Questions and Answers of Accounting Principles Volume 2

For each of the following transactions, indicate whether it will increase (+), decrease (−), or have no effect (NE) on a company’s cash flows: a. _______ Repayment of a mortgage
Lui Inc. reported the following for the fiscal year 2024: Additional information: 1. Accounts receivable decreased by $21,000 during the year. 2. Inventory increased by $32,000 during
An analysis of the comparative balance sheet, the current year’s income statement, and the general ledger accounts of Wellman Corp. uncovered the following items. Assume all items involve cash
Classify each of the following transactions as an operating (O), investing (I), financing (F), or significant noncash investing and financing activity (NC). If a transaction does not belong in any of
Molloy Ltd. reported the following for the fiscal year 2024: Additional information: 1. Accounts receivable decreased by $15,000 during the year. 2. Inventory increased by $7,000
Andrew Peller Limited is a leading producer and marketer of wines in Canada, with wineries in British Columbia, Ontario, and Nova Scotia. The company’s March 31, 2020, balance sheet reported
The following T-account is a summary of the Cash account of Atwal Company. The company prepares its financial statements using ASPE: Instructions a. What amount of net cash provided (used)
Sable Island Ltd. is a private company reporting under ASPE. Its income statement contained the following condensed information: Sable Island’s balance sheet contained the following
Identify and describe the differences among the three types of activities reported in the cash flow statement. Give an example of each.
Trudeau Inc. is a private company reporting under ASPE. The following selected account balances were reported in Trudeau Inc.’s financial statements at year end: Additional
Bird Corp., a private company reporting under ASPE with a December 31 year end, reported the following in its financial statements: Additional information: 1. Purchased land for $50,000 and
Indicate whether each of the following transactions would be added to (+) or subtracted from (−) profit in determining the cash provided (used) by operating activities using the indirect
The current sections of Scooters Rentals balance sheets at December 31, 2024 and 2023, are presented here. Scooters’ profit for 2024 was $153,000. Depreciation expense was
Presented below are the financial statements of Gaudette Ltd.Additional information: 1. Dividends of $33,000 were declared and paid. Gaudette reports under IFRS and does not report dividends as
The following are the financial statements of Gil Ltd. Additional information: 1. Dividends declared and paid were $20,000. Gil reports under IFRS and does not report dividends as operating
Diamond Ltd. reported profit of $850,000 for the year ended November 30, 2024. Depreciation Expense for the year was $175,000, Accounts Receivable increased by $80,000, Prepaid Expenses decreased by
Strong Shoes Limited’s comparative balance sheet is presented below. Strong reports under ASPE. Additional information: 1. Profit for the year was $28,300. Dividends declared and paid
Condensed financial data of Wanwright Corp. are shown below. Wanwright reports under ASPE.Additional information: 1. New plant assets costing $141,000 were purchased for cash during the
The comparative balance sheets for Gale Company show these changes in noncash current asset accounts: Accounts Receivable increased $80,000, Prepaid Expenses decreased $28,000, and Inventory
The comparative balance sheets for Chas Company show these changes in noncash current accounts: Accounts Receivable increased $35,500, Prepaid Expenses decreased $12,800, and Inventory decreased
Coyote Ltd., a private company reporting under ASPE, reported the following for the years ended May 31, 2024 and 2023. Additional information: 1. Profit for 2024 was $108,000. 2.
King Corp., a private company reporting under ASPE, reported the following for the years ended July 31, 2024 and 2023: Additional information: 1. Profit for 2024 was $106,500. 2.
