Question: Mosley Company’s income statement contained the
Mosley Company’s income statement contained the condensed information below.
Mosley’s balance sheet contained the comparative data at December 31, below.
Accounts payable pertain to operating expenses.
Instructions:
Prepare the operating activities section of the statement of cash flows using the indirect method.
Transcribed Image Text:
MOSLEY COMPANY Income Statement For the Year Ended December 31, 2014 Service revenue $850,000 Operating expenses, excluding depreciation depreciation expense Loss on disposal of plant assets $506,000 56,000 4,000 566,000 Income before income taxes 284,000 80,000 Income tax expense Net income $204,000 2014 2013 Accounts receivable Accounts payable Income taxes payable $72,000 27,000 23,000 $65,000 35,000 18,000
> Hatch Inc.’s common stock has a par value of $1 and a current market price of $15. Explain why these amounts are different.
> Deane Corporation has 10,000 shares of $15 par value common stock outstanding when it announces a 3-for-1 split. Before the split, the stock had a market price of $120 per share. After the split, how many shares of stock will be outstanding, and what wil
> Krause Corp. has a return on assets of 12%. It plans to issue bonds at 8% and use the cash to repurchase stock. What effect will this have on its debt to assets ratio and on its return on common stockholders’ equity?
> The management of Hinrichs Corporation is concerned because survey data suggest that many potential customers do not buy vehicles due to quality concerns. It is considering taking the bold step of increasing the length of its warranty from the industry s
> Whitson Corporation issues $400,000 of 9%, 5-year bonds on January 1, 2014, at 104. If Whitson uses the effective-interest method in amortizing the premium, will the annual interest expense increase or decrease over the life of the bonds? Explain.
> Glenda Hope is discussing the advantages of the effective-interest method of bond amortization with her accounting staff. What do you think Glenda is saying?
> Knobler Corporation issues $200,000 of 6%, 5-year bonds on January 1, 2014, at 103. Assuming that the straight-line method is used to amortize the premium, what is the total amount of interest expense for 2014?
> The Sarbanes-Oxley Act (SOX) has important implications for the financial community. Explain two implications of SOX.
> Norman Corporation has a current ratio of 1.1. Tim has always been told that a corporation’s current ratio should exceed 2.0. The company maintains that its ratio is low because it has a minimal amount of inventory on hand so as to reduce operating costs
> Matt Higgins needs a few new trucks for his business. He is considering buying the trucks but is concerned that the additional debt he will need to borrow will make his liquidity and solvency ratios look bad. What options does he have other than purchasi
> Whitson Corporation issues $400,000 of 9%, 5-year bonds on January 1, 2014, at 104. If Whitson uses the effective-interest method in amortizing the premium, will the annual interest expense increase or decrease over the life of the bonds? Explain.
> Glenda Hope is discussing the advantages of the effective-interest method of bond amortization with her accounting staff. What do you think Glenda is saying?
> Knobler Corporation issues $200,000 of 6%, 5-year bonds on January 1, 2014, at 103. Assuming that the straight-line method is used to amortize the premium, what is the total amount of interest expense for 2014?
> Norman Corporation has a current ratio of 1.1. Tim has always been told that a corporation’s current ratio should exceed 2.0. The company maintains that its ratio is low because it has a minimal amount of inventory on hand so as to reduce operating costs
> Matt Higgins needs a few new trucks for his business. He is considering buying the trucks but is concerned that the additional debt he will need to borrow will make his liquidity and solvency ratios look bad. What options does he have other than purchasi
> The management of Hinrichs Corporation is concerned because survey data suggest that many potential customers do not buy vehicles due to quality concerns. It is considering taking the bold step of increasing the length of its warranty from the industry s
> Natalie Pendlay, the chief financial officer of Mullins Inc., is considering the options available to her for financing the company’s new plant. Shortterm interest rates right now are 6%, and long-term rates are 8%. The company’s current ratio is 2.2:1.
> Natalie Pendlay, the chief financial officer of Mullins Inc., is considering the options available to her for financing the company’s new plant. Shortterm interest rates right now are 6%, and long-term rates are 8%. The company’s current ratio is 2.2:1.
