Make the adjusting journal entry necessary at the end of the period in the following situation: Bad debts created by selling on credit during the year are estimated to be $1,200. So far, none of these accounts have been specifically identified and written off as uncollectible.
> Describe what is meant by (a) a leveraged buyout (LBO), and (b) a management buyout (MBO).
> Describe how the relative value method is used to value a firm’s equity.
> Describe an outright sale of a venture. What are the four categories of possible buyers?
> What are the three types or methods of restructuring available when trying to turn around financially troubled ventures?
> What is meant by financial distress?
> What evidence exists as to whether entrepreneurs think about and/or develop exit strategies?
> What is the meaning of harvesting a venture?
> Brian Motley founded the MiniDiscs Corporation at the end of 2011. After nearly one year of development, the venture produced an optical storage disk about the size of a silver dollar that could store more than 500 megabytes of data along with a mechani
> Endco is a wireless solutions provider that facilitates wireless Internet access through small remote devices that connect to portable computers. During the past several years, Endco was lavished with an abundance of equity financial capital from a vari
> EnCal is a small West Coast-based power company specializing in power generation methods that use clean burning fuels and renewable natural resources. However, due to complex and confusing power pricing structure, EnCal is reeling from the aftereffects
> Following are the financial statements for the Chenhai Manufacturing Corporation for 2015 and 2016. The venture is in financial distress and hopes to turn around its financial performance in the near future. CHENHAI MANUFACTURING CORPORATION *Note a ta
> It was shown earlier in the chapter that Eastland Industries was suffering from cash flow insolvency. Let’s assume that scenario 1 projects that year 3 and following years will be like the results incurred for year 2 where profitability is low and conti
> What are unicorns? How might their exit values be impacted when they go public?
> It was shown earlier in the chapter that Westland Industries was suffering from cash flow insolvency in terms of its earnings before interest, taxes, and depreciation (EBITDA). Two scenarios are possible for Westland in year 3. Scenario 1 suggests that
> It was shown earlier in the chapter that Northland Industries was suffering from balance sheet insolvency. Two scenarios are possible for Northland in year 3. In scenario 1, year 3 for Northland is expected to result in an additional $150,000 operating
> New information for the Gamma Systems Manufacturing Corporation has been brought to the management’s attention. Use the financial statement information in Problem 5 and take into consideration that sales will grow at a 15 percent rate in 2017 and a 10 p
> Assume that some of the information relating to the Gamma Systems Manufacturing Corporation has changed. Using the financial statement data, answer the following questions. A. How would your valuation estimate change if the sales growth rate had been 6
> The Gamma Systems Manufacturing Corporation has reached its maturity stage and its net sales are expected to grow at a 6 percent compound rate for the foreseeable future. Management believes that as a mature venture the appropriate equity discount rate
> Benito Gonzalez, founded and grew the BioSystems Manufacturing Corporation over a several year period. However, Benito has decided to exit BioSystems as of the end of 2016 with the intention of starting a new entrepreneurial venture. The Fuji Electron
> Describe the business model turnaround Necton undertook. Comment on what you think would have been the challenges and your perceptions about the likelihood the new business model will succeed.
> Briefly define the following terms: cram down procedure, debtor-in-possession financing, and prepackaged bankruptcy.
> Comment on Tesla’s trip from incorporating in 2003 to its IPO in 2010. What impact do you think the IPO had on competitors in the electric car market?
> Briefly describe the common pool and holdout problems that often make it necessary for a venture to enter into a court-supervised reorganization.
> Identify major factors that cause ventures to get into financial trouble.
> Describe some of the preparations that a venture can undertake that may increase the possibility of IPO success.
> Indicate some of the differences between the NASDAQ’s National Market System and SmallCap listing requirements.
> Briefly describe how securities are traded on an organized stock exchange such as the New York Stock Exchange.
