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accounting

Questions and Answers of Accounting

On the first day of the fiscal year, a company issues $55,000, 9%, five-year installment notes that have annual payments of $ 14,140. The first note payment consists of $4,950 of interest and $9,190
Katula Company reported the following on the company's income statement in 2012 and 2011: a. Determine the number of times interest charges were earned for 2011 and 2012. Round to on decimal
March Products, Inc., reported the following on the company's income statement in 2012 and 2011: a. Determine the number of times interest charges were earned for 2011 and 2012, Round to one
Determine the present value of $750,000 to be received in three years, using an interest rate of 12%, compounded annually. a. Use the present value table in Exhibit 4. b. Why is the present value
Determine the present value of $150,000 to be received at the end of each of four years, using an interest rate of 7% compounded annually, as follows:a. By successive computations, using the present
Assume the same data as in Appendix 1 Exercise 12-19, except that the current interest rate is 13%.Will the present value of your winnings using an interest rate of 13% be one half the present value
Baliga Co. produces and sells high-quality audio equipment. To finance its operations, Baliga Co. issued $18,000,000 of five-year, 8% bonds with interest payable semiannually at a market (effective)
Herbst Co. issued $800,000,000 of five-year, 13% bonds with interest payable semiannually, at a market (effective) interest rate of 11%. Determine the present value of the bonds payable, using the
On the first day of its fiscal year, Ramsey Company issued $35,000,000 of 10-year, 9% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective)
Knight Corporation wholesales auto parts to auto manufacturers. On March 1,2012, Knight Corporation issued $ 17,500,000 of five-year, 12% bonds at a market (effective) interest rate of 10%, receiving
Evans Co produces and sells motorcycle parts. On the first day of its fiscal year, Evans Co. issued $50,000,000 of five-year, 14% bonds at a market (effective) interest rate of 12%, with interest
Lewis Co. produces and sells aviation equipment. On the first day of its fiscal year, Lewis Co. issues $60,000,000 of five-year, 10% bonds at a market (effective interest rate of 13%, with interest
Three different plans for financing a $200,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount,
On July 1, 2012, Bliss industries Inc. issued $24,000,000 of 20-year, 11% bonds at a market (effective) interest rate of 14%, receiving cash of $19,200,577. Interest on the bonds is payable
Fabulator, Inc. produces and sells fashion clothing. On July 1, 2012, Fabulator, Inc. issued $120,000,000 of 20-year, 14% bonds at a market (effective) interest rate of 11%, receiving cash of
Three different plans for financing a $40,000,000 corporation are under consideration by its organizers, under each of the following plans, the securities will be issued at their par of face amount,
On July 1, 2012, Hallo Corporation, a wholesaler of communication equipment, issued $34,000,000 of 20-year, 12% bonds at a market (effective) interest rate of 13%, receiving cash of $31,595,241.
Buddie Corporation Produces and sells baseball gloves. On July 1, 2012, Budddie Corporation issued $12,500,000 of 10-year, 14% bonds at a market (effective) interest rate of 12%, receiving cash of
General Electric Capital, a division of General Electric, uses long-term debt extensively. In a recent year, GE Capital issued $11 billion in long-term debt to investors, then within days filed legal
Juicy Energy Industries develops and produces biomass, an alternative energy source. The company has an outstanding $10,000,000, 30-year, 10% bond issue dated July 1, 2007. The bond issue is due June
Bailey Mills recently won the jackpot in the New Jersey lottery while he was visiting his parents. When he arrived at the lottery office to collect his winnings, he was offered the following three
A stockbroker advises a client to “buy preferred stock with that type of stock, [you] will never have to worry about losing the dividends.” Is the broker right?
