Question: At the end of the year, the

> Explain the significance of measuring a company’s return on equity.

> Bob Banker is the manager of one location of the Fastwhere Inc. chain, which is a delivery service. Banker’s location is currently earning an ROI of 14 percent on existing average capital of $750,000. The minimum required return for Fas

> Explain the need for closing entries and describe the process by which temporary owners’ equity accounts are closed at year-end

> Twin Towns, Inc., was authorized to issue 300,000 shares of common stock and originally issued 100,000 shares of $10 par value stock at $18 per share. Subsequently, 25,000 shares were repurchased at $20, of which 10,000 were subsequently resold at $23. A

> How does depreciation expense differ from other operating expenses?

> Explain why speeding up the collection of accounts receivable provides only a one-time increase in cash receipts.

> Explain the accounting principle of adequate disclosure.

> What are interim financial statements? Do accounts that appear in a company’s interim balance sheet require any special computations to be reported correctly? Explain.

> Can a company be profitable but not liquid? Explain.

> Which accounts appear in a company’s after-closing trial balance? How do these accounts differ from those reported in an adjusted trial balance?

> A particular investment proposal has a payback period that exceeds the investment’s expected life. The investment has no salvage value. Will this proposal’s net present value be positive or negative? Explain your answer.

> What factors might a company consider in establishing a minimum required return on an investment proposal?

> The present value of an investment depends on the timing of its future cash flows. Explain what this statement means by giving a specific example of two investments that have significant timing differences and discussing the implications of those timing

> Tootsie Roll Industries has two business segments, one for operations in the United States and one for operations in Mexico and Canada. The following information (in thousands) comes from a recent annual report. Find the ROI for each segment for each yea

> Minor Company is authorized to sell 1,200,000 shares of $10 par value common stock and 60,000 shares of $100 par value 6 percent preferred stock. As of the end of the current year, the company has actually sold 550,000 shares of common stock at $12 per s

> What nonfinancial considerations should be taken into account regarding a proposal to install a fire sprinkler system in a finished goods warehouse?

> Discounting cash flows takes into consideration one characteristic of the earnings stream that is ignored in the computation of return on average investment. What is this characteristic and why is it important?

> Discounting a future cash flow at 15 percent results in a lower present value than does discounting the same cash flow at 10 percent. Explain why.

> What is a liquidating dividend, and how does it relate to a regular (no liquidating) dividend?

> What is the major shortcoming of using the payback period as the only criterion in making capital budgeting decisions?

> Identify some conditions where upper management might allow some divisions to have a lower required rate of return.

> Why is it important to consider income tax consequences when deciding whether to replace an asset?

> What are some types of capital investment projects in which nonfinancial factors may outweigh financial factors?

> What steps can a firm take to ensure that employee estimates of the costs, revenue, and cash flows from a proposed capital investment are not overly optimistic or pessimistic?

> Depreciation expense does not require payment in cash. However, it is an important consideration in the discounting of an investment’s future cash flows. Explain why.

> Ashton Company was experiencing financial difficulty late in the current year. The company’s income was sluggish, and the market price of its common stock was tumbling. On December 21, the company began to buy back shares of its own stock in an attempt t

> The manager of the Fleet division of Potlatch Automotive is evaluated on her division’s return on investment and residual income. The company requires that all divisions generate a minimum return on invested assets of 15 percent. Consistent failure to ac

> What can be said about an investment proposal that has a net present value of zero?

> Is an investment’s average estimated net income used to compute its return on average investment the same thing as the incremental annual cash flows used to compute its net present value? Explain your answer.

> What is capital budgeting? Why are capital budgeting decisions crucial to the long-run financial health of a business enterprise?

> How would you expect the components of return on investment to be different for a mostly Internet-based retailer compared to a more traditional bricks-and-mortar retailer (e.g., Amazon.com versus Barnes & Noble)?

> Explain the concept of peak pricing and provide an example from your own experience.

> In designing a compensation plan for the manager of the international operations of Tootsie Roll Industries (which, in addition to the United States, include Mexico and Canada), what trade-offs might the company’s board of directors take into considerati

> Why is residual income suggested as an improvement over ROI for business measurement?

