In July 20X2, Ross donated $200,000 cash to a church with the stipulation that the revenue generated from this gift be paid to him during his lifetime. The conditions of this donation are that after Ross dies, the church may use the principal for any purpose voted on by its elders. The church received interest of $16,000 on the $200,000 for the year ended June 30, 20X3, and remitted the interest to Ross. In the church’s June 30, 20X3, annual financial statements should report a. $200,000 as temporarily restricted net assets in the balance sheet. b. $184,000 as revenue in the activity statement. c. $216,000 as revenue in the activity statement. d. Both a and c.
> Ethics Firms sometimes use the threat of a bankruptcy filing to force creditors to renegotiate terms. Critics argue that in such cases the firm is using bankruptcy laws “as a sword rather than a shield.” Is this an ethical tactic?
> What types of actions might the management of a firm take to fight a hostile acquisition bid from an unwanted suitor? How do the target firm shareholders benefit from the defensive tactics of their management team? How are the target firm shareholders ha
> Indicate the impact of the following corporate actions on cash, using the letter I for an increase, D for a decrease, or N when no change occurs. a. A dividend is paid with funds received from a sale of debt. b. Real estate is purchased and paid for with
> Dan Ervin was recently hired by East Coast Yachts to assist the company with its short-term financial planning and also to evaluate the company’s financial performance. Dan graduated from college five years ago with a finance degree, an
> Lear Company ceased doing business and is in bankruptcy. Among the claimants are employees seeking unpaid wages. The following statements describe the possible status of such claims in a bankruptcy proceeding. Which is the incorrect statement? a.
> The U.S. trustee in each of the federal judicial districts is an official appointed by the U.S. at torney general to oversee the administration of bankruptcy cases or private trustees in specific cases. You seek information on the selection of a trustee
> You are working on a report regarding bankruptcies. You need to locate more information and have heard that the U.S. bankruptcy courts have a website that would be useful. Locate the website using a search engine. (Hint: A helpful search term may be “U
> Items 1 through 6 represent various transactions pertaining to Crest Haven, a voluntary health and welfare organization, for the year ended December 31, 20X2. The information presented includes a list of how transactions could affect the statement of act
> Match the transactions on the left with their effects on the statement of changes in net assets on the right for a private, not-for-profit hospital. Effects of Transactions on Statement of Changes in Net Assets Transactions 1. Billed patients for
> How are the sales of assets reported on the statement of realization and liquidation?
> The plan of reorganization must be approved by a. At least one-third of all creditors who hold at least half of the total debt. b. At least half of all creditors who hold at least half of the total debt. c. At least half of all creditor
> What are the rights of creditors with priority in a Chapter 7 liquidation?
> What financial statements must a company file during a Chapter 11 reorganization?
> What is the difference between a Chapter 7 action and a Chapter 11 bankruptcy action?
> What are the nonjudicial actions available to a financially distressed company? What judicial actions are available?
> What are the financial reporting responsibilities of a trustee who accepts the debtor company’s assets in a Chapter 7 liquidation?
> How is the statement of affairs used in planning an anticipated liquidation?
> What conditions must occur for a company in reorganization to use fresh start accounting?
> How is the account Reorganization Value in Excess of Amount Assigned to Identifiable Assets used during a Chapter 11 reorganization?
> What is usually included in the plan of reorganization filed as part of a Chapter 11 reorganization?
> Under what circumstances may an involuntary petition for relief be filed? Who files this petition?
