Pineview Co., organized on June 1, 2012, was authorized to issue stock as follows: • 80,000 shares of preferred 9% stock, convertible, $100 par • 500,000 shares of common stock, $2.50 stated value During the remainder of Pineview Co.’s fiscal year ended May 31, 2013, the following transactions were completed in the order given: (a) 30,000 shares of preferred stock were subscribed for at $105, and 90,000 shares of common stock were subscribed for at $26. Both subscriptions were payable 30% upon subscription, the balance in one payment. (b) The second subscription payment was received, except one subscriber for 6,000 shares of common stock defaulted on payment. The full amount paid by this subscriber was returned, and all of the fully paid stock was issued. (c) 15,000 shares of common stock were reacquired by purchase at $28. (Treasury stock is recorded at cost.) (d) Each share of preferred stock was converted into four shares of common stock. (e) The treasury stock was exchanged for machinery with a fair market value of $430,000. (f) There was a 2-for-1 stock split, and the stated value of the new common stock is $1.25. (g) Net income was $83,000. Assume that revenues and expenses have been closed to a temporary account, Income Summary. Instructions: 1. Give the journal entries to record these transactions. (For net income, give the entry to close the income summary account to Retained Earnings.) 2. Prepare the Stockholders’ Equity section as of May 31, 2013.
> In the past, why was accounting for income taxes not as significant an issue in some foreign countries as it is in the United States?
> On January 3, 2013, McDonald Inc. purchased 40% of the outstanding common stock of Old Farms Co., paying $128,000 when the book value of the net assets of Old Farms equaled $250,000. The difference was attributed to equipment, which had a book value of $
> Alpha Co. acquired 20,000 shares of Beta Co. on January 1, 2012, at $12 per share. Beta Co. had 80,000 shares outstanding with a book value of $800,000. The difference between the book value and fair value of Beta Co. on January 1, 2012, is attributable
> On January 10, 2013, Delta Corporation acquired 12,000 shares of the outstanding common stock of Kennedy Company for $600,000. At the time of purchase, Kennedy Company had outstanding 48,000 shares with a book value of $2.4 million. On December 31, 2013,
> For each of the following independent situations, determine the appropriate accounting method to be used: cost or equity. For cost method situations, determine whether the security should be classified as trading or available for sale. For equity method
> During January 2013, Aragorn Inc. purchased the following securities: During 2013, Aragorn received interest from Mirkwood and the U.S. Treasury totaling $3,630. Dividends received on the stock held amounted to $1,760. During November 2013, Aragorn sol
> The following transactions of Kelsey, Inc., occurred within the same accounting period: (a) Purchased $55,000 U.S. Treasury 6% bonds, paying 102 plus accrued interest of $1,400. Kelsey uses the revenue approach to record accrued interest on purchased bo
> Refer to Practice 14-21. Make all journal entries necessary on the lending company’s books in connection with the loan during Year 2, Year 3, Year 4, and Year 5. Assume that all cash payments are received according to the renegotiated schedule. In Pract
> On January 1 of Year 1, the lending company made a $10,000, 8% loan. The $800 interest is receivable at the end of each year, with the principal amount to be received at the end of five years. As of the end of Year 1, the first year’s interest of $800 ha
> During Year 1, Walters Company purchased 6,000 shares of Company A common stock for $25 per share and 10,000 shares of Company B common stock for $32 per share. These investments are classified as available-for-sale securities. At December 31, Year 1, Wa
> Refer to Practice 14-18. Assume that the securities are classified as trading and that they were purchased for operating purposes. Compute (1) Cash flow from operating activities and (2) Cash flow from investing activities. In Practice 14-18 The compa
> What provision of the fair value option prevents companies from using hindsight to selectively enhance reported results using the fair value option?
> The company entered into the following transactions during the year: Purchase of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $400 Sale of investment securities . . . . . . . . . . .
> The company purchased the following securities during Year 1: In Year 2, the company reclassified both of these securities. Security A was reclassified as held to maturity; the fair value of security A at the time of the reclassification was $8,850. Se
> The company purchased the following securities during Year 1: In Year 2, the company reclassified both of these securities. Security A was reclassified as available for sale; the fair value of security A at the time of the reclassification was $5,500.
