Question: Refer to Exhibit 12–2. Is the

> The following selected data are taken from the comparative financial statements of Yankee Curling Club. The club prepares its financial statements using the accrual basis of accounting. Dues are billed to members based upon their use of the clubâ&

> What do these classes of ratios measure? (a) Liquidity ratios. (b) Profitability ratios. (c) Solvency ratios.

> Nordstrom, Inc. operates department stores in numerous states. Selected financial statement data (in millions of dollars) for a recent year follow. Instructions (a) Compute working capital and the current ratio at the beginning of the year and at the end

> As a financial analyst in the planning department for Erin Industries, Inc., you must develop ratios from the comparative financial statements. This information is to be used to convince creditors that, despite a slight decline in sales, Erin Industries,

> The following reconciling items are applicable to the bank reconciliation for Forde Co. Indicate how each item should be shown on a bank reconciliation. (a) Outstanding checks. (b) Bank debit memorandum for service charge. (c) Bank credit memorandum for

> Given the characteristics of useful accounting information, complete each of the following statements: (a) For information to be _____, it should have predictive and confirmatory value. (b) _____ means that information accurately depicts what really happ

> Tom Dawes, the founder of Footwear Inc., needs to raise $500,000 to expand his company’s operations. He has been told that raising the money through debt will increase the riskiness of his company much more than issuing stock. He doesn’t understand why t

> Contrast the straight-line method and the units-of-activity method in relation to (a) useful life and (b) the pattern of periodic depreciation over useful life.

> Branden Doyle is reviewing the principle of segregation of duties. What are the two common applications of this principle?

> The Triquel Theater Inc. was recently formed. It began operations in March 2017. The Triquel is unique in that it will show only triple features of sequential theme movies. On March 1, the ledger of The Triquel showed Cash $16,000, Land $38,000, Building

> Tabitha Andes was just hired as the assistant treasurer of Southside Stores, a specialty chain store company that has nine retail stores concentrated in one metropolitan area. Among other things, the payment of all invoices is centralized in one of the d

> 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 Visit Louis V

> Wells Company is a pesticide manufacturer. Its sales declined greatly this year due to the passage of legislation outlawing the sale of several of Wells’ chemical pesticides. During the coming year, Wells will have environmentally safe and competitive re

> Ken McCall believes that the allocation of cost of goods available for sale should be based on the actual physical flow of the goods. Explain to Ken why this may be both impractical and inappropriate.

> The following comparative information is available for Rose Company for 2017. Instructions (a) Determine net income under each approach. Assume a 30% tax rate. (b) Determine net cash provided by operating activities under each approach. Assume that all s

> In a discussion of dramatic increases in coffee-bean prices, a Wall Street Journal article noted the following fact about Starbucks. Before this year’s bean-price hike, Starbucks added several defenses that analysts say could help it maintain earnings an

> These financial statement items are for Fairview Corporation at year-end, July 31, 2017. Salaries and wages payable……………………………$ 2,080 Salaries and wages expense……………………………. 57,500 Supplies expense……………………………………………..15,600 Equipment………………………………………………………18

> A friend of yours, Saira Ortiz, recently completed an undergraduate degree in science and has just started working with a biotechnology company. Saira tells you that the owners of the business are trying to secure new sources of financing which are neede

> The July 6, 2011, edition of the Wall Street Journal Online includes an article by Michael Rapoport entitled “U.S. Firms Clash Over Accounting Rules.” The article discusses why some U.S. companies favored adoption of International Financial Reporting Sta

> In the corner grocery store, all sales clerks make change out of one cash register drawer. Is this a violation of internal control? Why?

> The accompanying chart shows the qualitative characteristics of useful accounting information. Fill in the blanks. Enhancing Qualities Fundamental Usefulness Qualities Relevance () (a) (g) (b) (h) (c) Understandability Faithful Representation (d) Neu

> Name ratios useful in assessing (a) liquidity, (b) solvency, and (c) profitability.

