Karen Knox Exports, Inc., is located in Clancy, New Mexico. Knox is the only company with reliable sources for its imported gifts. The company does a brisk business with specialty stores such as Neiman Marcus. Knox’s recent success has made the company a prime target for a takeover. An investment group in Alberton is attempting to buy 52% of Knox’s outstanding stock against the wishes of Knox’s board of directors. Board members are convinced that the Alberton investors would sell the most desirable pieces of the business and leave little of value. At the most recent board meeting, several suggestions were advanced to fight off the hostile takeover bid. The suggestion with the most promise is to purchase a huge quantity of treasury stock. Knox has the cash to carry out this plan. Requirements 1. Suppose you are a significant stockholder of Karen Knox Exports, Inc. Write a memorandum to explain to the board how the purchase of treasury stock would make it difficult for the Alberton group to take over Knox. Include in your memo a discussion of the effect that purchasing treasury stock would have on stock outstanding and on the size of the corporation. 2. Suppose Knox management is successful in fighting off the takeover bid and later sells the treasury stock at prices greater than the purchase price. Explain what effect these sales will have on assets, stockholders’ equity, and net income.
> Solomon’s net cash flow from financing activities for 2012 was (Assume no stock dividends were distributed.) a. Net cash used of $25,500. b. Net cash provided of $12,000. c. Net cash provided of $42,000. d. Net cash used of $14,500. So
> You are evaluating two companies as possible investments. The two companies, which are similar in size, are commuter airlines that fl y passengers up and down the West Coast. All other available information has been analyzed, and your investment decision
> Top managers of Gilligan Products, Inc., have asked for your help in comparing the company’s profit performance and financial position with the average for the industry. The accountant has given you the company’s incom
> Net sales, net income, and total assets for Azbell Shipping, Inc., for a five-year period follow: Requirements 1. Compute trend percentages for each item for 2009 through 2012. Use 2008 as the base year and round to the nearest percent. 2. Compute the
> Copperhead, Inc., has the following stockholders’ equity: Preferred stock, 1%, $12 par, 35,000 shares authorized and issued............................... $ 420,000 Common stock, $8 par, 100,000 shares authorized, 67,000 shares issued....................
> Assume that you are considering purchasing stock as an investment. You have narrowed the choice to CDRom.com and Web Stores and have assembled the following data. Selected income statement data for the current year: Selected balance sheet and market pr
> Comparative financial statement data of Hamden Optical Mart follow: Other information: 1. Market price of Hamden common stock: $102.17 at December 31, 2012, and $77.01 at December 31, 2011 2. Common shares outstanding: 18,000 during 2012 and 17,500 dur
> Financial statement data of Shawsworth Engineering include the following items: Requirements 1. Compute Shawsworth’s current ratio, debt ratio, and earnings per share. (Round all ratios to two decimal places.) 2. Compute the three rat
> You are evaluating two companies as possible investments. The two companies, which are similar in size, are commuter airlines that fly passengers up and down the West Coast. All other available information has been analyzed, and your investment decision
> Top managers of O’Hare Products, Inc., have asked for your help in comparing the company’s profit performance and financial position with the average for the industry. The accountant has given you the companyâ
> Net sales, net income, and total assets for Aaron Shipping, Inc., for a five-year period follow: Requirements 1. Compute trend percentages for each item for 2009 through 2012. Use 2008 as the base year and round to the nearest percent. 2. Compute the r
> Witkum, Inc., reported the following sales and net income amounts: Show Witkum’s trend percentages for sales and net income. Use 2009 as the base year. (In thousands) 2012 2011 2010 2009 Sales. $9,960 $9,260 $8,790 $8,590 Net inco
> Solomon’s largest financing cash flow for 2012 resulted from (Assume no stock dividends were distributed.) a. Sale of equipment. b. Purchase of equipment. c. Payment of dividends. d. Issuance of common stock. Solomon Corporation format
> Assume that you are a financial analyst. You are trying to compare the financial statements of Caterpillar, Inc., with those of CNH Global , an international company that uses international financial reporting standards (IFRS). Caterpillar, Inc., uses th
> Verifine Corporation reported the following amounts on its 2012 comparative income statements: Perform a horizontal analysis of revenues and net income—both in dollar amounts and in percentages—for 2012 and 2011.
