Brackett Insurance purchased $60,000 of 10% AMS bonds on January 1, 2018, at a price of 85 when the market rate of interest was 12%. Brackett intends to hold the bonds until their maturity date of January 1, 2038. The bonds pay interest semiannually on each January 1 and July 1. Record the initial purchase of the bonds by Brackett on January 1, 2018, and the receipt of the interest on the first interest payment date of July 1, 2018.
> data given in S8-6. What amount of warranty expense will North Boulder USA report during 2018? Which accounting principle addresses this situation? Does the warranty expense for the year equal the year’s cash payments for warranties? Explain the relevant
> North Boulder USA, a tire manufacturer, guarantees its tires against defects for five years or 60,000 miles, whichever comes first. Suppose North Boulder USA can expect warranty costs during the five-year period to add up to 3% of sales. Assume that a No
> Authority purchased inventory costing $25,000 by signing a 12%, six-month, short-term note payable. The purchase occurred on January 1, 2018. Jamison will pay the entire note (principal and interest) on the note’s maturity date of July 1, 2018. Journaliz
> Franklin Company purchased inventory costing $90,000 by signing an 8%, nine-month, short-term note payable. Franklin will pay the entire note (principal and interest) on the note’s maturity date. Journalize the company’s (a) purchase of inventory (b)
> Corporation’s accounts payable at the beginning of the most recent year was $50,000. At the end of the year, the accounts payable balance was $54,000. Landy’s sales revenue for the year was $3,105,000, while its cost of goods sold for the year was $1,508
> On Willow Grove Department Stores’ most recent balance sheet, the balance of its inventory at the beginning of the year was $12,000. At the end of the year, the inventory balance was $14,500. During that year, its cost of goods sold was $55,000. All purc
> Identify the current liability associated with each of the following operating activities: 1. Perform work on a warranty claim 2. Pay income taxes 3. Purchase supplies 4. Pay payroll taxes 5. Borrow money for operations using a short-term note 6. Process
> Grafton Company purchased a new car for use in its business on January 1, 2017. It paid $29,000 for the car. Grafton expects the car to have a useful life of four years with an estimated residual value of zero. Grafton expects to drive the car 40,000 m
> Grafton Company purchased a new car for use in its business on January 1, 2017. It paid $29,000 for the car. Grafton expects the car to have a useful life of four years with an estimated residual value of zero. Grafton expects to drive the car 40,000 m
> Grafton Company purchased a new car for use in its business on January 1, 2017. It paid $29,000 for the car. Grafton expects the car to have a useful life of four years with an estimated residual value of zero. Grafton expects to drive the car 40,000 mil
> Oak Ridge Garden Supplies uses a perpetual inventory system. The company has these account balances at May 31, 2018, prior to making the year-end adjustments: A year ago, the net realizable value of ending inventory was $11,500, which exceeded the cost
> This exercise uses the Northeast data from S7-5. Assume Northeast is trying to decide which depreciation method to use for income tax purposes. The company can choose from among the following methods: (a) straight-line, (b) units-of-production, or (c) do
> On January 1, 2017, Northeast Transportation Company purchased a used aircraft at a cost of $58,900,000. Northeast expects the plane to remain useful for five years (7,200,000 miles) and to have a residual value of $4,900,000. Northeast expects to fly
> LimeBike, located in San Mateo, California, is a startup founded in 2017. Its mission is to make shared bicycles accessible and affordable. The company has taken the basic idea of shared bicycles and eliminated the need to return the bike to a docking
> Identify each of the following items as a capital expenditure, an immediate expense, or neither. 1. Constructed a new parking lot on leased property for $300,000. 2. Paid property taxes of $75,000 for the first year a new administrative services building
> During 2018, Silverspring Systems, Inc., purchased two other companies for $10 million in cash. Also during 2018, Silverspring made capital expenditures of $8.6 million in cash to expand its market share. During the year, Silverspring sold its North Amer
> Oscar Optical Corporation provides a full line of designer eyewear to consumers. Oscar reported the following information for 2018 and 2017: Compute return on assets (ROA) for 2018 and 2017. Using the DuPont model, identify the components and state whe
> Lexington Garden Supply pays $280,000 for a group purchase of land, building, and equipment. At the time of acquisition, the land has a current market value of $124,000, the building’s current market value is $31,000, and the equipment’s current market v
> In 2018, Ambrosia Corporation LO 7reported $100 million in sales, $18 million in net income, and average total assets of $200 million. What is Ambrosia’s return on assets in 2018?