Financial statement data for years ending December 31 for Jardine Company are shown below. a. Determine the earnings per share for 2012 and 2011.b. Does the change in the earnings per share from
Financial statement data for years ending December 31 for Duffner Company are shown below. a. Determine the earnings per share for 2012 and 2011.b. Does the change in the earnings per share from
Baxter Inc., a developer of radiology equipment, has stock outstanding as follows: 18,000 shares of cumulative 2%, preferred stock of $75 par, and 40,000 shares of $10 par common. During its first
Wings Inc., a software development firm, has stock outstanding as follows: 25,000 shares of cumulative 1% preferred stock of $40 par, and 50,000 shares of $120 par common. During its firs four years
On January 14, Mountain Rocks Inc., a marble contractor, issued for cash 24,000 shares of $25 par common stock at $32, and on March 17, it issued for cash 60,000 shares of $10 par preferred stock at
On July 12, Lasting Carper Inc., a carpet wholesaler, issued for cash 300,000 shares of no-par common stock (with a stated value of $4) at $9, and on November 18, it issued for cash 40,000 shares of
On April 15, Hass Corporation, a wholesaler of hydraulic lifts, acquired land in exchange for 17,500 shares of $20 par common stock with a current marker price of $30. Journalize the entry to record
Fantastic Sounds Corp., an electric guitar retailer, was organized by Pam Mikhail, Jane Lo, and Dale Nadal. The charter authorized 400,000 shares of common stock with a par of $50. The following
Wildwood Nursery, with an authorization of 50,000 shares of preferred stock and 400,000 shares of common stock, completed several transactions involving its stock on June1, the first day of
Baird Products Inc., a wholesaler of office products, was organized on January 30 of the current year, with an authorization of 80,000 shares of 2% preferred stock, $75 par and 800,000 shares of $20
The declaration, record, and payment dates in connection with a cash dividend of $365,850 on a corporation’s common stock are April 1, May 1, and June 3. Journalize the entries required on each
Organic Life Co. is an HMO for businesses in the Portland area. The following account balances appear on the balance sheet of Organic Life Co: Common stock (250,000 shares authorized), $125 par,
Deer Creek Inc. bottles and distributes spring water. On April 27 of the current year, Deer Creek reacquired 15,000 shares of its common stock at $60 per share. On July 13, Deer Creek sold 9,000 of
Golden Gardens Inc. develops and produces spraying equipment for lawn maintenance and industrial uses. On June 19 of the current year, Golden Gardens Inc. reacquired 24,000 shares of its common stock
Conyers Water Inc. bottles and distributes spring water. On July 5 of the current year, Conyers Water Inc, reacquired 12,500 shares of its common stock at $80 per share. On November 3, Conyers Water
The following accounts and their balances were selected from the unadjusted trial balance of CW Group Inc., a freight forwarder, at March 31, the end of the current fiscal year:Preferred 1% Stock,
The following accounts and their balances appear in the ledger of Cline Properties Inc. on April 30 of the current year:Common Stock, $90 par...................$2,700,000Paid-In Capital in Excess of
Furious and Fast Car Inc. retails racing products for BMWs, porsches, and Ferraris. The following accounts and their balances appear in the ledger of Furious and Fast Car Inc. on November 30, the end
Sandusky Corporation, a manufacturer of industrial pumps, reports the following results for the year ending October 31, 2012:Retained earnings, November 1, 2011...............$796,750Net
List the errors in the following Stockholders?? Equity section of the balance sheet prepared as of the end of the current year.
The stockholders?? equity T accounts of Life??s Greeting Cards Inc. for the current fiscal year ended December 31, 2012, are as follows. Prepare a statement of stockholders?? equity for the fiscal
The following selected accounts appear in the ledger of Patton Environmental Inc. on July 1, 2012, the beginning of the current fiscal year:Preferred 2% Stock, $75 par (40,000 shares
Tolbert Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of Tolbert Enterprises Inc., with balances on January 1,2012, are as follows:Common Stock, $10 stated
Selected transactions completed by Big Water Boating Corporation during the current fiscal year are as follows:Jan. 3. Split the common stock 3 for 1 and reduced the par from $90 to $30 per share.