> The WestTek privately held venture is considering the sale of the venture to an outside buyer. WestTek has net sales = $21.2 million, EBITDA = $11.1 million, net income = $2.9 million, and interest-bearing debt = $12 million. Three publicly-traded comp
> The BETA firm is proposing to acquire the ACE Products venture described in Problem 1. BETA estimates that ACE’s free cash flow for next year could be improved to $5.5 million because of synergistic benefits in the form of operating or distribution econ
> What are some of the basic requirements of a successful turnaround plan?
> Define financial restructuring and describe what is meant by debt payments extension and debt composition change.
> Describe the terms “tombstone ad” and “red herring disclaimer.”
> What is investment banking? What is an underwriting spread?
> Describe an initial public offering (IPO). What are the differences between a primary offering and a secondary offering?
> The venture investors and founders of the ACE Products venture, a closely held corporation, are contemplating merging the successful venture into a much larger diversified firm that operates in the same industry. ACE estimates its free cash flows that wi
> Make the journal entry (or entries) necessary to record the following transaction: Gave land to an employee. The land originally cost $52,000, and it had that same value on the date it was given to the employee. This land was given in exchange for serv
> Make the journal entry (or entries) necessary to record the following transaction: Declared and paid a $12,000 cash dividend to shareholders.
> Using the following information, compute total current assets: Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,000 Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> Make the journal entry (or entries) necessary to record the following transaction: Sold land that had an original cost of $50,000. Received $40,000 cash. Also received a piece of equipment with a fair value of $90,000.
> Using the following information, compute total current liabilities: Accrued Income Taxes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,000 Notes Payable (due in 14 months). . . . . . . . . . . . . . . . . . . . . . . . . .
> Make the journal entry (or entries) necessary to record the following transaction: Purchased equipment with a fair market value of $100,000. Paid $10,000 cash as a down payment and signed two notes for the remaining cost—a 6% note for $20,000 tha
> Account balances taken from the ledger of High Flying Logistics Co. on December 31, 2013, follow: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,000
> Dylan’s Taxidermy Corporation reports revenues and expenses of $142,300 and $91,500, respectively, for the period. Give the remaining entries to close the books assuming the ledger reports Additional Paid-In Capital of $400,000 and Retained Earni
> On the Clark and Company Inc. balance sheet, indicate the amount that should appear for each of the items (a) through (n) on the balance sheet.
> For the years 2011–2013, Robbins Soccer Company had net income and average shares outstanding as follows: What was the percentage of change in earnings per share (EPS) in 2012? In 2013?
> Use the following account balance information to construct a trial balance: Salary Expense …………………………………………… $24,000 Unearned Ser
> The following accounts were taken from the trial balance of Cole Company as of December 31, 2013: Sales ………………………………………………&he
> Use the following account balance information to construct a trial balance: Cost of Goods Sold ……………………………. $ 9,000 Accounts Payable …………&helli
> Refer to Practice 4-1. Assets with the same productive capacity as the assets comprising the $365,000 beginning asset balance had a current cost of $437,000 at the end of the year. Using the physical capital maintenance concept, determine the company&r
> Match the numbered statements below with the lettered terms. An answer (letter) may be used more than once, and some terms require more than one answer (letter). 1. Key ingredients in quality of relevance. 2. Traditional assumptions that influence th
> Refer to Practice 4-16. Use that information to compute the price-earnings ratio. In Practice 4-16 Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.67 Cost of
> Use the following information to compute return on sales. Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.67 Cost of goods sold . . . . . . . . . . . . . . .