> The company purchased the following securities during Year 1: On July 23, Year 2, the company sold all of the shares of security B for a total of $9,500. As of December 31, Year 2, the shares of security A had a fair value of $5,800. No other activity
> During Year 1, the company purchased 1,000 shares of stock for $24 per share. Near the end of Year 1, the company sold 400 shares. Make the journal entry to record the sale, assuming that the shares were sold for (1) $27 per share and (2) $20 per share
> On January 1, Issuing Company issued $100,000 in debt securities. The stated interest rate on the debt securities is 8%, with interest payable semiannually, on June 30 and December 31. On February 1, Purchasing Company purchased the bonds from the privat
> Refer to Practice 13-8. Assume that the stock-based compensation plan is performance based. As of the end of the first year, the number of options that are probable to vest is 150,000. At the end of the second year, the number of options that are probabl
> On January 1, the company granted 150,000 stock options to key employees. Each option allows an employee to buy one share of $1 par common stock for $25, which was the market price of the shares on the grant date of January 1. In order to be able to exer
> Best Ski Manufacturer usually pays a cash dividend sufficient to give investors a dividend yield (annual dividend divided by stock price) of around 6%. Last quarter, Best Ski Manufacturer paid a quarterly cash dividend of $1 per share. Its stock price is
> J. D. Michael Company has been very successful in recent years. Cash flow from operations is more than sufficient to cover the cost of all capital expenditures as well as regular cash dividends. J. D. Michael has decided to use some of its extra cash to
> Describe the differences between pension plans and other postretirement benefit plans.
> Distinguish between a nondeductible expense and a temporary difference that results in a taxable income greater than pretax financial income reported in the income statement.
> The equity categories for Swire Pacific Limited are illustrated in Exhibit 13-9, on page 13-51. Using the information in the exhibit, answer the following questions: 1. Recall that the primary purpose of defining different reserve categories is to distin
> The 2009 financial statements for The Walt Disney Company can be found on the Internet. Locate those financial statements and consider the following questions. 1. What is the par value of Disney’s common stock? What was the average issuance price of Disn
> Historically, in some countries payments of bonuses to directors were deducted directly from Retained Earnings rather than being charged to income of the year. Does this treatment make it more or less likely that bonuses will be paid to directors? Can ac
> In early 2013, the $20 par common stock of Driftwood Construction Company was selling in the range of $100 to $130 per share, with 146,000 shares outstanding. On May 1, 2013, Driftwood’s board of directors decided that, effective May 10, 2013, Driftwood
> The company issued 40,000 shares of 7%, $50 par preferred stock. Associated with each share of stock was a detachable common stock warrant. Each warrant entitles the holder to purchase one share of the company’s $1 par common stock for $20 per share. Eac
> On March 23, 2013, the board of directors of Mycroft Company declared a quarterly cash dividend on its $1 par common stock of $0.50 per share, payable on May 10, 2013, to the shareholders of record on April 14, 2013. Before April 9, Mycroft’s shares trad
> The following is adapted from an article appearing in Forbes: The board of Hospital Corporation of America (HCA) authorized the buyback of 12 million of the firm’s own shares at a total cost of $564 million. However, after the stock market crash of 1987,
> A stock warrant entitles the owner to buy a specified number of shares of stock at a specified price. Landon Davis owns 1,000 stock warrants. Each warrant entitles him to buy one share of Plum Street Company common stock for $50. The current market price
> 1. On January 2, 2014, Kine Co. granted Morgan, its president, compensatory stock options to buy 1,000 shares of Kine’s $10 par common stock. The options call for a price of $20 per share and are exercisable beginning on December 31, 20
> You have been assigned to the audit of Packer Inc., a manufacturing company. You have been asked to summarize the transactions for the year ended December 31, 2013, affecting stockholders’ equity and other related accounts. The Stockhol
> What were the original reasons for the development of the ACRS income tax depreciation method?