> Payne Bancshares has 18,000 shares of $4 par common stock outstanding. Suppose Payne distributes an 8% stock dividend when the market value of its stock is $20 per share. 1. Journalize Payne’s distribution of the stock dividend on May 11. An explanation
> Based on the EVA® analysis, Karin Oil Pipeline appears to be the better investment. Requirements 1. Before performing any calculations, which company do you think represents the better investment? Give your reason. 2. Compute the EVAÂ&
> Evaluate the common stock of Orville Distributing Company as an investment. Specifically, use the three common stock ratios to determine whether the common stock increased or decreased in attractiveness during the past year. (Round calculations and your
> Compute return on sales (ROS), asset turnover (AT), return on assets (ROA), leverage (L), return on common stockholders’ equity (ROE), gross profit (GP), operating income percentage (OI), and earnings per share (EPS), to measure the abi
> Evensen Furniture Company has requested that you determine whether the company’s ability to pay its current liabilities and long-term debts improved or deteriorated during 2012. To answer this question, compute the following ratios for
> The financial statements of Alliance News, Inc., include the following items: Requirements 1. Compute the following ratios for 2012 and 2011: a. Current ratio b. Quick (acid test) ratio c. Inventory turnover and days’ inventory outsta
> Identify any weaknesses revealed by the statement of cash flows of Florida Oranges, Inc. Florida Oranges, Inc. Statement of Cash Flows For the Current Year Opcrating activitics: Net income $ 95,000 Add (subtract) noncash items: Depreciation $ 32,000
> Prepare a comparative common-size income statement for McCracken Music Co. using the 2012 and 2011 data of Exercise 13-27B and rounding to four decimal places. Data of Exercise 13-27B McCracken Music Co. Comparative Income Statements Years Ended Dec
> Drive Golf Company has requested that you perform a vertical analysis of its balance sheet to determine the component percentages of its assets, liabilities, and stockholders’ equity. Drive Golf Company Balance Sheet December 31, 2
> Compute trend percentages for Maple Valley Sales & Service’s total revenue and net income for the following five-year period, using year 0 as the base year. Round to the nearest full percent. Which grew faster during the period, t
> How many items enter the computation of Solomon’s net cash flow from financing activities for 2012? a. 3 b. 7 c. 2 d. 5 Solomon Corporation formats operating cash flows by the indirect method. *The book value of equipment sold during
> Sterling Garde, Inc., has 90,000 shares of $1.35 preferred stock outstanding in addition to its common stock. The $1.35 designation means that the preferred stockholders receive an annual cash dividend of $1.35 per share. In 2012, Sterling Garde declares
> Modern Brands recently completed a large debt refinancing. A debt refinancing occurs when a company issues new bonds payable to retire old bonds. The company debits the old bonds payable and credits the new bonds payable. Modern Brands had $160 million o
> Prepare a horizontal analysis of the comparative income statements of McCracken Music Co. Round percentage changes to the nearest one-tenth percent (three decimal places). McCracken Music Co. Comparative Income Statements Years Ended December 31, 20
> What were the dollar amount of change and the percentage of each change in Cobb Hill Lodge’s working capital during 2012 and 2011? Is this trend favorable or unfavorable? 2012 2011 2010 Total current asscts .. $60,000 $230,000 $250
> Two companies with different economic-value-added (EVA®) profiles are Emerson Oil Pipeline Incorporated and Farmer Bank Limited. Adapted versions of the two companies’ financial statements are presented here (in millions):
> Evaluate the common stock of Tristan Distributing Company as an investment. Specifically, use the three common stock ratios to determine whether the common stock increased or decreased in attractiveness during the past year. (Round calculations and your
> Compute return on sales (ROS), asset turnover (AT), return on assets (ROA), leverage (L), return on common stockholders’ equity (ROE), gross profit (GP), operating income percentage (OI), and earnings per share (EPS), to measure the abi
> Branson Furniture Company has requested that you determine whether the company’s ability to pay its current liabilities and long-term debts improved or deteriorated during 2012. To answer this question, compute the following ratios for
> The financial statements of Family News, Inc., include the following items: Requirements 1. Compute the following ratios for 2012 and 2011: a. Current ratio b. Quick (acid test) ratio c. Inventory turnover and days’ inventory outstand
> Identify any weaknesses revealed by the statement of cash flows of New York Apple Farms, Inc. New York Apple Farms, Inc. Statement of Cash Flows For the Current Year Opcrating activitics: Net income 67,100 Add (subtract) noncash items: Depreciation
> Prepare a comparative common-size income statement for McMahon Music Co., using the 2012 and 2011 data of Exercise 13-16A and rounding to four decimal places. Data in Exercise 13-16A McMahon Music Co. Comparative Income Statements Years Ended Decemb
> Putt Golf Company has requested that you perform a vertical analysis of its balance sheet to determine the component percentages of its assets, liabilities, and stockholders’ equity.
