Reference no: EM13341847

1. Accounts receivable in the amount of $225,000 were assigned to the ABC Finance Company by Severs, Inc., as security for a loan of $190,000. The finance company charged a 3.5% commission on the face amount of the loan, and the note bears interest at 6% per year.
During the first month,Marsh collected $119,000 on assigned accounts. This amount was remitted to the finance company along with one month's interest on the note.

Instructions

Make all the entries for Severs Inc. associated with the transfer of the accounts receivable, the loan, and the remittance to the finance company.

2. During April, the following changes in inventory took place:

April1Balance1,250 units @ $32 unit cost
6Sold650 units @ $60 unit sell price
10Purchased450 units @ $35 unit cost
15Sold1,000 units @ $62 unit sell price
26Purchased750 units @ $37.50 unit cost
29Sold500 units @ $63 unit sell price
Perpetual inventories are maintained.

Instructions
What is the cost of the ending inventory under the following methods? (Show calculations.)

(a)FIFO.
(b)LIFO.

3. An inventory taken the morning after a large theft discloses $18,000 of goods on hand as of November 14.The following additional data is available from the books:
Inventory on hand, November 1$ 97,000
Purchases received, November 1 - 1372,000
Sales (goods delivered to customers)180,000
Past records indicate that sales are made at 25% above cost.

Instructions

Estimate the inventory of goods on hand at the close of business on November 13 by the gross profit method and determine the amount of the theft loss.Show appropriate titles for all amounts in your presentation.

4. On December 31, 2012, Rambo Inc. borrowed $5,000,000 at 12% payable annually to finance the construction of a new building. In 2013 Rambo made the following expenditures related to this building: April 1, $420,000; July 1, $635,000; September 1, $1,900,000; December 1, $1,200,000. Additional information is provided as follows:

1. Other debt outstanding:
15-year, 12% bond, December 31, 2006, interest payable annually $4,500,000
6-year, 9% note, dated December 31, 2010,
interest payable annually$1,800,000
2. April 1, 2013 expenditure included land costs of $150,000
3. Interest revenue earned in 2013$65,000

Instructions

Determine the amount of interest to be capitalized in 2013 in relation to the construction of the building.

5. A new machine that costs $320,000 was purchased on January 1, 2004. It's estimated useful life is 20 years and the salvage value at the end of the 20 years is estimated to be $30,000. In what year will annual depreciation expense amount using the straight-line method exceed the annual depreciation expense amount using the double-declining balance method?

6. Benson Inc. obtained a trade name in January 2011, incurring legal costs of $22,000. The company amortizes the trade name over 10 years. Benson successfully defended its trade name in January 2012, incurring $4,900 in legal fees. At the beginning of 2013, based on new marketing research, Benson determines that the fair value of the trade name is $19,000. Estimated total future cash flows from the trade name are $17,000 on January 4, 2013.

Instructions

Prepare the necessary journal entries for the years ending December 31, 2011, 2012, and 2013. Show all computations.