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managerial accounting tools for business decision making

Questions and Answers of Managerial Accounting Tools For Business Decision Making

The accompanying chart shows the qualitative characteristics of useful accounting information. Fill in the blanks.AppendixLO1 Fundamental Qualities Usefulness Relevance (a) (b) (c) Faithful
Ronald Allerton has just approached a venture capitalist for financing for a new business venture, the development of a local ski hill. On July 1, 2013, Ronald was loaned $140,000 at an annual
Lyman purchased a new piece of equipment to be used in its new facility. The$380,000 piece of equipment was purchased with a $40,000 down payment and with cash received through the issuance of a
On January 1, 2014, Murphy Company issued $1,600,000 face value, 7%, 10-year bonds at $1,717,761. This price resulted in a 6% effective-interest rate on the bonds. Murphy uses the effective-interest
On January 1, 2014, Imelda Corporation issued $2,000,000 face value, 6%, 10-year bonds at $2,154,434. This price resulted in an effective-interest rate of 5% on the bonds. Imelda uses the
Wentworth Co. sold $3,000,000, 7%, 8-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. The company uses straightline amortization on bond premiums
Holmes Corporation sold $2,200,000, 8%, 5-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. Holmes Corporation uses the straight-line method to
The following section is taken from Zenith Oil Company’s balance sheet at December 31, 2013.Current liabilities Interest payable $ 144,000 Long-term liabilities Bonds payable (4%, due January 1,
Suppose you have been presented with the following selected information taken from the financial statements of Kellogg Company.KELLOGG COMPANY Balance Sheet (partial)December 31 (in millions)2014
Union Electric sold $5,000,000, 5%, 10-year bonds on January 1, 2014. The bonds were dated January 1 and pay interest on January 1. The bonds were sold at 103.Instructions(a) Prepare the journal
On April 1, 2013, CMV Corp. issued $600,000, 5%, 5-year bonds at face value.The bonds were dated April 1, 2013, and pay interest annually on April 1. Financial statements are prepared annually on
The following section is taken from Lyons Corp.’s balance sheet at December 31, 2013.Current liabilities Interest payable $ 96,000 Long-term liabilities Bonds payable (8%, due January 1, 2018)
Skate City Corporation sells skateboard products and also operates an indoor skating facility. During the last part of 2014, Skate City had the following transactions related to notes payable.Aug. 1
On January 1, 2014, the ledger of Flaming Company contained the following liability accounts.Accounts Payable $52,000 Sales Taxes Payable 8,200 Unearned Service Revenue 11,000 During January, the
Grace Herron has just approached a venture capitalist for financing for her new business venture, the development of a local ski hill. On July 1, 2013, Grace was loaned $150,000 at an annual interest
Frevert purchased a new piece of equipment to be used in its new facility. The$370,000 piece of equipment was purchased with a $50,000 down payment and with cash received through the issuance of a
On January 1, 2014, Jade Company issued $2,000,000 face value, 7%, 10-year bonds at $2,147,202. This price resulted in a 6% effective-interest rate on the bonds. Jade uses the effective-interest
On January 1, 2014, Lock Corporation issued $1,800,000 face value, 5%, 10-year bonds at $1,667,518. This price resulted in an effective-interest rate of 6% on the bonds.Lock uses the
Wempe Co. sold $3,000,000, 8%, 10-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. The company uses straightline amortization on bond premiums and
Yung Corporation sold $2,000,000, 7%, 5-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. Yung Corporation uses the straight-line method to amortize
The following information is taken from Oler Corp.’s balance sheet at December 31, 2013.Current liabilities Interest payable $ 96,000 Long-term liabilities Bonds payable (4%, due January 1, 2024)
Suppose you have been presented with selected information taken from the financial statements of Southwest Airlines Co., shown below.SOUTHWEST AIRLINES CO.Balance Sheet (partial)December 31 (in
Slocombe Company sold $6,000,000, 7%, 15-year bonds on January 1, 2014.The bonds were dated January 1, 2014, and pay interest on December 31. The bonds were sold at 98.Instructions(a) Prepare the
On October 1, 2013, Koppa Corp. issued $700,000, 5%, 10-year bonds at face value. The bonds were dated October 1, 2013, and pay interest annually on October 1.Financial statements are prepared
The following section is taken from Mareska’s balance sheet at December 31, 2013.Current liabilities Interest payable $ 40,000 Long-term liabilities Bonds payable (8%, due January 1, 2017) 500,000
Ermlar Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2014, Ermlar had the following transactions related to
On January 1, 2014, the ledger of Hiatt Company contained these liability accounts.Accounts Payable $42,500 Sales Taxes Payable 6,600 Unearned Service Revenue 19,000 During January, the following
Goins Corporation issued a $50,000, 10%, 10-year installment note payable on January 1, 2014. Payments of $8,137 are made each January 1, beginning January 1, 2015.Instructions(a) What amounts should
Nance Co. receives $280,000 when it issues a $280,000, 6%, mortgage note payable to finance the construction of a building at December 31, 2014. The terms provide for semiannual installment payments
Gomez Company issued $380,000, 7%, 10-year bonds on January 1, 2014, for$407,968. This price resulted in an effective-interest rate of 6% on the bonds. Interest is payable annually on January 1.
