Edgar Corporation was authorized to issue 100,000 shares of $8 par common stock and 50,000 shares of $80 par, 4 percent, cumulative preferred stock. Edgar Corporation completed the following transactions during its first two years of operation: Year 1 Jan. 2 Issued 25,000 shares of $8 par common stock for $10 per share. 15 Issued 2,000 shares of $80 par preferred stock for $90 per share. Feb. 14 Issued 20,000 shares of $8 par common stock for $12 per share. Dec. 31 During the year, earned $280,000 of cash revenues and paid $165,000 of cash operating expenses. 31 Declared the cash dividend on outstanding shares of preferred stock for Year 1. The dividend will be paid on January 31 to stockholders of record on January 15, Year 2. 31 Closed revenue, expense, and dividend accounts to the retained earnings account. Year 2 Jan. 31 Paid the cash dividend declared on December 31, Year 1. Mar. 1 Issued 4,000 shares of $80 par preferred stock for $92 per share. June 1 Purchased 1,000 shares of common stock as treasury stock at $14 per share. Dec. 31 During the year, earned $185,000 of cash revenues and paid $110,000 of cash operating expenses. 31 Declared the dividend on the preferred stock and a $1.00 per share dividend on the common stock. 31 Closed revenue, expense, and dividend accounts to the retained earnings account. Required: a. Prepare journal entries for these transactions for Year 1 and Year 2 and post them to T-accounts. b. Prepare the stockholders’ equity section of the balance sheet at December 31, Year 1. c. Prepare the balance sheet at December 31, Year 2.
> The trial balance of Pacilio Security Services, Inc. as of January 1, Year 10, had the following normal balances: During Year 10, Pacilio Security Services experienced the following transactions: 1. Paid the sales tax payable from Year 9. 2. Paid the b
> Forsyth Company had a beginning balance in utilities payable of $3,300 and an ending balance of $5,200. Net income amounted to $87,000. Based on this information alone, determine the amount of net cash flow from operating activities.
> Albring Company had a beginning balance in accounts receivable of $12,000 and an ending balance of $14,000. Net income amounted to $110,000. Based on this information alone, determine the amount of net cash flow from operating activities.
> What are the three categories of cash flows reported on the cash flow statement? Discuss each and give an example of an inflow and an outflow for each category.
> What are the three major forms of business organizations? Describe each.
> Which type of financing, debt or equity, increases the risk factor of a business? Why?
> If a company has a tax rate of 30 percent, and interest expense was $10,000, what is the after-tax cost of the debt?
> Assuming that the selling price of the bond and the face value are the same, would the issuer of a bond prefer to make annual or semiannual interest payments? Why?
> How do accounting principles affect financial statement analysis?
> If Best Company sold office equipment that originally cost $7,500 and had $7,200 of accumulated depreciation at a $100 loss, what was the selling price for the office equipment?
> What is the meaning of each of the following terms with respect to the corporate form of organization? (a) Legal capital (b) Par value of stock (c) Stated value of stock (d) Market value of stock (e) Book value of stock (f) Authorized shares of stock (g)
> In 2012, Duke Energy, a large utility company with its headquarters in North Carolina, completed its $32 billion acquisition of Progress Energy. To get an idea of the size of this deal, in 2011 Duke Energy reported revenues of $14.5 billion. In 2012, wit
> What is the call price of a bond? Is it usually higher or lower than the face amount of the bond? Explain.
> Clover Company had a beginning balance in unearned revenue of $4,300 and an ending balance of $3,200. Net income amounted to $54,000. Based on this information alone, determine the amount of net cash flow from operating activities.
> Can a company report negative net cash flows from operating activities for the year on the statement of cash flows but still have positive net income on the income statement? Explain.
> How would Best Company report the following transactions on the statement of cash flows? (a) Purchased new equipment for $46,000 cash. (b) Sold old equipment for $8,700 cash. The equipment had a book value of $4,900.
> Which method (direct or indirect) of presenting the statement of cash flows is more intuitively logical? Why?
> What is the difference between preparing the statement of cash flows using the direct method and using the indirect method?
> What effect does income tax have on the cost of borrowing funds for a business?
> If Best Company sold land that cost $4,200 at a $500 gain, how much cash did it collect from the sale of land?