Boise Bike Corp. manufactures mountain bikes and distributes them through retail outlets in Montana, Idaho, Oregon, and Washington. Boise Bike Corp. had declared the following annual dividends over a
Picasso Optics produces medical lasers for use in hospitals. The accounts and their balances appear in the ledger of Picasso Optics on November 30 of the current year as follows:Preferred 2% stock,
Daley Welding Corporation sells and services pipe welding equipment in Illinois. The following selected accounts appear in the ledger of Daley Welding Corporation on May 1, 2012, the beginning of the
Ruffalo Enterprises Inc. produces aeronautical navigation equipment. The stockholders’ equity accounts of Ruffalo Enterprises Inc., with balances on January 1, 2012, are as follows:Common Stock, $8
Maui Outfitters Corporation manufactures and distributes leisure clothing. Selected transactions completed by Maui Outfitters during the current fiscal year are as follows:Feb 19. Split the common
Bernie Ebbers, the CEO of WorldCom, a major telecommunications company, was having personal financial troubles, Ebbers Pledged a large stake of his WorldCom stock as security for some personal loans.
Hazel Holden and Cedric Dalton are organizing Calgary Metals Unlimited Inc. to undertake a high-risk gold-mining venture in Canada. Hazel and Cedric tentatively plan to request authorization for
Are lessees more likely to be in higher or lower income tax brackets than lessors?
Consider the data in Problem 18-1. Assume that Reynolds’s tax rate is 40% and that the equipment’s depreciation would be $100 per year. If the company leased the asset on a 2-hear lease, the
Why do creditors usually accept a plan for financial rehabilitation rather than demand liquidation of the business?
Southwestern Wear Inc. has the following balance sheet: The trustee's costs total $281,250, and the firm has no accrued taxes or wages. The debentures are subordinated only to the notes payable. If
An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free rate is 6%, the expected return on the first factor (r1) is 12%, and the expected return on the second
An analyst has modeled the stock of a company using the Fama-French three-factor mode. The rest-free rate is 5%, the required market return is 10%, the risk premium for small stocks (rSMB) is 3.2%,
Stock A has an expected return of 12% and a standard deviation of 40%. Stock B has an expected return of 18% and a standard deviation of 60%. The correlation coefficient between Stocks A and B is
How are the accounts of investor and investee companies affected when the investor acquires stock from stockholders of the investee (for example, a New York Stock Exchange purchase)? Does this differ
Should goodwill arising from an equity investment of more than 20 percent be recorded separately on the books of the investor? Explain.
Under the fair value/cost method of accounting for stock investments, an investor records dividends received from earnings accumulated after the investment is acquired as dividend income. How does an
Describe the equity method of accounting.
Why is the equity method referred to as a “one-line consolidation”?
Is there a difference between the amount of a parent’s net income under the equity method and the consolidated net income for the same parent and its subsidiaries?
What is the difference in reporting income from a subsidiary in the parent’s separate income statement and in consolidated financial statements?
Cite the conditions under which you would expect the balance of an equity investment account on a balance sheet date subsequent to acquisition to be equal to the underlying book value represented by
What accounting procedures or adjustments are necessary when an investor uses the cost method of accounting for an investment in common stock and later increases the investment such that the equity
Ordinarily, the income from an investment accounted for by the equity method is reported on one line of the investor’s income statement. When would more than one line of the income statement of the
Describe the accounting adjustments needed when a 25 percent equity interest in an investee is decreased to a 15 percent equity interest.
Does cumulative preferred stock in the capital structure of an investee affect the way that an investor accounts for its 30 percent common stock interest? Explain.
Briefly outline the steps to calculate a goodwill impairment loss.
Is there any difference in computing goodwill impairment losses for a controlled subsidiary versus an equity method investment?
