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fundamentals financial accounting

Questions and Answers of Fundamentals Financial Accounting

(a) Where does the accountant disclose information about an entity's financial position, operations. and cash Hows.'(It) The lull disclosure principle recognizes that the nature and amount of
Betsy McCall is the president of Brew News. She has no accounting background. McCall cannot understand why current cost is not used as the basis for accounting meas- urement and reporting. Explain
In February 2006, Matt Osterhaus invested an additional $5,000 in his business, Osterhaus Pharmacy, which is or- ganized as a corporation. Osterhaus' accountant, Kate Mulgrew, recorded this receipt
Identify three financial relationships that are useful in analyzing the profitability of a company. Why might we want more than one measure of profitability?
Natasha Company has current assets of $60,000 and cur- rent liabilities of $20,000. What is its (a) working capital and (b) current ratio?
If current assets are less than current liabilities, will work- ing capital be positive or negative? Will the current ratio be greater than or less than 1:1?
Bozeman Inc.'s debt to total asset ratio stands at 62 per- cent. If you were a banker, would you be comfortable about extending additional credit to Bozeman? Why or why not?
What organization establishes international accounting standards?
Indicate whether each of the following statements is true or false.(a) "Generally accepted" means that these principles must have "substantial authoritative support."(b) Substantial authoritative
Indicate which of the following items is(are) included in the FASB's conceptual framework.(Use "Yes" or "No" to answer this question.)(a) Analysis of financial statement ratios.(b) Objectives of
According to the FASB's conceptual framework, which of the following are objectives of financial reporting? (Use "Yes" or "No" to answer this question.)(a) Provide information that is helpful in
Presented below is a chart of the qualitative characteristics of accounting information.Fill in the blanks from (a) to (e). Relevance Usefulness Reliability (a) (d) Comparability (c) (b) (e) Timely
Given the qualitative characteristics of accounting established by the FASB's conceptual framework, complete each of the following statements:(a) For information to be . it should have predictive or
Presented below is a set of qualitative characteristics of accounting information.1. Predictive value 3. Verifiable 2. Neutral 4. Timely Match these qualitative characteristics to the following
Presented below are four concepts discussed in this chapter.1. Time period assumption 3. Full disclosure principle 2. Cost principle 4. Conservatism Match these concepts to the following accounting
Fast Forward Company uses the following accounting practices.(a) Inventory is reported at cost when market value is lower.(b) The alternative accounting methods are selected in order to avoid
The following data are taken from the ince sheet of Nike, Inc. The data are arranged in alphabetical order (in millions).Compute Nike*s (a) current ratio and (b) working capital. Accounts payable
The following information, presented in alphabetical order, is taken from the financial statements of Palpatine Inc.Compute Palpatine*s (a) operating expenses and (b) income tax expense for the
Additional information for Palpatine Inc. (BE7-10) is as follows.Given the information above and in BE7-10. compute Palpatine's earnings per share. Common shares outstanding for the entire year
Which of the following is not a component of shareholders' equity?a. Loss on sale of equipmentb. Dividends payablec. Retained earningsd. Net income
Which of the following statements is true?a. The shares that are in the hands of the shareholders are said to be outstanding.b. It is very unlikely that corporations will have more than one class of
Authorized shares represent the:a. number of shares that have been sold.b. number of shares that are currently held by shareholders.c. number of shares that have been repurchased by the
McKean Corporation authorized 500,000 common shares in its articles of incorporation. On May 1, 2018, 100,000 shares were sold to the company's founders. However, on October 15, 2018, McKean
Harvey Corporation shows the following in the shareholders' equity section of its statement of financial position: The stated value of its common shares is \(\$ 0.25\) and the total balance in the
Assad Corporation repurchases 10,000 of its shares for \(\$ 12\) per share. The shares were originally issued at an average price of \(\$ 10\) per share. How much gain or loss should Assad report on
With regard to preferred shares,a. their issuance provides no flexibility to the issuing company because their terms always require mandatory dividend payments.b. their shareholders may have the
DAE Parts Shop began business on January 1, 2018. The corporate charter authorized issuance of 20,000 no par value common shares and \(5,000 \$ 10\) stated value, \(5 \%\) cumulative preferred
Thornwood Partners began business on January 1, 2018. The corporate charter authorized issuance of unlimited no par value common shares, and \(8,000 \$ 3\) stated value, \(10 \%\) cumulative
A company would repurchase its own shares for all of the following reasons except:a. it believes the shares are overvalued.b. it wishes to increase the earnings per share.c. it wishes to prevent
When a company purchases treasury shares, which of the following statements is true?a. Dividends continue to be paid on the treasury shares.b. They are no longer considered to be issued.c. Treasury
When a company retires its own common shares, the company must:a. decrease the common share account balances by the original issue price.b. record a gain or loss depending on the difference between
Which of the following should be considered when a company decides to declare a cash dividend on common shares?a. The retained earnings balance onlyb. The number of authorized common sharesc. The
When a company declares a cash dividend, which of the following is true?a. Assets are decreased.b. Assets are increased.c. Liabilities are increased.d. Shareholders' equity is increased.