> Greenwood Corporation earned net income of $85,000 during the year ended December 31, 2012. On December 15, Greenwood declared the annual cash dividend on its 8% preferred stock (20,000 shares with total par value of $200,000) and a $0.15 per share cash
> The book value of equipment sold during 2012 was $20,000. Solomon’s net cash flow from investing activities for 2012 was a. Net cash used of $38,000. b. Net cash used of $47,000. c. Net cash used of $44,000. d. Net cash used of $25,500.
> Compute trend percentages for Peak Valley Sales & Service’s total revenue and net income for the following five-year period, using year 0 as the base year. Round to the nearest full percent. Which grew faster during the period, to
> Prepare a horizontal analysis of the comparative income statements of McMahon Music Co. Round percentage changes to the nearest one-tenth percent (three decimal places). McMahon Music Co. Comparative Income Statements Years Ended December 31, 2012 a
> What were the dollar amount of change and the percentage of each change in Blueberry Lane Lodge’s working capital during 2012 and 2011? Is this trend favorable or unfavorable? 2012 2011 2010 Total current assets $330,000 $280,000 $
> Compute economic value added (EVA®) for Lazeren Software. The company’s cost of capital is 3%. Net income was $755 thousand, interest expense $401 thousand, beginning long-term debt $620 thousand, and beginning stockholders’ equity was $3,010 thousand. R
> Take the role of an investment analyst at Cole Binder. It is your job to recommend investments for your client. The only information you have is the following ratio values for two companies in the graphics software industry. Write a report to the Cole
> A skeleton of Westview Country Florist’s balance sheet appears as follows (amounts in thousands): Use the following ratio data to complete Westview Country Florist’s balance sheet: a. Debt ratio is 0.57. b. Current r
> A skeleton of Westview Country Florist’s income statement appears as follows (amounts in thousands): Income Statement Net sales …………………………………………………….. $7,300 Cost of goods sold ………………….………………………….. (a) Selling expenses …………………….……………………… 1,520 Administra
> The annual report of Feeney Cars, Inc., for the year ended December 31, 2012, included the following items (in millions): Preferred stock outstanding, 3% ........................................ $700 Net income............................................
> Use the financial statements of Allstott, Inc., in Short Exercises 13-6 and 13-7 to compute these profitability measures for 2012. Show each computation. a. Rate of return on sales b. Asset turnover c. Rate of return on total assets. d. Leverage (equity
> Use the financial statements of Allstott, Inc., in Short Exercises 13-6 and 13-7. 1. Compute the company’s debt ratio at December 31, 2012. 2. Compute the company’s times-interest-earned ratio for 2012. For operating i
> How many items enter the computation of Solomon’s net cash flow from investing activities for 2012? a. 5 b. 3 c. 2 d. 7 Solomon Corporation formats operating cash flows by the indirect method. *The book value of equipment sold during
> Use the Allstott 2012 income statement that follows and the balance sheet from Short Exercise 13-6 to compute the following: a. Allstott’s rate of inventory turnover and days inventory outstanding for 2012 b. Days’
> Use the Allstott, Inc., balance sheet data on the following page. 1. Compute Allstott, Inc.’s quick (acid-test) ratio at December 31, 2012 and 2011. 2. Use the comparative information from the table on the bottom of page 811 for Baker,
> Examine the financial data of Stephens Corporation. Show how to compute Stephens current ratio for each year 2010 through 2012. Is the company’s ability to pay its current liabilities improving or deteriorating? Year Ended Decembe
> Craft, Inc., and Kleen Corporation are competitors. Compare the two companies by converting their condensed income statements to common size. Which company earned more net income? Which company’s net income was a higher percentage of
> McCormick Software reported the following amounts on its balance sheets at December 31, 2012, 2011, and 2010: Sales and profits are high. Nevertheless, McCormick is experiencing a cash shortage. Perform a vertical analysis of McCormick Softwareâ&
> Refer to the RadioShack Corporation, consolidated financial statements in Appendix B at the end of this book. Focus on the year ended December 31, 2010. 1. What is RadioShack Corporation’s main source of cash? Is this good news or bad news to RadioShack
> Use Amazon.com, Inc.’s consolidated statement of cash flows along with the company’s other consolidated financial statements, all in Appendix A at the end of the book, to answer the following questions. Requirements 1. By which method does Amazon.com, I
> The 2012 income statement and the 2012 comparative balance sheet of T-Bar-M Camp, Inc., have just been distributed at a meeting of the camp’s board of directors. The directors raise a fundamental question: Why is the cash balance so low
> Gellman Marketing Corporation reported the following stockholders’ equity at December 31 (adapted and in millions): Common stock...................................... $ 256 Additional paid-in capital....................... 286 Retained earnings..........