Dupré Corp. is a private company reporting under ASPE. The following selected accounts are from the general ledger for the year ended December 31, 2024 Additional information: July 31
Singh Ltd. reported the following information in its balance sheet and income statement for the year ended March 31, 2024:Calculate the net cash provided (used) by operating activities using the
The following information is provided for Charlie’s Chocolate Corporation, which reports under ASPE: Additional information: 1. Profit for 2024 was $113,625. 2. Common shares were
The following information is provided for Carla’s Cleaning Corp., which reports under ASPE:Additional information: 1. Profit for 2024 was $110,625. 2. Common shares were issued for
The following information is available for Singh Corporation for the year ended December 31, 2024: Beginning cash balance ..................................................... $
The T accounts for equipment and the related accumulated depreciation for Meyer Corporation are as follows: In addition, Meyer’s income statement reported a loss on the sale of equipment of
Presented below are the comparative balance sheets and income statement for Wayfarer Inc., a private company reporting under ASPE. Additional information: 1. Cash dividends of $10,800 were
Lu Corporation’s comparative balance sheet is presented below. Additional information: 1. Profit for the year was $22,630. Dividends declared and paid were $19,500. 2. No noncash
Presented below is the comparative balance sheet for Spicer Inc., a private company reporting under ASPE, at December 31, 2024 and 2023:Additional information: 1. Cash dividends of $15,000 were
The Retained Earnings account for Luo Company at the end of 2024 is shown here: What amount was reported on the cash flow statement as “cash dividends” assuming there was no balance at the
The financial statements of Oakley Ltd., a private company reporting under ASPE, follow: Additional information: 1. Short-term notes receivable are loans to other companies. During the
The financial statements of Milk River Ltd. follow: Additional information: 1. Equipment costing $24,000 was purchased with an $8,000 down payment and the remainder was financed with a note
Preferred Homes Ltd., a private company reporting under ASPE, reported the following for the year ended September 30, 2024: Additional information: 1. Equipment was purchased for
Selected information follows for Cheema Select Corporation at December 31: Additional information: 1. Land was sold for cash at a gain of $35,000. 2. Equipment was bought for
Environmental Equipment Ltd. reported $500,000 of sales on its income statement and $475,000 of cash collected from customers on its cash flow statement. Provide reasons why cash collected from
The following was reported in Barnett Ltd.’s 2024 financial statements: Calculate cash payments for dividends. Dividends payable Retained earnings Profit for the year 2024 $
The following information is provided for Jolly Ltd. Additional information: 1. Profit for 2024 was $93,000. 2. Depreciation expense was $34,000. 3. Cash dividends of $39,000 were
Selected information (in millions) for two close competitors, Manulife Financial Corporation and Great-West Life Assurance Company, follows for the year ended December 31,
AN Selected information for two railway competitors, Canadian Pacific Railway Limited (CP) and Canadian National Railway Company (CN), in millions of dollars, follows for the year ended December 31,
Contrast the advantages and disadvantages of the direct and indirect methods of preparing the cash flow statement. Are both methods acceptable? Which method is preferred by standard setters? Which
Selected information follows for Cheema Select Corporation at December 31: Additional information: 1. Principal payments on the mortgage payable were $25,000. 2. A building was
Considering both the indirect and direct method, explain how the sale of equipment at a gain is reported on a cash flow statement. Do the same for the sale of equipment at a loss.
Westcoast Corporation reported the following in its December 31, 2024, financial statements. Calculate the cash receipts from customers. Accounts receivable balance, December 31 Sales
Hudson Ltd. is a private company reporting under ASPE. Its income statement and changes in current assets and current liabilities for the year are reported below: Instructions Prepare the
The following information is taken from the general ledger of Robin Limited:Instructions Using the direct method, calculate: a. Cash receipts from customers b. Cash payments to
Macgregor Company completed its first year of operations on December 31, 2024. Its initial income statement showed that Macgregor had revenues of $192,000 and operating expenses of $78,000. Accounts
Winter Sportswear Inc. reported the following in its December 31, 2024, financial statements. Calculate (a) The cost of goods purchased.(b) Cash payments to suppliers. Inventory Accounts
The following information is taken from the 2024 general ledger of Gallop Design Company:Instructions In each case, calculate the amount that should be reported in the operating activities
ICE Inc. reported the following in its December 31, 2024, financial statements. Calculate the cash payments to employees. Salaries payable Salaries expense 2024 $ 2,500 188,000 2023 $4,000
How is it possible for a company to report positive net cash from operating activities but have a negative free cash flow?