What is the effect of a stock dividend on shareholders' equity?a. Shareholders' equity is decreased.b. Total shareholders' equity stays the same.c. Contributed surplus is decreased.d. Retained
As a result of a stock split,a. shareholders' equity is increased.b. the stated value of each share recorded in share capital is changed in the reverse proportion as the stock split.c. the
The balance of the no par value common share account for Patrice Company was \(\$ 240,000,000\) before its recent 2 -for-1 stock split. The market price of the shares was \(\$ 50\) per share before
When a company declares a 3 -for-1 stock split, the number of outstanding shares:a. triples.b. stays the same, but the number of issued shares triples.c. is reduced by one-third.d. is reduced by
Shea Company Ltd. has issued 100,000 \(6 \%, \$ 50\) stated value, cumulative preferred shares. In 2017, no dividends were declared on preferred shares. In 2018, Shea had a profitable year and
RVR Enterprises shows net income of \(\$ 100,000\) for 2018 and retained earnings of \(\$ 500,000\) on its December 31, 2018 . statement of financial position. During the year, RVR declared and paid
Comprehensive income:a. is considered an appropriation of retained earnings.b. includes transactions that affect shareholders' equity with the exception of those transactions that involve owners.c.
Garnean Inc. issued \(\$ 50,000\) in common share dividends. Its net income for the year was \(\$ 250,000\). What is Garnean's dividend payout ratio?a. 0.2b. 0.5c. 2.5d. 5Cornerstone Exercise
Recording the Issuance of Common and Preferred Shares Delhi Corporation Ltd. is authorized by its charter from the Province of Alberta to issue 2,000 \(7 \%\) preferred shares with a stated value of
Recording the Issuance of Common Shares}Dartmouth Company Ltd. issues 300,000 no par value common shares for \(\$ 27\) per share on June 30. 2018 .Required:Prepare the journal entry to record this
Calculating the Number of Shares Issued}Castalia Inc. issued no par value common shares on September 4, 2018, for \(\$ 8\) per share. The Common Shares account was credited for \(\$ 612,000\) in the
Accounting for Share Repurchase and Cancellation}On February 15, 2018, Spring Hope Ltd. repurchases and cancels 1,200 of its outstanding common shares for \(\$ 7\) per share. These shares were
Accounting for Share Repurchase and Cancellation On January 3, 2018, Tommyboy Corporation repurchases and cancels 250,000 of its outstanding common shares for \(\$ 18\) per share. These shares were
Share Repurchases and Cancellation}Kellman Company Inc. repurchases 110,000 of its own shares for \(\$ 8\) per share on September 4, 2018. The shares were ofriginally issued for \(\$ 6\) per
Share Repurchases}Refer to the information in Exercise 10-28 Required:What is the appropriate journal entry to record the transaction?\section*{Cornerstone Exercise
Cash Dividends}King Tut Corporation has issued 25,000 common shares, all of the same class. On December 1 , 2018, King Tut's Board of Directors declares a cash dividend of \(\$ 0.75\) per share
Declaration of Cash Dividend}Wilson Corporation declared a cash dividend of \(\$ 80,000\) on December 31,2018 .\section*{Required:}What is the appropriate journal entry to record this
Stock Dividend}Boyer Corporation reported the following information: common shares, no par value; unlimited shares authorized; 35,000 shares issued and outstanding.\section*{Required:}1. What is the
Preferred and Common Share Dividends CORNERSTONE 10.5 Barstow Corporation has a single class of common shares and a single class of cumulative preferred shares. The cumulative preferred shares
Preferred Share Dividends}Seashell Corporation Inc. has \(25,0008^{\prime}, \$ 10\) stated value, cumulative preferred shares outstanding. In 2016 and 2017, no dividends were declared on preferred
Shareholder Profitability Ratios \\ CORNERSTONE 10.6 The following information pertains to Shanghai Corporation:}\section*{Required:}Calculate the return on common equity and the earnings per share.