> The following information was drawn from the year-end balance sheets of Long’s Wholesale, Inc.: Additional information regarding transactions occurring during Year 2: 1. Long’s Wholesale, Inc. issued $90,000 of bonds
> The following information was drawn from the year-end balance sheets of Vigotti Company: Additional information regarding transactions occurring during Year 2: 1. Investment securities that had cost $11,300 were sold. The Year 2 income statement contai
> Presented here are selected data from the 10-K reports of four companies for their 2015 fiscal years. The four companies, in alphabetical order, are: Caterpillar, Inc., a company that manufactures heavy machinery. Oracle Corporation, a company that devel
> The following three companies issued the following bonds: 1. Carr, Inc. issued $100,000 of 8 percent, five-year bonds at 102¼ on January 1, 2016. Interest is payable annually on December 31. 2. Kim, Inc. issued $100,000 of 8 percent, five-year bonds at 9
> The following accounts and corresponding balances were drawn from Crimson Sports, Inc.’s Year 2 and Year 1 year-end balance sheets: The Year 2 income statement is shown next: Required: a. Prepare the operating activities section of
> Use the financial statements for Bluffton Company from Problem 13-17B to compute the following for Year 4. Round percentages to two decimal points. a. Current ratio. b. Quick (acid-test) ratio. c. Average days to collect accounts receivable, assuming all
> The following financial statements apply to Bedford Appliances, Inc.: Required: Calculate the following ratios for Year 4 by rounding to two decimal points: a. Working capital. b. Current ratio. c. Quick ratio. d. Accounts receivable turnover. e. Aver
> Information from Forman Company’s financial statements follows: Average number of shares outstanding was 16,000 for Year 3 and 15,000 for Year 2. Required: Compute the following ratios for Forman Company for Year 3 and Year 2 and rou
> Selected data for Hoback Company for Year 3 and additional information on industry averages follow: Required: Round computations to two decimal points. a. Calculate and compare Hoback Company’s ratios with the industry averages. b. D
> Rustin Craft discovered a piece of wet and partially burned balance sheet after his office was destroyed by fire. He could recall a current ratio of 1.75 and a debt to-assets ratio of 45 percent. Required: Complete the balance sheet by supplying the mi
> Lowery Company has a current ratio of 2:1 on June 30, Year 3. Indicate whether each of the following transactions would increase (+), decrease (−), or not affect (NA) Lowery’s current ratio and its working capital. Required: a. Issued 10-year bonds for
> Use the financial statements for Bluffton Company from Problem 13-17B to perform a vertical analysis (based on total assets, total equities, and sales) of both the balance sheets and income statements for Year 4 and Year 3. Round computations to one deci
> Bluffton Company’s stock is quoted at $16 per share at December 31, Year 4 and Year 3. Bluffton’s financial statements follow: Required: Prepare a horizontal analysis of the balance sheet and income statement for Ye
> Burton Corporation’s controller has prepared the following vertical analysis for the president: Required: Sales were $800,000 in Year 3 and $900,000 in Year 4. Convert the analysis to income statements for the two years. Year 4 Ye
> In 2016 and 2015, Sears Holding Corporation reported net losses and negative cash flows from operating activities. Using the company’s Form 10-K for the fiscal year ended January 28, 2017 (2016), complete the requirements shown in the following. The Form
> The following financial statements were drawn from the records of Boston Materials, Inc.: Additional Information 1. Sold equipment costing $48,000 with accumulated depreciation of $26,000 for $23,500 cash. 2. Paid a $50,000 cash dividend to owners. R
> An investor is trying to decide whether to purchase stock in Henderson Inc. or Glover Corporation. Glover Corporation reported annual earnings per share of $8, and the current market price of Glover stock is $64 per share. Henderson Inc. has annual earni
> The following events were experienced by Halbart Inc.: 1. Issued common stock for cash. 2. Distributed a 2-for-1 stock split on the common stock. 3. Appropriated retained earnings. 4. Issued cumulative preferred stock for cash. 5. Sold treasury stock for