Linus Corporation reported the following in its March 31, 2024, financial statements. Calculate the cash payments for operating expenses. Prepaid expenses Accrued expenses payable Operating
Home Grocery Corporation reported the following in its 2024 financial statements. Calculate the cash payments for income tax. Income tax payable Income tax expense 2024 $17,000 90,000 2023 $8,000
Selected information for a recent year follows for Bank of Montreal and Scotiabank (in millions):Instructions a. Calculate the increase or decrease in cash for each company. b. Calculate
Hill Corporation reported net cash provided by operating activities of $360,000, net cash used by investing activities of $250,000, and net cash provided by financing activities of $70,000. Dividends
On January 1, 2024, Global Satellites Ltd. issued $1.4-million, 10-year bonds. The bonds pay semi-annual interest on July 1 and January 1, and Global has a December 31 year end. A partial bond
Nick Bosch has prepared the following list of statements about bonds. 1. Bonds are a form of interest-bearing notes payable. 2. Secured bonds have specific assets of the issuer pledged as
State whether each of the following statements is true or false. 1. A disadvantage of issuing bonds is that it puts current shareholders at risk of losing full control of the company. 2.
On May 1, 2024, Herron Corp. issued $600,000 of 9%, 5-year unsecured bonds at face value. The bonds were dated May 1, 2024, and pay interest annually on May 1. Financial statements are prepared
On January 1, 2024, Ponasis Corporation issued $2.5-million, 10-year bonds. The bonds pay semi-annual interest on July 1 and January 1, and Ponasis has a December 31 year end. Presented below is a
On March 1, 2024, Jade Corp. issued $200,000 of 7%, 5-year unsecured bonds at face value. The bonds were dated March 1, 2024, and pay interest semi-annually on March 1 and September 1. Financial
Precision Inc. issued $900,000 of 10-year, 3% bonds on January 1, 2024. Interest is to be paid semi-annually. The market interest rate was 4%. a. What is the face value of the bond? When will
Paris Products Ltd. issued $3 million of 5%, 5-year bonds on January 1, 2024. The bonds were dated January 1 and pay interest annually. There is no collateral secured against the bonds and Paris
Carvel Corp. issued $500,000 of 10-year, 5% bonds with interest payable semiannually. How much did Carvel receive from the sale of these bonds if the market interest rate was (a) 4%, (b)
Whittemore Corp. issued $500,000 of 3-year, 4% bonds on May 1, 2024. The market interest rate when the bonds were issued was 6%. Interest is payable quarterly. Instructions a. What is the
The following terms are important in issuing bonds: (a) Face value, (b) Contractual interest rate(c) Bond certificate. Explain each of these terms.
Universal Corporation issued $2 million of 5%, 10-year bonds on January 1, 2024. The bonds were dated January 1 and pay interest annually. There is no collateral secured against the bonds and
Colton Cars Co. issued $1.8 million of 5%, 5-year bonds on January 1, 2024. The bonds were dated January 1 and pay interest annually. The bonds are secured with real estate holdings. The market
Sam Masasi, president of Masasi Corporation, is considering the issuance of bonds to finance an expansion of his business. He has asked you to (1) Discuss the advantages of bonds over common
Central College is about to issue $1 million of 10-year bonds that pay a 4% annual interest rate, with interest payable semi-annually. Instructions Calculate the issue price of these bonds
Laudie Ltd. issued $400,000 of 5%, 5-year bonds on January 1, 2024. Interest is payable semi-annually. Instructions Calculate the price of the bond and prepare the journal entry to record
Glover Corporation issued $3.5 million of 6%, 5-year bonds on January 1, 2024. The bonds were dated January 1 and pay interest annually. Glover has a December 31 year end. The bonds are secured with
On May 1, 2024, MEM Corp. issued $900,000 of 5-year, 5% bonds at $861,614. This price resulted in an effective interest rate of 6% on the bonds. The bonds pay interest semi-annually on May 1. MEM’s
Randle Inc. issues $300,000 of 10-year, 8% bonds at 98. Prepare the journal entry to record the sale of these bonds on March 1, 2024.
As indicated in the “All About You” feature in this chapter, a student can benefit from financial leverage by borrowing to pay for an education. However, too much leverage can result in graduates
Lombard Corporation issued $400,000 of 5%, 10-year bonds on January 1, 2024, at face value. Interest is payable annually on January 1, 2025. Instructions Prepare the journal entries to
Explain how the price of a bond is determined.
