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Change in Estimate Financial Statements Presented below are the comparative income statements for Pannebecker Inc. for the years 2009 and 2010. The following additional information is provided: 1. In 2010, Pannebecker Inc. decided to switch its depreciation method from sum-of-the-years’-digits to the straight-line method. The assets were purchased at the beginning of 2009 for $90,000 […]

Change from Fair Value to Equity On January 1, 2010, Sandburg Co. purchased 25,000 shares (a 10% interest) in Yevette Corp. for $1,400,000. At the time, the book value and the fair value of Yevette’s net identifiable assets were $13,000,000. On July 1, 2011, Sandburg paid $3,040,000 for 50,000 additional shares of Yevette common stock, […]

Change from Equity to Fair Value Gamble Corp. was a 30% owner of Sabrina Company, holding 210,000 shares of Sabrina’s common stock on December 31, 2010. The investment account had the following entries. On January 2, 2011, Gamble sold 126,000 shares of Sabrina for $3,440,000, thereby losing its significant influence. During the year 2011 Sabrina […]

Change from Fair Value to Equity Method On January 3, , 2009, Martin Company purchased for $500,000 cash a 10% interest in Renner Corp. On that date the net assets of Renner had a book value of $3,700,000. The excess of cost over the underlying equity in net assets is attributable to undervalued depreciable assets […]

Fair Value to Equity Method with Goodwill On January 1,. , 2010, Millay Inc. paid$700,000 for 10,000 shares of Genso Company’s voting common stock, which was a 10% interest in Genso. At that date the net assets of Genso totaled $6,000,000. The fair values of all of Genso’s identifiable assets and liabilities were equal to […]

Error Corrections you have been assigned to examine the financia tatements of Zarle Company for the year ended December 31, 2010. You discover the following situations. 1. Depreciation of $3,200 for 2010 on delivery vehicles was not recorded. 2. The physical inventory count on December 31, 2009, improperly excluded merchandise costing $19,000 that had been […]

Error Correction Entries the first audit Fennimore Company was made for the year ended December 31, 2010. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are: 1. At the beginning of 2008, the company purchased a machine for $510,000 (salvage […]

Why Do They Make the Change?   An interesting phenomenon can sometimes occur when companies are in danger of not meeting their projected earnings goals. Management suddenly realizes that they have been far too conservative in their previous estimates associated with bad debts, estimated useful lives of equipment, and residual values, to name a few. […]

Charles Chadwick opened a business called Charlie’s Detective Se Service in January 20–. Set up T accounts for the following accounts: Cash; Accounts Receivable; Office Supplies; Computer Equipment; Office Furniture; Accounts Payable; Charles Chadwick, Capital; Charles Chadwick, Drawing; Professional Fees; Rent Expense; and Utilities Expense. The following transactions occurred during the first month of business. […]

(Segment Reporting—Theory) The following article appeared in the W all St r eet Journal . washington—The Securities and Exchange Commission staff issued guidelines for companies grappling with the problem of dividing up their business into industry segments for their annual reports. An industry segment is defined by the Financial Accounting Standards Board as a part […]