> The Stockholders’ Equity section of Nilsson Corporation’s balance sheet as of December 31, 2012, is as follows: Nilsson Corporation had the following stockholders’ equity transactions during 2013: J
> The following items relate to the activities of Schmidt Company for 2013: (a) Cash dividends declared and paid on common stock during the year totaled $90,000. In addition, on January 15, 2013, dividends of $25,000 that were declared in 2012 were paid. (
> A condensed balance sheet for Sharp Tax Inc. as of December 31, 2010, follows. Capital stock authorized consists of 750 shares of 8%, $100 par, cumulative preferred stock and 15,000 shares of $50 par common stock. Information relating to operations of t
> Squires Inc. was organized on January 2, 2012, with authorized capital stock consisting of 40,000 shares of 10%, $200 par value preferred, and 300,000 shares of no-par, no stated value common. During the first two years of the company’s existence, the fo
> On January 1, 2013, Cozumel Company had 100,000 shares of $0.50 par value common stock outstanding. The market value of Cozumel’s common stock was $18 per share. Cozumel’s Retained Earnings balance on January 1 was $460,000. During 2012, Cozumel had decl
> Refer to Practice 13-5. Make the necessary journal entries using the par value method. In Practice 13-5 The company repurchased 10,000 shares of $1 par common stock for a total of $300,000. None of the shares were retired. A month later, the company sol
> Valentine Corporation was organized on June 30, 2010. After 2 1/2 years of profitable operations, the Equity section of Valentine’s balance sheet was as follows: Contributed capital: Common stock, $5 par, 500,000 shares authorized, 300,000 shares issued
> Morris Corporation is publicly owned, and its shares are traded on a national stock exchange. Morris has 16,000 shares of $2 stated value common stock authorized. Only 75% of these shares have been issued, and of the shares issued, only 11,000 are outsta
> You have been asked to audit Greystone Company. During the course of your audit, you are asked to prepare comparative data from the company’s inception to the present. You have determined the following: (a) Greystone Companyâ€
> Globe Corporation, a new environmental control company, initiated a performance-based stock option plan for its management on January 1, 2012. The plan provided for the granting of a variable number of stock options to management personnel who worked for
> If a company experiences a current operating loss, it may carry the loss backward and forward. What impact do these carrybacks and carryforwards have on the reported operating loss? on the statement of cash flows?
> The board of directors of Muir Company adopted a fixed stock option plan to supplement the salaries of certain executives of the company. Options to buy common stock were granted as follows: Options are nontransferable and can be exercised beginning th
> Transactions that affected Barter Company’s stockholders’ equity during 2013, the first year of operations, follow. (a) Issued 30,000 shares of 9% preferred stock, $20 par, at $26. (c) Purchased and immediately retired 4,000 shares of preferred stock at
> Lupito Company had the following transactions occur during 2013: (a) Issued 8,000 shares of common stock to the founders for land valued at $275,000. Par value of the common stock is $1 per share. (b) Issued 4,000 shares of $100 par preferred stock for c
> The Stockholders’ Equity section of Webster Inc. showed the following data on December 31, 2012: common stock, $3 par, 300,000 shares authorized, 250,000 shares issued and outstanding, $750,000; paid-in capital in excess of par, $7,050,000; additional pa
> Keystone Company has two classes of capital stock outstanding: 10%, $40 par preferred and $1 par common. During the fiscal year ended November 30, 2013, the company was active in transactions affecting the stockholders’ equity. Balanc
> Manti Company had the following account balances on its balance sheet at December 31, 2013, the end of its first year of operations. All stock was issued on a subscription basis. Common stock subscriptions receivable . . . . . . . . . . . . . . . . . .
> Atlantic Pacific Corporation was organized on September 1, 2013, with authorized capital stock of 150,000 shares of 7% cumulative preferred stock with a $40 par value and 1,000,000 shares of no-par common stock with a $2 stated value. During the balance
> Lighthouse Company began operations on January 1. Authorized were 25,000 shares of $1 par value common stock and 5,000 shares of 10%, $100 par value convertible preferred stock. The following transactions involving stockholders’ equity occurred during th
> Kenny Co. began operations on January 1, 2012, by issuing at $15 per share one-half of the 950,000 shares of $1 par value common stock that had been authorized for sale. In addition, Kenny has 500,000 shares of $5 par value, 6% preferred shares authorize
> Why isn’t depreciation expense always computed for the exact number of days an asset is owned?
> From the following information, reconstruct the journal entries that were made by Rivers Corporation during 2013. *Includes net income of $40,000 for 2013. There were no dividends. Assume that revenues and expenses were closed to a temporary account, I
> The following data are for Radial Company: Contributed capital and retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $417,000 Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . .
> The retained earnings account for Carlitos Inc. shows the following debits and credits. Indicate all entries required to correct the account. What is the corrected amount of retained earnings? Account: Retained Earnings Balance Date Item Deblt Credi
> Zenon Company has 450,000 shares of $1 par value common stock outstanding. In declaring and distributing a 10% stock dividend, Zenon initially issued only 40,000 new shares; the other stock dividend shares have not yet been issued as of the end of the ye
> The capital accounts for Alston Market on June 30, 2013, are as follows: Common stock, $6 par, 50,000 shares issued and outstanding. . . . . . . . . . . . . . . . . . . . $ 300,000 Paid-in capital in excess of par. . . . . . . . . . . . . . . . . . . .
> The balance sheet of Carmen Corporation shows the following: Common stock, $1 stated value, 80,000 shares issued and outstanding . . . . . . . . . . . . . $ 80,000 Paid-in capital in excess of stated value . . . . . . . . . . . . . . . . . . . . . . . .
> Phelps Company distributed the following dividends to its stockholders: (a) 450,000 shares of Bedrock Corporation stock, carrying value of investment, $975,000; fair market value, $1,350,000. (b) 220,000 shares of Great Basin Company stock, a closely hel
> Consistent Company has been paying regular quarterly dividends of $2.00 and wants to pay the same amount in the third quarter of 2013. Given the following information, (1) What is the total amount that Consistent will have to pay in dividends in the thir
> Endicott Company’s December 31, 2012, balance sheet reported retained earnings of $86,500, and net income of $124,000 was reported in the 2012 income statement. While preparing financial statements for the year ended December 31, 2013, Tom Dryden, accoun
> Stockholders’ equity for Channa Co. on December 31 was as follows: Preferred stock, $14 par, 25,000 shares issued and outstanding . . . . . . . . . . . . . . . . . . . $ 350,000 Paid-in capital in excess of par—preferred stock . . . . . . . . . . . . .
> How do changes in the balances of deferred income taxes affect the amount of cash paid for income taxes?
> San Juan Corporation established a stock option plan that provides for cash payments to employees based on the appreciation of stock prices from an established threshold price. The plan was instituted on January 1, 2013, and provides benefits to employee
> Rhiener Corporation initiated a performance-based employee stock option plan on January 1, 2012. The performance base for the plan is net sales in the year 2014. The plan provides for stock options to be awarded to the employees as a group on the followi
> On January 1, 2012, Obregon Supply Company established a stock-based compensation plan for its senior employees. A total of 45,000 options was granted that permit employees to purchase 45,000 shares of $2 par common stock at $29 per share. Each option ha
> Western Company wants to raise additional equity capital. After analysis of the available options, the company decides to issue 1,500 shares of $20 par preferred stock with detachable warrants. The package of the stock and warrants sells for $90. The war
> In 2013, Calton Inc. had 100,000 shares of $1.50 par value common stock outstanding. Calton issued 100,000 stock rights. Five rights, plus $50 in cash, are required to purchase one new share of Calton common stock. On the date the rights were issued, Cal
> The company received subscriptions for 20,000 shares of $1 par common stock for $25 per share. The company received 40% of the subscription amount immediately and the remainder two months later. Make the journal entries necessary to record the initial su
> The stockholders’ equity of Thomas Company as of December 31, 2012, was as follows: Common stock, $1 par, authorized 275,000 shares; 240,000 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 240,
> Holanna Company reported the following balances related to common stock as of December 31, 2012: Common stock, $1 par, 200,000 shares issued and outstanding . . . . . . . . . . . . . . . . . . $ 200,000 Paid-in capital in excess of par. . . . . . . . .
> Palo Verde Company was incorporated on January 1, 2013, with the following authorized capitalization: • 25,000 shares of common stock, stated value $6 per share • 8,000 shares of 8% cumulative preferred stock, par value $20 per share Make the entries req
> Solar Storm Inc. began operations on June 30, 2011, and issued 60,000 shares of $1 par common stock on that date. On December 31, 2011, Solar Storm declared and paid $24,200 in dividends. After a vote of the board of directors, Solar Storm issued 25,000
> Under what circumstances is a gain recognized when a productive asset is exchanged for a similar productive asset? A loss?
> Verdero Company is authorized to issue 100,000 shares of $2 par value common stock. Verdero has the following transactions: (a) Issued 20,000 shares at $30 per share; received cash. (b) Issued 250 shares to attorneys for services in securing the corporat
> Beginning balances in the equity accounts were as follows: Common stock, at par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,000 Paid-in capital in excess of par. . . . . . . . . . .