On October 1, 2024, PFQ Corp. issued $250,000, 7%, 10-year bonds at $268,400. This price resulted in a 6% effective-interest rate. The bonds pay interest annually on October 1. PFQ’s year end is
On July 1, 2024, Webhancer Corp. issued $4 million of 10-year, 5% bonds at $4,327,029. This price resulted in a 4% market interest rate on the bonds. The bonds pay semi-annual interest on July 1 and
Price Corporation issues $400,000 of 20-year, 7% bonds at 101. Prepare the journal entry to record the sale of these bonds on June 1, 2024.
On September 1, 2024, Praise Corporation issued $600,000 of 10-year, 3% bonds at 96. Interest is payable semi-annually on September 1 and March 1. Praise’s fiscal year end is February
Kershaw Electric Ltd. sold $6 million of 10%, 10-year bonds on January 1, 2024. The bonds were dated January 1, 2024, and pay interest on January 1. The bonds were sold at
Janet, Brian, and Natalie have recently negotiated a contract to provide all-natural granola bars on a weekly basis to a number of coffee shops in their area. As a result of the anticipated demand
On July 1, 2024, Waubonsee Ltd. issued $3.2 million of 10-year, 6% bonds at $3,449,427. This price resulted in a market interest rate of 5%. The bonds pay semi-annual interest on July 1 and January
Bight Corporation issued $400,000 of 5-year bonds on April 1, 2023. Interest is paid semi-annually on April 1 and October 1. Below is a partial amortization schedule for the first few years of the
On January 1, 2024, DC Ltd. issued bonds with a maturity value of $8 million when the market rate of interest was 4%. The bonds have a coupon (contractual) interest rate of 5% and mature on January
Frankum Corporation has issued three different bonds during 2024. Interest is payable annually on each of these bonds. Calculate the price of the bonds and prepare the journal entry to record each
On July 31, 2024, Mooney Inc. issued $500,000 of 5-year, 4% bonds at 102. Interest is payable semi-annually on July 31 and January 31. Mooney’s fiscal year end is January
On January 1, 2024, Vision Inc. issued bonds with a maturity value of $5 million when the market rate of interest was 5%. The bonds have a coupon (contractual) interest rate of 4% and mature on
A partial bond amortization schedule for $2-million, 5-year bonds is presented below: a. Fill in the missing words or amounts for items [1] through [6]. b. What is the bonds’ face
Windsor Corporation issues $500,000 of 9%, 5-year bonds on January 1, 2024, at 104. If Windsor uses the effective-interest method in amortizing the premium, will the annual interest expense increase
Lopez Co. sold $600,000 of 9%, 10-year bonds on January 1, 2024. The bonds were dated January 1, and interest is paid on January 1 and July 1. The bonds were sold at 105. Instructions a.
Peter Furlong has just approached a venture capitalist for financing for his sailing school. The lenders are willing to lend Peter $120,000 in exchange for a note payable at a high-risk interest rate
A local company has just approached a venture capitalist for financing to develop a ski hill. On April 1, 2024, the venture capitalist lent the company $1 million at an interest rate of 5%. The loan
A partial bond amortization schedule for GreenLeaf Corp. is provided below. GreenLeaf has a December 31 year end. a. Was the bond issued at a premium or discount? b. Record the interest
Messer Company issued $600,000 of 8%, 5-year bonds on January 1, 2024. The bonds pay interest annually. Instructions a. Assuming the market interest rate on January 1, 2024, was 6%,
Solar Power Corporation purchased equipment for $900,000 on September 30, 2024. The equipment was purchased with a $150,000 down payment and the issue of a $750,000, 3-year, 3.6% mortgage note
Olsen Well Services Ltd. purchased equipment for $905,000 on September 30, 2024. The equipment was purchased with a $137,000 cash down payment and through the issue of a $768,000, 5-year, 3.6%
Korman Company issued $800,000 of 7%, 5-year bonds on January 1, 2024. The bonds pay interest annually. Instructions a. Assuming the market interest rate on January 1, 2024, was 8%,

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