> Use the same data from BE14–10 above and the data below. Determine the missing amounts. Data from BE 14: Costs of Goods Total Work in Process (1/1) Work in Process (12/31) Manufacturing Cost Manufactured (1) (2) (3) $120,000 $82,
> Angie Diltz asks, “Since stock dividends don’t change anything, why declare them?” What is your answer to Angie?
> Diaz, 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 (
> The corporate charter of Gagne Corporation allows the issuance of a maximum of 100,000 shares of common stock. During its first 2 years of operation, Gagne sold 70,000 shares to shareholders and reacquired 4,000 of these shares. After these transactions,
> Janie Null believes a corporation must be incorporated in the state in which its headquarters office is located. Is Janie correct? Explain
> (a) Your friend C. J. Gibson cannot understand how the characteristic of corporate management is both an advantage and a disadvantage. Clarify this problem for C. J. (b) Identify and explain two other disadvantages of a corporation
> Rob, a student, asks your help in understanding some characteristics of a corporation. Explain each of these to Rob. (a) Separate legal existence. (b) Limited liability of stockholders. (c) Transferable ownership rights.
> Assume the same information for Ling Company as in IFRS13-1. Prepare the income statement using the two-statement approach.
> The financial statements of Zetar plc are presented in Appendix C. The company’s complete annual report, including the notes to its financial statements, is available in the Investors section at www.zetarplc.com. Instructions: Use the company’s annual r
> The April 23, 2012, edition of the Wall Street Journal Online contains an article by Christopher Bjork entitled “Santander Prepares Record Mexico IPO.” Instructions: Read the article and answer the following questions. (a) Why is the Spanish lender Sant
> Many multinational companies find it beneficial to have their shares listed on securities exchanges in foreign countries. In order to do this, they must comply with the securities laws of those countries. Some of these laws relate to the form of financia
> Complete the following comparison table between managerial and financial accounting. Financial Accounting Managerial Accounting Primary users of reports Types of reports Frequency of reports Purpose of reports Content of reports Verification process
> Many multinational companies find it beneficial to have their shares listed on securities exchanges in foreign countries. In order to do this, they must comply with the securities laws of those countries. Some of these laws relate to the form of financia
> Explain how IFRS defines a contingent liability and give an example.
> Explain how IFRS defines a contingent liability and give an example.
> Ling Company reports the following information for the year ended December 31, 2014: sales revenue $1,000,000, cost of goods sold $700,000, operating expenses $200,000, and an unrealized gain on non-trading securities of $75,000. Prepare a statement of c
> Ortiz Company is a manufacturer of toys. Its controller resigned in August 2014. An inexperienced assistant accountant has prepared the following income statement for the month of August 2014. Prior to August 2014, the company had been profitable every
> The following data were taken from the records of Moxie Company for the year ended December 31, 2014. Instructions: (a) Prepare a cost of goods manufactured schedule. (Assume all raw materials used were direct materials.) (b) Prepare an income statemen
> Incomplete manufacturing costs, expenses, and selling data for two different cases are as follows. Instructions: (a) Indicate the missing amount for each letter. (b) Prepare a condensed cost of goods manufactured schedule for Case A. (c) Prepare an inc
> Elliott Company, a manufacturer of tennis rackets, started production in November 2013. For the preceding 5 years, Elliott had been a retailer of sports equipment. After a thorough survey of tennis racket markets, Elliott decided to turn its retail store
> Agler Company specializes in manufacturing motorcycle helmets. The company has enough orders to keep the factory production at 1,000 motorcycle helmets per month. Agler’s monthly manufacturing cost and other expense data are shown below
> Suppose selected financial data of Edgewater Company and The Ritter Company for 2014 are presented here (in millions). Instructions: (a) For each company, compute the following ratios. (1) Current ratio. (8) Return on assets. (2) Accounts receivabl
> Horizontal analysis (trend analysis) percentages for Roswell Company’s sales revenue, cost of goods sold, and expenses are listed here. Explain whether Roswell’s net income increased, decreased, or remained unchanged
