Early in its 2014 fiscal year (December 31 year-end), Hayes Company purchased 10,000 shares of Kenyon Corporation common shares for $26.18 per share, plus $1,800 in brokerage commissions. These securities were accounted for at FV-OCI (with recycling) and transaction costs are capitalized. In September, Kenyon declared and paid a dividend of $1.02 per share, and on December 31, 2014, the fair value of these shares was $271,500. On April 13, 2015, Hayes sold all the Kenyon shares at a price of $28.10 each, incurring $1,925 in brokerage commissions on the sale. Prepare the entries to record (a) The purchase of the Kenyon shares, (b) The receipt of the dividend, (c) The fair value adjustment at December 31, 2014, and (d) All entries associated with the disposal of the investment on April 13, 2015.
> When is a stock said to be in equilibrium? At any given time, would you guess that most stocks are in equilibrium as you defined it? Explain.
> D’Leon Inc., a regional snack foods producer, after an expansion program. D’Leon had increased plant capacity and undertaken a major marketing campaign in an attempt to “go national.”
> The Corrigan Corporation’s 2007 and 2008 financial statements follow, along with some industry average ratios. a. Assess Corrigan’s liquidity position and determine how it compares with peers and how the liquidity posi
> A rookie quarterback is negotiating his first NFL contract. His opportunity cost is 10%. He has been offered three possible 4-year contracts. Payments are guaranteed, and they would be made at the end of each year. Terms of each contract are as follows:
> Explain the following statement: While the balance sheet can be thought of as a snapshot of a firm’s financial position at a point in time, the income statement reports on operations over a period of time.
> How does the deductibility of interest and dividends by the paying corporation affect the choice of financing (that is, the use of debt versus equity)?
> What does double taxation of corporate income mean? Could income ever be subject to triple taxation? Explain your answer.
> Would it be possible for a company to report negative free cash flow and still be highly valued by investors; that is, could a negative free cash flow ever be a good thing in the eyes of investors? Explain your answer.
> a. Find the present values of the following cash flow streams at 8% compounded annually. b. What are the PVs of the streams at 0% compounded annually? 2 3 + + $400 + $400 Stream A $0 $100 $400 $300 Stream B $0 $300 $400 $400 $400 $100
> What is free cash flow? If you were an investor, why might you be more interested in free cash flow than net income?
> Financial statements are based on generally accepted accounting principles (GAAP) and are audited by CPA firms. Therefore, do investors need to worry about the validity of those statements? Explain your answer.
> Bailey Corporation’s financial statements (dollars and shares are in millions) are provided here. a. What was net working capital for 2007 and 2008? b. What was Bailey’s 2008 free cash flow? c. Construct Baileyâ
> W.C. Cycling had $55,000 in cash at year-end 2007 and $25,000 in cash at year-end 2008. Cash flow from long-term investing activities totaled -$250,000, and cash flow from financing activities totaled +$170,000. a. What was the cash flow from operating a
> What is a firm’s intrinsic value? its current stock price? Is the stock’s “true long-run value” more closely related to its intrinsic value or to its current price?
> Which of the following actions are most likely to directly increase cash as shown on a firm’s balance sheet? Explain and state the assumptions that underlie your answer. a. It issues $2 million of new common stock. b. It buys new plant and equipment at a
> Your client is 40 years old; and she wants to begin saving for retirement, with the first payment to come one year from now. She can save $5,000 per year; and you advise her to invest it in the stock market, which you expect to provide an average return
> Financial information for Powell Panther Corporation is shown here. a. What was net working capital for 2007 and 2008? b. What was the 2008 free cash flow? c. How would you explain the large increase in 2008 dividends? Powell Panther Corporation: In
> The Davidson Corporation’s balance sheet and income statement are provided here. a. Construct the statement of stockholders’ equity for December 31, 2008. b. How much money has been reinvested in the firm over the year
> Hermann Industries is forecasting the following income statement: The CEO would like to see higher sales and a forecasted net income of $2,500,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciati
> Briefly explain what is meant by the term efficiency continuum.
> Describe the three different forms of market efficiency.
> Differentiate between dealer markets and stock markets that have a physical location.
