Questions and Answers of Fundamental Managerial Accounting Concepts 10th

Comprehensive Income The following information relates to Larkin Company:a. Larkin Company’s net income for the year was $23,000.b. Larkin Company has an investment portfolio for long-term
Other Equity Items Red Rider Company has the following stockholders’ equity section on its balance sheet as of December 31, 2009 and 2008.Based on this stockholders’ equity section, answer the
Stock Transactions and Analysis The following selected items and amounts were taken from the balance sheet of Quale Company as of December 31, 2009:Required:For each of parts (1) to (5), (a) prepare
Stock Transactions and the Stockholders’ Equity Section The following is Saratoga Springs Company’s stockholders’ equity section of the balance sheet on December 31, 2008:Required:1. Journalize
Recording Stockholders’ Equity Transactions Zina Corporation was organized during 2008. At the end of 2008, the stockholders’ equity section of the balance sheet appeared as follows:During 2009,
Stock Transactions and Stockholders’ Equity Section The balance sheet for Lakeland Corporation as of December 31, 2008, is as follows:During 2009, the following transactions were completed in the
Stockholders’ Equity, Dividends, and Treasury Stock The stockholders’ equity section of Nielsen Corporation’s December 31, 2008, balance sheet is as follows:During 2009, Nielsen Corporation had
Dividend Calculations Snowy Peaks Corporation was organized in January 2006 and issued shares of preferred and common stock as shown. As of December 31, 2009, there have been no changes in
Dividend Calculations Lowe Corporation had authorization for 80,000 shares of 8% preferred stock, par value $20 per share, and 24,000 shares of common stock, par value $120 per share, all of which
Dividend Transactions and Calculations As of December 31, 2008, Nibley Corporation has 300,000 shares of $12 par-value common stock authorized, with 120,000 of these shares issued and
Dividend Payout Ratio The following numbers are for three different companies:Required:1. For each company, compute the dividend payout ratio.2. Interpretive Question: Which of the three companies is
Preparing the Stockholders’ Equity Section and Recording Dividends In 2007, Lee Ann Adams and some college friends organized The Candy Jar, a gourmet candy company. In 2007, The Candy Jar issued
Stockholders’ Equity Calculations A computer virus destroyed important financial information pertaining to Paseo Company’s stockholders’ equity section. Your expertise is needed to compute the
Stock Calculations and the Stockholders’ Equity Section The following account balances appear on the books of World Corporation as of December 31, 2009:Required:1. If the preferred stock is selling
Unifying Concepts: Stock Transactions and the Stockholders’ Equity Section Richard Corporation was founded on January 1, 2009, and entered into the following stock transactions during 2009:a.
Unifying Concepts: Stock Transactions, the Stockholders’ Equity Section, and the Statement of Stockholders’ Equity The condensed balance sheet of JCB Corporation at December 31, 2008, is shown
Unifying Concepts: Stockholders’ Equity Icon Corporation was organized during 2007. At the end of 2008, the equity section of its balance sheet appeared as follows:During 2009, the following
Comprehensive Income The following information relates to Loveland Company:In addition, the following events occurred during the year:a. Loveland Company has an investment portfolio for long-term
Stockholders’ Equity Section with Selected “Other Information”The stockholders’ equity section of Glory Company’s balance sheet was as follows as of December 31, 2009, and December 31,
Does Stockholders’ Equity Tell the Real Story?Last year, Shades International (a hypothetical company) invented the famous Shades Sunglasses that are widely popular around the world and especially
To Pay or Not To Pay Dividends Assume Lenny Company manufactures specialized computer peripheral parts such as speakers and modems. It is a new company that has been in operation for just two years.
You Decide: Should the U.S. government change the current corporate tax system from double to single taxation, or is the present system (taxing corporate profits and then dividends to shareholders)
You Decide: Should companies be required to pay cash dividends on their stock to shareholders, or should it be left up to the companies’ discretion whether they pay dividends or reinvest those
Wal-Mart The 2006 Form 10-K for Wal-Mart is included in Appendix A. Wal-Mart’s stockholders’ equity statements provide details of equity transactions of the company during the 2006 fiscal year.