Shareholder Payout Ratios}CORNERSTONE 10.7 The following information pertains to Milo Mindbender Corporation:Required:Calculate the dividend yield. dividend parout, and total payout. (Vote: Round
Common Shares versus Preferred Shares Corporations issue two general types of shares-common and preferred. Required: Describe the major differences between common and preferred shares.\section*{Brief
Recording the Sale of Common and Preferred Shares}At the end of its first year of operations, Mulligan Corporation has outstanding shares of 96,000 common shares and 1,900 preferred shares. The
Recording the Sale of Common Shares}Green Company, a food colouring manufacturer that provides its products to large processed food corporations, issues 450,000 shares of common shares (par value
Calculating the Number of Shares Issued}Castanet Inc. issued shares of its \(\$ 1.50\) par value common shares on November 9, 2018, for \(\$ 13\) per share. In recording the issuance of the shares,
Declaration of Cash Dividend}Travis Corporation expected to pay its shareholders a dividend in January 2018. The cash dividend of \(\$ 75,000\) was declared on December 31,
Preferred and Common Shares Dividends}Brookshed Corporation has a single class of common shares and a single class of cumulative preferred shares. The cumulative preferred shares require the
Preferred Stock Dividends}Eugene Corporation issued 25,000 shares outstanding of \(6 \%\), \(\$ 5\) par value, cumulative preferred shares. Eugene purchased 5,000 shares of its preferred shares to
Retained Earnings \\ Refer to the information for Titanic Corporation above.}\section*{Required:}Calculate the ending balance (12/31/18) of retained earnings.Titanic Corporation's net income for the
Retained Earnings}Refer to the information for Titanic Corporation above. Assume that on July 31, 2018, Titanic discovered that 2017 depreciation was overstated by \(\$
Shareholder Profitability Ratios}The following information pertains to Capital Corporation:\section*{Required:}Calculate the return on common equity and the earnings per share.\section*{Exercise Net
Accounting for Shares}Kress Products Ltd.'s corporate charter authorizes the firm to issue 800,000 no par common shares. At the beginning of 2018 , Kress issued 318,000 shares and had reacquired and
Outstanding Shares}Rao Corporation shows the following information in the shareholders' equity section of its statement of financial position: The recorded value of common shares in the common share
Outstanding Shares}Stahl Company Ltd. was incorporated as a new business on January 1, 2018. The company is authorized to issue 600,000 no par value common shares and \(80,0006 \%, \$ 20\) stated
Prepáration of Shareholders' Equity Section Refer to the information in Exercise 10-49.\section*{Required:}Prepare the shareholders' equity section of the statement of financial position for Stahl
Issuing Common Shares}Carmean Products Inc. issued 49,750 no par value common shares to shareholders at the time of its incorporation. Carmean received \(\$ 23\) per share.\section*{Required:}Prepare
Issuing and Repurchasing Shares Radko Inc. had the following transactions related to its common and preferred shares:\section*{Required:}Prepare the journal entries for these transactions.Exercise
Prepare the Shareholders' Equity Section Renee Corporation has the following shareholders' equity information:Retained earnings is \(\$ 1,837,000\).Required:Prepare the shareholders' equity portion
Prepare the Shareholders' Equity Section Wildcat Drilling Ltd. has the following accounts on its trial balance.Required:Prepare the shareholders \({ }^{\circ}\) equity portion of Wildcat's statement
Interpret the Shareholders' Equity Section}Medici Inc. has the following shareholders" equity section of the statement of financial position:\section*{Required:}1. How many preferred shares are
Cash Dividends on Common Shares Bergman Company Inc. is authorized to issue an unlimited number of common shares. At the beginning of 2018. Bergman had 248.000 issued and outstanding shares. On July
Cash Dividends on Common and Preferred Shares Metzler Design Ltd. has the following information regarding its preferred and common shares:Preferred shares, \(\$ 50\) stated value, \(10 \%\)
Distribution to Shareholders}Owners invest in corporations through the purchase of shares.\section*{Required:}Describe two ways that corporations distribute assets to shareholders (without