> Suppose you are a director of an energy company that has three divisions—natural gas, oil, and retail (gas stations). These divisions operate independently from one another, but all division managers report to the firm’s CEO. If you were on the compensat
> Suppose you were a member of Company X’s board of directors and chairperson of the company’s compensation committee. What factors should your committee consider when setting the CEO’s compensation? Should the compensation consist of a dollar salary, stoc
> What types of changes have financial markets experienced during the last two decades? Have they been perceived as positive or negative changes? Explain.
> Investors generally can make one vote for each share of stock they hold. TIAA-CREF is the largest institutional shareholder in the United States; therefore, it holds many shares and has more votes than any other organization. Traditionally, this fund has
> The president of Southern Semiconductor Corporation (SSC) made this statement in the company’s annual report: “SSC’s primary goal is to increase the value of our common stockholders’ equity.” Later in the report, the following announcements were made: a.
> Find the present values of these ordinary annuities. Discounting occurs once a year. a. $400 per year for 10 years at 10% b. $200 per year for 5 years at 5% c. $400 per year for 5 years at 0% d. Rework Parts a, b, and c assuming they are annuities due.
> Find the future values of these ordinary annuities. Compounding occurs once a year. a. $400 per year for 10 years at 10% b. $200 per year for 5 years at 5% c. $400 per year for 5 years at 0% d. Rework Parts a, b, and c assuming they are annuities due.
> How long will it take $200 to double if it earns the following rates? Compounding occurs once a year. a. 7% b. 10% c. 18% d. 100%
> Find the interest rates earned on each of the following: a. You borrow $700 and promise to pay back $749 at the end of 1 year. b. You lend $700 and the borrower promises to pay you $749 at the end of 1 year. c. You borrow $85,000 and promise to pay back
> Shalit Corporation’s 2008 sales were $12 million. Its 2003 sales were $6 million. a. At what rate have sales been growing? b. Suppose someone made this statement: “Sales doubled in 5 years. This represents a growth of 100% in 5 years; so dividing 100% by
> Find the following values. Compounding/discounting occurs annually. a. An initial $500 compounded for 10 years at 6% b. An initial $500 compounded for 10 years at 12% c. The present value of $500 due in 10 years at 6% d. The present value of $1,552.90 du
> Find the following values using the equations and then a financial calculator. Compounding/discounting occurs annually. a. An initial $500 compounded for 1 year at 6% b. An initial $500 compounded for 2 years at 6% c. The present value of $500 due in 1 y
> You want to buy a car, and a local bank will lend you $20,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 12% with interest paid monthly. What will be the monthly loan payment? What will be the loan’s
> What is an opportunity cost? How is this concept used in TVM analysis, and where is it shown on a time line? Is a single number used in all situations? Explain.
> What are some actions that stockholders can take to ensure that management’s and stockholders’ interests are aligned?
> If you bought a share of stock, what would you expect to receive, when would you expect to receive it, and would you be certain that your expectations would be met?
> Use the information for Odyssey Ltd. in BE11-5. In exercise BE11-5 Odyssey Ltd. purchased machinery on January 1, 2014, for $60,000. The machinery is estimated to have a residual value of $6,000 after a useful life of eight years. (a) Calculate the 20
> On December 31, 2014, Convenient Cabs Incorporated was granted 10 taxi licences by the City of Somerdale, at a cost of $1,000 per licence. It is probable that Convenient Cabs will receive the expected future economic benefits of the taxi licences. There
> Use the information in BE12-13 and assume that in January 2016, Latupatula spends $26,000 successfully defending a patent suit. In addition, Latupatula now feels the patent will be useful only for another seven years. Prepare the journal entries to recor
> Wettlauffer Company Ltd. shows the following entries in its Equipment account for 2014. All amounts are based on historical cost. Instructions (a) Prepare any correcting entries that are necessary (b) Assuming that depreciation is to be charged for a fu
> Latupatula Corporation purchased a patent from MaFee Corp. on January 1, 2014, for $87,000. The patent had a remaining legal life of 16 years. Prepare Latupatula's journal entries to record the 2014 patent purchase and amortization.