Union Pacific Corporation Union Pacific’s statement of shareholders’ equity for the year 2005 is reproduced below.1. Based on the dividends paid during 2005, how many shares of stock were
The EMI Group The shareholders’ equity section of the balance sheet of The EMI Group, a company based in the United Kingdom, is reproduced below. Review this information and answer the questions
Buying Your Own Shares Back You are the chief financial officer for Esoteric, Inc., a company whose stock is publicly traded. The stock market has recently experienced an overall downturn, and the
Other Comprehensive Income In this chapter you learned that certain transactions that changed a company’s net assets were not reflected on the income statement but instead were reflected on the
Preparing New Forecasts This spreadsheet assignment is a continuation of the spreadsheet assignments given in earlier chapters. If you completed those spreadsheets, you have a head start on this
Stockholders’ Equity Clarke Corporation was organized during 1979. At the end of 2009, the equity section of the balance sheet was:During 2009, the following stockholders’ equity transactions
Present Value of a Single Amount The company will receive $20,000 in five years when the interest rate is 8%. Compute the present value of this payment.
Accounting for BondsBrown & Co., a calendar-year firm, is authorized to issue $500,000 of 11%, 15-year bondsdated May 1, 2009, with interest payable semiannually on May 1 and November 1.Amortization
Future Value of a Single Amount The company invests $61,000 today in a savings account that earns 10% compounded annually.What will be the balance in the savings account ten years from today (e.g.,
Present and Future Value ComputationsRequired:1. Compute the present value for each of the following situations, assuming an interestrate of 10% compounded annually. (Round amounts to the nearest
Interest Rate per Compounding Period The interest rate is 16% compounded quarterly for six years. Compute the interest rate per compounding period.
Computing the Amount of Periodic PaymentsNathan Smith has just purchased a new car for $28,000. He paid $8,000 down and signed anote for the remaining $20,000. The interest rate on the note is 12%
Number of Interest Periods The interest rate is 12% compounded monthly for seven years. Compute the number of interest periods.
Accounting for Notes PayableSweet’s Candy Company needed cash for its current business operations. On January 1,2008, the company borrowed $8,000 on a two-year, interest-bearing note from
Future Value of Single Amount Compounded Monthly Compute the future value of $10,000 invested today at 24% interest compounded monthly for five years.
Accounting for Notes PayableDuring 2008, Schmaal Corporation had the following transactions relating to long-termliabilities:May 1 Purchased a machine costing $600,000 from Kretschmar Corporation.
Computing the Present Value of an Annuity The company will receive $1,600 every six months for eight years. The company’s interest rate is 10% compounded semiannually. Compute the present value of
Accounting for a MortgageOn November 1, 2009, Nydegger Company arranges with an insurance company to borrow$400,000 on a 30-year mortgage to purchase land and a building to be used in its
Computing Periodic Payment Amount The company borrowed $50,000 to be repaid in equal monthly installments at 12% interest over five years. Compute the periodic payment amount.
Lease AccountingOn January 1, 2008, Linda Lou Foods, Inc., leased a tractor. The lease agreement qualifies asa capital lease and calls for payments of $7,000 per year (payable each year on January
Interest-Bearing Notes The company borrowed $20,000 at 8% interest by issuing a note payable. The terms of the note require yearly interest payments for seven years and repayment of the principal at
Lease AccountingEmpire, Inc., leased a starship on January 2, 2009. Terms of the lease require annual paymentsof $135,746 per year for 14 years. The interest rate on the lease is 10%, and the
Mortgages Payable Issuance and First Payment On January 1, the company borrowed $500,000 to purchase a new building and signed a mortgage agreement pledging the building as collateral on the loan.
Issuance Price of BondsPatterson Company issued 30-year bonds on June 30. The face value of the bonds was$750,000. The stated interest rate on the bonds was 6%. The market rate of interest at thetime
Mortgages Payable Second Payment Refer to the data in PE 10-9. Make the necessary journal entry(ies) to record the second month’s mortgage payment on February 28. Round to the nearest penny.
Accounting for BondsOn July 1, 2009, Paramount, Inc. issued $500,000, 8%, 30-year bonds with interest paidsemiannually on January 1 and July 1. The bonds were sold when the market rate of
Capital Lease Acquisition The company leased a delivery truck on January 1, 2009. The lease requires annual payments of $7,500 for seven years at a 12% rate of interest payable at the end of each
Accounting for BondsLihue Enterprises issued $1.5 million, 9%, 20-year bonds on November 1, 2008. Interest paymentdates are May 1 and November 1. The bonds were sold at face value.Required:1. Provide
Capital Lease Payment Refer to the data in PE 10-11. Make the necessary journal entry(ies) to record the first lease payment on December 31, 2009. Round amounts to the nearest penny.