> The accounting records of Jasmine Pharmaceuticals, Inc., reveal the following: Requirement Compute cash flows from operating activities by the direct method. Also evaluate Jasmine’s operating cash flow. Give the reason for your evalua
> Compute the following items for the statement of cash flows: a. Beginning and ending Plant Assets, Net, are $125,000 and $115,000, respectively. Depreciation for the period was $19,000, and purchases of new plant assets were $45,000. Plant assets were so
> Solomon’s net cash provided by operating activities during 2012 was a. $41,000. b. $47,000. c. $38,000. d. $44,000. Solomon Corporation formats operating cash flows by the indirect method. *The book value of equipment sold during 201
> Consider three independent cases for the cash flows of Texas Tires Corp. For each case, identify from the statement of cash flows how Texas Tires Corp. generated the cash to acquire new plant assets. Rank the three cases from the most healthy financially
> The income statement and additional data of Breen Travel Products, Inc., follow: Additional data: a. Acquisition of plant assets was $200,000. Of this amount, $160,000 was paid in cash and $40,000 by signing a note payable. b. Proceeds from sale of lan
> The accounting records of Ashby Fur Traders include these accounts: Requirement Compute Ashby’s net cash provided by (used for) operating activities during August. Use the indirect method. Do you see any potential problems in Ashby&ac
> The accounting records of South Central Distributors, Inc., reveal the following: Requirement Compute cash flows from operating activities by the indirect method. Use the format of the operating activities section of Exhibit 12-6. Also evaluate the ope
> Indicate whether each of the following transactions affects an operating activity, an investing activity, a financing activity, or a non-cash investing and financing activity. 61,000 8. Equipment 11,000 a. Cash Common Stock 10,000 Cash 11,000 51,000
> Carter-Pierce Investments specializes in low-risk government bonds. Identify each of Carter-Pierce’s transactions as operating (O), investing (I), financing (F), non-cash investing and financing (NIF), or a transaction that is not reported on the stateme
> Compute the following items for the statement of cash flows: a. Beginning and ending Accounts Receivable are $21,000 and $17,000, respectively. Credit sales for the period total $66,000. How much are cash collections from customers? b. Cost of goods sold
> Refer to the data in S10-8. Using only year-end figures rather than averages, compute the following for Ridgeview Employment Services: a. Net income b. Total liabilities c. Total assets (use the accounting equation) d. Net profit ratio e. Asset turnover
> The income statement and additional data of One Stop, Inc., follow: Additional data: a. Collections from customers are $20,000 more than sales. b. Payments to suppliers are $1,200 less than the sum of cost of goods sold plus advertising expense. c. Pay
> Selected accounts of Jessie Antiques show the following: Requirement For each account, identify the item or items that should appear on a statement of cash flows prepared by the direct method. State where to report the item. Salary Payable Beginnin
> The accounting records of Best Pharmaceuticals, Inc., reveal the following: Requirement Compute cash flows from operating activities by the direct method. Also evaluate Best’s operating cash flow. Give the reason for your evaluation.
