Question: Larry Dundee is the chief executive officer

> (a) Distinguish among the following bases of comparison: intra company, intercompany, and industry averages. (b) Give the principal value of using each of the three bases of comparison.

> Describe the indirect method for determining net cash provided (used) by operating activities.

> Monet, Inc. purchases 1,000 shares of its own previously issued $5 par common stock for $11,000. Assuming the shares are held in the treasury, what effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d)

> On January 1, 2017, Lachte 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. Lachte uses the effective-interest method to amortize bond premium or discount. Th

> Data for Granger Inc. are presented in P12-9A(given below): Further analysis reveals that accounts payable pertain to merchandise creditors. Instructions Prepare a statement of cash flows for Granger Inc. using the direct method. GRANGER INC. Compar

> Arroyo 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, 2017. (b) Suppose the remaining Premium on Bonds Payable was $10,800 on December 31, 2020. Show the balan

> Suppose selected comparative statement data for the giant bookseller Barnes & Noble are presented here. All balance sheet data are as of the end of the fiscal year (in millions). Instructions Compute the following ratios for 2017. (a) Profit margin.

> The following accounts appear in the ledger of Paisan Inc. after the books are closed at December 31, 2017. Common Stock (no-par, $1 stated value, 400,000 shares authorized, 250,000 shares issued) $ 250,000 Paid-in Capital in Excess of Stated Value

> In this chapter, you learned that companies prepare a statement of cash flows in order to keep track of their sources and uses of cash and to help them plan for their future cash needs. Planning for your own short- and long-term cash needs is every bit a

> a. Indicate whether each of the following statements is true or false. 1. A company has the following assets at the end of the year: cash on hand $40,000, cash refund due from customer $30,000, and checking account balance $22,000. Cash and cash equivale

> The July 1998 issue of Inc. magazine includes an article by Jeffrey L. Seglin entitled “Would You Lie to Save Your Company?” It recounts the following true situation: “A Chief Executive Officer (CEO) of a $20-million company that repairs aircraft engines

> The following transactions are for Alonzo Company. 1. On December 3, Alonzo Company sold $500,000 of merchandise to Arte Co., terms 1/10, n/30. The cost of the merchandise sold was $330,000. 2. On December 8, Arte Co. was granted an allowance of $25,000

> Hans Miken, president of Miken 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

> When the total cash inflows exceed the total cash outflows in the statement of cash flows, how and where is this excess identified?

> Contrast these types of bonds: (a) Secured and unsecured. (b) Convertible and callable.

> (a) Gina Jaimes believes that the analysis of financial statements is directed at two characteristics of a company: liquidity and profitability. Is Gina correct? Explain. (b) Are short-term creditors, long-term creditors, and stockholders interested in p

> For what reasons might a company like IBM repurchase some of its stock (treasury stock)?

> Megan Corporation purchased machinery on January 1, 2017, at a cost of $250,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $30,000. The company is considering different depreciatio

> Condensed financial data of Granger 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

> Saylor Co. sold $3,000,000, 8%, 10-year bonds on January 1, 2017. The bonds were dated January 1, 2017, and pay interest on January 1. The company uses straight-line amortization on bond premiums and discounts. Financial statements are prepared annually.

> The financial statements of Amazon.com, Inc. are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. Instructions Answer the following questions for each company. (a) What is the balance in cash and cash eq

> The following stockholders’ equity accounts, arranged alphabetically, are in the ledger of Ryder Corporation at December 31, 2017. Common Stock ($2 stated value) $1,600,000 Paid-in Capital in Excess of Par Value—Preferred Stock 45,000 Paid-

> Lendell Company has these comparative balance sheet data: Additional information for 2017: 1. Net income was $25,000. 2. Sales on account were $375,000. Sales returns and allowances amounted to $25,000. 3. Cost of goods sold was $198,000. 4. Net cash pr

> Assume information similar to that in DO IT! 5-2. That is: On October 5, Iverson Company buys merchandise on account from Lasse Company. The selling price of the goods is $5,000, and the cost to Lasse Company is $3,000. On October 8, Iverson returns defe