1. GAAP provides indicators of an investor’s inability to exercise significant influence over an investee. Which of the following is not included among those indicators?a. Surrender of significant
1. Invest Company owns 30 percent of Ali Corporation. During the year, Ali had net earnings of $200,000 and paid dividends of $18,000. Invest mistakenly recorded these transactions using the cost
Tre Corporation’s stockholders’ equity at December 31 consisted of the following (in thousands):Capital stock, $10 par, 60,000 shares issued and outstanding $ 600Additional paid-in capital
Calculate income for a midyear investment Car Corporation pays $600,000 for a 30 percent interest in Med Corporation on July 1, 2011, when the book value of Med's identifiable net assets equals fair
Dok Company acquired a 30 percent interest in Oak on January 1 for $2,000,000 cash. Assume the cost of the investment equals the fair value of Oak’s net assets. Dok assigned the $500,000 fair value
Man Corporation purchased a 40 percent interest in Nib Corporation for $1,000,000 on January 1, at book value, when Nibs’s assets and liabilities were recorded at their fair values. During the
1. On January 3, 2011, Han Company purchases a 15 percent interest in Ben Corporation’s common stock for $50,000 cash. Han accounts for the investment using the cost method. Ben’s net income for
Calculate investment balance four years after acquisition Ray Corporation owns a 40 percent interest in the outstanding common stock of Ton Corporation, having acquired its interest for $2,400,000 on
Run Company had net income of $400,000 and paid dividends of $200,000 during 2012. Run's stockholders' equity on December 31, 2011, and December 31, 2012, is summarized as follows (in
Arb Corporation acquired 25 percent of Tee Corporation's outstanding common stock on October 1, for $600,000. A summary of Tee's adjusted trial balances on this date and at December 31 follows (in
Summary balance sheet and income information for Pim Company for two years is as follows (in thousands): On January 2, 2011, Pim Corporation purchases 10 percent of Fed Company for $25,000 cash,
The stockholders’ equity of Tal Corporation at December 31, 2011, was $380,000, consisting of the following (in thousands):Capital stock, $10 par (24,000 shares outstanding)
BIP Corporation paid $390,000 for a 30 percent interest in Cow Corporation on December 31, 2011, when Cow’s equity consisted of $1,000,000 capital stock and $400,000 retained earnings. The price
Val Corporation paid $290,000 for 40 percent of the outstanding common stock of Wat Corporation on January 2, 2012. During 2012, Wat paid dividends of $48,000 and reported net income of $108,000. A
Par Corporation recorded goodwill in the amount of $100,000 in its acquisition of Sel Company in 2011. Par paid a total of $350,000 to acquire Sel. In preparing its 2012 financial statements, Par
Flash, Inc. has two primary business reporting units: Alfa and Beta. In preparing its 2012 financial statements, Flash conducts an annual impairment review of goodwill. Alfa has recorded goodwill of
Rit Corporation paid $1,372,000 for a 30 percent interest in Tel Corporation’s outstanding voting stock on April 1, 2011. At December 31, 2010, Tel had net assets of $4,000,000 and only common
Put Company paid $220,000 for an 80% interest in Sel Company on July 1, 2011, when Sel Company had total equity of $110,000. Sel Company reported earnings of $10,000 for 2011 and declared dividends
Vat Company acquired a 30 percent interest in the voting stock of Zel Company for $331,000 on January 1, 2011, when Zel’s stockholders’ equity consisted of capital stock of $600,000 and retained
Jack Corporation paid $380,000 for 40 percent of Jill Corporation’s outstanding voting common stock on July 1, 2011. Jill’s stockholders’ equity on January 1, 2011, was $500,000, consisting of
Quake Corporation paid $1,680,000 for a 30 percent interest in Tremor Corporation's outstanding voting stock on January 1, 2011. The book values and fair values of Tremor's assets and liabilities on
Pal Corporation purchased for cash 6,000 shares of voting common stock of Sap Corporation at $16 per share on July 1, 2011. On this date, Sap’s equity consisted of $100,000 of $10 par capital
Dil Corporation acquired 30 percent of the voting stock of Lar Company at book value on July 1, 2011. During 2013, Lar paid dividends of $160,000 and reported income of $500,000 as follows:Income
Jen Corporation became a subsidiary of Laura Corporation on July 1, 2011, when Laura paid $1,980,000 cash for 90 percent of Jen's outstanding common stock. The price paid by Laura reflected the fact
Tricia Corporation exchanged 40,000 previously unissued no par common shares for a 40 percent interest in Lisa Corporation on January 1, 2011. The assets and liabilities of Lisa on that date (after
Fred Corporation made three investments in Prima during 2011 and 2012, as follows: Prima's stockholders' equity on January 1, 2011, consisted of 20,000 shares of $10 par common stock and retained

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