> Rabern Corp. completed the following transactions in Year 1, the first year of operation: 1. Issued 15,000 shares of $10 par common stock at par. 2. Issued 5,000 shares of $50 stated value preferred stock at $52 per share. 3. Purchased 800 shares of comm
> The following information pertains to Tacoma and Olympia companies: Required: a. Compute each company’s debt-to-assets ratio, current ratio, and times interest earned (EBIT must be computed). Identify the company with the greater fina
> On January 1, Year 1, Mason Corp. sold $100,000 of its own 6 percent, 10-year bonds. Interest is payable annually on December 31. The bonds were sold to yield an effective interest rate of 5 percent. Mason Corp. uses the effective interest rate method. T
> The stockholders’ equity section of the balance sheet for Stinson Company at December 31, Year 1, is as follows: Note: The market value per share of the common stock is $40, and the market value per share of the preferred stock is $12
> Whitten Company was started when it issued bonds with $300,000 face value on January 1, Year 1. The bonds were issued for cash at 103. Whitten uses the straight-line method of amortization. They had a 15-year term to maturity and a 6 percent annual inter
> During Year 1 and Year 2, Kale Co. completed the following transactions relating to its bond issue. The company’s fiscal year ends on December 31. Year 1 Mar. 1 Issued $200,000 of eight-year, 6 percent bonds for $194,000. The semiannual cash payment fo
> White Co. was formed when it acquired cash from the issue of common stock. The company then issued bonds at a discount on January 1, Year 1. Interest is payable on December 31 with the first payment made December 31, Year 1. On January 2, Year 1, White C
> Andy and Jean Crocket are involved in divorce proceedings. When discussing a property settlement, Andy told Jean that he should take over their investment in an apartment complex because she would be unable to absorb the loss that the apartments are gene
> Dame Co. issued $250,000 of 10year, 6 percent, callable bonds on January 1, Year 1, with interest payable annually on December 31. The bonds were issued at their face amount. The bonds are callable at 101½. The fiscal year of the corporatio
> Burk Corp. completed the following transactions in Year 1, the first year of operation: 1. Issued 30,000 shares of $10 par common stock for $15 per share. 2. Issued 6,000 shares of $100 par, 5 percent, preferred stock at $101 per share. 3. Paid the annua
> On January 1, Year 1, Kramer Co. borrowed cash from First City Bank by issuing a $90,000 face-value, three-year term note that had a 7 percent annual interest rate. The note is to be repaid by making annual payments of $34,295 that include both interest
> Edwards Corporation reports the following information in its January 1, Year 1, balance sheet: During Year 1, Edwards was affected by the following accounting events: 1. Purchased 2,000 shares of treasury stock at $15 per share. 2. Reissued 1,200 share
> Tyler Corp. had the following stock issued and outstanding at January 1, Year 2: 1. 60,000 shares of no-par common stock. 2. 15,000 shares of $100 par, 4 percent, cumulative preferred stock. (Dividends are in arrears for one year, Year 1.) On February 1,
> Best Auto Parts Company was started on January 1, Year 1, when the owners invested $120,000 cash in the business. During Year 1, the company earned cash revenues of $80,000 and incurred cash expenses of $56,000. The company also paid cash distributions o
> Bill Wheeler established a partnership with June Cramer. The new company, W&C Fuels, purchased coal directly from mining companies and contracted to ship the coal via waterways to a seaport where it was delivered to ships that were owned and operated by
> The Electric Company engaged in the following transactions during Year 2. The beginning cash balance was $43,000 and the ending cash balance was $48,600. 1. Sales on account were $274,000. The beginning receivables balance was $86,000 and the ending bala
> The comparative balance sheets and an income statement for Wang Beauty Products, Inc. are shown next. Other Information 1. Purchased land for $112,000. 2. Purchased new equipment for $100,000. 3. Sold old equipment that cost $132,000 with accumulated
> The following selected information was drawn from the records of Fleming Company: Fleming is experiencing cash flow problems. Despite the fact that it reported significant increases in operating income, operating activities produced a net cash outflow.