> Green Earth Corp. has capitalized software costs of $980,000 on a product to be sold externally. During its first year, sales of this product totalled $380,000. Green Earth expects to earn $1,560,000 in additional future revenue from this product, which
> Alaska Corporation purchased 300 common shares of Burke Inc. for $23,400 and accounted for them using the fair value through other comprehensive income model. During the year, Burke paid a cash dividend of $3.25 per share. At year end, Burke shares had a
> Darrien Corporation purchased a trade name, customer list, and manufacturing equipment for a Jump sum of $800,000. The fair market values of each asset are $280,000, $290,000, and $320,000, respectively. There were initial operating losses of $14,500 dur
> Wholesome Foods Corporation is a producer of gourmet organic cookies. The company was established three years ago when its founder and president, Martha Spencer, purchased the trademark "Healthy Originals" and its six patented cookie recipes. Martha soon
> Rachel Timber Inc., a small private company that follows Canadian ASPE, owns 9,000 hectares of timberland purchased in 2001 at a cost of $1,400 per hectare. At the time of purchase, the land without the timber was valued at $420 per hectare. In 2002, Rac
> Nigel Corporation is interested in purchasing Lau Company Ltd. The total of Lau’s net income amounts over the last five years is $750,000. During one of those years, Lau reported a gain on discontinued operations of $94,000. The fair value of Lau's net i
> Using the data from BE12-19, assume that Luigi Corporation is a private entity. Explain how goodwill will 10) be tested for impairment. If the unit's carrying amount (including goodwill) is $3,613,000 and its fair value is $3,550,000, determine the amoun
> Using the data from BE12-19, assume that Luigi Corporation is a public company and that the goodwill 10) was allocated entirely to one cash-generating unit (CGU). Two years later, information about the CGU is as follows: carrying amount $3,925,000; value
> On September 1, 2014, Luigi Corporation acquired Edinburgh Enterprises for a cash payment of $863,000. At the time of purchase, Edinburgh's statement of financial position showed assets of $900,000, liabilities of $460,000, and owners' equity of $440,000
> Use the data provided in BE12-16, except assume that useful life is expected to be unlimited. How would your response change if ABC reports under (a) ASPE (b) IFRS In exercise E12-16: ABC Company has a trademark with a carrying amount of $83,750,
> Use the data provided in BE12- 16. How would your response change if ABC is a public company reporting under IFRS? In exercise E12-16: ABC Company has a trademark with a carrying amount of $83,750, and expected useful life of 15 years. As part of an imp
> ABC Company has a trademark with a carrying amount of $83,750, and expected useful life of 15 years. As part of an impairment test on December 31, 2014, due to a change in customer tastes, ABC gathered the following data about the trademark for purposes
> Swinson, Inc., a private company that applies ASPE, incurred $15,000 in materials and $12,000 in direct labour costs between January and March 2014 to develop a new product. In May 2014, the criteria required to capitalize development costs were met. A f
> WEBDESIGN Ltd. decided that it needed to update its computer programs for its supplier relationships. It purchased an off-the-shelf program and modified it internally to link it to 'WEBDESIGN's other programs. The following costs may be relevant to the a
> Canadian Tire Corporation, Limited is one of Canada's best-known retailers. Obtain a copy of Canadian Tire's financial statements for the year ended December 31, 2011, through SEDAR at www.sedar.com or on the companys website. To answer the following que
> Instructions Gain access to the 2011 financial statements of Potash Corporation of Saskatchewan from the company's website (www.potashcorp.com) or www.sedar.com. (a) Based on the information contained in these financial statements, determine each of the
> Usually a comparison assignment involves comparing two similar companies that are reporting under different GAAP. Ideally, it would be better to compare the same company's financial reports prepared on two different bases. First Capital Realty adopted IF
> Lufthansa and Air Canada are both global airline companies. Lufthansa reports under IFRS. Air Canada reported under pre-changeover Canadian GAAP until 2010 and now reports under IFRS. Access the financial statements of Lufthansa for its year ended Decemb
> Two well-known company names in the transportation industry in Canada are Canadian National Railway Company and Canadian Pacific Railway Limited. Go co either SEDAR (www.sedar.com) or to each company's website to gain access to the financial statements o
> Gibbs Inc. purchased a machine on January 1, 2014, at a cost of $60,000. The machine is expected to have an estimated residual value of $5,000 at the end of its five-year useful life. The company capitalized the machine and depreciated it in 2014 using t
> Brookfield Asset Management Inc. is a publicly traded Canadian company that converted to IFRS on January 1, 2010. Instructions From the company's website, access the annual report for the year ended December 31, 2009, the last year of reporting under Ca
> LianTang, HK Corporation's controller, is concerned that net income may be lower this year. He is afraid that upper-level management might recommend cost reductions by layiog off accounting staff, himself included. Tang knows that depreciation is a major
> Prophet Manufacturing Limited was organized on January 1, 2014. During 2014, it used the straight-line method of amortizing its plant assets in its reports to management. As the company's controller, on November 8 you are having a conference with Prophet
> On March 31, Ramesh Corp. invests in a $1,000, 6% bond to be held for short-term trading purposes, and accounts for this investment using the FV-NI method. The bond's fair value when acquired was $970, but an additional $10 was paid (and debited to Inter
> Write a brief essay highlighting the differences between IFRS and ASPE noted in this chapter, discussing the conceptual justification for each.
