I wanted to see if someone can please check the answers for this document please. The only problem I did not understand is problem 3 part ii (highlighted in red)
3. C....j. Bonds are popular source of financing because: 3. Financial analysts tend to downgrade a company that has raised large amounts of cash by frequent issue of stock. b. A company having cash flow problems can postpone payment of interest to bondholders. C. Bond interest expense is deductible for tax purposes, while dividends paid on stock are not. d. The bondholders can always convert their bonds into stock if they choose. _ii. Assume bonds were issued during the month of June. When comparing the balance sheets for May 31 to June 30, if Total Assets increased by $425,000 and Total Liabilities increased by $250,000, then the change in Stockholders' Equity would be_ Identify amount and if it is an increase or decrease C 4. The time it takes McDonald's to purchasebeef patties, cook and sell burgers, and collect cash from customers is known as the: 3. Accounting cycle b. Financing cycle c. Operating cycle d. Investing cycle e. Spin cycle C 5. Which of the following is a current liability? 3. Prepaid insurance.... Current Asset b. Accounts receivable..... Current Asset C. Unearned subscription revenue Rent revenue.... Income/revenue . Bonds payable..... Long Term Liability 5. The Notes to the financial statements indicate the types of sales included in the receivables accounts along with the uncollectible amounts balance (Allowance for Doubtful Accounts]. i. Tor F: If gross receivables are $218,000 and the allowance for doubtful accounts is 25,000, the Balance Sheet will indicate a line item for "Receivables, net" = $193,000. 5218,000-525,000 =$193,000 TRUE ii The valuation method for receivables is called: 3. Fair value b. Historical Cost C. Net present value d. Lower of cost or net realizable value (LONRV] e. Net realizable value1. The following are categories of accounts reported in the financial statements: A. Current Assets E. Stockholders' Equity B. Non-Current Assets F. Revenue C. Current Liabilities G. Expense D. Non-Current Liabilities H. Not Applicable Indicate where each of the following accounts would be reported (classified) in the financial statement categories noted above (categories may be used more than once or not at all). Identify only one category for each account listed below. C...Short-term Notes Payable C..Deferred Income Tax Payable B.Property, Plant & Equipment C.Accrued Liabilities C..Accounts Payable E.Retained Earnings B.Goodwill E.Rental Income 2. i. What is total Stockholders' Equity based on the following account balances? Paid in Capital: Common Stock $926,000 Paid-in-Capital in excess of par 9,255,000 Retained Earnings 22,876,000 Other Comprehensive Income 66,000 Treasury Stock +(85,000) $33,123,000 Total Stockholders Equity = $33,123,000 .D.iis Treasury stock represents a. Contra-equity account b. The cost of company shares repurchased by the company c. A reduction of stockholders' equity d. All of the above are both correct
