Questions and Answers of Fundamental Managerial Accounting Concepts 10th

Computation of Debt-Related Financial Ratios The following information comes from the financial statements of Gwynn CompanyCompute the following ratio values:1. Debt ratio.2. Debt-to-equity ratio.3.
Preparing New ForecastsThis spreadsheet assignment is a continuation of the spreadsheet assignments given in earlierchapters. If you completed those spreadsheets, you have a head start on this one.1.
Impact of Capitalizing the Value of Operating Leases The following information comes from the financial statements of Karlla Peterson Company:In addition, Karlla Peterson has a large number of
Accounting for a Mortgage On January 1, 2009, Paik, Inc., borrowed $75,000 to finance the purchase of machinery. The terms of the mortgage require payments to be made at the end of every month with
Accounting for Bonds Issued at a Discount Kontiki Alarm Company issued $250,000 of 10%, five-year bonds at 98 on June 30, 2009.Interest is payable on June 30 and December 31. The company uses the
Accounting for Long-Term LiabilitiesEnergy Corporation had the following transactions relating to its long-term liabilities for theyear:a. Issued a $30,000, three-year, 8% note payable to White
Accounting for Bonds Issued at a Premium Sealon Corporation issued $100,000 of 10%, 10-year bonds at 102 on April 1, 2009. Interest is payable semiannually on April 1 and October 1. Sealon
Bonds PayableScientific Engineering Company received authorization on July 1, 2009, to issue $300,000 of12% bonds. The maturity date of the bonds is July 1, 2029. Interest is payable on January 1and
Effective-Interest Calculation Determine the approximate effective rate of interest for $300,000, 8%, five-year bonds issued at 95. (Assume straight-line amortization.)
Use debt-related financial ratios to determine the degree of a company’sfinancial leverage and its ability to repay loans.
Bond Amortization Schedule The following is a partially completed amortization schedule prepared for the Liggett Company to account for its three-year bond issue with a face value of $50,000. The
The Income Statement From the following information, prepare an income statement for Southern Corporation for the year ended December 31, 2009. Assume that there are 200,000 shares of stock
Long-Term Operating Assets Which one of the following is not an example of a long-term operating asset?a. Buildingsb. Landc. Goodwilld. Equipmente. Office Supplies
Decision of Long-Term Asset Acquisition Pekka Inc. has the option to purchase a new drilling machine for $50,000 today. The company expects a net cash flow of $13,000 per year from using the machine,
Asset Purchased with Cash The company used cash to purchase a stamping machine. The retail price on the machine is$35,000, but the company received a 2% discount. It also paid $2,150 in sales tax for
Asset Purchased Partially with Cash Refer to the data in PE 9-3. Assume the company borrowed $15,000 of the purchase price from a bank. Make the necessary journal entry(ies) to record this
Operating Lease On January 1, XYZ Company entered into a lease for equipment rental. The company agreed to pay $4,500 per year for ten years. The present value of all ten lease payments is
Capital Lease Acquisition On January 1, XYZ Company entered into a lease for equipment rental. The company agreed to pay $4,500 per year for ten years. The present value of all ten lease payments is
Capital Lease Payments Refer to the data in PE 9-6. The interest included in the first lease payment is $2,765. Make the necessary journal entry(ies) to record the first $4,500 lease payment at the
Classifying Leases Which one of the following characteristics of a lease would not cause the lease to be classified as a capital lease?a. Lease ownership transfers to the lessee at the end of the
Assets Acquired by Self-Construction Using the following data, compute the total cost of a self-constructed office building. Percentage of overhead attributable to construction of office building..
