Ermlar Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2014, Ermlar had the following transactions related to notes payable. Sept. 1 Issued a $12,000 note to Lippert to purchase inventory. The 3-month note payable bears interest of 6% and is due December 1. (Ermlar uses a perpetual inventory system.) Sept. 30 Recorded accrued interest for the Lippert note. Oct. 1 Issued a $16,500, 8%, 4-month note to Shanee Bank to finance the purchase of a new climbing wall for advanced climbers. The note is due February 1. Oct. 31 Recorded accrued interest for the Lippert note and the Shanee Bank note. Nov. 1 Issued a $26,000 note and paid $8,000 cash to purchase a vehicle to transport clients to nearby climbing sites as part of a new series of climbing classes. This note bears interest of 6% and matures in 12 months. 30 Recorded accrued interest for the Lippert note, the Shanee Bank note, and the vehicle note. Dec. 1 Paid principal and interest on the Lippert note. Dec. 31 Recorded accrued interest for the Shanee Bank note and the vehicle note. Instructions: (a) Prepare journal entries for the transactions noted above. (b) Post the above entries to the Notes Payable, Interest Payable, and Interest Expense accounts. (Use T-accounts.) (c) Show the balance sheet presentation of notes payable and interest payable at December 31. (d) How much interest expense relating to notes payable did Ermlar incur during the year?
> Here are comparative statement data for Prince Company and King Company, two competitors. All balance sheet data are as of December 31, 2014, and December 31, 2013. Instructions: (a) Prepare a vertical analysis of the 2014 income statement data for Pri
> Condensed financial data of Odgers Inc. follow. Additional information: 1. New plant assets costing $100,000 were purchased for cash during the year. 2. Old plant assets having an original cost of $57,500 and accumulated depreciation of $48,500 were so
> Data for Kurtzel Company are presented in P12-7A. Further analysis reveals the following. 1. Accounts payable pertain to merchandise suppliers. 2. All operating expenses except for depreciation were paid in cash. 3. All depreciation expense is in the sel
> Presented below is the partial bond discount amortization schedule for Pape Corp., which uses the effective-interest method of amortization. Instructions: (a) Prepare the journal entry to record the payment of interest and the discount amortization at
> Presented below are the financial statements of Kurtzel Company. Additional data: 1. Depreciation expense was $17,500. 2. Dividends declared and paid were $20,000. 3. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 origi
> Data for Thornton Company are presented in P12-5A. Data given in P12-5A: Thornton Company’s income statement contained the condensed information below. Instructions: Prepare the operating activities section of the statement of cash
> Thornton Company’s income statement contained the condensed information below. Instructions: Prepare the operating activities section of the statement of cash flows using the indirect\ method. THORNTON COMPANY Income Statement For
> Data for Paxson Company are presented in P12-3A. Data given oin P12-3A: The income statement of Paxson Company is presented here. Additional information: 1. Accounts receivable decreased $380,000 during the year, and inventory decreased $300,000. 2. P
> The income statement of Paxson Company is presented here. Additional information: 1. Accounts receivable decreased $380,000 during the year, and inventory decreased $300,000. 2. Prepaid expenses increased $150,000 during the year. 3. Accounts payable t
> The following account balances relate to the stockholders’ equity accounts of Smoltz Corp. at year-end. A small stock dividend was declared and issued in 2014. The market price of the shares was $8,800. Cash dividends were $20,000 in
> The comparative balance sheets for Yanik Company as of December 31 are presented below. Additional information: 1. Operating expenses include depreciation expense of $42,000. 2. Land was sold for cash at book value. 3. Cash dividends of $12,000 were pa
> Data for Odgers Inc. are presented in P12-9A. Further analysis reveals that accounts payable pertain to merchandise creditors. Data given in P12-9A: Condensed financial data of Odgers Inc. follow. Instructions: Prepare a statement of cash flows for Od
> You are provided with the following transactions that took place during a recent fiscal year. Instructions: Complete the table, indicating whether each item (1) affects operating (O) activities, investing (I) activities, financing (F) activities, or is