> How do accounts receivable affect Solomon’s cash flows from operating activities for 2012? a. Decrease in cash provided by operating activities b. Increase in cash provided by operating activities c. They don’t because
> Compute the following items for the statement of cash flows: a. Beginning and ending Plant Assets, Net, are $99,000 and $92,000, respectively. Depreciation for the period was $11,000, and purchases of new plant assets were $23,000. Plant assets were sold
> Consider three independent cases for the cash flows of Building Blocks Corp. For each case, identify from the statement of cash flows how Building Blocks Corp. generated the cash to acquire new plant assets. Rank the three cases from the most healthy fin
> The income statement and additional data of Bolton Travel Products, Inc., follow: Additional data: a. Acquisition of plant assets was $130,000. Of this amount, $75,000 was paid in cash and $55,000 by signing a note payable. b. Proceeds from sale of lan
> The accounting records of Michigan Fur Traders include these accounts: Cash Accounts Reccivable Inventory Dec 1 100,000 Dec 1 5,000 Dec 1 6,000 Receipts 526,000 Payments 438,000 Receipts 528,000 Collections 526,000 Purchases 451,000 Cost of Sales 44
> The accounting records of Mid West Distributors, Inc., reveal the following: Requirement Compute cash flows from operating activities by the indirect method. Use the format of the operating activities section of Exhibit 12-6. Also evaluate the operatin
> Indicate whether each of the following transactions affects an operating activity, an investing activity, a financing activity, or a non-cash investing and financing activity. h. Cash 74,000 Depreciation Expense Accumulated Depreciation Treasury Sto
> The financial statements of Ridgeview Employment Services, Inc., reported the following accounts (adapted, with dollar amounts in thousands except for par value): Prepare the stockholders’ equity section of Ridgeview’
> McTaggart-Hicks Investments specializes in low-risk government bonds. Identify each of McTaggart-Hicks transactions as operating (O), investing (I), financing (F), non-cash investing and financing (NIF), or a transaction that is not reported on the state
> Use the data in Short Exercise 12-14 to prepare Medford Golf Club, Inc.’s statement of cash flows for the year ended September 30, 2012. Medford uses the direct method for operating activities. In Short Exercise 12-14 Medford Golf Club
> Medford Golf Club, Inc., has assembled the following data for the year ended September 30, 2012: Prepare the operating activities section of Medford Golf Club, Inc.’s statement of cash flows for the year ended September 30, 2012. Medf
> Paloma Horse Farm, Inc., began 2012 with cash of $100,000. During the year, Paloma earned service revenue of $594,000 and collected $580,000 from customers. Expenses for the year totaled $410,000, with $400,000 paid in cash to suppliers and employees. Pa
> How do Solomon’s accrued liabilities affect the company’s statement of cash flows for 2012? a. Increase in cash provided by operating activities b. They don’t because the accrued liabilities are not y
> Use the Motorvehicles of Philadelphia data in Short Exercise 12-9 to compute the following: (Enter all amounts in thousands). a. Payments to employees b. Payments of other expenses In Short Exercise 12-9 Motorvehicles of Philadelphia, Inc., reported the
> Use the Motorvehicles of Philadelphia data in Short Exercise 12-9 to compute the following: (Enter all amounts in thousands.) a. Collections from customers b. Payments for inventory Data from Short Exercise 12-9 Motorvehicles of Philadelphia, Inc., repo
> Use the Motorvehicles of Philadelphia data in Short Exercise 12-9 to compute the following: (Enter all amounts in thousands.) a. New borrowing or payment of long-term notes payable. Motorvehicles of Philadelphia had only one long-term note payable transa
> Motorvehicles of Philadelphia, Inc., reported the following financial statements for 2012: Motorvehicles of Philadelphia, Inc. Income Statement Year Ended December 31, 2012 (In thousands) Service revenue ……â&
> Use the data in Short Exercise 12-7 to prepare Eldred Corporation’s statement of cash flows for the year ended June 30, 2012. Eldred uses the indirect method for operating activities. Data in Short Exercise 12-7 Eldred Corporation acco
> This short exercise demonstrates the similarity and the difference between two ways to acquire plant assets. Case A—Issue stock and buy the assets in separate transactions: Hampton, Inc., issued 17,000 shares of its $25 par common stock for cash of $850,
> Eldred Corporation accountants have assembled the following data for the year ended June 30, 2012: Prepare the operating activities section of Eldred’s statement of cash flows for the year ended June 30, 2012. Eldred uses the indirect
> Smith Clinic, Inc., is preparing its statement of cash flows (indirect method) for the year ended March 31, 2012. Consider the following items in preparing the company’s statement of cash flows. Identify each item as an operating activity—addition to net
> Incredible America Transportation (IAT) began 2012 with accounts receivable, inventory, and prepaid expenses totaling $48,000. At the end of the year, IAT had a total of $49,000 for these current assets. At the beginning of 2012, IAT owed current liabili
> Top managers of Harmony Inns are reviewing company performance for 2012. The income statement reports a 20% increase in net income over 2011. However, most of the increase resulted from a gain on insurance proceeds from fi re damage to a building. The ba
> Examine the statement of cash flows of Mirror, Inc. Suppose Mirror’s operating activities provided, rather than used, cash. Identify three things under the indirect method that could cause operating cash flows to be positive. Mirr
> How many items enter the computation of Solomon’s net cash provided by operating activities? a. 2 b. 5 c. 3 d. 7 Solomon Corporation formats operating cash flows by the indirect method. *The book value of equipment sold during 2012 w
> Bryant, Inc., has experienced an unbroken string of nine years of growth in net income. Nevertheless, the company is facing bankruptcy. Creditors are calling all of Bryant’s loans for immediate payment, and the cash is simply not available. It is clear t