Reporting Liabilities on the Balance SheetThe following list of accounts is taken from the adjusted trial balance of Goforth Company. Required:Prepare the liabilities section of the
Types of Bonds Which one of the following statements is false?a. Debentures are bonds that have no underlying assets pledged as collateral to guarantee their payment.b. Serial bonds mature in one
The following amounts are shown on Plymouth Company’s adjusted trial balance for theyear 2009:Required:Prepare the liabilities section of Plymouth Company’s balance sheet at December 31, 2009.
Bonds Issued at Face Value The company issued 15-year, $100,000 bonds with a stated rate of interest of 12%, compounded quarterly. The effective interest rate demanded by investors for bonds of this
Computation of Debt-Related Financial RatiosThe following information comes from the financial statements of Walker Company:Required:Compute the following ratio values. State any assumptions that you
Bonds Issued at a Discount The company issued five-year, $25,000 bonds with a stated rate of interest of 8%, compounded semiannually. The effective interest rate demanded by investors for bonds of
Impact of Capitalizing the Value of Operating LeasesThe following information comes from the financial statements of Travis CampbellCompany:In addition, Travis Campbell has a large number of
Bonds Issued at a Premium The company issued seven-year, $100,000 bonds with a stated rate of interest of 8%, compounded semiannually. The effective interest rate demanded by investors for bonds of
Accounting for BondsNemo Company authorized and sold $90,000 of 10%, 15-year bonds on April 1, 2009. Thebonds pay interest each April 1, and Nemo’s year-end is December 31.Required:1. Prepare
Accounting for Bonds Payable Issued at Face Value The company issued 20-year, $450,000 bonds with a stated rate of interest of 11%, compounded semiannually. The effective interest rate demanded by
Accounting for Bonds Issued at a PremiumOn March 1, 2009, Roger Corporation issued $90,000 of 12%, five-year bonds at 110. Thebonds were dated March 1, 2009, and interest is payable on March 1 and
Accounting for Retirement of Bonds Payable Issued at Face Value Refer to the data in PE 10-17. Assuming all interest has been accounted for, make the necessary journal entry(ies) to record the
Bonds Retired at MaturityStottard Company issued $450,000 of 10%, 10-year bonds on June 1, 2008, at 103. Thebonds were dated June 1, and interest is payable on June 1 and December 1 of each
Bond Retirements before Maturity The company had $300,000 in callable bonds in the open market. The company’s bonds were selling in the open market at 106 and were callable at 107. The company
Straight-Line versus Effective-Interest AmortizationCyprus Corporation issued $150,000 of bonds on January 1, 2009, to raise funds to buysome special machinery. The maturity date of the bonds is
Debt Ratio Using the following information, compute the debt ratio. Total liabilities $247,500 Annual interest expense 5,204 Total assets 542,850 Income before interest and taxes 62,030
Effective-Interest AmortizationRoyce Corporation issued $200,000 of three-year, 12% bonds on January 1, 2008. The bondspay interest on January 1 and July 1 each year. The bonds were sold to yield a
Debt-to-Equity Ratio Refer to the data in PE 10-20. Compute the debt-to-equity ratio.
Accounting for BondsBell Company sold $200,000 of 10-year bonds on January 1, 2008, to Brown Corporation.The bond indenture included the following information:Face value $200,000Date of bonds January
Times Interest Earned Ratio Refer to the data in PE 10-20. Compute the times interest earned ratio.
Straight-Line versus Effective-Interest AmortizationFoster Corporation issued three-year bonds with a $180,000 face value on March 1, 2008, inorder to pay for a new computer system. The bonds mature
Computing the Present Value of a Single Sum Find the present value (rounded to the nearest dollar) of:1. $20,000 due in 4 years at 6% compounded annually.2. $40,000 due in 61⁄2 years at 4%
Bonds Retired before MaturityAmity Construction Company issued $100,000 of 10% bonds on January 1, 2009. The maturitydate of the bonds is January 1, 2019. Interest is payable January 1 and July 1.