Acquisition of Several Assets at Once The company purchased a building and the accompanying land for $890,000 cash. Independent appraisers estimated the fair market value of the building and the land
Straight-Line Method of Depreciation Using the following data and the straight-line method of depreciation, compute depreciation expense, and make the necessary journal entry to record depreciation
Units-of-Production Method of Depreciation Refer to the data in PE 9-11. Using the units-of-production method of depreciation, compute depreciation expense, and make the necessary journal entry to
Partial-Year Depreciation Calculations On September 30, the company purchased a $25,000 delivery truck. The company estimates the truck will last five years and have a salvage value of $5,000 at the
Units-of-Production Method with Natural Resources The company purchased an oil field for $4,200,000 cash. The oil field contains an estimated 600,000 barrels of oil. During the first year of
Repairing and Improving Property, Plant, and Equipment The company has a molding machine with a historical cost of $150,000 and accumulated depreciation of $110,000. On January 1, the company
Determining Asset Impairment The company purchased a building 14 years ago for $720,000. The building has accumulated depreciation of $504,000 and a fair market value of $150,000. The company expects
Recording Decreases in the Value of Property, Plant, and Equipment Using the information in PE 9-16, determine the amount of impairment and record the impairment loss. Original cost Accumulated
Discarding Property, Plant, and Equipment The company scrapped a truck with a historical cost of $60,000 and accumulated depreciation of $48,000. In addition, the company had to pay $500 to discard
Selling Property, Plant, and Equipment The company sold a truck with a historical cost of $30,000 and accumulated depreciation of $24,000 for $7,000 cash. Make the necessary journal entry(ies) to
Patents On January 1, the company purchased a 13-year-old patent from another company for$210,000. The patent has a seven-year legal life remaining. Make the necessary journal entry(ies) to record
Goodwill Parent Company purchased Daughter Company for $200,000. At the time of purchase, the fair market value of Daughter Company’s assets and liabilities was as follows:Make the necessary
Fixed Asset Turnover Using the following data, compute the fixed asset turnover. year Current assets, end of Fixed assets, end of year Fixed assets, beginning of year Sales during the year $ 35,000
Declining-Balance Method of Depreciation Using the following data and the declining-balance method of depreciation, compute depreciation expense for the first two years. Cost of machine Estimated
Sum-of-the-Years’-Digits Method of Depreciation Using the data in PE 9-23 and the sum-of-the-years’-digits method of depreciation, compute depreciation expense for the first two years.
Changes in Depreciation Estimates Using the information in PE 9-11, the company computed depreciation expense of $120,000 per year. After two years, the company determined that the machine would last
Acquisition Decision Johnson Company is considering acquiring a new airplane. It has looked at two financing options. The first is to lease the airplane for 10 years with lease payments of $70,000
Accounting for the Acquisition of a Long-Term Asset Action Jackson Company acquired a new machine in order to expand its productive capacity.The costs associated with the machine purchase were as
Computing Asset Cost and Depreciation Expense Freddy’s Restoration Company decided to purchase a new floor-polishing machine for its shop in New York City. After a long search, it found the
Acquisition and Depreciation of Assets Vandre Oil Company, which prepares financial statements on a calendar-year basis, purchased new drilling equipment on July 1, 2009, using check numbers 1035 and
Accounting for Leased Assets On January 1, 2009, Hanks Company leased a copy machine with an integrated laser printer from Officeneeds, Inc. The five-year lease is noncancelable and requires monthly
Interest Capitalization Litton Company is constructing a new office building. Costs of the building are as follows:Given the above costs, at what amount should the building be recorded in the
Accounting for the Acquisition of Assets—Basket Purchase Sealise Corporation purchased land, a building, and equipment for a total cost of $450,000.After the purchase, the property was appraised.