> Clean Aire Anti-Pollution Company is suffering declining sales of its principal product, non biodegradable plastic cartons. The president, Wade Truman, instructs his controller, Kate Rollins, to lengthen asset lives to reduce depreciation expense. A proc

> Jerry Hogan, president of Norwest, 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 bonds

> René Kelly, president of RL 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

> Pendleton 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

> Cooper 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

> Horizontal analysis (trend analysis) percentages for Phoenix Company’s sales revenue, cost of goods sold, and expenses are listed here. Explain whether Phoenix’s net income increased, decreased, or remained unchanged

> Sudz 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’ equity

> Barrister Company acquires the land and building owned by Ansel Company. What types of costs may be incurred to make the asset ready for its intended use if Barrister Company wants to use only the land? If it wants to use both the land and the building?

> (a) What are long-term liabilities? Give two examples. (b) What is a bond?

> Which is the better investment—common stock with a par value of $5 per share or common stock with a par value of $20 per share?

> Contrast the advantages and disadvantages of the direct and indirect methods of preparing the statement of cash flows. Are both methods acceptable? Which method is preferred by the FASB? Which method is more popular?

> The financial statements of Amazon.com, Inc. are presented in Appendix D. Financial statements of WalMart Stores, Inc. are presented in Appendix E. Instructions (a) Based on the information contained in these financial statements, determine the following

> In recent years, Jayme Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been use

> Data for Warner Company are presented in P12-7A(given below). 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

> On January 1, 2017, Tacoma 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 620,000 Dur

> Fong Corporation sold $2,000,000, 7%, 5-year bonds on January 1, 2017. The bonds were dated January 1, 2017, and pay interest on January 1. Fong Corporation uses the straight-line method to amortize bond premium or discount. Instructions (a) Prepare all

> On August 1, 2017, Gonzaga Corporation issued $600,000, 7%, 10-year bonds at face value. Interest is payable annually on August 1. Gonzaga’s year-end is December 31. Instructions Prepare journal entries to record the following events. (a) The issuance of

> Gwynn Incorporated had the following transactions involving current assets and current liabilities during February 2017. Feb. 3 Collected accounts receivable of $15,000. 7 Purchased equipment for $23,000 cash. 11 Paid $3,000 for a 1-year insurance policy

> On March 1, 2017, Boyd Company acquired real estate, on which it planned to construct a small office building, by paying $80,000 in cash. An old warehouse on the property was demolished at a cost of $8,200; the salvaged materials were sold for $1,700. Ad

> The information in the table is from the statement of cash flows for a company at four different points in time (M, N, O, and P). Negative values are presented in parentheses. Instructions For each point in time, state whether the company is most likely

> Wells Fargo & Company, headquartered in San Francisco, is one of the nation’s largest financial institutions. Suppose it reported the following selected accounts (in millions) as of December 31, 2017. Instructions Prepare the stock

> Assume that you are either (a) the president of a company that is very dependent on ongoing research and development, writing a memo to the FASB complaining about the cur-rent accounting standards regarding research and development, or (b) the FASB membe

> The R&D division of Pele 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 Pele is anxious to get the chemical on the market because Pele pro

> The Moto Hotel opened for business on May 1, 2017. Here is its trial balance before adjustment on May 31. Other data: 1. Insurance expires at the rate of $450 per month. 2. A count of supplies shows $1,050 of unused supplies on May 31. 3. Annual depreci

> On January 1, 2015, Picard Corporation issued $3,000,000, 5-year, 8% bonds at 97. The bonds pay interest annually on January 1. By January 1, 2017, the market rate of interest for bonds of risk similar to those of Picard Corporation had risen. As a resul

> Walt Jax, 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 the

> Vertical analysis (common-size) percentages for Palau Company’s sales revenue, cost of goods sold, and expenses are listed here. Did Palau’s net income as a percent of sales increase, decrease, or remain unchanged ove

> (a) Why is net cash provided by operating activities likely to be lower than reported net income during the growth phase? (b) Why is net cash from investing activities often positive during the late maturity phase and during the decline phase?