Computing the Future Value of a Single Sum Compute the future value (rounded to the nearest dollar) of the following investments:1. $15,842 invested to earn interest at 6% compounded annually for 4
Unifying Concepts: Accounting for Bonds PayableGonzalez Corporation was authorized to issue $100,000 of 7%, four-year bonds, dated May 1,2009. All the bonds were sold on that date when the effective
Computing the Present Value of an Annuity What is the present value (rounded to the nearest dollar) of an annuity of $12,000 per year for seven years if the interest rate is:1. 9% compounded
Analysis of BondsBonds with a face value of $200,000 and a stated interest rate of 12% were issued on March1, 2009. The bonds pay interest each February 28 and August 31 and mature on March 1,2019.
Computing the Amount of Periodic Payments Howard Company has just borrowed $250,000. The loan is to be repaid in regular annual payments made at the end of each year. What is the amount of each
Present Value ConceptsHamburg Company recently began business and purchased a large facility to make beachclothing. Hamburg Company managed to make a small profit in its initial year of
Accounting for Long-Term Note Payable Maloney Company borrowed $60,000 on a two-year, 8% note dated October 1, 2008.Interest is payable annually on October 1, 2009, and October 1, 2010, the maturity
Debt and Equity FinancingBerlin Company is in a world of hurt. For the past 15 years, the company has been the exclusivetoy supplier to Infants-R-Us toy stores. Unfortunately for Berlin Company,
Accounting for Long-Term Note Payable Silmaril, Inc., borrowed $25,000 from First National Bank by issuing a three-year, 10% note dated July 1, 2008. Interest is payable semiannually on December 31
You Decide: Should the following bonds be classified as debt or equity on the balancesheet?A company has recently issued bonds that are convertible into stock at the bondholder’s request.The
The principal amount is to be repaid in full on June 30, 2011. Silmaril, Inc., reports on a calendar-year basis. Prepare all journal entries relating to the note during 2008, 2009, 2010, and 2011.29.
You Decide: If a young company has a negative “times interest earned” ratio,should the company be refused or given a loan by lenders?Design Arts Inc. is a young computer game design company that
Lease Accounting Logan Electronics signed a lease to use a machine for five years. The annual lease payment is$14,200 payable at the end of each year.1. Record the lease, assuming that the lease
Wal-MartThe 2006 Form 10-K for Wal-Mart is included in Appendix A. Locate that Form 10-K andconsider the following questions:1. Examine Wal-Mart’s balance sheet as of January 31, 2006. What percent
Lease Accounting Digital, Inc., leased computer equipment from Young Leasing Company on January 2, 2009.The terms of the lease required annual payments of $4,141 for five years beginning on December
IBMInternational Business Machines (IBM) included the following information in Note K toits 2005 financial statements1. IBM lists eight different issues of debentures. What is a debenture?2. What is
Issuance Price of Bonds Neukoelln Company issued seven-year bonds on January 1. The face value of the bonds is$72,000. The stated interest rate on the bonds is 12%. The market rate of interest at the
CitigroupThe City Bank of New York was chartered on June 16, 1812, just two days before thestart of the War of 1812 between the United States and Great Britain. To get aroundtwentieth-century bank
Issuance Price of Bonds Hopeful Company issued seven-year bonds on January 1. The face value of the bonds is$80,000. The stated interest rate on the bonds is 7%. The market rate of interest at the
British Petroleum In May 1901, William Knox D’Arcy convinced the Shah of Persia (present-day Iran) to allow him to hunt for oil. The oil discovered in Persia in 1908 was the first commercially
Accounting for Bonds Issued at Face Value Romulus, Inc., issued $500,000 of 10%, five-year bonds at face value on July 1, 2009. Interest on the bonds is payable semiannually on December 31 and June
Hiding an Obligation By Calling It a LeaseYou and your partner own Miss Karma’s Preschool, which provides preschool and day careservices for about 100 children per day. Business is booming, and you
Accounting for Bonds Issued at Face Value Schwedt Company issued $280,000 of 9%, 10-year bonds at face value on September 1, 2009. The bonds pay interest on March 1 and September 1. Schwedt uses the
My Contract’s Bigger Than Your Contract!You are an agent for professional athletes. One of your clients is a superstar in the NBA. Lastmonth you negotiated a new deal for your client that pays him

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