Depreciation Calculations Garns Photography Company purchased a new car on July 1, 2008, for $26,000. The estimated life of the car was five years or 110,000 miles, and its salvage value was
Depreciation Calculations Denver Hardware Company has a giant paint mixer that cost $31,500 plus $400 to install.The estimated salvage value of the paint mixer at the end of its useful life in 15
Acquisition and Improvement of Assets Prepare entries in the books of Sanmara, Inc., to reflect the following. (Assume cash transactions.)1. Purchased a lathing machine to be used by the firm in its
Asset Impairment Consider the following three independent scenarios:1. For each of the three scenarios, answer the following questions:a. Is the asset impaired?b. At what amount (net of accumulated
Asset Impairment In 2004, Yorkshire Company purchased land and a building at a cost of $700,000, of which $150,000 was allocated to the land and $550,000 was allocated to the building. As of December
Accounting for the Disposal of Assets Canlas Concrete Company has a truck that it wants to sell. The truck had an original cost of$80,000, was purchased four years ago, and was expected to have a
Disposal of an Asset Aeronautics Company purchased a machine for $115,000. The machine has an estimated useful life of eight years and a salvage value of $7,000. Journalize the disposal of the
Accounting for Intangible Assets Gaylord Research, Inc., has the following intangible assets:1. Record the amortization expense for both of these intangible assets for 2009 assuming neither of the
Intangible Assets On January 1, 2008, Landon Company purchased a patent for $250,000 to allow it to improve its product line. On July 1, 2008, Landon Company purchased another existing business in a
Computing Goodwill Stringtown Company purchased Stansbury Island Manufacturing for $1,800,000 cash. The book value and fair value of the assets of Stansbury Island as of the date of the acquisition
Fixed Asset Turnover The Store Next Door reported the following asset values in 2008 and 2009:In addition, The Store Next Door had sales of $3,200,000 in 2009. Cost of goods sold for the year was
Acquisition and Depreciation of Assets Brough Oil Company, which prepares financial statements on a calendar-year basis, purchased new drilling equipment on July 1, 2009. A breakdown of the cost
Acquisition and Depreciation At the beginning of 2009, Beef’s Steak House constructed a new walk-in freezer that had a useful life of 10 years. At the end of 10 years, the motor could be salvaged
Depreciation Computations Hsin-Yo Company purchases an $850,000 piece of equipment on January 2, 2007, for use in its manufacturing process. The equipment’s estimated useful life is 10 years with
Depreciation Calculations Letha Enterprises purchased a new van on January 1, 2008, for $35,000. The estimated life of the van was four years or 76,000 miles, and its salvage value was estimated to
Depreciation Calculations On January 1, 2008, MAC Corporation purchased a machine for $60,000. The machine cost$800 to deliver and $2,000 to install. At the end of 10 years, MAC expects to sell the
Accounting for Natural Resources On January 1, 2008, Georgetown Holdings Corporation purchased a coal mine for cash, having taken into consideration the favorable tax consequences and the inevitable
Change in Estimated Useful Life On January 1, 2007, Landon Excavation Company purchased a new bulldozer for $120,000.The equipment had an estimated useful life of 10 years and an estimated residual
Acquisition, Depreciation, and Disposal of Assets On January 2, 2009, Dale Company purchased a building and land for $580,000. The most recent appraisal values for the building and the land are
Purchasing Property, Plant, and Equipment Jordon Company is considering replacing its automated stamping machine. The machine is specialized and very expensive. Jordon is considering three
Acquisition of an Asset Ray’s Printing Company purchased a new printing press. The invoice price was $184,250.The company paid for the press within 10 days, so it was allowed a 2% discount. The
Accounting for Leased Assets On January 2, 2009, Yardley Company contracted to lease a computer on a noncancelable basis for six years at an annual rental of $55,000, payable at the end of each year.
Accounting for Leased Assets The board of directors of Swogen Company authorized the president to lease a corporate jet to facilitate her travels to domestic and international subsidiaries of the
Interest Capitalization Jennifer Cosmetics wants to construct a new building. It has two building options, as follows:a. Hire a contractor to do all the work. Jennifer has a bid of $850,000 from a
Depreciation Calculations On January 1, Clauser Company purchased a $79,000 machine. The estimated life of the machine was four years, and the estimated salvage value was $4,000. The machine had an
Purchase of Multiple Assets for a Single Sum On April 1, 2009, Cajun Company paid $210,000 in cash to purchase land, a building, and equipment. The appraised fair market values of the assets were as
Basket Purchase and Partial-Year Depreciation On April 1, 2009, Rosenberg Company purchased for $200,000 a tract of land on which was located a fully equipped factory. The following information was
Acquisition, Depreciation, and Sale of an Asset On January 2, 2007, Union Oil Company purchased a new airplane. The following costs are related to the purchase:Required:1. Prepare the journal entry
Acquisition, Depreciation, and Sale of an Asset On July 1, 2009, Philip Ward bought a used pickup truck at a cost of $5,300 for use in his business. On the same day, Ward had the truck painted blue
Accounting for Natural Resources On May 31, 2007, Barren Oil Company purchased an oil well, with estimated reserves of 200,000 barrels of oil, for $2.0 million cash.Required:Prepare journal entries
Asset Impairment Delta Company owns plant and equipment on the island of Lagos. The cost and book value of the building are $2,800,000 and $2,400,000, respectively. Until this year, the market value
Accounting for Intangible Assets (Goodwill)On January 1, 2009, InterGalactic Company purchased the following assets and liabilities from Immensity Company for $325,000:Required:Prepare a journal
Accounting for Goodwill On January 1, 2009, Fishing Creek Company purchased Skull Valley Technologies for$8,800,000 cash. The book value and fair value of Skull Valley’s assets as of the date of
Fixed Asset Turnover Ratio Waystation Company reported the following asset values in 2008 and 2009:In addition, Waystation had sales of $4,000,000 in 2009. Cost of goods sold for the year was
Depreciation Calculations Neilson’s Hardware Company has a giant paint mixer that cost $51,300 plus $700 to install.The estimated salvage value of the paint mixer at the end of its useful life in
Depreciation Calculations On January 1, Top Flight Company purchased a $68,000 machine. The estimated life of the machine was five years, and the estimated salvage value was $5,000. The machine had
Financial Statement Effects of Depreciation Methods On July 1, 2008, the consulting firm of Little, Smart, and Quick bought a new computer for$120,000 to help it service its clients more efficiently.