Cole Corporation issued $400,000, 7%, 20-year bonds on January 1, 2014, for$360,727. This price resulted in an effective-interest rate of 8% on the bonds. Interest is payable annually on January 1.
Dailey Company issued $300,000, 8%, 15-year bonds on December 31, 2013, for $288,000. Interest is payable annually on December 31. Dailey uses the straight-line method to amortize bond premium or
Prophet Company issued $500,000, 6%, 30-year bonds on January 1, 2014, at 103. Interest is payable annually on January 1. Prophet uses straight-line amortization for bond premium or
A large retailer was sued nearly 5,000 times in a recent year—about once every two hours every day of the year. It has been sued for everything imaginable—ranging from falls on icy parking lots
Sedgewick Boutique reported the following financial data for 2014 and 2013.SEDGEWICK BOUTIQUE Balance Sheet (partial)September 30 (in thousands)2014 2013 Current assets Cash and short-term deposits
Suppose 3M Company reported the following financial data for 2014 and 2013 (in millions).3M COMPANY Balance Sheet (partial)2014 2013 Current assets Cash and cash equivalents $ 3,040 $1,849 Accounts
Suppose McDonald’s 2014 financial statements contain the following selected data (in millions).Current assets $ 3,416.3 Interest expense $ 473.2 Total assets 30,224.9 Income taxes 1,936.0 Current
Santana, Inc. reports the following liabilities (in thousands) on its January 31, 2014, balance sheet and notes to the financial statements.Accounts payable $4,263.9 Mortgage payable $6,746.7 Accrued
The situations presented here are independent of each other.Instructions For each situation, prepare the appropriate journal entry for the redemption of the bonds.(a) Pelfer Corporation redeemed
Romine Company issued $350,000 of 8%, 20-year bonds on January 1, 2014, at face value. Interest is payable annually on January 1.Instructions Prepare the journal entries to record the following
Assume that the following are independent situations recently reported in the Wall Street Journal. 1. General Electric (GE) 7% bonds, maturing January 28, 2015, were issued at 111.12. 2. Boeing 7%
Riot Company issued $500,000, 15-year, 7% bonds at 96.Instructions(a) Prepare the journal entry to record the sale of these bonds on January 1, 2014.(b) Suppose the remaining Discount on Bonds
Canyon Company issued $600,000, 10-year, 6% bonds at 103.Instructions(a) Prepare the journal entry to record the sale of these bonds on January 1, 2014.(b) Suppose the remaining Premium on Bonds
On January 1, Newkirk Company issued $300,000, 8%, 10-year bonds at face value. Interest is payable annually on January 1.Instructions Prepare journal entries to record the following events.(a) The
On August 1, 2014, Ortega Corporation issued $600,000, 7%, 10-year bonds at face value. Interest is payable annually on August 1. Ortega’s year-end is December 31.Instructions Prepare journal
Valenti Company Ltd. publishes a monthly sports magazine, Fishing Preview.Subscriptions to the magazine cost $28 per year. During November 2014, Valenti sells 6,300 subscriptions for cash, beginning
Season tickets for the Wildcats are priced at $320 and include 16 games. Revenue is recognized after each game is played. When the season began, the amount credited to Unearned Ticket Revenue was
During the month of March, Olinger Company’s employees earned wages of$64,000. Withholdings related to these wages were $4,896 for Social Security (FICA),$7,500 for federal income tax, $3,100 for
In providing accounting services to small businesses, you encounter the following situations pertaining to cash sales.1 Furcal Company enters sales and sales taxes separately on its cash register. On
On June 1, Fancher Company Ltd. borrows $60,000 from First Bank on a 6-month,$60,000, 8% note. The note matures on December 1.Instructions(a) Prepare the entry on June 1.(b) Prepare the adjusting
On May 15, Criqui Outback Clothiers borrowed some money on a 4-month note to provide cash during the slow season of the year. The interest rate on the note was 8%.At the time the note was due, the
Jenny Kane and Cindy Travis borrowed $15,000 on a 7-month, 8% note from Golden State Bank to open their business, KT’s Coffee House. The money was borrowed on June 1, 2014, and the note matures