> Indicate whether the following statements are true or false. 1. A merchandising company reports gross profit but a service company does not. 2. Under a periodic inventory system, a company determines the cost of goods sold each time a sale occurs. 3. A s

> Melanie is studying for the next accounting examination. She asks your help on two questions: (a) What is salvage value? (b) How is salvage value used in determining depreciable cost under the straight-line method? Answer Melanie’s questions.

> This trial balance of Washburn Co. does not balance. Each of the listed accounts has a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors: 1. Cash received from a customer on account was debited

> On November 1, 2017, the following were the account balances of Soho Equipment Repair. During November, the following summary transactions were completed. Nov 8 Paid $1,220 for salaries due employees, of which $600 is for November and $620 is for Octobe

> On numerous occasions, proposals have surfaced to put the federal government on the accrual basis of accounting. This is no small issue because if this basis were used, it would mean that billions in unrecorded liabilities would have to be booked and the

> What is the primary basis of accounting for inventories?

> Jeters Company reports the following for the month of June. Instructions (a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO, (2) LIFO, and (3) average-cost. (Round average unit cost to three decimal places.) (b) Which

> Solar Electronics has enjoyed tremendous sales growth during the last 10 years. However, even though sales have steadily increased, the company’s CEO, Dana Byrnes, is concerned about certain aspects of its performance. She has called a

> (a) What is the primary source document for recording (1) cash sales and (2) credit sales? (b) Using XXs for amounts, give the journal entry for each of the transactions in part (a), assuming perpetual inventory.

> Suppose the following information is available for Callaway Golf Company for the years 2017 and 2016. (Dollars are in thousands, except share information.) There were 73,139,000 shares outstanding at the end of 2015. Instructions (a) What was the compa

> The key to successful business operations is effective inventory management.” Do you agree? Explain.

> Selected financial data of two competitors, Target and Wal-Mart, are presented here. (All dollars are in millions.) Suppose the data were taken from the 2017 financial statements of each company. Instructions For each company, compute these values and ra

> Suppose the following items were taken from the 2017 financial statements of Texas Instruments, Inc. (All dollars are in millions.) Instructions Prepare a classified balance sheet in good form as of December 31, 2017. Common stock $2,826 Accumulated

> Tott Company has the following internal control procedures over cash disbursements. Identify the internal control principle that is applicable to each procedure. (a) Company checks are pre numbered. (b) The bank statement is reconciled monthly by an inte

> Indicate whether each statement is true or false. (a) GAAP is a set of rules and practices established by accounting standard-setting bodies to serve as a general guide for financial reporting purposes. (b) Substantial authoritative support for GAAP usua

> What types of receivables does Apple report on its balance sheet? Does it use the allowance method or the direct write-off method to account for uncollectibles?

> What principles of internal control apply to most businesses?

> This is the trial balance of Lacey Company on September 30. The October transactions were as follows. Oct. 5 Received $1,300 in cash from customers for accounts receivable due. 10 Billed customers for services performed $5,100. 15 Paid employee salaries

> Roadside Travel Court was organized on July 1, 2016, by Betty Johnson. Betty is a good manager but a poor accountant. From the trial balance prepared by a part-time bookkeeper, Betty prepared the following income statement for her fourth quarter, which e

> Abbey Park was organized on April 1, 2016, by Trudy Crawford. Trudy is a good manager but a poor accountant. From the trial balance prepared by a part-time bookkeeper, Trudy prepared the following income statement for the quarter that ended March 31, 201

> Masie Ascot believes revenues from credit sales may be recorded before they are collected in cash. Do you agree? Explain.

> (a) “The steps in the accounting cycle for a merchandising company differ from the steps in the accounting cycle for a service company.” Do you agree or disagree? (b) Is the measurement of net income in a merchandising company conceptually the same as in

> Fraser Company will need a new warehouse in five years. The warehouse will cost $500,000 to build. Required: What lump-sum amount should the company invest now to have the $500,000 available at the end of the five-year period? Assume that the compa

> Matheson Electronics has just developed a new electronic device which, when mounted on an automobile, will tell the driver how many miles the automobile is traveling per gallon of gasoline. The company is anxious to begin production of the new device. To

> Westwood Furniture Company is considering the purchase of two different items of equipment, as described below: Machine A A compacting machine has just come onto the market that would permit Westwood Furniture Company to compress sawdust into various she

> What is meant by the term payback period? How is the payback period determined? How can the payback method be useful?

