Questions and Answers of Financial Accounting For MBA

Stocken Surf Shop began operations on July 1, 2010, with an initial investment of $\$ 50.000$. During the first three months of operations, the following cash transactions were recorded in the
Kadous Consulting, a firm started three years ago by K. Kadous, offers consulting services for material handling and plant layout. Its balance sheet at the close of 2010 follows.Earlier in the year
It is the end of the accounting year for Anne Beatty, controller of a medium-sized, publicly held corporation specializing in toxic waste cleanup. Within the corporation, only Beatty and the
Lowe's is the second-largest home improvement retailer in the world with 1,534 stores. During its fiscal year ended in 2008 , Lowe's purchased merchandise inventory at a cost of $\$ 32,023$ (
The adjusted trial balance as of December 31, 2009, for Hanlon Consulting contains the following selected accounts.Prepare entries to close these accounts in journal entry form. Set up T-accounts for
The publisher of Accounting View, a monthly magazine, received $\$ 9,720$ cash on January 1 for new subscriptions covering the next 24 months, with service beginning immediately. (a) Use the
Refer to Question Q3-7. Prepare journal entries for the receipt of cash and the delivery of the magazines.
DeFond Services, a firm providing art services for advertisers, began business on June 1, 2009. The following accounts are needed to record the transactions for June: Cash; Accounts Receivable;
Refer to the information in M3-12. Prepare a journal entry for each transaction. Create a T-account for each account, and then post the journal entries to the T-accounts (use dates to reference each
Verrecchia Company, a cleaning services firm, began business on April 1, 2009. The company created the following accounts to record the transactions for April: Cash; Accounts Receivable; Supplies;
Refer to the information in M3-14. Prepare a journal entry for each transaction. Create a T-account for each account, and then post the journal entries to the T-accounts (use dates to reference each
Schrand Services offers janitorial services on both a contract basis and an hourly basis. On January 1. 2008, Schrand collected $\$ 20,100$ cash in advance on a six-month contract for work to be
\\ Refer to the information in M3-16. Prepare a journal entry for each of parts $\mathrm{a}, \mathrm{b}$, and $\mathrm{c}$.}
\\ Selected accounts of Piotroski Properties, a real estate management firm, are shown below as of January 31,2010 , before any accounts have been adjusted.Piotroski Properties prepares monthly
Refer to the information in M3-18. Prepare journal entries for each of parts $a$ through $e$.
Foot Locker, Inc., a retailer of athletic footwear and apparel, operates 3,785 stores in the United States, Canada, Europe and Asia Pacific. During its fiscal year ended in 2008, Foot Locker
Refer to the information in M3-20. Prepare journal entries for each of parts $a, b$ and $c$.
Refer to the information in M3-20. Prepare journal entries for each of parts $a, b$ and $c$.Assume that the company has not yet closed any accounts to retained earnings. Prepare journal entries
Margaret Diver invests $$7,000$ into her bank account that pays 12 percent, compounded annually. How much will she have if:a. She leaves the money in her account for two years?b. She leaves the
Jay Stone invested $$3,000$ he won in a poker match at 8 percent annual interest for 10 years. At the end of the 10 years he took all the money out and went on a spending spree. How much can he
Julie Lynch invests $$1,000$ annually into her bank at the end of each year for five years. Her bank pays interest at the annual rate of 6 percent. How much will she have at the end of the fifth
Murat Borat just opened an Individual Retirement Account (IRA) and plans to contribute $$4,000$ per year for 30 years at which time he will retire. Assume he funds his IRA at the end of each of the
Debra Moore needs $$20,000$ 3 years from now. How much should she invest today in order to reach her goal if:a. She can earn 6 percent compounded annually?b. She can earn an annual rate of 6
Abe Washington sold some property in Oregon and will receive $$40,000$ in 5 equal payments of $$8,000$ at the end of each year from today. What is the present value of these future payments at an
Lucky Lewis won a jackpot that offered him the option of receiving $$15,000$ immediately or $$30,000$ 20 years from now. Assuming Lucky can earn a rate of 8 percent compounded annually, which
You have been offered an investment that will pay you a lump sum of $$30,000$ 25 years from today, along with a payment of $$1,000$ per year for 25 years starting one year from today. How much