Stock Dividends}Crystal Corporation has the following information regarding its common shares:No par, with unlimited shares authorized, 183,700 shares issued and outstanding On August 22, 2018,
Stock Dividend}The statement of financial position of Cohen Enterprises Ltd. includes the following shareholders' equity section (Assume the date of the financial statements is before the stock
Stock Split}Toy World Inc. reported the following information: common shares, no par; unlimited shares authorized; 200,000 shares issued and outstanding.\section*{Required:}What is the typical effect
Stock Dividends and Stock Splits}The statement of financial position of Chungking Corporation includes the following shareholders' equity section:\section*{Required:}1. Assume that Chungking issued
Preferred Dividends}Nathan Product Ltd.'s equity includes \(6.5 \%\), \(\$ 150\) stated value preferred shares. There are unlimited shares authorized and 30,000 shares issued and outstanding. Assume
Cumulative Preferred Dividends}Share capital of Barr Company Ltd. includes:As of December 31, 2017, two years' dividends are in arrears on the preferred shares. During 2018. Barr plans to pay
Retained Earnings Titania Corporation's net income for the year ended December 31,2018 , is \(\$ 380,000\). On June 30,2018 , a \(\$ 0.75\) per share cash dividend was declared for all common
Retained Earnings}Refer to the information in Exercise 10-65. Assume that on July 31, 2018, Titania discovered that 2017 depreciation was overstated by \(\$ 90,000\).\section*{Required:}Provide
Retained Earnings}Gibson Products Ltd. had beginning retained earnings of \(\$ 2,000,000\). During the year, Gibson paid cash dividends of \(\$ 120,000\) to preferred shareholders and \(\$ 25,000\)
Retained Earnings}The December 31, 2018, comparative statement of financial position of Savard Industries Ltd. includes the following shareholders' equity section:\section*{Required:}During 2018 ,
Restrictions on Retained Earnings}At December 31, 2017, Birney Clothing Ltd. had \(\$ 226,700\) of retained earnings, all unrestricted. During 2018, Birney earned net income of \(\$ 92,000\) and
Ratio Analysis}Consider the following information.\section*{Required:}1. Calculate the following shareholder payout ratios: (1) dividend yield, (2) dividend payout, (3) share repurchase payout, and
Ratio Analysis}Mojo Inc. has the following shareholders' equity section of the statement of financial position:On this date Mojo's shares were selling for \(\$ 25\) per share.\section*{Required:}1.
Shareholders' Equity Terminology A list of terms and a list of definitions or examples are presented below. Make a list of the numbers 1 through 12 and match the letter of the most directly related
Presentation of Shareholders' Equity}Yeager Corporation was organized in January 2018. During 2018, Yeager engaged in the following shareholders' equity activities:a. Secured approval for a corporate
Issuing Common and Preferred Shares}Klaus Herrmann, a biochemistry professor, organized Bioproducts Inc. early this year. The firm will manufacture antibiotics using gene-splicing technology.
Statement of Shareholders' Equity At the end of 2017, Jeffco Inc. had the following equity accounts and balances:During 2018, Jeffco engaged in the following transactions involving its equity
Common Dividends}Fusion Payroll Service Ltd. began 2018 with unlimited authorized and 375,000 issued and outstanding no par common shares. During 2018, Fusion entered into the following
Stock Dividends and Stock Splits}Lopez Products Ltd.'s statement of financial position includes total assets of \(\$ 587,000\) and the following equity account balances at December 31, 2018:Lopez's
Preferred Dividends Magic Conglomerates Ltd. had the following preferred shares outstanding at the end of a recent year:\section*{Required:}1. Determine the amount of annual dividends on each issue
Ratio Analysis}Consider the following information taken from the shareholders' equity section:\section*{Required:}1. Calculate the following for 2018 (Note: Round answers to two decimal places):2.
Proprietorship Accounting}Dan Hawalchuk, proprietor, operated a financial counselling business that generated a profit of \(\$ 90,000\) for the year ended December 31, 2018. The proprietor's capital
Partnership Accounting}Michelle Maw and Marc Joness, partners, opened a new consulting business starting January 1, 2018. Profit for the year ended December 31, 2018, was \(\$ 100,000\). Michelle and

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