> Financial information for Bradford Company is presented here. Additional information: 1. Inventory at the beginning of 2013 was $330,000. 2. Accounts receivable at the beginning of 2013 were $80,000. 3. Total assets at the beginning of 2013 were $1,175
> The condensed balance sheet and income statement data for Symbiosis Corporation are presented below. Additional information: 1. The market price of Symbiosis common stock was $5.00, $3.50, and $2.80 for 2012,2013, and 2014, respectively. 2. You must co
> The comparative statements of Simpson Company are shown below. All sales were on account. Net cash provided by operating activities was $108,000. Capital expenditures were $47,000, and cash dividends were $30,900. Instructions: Compute the following r
> Here are comparative statement data for Dean Company and Gerald Company, two competitors. All balance sheet data are as of December 31, 2014, and December 31, 2013 Instructions: (a) Prepare a vertical analysis of the 2014 income statement data for Dean
> Condensed financial data of Turner Inc. follow. Additional information: 1. New plant assets costing $90,000 were purchased for cash during the year. 2. Old plant assets having an original cost of $30,000 were sold for $2,000 cash. 3. Bonds matured and
> Data for Filmore Company are presented in P12-7B. Further analysis reveals the following. 1. Accounts payable pertains to merchandise creditors. 2. All operating expenses except for depreciation are paid in cash. 3. All depreciation expense is in the sel
> Shown below are the financial statements of Filmore Company. Additional data: 1. Depreciation expense was $6,000. 2. Dividends of $28,000 were declared and paid. 3. During the year, equipment was sold for $10,000 cash. This equipment cost $13,000 origi
> Data for Mosley Company are presented in P12-5B. Data given in P12-5B: Mosley Company’s income statement contained the condensed information below. Mosley’s balance sheet contained the comparative data at December 3
> Data for Hubble Company are presented in P12-3B. Data given in P12-3B: The income statement of Hubble Company is presented below. Additional information: 1. Accounts receivable decreased $290,000 during the year, and inventory increased $140,000. 2. Pre
> Vertical analysis (common-size) percentages for Capuano Company’s sales revenue, cost of goods sold, and expenses are listed here. Did Capuano’s net income as a percent of sales increase, decrease, or remain unchange
> The income statement of Hubble Company is presented below. Additional information: 1. Accounts receivable decreased $290,000 during the year, and inventory increased $140,000. 2. Prepaid expenses increased $175,000 during the year. 3. Accounts payable to
> The following selected account balances relate to the plant asset accounts of Lazari Inc. at year-end. Additional information: 1. Lazari purchased $85,000 of equipment and $50,000 of land for cash in 2014. 2. Lazari also sold equipment in 2014. 3. Depr
> You are provided with the following transactions that took place during the year. Instructions: For each transaction listed above, indicate whether it will increase (I), decrease (D), or have no effect (NE) on the ratios. Current Cash Debt Coverage
> The comparative balance sheets for Berkler Company as of December 31 are presented below. Additional information: 1. Operating expenses include depreciation expense of $48,000. 2. Land was sold for cash at book value. 3. Cash dividends of $12,000 were
> Data for Turner Inc. are presented in P12-9B. Further analysis reveals that accounts payable pertain to merchandise creditors. Data given in P12-9B: Condensed financial data of Turner Inc. follow. Additional information: 1. New plant assets costing $9
> You are provided with the following transactions that took place during a recent fiscal year. Instructions: Complete the table indicating whether each item (1) affects operating (O) activities, investing (I) activities, financing (F) activities, or is
> On January 1, 2014, Lamar Corporation had these stockholders’ equity accounts. Common Stock ($20 par value, 80,000 shares issued and outstanding) ………. $1,600,000 Paid-in Capital in Excess of Par Value ………………………………………………………………240,000 Retained Earnings …
> Hercules Company manufactures raingear. During 2014, Hercules Company decided to issue bonds at 8% interest and then used the cash to purchase a significant amount of treasury stock. The following information is available for Hercules Company. Instruct
> On January 1, 2014, Ferris Inc. had these stockholders’ equity balances. Common Stock, $5 par (2,000,000 shares authorized, 600,000 shares issued and outstanding) ……………………………………………$3,000,000 Paid-in Capital in Excess of Par Value…………………………………….. 1,80