> How even Inc. is a private company that expects to "go public" and become publicly traded soon. Accordingly, it expects to be adopting IFRS by 2014. It is a manufacturing company with extensive investments in property, plant, and equipment. The company c
> Variable interest entities (VIEs) is a very complex topic and continues to be high on the agendas of the accounting standard-setting communities around the world. Part of the recent global credit crisis, as well as the fall of Enron, was a result of the
> Puma Paper Company Ltd. operates a 300-tonne per-day kraft pulp mill and four sawmills in New Brunswick. The company is expanding its pulp mill facilities to a capacity of 1,000 tonnes per day and plans to replace three of its older, less efficient sawmi
> Realtor Inc. is a company that owns five large office buildings that are leased out to tenants. Most of the leases are for 10 years or more with renewal clauses for an additional 5 years. Currently, the company is a private company that follows ASPE. Rec
> Nickel Strike Mines is a nickel mining company with mines in northern Ontario, Colombia, and Australia. It is a publicly traded company and follows IFRS, and has historically followed industry practice and used units of production as its depreciation pol
> MA Hydro (MH) is a private company that owns and operates all of Ontario~ electricity transmission systems. It is deciding whether it should follow IFRS or ASPE in the upcoming year. The company must choose now and is looking to do an analysis of the imp
> On March 10, 2014, Lucas Limited sold equipment that it purchased for $192,000 on August 20, 2007. It was originally estimated that the equipment would have a useful life of 12 years and a residual value of $16,800 at the end of that time, and depreciati
> Club Loop Corporation (CL) is a large owner, operator, and developer of golf clubs and resorts. The company is privately owned by several wealthy individuals. During the current year, according to the draft financial statements, revenues increased by 7.2
> On June 15,201 1, a second-hand machine was purchased for$77,000. Before being put into service, the equipment was overhauled at a cost of$5,200, and additional costs of $400 for direct material and $800 for direct labour were paid in fine-tuning the con
> Phoenix Corp. purchased Machine no. 201 on May 1, 2014. The following information relating to Machine no. 201 was gathered at the end of May: Price $85,000 Credit terms 2/10, n/30 Freight-in costs $800 Preparation and i
> Kitchigami Limited was attracted to the Town of Mornington by the town's municipal industry commission. Mornington donated a plant site to Kitchigami, and the provincial government provided S150, 000 toward the cost of the new manufacturing facility. The
> On October 1, Qilan Ltd. purchased 7% bonds with a face value of $1,000 for trading purposes, accounting for the investment at fair value through net income. The bonds were priced at 1.044 to yield Qilan 6%, and pay interest annually each October 1. Qila
> Refer to the 2011 financial statements and accompanying notes of Royal Bank of Canada (RBC) that are found on the company's website ('www.royalbank.ca) or www.sedar.com. Instructions (a) What percentage of total assets is held in investments (2011 versu
> Munro Limited reports the following information in its tax files covering the five-year period from 2012 to 2016. All assets are Class 10 with a 30% maximum CCA, and no capital assets had been acquired before 2012. 2012 Purchased assets A, B, and C for $
> Consider the following independent situations. Situation 1: Ducharme Corporation purchased electrical equipment at a cost of $12,400 on June 2, 2011. From 2011 through 2014, the equipment was depreciated on a straight-line basis, under the assumption tha
> Sung Corporation, a manufacturer of steel products, began operations on October 1, 2013. Sung’s accounting department has begun preparing the capital asset and depreciation schedule that follows. You have been asked to assist in complet