> For each of the following scenarios, indicate whether a long-term asset has been impaired (Y for yes and N for no) and, if so, the amount of the loss that should be recorded.
> Munchies, Inc., dominates the snack-food industry with its Salty Chip brand. Assume that Munchies purchased Sweet Snacks Company for $5.4 million cash. The market value of Sweet Snacks’ assets is $10 million, and Sweet Snacks has liabilities with a marke
> Suppose a Walmart store in Fillmore, Missouri, ended January 2018 with 900,000 units of merchandise that cost $5 each. Suppose the store then sold 50,000 units for $510,000 during February. Further, assume the store made two large purchases during Februa
> Jackson Petroleum, a giant oil company, holds reserves of oil and gas assets. At the end of 2018, assume the cost of Jackson’s oil reserves totaled $180 billion, representing 10 billion barrels of oil in the ground. 1. Which depreciation method is simila
> On January 1, 2017, Worldwide Manufacturing purchased a machine for $810,000 that it expected to have a useful life of four years. The company estimated that the residual value of the machine was $50,000. Worldwide Manufacturing used the machine for tw
> Fun Town Amusement Park paid $500,000 for a concession stand. Fun Town started out depreciating the building using the straight-line method over 25 years with a residual value of zero. After using the concession stand for four years, Fun Town determines
> Assume that on September 30, 2017, EuroAir, an international airline based in Germany, purchased a Jumbo aircraft at a cost of €45,000,000 (€ is the symbol for the euro). EuroAir expects the plane to remain useful for four years (4,000,000 miles) and to
> FlavorRite purchased a used van for use in its business on January 1, 2017. It paid $17,000 for the van. FlavorRite expects the van to have a useful life of four years, with an estimated residual value of $1,400. FlavorRite expects to drive the van 16,
> FlavorRite purchased a used van for use in its business on January 1, 2017. It paid $17,000 for the van. FlavorRite expects the van to have a useful life of four years, with an estimated residual value of $1,400. FlavorRite expects to drive the van 16,
> FlavorRite purchased a used van for use in its business on January 1, 2017. It paid $17,000 for the van. FlavorRite expects the van to have a useful life of four years, with an estimated residual value of $1,400. FlavorRite expects to drive the van 16,
> Examine the excerpt of a footnote from Albrecht Corporation’s September 30, 2018, annual report to follow. 1. What are Albrecht’s largest two categories of property and equipment as of September 30, 2018? Describe in
> Using the LIFO method, calculate the cost of ending inventory and cost of goods sold for Sandy Corporation.
> Using the FIFO method, calculate the cost of ending inventory and cost of goods sold for Sandy Corporation.
> Woody’s specializes in sound equipment. Company records indicate the following data for a line of speakers: Requirements: 1. Determine the amounts that Woody’s should report for cost of goods sold and ending inventory
> Using the average-cost method, calculate the cost of ending inventory and cost of goods sold for Sandy Corporation.
> This exercise should be used in conjunction with S6-4. Carson Print Supplies, Inc., is a corporation subject to a 25% income tax. Compute the company’s income tax expense under the average-cost, FIFO, and LIFO inventory costing methods.
> Carson Print Supplies, Inc., sells laser printers and supplies. Assume Carson started the year with 100 containers of ink (average cost of $8.90 each, FIFO cost of $9.00 each, LIFO cost of $7.80 each). During the year, the company purchased 800 container
> Beavercreek Company sold 14,000 jars of its organic honey in the most current year for $15 per jar. The company had paid $10.50 per jar of honey. (Assume that sales returns are nonexistent.) Calculate the following: 1. Sales revenue 2. Cost of goods so
> Beavercreek Company sold 14,000 jars of its organic honey in the most current year for $15 per jar. The company had paid $10.50 per jar of honey. (Assume that sales returns are nonexistent.) Calculate the following: 1. Sales revenue 2. Cost of goods so
> Here is the original schedule of cost of goods sold for Talladega Company for the years of 2016 through 2019: During the preparation of its 2019 financial statements, Talladega Company discovered that its 2017 ending inventory was understated by $400. M
> Warner Supply’s $3.5 million cost of inventory at the end of last year was understated by $1.9 million. 1. Was last year’s reported gross profit of $3.1 million overstated, understated, or correct? What was the correct amount of gross profit last year?