Jesse would like to have $$1$ million dollars in 10 years. Jesse will invest $$75,000$ in a money market account at the end of each year for the next 10 years. His account will earn an annual
Muir would like to have $$6$ million dollars in 20 years. Muir will invest $$150,000$ in a money market account at the end of each year for the next 20 years. His account will earn an annual rate
Azusa Company reported the following financial results for 2016 and 2017:Azusa Company did not pay any dividends in 2016 or in 2017.RequiredPrepare pro forma income statements and balance sheets for
The following financial data was obtained from financial statements from Agnes Company.Assume Agnes Company has a cost of equity of 8 percent and projects a terminal growth rate of 2
The following financial data was obtained from pro forma financial statements for Osprey Company.Assume Osprey Company has a cost of equity of 9 percent and projects a terminal growth rate of 4
Muir & Sons is planning to go public with an initial public offering. The company would like to determine the potential price for its common stock based on comparable price-earnings
Describe the general steps followed to value the common equity of a business using (a) the discounted cash flow method and (b) the residual income method. Discuss what circumstances will yield
Describe the basic steps to be followed in developing pro forma financial statements. Discuss why it is unnecessary to make a separate set of pro forma assumptions for the statement of cash flow.
Discuss how (a) the free cash flow and (b) the residual income of a business are calculated. Describe how these two measures are related.
Explain the Capital Asset Pricing Model. What does it mean if a company has a beta of 1.3? What does it mean if a company has a beta of 1.0?
The following information is taken from the annual report of The Coca-Cola Company:Discuss how the existence of operating-loss carryforwards affects firm value. Discuss how the financial effects of
Many investment professionals forecast the cost of goods sold on the pro forma income statement using recent historical common-size percentages. Common-size percentages, however, may be significantly
Some investment professionals “unlever” the cash flow from operations by adding the following term i(1-tx) to the cash flow from operations (CFFO). Discuss why these professionals might modify
Under the residual income approach and the discounted cash flow approach to firm valuation, earnings and cash flows, respectively, are discounted using a firm’s cost of equity. Discuss why the cost
The virtue-based approach to ethics asks the following questions—What role should an individual occupy in an organization? What good traits (or virtues) are needed to succeed at that role? And, how
Assume that the Coffman Company has a beta of 1.9 and that the risk-free rate of return is three percent. If the equity-risk premium is six percent, calculate the cost of equity for the Coffman
Assume that The Jackson Company has a beta of 0.8 and the risk-free rate of return is 4.5 percent. If the equity-risk premium is seven percent, calculate the cost of equity for The Jackson Company
The Claremont Company is planning an initial public offering (IPO) and management would like to have an idea of an appropriate price to charge for a share of its stock.The company plans to issue
The La Verne Company is planning an initial public offering (IPO) and management would like to have an idea of an appropriate price to charge for a share of its stock. seen The company plans to
Scripps Inc. is projected to generate free cash flow (FCF) of $$800,000$ in its terminal year, at which point it is forecasted to have a four percent growth rate. The firm’s cost of equity is
Below are data from the financial statements of Sand and Glass Audio:Compute the company’s free cash flow to equity using three different methods. (Each method should yield the same answer.) Net
Below are data from the financial statements of Ann A. Logg Audio.Compute the company’s free cash flow to equity using three different methods. (Each method should yield the same answer.) Net
Presented below are data for Boso Audio:Compute the value of a share of Boso common stock using the residual income method. Forecast Year 2 5 Terminal No. of outstanding shares. Terminal year growth
Presented below are data for Boso Audio:Compute the value of a share of Boso common stock using the discounted cash flow method. Forecast Year 2 3 5 Terminal No. of outstanding shares. 500 500 500
Presented below are data for Hero Cable:Compute the value of a share of Hero common stock using the residual income method. Forecast Year 1 2 3 4 5 Terminal No. of outstanding shares.. Terminal year
