2020, 2021, and 2022, after givingeffect to the change in accounting policy.
During the course of your examination of the financial statements of H Co., a new client, for the year ended December 31, 2020, you discover the following:
Inventory at January 1, 2020, had been overstated by P3,000.
Inventory at December 31, 2020, was understated by P5,000.
An insurance policy covering three years had been purchased on January 2, 2019, for P1,500. The entire amount was charged as an expense in 2019.
During 2020 the company received a P1,000 cash advance from a customer for merchandise to be manufactured and shipped during 2021. The P1,000 had been credited to sales revenues. The company's gross profit on sales is 50%.
Net income reported on the 2020 income statement (before reflecting any adjustments for the above items) is P20,000.
The proper net income for 2020 is
Vaughn Co. decides at the beginning of 2020 to adopt the FIFO method of inventory valuation. Vaughn had used the LIFO method for financial reporting since its inception on January 1, 2018, and had maintained records adequate to apply the FIFO method retrospectively. Vaughn concluded that FIFO is the preferable inventory method because it reflects the current cost of inventory on the balance sheet. The following table presents the effects of the change in accounting principles on inventory and cost of goods sold. Income taxes are ignored.
Inventory Determined by
Cost of Goods Sold Determined by
Date
LIFO Method
FIFO Method
LIFO Method
FIFO Method
January 1, 2018
$ 0
$ 0
$ 0
$ 0
December 31, 2018
100
8
800
892
December 31, 2019
200
220
940
828
December 31, 2020
350
410
1,100
1,060
Retained earnings reported under LIFO are as follows.
Retained Earnings Balance
December 31, 2018
$1,060…
Chapter 12 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 12 - Prob. 1GICh. 12 - Prob. 2GICh. 12 - Prob. 3GICh. 12 - Prob. 4GICh. 12 - Prob. 5GICh. 12 - Prob. 6GICh. 12 - Prob. 7GICh. 12 - What activities are included in RD? Which are...Ch. 12 - What elements of RD activities does a company...Ch. 12 - How does a company record a patent worth 100,000...
Ch. 12 - Prob. 11GICh. 12 - Prob. 12GICh. 12 - Over how many years are patents amortized?...Ch. 12 - Prob. 14GICh. 12 - Prob. 15GICh. 12 - Prob. 16GICh. 12 - Prob. 17GICh. 12 - Prob. 18GICh. 12 - Prob. 19GICh. 12 - Prob. 20GICh. 12 - What is the proper time or time period over which...Ch. 12 - Prob. 2MCCh. 12 - Prob. 3MCCh. 12 - Which of the following assets typically are...Ch. 12 - Prob. 5MCCh. 12 - Prob. 6MCCh. 12 - Prob. 7MCCh. 12 - Prob. 8MCCh. 12 - Prob. 9MCCh. 12 - Prob. 10MCCh. 12 - Steel Magnolia Incorporated purchased a trademark...Ch. 12 - Match the following items with correct accounting...Ch. 12 - Notting Hill Company incurred the following costs...Ch. 12 - Hook Corp. incurred the following start-up costs,...Ch. 12 - Mystic Pizza Company purchased a patent from Prime...Ch. 12 - Mystic Pizza Company purchases a franchise from NY...Ch. 12 - Prob. 7RECh. 12 - Prob. 8RECh. 12 - Prob. 9RECh. 12 - Prob. 10RECh. 12 - Prob. 1ECh. 12 - On January 4, 2019, Franc Company purchased for...Ch. 12 - On January 11, 2019, Hughes Company applied for a...Ch. 12 - Gansac Publishing Company signed a contract with...Ch. 12 - Prob. 5ECh. 12 - Prob. 6ECh. 12 - KLK Clothing Company manufactures professional...Ch. 12 - Cressman Company incurred RD costs for various...Ch. 12 - In 2019, Lalli Corporation incurred RD costs as...Ch. 12 - Kling Company was organized in late 2019 and began...Ch. 12 - Prob. 11ECh. 12 - Prob. 12ECh. 12 - Prob. 13ECh. 12 - Prob. 14ECh. 12 - Prob. 15ECh. 12 - Prob. 16ECh. 12 - Company is considering purchasing EKC Company....Ch. 12 - Prob. 18ECh. 12 - Prob. 19ECh. 12 - Prob. 20ECh. 12 - Prob. 1PCh. 12 - Prob. 2PCh. 12 - Prob. 3PCh. 12 - Halpern Companys controller prepared the following...Ch. 12 - Prob. 5PCh. 12 - Prob. 6PCh. 12 - Hamilton Companys balance sheet on January 1,...Ch. 12 - Prob. 8PCh. 12 - Lee Manufacturing Corporation was incorporated on...Ch. 12 - Information concerning Tully Corporations...Ch. 12 - Prob. 11PCh. 12 - In examining Samson Manufacturing Companys books,...Ch. 12 - Prob. 2CCh. 12 - Prob. 3CCh. 12 - Prob. 4CCh. 12 - On June 30, 2019, your client, Sprauge...Ch. 12 - Prob. 6CCh. 12 - NBC paid 401 million for the rights to televise...Ch. 12 - Prob. 8C
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