> A condition that must exist for filing an involuntary bankruptcy petition is a. The debtor must have debts of at least $10,000. b. If the debtor has 12 or more creditors, a majority of them must sign the petition. c. If the debtor has 1
> Following is a list of transactions and events that may occur in private, not-for-profit entities. Indicate where each transaction or event should be reported on the entity’s statement of cash flows Assume that the indirect method of reporting operating
> The following information pertains to United Ways, a private voluntary health and welfare organization, for the year ended December 31, 20X3. The following transactions occurred during the year ended December 31, 20X3: 1. Received cash donations of $
> Determine whether each of the following is true or false. Assume that each organization is a private, not-for-profit entity. It is possible that an item need not be reported on the hospital’s statement of operations. 1. A statement of functional exp
> Smallville Community Hospital, a not-for-profit hospital, needs to evaluate a number of items to determine their proper placement on its statement of operations (either above or below the performance measure of Excess of Revenues over Expenses. Requ
> Alpha Hospital, a large not-for-profit organization, has adopted an accounting policy that does not imply a time restriction on gifts of long-lived assets. Required: For items 1 through 6, indicate the effect of the transaction on Alphaâ€
> Name Brand Company is to be liquidated under Chapter 7 of the Bankruptcy Code. The balance sheet on July 31, 20X1, follows: Additional Information: 1. Marketable securities consist of 1,000 shares of Wooly Inc. common stock. The stockâ€
> Buckwall University (BU), a private not-for-profit university, had the following transactions during the year ended June 30, 20X8: 1. Assessed students $2,000,000 for tuition for the winter semester, starting in January 20X8. 2. Received $1,000,00
> Match the transactions on the left with their effects on the statement of activities on the right for a voluntary health and welfare organization. A transaction may have more than one effect. Effects of Transactions on Transactions Statement of Ac
> During the recent recession, Polydorous Inc. accumulated a deficit in retained earnings. Although still operating at a loss, the company posted better results during 20X1. Polydorous is having trouble paying suppliers on time and is paying interest whe
> The following information is for funds used to account for the transactions of the Hospital of Havencrest, which is operated by a religious organization. The balances in the accounts are as of June 30, 20X8, the end of the hospital’s fi
> Among other provisions, a Chapter 11 plan of reorganization must a. Rank claims according to their liquidation priorities. b. Not impair claims of secured creditors. c. Provide adequate means for the plan’s execution. d. Treat all
> DeKalb Hospital, a large not-for-profit organization, has adopted an accounting policy that does not imply a time restriction on gifts of long-lived assets. For each of the six items presented, select the best match from the Match List. Transac
> Following are four independent transactions or events that relate to a local government and a voluntary health and welfare organization: 1. Made a disbursement of $25,000 from the general fund unrestricted assets for the cash purchase of new equipment.
> Following are the adjusted current funds trial balances of Community Association for Children With Disabilities, a voluntary health and welfare organization, on June 30, 20X4: Required: a. Prepare a statement of activities for the year ended June
> The postclosing trial balance of the general fund of Serene Hospital, a not-for-profit entity, on December 31, 20X1, was as follows: During 20X2 the following transactions occurred: 1. Provided the value of patient services, $6,160,000. 2. App
> A group of civic-minded merchants in Eldora organized the Committee of 100 for establishing the Community Sports Club, a not-for-profit sports organization for local youth. Each of the committee’s 100 members contributed $1,000 toward
> Brookdale Hospital hired an inexperienced controller early in 20X4. Near the end of 20X4, the board of directors decided to conduct a major fund-raising campaign. They wished to have the December 31, 20X4, statement of financial position for Brookdale fu
> Friendly College is a small, privately supported liberal arts college. The college uses a fund structure; however, it prepares its financial statements in conformance with ASC 958. Partial balance sheet information as of June 30, 20X2, follows: The f
> On January 2, 20X2, Hobbes Company files a petition for relief under Chapter 11 of the Bankruptcy Code. Hobbes had disastrous operating performance during the recent recession and needs time to reestablish profitable operations. The trial balance on Janu
> The following is a list of selected account balances in the unrestricted operating fund for Pleasant School: Required: Prepare a statement of activities for Pleasant School’s unrestricted operating fund for the year ended June 30, 2
> (Note: The following information is for questions 8 through 10.) United Together, a labor union, had the following receipts and expenses for the year ended December 31, 20X2: The union’s constitution provides that 10 percent of the
> Hardluck Inc. is insolvent. Its liabilities exceed its assets by $13 million. Blank, its president, and other family members own Hardluck. Blank, whose assets are estimated at less than $1 million, guaranteed the corporation’s loans. A consortium of bank
> (Note: The following information is for questions 8 through 10.) United Together, a labor union, had the following receipts and expenses for the year ended December 31, 20X2: The union’s constitution provides that 10 percent of the