> On January 1, 2014, Everett Corporation had these stockholders’ equity accounts. Common Stock ($10 par value, 70,000 shares issued and outstanding) ………..$700,000 Paid-in Capital in Excess of Par Value ……………………………………………………………500,000 Retained Earnings ……
> Suppose the 2014 Adidas financial statements contain the following selected data (in millions). Compute the following values and provide a brief interpretation of each. (a) Working capital. (b) Current ratio. (c) Debt to assets ratio. (d) Times inte
> Cepeda Company manufactures backpacks. During 2014, Cepeda issued bonds at 10% interest and used the cash proceeds to purchase treasury stock. The following financial information is available for Cepeda Company for the years 2014 and 2013. Instructions
> On January 1, 2014, Kessler Inc. had these stockholders’ equity balances. Common Stock, $1 par (2,000,000 shares authorized, 600,000 shares issued and outstanding) ……………………………………… $ 600,000 Paid-in Capital in Excess of Par Value …………………………………………. 1,500,
> Pringle Corporation has been authorized to issue 20,000 shares of $100 par value, 7%, noncumulative preferred stock and 1,000,000 shares of no-par common stock. The corporation assigned a $5 stated value to the common stock. At December 31, 2014, the led
> The ledger of Wade Corporation at December 31, 2014, after the books have been closed, contains the following stockholders’ equity accounts. Preferred Stock (10,000 shares issued) ………………………………………. $1,000,000 Common Stock (300,000 shares issued) ……………………
> On December 31, 2013, Paxson Company had 1,300,000 shares of $5 par common stock issued and outstanding. At December 31, 2013, stockholders’ equity had the amounts listed here. Common Stock …………………………………………. $6,500,000 Additional Paid-in Capital …………………
> The stockholders’ equity accounts of Miley Corporation on January 1, 2014, were as follows. Preferred Stock (7%, $100 par noncumulative, 5,000 shares authorized) …………………$ 300,000 Common Stock ($4 stated value, 300,000 shares authorized) ………………………….…1,00
> Tidwell Corporation was organized on January 1, 2014. It is authorized to issue 20,000 shares of 6%, $50 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. The following stock transactions were comple
> Wempe Co. sold $3,000,000, 8%, 10-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. The company uses straight-line amortization on bond premiums and discounts. Financial statements are prepared annually.
> Yung Corporation sold $2,000,000, 7%, 5-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. Yung Corporation uses the straight-line method to amortize bond premium or discount. Instructions: (a) Prepare al
> The following information is taken from Oler Corp.’s balance sheet at December31, 2013. Interest is payable annually on January 1. The bonds are callable on any annual interest date. Oler uses straight-line amortization for any bond p
> Presented here are liability items for Desmond Inc. at December 31, 2014. Prepare the liabilities section of Desmond’s balance sheet. $ 7,800 Accounts payable Notes payable (due May 1, 2015) Bonds payable (due 2018) Unearned FICA t
> Suppose you have been presented with selected information taken from the financial statements of Southwest Airlines Co., shown below. Instructions: (a) Calculate each of the following ratios for 2014 and 2013. (1) Current ratio. (2) Free cash flow. (3)
> Slocombe Company sold $6,000,000, 7%, 15-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on December 31. The bonds were sold at 98. Instructions: (a) Prepare the journal entry to record the issuance of the bonds on
> On October 1, 2013, Koppa Corp. issued $700,000, 5%, 10-year bonds at face value. The bonds were dated October 1, 2013, and pay interest annually on October 1. Financial statements are prepared annually on December 31. Instructions: (a) Prepare the jour
> The following section is taken from Mareska’s balance sheet at December 31, 2013. Current liabilities Interest payable ……………………………………………………..$ 40,000 Long-term liabilities Bonds payable (8%, due January 1, 2017) ………………..500,000 Interest is payable annual
> Ermlar Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2014, Ermlar had the following transactions related to notes payable. Sept. 1 Issued a $12,000 note to Lippe
> Grace Herron has just approached a venture capitalist for financing for her new business venture, the development of a local ski hill. On July 1, 2013, Grace was loaned $150,000 at an annual interest rate of 7%. The loan is repayable over 5 years in annu
> Frevert purchased a new piece of equipment to be used in its new facility. The $370,000 piece of equipment was purchased with a $50,000 down payment and with cash received through the issuance of a $320,000, 8%, 3-year mortgage note payable issued on Oct