> Volcano Technology began the year with inventory of $275,000 and purchased $1,850,000 of goods during the year. Sales for the year are $2,600,000, and Volcano Technology’s gross profit percentage is 40% of sales. Compute Volcano Technology’s estimated co
> Fairbanks Company made sales of $24,600 million during 2018. Cost of goods sold for the year totaled $9,840 million. At the end of 2017, Fairbanks’ inventory stood at $1,000 million, and Fairbanks ended 2018 with inventory of $1,400 million. Compute Fair
> It is December 31, the end of the year, and the controller of Reed Corporation is applying the lowerof-cost-or-market (LCM) rule to inventories. Before any year-end adjustments, the company reports the following data: Reed determines that the net realiz
> Selma Company’s inventory records for the most recent year contain the following data:
> Jasmine Corporation purchased inventory costing $125,000 and sold 75% of the goods for $163,750. All purchases and sales were on account. Jasmine later collected 25% of the accounts receivable. Assume that sales returns are nonexistent. 1. Journalize th
> Using the data from E-S-15, make the adjusting entries that Glimmer Pools would need to make on December 31, 2018, related to the investment in AKL bonds. How would the bonds be reported on Glimmer Pools’ balance sheet as of December 31, 2018? What amoun
> Glimmer Pools purchased $50,000 of 7% AKL bonds on January 1, 2018, at a price of 104.2 when the market rate of interest was 6%. Glimmer intends to hold the bonds until their maturity date of January 1, 2023. The bonds pay interest semiannually on each J
> Using the data from E-S-12, make the adjusting entries that Brackett Insurance would need to make on December 31, 2018, related to the investment in AMS bonds. How would the bonds be reported on Brackett Insurance’s balance sheet as of December 31, 2018?
> Using the data from E-S-12, calculate the amount of discount amortization (using the straight-line amortization method) on July 1, 2018, and record the related journal entry. What is the total interest revenue for the first six months of 2018? (Hint: in
> On January 1, 2018, Downtown Industries purchased $8,000 of 4% JMK bonds at a price of 100 (par). Downtown intends to hold the bonds until their maturity date of January 1, 2021. The bonds pay interest semiannually on each January 1 and July 1. Record th
> McGee Leasing leased a car to a customer. McGee will receive $300 a month, at the end of each month, for 36 months. Use the PV function in Excel® to calculate the answers to the following questions 1. What is the present value of the lease if the annual
> Use the data given in E-S-8. On January 1, 2019, Western Motors sold half of its investment in Yaza Motors. The sale price was $135 million. Calculate Western Motors’ gain or loss on the sale. Data from E-S-8: On January 1, 2018, Western Motors paid $4
> On January 1, 2018, Western Motors paid $450 million for a 40% investment in Yaza Motors. Yaza earned net income of $65 million and declared and paid cash dividends of $45 million during 2018. 1. What method should Western Motors use to account for the
> Use the data for Griffin Company in E6-16A to illustrate Griffin’s income tax advantage from using LIFO over FIFO. Sales revenue is $8,000, operating expenses are $2,000, and the income tax rate is 30%. How much in taxes would Griffin Company save by usi
> Use the data given in E-S-6. On May 21, 2019, Athens Company sold its investment in Technomite stock for $28 per share. 1. Journalize the sale. No explanation is required. 2. How does the gain or loss you recorded differ from the gain or loss recorded on
> For an investment to be classified as a current asset, a. the investment must be easily convertible to cash. b. the investor must intend to convert the investment to cash within one year or current operating cycle, whichever is longer, or use it to pay a
> Notes payable due in six months are reported as a. current liabilities on the balance sheet. b. current liabilities on the income statement. c. contra-assets on the income statement. d. long-term liabilities on the balance sheet.