> (Note: The following information is for questions 8 through 10.) United Together, a labor union, had the following receipts and expenses for the year ended December 31, 20X2: The union’s constitution provides that 10 percent of the
> In 20X3, Burr Foundation’s board of trustees designated $100,000 from its current funds for college scholarships. Also in 20X3, the foundation received a bequest of $200,000 from the estate of a benefactor who specified that it be used for hiring teacher
> Trees Forever, a community foundation, incurred $5,000 in expenses during 20X3 putting on its annual fund-raising talent show. In its statement of activities, Trees Forever should report the $5,000 as a. A contra asset account. b. A contra re
> The following expenditures were among those a not-for-profit botanical society incurred during 20X4: What amount should be classified as fund-raising costs in the society’s activity statement? a. $0 b. $5,000 c. $35,00
> Roberts Foundation received a nonexpendable endowment of $500,000 in 20X3 from Multi Enterprise and invested it in publicly traded securities. Multi did not specify how gains and losses from dispositions of endowment assets were to be treated. No restric
> In 20X1, a not-for-profit trade association enrolled five new member companies, each of which was obligated to pay nonrefundable initiation fees of $1,000. The association received these fees in 20X1. Three of the new members paid the initiation fees in
> On January 2, 20X2, a not-for-profit botanical society received a gift of an exhaustible fixed asset with an estimated useful life of 10 years and no salvage value. The donor’s cost of this asset was $20,000, and its fair market value at the date of the
> Tower Inc. advises you that it is facing bankruptcy proceedings. As the company’s CPA, you are aware of its condition. Tower’s balance sheet on December 31, 20X1, and supplementary data follow: Additional Information
> A client has joined other creditors of Jet Company in a composition agreement seeking to avoid a bankruptcy proceeding against Jet. Which statement describes the composition agreement? a. It provides for the appointment of a receiver to take over a
> Penn Inc.’s assets have the carrying values and estimated fair values as follows: Penn’s debts follow: Required: a. Prepare a schedule to calculate the net estimated amount available for general unsecured creditor
> Atwater Health Services, a voluntary health and welfare organization, has provided support for families with low income in the town of Atwater for approximately 20 years. In 20X6, it conducted a major funding campaign to help replace facilities that are
> The plan of reorganizing for Taylor Companies, Inc., was approved by the court, stockholders, and creditors on December 31, 20X1. The plan calls for a general restructuring of all of Taylor’s debt. The company’s liabil
> The following are the 20X2 transactions of the Midwest Heart Association, which has the following funds and fund balances on January 1, 20X2: 1. Had Unrestricted pledges totaling $700,000, of which $150,000 is for 20X3 and uncollectible pledges esti
> A trustee has been appointed for Pace Inc., which is being liquidated under Chapter 7 of the Bankruptcy Code. The following occurred after the assets were transferred to the trustee: 1. Sales on account by the trustee were $75,000. Cost of goods sold w
> WorldCom Inc. was one of the largest companies to file for bankruptcy. This case requires the analysis of WorldCom’s December 31, 2002, 10-K filed with the Securities and Exchange Commission. The 10-K can be obtained through EDGAR (w ww.sec.gov) or some
> Your client is insolvent under the federal bankruptcy law. Under the circumstances a. So long as the client can meet current debts or claims by its most aggressive creditors, a bankruptcy proceeding is not possible. b. Your CPA firm need not d
> Narco is in serious financial difficulty and is unable to meet current unsecured obligations of $30,000 to some 14 creditors who are demanding immediate payment. Narco owes Johnson $5,000, and Johnson has decided to file an involuntary petition against N
> The order of payments for unsecured priority claims in a Chapter 7 bankruptcy case is such that a. Tax claims of governmental units are paid before claims for administrative expenses incurred by the trustee. b. Tax claims of governmental units
> The highest priority for payment of unsecured claims in a bankruptcy proceeding is a. Administrative expenses of the bankruptcy. b. Unpaid federal income taxes. c. Wages of each employee up to $10,000 earned within 180 days before the p
> The creditors of Lost Hope Company have had several meetings with the company’s management to discuss its financial difficulties. Lost Hope currently has a significant deficit in retained earnings and has defaulted on several of its debt issues. The opti
> Shimada Products Corporation of Japan is anxious to enter the electronic calculator market. Management believes that in order to be competitive in world markets, the price of the electronic calculator that the company is developing cannot exceed $15. Shi
> Refer to the financial statements for Castile Products, Inc., in Exercise 15–8. In addition to the data in these statements, assume that Castile Products, Inc., paid dividends of $2.10 per share during the year. Also assume that the company’s common stoc
> Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 800,000 shares of common stock were outstanding. Th
> Refer to the data in Exercise 1 for Weller Corporation. Data given in Exercise 1: Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common st
> Refer to the data in Exercise 1 for Weller Corporation. Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A tot
> Refer to the data in Exercise 1 for Weller Corporation. Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A tot
> Refer to the data in Exercise 1 for Weller Corporation. Data given in Exercise 1: Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common st