> On January 1, 2014, Jade Company issued $2,000,000 face value, 7%, 10-year bonds at $2,147,202. This price resulted in a 6% effective-interest rate on the bonds. Jade uses the effective-interest method to amortize bond premium or discount. The bonds pay
> On January 1, 2014, Lock Corporation issued $1,800,000 face value, 5%, 10-year bonds at $1,667,518. This price resulted in an effective-interest rate of 6% on the bonds. Lock uses the effective-interest method to amortize bond premium or discount. The bo
> On January 1, 2014, the ledger of Hiatt Company contained these liability accounts. Accounts Payable …………………………………………$42,500 Sales Taxes Payable …………………………………………6,600 Unearned Service Revenue ……………………………. 19,000 During January, the following selected tr
> Suppose the 2014 Adidas financial statements contain the following selected data (in millions). Compute the following values and provide a brief interpretation of each. (a) Working capital. (b) Current ratio. (c) Debt to assets ratio. (d) Times inte
> Grace Herron has just approached a venture capitalist for financing for her new business venture, the development of a local ski hill. On July 1, 2013, Grace was loaned $150,000 at an annual interest rate of 7%. The loan is repayable over 5 years in annu
> Frevert purchased a new piece of equipment to be used in its new facility. The $370,000 piece of equipment was purchased with a $50,000 down payment and with cash received through the issuance of a $320,000, 8%, 3-year mortgage note payable issued on Oct
> On January 1, 2014, Jade Company issued $2,000,000 face value, 7%, 10-year bonds at $2,147,202. This price resulted in a 6% effective-interest rate on the bonds. Jade uses the effective-interest method to amortize bond premium or discount. The bonds pay
> On January 1, 2014, Lock Corporation issued $1,800,000 face value, 5%, 10-year bonds at $1,667,518. This price resulted in an effective-interest rate of 6% on the bonds. Lock uses the effective-interest method to amortize bond premium or discount. The bo
> Wempe Co. sold $3,000,000, 8%, 10-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. The company uses straight-line amortization on bond premiums and discounts. Financial statements are prepared annually.
> Yung Corporation sold $2,000,000, 7%, 5-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. Yung Corporation uses the straight-line method to amortize bond premium or discount. Instructions: (a) Prepare al
> The following information is taken from Oler Corp.’s balance sheet at December31, 2013. Interest is payable annually on January 1. The bonds are callable on any annual interest date. Oler uses straight-line amortization for any bond p
> Suppose you have been presented with selected information taken from the financial statements of Southwest Airlines Co., shown below. Instructions: (a) Calculate each of the following ratios for 2014 and 2013. (1) Current ratio. (2) Free cash flow. (3)
> Slocombe Company sold $6,000,000, 7%, 15-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on December 31. The bonds were sold at 98. Instructions: (a) Prepare the journal entry to record the issuance of the bonds on
> On October 1, 2013, Koppa Corp. issued $700,000, 5%, 10-year bonds at face value. The bonds were dated October 1, 2013, and pay interest annually on October 1. Financial statements are prepared annually on December 31. Instructions: (a) Prepare the jour
> Presented here are liability items for Desmond Inc. at December 31, 2014. Prepare the liabilities section of Desmond’s balance sheet. $ 7,800 Accounts payable Notes payable (due May 1, 2015) Bonds payable (due 2018) Unearned FICA t
> The following section is taken from Mareska’s balance sheet at December 31, 2013. Current liabilities Interest payable ……………………………………………………..$ 40,000 Long-term liabilities Bonds payable (8%, due January 1, 2017) ………………..500,000 Interest is payable annual
> On January 1, 2014, the ledger of Hiatt Company contained these liability accounts. Accounts Payable …………………………………………$42,500 Sales Taxes Payable …………………………………………6,600 Unearned Service Revenue ……………………………. 19,000 During January, the following selected tr
> As noted in this chapter, because of global competition, companies have become increasingly focused on reducing costs. To reduce costs and remain competitive, many companies are turning to outsourcing. Outsourcing means hiring an outside supplier to prov
> The primary purpose of managerial accounting is to provide information useful for management decisions. Many of the managerial accounting techniques that you learn in this section of the course will be useful for decisions you make in your everyday life.