> The company started business in 2011. In 2013, the company decided to change its method of computing oil and gas exploration expense. The company has only two expenses: oil and gas exploration expense and income tax expense. The following sales and oil
> Use the following information to compute net income and comprehensive income. For simplicity, ignore income taxes. Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,000 U
> Make the closing entry (or entries) necessary to close the following accounts: Salary Expense ………………………………………….. $18,000 Unearned Servic
> Make the closing entry (or entries) necessary to close the following accounts: Cost of Goods Sold ………………………………….. $ 7,000 Accounts Payable ……&h
> Make the adjusting journal entry necessary at the end of the period in the following situation: On June 1, the company received $9,600 in advance for 12 months of service to be provided, with the service period beginning on June 1. This $9,600 was reco
> Make the adjusting journal entry necessary at the end of the period in the following situation: On August 1, the company paid $3,600 in advance for 12 months of rent, with the rental period beginning on August 1. This $3,600 was recorded as Prepaid Ren
> Make the adjusting journal entry necessary at the end of the period in the following situation: On August 1, the company borrowed $10,000 under a 1-year loan agreement. The annual interest rate is 8%. As of the end of the year, no entry has yet been ma
> From the following list of accounts, determine which ones should be closed and whether each would normally be closed by a debit or by a credit entry. Cash Land Rent Expense Interest Revenue Depreciation Expense Advertising Expense Sales Notes P
> Make the journal entry (or entries) necessary to record the following transaction: Sold merchandise costing $14,000 for $22,000. Of the $22,000, $4,000 was received in cash and the remainder was on account. Assume a perpetual inventory system, meaning
> Make the adjusting journal entry necessary at the end of the period in the following situation: Equipment depreciation for the year was computed to be $5,500.
> The following information describes the company’s sales for the year: (a) A sale for $100,000 was made on March 23. As of the end of the year, all work associated with the sale has been completed. Unfortunately, the customer is a significant cre
> Use the following information to compute the quick ratio: Long-Term Loan Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,100 Accounts Receivable . . . . . . . . . . . . . . . . .
> Prepare two income statements, one using the information in Practice 2–8 and the other using the information in Practice 2–9. In Practice 2–8 Use the following account balance information to construct a trial balance: Cost of G
> Use the following information to compute the current ratio: Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,700 Paid-In Capital. . . . . . . . . . . . . . . .
> The company had the following total asset and total liability balances at the beginning and the end of the year: During the year, the company received $100,000 in new investment funds contributed by the owners. Using the financial capital main
> Refer to the IBM information in Exhibit 4-5. Compute the overall gross profit percentage for 2007, 2008, and 2009.
> The beginning balance in the accounts payable account was $8,000. During the month, the following four journal entries (involving accounts payable) were recorded: Create an Accounts Payable T-account and post the entries to this account. Compu
> The beginning balance in the cash account was $10,000. During the month, the following four journal entries (involving cash) were recorded: Create a Cash T-account and post the entries to this account. Compute an ending balance.
> For each of the following items, identify the financial statement element being discussed. 1. Changes in equity during a period except those resulting from investments by owners and distributions to owners. 2. The net assets of an entity. 3. The res
> Using the following information, compute working capital: Cost of Goods Sold. . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . $ 9,000 Accounts Payable . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . .
> An accountant for Jolley, Inc., a merchandising enterprise, has just finished posting all year-end adjusting entries to the ledger accounts and now wishes to close the appropriate account balances in preparation for the new period. 1. For each of the acc
> What are the differences in purpose and scope of the FASB Accounting Standards Codification and the FASB Statements of Financial Accounting Concepts?
> Companies regularly obtain money through the issuance of bonds. The market value of bonds changes daily and on any given day is a function of many factors including economic variables, interest rates, industry developments, and firm specific information.
> Guidecom Consulting Company initially records prepaid items as assets and unearned items as liabilities. Selected account balances at the end of the current and prior year follow. Accrued expenses and revenues are adjusted only at year-end. During 2013
> Conserv Corporation, a computer software company, is trying to determine the appropriate accounting procedure to apply to its software development costs. Management is considering capitalizing the development costs and amortizing them over several years.
> The following data were obtained from an analysis of the accounts of Noble Distributor Company as of March 31, 2013, in preparation of the annual report. Noble records current transactions in nominal accounts. What are the appropriate adjusting entries?
> The FASB concluded in Concepts Statement No. 1 that investors and creditors are interested in an enterprise’s future cash flows. However, the Board further stated that the primary focus of financial reporting is information about earnings. If an investor
> The following balance sheet asset information is for 2013: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100 Accounts receivable . . . . . . . . . .