> Martin Company uses the absorption costing approach to cost-plus pricing.It is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: Number of units to be produced and sold each
> Benoit Company produces three products—A, B, and C. Data concerning the three products follow (per unit): The company estimates that it can sell 800 units of each product per month. The same raw material is used in each product. The ma
> Futura Company purchases the 40,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $8.40 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starter
> Portsmouth Company makes fine colonial reproduction furniture. Upholstered furniture is one of its major product lines and the bottleneck on this production line is time in the upholstery shop. Upholstering is a craft that takes years of experience to ma
> Outdoor Luggage, Inc., makes high-end hard-sided luggage for sports equipment. Data concerning three of the company’s most popular models appear below. Required: 1. If we assume that the total time available on the plastic injection mo
> Imperial Jewelers manufactures and sells a gold bracelet for $189.95.The company’s accounting system says that the unit product cost for this bracelet is $149.00 as shown below: Direct materials ........................................$ 84.00 Direct lab
> Svahn, AB, is a Swedish manufacturer of sailing yachts. The company has assembled the information shown below that pertains to two independent decision-making contexts called Case A and Case B: Case A: The company chronically has no idle capacity and the
> Fitness Fanatics is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based largely on return on investment (ROI). The company’s Springfield Club reported the following results fo
> Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shown by its June contribution format income statement below: Janet Dunn, who has just been appointed general manager of the Westw
> Koontz Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May. The production superintendent was pleased when he saw this report and commented: “T
> Mickley Corporation produces two products, Alpha6s and Zeta7s, which pass through two operations, Sintering and Finishing. Each of the products uses two raw materials—X442 and Y661. The company uses a standard cost system, with the foll
> Wallis Company manufactures only one product and uses a standard cost system.The company uses a predetermined plantwide overhead rate that relies on direct labor-hours as the allocation base. All of the company’s manufacturing overhead
> Refer to the data in Exercise 10–6. Assume that instead of producing 4,000 units during the month, the company produced only 3,000 units, using 14,750 pounds of material. (The rest of the material purchased remained in raw materials inv
> Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows: During August, 5,750 hours of direct labor time were
> Refer to the data for Lavage Rapide in Exercises 9–10 and 9–13. Data given in Exercise 9-10: Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data
> Refer to the data for Lavage Rapide in Exercise 9–10. Also assume that the company’s actual operating results for August are as follows: Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed……………………………………………………………………..8,800 Rev
> Refer to the data for Lavage Rapide in Exercise 9–10. The company actually washed 8,800 cars in August. Exercise 9–10: Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility nea
> Refer to the data for Lavage Rapide in Exercise 9–10. The company actually washed 8,800 cars in August. Data given in Exercise 9-10: Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Mo
> Refer to the data for The Terminator Inc. in Exercise 9–6. A management intern has suggested that the budgeted revenues and costs should be adjusted for the actual level of activity in April before they are compared to the actual revenu
> Flight Café prepares in-flight meals for airlines in its kitchen located next to a local airport. The company’s planning budget for July appears below: Flight Café Planning Budget For the Month Ended July 31 Budgeted meals (q) ..........................
> Wolfpack Company is a merchandising company that is preparing a budget for the month of July. It has provided the following information: Wolfpack Company Balance Sheet June 30 Assets Cash..................................................................
> Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below: Wheeling Company Balance Sheet September 30 Assets Cash.......................................................................................$ 59,000 Ac
> Hartwell Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a standard cost system. Its predetermined overhead rate includes $1,760,000 of fixed manufacturing overhead in the numerator and 44,000 dire
> The production department of Zan Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year: In addition, 6,000 grams of raw materials inventory is on hand at the start of the 1st Quarter and the be
> Refer to the data for Beech Corporation in Exercise 2. The company is considering making the following changes to the assumptions underlying its master budget: 1. Each month’s credit sales are collected 45% in the month of sale and 55% in the month follo
> Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company’s balance sheet as of June 30th is shown below: Beech Corporation Balance Sheet June 30 Assets Cash...................
> Weller Company’s budgeted unit sales for the upcoming fiscal year are provided below: The company’s variable selling and administrative expense per unit is $2.50. Fixed selling and administrative expenses include adve
> Fogerty Company makes two products—titanium Hubs and Sprockets. Data regarding the two products follow: Additional information about the company follows: a. Hubs require $32 in direct materials per unit, and Sprockets require $18. b. T