> Bylie Company has an old factory machine that cost $50,000. The machine has accumulated depreciation of $28,000. Bylie has decided to sell the machine. (a) What entry would Bylie make to record the sale of the machine for $25,000 cash? (b) What entry wou

> Hudson Corporation’s balance sheet at December 31, 2016, is presented below. During January 2017, the following transactions occurred. Hudson uses the perpetual inventory method. Jan. 1 Hudson accepted a 4-month, 8% note from Betheny C

> Brady Furniture Corp. is nationally recognized for making high-quality products. Management is concerned that it is not fully exploiting its brand power. Brady’s production managers are also concerned because their plants are not operat

> Identify the liabilities classified by Apple as current.

> The corporate charter of Gage Corporation allows the issuance of a maximum of 100,000 shares of common stock. During its first 2 years of operation, Gage sold 70,000 shares to shareholders and reacquired 4,000 of these shares. After these transactions, h

> Two popular methods of financial statement analysis are horizontal analysis and vertical analysis. Explain the difference between these two methods.

> Why is it necessary to use comparative balance sheets, a current income statement, and certain transaction data in preparing a statement of cash flows?

> The financial statements of Louis Vuitton are presented in Appendix F. Instructions for accessing and using the company’s complete annual report, including the notes to its financial statements, are also provided in Appendix F. Instructions Using the not

> Blythe Corporation and Jacke Corporation, two companies of roughly the same size, are both involved in the manufacture of shoe-tracing devices. Each company depreciates its plant assets using the straight-line approach. An investigation of their financia

> Presented below are the financial statements of Warner 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 origina

> Spahn Company manufactures backpacks. During 2017, Spahn issued bonds at 10% interest and used the cash proceeds to purchase treasury stock. The following financial information is available for Spahn Company for the years 2017 and 2016. Instructions (a)

> The following information is taken from Lassen Corp.’s balance sheet at December 31, 2016. Interest is payable annually on January 1. The bonds are callable on any annual interest date. Lassen uses straight-line amortization for any bo

> What are the essential features of the allowance method of accounting for bad debts?

> Cassini Company Ltd. publishes a monthly sports magazine, Fishing Preview. Subscriptions to the magazine cost $28 per year. During November 2017, Cassini sells 6,300 subscriptions for cash, beginning with the December issue. Cassini prepares financial st

> Nordstrom, Inc. operates department stores in numerous states. Suppose selected financial statement data (in millions) for 2017 are presented below. For the year, net credit sales were $8,258 million, cost of goods sold was $5,328 million, and net cash

> The following are comparative balance sheets for Mitch Company. Additional information: 1. Net income for 2017 was $93,000. 2. Depreciation expense was $34,000. 3. Cash dividends of $39,000 were declared and paid. 4. Bonds payable amounting to $50,000 w

> On October 31, the stockholders’ equity section of Manolo Company’s balance sheet consists of common stock $648,000 and retained earnings $400,000. Manolo is considering the following two courses of action: (1) declaring a 5% stock dividend on the 81,000

> You are a loan officer for White Sands Bank of Taos. Paul Jason, president of P. Jason 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 used to pu

> Pete Kent and Maria Robles are examining the following statement of cash flows for Sullivan Company for the year ended January 31, 2017. Pete claims that Sullivan’s statement of cash flows is an excellent portrayal of a superb first ye

> What is just-in-time inventory management? What are its potential advantages?

> The notes that accompany a company’s financial statements provide informative details that would clutter the amounts and descriptions presented in the statements. Refer to the financial statements of Apple Inc. in Appendix A. Instructions for accessing a

> Earl Kent, your uncle, is an inventor who has decided to incorporate. Uncle Earl 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 th

> The September 1, 2009, edition of CFO.com contains an article by Marie Leone and Tim Reason entitled “Dirty Secrets.” You can access this article at www.cfo.com/article.cfm/14292477?f=singlepage. Instructions Read the article and answer the following qu

> Presented below is an aging schedule for Bryan Company. At December 31, 2016, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $8,000. Instructions (a) Journalize and post the adjusting entry for bad debts at December 31, 2016. (

> The stockholders’ equity section of Mabry Corporation’s balance sheet consists of common stock ($8 par) $1,000,000 and retained earnings $300,000. A 10% stock dividend (12,500 shares) is declared when the market price per share is $19. Show the before-an

> What are the two principal components of stock- holders’ equity?