Depreciation Calculations Gretchen, Inc., a firm that makes oversized boots, purchased a machine for its factory. The following data relate to the machine:During 2008, the machine was used 1,800
Changes in Depreciation Estimates and Capitalization of Expenditures Ironic Metal Products, Inc., acquired a machine on January 2, 2007, for $76,600. The useful life of the machine was estimated to
Unifying Concepts: Accounting for Natural Resources Forest Products, Inc., buys and develops natural resources for profit. Since 2006, it has had the following activities:1/1/06 Purchased for
Unifying Concepts: Property, Plant, and Equipment Logan Corporation owns and operates three sawmills that make lumber for building homes.The operations consist of cutting logs in the forest, hauling
Intangible Assets Renford Company owns two restaurants. One, located in Tacoma, was purchased from a previous owner and the other, located in Seattle, was built by Renford Company. The restaurant was
Straight-Line versus Accelerated Depreciation Dennis Company currently depreciates its assets using the straight-line method for both tax and financial accounting. Total depreciation expense for this
You Decide: Should companies leasing equipment be required to record the equipment and leases as assets and liabilities on the balance sheet or as expenses on the income statement?Current rules
Wal-Mart Using Wal-Mart’s 2006 Form 10-K contained in Appendix A, answer the following questions:1. As a percentage of total assets, is Wal-Mart’s investment in property, plant, and equipment
FedEx FedEx delivers packages around the world. To accomplish this task, FedEx has made huge investments in long-term assets.1. Identify what you consider to be the major long-term assets of FedEx.
U.S. Steel 1. U.S. Steel provides the following information in the notes to its financial statements relating to its use of the straight-line method of depreciation. Can you interpret the information
Swire Pacific Swire Pacific, Ltd., based in Hong Kong, is one of the largest companies in the world. The primary operations of the company are in the regions of Hong Kong, China, and Taiwan where it
Strategic Accounting Method Choices You saw in Chapter 6 that a company’s management selects the percentage to be used when computing bad debt expense. You noted in Chapter 7 that management is
Gains Are Good, Losses Are Bad—Right?When a long-term asset is sold for more than its book value, we record a gain. When a longterm asset is sold for less than its book value, we record a loss.Your
Preparing New Forecasts This spreadsheet project is a continuation of the spreadsheet projects in earlier chapters. If you completed those spreadsheets, you have a head start on this one.1. Handyman
Property, Plant, and Equipment Swift Motor Lines is a trucking company that hauls crude oil in the Rocky Mountain states.It currently has 20 trucks. The following information relates to a single
Property, Plant, and Equipment Swift Motor Lines is a trucking company that hauls crude oil in the Rocky Mountain states.It currently has 20 trucks. The following information relates to a single
Salaries Expense Calculation Using the following data, compute salaries expense State Withholding Taxes Payable FICA Taxes Payable, Employer Salaries Payable Federal Unemployment Taxes Payable
Salaries Expense Journal Entry Refer to the data in PE 8-1. Make the journal entry necessary to record salaries expense for the period.
Payroll Tax Expense Calculation Refer to the data in PE 8-1. Compute payroll tax expense.

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