> Little attempt is made to reconcile the accounting standard differences between the IRS and the FASB. These differences are recognized as arising from differences in the objectives of the two bodies. However, the existence of differences requires compani
> For each of the following journal entries, write a description of the underlying event. 1. Cash 300 Accounts Receivable 300 2. Accounts Payable 400 Inventory. 400 3. Cash 5,000 Loan Payable. 5,000 4. Cash 200 Accounts Receivable 700 Sales 900 Cost o
> Aiga Company is a leading manufacturer of household plumbing materials. Aiga does not make the high-profile faucets and fixtures; instead, it makes the pipes and other connections that are usually out of sight under kitchen and bathroom sinks. You are Ai
> For more than three decades, accounting professionals, accounting educators, and accounting bodies have debated requiring more education for those entering the public accounting profession. In 1988, the AICPA passed a resolution mandating 150 college cre
> Below is the trial balance for Boudreaux Company as of December 31. Consider the following additional information: (a) Boudreaux uses a perpetual inventory system. (b) The prepaid expenses were paid on September 1 and relate to a 3-year insurance polic
> Give three common examples of contra accounts. Explain why contra accounts are used.
> Tom Obstinate is disgusted by all of the emphasis being put on international accounting issues. Tom plans to practice accounting in the United States, with U.S. companies, using U.S. GAAP. Accordingly, Tom sees no reason to know anything about the Intern
> Accounts of Pioneer Heating Corporation at the end of the first year of operations showed the following balances. In addition, prepaid operating expenses are $4,000, and accrued sales commissions payable are $5,900. Investment revenue receivable is $1,00
> FASB ASC Subtopic 715-60 requires companies to recognize a liability for their obligation to pay for retirees’ health care. Prior to this rule, most companies recognized no liability for their health care promises to employees, although an economic liabi
> For each situation, reconstruct the adjusting entry that was made to arrive at the ending balance. Assume statements and adjusting entries are prepared only once each year. 1. Prepaid Insurance: Balance beginning of year ……………………………… $3,600 Balance end o
> The “due process” system of the FASB encourages public input into the standard-setting process. It invites written comments, holds public hearings, and often changes proposed standards in response to this input. However, some observers have suggested tha
> Upon inspecting the books and records for Wernli Company for the year ended December 31, 2013, you find the following data: (a) A receivable of $640 from Hatch Realty is determined to be uncollectible. The company maintains an allowance for bad debts for
> Quality Enterprises Inc. issued its 2012 financial statements on February 22, 2013. The auditors expressed a “clean” opinion in the audit report. On July 14, 2013, the company filed for bankruptcy as a result of the inability to meet currently maturing l
> Explain the significance of a company meeting or beating analysts’ earnings forecasts for many quarters in a row.
> In analyzing the accounts of Sydney Corporation, the adjusting data listed below are determined on December 31, the end of an annual fiscal period. (a) The prepaid insurance account shows a debit of $6,000, representing the cost of a 2-year earthquake in
> Emilio Valdez worked for several years as a loan analyst for a large bank. He recently left the bank and took a management position with Positron, a high-tech manufacturing firm. Emilio prepared for his first management meeting by extensively analyzing P
> Georgia Supply Corporation, a merchandising firm, prepared the following trial balance as of October 1: Georgia Supply engaged in the following transactions during October 2013. The company records inventory using the perpetual system. Oct. 1 Sold merc
> Describe the structure of the FASB. Where does the FASB get its operating funds?
> Assume that you just inherited $1 million. You are aware that numerous studies have shown that investments in equity securities (stocks) give the highest rate of return over the long run. However, you are not sure in which companies you should invest. Yo
> Tarazania is a country with a small but active stock market. However, the country has no accounting standards; in fact, the issuance of financial statements is illegal. This odd law stems from the fact that the founding king of Tarazania once took an int
