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Accounting
Inventory and receivable balances and gross profit data for Mountain Electric follow.Instructions:Compute the following ratios for 2011 and 2010.1. Accounts receivable turnover2. Average collection
The following data are taken from Clayburgh Corporation's records for the years ended December 31, 2011, 2010, and 2009.Instructions:1. Compute turnover rates for 2011 and 2010 for the following:(a)
The following are comparative data for Sunshine State Equipment, Inc., for the 3-year period 2009–2011.Instructions:1. From the foregoing data, calculate financial ratios for the three years
Use the comparative data for Sunshine State Equipment, Inc., as given in Problem 23-35. In addition, the year-end price per share of Sunshine’s stock was $50 for 2009, $25 for 2010, and $35 for
The following three ratios have been computed using the financial statements for the year ended December 31, 2011, for Fun Science Company:The following additional information has been assembled:(a)
Sample CPA Exam Questions1. A company pays $75,000 in cash to pay a current account payable. Would this transaction increase, decrease, or have no effect on the current ratio that now stands at
As the world economy becomes more integrated, one question facing financial analysts is whether financial ratios can be compared across national boundaries. For example, at one time the average P/E
Royer Donahoe owns two businesses, a drug store and a retail department store.Which business is more profitable? Which business is more efficient? Overall, which business would you consider to be a
Tony Christopher is analyzing the financial statements of Shaycole Company and has computed the following ratios.Andy Martinez, Tonys colleague, tells Tony that Shaycole looks great.
Judy Snow is considering investing $10,000 and wishes to know which of two following companies offers the better alternative.Hoffman Company earned net income of $63,000 last year on average total
Locate the 2007 financial statements for The Walt Disney Company on the Internet. Once you have located those financial statements, consider the following questions.1. Disney has four primary
Shown on the next page are comparative income statements for McDonald's for 2005, 2006, and 2007.1. There are two kinds of McDonald's restaurants'restaurants that McDonald's itself owns and
The following information is from the 2007 annual reports of The Coca-Cola Company and of PepsiCo (all amounts are in millions of U.S. dollars). The information for PepsiCo is separated into overall
Below are sales data, in nominal dollars, for Safeway, the supermarket chain, from 1981 through 2007 (in millions of U.S. dollars). In addition, the consumer price index (CPI) for each year is given
Roaring Springs Booksellers is a mail-order book company. Customers choose their purchases from a catalog and send in their order by mail, fax, phone, or e-mail. Roaring Springs then assembles the
What securities fall under the scope of FASB Statement No. 115?
What criteria must be met for a security to be classified as held to maturity?
What criteria must be met for a security to be classified as a trading security?
What is “the fair value option”?
How does the classification of investment securities under International Financial Reporting Standards (trading, available for sale, and held to maturity) differ from the classification under U.S.
(a) When computing the price to be paid for a debt security, the stated rate of interest is used to determine what value? (b) How does the market or effective rate affect a debt security’s value?
How does one compute the interest revenue to be recognized on a debt security if the effective-interest method is being used?
What other factors are considered when determining whether effective control exists when the investor does not possess absolute voting control?
(a) What factors may indicate the ability of an investor owning less than a majority voting interest to exercise significant influence on the investee’s operating and financial policies?(b) What
How is a joint venture a form of off-balance-sheet financing?
In the United States, we use the term “equity method investee” to describe a company in which another company has purchased between 20 and 50% of the shares and is thus able to exert significant
How are changes in value reported in the financial statements for trading securities? Available-for-sale securities? Held-to-maturity securities?
What type of account is Market Adjustment? How is it disclosed on the financial statements?
How is an “other-than-temporary” decline in the value of investments recorded?
What impact does the sale of investment securities during the year have on the computation of unrealized gains and losses on trading securities? On unrealized increases and decreases on
What is a QSPE?
When transferring securities between categories under the provisions of FASB Statement No. 115, how is the transfer accounted for? At what value are the securities recorded?
How are realized gains and losses on trading securities handled in the statement of cash flows? How are unrealized gains and losses on trading securities handled?
Are trading, available-for-sale, and held-to-maturity securities disclosed on the balance sheet as current or long-term assets?
Where are the cash flow effects of purchases and sales of equity securities reported?
What additional disclosures are recommended under FASB Statement No. 115 for trading, available-for-sale, and held-to-maturity securities?
Why is the impairment of a loan accounted for differently from the decline in value of a debt security?
