Summary: Advanced Financial Accounting

Read the summary and the most important questions on advanced financial accounting

• lecture 1

• prepaid Expenses Q1) On Oct. 4th, Pioneer paid $6,000 for a one-year fire insurance policy, beginning Oct 1. Show the entry to record the purchase of the insurance.Q2) What journal entry should Pioneer make on Oct 31 when it comes to the prepaid expense?

  
  
  
  
  1. Prepaid Expense* 6,000
  a) Cash 6000
  
  2. Insurance Expense 500 
  a) Prepaid Expense 500

• Unearned Revenues Q1) Pioneer received $12,000 on Oct 2 from KC for advertising services expected to be completed by Dec 31. Show the journal entry on Oct 2.Q2) What journal entry should Pioneer make on Oct 31 if the company determines that it should recognize $4,000 of revenue in Oct?

  1. Cash 12,000
  
  
  
  a) Unearned Revenues* 12000
  
  2. Unearned Revenues 4000
  a) Service Revenues

• Accrued Revenues Q1) In Oct, Pioneer performed services worth $2,000 that were not billed to clients on or before Oct 31. Pioneer makes the following adjusting entry.Q2) On Dec 4, Pioneer collected cash from the customer.

  1. Accounts Receivable 2,000 
  a) Service Revenue 2000
  2. Cash 2,000
  
  a) Accounts Receivable 2000 

• Accrued Expenses Q1) Pioneer signed a three-month, 12%, note payable in the amount of $50,000 on Oct 1. Prepare journal entries on Oct 1 and Oct 31 (Assume that the note payable is issued at par).

  
  
  1 Oct. 
  Cash 50000
  a) Note Payable 50000
  31 Oct. 
  Interest Expense 500
  
  
  a) Interest Payable 500 

• Exercise Goodwill 11. Dotel Company’s 12/31/15 statement of financial position reports assets of$6,000,000 and liabilities of $2,500,000. All of Dotel’s assets’ book valuesapproximate their fair value, except for land, which has a fair value that is $400,000 greater than its book value. On 12/31/15, Egbert Corporation paid $6,500,000 to acquire Dotel. What amount of goodwill should Egbert record as a result of this purchase?a. $ -0-b. $ 500,000 c. $2,600,000 d. $3,000,000

  
  
  
  
  (1) Purchasing price= $6.5M
  (2) FV (A-L)= FV (A) – FV (L)= 6M + 0.4M – 2.5M= $3.9M 
  (3) Goodwill= (1) – (2)= 6.5 – 3.9= $2.6M

• Exercise Goodwill 2 Floyd Company purchases Haeger Company for $840,000 cash on Jan 1,2016. The book value of the Company’s net assets on Dec 31, 2015 is $620,000. The fair value of tangible assets exceeded the book value by $60,000, and the fair value of identifiable intangible assets exceeded book value by $45,000. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company?a. $ -0-b. $220,000 c. $160,000 d. $115,000

  
  
  
  
  (1) Purchasing price= $840,000
  (2) FV (A–L)= FV (A) – FV (L)= 620,000 + 60,000 + 45,000= $725,000 
  (3) Goodwill= (1) – (2)= 840,000 – 725,000= $115,000

• Exercise Goodwill 33. Leon Corp. purchased Spinks Co. and recorded goodwill of $300,000 four years ago. The Spinks Division’s net assets, including goodwill, have acarrying amount of $720,000. The recoverable amount of the division is estimated to be $750,000.(a) Explain whether or not Leon Corp. must prepare an entry to record impairment of the goodwill. Include the entry, if necessary.(b) Repeat the instruction (a) assuming that the recoverable amount of the division is estimated to be $650,000.

  
  
  (a) Recoverable amount= 750,000 > carrying amount (720,000) --> no impairment
  (b) Recoverable amount= 650,000 < carrying amount (720,000) --> Impairment loss: $70,000
  Journal entry:
  Loss on Impairment 70,000
  
  
  a) Goodwill 70000

• lecture 2

  This is a preview. There are 8 more flashcards available for chapter 09/01/2019
  Show more cards here

• Accounts payable On June 20, GM Co. purchased goods from NGK Co. for $30,000, terms 2/10, n/30. The invoice was paid on June 27. The company uses a perpetual inventory system and records purchases gross.

  
  
  
  
  Q1. Record journal entries on June 20. 
  Inventory.  30000
  a) Accounts Payable  30000
  Q2. Record journal entries on June 27. 
  Accounts Payable.  30000
  a)Cash   29400
  a)Inventory  600

• Accounts payable On Sep 1, GM Co. purchased $9,500 of inventory items on credit with the terms 1/15, net 30. Payment for the purchase was made on Sep 18. Assuming the firm uses the perpetual inventory system and the net method of accounting for purchase discounts.

  
  Q2. Record journal entries on Sep 1. 
  Inventory 9405
  a) Accounts Payable. 9405
  Q2. Record journal entries on Sep 18. 
  Accounts Payable 9405
  Inventory 95
  a) Cash.     9500

• Zero interest bearing note On March 1, 2020, GM issues a €102,000, four-month, zero-interest-bearing note toABN AMRO. The present value of the note is €100,000.1. GM records the cash received on March 1, 2020 as follows:2. If GM prepares financial statements semiannually, it makes the adjusting entry to recognize interest expense and the increase in the note payable of €2,000 at June 30.3. On July 1, 2020, GM records payment of the note and accrued interest.

  1.
  
  
  
  
  Cash 100,000
  a) Notes Payable 10000
  2. 
  Interest expense 2000
  a) Notes payable  2000
  3. 
  Notes payable 102000
  a) cash 102000