> A company with high earnings quality is more likely to experience than a company with low earnings quality. a. low revenue levels in the future b. increasing operating expenses, compared to sales, in the future c. high earnings in the future d. low earn
> The quality of earnings concept indicates that a. stockholders want the corporation to earn enough income to be able to pay its debts. b. net income is the best measure of the results of operations. c. continuing operations and one-time transactions are
> Book value per share1 of Orlando Medical’s common stock outstanding at December 31, 2018, was a. 137.9. b. $35,147. c. $2.99. d. 20.1
> How many shares of common stock did Orlando Medical have outstanding, on average, during 2018? (Hint: Calculate earnings per share.) a. 137.9 million b. 1,880 million c. 20.1 million d. 35,147 million
> Orlando Medical’s trend of return on sales is a. improving. b. declining. c. stuck at 22.1%. d. worrisome.
> Orlando Medical’s long-term debt carries an annual interest rate of 11%. During the year ended December 31, 2018, Orlando’s times-interest-earned ratio was a. 137.9 times. b. $35,147. c. 20.1 times. d. 108.7 times.
> Orlando Medical’s inventory turnover during fiscal year 2018 was a. $35,147. b. very slow. c. 83 times. d. 137.9 times
> Use the data for Griffin Company in E6-16A to answer the following. Requirements: 1. Compute cost of goods sold and ending inventory, using each of the following methods: a. Specific identification, with seven $165 units and four $175 units still on h
> Orlando Medical’s days’ sales in receivables during 2018 was (assuming all revenue is on credit) a. 137.9 days. b. 25 days. c. 35 days. d. 20.1 days.
> Orlando Medical’s common-size income statement for 2018 would report cost of goods sold as a. 82.4%. b. $35,147 million. c. up by 20.1%. d. 137.9%.
> Using the earliest year available as the base year, the trend percentage for Orlando Medical’s net revenue during 2018 was a. 121%. b. up by 21.1%. c. up by $11,555 million. d. 137%.
> What is the largest single item included in Orlando Medical’s debt ratio at December 31, 2018? a. Accounts payable b. Cash and cash equivalents c. Common stock d. Investments
> Orlando Medical’s quick (acid-test) ratio at year-end 2018 is closest to a. 0.68. b. $8,578 million. c. 0.45. d. 0.75.
> Orlando Medical’s current ratio at year-end 2018 is closest to a. $735. b. $8,578. c. 0.94. d. 1.2
> During 2018, Orlando Medical’s total assets a. increased by $1,863 million. b. increased by 28.3%. c. Both a and b. d. increased by 22.1%.
> Movens Company gathered the following data (in millions) for the past two years: In a vertical analysis of 2019, the gross profit percentage would be closest to a. 18%. b. 46%. c. 100%. d. 325%
> Bond Company reported the following inventory data: Use 2016 as the base year. The trend percentage in 2019 is closest to a. 83%. b. 87%. c. 92%. d. 115%
> If you want an indication of the direction a business is taking, you would use a. benchmarking. b. trend percentages. c. industry analysis. d. vertical analysis.
> Simon Granite & Stone Corporation reported the following comparative income statements for the years ended September 30, 2018, and 2017: Simon’s president and shareholders are thrilled by the company’s boost in
> public company’s annual report filed with the SEC includes a. a description of the business. b. financial statements. c. management’s explanations for trends in sales. d. All of the above are included in an annual report.