> Steve Morgan, controller for Newton Industries, was reviewing production cost reports for the year. One amount in these reports continued to bother him—advertising. During the year, the company had instituted an expensive advertising campaign to sell som
> Refer to P14-5A and add the following requirement. Prepare a letter to the president of the company, Shelly Phillips, describing the changes you made. Explain clearly why net income is different after the changes. Keep the following points in mind as yo
> If your school has a subscription to the FASB Codification, go to http://aaahq.org/ ascLogin.cfm to log in and prepare responses to the following. Use the Master Glossary for determining the proper definitions. (a) Discontinued operations. (b) Extraordin
> Kelli Rice, president of LR Industries, wishes to issue a press release to bolster her company’s image and maybe even its stock price, which has been gradually falling. As controller, you have been asked to provide a list of 20 financial ratios and other
> David Lemay is the chief executive officer of Brenna Electronics. Lemay is an expert engineer but a novice in accounting. Lemay asks you, as an accounting student, to explain (a) the bases for comparison in analyzing Brenna’s financial statements and (b)
> The following data are taken from the financial statements of Filbert Company Compute for each year (a) the accounts receivable turnover and (b) the average collection period. What conclusions about the management of accounts receivable can be drawn
> You are a loan officer for Great Plains Bank of Davenport. Jason Putnam, president of J. Putnam Corporation, has just left your office. He is interested in an 8-year loan to expand the company’s operations. The borrowed funds would be u
> Templeton Automotive Corp. is a medium-sized wholesaler of automotive parts. It has 10 stockholders who have been paid a total of $1 million in cash dividends for 8 consecutive years. The board’s policy requires that, for this dividend to be declared, ne
> Jack Werth, the owner-president of Computer Services Company, is unfamiliar with the statement of cash flows that you, as his accountant, prepared. He asks for further explanation. Instructions: Write him a brief memo explaining the form and content of
> Ken Pember and Robyn Mays are examining the following statement of cash flows for Gilbert Company for the year ended January 31, 2014. GILBERT COMPANY Statement of Cash Flows For the Year Ended January 31, 2014 Sources of cash From sales of merchandise
> Osborn Corporation has paid 60 consecutive quarterly cash dividends (15 years). The last 6 months have been a real cash drain on the company, however, as profit margins have been greatly narrowed by increasing competition. With a cash balance sufficient
> The R&D division of Jobe Corp. has just developed a chemical for sterilizing the vicious Brazilian “killer bees” which are invading Mexico and the southern United States. The president of Jobe is anxious to get the chemical on the market because Jobe pro
> Ken Endicott, your uncle, is an inventor who has decided to incorporate. Uncle Ken knows that you are an accounting major at U.N.O. In a recent letter to you, he ends with the question, “I’m filling out a state incorporation application. Can you tell me
> During a recent period, the fast-food chain Wendy’s International purchased many treasury shares. This caused the number of shares outstanding to fall from 124 million to 105 million. The following information was drawn from the company
> If your school has a subscription to the FASB Codification, go to http://aaahq.org/ asclogin.cfm to log in and prepare responses to the following. (a) What is the definition of current liabilities? (b) What is the definition of long-term obligations? (c)
> Some employees are encouraging and setting up preventive healthcare programs. Here are the percentages for five unhealthy behaviors for individuals with some college education: current cigarette smoker (22.9%), five or more alcoholic drinks at one sittin
> The management of Unruh Inc. is trying to decide whether it can increase its dividend. During the current year, it reported net income of $875,000. It had net cash provided by operating activities of $734,000, paid cash dividends of $92,000, and had capi