> How is the project profitability index computed, and what does it measure?

> As the discount rate increases, the present value of a given future cash flow also increases. Do you agree? Explain.

> Explain how the cost of capital serves as a screening tool when using the net present value method.

> Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The truck is worn out and must be either overhauled or replaced with a new truck. The company has assembled the following information (Panama uses the U.S. dol

> Perit Industries has $100,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit

> Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate of return that she is earning. For example, three years ago she paid $13,000 for 200 shares of Malti Company’s common stock. She received a $420 cash divide

> Labeau Products, Ltd., of Perth, Australia, has $35,000 to invest. The company is trying to decide between two alternative uses for the funds as follows: The company’s discount rate is 18%. Required: (Ignore income taxes.) Which alte

> The Caldwell Herald newspaper reported the following story: Frank Ormsby of Caldwell is the state’s newest millionaire. By choosing the six winning numbers on last week’s state lottery, Mr. Ormsby has won the week’s grand prize totaling $1.6 million. The

> The Atlantic Medical Clinic can purchase a new computer system that will save $7,000 annually in billing costs. The computer system will last for eight years and have no salvage value. Required: Up to how much should the Atlantic Medical Clinic be willi

> Julie has just retired. Her company’s retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $150,000 immediately as her full retirement benefit. Under the second option

> Annual cash inflows that will arise from two competing investment projects are given below: The discount rate is 18%. Required: Compute the present value of the cash inflows for each investment. Year Investment A Investment B $ 3,000 $12,000 1.. 2

> In three years, when he is discharged from the Air Force, Steve wants to buy an $8,000 power boat. Required: What lump-sum amount must Steve invest now to have the $8,000 at the end of three years if he can invest money at: 1. Ten percent? 2. Fourteen p

> What is meant by the dividend yield on a common stock investment?

> If a company has to pay interest of 14% on long-term debt, then its cost of capital is 14%. Do you agree? Explain.

> Linda Clark received $175,000 from her mother’s estate. She placed the funds into the hands of a broker, who purchased the following securities on Linda’s behalf: a. Common stock was purchased at a cost of $95,000. The stock paid no dividends, but it was

> Identify two simplifying assumptions associated with discounted cash flow methods of making capital budgeting decisions.

> What is net present value? Can it ever be negative? Explain.

> Why are discounted cash flow methods of making capital budgeting decisions superior to other methods?

> Why isn’t accounting net income used in the net present value method of making capital budgeting decisions?

> What is meant by the term discounting?

> What is meant by the term time value of money?

> What is the difference between capital budgeting screening decisions and capital budgeting preference decisions?

> The questions in this exercise are based on Target Corporation. To answer the questions, you will need to download Target’s 2004 annual report (the company’s fiscal year ended on January 29, 2005) at http://investors.target.com/. You do not need to print

> Incomplete financial statements for Pepper Industries follow: The following additional information is available about the company: a. All sales during the year were on account. b. There was no change in the number of shares of common stock outstanding

> Typically, the market price of shares of a company’s stock takes a beating when the company announces that it has not met analysts’ expectations. As a result, many companies are under a lot of pressure to meet analysts’ revenue and earnings projections.

> The Riteway Ad Agency provides cars for its sales staff. In the past, the company has always purchased its cars from a dealer and then sold the cars after three years of use. The company’s present fleet of cars is three years old and will be sold very sh

> Venice InLine, Inc., was founded by Russ Perez to produce a specialized in-line skate he had designed for doing aerial tricks. Up to this point, Russ has financed the company with his own savings and with cash generated by his business. However, Russ now

> Paul Ward is interested in the stock of Pecunious Products, Inc. Before purchasing the stock, Mr. Ward would like your help in analyzing the data that are available to him as follows: Mr. Ward would like answers to a number of questions about the trend

> In the right-hand column below, certain financial ratios are listed. To the left of each ratio is a business transaction or event relating to the operating activities of Delta Company (each transaction should be considered independently). Required: Ind