Presented below are data for Snap Imaging:Compute the value of Snap Imaging stock using the discounted cash flow method. Forecast Year 2 3 5 Terminal No. of outstanding shares 800 800 800 800 800 800
Presented below are data for Snap Imaging:Compute the value of Snap Imaging stock using the residual income method. Forecast Year 2 3 Terminal No. of outstanding shares 800 800 800 800 800 800
The Boeing Company (BA) is one of the world’s leading aerospace and defense products and services companies. On May 3, 2015, the company’s trailing (twelve months) earnings per share was
Presented below is the consolidated statement of earnings for Mann & Miller, Inc.RequiredUsing the Mann & Miller Inc. (M&M) consolidated statement of earnings as your base year, prepare
Presented below are recent financial statements for The Gamble Company.Required Prepare a statement of cash flow using the indirect method. What does the company’s statement of cash flow reveal
The Mann Corporation is a small manufacturer of office products. Until recently, the company was all equity-financed (shareholders’ equity totaled $$20$ million), having a cost of equity of
Presented below are recent financial data for The Coca-Cola Company.RequiredPrepare a statement of cash flow for Year 9 using the indirect method format. What does the company’s statement of cash
China Yuchai International Ltd. is a Bermuda holding company that owns 76.4 percent of the outstanding common shares of Guangxi Yuchai Machinery Company Ltd. Guangxi Yuchai is one of the leading
Presented below are the financial statements of the Wacoal Corporation, a leading manufacturer of women’s apparel in Japan. Wacoal’s footnotes and other supplementary data revealed the following
Presented below are recent statements for the Chateau Company.Other income on the income statement represents a gain on the sale of equipment. Cash dividends paid in 2016 were $$40$.RequiredPrepare
The Canik Corporation is a small manufacturer of photography products. Until recently, the company was all equity-financed (shareholders’ equity totaled $$13$ million), having a cost of equity of
The venture capital division of a major U.S. financial institution has elected to fund an investment in an oil and gas exploration and production company that will operate both onshore and offshore
Handy Dan, Inc., operates warehouse-style stores, selling a variety of home building products and lawn and garden supplies. Presented below are Handy Dan’s historical financial statements for Year
Lowe’s Companies Inc. is the second largest retailer of home improvement products in the world, with a specific emphasis on retail do-it-yourself (DIY) and commercial business customers. Lowe’s
The Kat Company began operations in 2015. The year went very well with the company generating a positive net income, with strong demand for its products providing management with a rosy forecast for
CSK Auto Corp. is the largest retailer of automotive parts and accessories in the Western United States and one of the largest retailers of such products in the United States based on the number of
Weis Markets, Inc., is a Pennsylvania business founded by Harry and Sigmund Weis in 1912. The company is engaged principally in the retail sale of food and pet supplies in Pennsylvania and
The 2014 annual report of The Procter & Gamble Company (P&G) is available at Procter & Gamble’s website. http://www.pginvestor.com/interactive/lookandfeel/4004124/PG _Annual Report
Internet-based Analysis. Consider a publicly held company whose products you are familiar with. Some examples might include:Access the company’s public website and search for its most recent annual
The Arcadia Company began operations on January Ist, by issuing 500,000 shares of $$1$ par value common stock at a price of $$10$ per share. On July Ist of the same year the company repurchased
The Arcadia Company began operations on January Ist, by issuing 500,000 shares of $$1$ par value common stock at a price of $$10$ per share. On July Ist of the same year the company repurchased
The Arcadia Company began operations on January 1, by issuing 500,000 shares of $$1$ par value common stock at a price of $$10.00$ per share. During the first year of operations, the company
The Home Depot, Inc. reports a book value of approximately $$9$ billion in its February 1, 2015 annual report; however its market capitalization exceeds $$100$ billion (more than 11 times its
Stock dividends and stock splits are often referred to as “free share distributions.” Discuss why the use of the label “free share distribution” is an appropriate description of these
When dividends are unpaid on a cumulative preferred stock, they are referred to as a dividend-in-arrears. Discuss why dividends-in-arrears are disclosed as a contingent liability in the footnotes to