On January 1, Issuing Company issued $50,000 in debt securities. The stated interest rate on the debt securities is 8%, with interest payable semiannually, on June 30 and December 31. On February 1,
The company purchased 2,000 shares of equity securities for $27 per share. The shares were purchased as an available-for-sale investment. The broker’s commission on the purchase was $300. Make the
On January 1, the company purchased debt securities with a face value of $100,000. The securities mature in seven years. The securities have a stated interest rate of 8%, and interest is paid
On January 1, the company purchased debt securities for cash of $25,518. The securities have a face value of $20,000, and they mature in 15 years. The securities have a stated interest rate of 10%,
Identify how each of the following investments in equity securities should be classified by the investorcompany:
The company owns 1,000 shares of Stock A and 3,000 shares of Stock B. The company received dividends of $1.75 per share from Stock A and $0.97 per share from Stock B. The company classifies Stock A
On January 1 of Year 1, Burton Company purchased 2,000 shares of the 8,000 outstanding shares of Company A for a total of $27,000. The purchase price was equal to 25% of the book value of Company
On January 1 of Year 1, Stratton Company purchased 5,000 shares of the 15,000 outstanding shares of Company B for a total of $82,000. At the time of the purchase, the book value of Company B’s
On January 1 of Year 1, Dridge Company purchased 2,500 shares of the 10,000 outstanding shares of Company C for a total of $100,000. At the time of the purchase, the book value of Company C's equity
On December 1, the company purchased securities for $4,000. On December 31, the company still held the securities. Make the necessary adjusting journal entry to record a change in value of the
Refer to Practice 14–10. Make the adjusting journal entries for (a) and (b) and the computations for (c) and (d), assuming that the securities are classified as available for sale.
Refer to Practice 14–10. Make the adjusting journal entries for (a) and (b) and the computations for (c) and (d), assuming that the securities are classified as held to maturity. The changes in
Refer to Practice 14–10. Make the adjusting journal entries for (a) and (b) and the computations for (c) and (d), assuming that the securities are accounted for using the equity method. Ignore the
During Year 1, the company purchased 1,000 shares of stock for $23 per share. Near the end of Year 1, the company sold 400 shares. Make the journal entry to record the sale, assuming that the shares
The company purchased the following securities during Year 1:On July 23, Year 2, the company sold all of the shares of security B for a total of $9,500. As of December 31, Year 2, the shares of
The company purchased the following securities during Year 1:In Year 2, the company reclassified both of these securities. Security A was reclassified as available for sale; the fair value of
The company purchased the following securities during Year 1:In Year 2, the company reclassified both of these securities. Security A was reclassified as held to maturity; the fair value of security
The company entered into the following transactions during the year:Purchase of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $400Sale of investment securities . . .
Refer to Practice 14–18. Assume that the securities are classified as trading and that they were purchased for operating purposes. Compute (1) Cash flow from operating activities and (2) Cash flow
During Year 1, Walters Company purchased 6,000 shares of Company A common stock for $25 per share and 10,000 shares of Company B common stock for $32 per share. These investments are classified as
On January 1 of Year 1, the lending company made a $10,000, 8% loan. The $800 interest is receivable at the end of each year, with the principal amount to be received at the end of five years. As of
Refer to Practice 14–21. Make all journal entries necessary on the lending company’s books in connection with the loan during Year 2, Year 3, Year 4, and Year 5. Assume that all cash payments are
The following transactions of Kelsey, Inc., occurred within the same accounting period:(a) Purchased $55,000 U.S. Treasury 6% bonds, paying 102 plus accrued interest of $1,400. In addition, Kelsey
During January 2011, Aragorn Inc. purchased the following securities:During 2011, Aragorn received interest from Mirkwood and the U.S. Treasury totaling $3,630. Dividends received on the stock held
For each of the following independent situations, determine the appropriate accounting method to be used: cost or equity. For cost method situations, determine whether the security should be
On January 10, 2011, Delta Corporation acquired 12,000 shares of the outstanding common stock of Kennedy Company for $600,000. At the time of purchase, Kennedy Company had outstanding 48,000 shares
Alpha Co. acquired 20,000 shares of Beta Co. on January 1, 2010, at $12 per share. Beta Co. had 80,000 shares outstanding with a book value of $800,000. The difference between the book value and fair
On January 3, 2011, McDonald Inc. purchased 40% of the outstanding common stock of Old Farms Co., paying $128,000 when the book value of the net assets of Old Farms equaled $250,000. The difference
On January 1, 2011, Randy Incorporated purchased $500,000 of 20-year, 10% bonds when the market rate of interest was 8%. Interest is to be paid on June 30 and December 31 of each year.1. Prepare the
On January 1, 2011, Cougar Creations Inc. purchased $100,000 of 5-year, 8% bonds when the effective rate of interest was 10%, paying $92,277. Interest is to be paid on July 1 and December 31.1.
Using the information from Exercise 14–30, provide the journal entry that would be necessary to properly value the debt security if, on December 31, 2011, the bond’s fair value was $96,500.