> Refer to Practice 13-20. Compute the balance in (1) Retained Earnings and (2) Accumulated Other Comprehensive Income as of the end of each year: 2011, 2012, 2013. In Practice 13-20 The company started business on January 1, 2011. Net income and divide
> The company had 10,000 shares of $1 par common stock outstanding. When each share of stock had a market value of $130, the company decided to reduce the price per share of stock to $65 by doubling the number of shares outstanding. Make the journal entrie
> The company had 40,000 shares of $1 par common stock outstanding. When each share of stock had a market value of $44, the company declared and distributed a 10% stock dividend. After the distribution of the dividend shares, each share of stock had a mark
> On January 1, the company purchased 10,000 shares of Wilsonville Company stock for $20 per share as an available-for-sale investment. In March, the company decided to distribute the Wilsonville shares as a property dividend to its stockholders. The Wilso
> On January 1, Year 1, the company wrote a put option agreeing to purchase 100 shares of its own stock for $50 per share on December 31, Year 2, at the option of the purchaser of the put option. The market price of the company’s shares on January 1, Year
> On January 1, Year 1, the company issued mandatorily redeemable preferred shares in exchange for $2,000 cash. No dividends are to be paid on these shares, and they must be redeemed in exactly two years, on January 1, Year 3, for $2,332.80. The interest r
> Refer to Practice 13-8. Assume that the stock-based compensation plan involves stock appreciation rights (SARs). At the end of three years, the employees are given a cash award equal to the excess of the fair value at that time of 150,000 shares of stock
> You are the chief financial officer of a local manufacturing company, Larsen Enterprises. This company is run by two brothers, Steve and John Larsen. The Larsen brothers have built this company up from a small 5-man shop to a company now employing over 2
> What was the most significant change in accounting for income tax carryforwards between pre-Codification Statement No. 96 and pre-Codification Statement No. 109? (Pre-Codification Statement No. 109 is the source for most of the existing provisions in FAS
> J. R. Chump, president of Pro Keeper Industries, is contemplating the issuance of long-term debt to finance plant expansion and renovation. In the past, his company has issued traditional debt instruments that require regular interest payments and a reti
> Examine the partial balance sheet of Altria Group shown below and answer the following questions. 1. Current assets for Altria Group (parent company of Philip Morris) totaled $5,773 (in millions) at the end of 2009. Compute the company’
> The company intends to issue 10-year bonds with a face value of $1,000. The bonds carry a coupon rate of 13%, and interest is paid semiannually. On the issue date, the market interest rate for bonds issued by companies with similar risk is 8% compounded
> Review the 2009 balance sheet data for Hewlett-Packard (HP) and Dell shown below. 1. Compute each company’s current ratio for 2009. Based on the result, which company appears to be more liquid? 2. Compute each companyâ€
> In December of 2002, the Boston Celtics were purchased by a private investment group. Now that the Celtics are owned by a private group, their financial statements are not publicly available. However, prior to their going private, their financial stateme
> Locate The Walt Disney Company’s 2009 annual report on the Internet and answer the following questions. 1. What is the largest liability listed in Disney’s 2009 balance sheet? 2. By what percentage did Disney change its total borrowings (current and long
> Jefferson Corporation has $20,000,000 of 10% bonds outstanding. Because of cash flow problems, the company is behind in interest payments and in contributions to its bonds retirement fund. The market value of the bonds has declined until it is currently
> John Jex, CPA, had just delivered a keynote address to a banker’s organization on the merits of valuing loan portfolio assets at fair values that reflected changing interest rates. During the question-and-answer period, he was asked why bank liabilities
> Soto Inc., a closely held corporation, has never been audited and is seeking a large bank loan for plant expansion. The bank has requested audited financial statements. In conference with the president and majority stockholder of Soto, the auditor is inf
> Professional athletes regularly sign long-term multimillion-dollar contracts in which they promise to play for a particular team for a specified time period. Owners of these teams often sign long-term leases for the use of playing facilities for a specif
> The conversion of convertible bonds to common stock may be viewed as an exchange involving no gain or loss or as a transaction for which market values should be recognized and a gain or loss reported. What arguments support each of these views for the is
