Recording an adjustment for product warranties is a claims exchange transaction.

On January 1, Year 5, Raven Limo Service, Incorporated sold a used limo that had cost $80,000 and had accumulated depreciation of $44,000. The limo was sold for $32,400 cash. Which of the following shows how the sale of the limo would affect Raven’s financial statements? Balance SheetIncome StatementStatement of Cash Flows Assets=Liabilities+EquityCash+Book Value of LimoGain−Loss=Net IncomeA.32,400+(36,000)= +(3,600)3,600− =(3,600)32,400 IAB.32,400+(36,000)= +3,6003,600− =3,6003,600 IAC.32,400+(36,000)= +(3,600) −3,600=(3,600) D.32,400+(36,000)= +(3,600) −3,600=(3,600)32,400 IA

The total amount of uncollectible accounts expense recognized over the life of a business will be the smallest under the

On January 1, Year 1 Residence Company issued bonds with a 67,000% face value. The bonds were issued at 96 resulting in a 4% discount. They had a 20-year term and a stated rate of interest of 7%. Which of the following shows how the bond issue will affect Residence’s financial statements on January 1, Year 1? Balance SheetIncome StatementStatement of Cash FlowsAssets=Carrying Value Bond Liability+EquityRevenues−Expenses=Net IncomeA.67,000=64,320+2,680 − = 64,320 FAB.64,320=64,320+ − = 64,320 FAC.69,680=69,680+ − = 69,680 FAD.67,000=69,680+ − = 67,000 FA

On January 1, Year 1, Gemstone Mining Company (GMC) paid $10,555,000 cash to purchase the rights to extract raw stone from a surface pit estimated to hold 50,000 pounds of useable material. GMC extracted 15,500 pounds of stone in Year 1, 27,700 pounds of stone in Year 2, and 30,500 pounds of stone in Year 3. The rights to the surface pit were expected to have a $555,000 salvage value at the end of Year 3. Which of the following statements models shows how recognizing depletion expense will affect GMC’s Year 1 financial statements? Balance SheetIncome StatementStatement of Cash FlowsAssets=Liabilities+Stockholders’ EquityCash+Stone ReservesRevenue−Expenses=Net IncomeA. +$(3,100,000)= +$(3,100,000) −$3,100,000=$(3,100,000) B. +$(3,100,000)= +$(3,100,000) −$3,100,000=$(3,100,000)$(3,100,000) OAC. +$(3,100,000)= +$(3,100,000) − = D. +$(3,100,000)= +$(3,100,000) − = $(3,100,000) OA

Which of the following shows how recognizing uncollectible accounts expense under the direct write-off method would affect the financial statements? Balance SheetIncome StatementStatement of Cash FlowsAssets=Liabilities+Stockholders’ EquityCash+Accounts Receivable=Accounts Payable+Common Stock+Retained EarningsRevenue−Expense=Net IncomeA. +Decrease= + +Decrease −Increase=DecreaseDecrease OAB. +Decrease= + +Decrease −Increase=Decrease C.Increase+Decrease= + +Decrease −Increase=DecreaseIncrease OAD. + =Increase+ +Decrease −Increase=Decrease

A company uses the effective interest method to amortize a bond premium. Which of the following statements is true regarding the carrying value of the bond?

Perry Corporation was established on January 1, Year 1 when it issued 21,600 shares of $50 par, 5 percent, cumulative preferred stock and 62,000 shares of $10 par common stock. The company’s earnings history is as follows: Year 1$112,320Net lossYear 2$190,000Net incomeYear 3$200,000Net income The corporation paid the maximum amount of dividends possible in each year of operation. The dividend paid to common stockholders at the end of Year 3 is

Perry Corporation was established on January 1, Year 1 when it issued 21,800 shares of $50 par, 5 percent, cumulative preferred stock and 66,000 shares of $10 par value common stock. The company’s earnings history is as follows: Year 1$121,360Net lossYear 2$200,000Net incomeYear 3$210,000Net income The corporation paid the maximum amount of dividends possible in each year of operation. The dividend paid to preferred stockholders at the end of Year 2 is

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,425,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $370,000; Building, $1,100,000 and Equipment, $730,000.What value will be reported for the land on the balance sheet?Note: Round intermediate percentage values to a whole percentage. Do not round other intermediate calculations.