During 2011, Litten Company purchased trading securities as a short-term investment. The costs of the securities and their fair values on December 31, 2011, follow:At the beginning of 2011, Litten
During 2010, Spelling Inc. purchased the following trading securities:At the beginning of 2010, Spelling had a zero balance in Market AdjustmentTrading Securities.1. What entry would be
American Steel Corp. acquired the following securities in 2011:At the beginning of 2011, American Steel had a zero balance in each of its market adjustment accounts.1. What entry or entries would be
The securities portfolio for Malibu Industries contained the following trading securities:1. Assuming that all changes in fair value are considered temporary, what is the effect of the changes in
Kyoto Inc. had the following portfolio of securities at the end of its first year of operations:1. Provide the entry necessary to adjust the portfolio of securities to its fair value.2. In the
Bicknel Technologies Inc. purchased the following securities during 2010:At the beginning of 2010, Bicknel Technologies had a zero balance in each of its market adjustment accounts. During 2011,
Truss Builders Co. reported the following selected balances on its financial statements for each of the four years 20092012:Based on these balances, reconstruct the valuation entries
During 2010, the first year of its operations, Profit Industries purchased the following securities:During 2011, Profit sold one-half of security A for $8,000 and one-half of security D for
Indicate how each of the following transactions or events would be reflected in a statement of cash flows prepared using the indirect method. Each transaction or event is independent of the others.
Miss Maggie Company entered into the following transactions during the year:Purchase of trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500Sale of
Tortuga Enterprises loaned $350,000 to Turner Inc. on January 1, 2010. The terms of the loan require principal payments of $70,000 each year for five years plus interest at the market rate of
Fox Company made the following transactions in the common stock of NOP Company:July 10, 2009 Purchased 10,000 shares at $45 per share.Sept. 29, 2010 Sold 2,000 shares for $51 per share.Aug. 17, 2011
Myers & Associates reports the following information on its December 31, 2009, balance sheet:Trading securities (at cost) . . . . . . . . . . . . . . . . . . . . . . . . . $225,850Less: Market
During 2011, Rooster Company purchased 5,000 shares of Hen Company common stock for $18 per share and 3,200 shares of Egg Company common stock for $21 per share. These investments are intended to be
On December 31, 2009, Durst Company's balance sheet showed the following balances related to its securities accounts:Durst's securities portfolio on December 31, 2009, was made up of the following
During 2011 and 2012, Foley Co. made the following journal entries to account for transactions involving trading securities:The beginning balance in Market Adjustment'Trading Securities was a $900
The investment portfolio of Morris Inc. on December 31, 2010, contains the following securities:Opus Co. common, 3% ownership, 5,000 shares; cost, $100,000; fair value, $95,000; classified as a
Both Seco Inc. and Hillsborough Corp. have 100,000 shares of no-par common stock outstanding. World Inc. acquired 10,000 shares of Seco stock for $6 per share and 30,000 shares of Hillsborough stock
On January 1, 2011, Standard Co. bought 40% of the outstanding common stock of Exchange Corp. for $380,000 cash. Standard Co. accounts for this investment by the equity method. At the date of
On July 1 of the current year, Melissa Co. acquired 25% of the outstanding shares of common stock of International Co. at a total cost of $700,000. At the time, the equity (net assets) of Melissa
JJJ Inc. purchased 35% of ABC Co. on January 4, 2011, for $280,000 when ABC's book value was $810,000. On that day, the fair value of the net assets of ABC equaled their book values with the
Willow Creek Incorporated had the following portfolio of securities on December 31, 2010:The balances in the market adjustment accounts as of January 1, 2010, were as follows:Market
Trans America Trust Co. owns both trading and available-for-sale securities. The following securities were owned on December 31, 2010:The following transactions occurred during 2011:(a) Sold 500
On January 2, 2009, Weston Company acquired 20% of the 200,000 shares of outstanding common stock of Startile Corp. for $18 per share. The purchase price was equal to Startile's underlying book
Julie Company came into existence with a $2,000 cash investment by owners on January 1, 2011, and entered into the following transactions during 2011:Sales . . . . . . . . . . . . . . . . . . . . . .
1. A company should report the marketable equity securities that it has classified as trading at:(a) Lower of cost or market, with holding gains and losses included in earnings.(b) Lower of cost or
Halstead Associates loaned Stevens Company $600,000 on January 1, 2009. The terms of the loan were payment in full on January 1, 2014, plus annual interest payments at 10%. The interest payment was
The movement toward the use of fair value for investments has been given the label “mark to market.” Previously, marketable equity securities were valued at the lower of cost or market. The shift
In 1986, The Coca-Cola Company borrowed $2.4 billion to purchase several large soft drink bottling operations. Then a separate company, Coca-Cola Enterprises, was formed to bottle and distribute Coke
International Inc. owns companies or the stock of companies in countries all over the world. International is reviewing its methods of accounting for those companies and has asked you to provide
Logical Corporation, a producer of medical products, disclosed the following investments in affiliates in the notes to its July 31, 2011, financial statements:Discuss the factors that determine
You have been approached about doing a consulting job for Choi Hung Company, which is based in southern China. Choi Hung reports its financial results using International Financial Reporting
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