> Refer to the financial statement data for Lydex Company given in Problem 14–14A. In Problem 14–14A You have just been hired as a loan officer at Slippery Rock State Bank. Your supervisor has given you a file containin

> You have just been hired as a loan officer at Slippery Rock State Bank. Your supervisor has given you a file containing a request from Lydex Company, a manufacturer of safety helmets, for a $3,000,000, five-year loan. Financial statement data on the comp

> Refer to the financial statements and other data in Problem 14–12A. Assume that you are an account executive for a large brokerage house and that one of your clients has asked for a recommendation about the possible purchase of Sabin El

> Paul Sabin organized Sabin Electronics 10 years ago to produce and sell several electronic devices on which he had secured patents. Although the company has been fairly profitable, it is now experiencing a severe cash shortage. For this reason, it is req

> Denna Company’s working capital accounts at the beginning of the year follow: During the year, Denna Company completed the following transactions: x. Paid a cash dividend previously declared, $12,000. a. Issued additional shares of co

> Norsk Optronics, ALS, of Bergen, Norway, had a current ratio of 2.5 on June 30 of the current year. On that date, the company’s assets were: Cash ........................................................ Kr 90,000 Accounts receivable, net ...............

> Refer to the financial statements for Castile Products, Inc., in Exercise 14–7. Assets at the beginning of the year totaled $280,000, and the stockholders’ equity totaled $161,600. In Exercise 14–7 The financial statements for Castile Products, Inc., ar

> In eight years, Kent Duncan will retire. He is exploring the possibility of opening a self-service car wash. The car wash could be managed in the free time he has available from his regular occupation, and it could be closed easily when he retires. After

> Refer to the financial statements for Castile Products, Inc., in Exercise 14–7. In addition to the data in these statements, assume that Castile Products, Inc., paid dividends of $2.10 per share during the year. Also assume that the company’s common stoc

> The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash ........................................................................... $ 6,500 Accounts receivable, n

> Selected financial data from the June 30 year-end statements of Safford Company are given below: Total assets .................................................. $3,600,000 Long-term debt (12% interest rate) ................ $500,000 Preferred stock, $100

> Rotorua Products, Ltd., of New Zealand markets agricultural products for the burgeoning Asian consumer market. The company’s current assets, current liabilities, and sales have been reported as follows over the last five years (Year 5 i

> Refer to the data in Brief Exercise 14–2 for Weller Corporation. In Brief Exercise 14–2 Comparative financial statements for Weller Corporation for the fiscal year ending December 31 appear below. The company did not

> Refer to the data in Brief Exercise 14–2 for Weller Corporation. In Brief Exercise 14–2 Comparative financial statements for Weller Corporation for the fiscal year ending December 31 appear below. The company did not

> Comparative financial statements for Weller Corporation for the fiscal year ending December 31 appear below. The company did not issue any new common or preferred stock during the year. A total of 800,000 shares of common stock were outstanding. The inte

> A comparative income statement is given below for McKenzie Sales, Ltd., of Toronto: Members of the company’s board of directors are surprised to see that net income increased by only $38,000 when sales increased by 2 million dollars.

> A company seeking a line of credit at a bank was turned down. Among other things, the bank stated that the company’s 2 to 1 current ratio was not adequate. Give reasons why a 2 to 1 current ratio might not be adequate.

> If a stock’s market value exceeds its book value, then the stock is overpriced. Do you agree? Explain.

> Sharkey’s Fun Center contains a number of electronic games as well as a miniature golf course and various rides located outside the building. Paul Sharkey, the owner, would like to construct a water slide on one portion of his property. Mr. Sharkey has g

> The president of a plastics company was quoted in a business journal as stating, “We haven’t had a dollar of interest-paying debt in over 10 years. Not many companies can say that.” As a stockholder in this company, how would you feel about its policy of

> What is meant by the term financial leverage?

> Would you expect a company in a rapidly growing technological industry to have a high or low dividend payout ratio?

> Assume that two companies in the same industry have equal earnings. Why might these companies have different price-earnings ratios? If a company has a price-earnings ratio of 20 and reports earnings per share for the current year of $4, at what price wou