During 2006 The Wall Street Journal carried the following headline and lead paragraph:The Times’ Class B shares, which are primarily owned by the family of Chairman Arthur Sulzberger, carry
In early 2006, India’s Reliance Petroleum announced that it would hold an initial public offering (IPO) of its common shares. The announced IPO was for 1.8 million shares at an estimated price
The Loews Corporation, a property and casualty insurance company, announced that its board of directors had approved a 3-for-1 forward stock split. At the time of the stock split announcement,
The Mills Corporation announced that it would cut its dividend payment to shareholders from $$0.63$ per share to just $$0.25$ per share. In response to the announcement, Mills’ share price rose
The dividend payout ratio, or the percentage of net income paid out to shareholders in the form of a dividend (Dividends paid/Net income), is used by some investors to identify securities to add to
The April 19, 2006, edition of The Wall Street Journal carried the following headline: “Yahoo’s Net Declines 22% After Accounting Change.” The article explained that while the internet
In 2006, the Coca-Cola Company announced a major change in company policy regarding the compensation of its board of directors. Under the new director compensation plan, nonexecutive directors would
On March 2, 2015, Best Buy Co. announced that it planned to repurchase up to $$1$ billion of its common shares, the first such repurchase since 2012. This was part of an existing $$5$ billion
To whom do you feel corporate managers owe their responsibility? Do you feel that shareholder wealth maximization and stakeholder theory are necessarily competing theories? If you feel that managers
The following transactions occurred during the year for The Niagara Company: itty 1. Generated net income of $$2.5$ million.2. Sold common stock having a par value of $$0.01$ for $$22$ per
The shareholders’ equity section of the balance sheet of The Claremont Company appeared as follows at the end of the first year of operations:During the second year of operations, the following
The shareholders’ equity section of the consolidated balance sheet of Perry Corporation appeared as follows at the beginning of the year.The following transactions occurred during the year:1.
The following information is available for West Texas Waste Management Inc. (WTWM).Calculate WTWM’s dividend payout ratio and dividend yield for Year 1 through Year 3. Describe the trend in
The Irvine Corporation reported the following data at year-end:The following transactions occurred during the year in the following sequence:1. Declared and distributed a ten percent stock dividend
The following information is taken from the annual report of The Home Depot, Inc.:Discuss why the Foreign Currency Translation Adjustment account was negative for Home Depot in all three fiscal
The following information is taken from the annual report of Smith & Sons Inc.:Explain why the net unrealized gain on available-for-sale securities was negative in Year 1. Explain why the account
R.J. Miller & Company has the following securities outstanding:* Common stock, $$0.10$ par value* Convertible preferred stock* Convertible debentures The convertible preferred stock carried a
The following information is taken from the annual reports of Alpha Systems, Gamma Company, and Delta Industries:For each company, calculate the ratio of treasury stock divided by contributed
Presented below is the consolidated statement of shareholders’ equity for Johnson & Johnson (J&J) at year-end:The following information is provided in J&J’s notes to the financial
Presented below is the Shareholders’ Equity section of the consolidated balance sheet of Pfizer Inc. The data is taken from the company’s annual report:Based on your review of this data, develop
At the beginning of the year, The Mann Corporation, a private entity, decided to go public. A charter of incorporation was constructed which authorized the sale of ten million shares of $$1$ par
The Mayfair Corporation went public on January 1, 2015, with an initial public offering of 10,000,000 common shares, $$1$ par value, at a market price of $$3$ per share. Since then, the following
The shareholders’ equity section of the consolidated balance sheet of Wilson Industries appeared as follows at the beginning of the year:The following events occurred sequentially during the
Mic Dundee, President of Aussie Steaks Inc., is contemplating issuing a stock dividend that would lower the company’s share price to either the $$24$ or to the $$25$ per share range. Aussie

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