> What are some problems that companies have encountered in using the balanced scorecard?

> Assume you are the manager of the finished goods warehouse of a computer manufacturer. Which warehouserelated business measures might help the company achieve its balanced scorecard goals?

> Green Thumb operates a chain of lawn fertilizer stores. Although the fertilizer is sold under the Green Thumb label, it is purchased from an independent manufacturer. Sue Smith, president of Green Thumb, is studying the advisability of opening another st

> Distinguish between the four lenses of the balanced scorecard and provide an example of a business measure for each category for a family owned grocery store

> Consider the Empire Hotel discussed in Problem 25.1A. The manager of the restaurants department complains that sales and resulting earnings for the restaurants are not higher due to the poor reputation of the hotel rooms department. Because the hotel roo

> What activities would make up the learning and growth component of the balanced scorecard for a large public accounting firm?

> Suppose you are interested in opening a new restaurant in your area. What specific activities would you identify as goals for your restaurant?

> Identify the costs and benefits of a competitive incentive plan in which only one individual out of a group receives the bonus if he or she outperforms the others in the group.

> Identify the costs and benefits of a cooperative incentive plan in which a team of individuals equally shares a bonus pool if the team achieves a predetermined goal.

> Assume sales remain constant from year 1 to year 2 and return on sales (ROS) increases from year 1 to year 2. Identify two reasons why the return on sales ratio might increase from year 1 to year 2

> If a company’s total stockholders’ equity is unchanged by the distribution of a stock dividend, how is it possible for a stockholder who received shares in the distribution of the dividend to benefit?

> For which perspective of the balanced scorecard would the output from a standard cost system (e.g., variances) provide useful performance measurement information? Explain.

> Exhibit 25–9 identifies balanced scorecard performance measures. Review this exhibit and identify two measures from the customer perspective category that in the short run might be in conflict with some of the measures listed in the fin

> Ashton Company was experiencing financial difficulty late in the current year. The company’s income was sluggish, and the market price of its common stock was tumbling. On December 21, the company began to buy back shares of its own stock in an attempt t

> Custodian Commandos, Inc., provides janitorial services to public school systems. The business adjusts its accounts monthly, but closes them only at year-end. Its fiscal year ends on December 31. A summary of the company’s total revenue

> Early in 2019, Feller Corporation was formed with authorization to issue 50,000 shares of $1 par value common stock. All shares were issued at a price of $8 per share. The corporation reported net income of $95,000 in 2019, $27,500 in 2020, and $75,700 i

> Techno Corporation is the producer of popular business software. Recently, an investment service published the following per-share amounts relating to the company’s only class of stock. Instructions: a. Without reference to dollar amo

> Parsons, Inc., is a publicly owned company. The following information is excerpted from a recent balance sheet. Dollar amounts (except for per-share amounts) are stated in thousands. Instructions: From this information, answer the following questions.

> Fowler, Inc., declared a 4 percent stock dividend on its 750,000 shares of common stock. The $10 par value common stock was originally sold for $14 and was selling at $17 at the time the stock dividend was declared. Prepare the general journal entries to

> The year-end balance sheet of Ft. Smith Products includes the following stockholders’ equity section (with certain details omitted). Instructions: From this information, compute answers to the following questions. a. How many shares

> Early in the year Bill Shares and several friends organized a corporation called Shares Communications, Inc. The corporation was authorized to issue 50,000 shares of $100 par value, 10 percent cumulative preferred stock and 400,000 shares of $2 par value

> Maria Martinez organized Manhattan Transport Company in January 2018. The corporation immediately issued at $8 per share one-half of its 200,000 authorized shares of $2 par value common stock. On January 2, 2019, the corporation sold at par value the ent

> McMinn Publications was organized early in 2016 with authorization to issue 20,000 shares of $100 par value preferred stock and 1 million shares of $1 par value common stock. All of the preferred stock was issued at par, and 300,000 shares of common stoc