> Hartwell Corporation has been authorized to issue 25,000 shares of $100 par value, 8%, noncumulative preferred stock and 1,000,000 shares of no-par common stock. The corporation assigned a $4 stated value to the common stock. At December 31, 2014, the le
> The following data were taken from the income statements of Imhoff Company. Compute for each year (a) the inventory turnover and (b) days in inventory. What conclusions concerning the management of the inventory can be drawn from these data? 2014
> The post-closing trial balance of Dondec Corporation at December 31, 2014, contains these stockholders’ equity accounts. Preferred Stock (6,000 shares issued) ……………………………………. $ 300,000 Common Stock (350,000 shares issued) ………………………………....3,500,000 Paid-
> On December 31, 2013, Peabody Company had 820,000 shares of $10 par common stock issued and outstanding. At December 31, 2013, stockholders’ equity had the amounts listed here. Common Stock ……………………………………………$8,200,000 Additional Paid-in Capital ……………………
> The stockholders’ equity accounts of Warden Corporation on January 1, 2014, were as follows. Preferred Stock (9%, $50 par cumulative, 10,000 shares authorized) …………$ 200,000 Common Stock ($1 stated value, 2,000,000 shares authorized) …………………. 1,000,000
> Bennis Corporation was organized on January 1, 2014. It is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. The following stock transactions were comple
> Wentworth Co. sold $3,000,000, 7%, 8-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. The company uses straightline amortization on bond premiums and discounts. Financial statements are prepared annually
> Holmes Corporation sold $2,200,000, 8%, 5-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. Holmes Corporation uses the straight-line method to amortize bond premium or discount. Instructions: (a) Prepar
> The following section is taken from Zenith Oil Company’s balance sheet at December 31, 2013. Interest is payable annually on January 1. The bonds are callable on any annual interest date. Zenith uses straight-line amortization for any
> Suppose you have been presented with the following selected information taken from the financial statements of Kellogg Company. Instructions: (a) Calculate each of the following ratios for 2014 and 2013. (1) Current ratio. (2) Free cash flow. (3) Debt
> Union Electric sold $5,000,000, 5%, 10-year bonds on January 1, 2014. The bonds were dated January 1 and pay interest on January 1. The bonds were sold at 103. Instructions: (a) Prepare the journal entry to record the issuance of the bonds on January 1,
> On April 1, 2013, CMV Corp. issued $600,000, 5%, 5-year bonds at face value. The bonds were dated April 1, 2013, and pay interest annually on April 1. Financial statements are prepared annually on December 31. Instructions: (a) Prepare the journal entr
> Leihsing Inc. issues a $600,000, 10%, 10-year mortgage note on December 31, 2013, to obtain financing for a new building. The terms provide for semiannual installment payments of $48,145. Prepare the entry to record the mortgage loan on December 31, 2013
> Skate City Corporation sells skateboard products and also operates an indoor skating facility. During the last part of 2014, Skate City had the following transactions related to notes payable. Aug. 1 Issued a $6,000 note to Wheeler to purchase inventor
> Ronald Allerton has just approached a venture capitalist for financing for a new business venture, the development of a local ski hill. On July 1, 2013, Ronald was loaned $140,000 at an annual interest rate of 8%. The loan is repayable over 5 years in an
> Lyman purchased a new piece of equipment to be used in its new facility. The $380,000 piece of equipment was purchased with a $40,000 down payment and with cash received through the issuance of a $340,000, 8%, 5-year mortgage note payable issued on Octob
> On January 1, 2014, Murphy Company issued $1,600,000 face value, 7%, 10-year bonds at $1,717,761. This price resulted in a 6% effective-interest rate on the bonds. Murphy uses the effective-interest method to amortize bond premium or discount. The bonds
> On January 1, 2014, Imelda Corporation issued $2,000,000 face value, 6%, 10-year bonds at $2,154,434. This price resulted in an effective-interest rate of 5% on the bonds. Imelda uses the effective-interest method to amortize bond premium or discount. Th
> Ronald Allerton has just approached a venture capitalist for financing for a new business venture, the development of a local ski hill. On July 1, 2013, Ronald was loaned $140,000 at an annual interest rate of 8%. The loan is repayable over 5 years in an
> Lyman purchased a new piece of equipment to be used in its new facility. The $380,000 piece of equipment was purchased with a $40,000 down payment and with cash received through the issuance of a $340,000, 8%, 5-year mortgage note payable issued on Octob