Loveland Corporation issued $400,000 of 10-year bonds at a discount. Prior to maturity, when the carrying value of the bonds was $388,000, the company redeemed the bonds at 99. Prepare the entry to
Dilley Corporation issues $300,000 of bonds for $315,000. (a) Prepare the journal entry to record the issuance of the bonds, and (b) show how the bonds would be reported on the balance sheet at the
State whether each of the following statements is true or false._______1 Convertible bonds are also known as callable bonds._______2 The market rate is the rate investors demand for loaning
During the month of February, Morrisey Corporation’s employees earned wages of $74,000. Withholdings related to these wages were $5,661 for Social Security(FICA), $7,100 for federal income tax, and
You and several classmates are studying for the next accounting examination.They ask you to answer the following questions:1 If cash is borrowed on a $60,000, 9-month, 10% note on August 1, how much
Leihsing Inc. issues a $600,000, 10%, 10-year mortgage note on December 31, 2013, to obtain financing for a new building. The terms provide for semiannual installment payments of $48,145. Prepare the
Presented below is the partial bond discount amortization schedule for Pape Corp., which uses the effective-interest method of amortization.Interest Bond Interest Interest to Expense to Discount
Oxford Inc. issues $4 million, 5-year, 8% bonds at 102, with interest payable on January 1. The straight-line method is used to amortize bond premium.(a) Prepare the journal entry to record the sale
Verlin Company issues $2 million, 10-year, 7% bonds at 99, with interest payable on December 31. The straight-line method is used to amortize bond discount.(a) Prepare the journal entry to record the
Suppose the Canadian National Railway Company’s (CN) total assets in a recent year were $24,004 million and its total liabilities were $14,180 million. That year, CN reported operating lease
Suppose the 2014 adidas financial statements contain the following selected data (in millions).Current assets $4,485 Interest expense $169 Total assets 8,875 Income taxes 113 Current liabilities
Presented here are liability items for Desmond Inc. at December 31, 2014. Prepare the liabilities section of Desmond’s balance sheet.Accounts payable $157,000 FICA taxes payable $ 7,800 Notes
Presented here are long-term liability items for Evenson Inc. at December 31, 2014. Prepare the long-term liabilities section of the balance sheet for Evenson Inc.Bonds payable (due 2018) $700,000
The balance sheet for Fogelberg Company reports the following information on July 1, 2014.FOGELBERG COMPANY Balance Sheet (partial)Long-term liabilities Bonds payable $2,000,000 Less: Discount on
Rooney Corporation issued 3,000 7%, 5-year, $1,000 bonds dated January 1, 2014, at face value. Interest is paid each January 1.(a) Prepare the journal entry to record the sale of these bonds on
Range Company issues $400,000, 20-year, 7% bonds at 101. Prepare the journal entry to record the sale of these bonds on June 1, 2014.AppendixLO2
Saddle Inc. issues $300,000, 10-year, 8% bonds at 98. Prepare the journal entry to record the sale of these bonds on March 1, 2014.AppendixLO2
Data for Susan Braun are presented in BE10-5. Prepare the employer’s journal entry to record payroll taxes for the period. Ignore unemployment taxes.AppendixLO2
Data for Susan Braun are presented in BE10-5. Prepare the employer’s journal entries to record (a) Susan’s pay for the period and (b) the payment of Susan’s wages. Use January 15 for the end of
Susan Braun’s regular hourly wage rate is $16, and she receives an hourly rate of $24 for work in excess of 40 hours. During a January pay period, Susan works 47 hours.Susan’s federal income tax
Washburn University sells 3,500 season basketball tickets at $80 each for its 10-game home schedule. Give the entry to record (a) the sale of the season tickets and(b) the revenue recognized after
Bluestem Supply does not segregate sales and sales taxes at the time of sale. The register total for March 16 is $10,388. All sales are subject to a 6% sales tax. Compute sales taxes payable and make