> The following financial statements were drawn from the records of Culinary Products Co.: 1. During Year 2, the company sold equipment for $18,500; it had originally cost $30,000. Accumulated depreciation on this equipment was $12,000 at the time of th
> The following information can be obtained by examining a company’s balance sheet and income statement information: a. Increases in current asset account balances, other than cash. b. Cash outflows to purchase noncurrent assets. c. Decre
> The following information was drawn from the year-end balance sheets of Mass Trading Company: Additional information regarding transactions occurring during Year 2: 1. Investment securities that had cost $6,100 were sold. The Year 2 income statement co
> Green Brands, Inc. (GBI) presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from GBI’s Year 2 and Year 1 year-end balance sheets The Year 2 income statement is
> Use the financial statements for Allendale Company from Problem 13-17A to calculate the following ratios for Year 4 and Year 3: a. Working capital. b. Current ratio. c. Quick ratio. d. Receivables turnover (beginning receivables at January 1, Year 3, wer
> Selected data for Dalton Company for Year 3 and additional information on industry averages follow: Required: a. Calculate and compare Dalton Company’s ratios with the industry averages. b. Discuss factors you would consider in decid
> Riley Manufacturing has a current ratio of 3:1 on December 31, Year 3. Indicate whether each of the following transactions would increase (+), decrease (−), or have no effect (NA) on Riley’s current ratio and its working capital. Required: a. Paid cash
> Use the financial statements for Allendale Company from Problem 13-17A to perform a vertical analysis of both the balance sheets and income statements for Year 4 and Year 3. Round computations to two decimal points.
> The following events were experienced by Sequoia, Inc.: 1. Issued cumulative preferred stock for cash. 2. Issued common stock for cash. 3. Issued noncumulative preferred stock for cash. 4. Paid cash to purchase treasury stock. 5. Sold treasury stock for
> Choctaw Co. completed the following transactions in Year 1, the first year of operation: 1. Issued 20,000 shares of $1 par common stock for $10 per share. 2. Issued 3,000 shares of $20 stated value preferred stock for $20 per share. 3. Purchased 1,000 sh
> The following financial statements and information are available for Blythe Industries Inc.: Additional Information 1. Sold land that cost $40,000 for $44,000. 2. Sold equipment that cost $30,000 and had accumulated depreciation of $20,000 for $18,000
> Brice Co. completed the following transactions in Year 1, the first year of operation 1. Issued 40,000 shares of no par common stock for $10 per share. 2. Issued 8,000 shares of $20 par, 6 percent, preferred stock for $20 per share. 3. Paid a cash divide
> The stockholders’ equity section of the balance sheet for Mann Equipment Co. at December 31, Year 1, is as follows: Note: The market value per share of the common stock is $42, and the market value per share of the preferred stock is
> The following information pertains to Austin, Inc. and Huston Company: Required: a. Compute each company’s debt-to-assets ratio, current ratio, and times interest earned (EBIT must be computed). Identify the company with the greater f
> On January 1, Year 1, Twain Corp. sold $500,000 of its own 7 percent, 10-year bonds. Interest is payable annually on December 31. The bonds were sold to yield an effective interest rate of 8 percent. Twain uses the effective interest rate method. The bon
> The three typical accounting events associated with borrowing money through a bond issue are: 1. Exchanging the bonds for cash on the day of issue. 2. Making cash payments for interest expense and recording amortization when applicable. 3. Repaying the p
> OZ Company was started when it issued bonds with a $500,000 face value on January 1, Year 1. The bonds were issued for cash at 96. OZ uses the straight-line method of amortization. They had a 20-year term to maturity and an 8 percent annual interest rate
> During Year 1 and Year 2, Agatha Corp. completed the following transactions relating to its bond issue. The corporation’s fiscal year is the calendar year. Year 1 Jan. 1 Issued $300,000 of 10year, 6 percent bonds for $294,000. The annual cash payment f
> Pine Land Co. was formed when it acquired cash from the issue of common stock. The company then issued bonds at a premium on January 1, Year 1. Interest is payable annually on December 31 of each year, beginning December 31, Year 1. On January 2, Year 1,
> b. Interest Expense: $48,000  Loss on Bond Redemptions: $24,000 Arnold Corp. issued $600,000 of 20-year, 8 percent, callable bonds on January 1, Year 1, with interest payable annually on December 31. The bonds were issued at their face
> Boyd Company has a line of credit with State Bank. Boyd can borrow up to $400,000 at any time over the course of the Year 1 calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repa
> Tesla, Inc. began operations in 2003 but did not begin selling its stock to the public until June 28, 2010. It has lost money every year it has been in existence, and by December 31, 2016, it had total lifetime losses of approximately $3 billion. In addi