> Cramer Corporation formats operating cash flows using the indirect method in questions 46–54. Cramer uses the direct method in question Assume Cramer uses the direct method to prepare the statement of cash flows. Income tax payable wa
> Cramer Corporation formats operating cash flows using the indirect method in questions 46–54. Cramer uses the direct method in question Assume Cramer uses the direct method to prepare the statement of cash flows. Credit sales totaled
> Cramer Corporation formats operating cash flows using the indirect method in questions 46–54. Cramer uses the direct method in question Cramer’s net cash flow from financing activities for 2018 was (assume no stock di
> Cramer Corporation formats operating cash flows using the indirect method in questions 46–54. Cramer uses the direct method in question Cramer’s largest financing cash flow for 2018 resulted from (assume no stock divi
> Cramer Corporation formats operating cash flows using the indirect method in questions 46–54. Cramer uses the direct method in question How many items enter the computation of Cramer’s net cash flow from financing ac
> Cramer Corporation formats operating cash flows using the indirect method in questions 46–54. Cramer uses the direct method in question The book value of equipment sold during 2018 was $22,000. Cramer’s net cash flow
> Cramer Corporation formats operating cash flows using the indirect method in questions 46–54. Cramer uses the direct method in question How many items enter the computation of Cramer’s net cash flow from investing ac
> Cramer Corporation formats operating cash flows using the indirect method in questions 46–54. Cramer uses the direct method in question Cramer’s net cash provided by operating activities during 2018 was a. $32,000. b.
> Cramer Corporation formats operating cash flows using the indirect method in questions 46–54. Cramer uses the direct method in question How do accounts receivable affect Cramer’s cash flows from operating activities f
> Sokol Antiques, Inc., began June with inventory of $48,400. The business made net purchases of $51,300 and had net sales of $104,000 before a fire destroyed the company’s inventory. For the past several years, Sokol’s gross profit percentage has been 3
> Cramer Corporation formats operating cash flows using the indirect method in questions 46–54. Cramer uses the direct method in question How do Cramer’s accrued liabilities affect the company’s statem
> Cramer Corporation formats operating cash flows using the indirect method in questions 46–54. Cramer uses the direct method in question How many items enter the computation of Cramer’s net cash provided by operating a
> PhotoEase Camera Co. sold equipment with a cost of $19,000 and accumulated depreciation of $7,000 for an amount that resulted in a gain of $1,000. What amount should PhotoEase report on the statement of cash flows as “proceeds from sale of plant assets”?
> If the indirect method is used, which of the following items appears on a statement of cash flows? a. Collections from customers b. Payments to suppliers c. Cash receipt of interest revenue d. Depreciation expense
> The issuance of stock for cash is reported on the statement of cash flows under a. financing activities. b. operating activities. c. noncash investing and financing activities. d. investing activities.
> The issuance of common stock in exchange for cash is reported in: a. the operating activities section of the statement of cash flows. b. the investing activities section of the statement of cash flows. c. the financing activities section of the statement
> In a DuPont analysis, what are the components of return on assets? a. Net Profit Margin Ratio and Debt Ratio b. Net Profit Margin Ratio and Leverage Ratio c. Net Profit Margin Ratio and Asset Turnover Ratio d. Asset Turnover Ratio and Leverage Ratio
> Amir Company’s net income and net sales are $18,000 and $1,100,000, respectively, and average total assets are $100,000. What is Amir’s return on assets? a. 20.0% b. 18.0% c. 3.7% d. 7.0%
> A corporation has 100,000 shares of 4% preferred stock outstanding. Also, there are 100,000 shares of common stock outstanding. Par value for each is $100. If a $825,000 dividend is paid, how much goes to the preferred stockholders? a. None b. $400,000 c
> A corporation has 100,000 shares of 4% preferred stock outstanding. Also, there are 100,000 shares of common stock outstanding. Par value for each is $100. If a $825,000 dividend is paid, how much goes to the preferred stockholders? a. None b. $400,000 c
> Spicer Industries prepares budgets to help manage the company. Spicer is budgeting for the fiscal year ended January 31, 2018. During the preceding year ended January 31, 2017, sales totaled $9,700 million and cost of goods sold was $6,400 million. At
> Hodson Corp. purchased ten $1,000 8% bonds of Eagle Corporation when the market rate of interest was 6%. Interest is paid semiannually, and the bonds will mature in four years. Using the PV function in Excel®, compute the price Hodson paid (the present v
> Marvin’s Foods has outstanding 400 shares of 2% preferred stock, $100 par value; and 1,500 shares of common stock, $15 par value. Marvin’s declares dividends of $13,800. Which of the following is the correct entry?