Graves Company borrows $90,000 on July 1 from the bank by signing a $90,000, 7%, 1-year note payable. Prepare the journal entries to record (a) the proceeds of the note and (b) accrued interest at
Linton Company has these obligations at December 31: (a) a note payable for$100,000 due in 2 years, (b) a 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments, (c) interest
Roy Toth, a friend of yours, has recently purchased a home for $125,000, paying $25,000 down and the remainder financed by a 6.5%, 20-year mortgage, payable at $745.57 per month. At the end of the
Your friend just received a car loan. It is a 7-year installment note. He does not understand the mechanics of how the loan works. Explain the important aspects of the installment note.AppendixLO2
Whitson Corporation issues $400,000 of 9%, 5-year bonds on January 1, 2014, at 104. If Whitson uses the effective-interest method in amortizing the premium, will the annual interest expense increase
Glenda Hope is discussing the advantages of the effective-interest method of bond amortization with her accounting staff. What do you think Glenda is saying?AppendixLO2
Knobler Corporation issues $200,000 of 6%, 5-year bonds on January 1, 2014, at 103. Assuming that the straight-line method is used to amortize the premium, what is the total amount of interest
Explain the straight-line method of amortizing discount and premium on bonds payable.AppendixLO2
What criteria must be met before a contingency must be recorded as a liability? How should the contingency be disclosed if the criteria are not met?AppendixLO2
What are the implications for analysis if a company has significant operating leases?AppendixLO2
Norman Corporation has a current ratio of 1.1. Tim has always been told that a corporation’s current ratio should exceed 2.0. The company maintains that its ratio is low because it has a minimal
Matt Higgins needs a few new trucks for his business. He is considering buying the trucks but is concerned that the additional debt he will need to borrow will make his liquidity and solvency ratios
The management of Hinrichs Corporation is concerned because survey data suggest that many potential customers do not buy vehicles due to quality concerns. It is considering taking the bold step of
Samuel Engels says that liquidity and solvency are the same thing. Is he correct? If not, how do they differ?AppendixLO2
(a) In general, what are the requirements for the financial statement presentation of long-term liabilities?(b) What ratios may be computed to evaluate a company’s liquidity and solvency?AppendixLO2
Natalie Pendlay, the chief financial officer of Mullins Inc., is considering the options available to her for financing the company’s new plant. Shortterm interest rates right now are 6%, and
Which accounts are debited and which are credited if a bond issue originally sold at a premium is redeemed before maturity at 97 immediately following the payment of interest?AppendixLO2
If the Bonds Payable account has a balance of$700,000 and the Discount on Bonds Payable account has a balance of $36,000, what is the carrying value of the bonds?AppendixLO2
If a 6%, 10-year, $800,000 bond is issued at face value and interest is paid annually, what is the amount of the interest payment at the end of the first period?AppendixLO2
Jack and Lance are discussing how the market price of a bond is determined. Jack believes that the market price of a bond is solely a function of the amount of the principal payment at the end of the
Assume that Ziegler Inc. sold bonds with a face value of $100,000 for $104,000. Was the market interest rate equal to, less than, or greater than the bonds’contractual interest rate?
Describe the two major obligations incurred by a company when bonds are issued.AppendixLO2
(a) What is a convertible bond?(b) Discuss the advantages of a convertible bond from the standpoint of the bondholders and of the issuing corporation.AppendixLO2
Explain each of these important terms in issuing bonds:(a) Face value.(b) Contractual interest rate.(c) Bond certificate.AppendixLO2
Contrast these types of bonds:(a) Secured and unsecured.(b) Convertible and callable.AppendixLO2
(a) What are long-term liabilities? Give two examples.(b) What is a bond?AppendixLO2

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