> Helen Powell and Paul Tang were discussing the format of the statement of cash flows of Baumgarten Co. At the bottom of Baumgarten’s statement of cash flows was a separate section entitled “Noncash investing and financing activities.” Give three examples

> (a) Identify three taxes commonly paid by employers on employees’ salaries and wages. (b) Where in the financial statements does the employer report taxes withheld from employees’ pay?

> Explain how the choice of one of the following accounting methods over the other raises or lowers a company’s net income during a period of continuing inflation. (a) Use of FIFO instead of LIFO for inventory costing. (b) Use of a 6-year life for machiner

> Suppose you have been presented with selected information taken from the financial statements of Southwest Airlines Co., shown on the next page. Instructions (a) Calculate each of the following ratios for 2017 and 2016. (1) Current ratio. (2) Free cash f

> Data for Rewe Company are presented in P12-5A(given below). Instructions Prepare the operating activities section of the statement of cash flows using the direct method. REWE COMPANY Income Statement For the Year Ended December 31, 2017 Service reve

> On January 1, 2017, Kimbel 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 1,500,000 Retained Earnings

> Gato Inc. had the following inventory situations to consider at January 31, its year-end. (a) Goods held on consignment for Steele Corp. since December 12. (b) Goods shipped on consignment to Logan Holdings Inc. on January 5. (c) Goods shipped to a custo

> Season tickets for the Dingos are priced at $320 and include 16 home games. An equal amount of revenue is recognized after each game is played. When the season began, the amount credited to Unearned Ticket Revenue was $1,728,000. By the end of October, $

> The following information is available for Nguoi Corporation. (a) Compute earnings per share for 2017 and 2016 for Nguoi, and comment on the change. Nguoi’s primary competitor, Matisse Corporation, had earnings per share of $1 per shar

> Here are the comparative income statements of Delaney Corporation. Instructions (a) Prepare a horizontal analysis of the income statement data for Delaney Corporation, using 2016 as a base. (Show the amounts of increase or decrease.) (b) Prepare a verti

> The following three accounts appear in the general ledger of Beiber Corp. during 2017. Instructions From the postings in the accounts, indicate how the information is reported on a statement of cash flows using the indirect method. The loss on disposal

> On January 1, Graves Corporation had 60,000 shares of no-par common stock issued and outstanding. The stock has a stated value of $4 per share. During the year, the following transactions occurred. Apr. 1 Issued 9,000 additional shares of common stock fo

> The November 16, 2011, edition of the Wall Street Journal Online contains an article by Maxwell Murphy entitled “The Big Number: 51.” Instructions Read the article and answer the following questions. (a) What do the 51 companies referred to in the title

> Bond or debt securities pay a stated rate of interest. This rate of interest is dependent on the risk associated with the investment. Also, bond prices change when the risks associated with those bonds change. Standard & Poor’s provides ratings for compa

> The April 25, 2012, edition of the Wall Street Journal contains an article by Spencer Jakab entitled “Amazon’s Valuation Is Hard to Justify.” Instructions Read the article and answer the following questions. (a) Explain what is meant by the statement tha

> The November 23, 2011, edition of the Wall Street Journal Online contains an article by John Jannarone entitled “Backlash from Netflix Buybacks.” Instructions Read the article and answer the following questions. (a) What was the stock price for the share

> 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

> The comparative balance sheets for Gale Company show these changes in non-cash current asset accounts: accounts receivable decreased $80,000, prepaid expenses increased $28,000, and inventories increased $40,000. Compute net cash provided by operating ac

> a. Jeri Company sells three different categories of tools (small, medium and large). The cost and market value of its inventory of tools are as follows. Determine the value of the company’s inventory under the lower-of-cost-or-market ap

> At the beginning of the current period, Rose Corp. had balances in Accounts Receivable of $200,000 and in Allowance for Doubtful Accounts of $9,000 (credit). During the period, it had net credit sales of $800,000 and collections of $763,000. It wrote off

> The net income for Mongan Co. for 2017 was $280,000. For 2017, depreciation on plant assets was $70,000, and the company incurred a loss on disposal of plant assets of $28,000. Compute net cash provided by operating activities under the indirect method,

> Identify three taxes commonly withheld by the employer from an employee’s gross pay.