> On January 1, Year 1, Brown Co. borrowed cash from First Bank by issuing a $100,000 face-value, four-year term note that had an 8 percent annual interest rate. The note is to be repaid by making annual cash payments of $30,192 that include both interest
> The following percentages apply to Thornton Company for Year 3 and Year 4: Required: Assuming that sales were $800,000 in Year 3 and $960,000 in Year 4, prepare income statements for the two years. Year 4 Year 3 Sales 100.0% 100.0% Cost of goods so
> The following correctly prepared entries without explanations pertain to Corners Corporation: The original sale (Entry 1) was for 400,000 shares, and the treasury stock was acquired for $5 per share (Entry 2). Required: a. What was the sales price per
> Nowell Inc. had the following stock issued and outstanding at January 1, Year 2: 1. 150,000 shares of no-par common stock. 2. 30,000 shares of $50 par, 4 percent, cumulative preferred stock. (Dividends are in arrears for one year, Year 1.) On March 8, Ye
> Cascade Company was started on January 1, Year 1, when it acquired $60,000 cash from the owners. During Year 2, the company earned cash revenues of $35,000 and incurred cash expenses of $18,100. The company also paid cash distributions of $4,000. Requir
> The following financial statements were drawn from the records of Matrix Shoes: Additional Information 1. Sold equipment costing $72,000 with accumulated depreciation of $56,000 for $15,200 cash. 2. Paid a $7,200 cash dividend to owners. Required: An
> York Company engaged in the following transactions for the year Year 1. The beginning cash balance was $86,000 and the ending cash balance was $59,100. 1. Sales on account were $548,000. The beginning receivables balance was $128,000 and the ending balan
> The comparative balance sheets and an income statement for Raceway Corporation follow: Other Information 1. Purchased land for $66,000. 2. Purchased new equipment for $62,000. 3. Sold old equipment that cost $66,000 with accumulated depreciation of $5
> The comparative balance sheets and income statements for Gypsy Company follow: 1. During Year 2, the company sold equipment for $21,500; it had originally cost $36,000. Accumulated depreciation on this equipment was $16,000 at the time of the sale. Al
> The following information can be obtained by examining a company’s balance sheet and income statement information: a. Increases in current asset account balances, other than cash. b. Decreases in current asset account balances, other th
> Obtain the Target Corporation’s annual report at http://investors.target.com using the instructions in Appendix B, and use it to answer the following questions: a. For the year ended January 28, 2017 (2016), which was larger, Target’s net income or its c
> The following information was drawn from the year-end balance sheets of Fox River, Inc.: Additional information regarding transactions occurring during Year 2: 1. Fox River, Inc. issued $100,000 of bonds during Year 2. The bonds were issued at face val
> On January 1, Year 1, Monroe Co. borrowed $80,000 cash from First Bank by issuing a four-year, 6 percent note. The principal and interest are to be paid by making annual payments in the amount of $23,087. Payments are to be made December 31 of each year,
> Pare Co. borrowed $80,000 from National Bank by issuing a note with a five-year term. Pare has two options with respect to the payment of interest and principal. Option 1 requires the payment of interest only on an annual basis with the full amount of th
> Compute the specified ratios using the following December 31, Year 3, statement of financial position for Palmer Company: The average number of common shares outstanding during Year 3 was 1,500. Net income for the year was $60,000. Required: Compute e
> During Year 4, Roper Corporation reported net income after taxes of $1,200,000. During the year, the number of shares of stock outstanding remained constant at 20,000 shares of $100 par, 8 percent preferred stock and 200,000 shares of common stock. The c
> December 31, Year 4, balance sheet data for Hestand Company follow. All accounts are represented. Amounts indicated by question marks (?) can be calculated using the following additional information: Required: Determine the following: a. The balance in
> Balance sheet data for the Beech Corporation follows: Required: Compute the following and round computations to one decimal point: a. Working capital. b. Current ratio. c. Debt-to-assets ratio. d. Debt-to-equity ratio. $ 80,000 320,000 $400,000 $ 3
> On October 31, Year 4, Corona Company’s total current assets were $160,000 and its total current liabilities were $40,000. On November 1, Year 4, Corona purchased marketable securities for $20,000 cash. Required: a. Compute Corona’s working capital befo
> Bruno Corporation purchased $480 of merchandise on account. Required: Explain the effect of the purchase on Bruno’s current ratio.
> Alpena Company reported the following operating results for Year 4 and Year 3: Required: Round percentages to one decimal point. a. Perform a horizontal analysis, showing the percentage change in each income statement component between Year 4 and Year
> Using either Starbucks Corporation’s most current Form 10-K or the company’s annual report, answer the following questions. To obtain the Form 10-K, use either the EDGAR system, following the instructions in Appendix A, or the company’s website. The comp
