Intermediate Financial Accounting I

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Intermediate Financial Accounting I

ASSIGNMENT 1

Instructor: Ani

SPRING 2021 Total Marks: 55

PART A Answer the following questions. (7*2) 1) Which organization initiated the convergence process between GAAP and IFRS and why 2) Why sometimes soft assets can be more important that hard assets?

3) Mr. Tee ordered two computers which he is going to receive after 1 month. He is going to pay for the computers after their arrival. Besides, one of this computer is for his personal use at home. Should Mr. Tee record this transaction in the accounting book of the business? Give your explanations. Which accounting principle or assumptions should we apply here?

4) Evergreen Co. has a land which he has purchased at the cost of $85,000. Currently the value of the land has been appreciated by $30,000. Should evergreen recognize any loss or gain in the income statement? Give your explanations.

5) Which method to account for allowance for doubtful account is better according to you and why?

6) Lawrence Co. restricted 50% of its’ retained earnings for further expansion of the business.

What do we call this restriction and how should we report this?

7) What is the normal balance for bank overdraft and why?

PART B 1) Presented below is information related to Opra Company for 2019.

Beginning retained earnings Sales discounts Interest expense Sales commission expenses Sales returns and allowances Sales revenue Dividend revenue Cost of goods sold Loss on sale of plant assets Unrealized gain on held-to-maturity investments Loss on the disposition of retail division Salaries and wages expense Unearned sales revenue Freight-Out Telephone and Internet expense Utilities expense

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$ 120,400 55,500 12,700 44,400 85,000 5,800,000 51,000 1,175,100 85,500 15,000 95,000 284,000 115,000 45,000 19,000 40,000

Intermediate Financial Accounting I

ASSIGNMENT 1

Instructor: Ani Insurance expense Advertising expense Loss due to Hailstorm Depreciation expense Write-off-of Goodwill Dividends declared and paid on Common Stock Dividends declared and paid on Preferred Stock

SPRING 2021 Total Marks: 55 18,000 85,000 70,000 58,000 125,000 50,000 40,000

During 2019, there were 900,000 shares of common stock outstanding all year. (Assume a tax rate of 30% on all items, unless indicated otherwise.)

Instructions Prepare a multiple-step income statement. Opra Company decided to discontinue its entire retail operations and to retain its wholesale operations. On July, Opra sold the retail operations to Ramp Corp. Compute earnings per share as it should be shown on the face of the income statement.

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2) Neptune Corporation is preparing its December 31, 2018, balance sheet. The following items may be reported as either assets, liabilities or stockholders’ equity. a) Neptune invested $75,000 in an available for sale securities, fair value of which is $95,000 b) On October 1, 2018, the company borrowed $900,000 for 5 years at 8% per year. Interest is to be paid half-yearly on April 1 of every year. c) On December 15, 2018, the company declared a $1.50 per share dividend on the 60,000 shares of common stock outstanding, to be paid on January 25, 2019. d) During the year, customer advances of $220,000 were received; $110,000 of this amount was earned by December 31, 2018. e) A 10% bonds payable of 1,000,000 was issued on December 31, 2018, due on December 31, 2023. f) Treasury stock of $55,000 has been recorded at cost. g) Notes payable of $440,000 is due on 31st January, 2020. h) Neptune restricted 50% of its’ total cash of $330,000 to repay a loan after 2 years. i) Neptune has a claim of $60,000 to be received after 2 months against an insurance company for a causality loss. j) Neptune owns an equipment of $35,000 which is currently unused.

Instructions For each item above indicate the dollar amounts to be reported as assets, liabilities or stockholders’ equity. Mention the classification as well.

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Intermediate Financial Accounting I

ASSIGNMENT 1

Instructor: Ani

SPRING 2021 Total Marks: 55

3) Presented below is information related to Lathorp Corp., which sells merchandise with terms 2/10, net 60. Lathorp records its sales and receivables net.

Oct-1 Lathorp Corp. sold to Pittman Co. merchandise having a sales price of $15,000.

9 Specific accounts receivable of $11,000 (gross) are pledged to Aladin Credit Corp. as security for a loan of $7,000 at a finance charge of 7% of the amount of the loan.

The finance company will make the collections. (All the accounts receivable are past the discount period.)

Nov- Lathorp Corp. factors receivables with a carrying amount of $32,000 to Anderson 15 Inc. for $27,000 on a with recourse basis. The recourse provision has a fair value of $800. This transaction should be recorded as a sale.

Dec- Pittman Co.. notifies Lathorp that it is bankrupt and will pay only 15% of its account.

31 Give the entry to write off the uncollectible balance using the allowance method.

(Note: First record the increase in the receivable on Oct 11 when the discount period passed.)

Dec- It sold a land having a fair value of $300,000 in exchange for a 3-year zero-interest31 bearing promissory note in the face amount of $399,297. The land is carried on Lathorp’s book at a cost of $175,000. (Note: Lathorp recently had to pay 7% interest for money that it borrowed from NRB Bank. The customer in this transaction has credit rating that requires him to borrow money at 10% interest.

Instructions Prepare all necessary entries in general journal entries for Lathorp Corp.

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