> Harry Jackman, president of Weast, Inc., is considering the issuance of bonds to finance an expansion of his business. He has asked you to do the following: (1) discuss the advantages of bonds over common stock financing, (2) indicate the types of bond
> On January 1, 2012, Kenard Corporation issued $3,000,000, 5-year, 8% bonds at 97. Thevbonds pay interest annually on January 1. By January 1, 2014, the market rate of interest for bonds of risk similar to those of Kenard Corporation had risen. As a resul
> If your school has a subscription to the FASB Codification, go to http://aaahq.org/ asclogin.cfm to log in and prepare responses to the following. (a) What is the definition of current liabilities? (b) What is the definition of long-term obligations? (c)
> Some employees are encouraging and setting up preventive healthcare programs. Here are the percentages for five unhealthy behaviors for individuals with some college education: current cigarette smoker (22.9%), five or more alcoholic drinks at one sittin
> Harry Jackman, president of Weast, Inc., is considering the issuance of bonds to finance an expansion of his business. He has asked you to do the following: (1) discuss the advantages of bonds over common stock financing, (2) indicate the types of bond
> On January 1, 2012, Kenard Corporation issued $3,000,000, 5-year, 8% bonds at 97. Thevbonds pay interest annually on January 1. By January 1, 2014, the market rate of interest for bonds of risk similar to those of Kenard Corporation had risen. As a resul
> The following information is available for Fishel Company. Materials purchased in April $ 98,000 Direct labor in April 80,000 Manufacturing overhead in April 180,000 Prepare the cost of goods manufactured schedule for the month of April. April 1 Ra
> A music company has these costs: Advertising Paper inserts for CD cases Blank CDs CD plastic cases Depreciation of CD image Salaries of sales representatives burner Salaries of factory maintenance employees Salary of factory manager
> Match each of the following terms with the phrase that best describes it. Quality of earnings Pro forma income Current ratio Discontinued operations Horizontal analysis Comprehensive income 1. A me
> Foyle Corporation has issued 100,000 shares of $5 par value common stock. It was authorized 500,000 shares. The paid-in capital in excess of par value on the common stock is $263,000. The corporation has reacquired 7,000 shares at a cost of $46,000 and i
> Fugate Inc. is considering these two alternatives to finance its construction of a new $2 million plant: 1. Issuance of 200,000 shares of common stock at the market price of $10 per share. 2. Issuance of $2 million, 6% bonds at face value. Complete the t
> Kosco CD Company has had 4 years of record earnings. Due to this success, the market price of its 400,000 shares of $2 par value common stock has increased from $6 per share to $50. During this period, paid-in capital remained the same at $2,400,000. Ret
> Fusion Corporation has 3,000 shares of 8%, $100 par value preferred stock outstanding at December 31, 2014. At December 31, 2014, the company declared a $105,000 cash dividend. Determine the dividend paid to preferred stockholders and common stockholders
> Edelman Corporation issued the following statement of cash flows for 2014. (a) Compute free cash flow for Edelman Corporation. (b) Explain why free cash flow often provides better information than “Net cash provided by operating activ
> RL Photography reported net income of $100,000 for 2014. Included in the income statement were depreciation expense of $6,300, patent amortization expense of $4,000, and a gain on disposal of plant assets of $3,600. RL’s comparative bal
> Suppose McDonald’s 2014 financial statements contain the following selected data (in millions). Instructions: (a) Compute the following values and provide a brief interpretation of each. (1) Working capital. (2) Current ratio. (3) D
> Romine Company issued $350,000 of 8%, 20-year bonds on January 1, 2014, at face value. Interest is payable annually on January 1. Instructions: Prepare the journal entries to record the following events. (a) The issuance of the bonds. (b) The accrual of
> Assume that the following are independent situations recently reported in the Wall Street Journal. 1. General Electric (GE) 7% bonds, maturing January 28, 2015, were issued at 111.12. 2. Boeing 7% bonds, maturing September 24, 2029, were issued at 99.08.
