🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
Accounting
1
answer
0
watching
143
views
17 Sep 2018

1.How do we account for contingent liabilities?

2. What are the effects on the income statement of using thestraight-line method of depreciation, compared to thedeclining-balance method?

3. Which types of costs incurred in preparing equipment forits intended use should be capitalized or expenses?

Watch
1
answer
0
watching
143
views

For unlimited access to Homework Help, a Homework+ subscription is required.

17 Sep 2018

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

Case 6-8

Morgan Company grows various crops and then processes them forsale to retailers. Morgan has changed its depreciation method forits processing equipment from the double-declining-balance methodto the straight-line method effective January 1 of this year.

In the latter part of this year, a large portion of Morgan’scrops were destroyed by a hailstorm. Morgan has incurredsubstantial costs in raising the crops that were destroyed. Severedamage is rare in the locality where the crops are grown.

Required:

A) How should Morgan calculate and report the effect(s) of thechange in depreciation method in this year’s income statement?

B) where should Morgan report the effects of the hailstorm inits income statement? Why?

C) how does the classification in the incoem statement of anextraordinary item differ from that of an operating item? Why?

MATCHING

____ 1. Accelerated Depreciation

____ 2. Double Declining-Balance Method

____ 3. FIFO Method

____ 4. Internal Control System

____ 5. LIFO Method

____ 6. Periodic System

____ 7. Perpetual System

____ 8. Sarbanes-Oxley Act

____ 9. Straight-Line Method

____ 10. Time Value of Money

A. Policies and procedures necessary to ensure the safeguardingof an entity’s assets, the reliability of its accounting
records, and theaccomplishment of overall company objectives..

B. An inventory costing method that assigns the most recentcosts to ending inventory.

C. An inventory costing method that assigns the most recentcosts to cost of goods sold.

D. The system in which the Inventory account is updated at theend of the period.

E. The system in which the Inventory account is increased at thetime of each purchase of merchandise and
decreased at the time of eachsale.

F. A method by which the same dollar amount of depreciation isrecorded in each year of asset use.

G. The concept that indicates that people should prefer toreceive an immediate amount at the present time over an
equal amount in the future.
H. An act of Congress in 2002 intended to bring reform to corporateaccountability and stewardship in the wake of a

number of major corporatescandals.

I. A term that refers to several methods by which a higheramount of depreciation is recorded in the early years of

an asset’s life and a lower amount isrecorded in the later years.

J. A method by which depreciation is recorded at twice thestraight-line rate, but the depreciable balance is reduced
in each period.

SHORTANSWER

Please give a brief answer to each ofthe following questions.

1. 1.Why are shipping terms such asFOB shipping point or FOB destination point, important in decidingownership of inventory
at the end of the year?

2. 2. An effective system of internalcontrol is critical to protecting a company’s investment in threeof its major assets: cash,
accounts receivable, andinventory. For each of the three assets, describe briefly how acompany might protect that asset.

W 3. What is a cash equivalent? Whyis it included with cash on the balance sheet?

4. 4 Define the termgoodwill. Give an example of a transaction that wouldresult in the recording of goodwill on the balance

sheet.

5. 5 What is a contingent liability?Give an example of a contingent liability.

During the current year, Rothchild, Inc., purchased two assetsthat are described as follows:

HeavyEquipment
Purchase price,$275,000.
Expected to beused for 10 years, with a residual value at the end of that time of$50,000.
Expendituresrequired to recondition the equipment and prepare it for use,$75,000.
Patent
Purchase price,$75,000.
Expected to beused for five years, with no value at the end of that time.

Rothchild depreciates heavyequipment by the declining-balance method at 150 percent of thestraight-line rate. It amortizes intangible assets by thestraight-line method. At the end of two years, because of changesin Rothchild’s core business, it sold the patent to a competitorfor $30,000.


a. Compute the amount of depreciation expense onthe heavy equipment for each of the first three years of theasset’s life.

b.

Compute the amount of amortization on the patent for each of thetwo years it was owned by Rothchild.

c-1. Prepare the plant and intangible assetssection of Rothchild’s balance sheet at the end of the first andsecond years.

Calculate the amount of the gain or loss on the patent thatwould be included in the second year’s income statement.

Weekly leaderboard

Home
Homework Help 3,900,000
Accounting 580,000
Start filling in the gaps now
Log in