> The following is a schedule of property dispositions for Shangari Corp.: The following additional information is available: Land On February 15, land that was being held mainly as an investment was expropriated by the city. On March 31, another parcel of
> Conan Logging and Lumber Company, a small private company that follows ASPE, owns 3,000 hectares of timberland on the north side of Mount Leno, which was purchased in 2002 at a cost of S550 per hectare. In 2014, Conan began selectively logging this timbe
> Hubbub Company Ltd. acquired equipment at the beginning of Year 1. The asset has an estimated useful life of five years. An employee has prepared depreciation schedules for this asset using two different methods to compare the results of using one method
> Khamsah Mining Ltd. is a small private company that purchased a tract of land for $720,000. After incurring exploration costs of $83,000, the company estimated that the tract will yield 120,000 tonnes of ore having enough mineral content to make mining a
> On April30, 2014, Oceanarium Corporation ordered a new passenger ship, which was delivered to the designated cruise port and available for use as of June 30, 2014. Overall, the cost of the ship was $97 million, with an estimated useful life of 12 years a
> Linda Monkland established Monkland Ltd. in mid-2013 as the sole shareholder. The accounts on June 30, 2014, the company's year end, just prior to preparing the required adjusting entries, were as follows: All the capital assets were acquired and put int
> Soon after December 31,2014, the auditor of Morino Manufacturing Corp. asked the company to prepare a depreciation schedule for semi trucks that showed the additions, retirements, depreciation, and other data that affected the company's income in the fou
> Refer to the annual financial statements of Shoppers Drug Mart for its fiscal year ended December 31, 2011, found in Appendix 5B. Instructions (a) Review Shoppers Drug Mart's balance sheet. Identify all financial investments that are reported. You may n
> On January 1, 2012, Dayan Corporation, a small manufacturer of machine tools, acquired new industrial equipment for $1.1 million. The new equipment had a useful life of five years and the residual value was estimated to be $50,000. Dayan estimates that t
> Abdul Corporation purchased 400 common shares of Sigma Inc. for trading purposes for $13,200 on September 8 and accounted for the investment under ASPE at FV-NI. In December, Sigma declared and paid a cash dividend of $1.75 per share. At year end, Decemb
> Comco Tool Corp. records depreciation annually at the end of the year. Its policy is to take a full year's depreciation on all assets that are used throughout the year and depreciation for half a year on all machines that are acquired or disposed of duri
> Gambit Corporation purchased a new plant asset on April 1, 2014, at a cost of $769,000. It was estimated to have a useful life of 20 years and a residual value of $300,000, and a physical life of 30 years and a salvage value of $0. Gambit's accounting pe
> Diderot Corp. acquired a property on September 15, 2014, for $220,000, paying $3,000 in transfer taxes and a $1,500 real estate fee. Based on the provincial assessment information, 75% of the property's value was related to the building and 25% to the la
> The following assets have been acquired by various companies over the past year: 1. Boardroom table and chairs for a corporate head office 2. Dental equipment in a new dental clinic 3. Long-haul trucks for a trucking business 4. Weight and aerobic equipm
> Jiang Company Ltd. Purchases equipment on January 1, 2014, for $387,000 cash. The asset is expected to have a useful life of 12 years and a residual value of$39,000.Jiang prepares financial statements under IFRS. Instructions (a) Calculate the amount of
> Barnett Inc. purchased computer equipment on March 1, 2014, for $31,000. The computer equipment has a useful life of five years and a residual value of 51,000. Barnett uses a double declining- balance method of depreciation for this type of capital asset