> On January 1, 2014, Murphy Company issued $1,600,000 face value, 7%, 10-year bonds at $1,717,761. This price resulted in a 6% effective-interest rate on the bonds. Murphy uses the effective-interest method to amortize bond premium or discount. The bonds
> On January 1, 2014, Imelda Corporation issued $2,000,000 face value, 6%, 10-year bonds at $2,154,434. This price resulted in an effective-interest rate of 5% on the bonds. Imelda uses the effective-interest method to amortize bond premium or discount. Th
> Wentworth Co. sold $3,000,000, 7%, 8-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. The company uses straightline amortization on bond premiums and discounts. Financial statements are prepared annually
> Presented below is the partial bond discount amortization schedule for Pape Corp., which uses the effective-interest method of amortization. Instructions: (a) Prepare the journal entry to record the payment of interest and the discount amortization at
> Holmes Corporation sold $2,200,000, 8%, 5-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. Holmes Corporation uses the straight-line method to amortize bond premium or discount. Instructions: (a) Prepar
> The following section is taken from Zenith Oil Company’s balance sheet at December 31, 2013. Interest is payable annually on January 1. The bonds are callable on any annual interest date. Zenith uses straight-line amortization for any
> Suppose you have been presented with the following selected information taken from the financial statements of Kellogg Company. Instructions: (a) Calculate each of the following ratios for 2014 and 2013. (1) Current ratio. (2) Free cash flow. (3) Debt
> Union Electric sold $5,000,000, 5%, 10-year bonds on January 1, 2014. The bonds were dated January 1 and pay interest on January 1. The bonds were sold at 103. Instructions: (a) Prepare the journal entry to record the issuance of the bonds on January 1,
> On April 1, 2013, CMV Corp. issued $600,000, 5%, 5-year bonds at face value. The bonds were dated April 1, 2013, and pay interest annually on April 1. Financial statements are prepared annually on December 31. Instructions: (a) Prepare the journal entr
> On January 1, 2014, the ledger of Flaming Company contained the following liability accounts. Accounts Payable ………………………………………………..$52,000 Sales Taxes Payable ……………………………………………….8,200 Unearned Service Revenue ………………………………….11,000 During January, the fo
> Skate City Corporation sells skateboard products and also operates an indoor skating facility. During the last part of 2014, Skate City had the following transactions related to notes payable. Aug. 1 Issued a $6,000 note to Wheeler to purchase inventor
> On January 1, 2014, the ledger of Flaming Company contained the following liability accounts. Accounts Payable ………………………………………………..$52,000 Sales Taxes Payable ……………………………………………….8,200 Unearned Service Revenue ………………………………….11,000 During January, the fo
> Phillips Company is a manufacturer of computers. Its controller resigned in October 2014. An inexperienced assistant accountant has prepared the following income statement for the month of October 2014. Prior to October 2014, the company had been profi
> The following data were taken from the records of Clarkson Company for the fiscal year ended June 30, 2014. Instructions: (a) Prepare a cost of goods manufactured schedule. (Assume all raw materials used were direct materials.) (b) Prepare an income st
> Leihsing Inc. issues a $600,000, 10%, 10-year mortgage note on December 31, 2013, to obtain financing for a new building. The terms provide for semiannual installment payments of $48,145. Prepare the entry to record the mortgage loan on December 31, 2013
> Explain how IFRS defines a provision and give an example.
> Incomplete manufacturing costs, expenses, and selling data for two different cases are as follows. Instructions: (a) Indicate the missing amount for each letter. (b) Prepare a condensed cost of goods manufactured schedule for Case 1. (c) Prepare an inc
> Bell Company, a manufacturer of audio systems, started its production in October 2014. For the preceding 3 years, Bell had been a retailer of audio systems. After a thorough survey of audio system markets, Bell decided to turn its retail store into an au
> Lott Company specializes in manufacturing a unique model of bicycle helmet. The model is well accepted by consumers, and the company has enough orders to keep the factory production at 10,000 helmets per month (80% of its full capacity). Lottâ€
> Suppose selected financial data of Target and Wal-Mart for 2014 are presented here (in millions). Instructions: (a) For each company, compute the following ratios. (1) Current ratio. (8) Return on assets. (2) Accounts receivable turnover. (9) Ret