> Early in 2018, Robbinsville Press was organized with authorization to issue 100,000 shares of $100 par value preferred stock and 500,000 shares of $1 par value common stock. Ten thousand shares of the preferred stock were issued at par, and 170,000 share

> As of December 31 of the current year, Petersen Corporation has prepared the following information regarding its liabilities and other obligations Instructions: a. Prepare a listing of the Petersen Corporation’s current and long-term

> The following items were taken from the accounting records of Murfreesboro Telephone Corporation (MTC) for the year ended December 31, 2021 (dollar amounts are in Other Information: 1. The 63⁄4 percent bonds due in February 2022 will

> On September 1, 2021, Evansville Lumber Company issued $80 million in 20-year, 10 percent bonds payable. Interest is payable semiannually on March 1 and September 1. Bond discounts and premiums are amortized at each interest payment date and at year-end.

> Green Mountain Power Company obtained authorization to issue 20-year bonds with a face value of $10 million. The bonds are dated May 1, 2021, and have a contract rate of interest of 10 percent. They pay interest on November 1 and May 1. The bonds were is

> On September 1, 2021, Speedy Lube signed a 30-year, $1,080,000 mortgage note payable to Johnstown Bank and Trust in conjunction with the purchase of a building and land. The mortgage note calls for interest at an annual rate of 12 percent (1 percent per

> Briefly explain the gross profit method of estimating inventories. In what types of situations is this technique likely to be useful?

> During the fiscal year ended December 31, Swanson Corporation engaged in the following transactions involving notes payable. Instructions: a. Prepare journal entries (in general journal form) to record these transactions. Use a 360-day year in making t

> The following are selected items from the accounting records of Denver Chocolates for the year ended December 31, 2021. Other Information: 1. The note payable to Northwest Bank is due in 60 days. Arrangements have been made to renew this note for an ad

> Fifteen transactions or events affecting Technology Specialists, Inc., are as follows. a. Made a year-end adjusting entry to accrue interest on a note payable. b. A liability classified for several years as long term becomes due within the next 12 months

> Walmart uses LIFO to account for its inventories. Recent financial statements were used to compile the following information (dollar figures are in millions). Instructions: a. Using the information provided, compute the following measures based upon th

> Between The Ears (BTE.com) is a popular Internet music store. During the current year, the company’s cost of goods available for sale amounted to $462,000. The retail sales value of this merchandise amounted to $840,000. Sales for the year were $744,000.

> The owners of Health Foods are offering the business for sale. The partial income statements of the business for the three years of its existence are summarized as follows. In negotiations with prospective buyers of the business, the owners of Health Fo

> Clear Sound Audio uses a periodic inventory system. One of the store’s most popular products is an MP8 car stereo system. The inventory quantities, purchases, and sales of this product for the most recent year are as follows. Instructi

> Mary’s Nursery uses a perpetual inventory system. At December 31, the perpetual inventory records indicate the following quantities of a particular blue spruce tree. A year-end physical inventory, however, shows only 310 of these trees

> Speed World Cycles sells high-performance motorcycles and motocross racers. One of Speed World’s most popular models is the Kazomma 900 dirt bike. During the current year, Speed World Cycles purchased eight of these bikes at the followi

> On January 15, 2021, Sports World sold 1,000 Ace-5 fishing reels to Angler’s Warehouse. Immediately prior to this sale, Sports World perpetual inventory records for Ace-5 reels included the following cost layers. Instructions: Note: W

> Gammon, Inc., declared dividends during the current year as follows. Prepare the general journal entries to record the declaration and payment of these dividends, assuming the declaration is recorded directly in retained earnings.

> Give two examples of cash receipts and two examples of cash payments that fit into each of the following classifications: a. Operating activities. b. Investing activities. c. Financing activities.