> Riot Company issued $500,000, 15-year, 7% bonds at 96. Instructions: (a) Prepare the journal entry to record the sale of these bonds on January 1, 2014. (b) Suppose the remaining Discount on Bonds Payable was $12,000 on December 31, 2019. Show the balan
> Leiker Corporation has these accounts at December 31: Common Stock, $10 par, 5,000 shares issued, $50,000; Paid-in Capital in Excess of Par Value $22,000; Retained Earnings $42,000; and Treasury Stock, 500 shares, $11,000. Prepare the stockholders’ equit
> Goins Corporation issued a $50,000, 10%, 10-year installment note payable on January 1, 2014. Payments of $8,137 are made each January 1, beginning January 1, 2015. Instructions: (a) What amounts should be reported under current liabilities related to t
> Nance Co. receives $280,000 when it issues a $280,000, 6%, mortgage note payable to finance the construction of a building at December 31, 2014. The terms provide for semiannual installment payments of $14,285 on June 30 and December 31. Instructions: P
> Gomez Company issued $380,000, 7%, 10-year bonds on January 1, 2014, for $407,968. This price resulted in an effective-interest rate of 6% on the bonds. Interest is payable annually on January 1. Gomez uses the effective-interest method to amortize bond
> Cole Corporation issued $400,000, 7%, 20-year bonds on January 1, 2014, for $360,727. This price resulted in an effective-interest rate of 8% on the bonds. Interest is payable annually on January 1. Cole uses the effective-interest method to amortize bon
> Canyon Company issued $600,000, 10-year, 6% bonds at 103. Instructions: (a) Prepare the journal entry to record the sale of these bonds on January 1, 2014. (b) Suppose the remaining Premium on Bonds Payable was $10,800 on December 31, 2017. Show the bal
> Prophet Company issued $500,000, 6%, 30-year bonds on January 1, 2014, at 103. Interest is payable annually on January 1. Prophet uses straight-line amortization for bond premium or discount. Instructions: Prepare the journal entries to record the follo
> Suppose 3M Company reported the following financial data for 2014 and 2013 (in millions). Instructions: (a) Calculate the current ratio for Sedgewick Boutique for 2014 and 2013. (b) Suppose that at the end of 2014, Sedgewick Boutique used $1.5 million
> Suppose McDonald’s 2014 financial statements contain the following selected data (in millions). Instructions: (a) Compute the following values and provide a brief interpretation of each. (1) Working capital. (2) Current ratio. (3) D
> Santana, Inc. reports the following liabilities (in thousands) on its January 31, 2014, balance sheet and notes to the financial statements. Instructions: (a) Identify which of the above liabilities are likely current and which are likely long-term. Li
> The situations presented here are independent of each other. Instructions: For each situation, prepare the appropriate journal entry for the redemption of the bonds. (a) Pelfer Corporation redeemed $140,000 face value, 9% bonds on April 30, 2014, at 101
> Mike Haden, president of Haden Corporation, believes that it is a good practice for a company to maintain a constant payout of dividends relative to its earnings. Last year, net income was $600,000, and the corporation paid $120,000 in dividends. This ye