> Manufacturing Engineering, Inc., is a leading provider of lean manufacturing solutions. Its website is at the following address: www.mfgeng.com. On its website, Manufacturing Engineering lists several categories of projects. With a team of students choos

> An Air Force introductory course in electronics uses a personalized system of instruction whereby each student views a videotaped lecture and then is given a programmed instruction text. The students work independently with the text until they have compl

> The Sagittarius Casino’s strategy for establishing a competitive advantage over its competitors is to periodically create unique and interesting new games for its customers to play. Sagittarius management feels it is time for the casino

> The Wall Street Journal reported on several studies that show massage therapy has a variety of health benefits and it is not too expensive. A sample of 10 typical one-hour massage therapy sessions showed an average charge of $59. The population standard

> Consider the following hypothesis test. The following results are for two independent samples taken from the two populations. a. What is the value of the test statistic? b. What is the p-value?

> A 95% confidence interval for a population mean was reported to be 152 to 160. If s 5 15, what sample size was used in this study?

> In this section we used a two-step procedure to select a simple random sample of 30 EAI employees. Use this procedure to select a simple random sample of 50 EAI employees.

> The U.S. Golf Association has instituted a ban on long and belly putters. This has caused a great deal of controversy among both amateur golfers and members of the Professional Golf Association (PGA). Shown below are the names of the top 10 finishers in

> The 2019 American League consists of 15 baseball teams. Suppose a sample of 5 teams is to be selected to conduct player interviews. The following table lists the 15 teams and the random numbers assigned by Excel’s RAND function. Use the

> Rob’s Market (RM) is a regional food store chain in the southwest United States. David Crawford, director of Business Intelligence for RM, would like to initiate a study of the purchase behavior of customers who use the RM loyalty card

> Assume a finite population has 10 elements. Number the elements from 1 to 10 and use the following 10 random numbers to select a sample of size 4.

> Methods 1. Consider a finite population with five elements labeled A, B, C, D, and E. Ten possible simple random samples of size 2 can be selected. a. List the 10 samples beginning with AB, AC, and so on. b. Using simple random sampling, what is the pr

> Consider the following hypothesis test. The following results are from independent samples taken from two populations. a. What is the value of the test statistic? b. What is the degrees of freedom for the t distribution? c. What is the p-value?

> The mean cost to repair the smoke and fire damage that result from home fires of all causes is $11,389 (HomeAdvisor). How does the damage that results from home fires caused by careless use of tobacco compare? The file Tobacco Fires provides the cost to

> The Tire Rack, an online distributor of tires and wheels, conducts extensive testing to provide customers with products that are right for their vehicle, driving style, and driving conditions. In addition, The Tire Rack maintains an independent consumer

> Recall that in exercise 44, the admissions officer for Clearwater College developed the following estimated regression equation relating final college GPA to the student’s SAT mathematics score and high-school GPA.

> The following table reports the price, horsepower, and ¼-mile speed for 16 popular sports and GT cars.

> Americans tend to dine out multiple times per week. The number of times a sample of 20 families dined out last week provides the following data. a. Compute the mean and median. b. Compute the first and third quartiles. c. Compute the range and interquar

> In 2014, the Centers for Disease Control and Prevention reported the percentage of people 18 years of age and older who smoke. Suppose that a study designed to collect new data on smokers and nonsmokers uses a preliminary estimate of the proportion who s

> Best Buy, a nationwide retailer of electronics, computers, and appliances, sells several brands of refrigerators. A random sample of models of full size refrigerators prices sold by Best Buy and the corresponding cubic feet (cu. ft.) and list price follo

> Hamilton County judges try thousands of cases per year. In an overwhelming majority of the cases disposed, the verdict stands as rendered. However, some cases are appealed, and of those appealed, some of the cases are reversed. Kristen Deglaze of The Cin

> The following data show the annual revenue ($ millions) and the estimated team value ($ millions) for the 30 Major League Baseball teams (Forbes website). a. Develop a scatter diagram with Revenue on the horizontal axis and Value on the vertical axis.

> Jensen Tire & Auto is in the process of deciding whether to purchase a maintenance contract for its new computer wheel alignment and balancing machine. Managers feel that maintenance expense should be related to usage, and they collected the followin

> The file Cost Living contains the cost of living indexes and the population densities (number of people per square mile) for 61 cities in the United States. The cost of living index measures the cost of living in a particular city relative to the cost of