Roger Fuller and Mike Rangel are discussing the liquidation of a partnership. Roger maintains that all cash should be distributed to partners on the basis of their income ratios. Is he correct? Explain.
> Capital balances in Pelmar Co. are Lango $40,000, Oslo $30,000, and Fernetti $20,000. Lango and Oslo each agree to pay Fernetti $12,000 from their personal assets. Lango and Oslo each receive 50% of Fernetti’s equity. The partners share income equally. J
> In Eastwood Co., capital balances are Irey $40,000 and Pedigo $50,000. The partners share income equally. Vernon is admitted to the firm with a 45% interest by an investment of cash of $58,000. Journalize the admission of Vernon.
> Gamma Co. capital balances are Barr $30,000, Croy $25,000, and Eubank $22,000. The partners share income equally. Tovar is admitted to the firm by purchasing one-half of Eubank’s interest for $13,000. Journalize the admission of Tovar to the partnership.
> After liquidating noncash assets and paying creditors, account balances in the Mann Co. are Cash $21,000; A, Capital (Cr.) $8,000; B, Capital (Cr.) $9,000; and C, Capital (Cr.) $4,000. The partners share income equally. Journalize the final distribution
> Nabb & Fry Co. reports net income of $31,000. Interest allowances are Nabb $7,000 and Fry $5,000, salary allowances are Nabb $15,000 and Fry $10,000, and the remainder is shared equally. Show the distribution of income.
> Gorton Corporation has 30,000 shares of $10 par value common stock outstanding when it announces a 2-for-1 stock 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? What
> Rich Mordica asks, “Since stock dividends don’t change anything, why declare them?” What is your answer to Rich?
> Beauty Island Corporation began operations on April 1 by issuing 60,000 shares of $5 par value common stock for cash at $13 per share. On April 19, it issued 2,000 shares of common stock to attorneys in settlement of their bill of $27,500 for organizatio
> Farley Inc. declares a $55,000 cash dividend on December 31, 2020. The required annual dividend on preferred stock is $10,000. Determine the allocation of the dividend to preferred and common stockholders assuming the preferred stock is cumulative and di
> a. Three dates are important in connection with cash dividends. Identify these dates, and explain their significance to the corporation and its stockholders. b. Identify the accounting entries that are made for a cash dividend and the date of each entry.
> Jan Kimler maintains that adequate cash is the only requirement for the declaration of a cash dividend. Is Jan correct? Explain.
> Emko Inc.’s common stock has a par value of $1, a book value of $24, and a current market price of $18. Explain why these amounts are all different.
> What is the formula for computing book value per share when a corporation has only outstanding common stock?
> What were the amounts of basic earnings per share of common stock that Apple reported in the years 2014 to 2015?
> Why must preferred stock dividends be subtracted from net income in computing earnings per share?
> What is the unique feature of a corporation income statement? Illustrate this feature, using assumed data.
> Dean Percival, who owns many investments in common stock, says, “I don’t care what a company’s net income is. The stock price tells me everything I need to know!” How do you respond to Dean?
> Rafy Furcal believes that both the beginning and ending balances in retained earnings are shown in the stockholders’ equity section. Is Rafy correct? Discuss.
> Kevin Mathis is confused about the partnership characteristics of (a) mutual agency and (b) unlimited liability. Explain these two characteristics for Kevin.
> How are retained earnings restrictions generally reported in the financial statements?
> a. What is a dividend? b. “Dividends must be paid in cash.” Do you agree? Explain.
> What factors help determine the market price of stock?
> The corporate charter of Luney Corporation allows the issuance of a maximum of 100,000 shares of common stock. During its first two years of operations, Luney sold 70,000 shares to shareholders and reacquired 7,000 of these shares. After these transactio
> How does the balance sheet for a corporation differ from the balance sheet for a proprietorship?
> a. What are the two principal components of stockholders’ equity? b. What is paid-in capital? Give three examples.
> a. The following terms pertain to the forming of a corporation: (1) charter, (2) by-laws, and (3) organization costs. Explain the terms. b. Donna Fleming believes a corporation must be incorporated in the state in which its headquarters’ office is locate
> a. Your friend Katie Fehr cannot understand how the characteristic of corporation management is both an advantage and a disadvantage. Clarify this problem for Katie. b. Identify and explain two other disadvantages of a corporation.
> How many shares of common stock did Apple have outstanding at September 26, 2015, and at September 27, 2014?
> Indicate how each of the following accounts should be classified in the stockholders’ equity section. a. Common stock. b. Paid-in capital in excess of par—common stock. c. Retained earnings. d. Treasury stock. e. Paid-in capital from treasury stock. f. P
> At the end of its first year of operation, Goss Corporation has $1,000,000 of common stock and net income of $236,000. Prepare (a) the closing entry for net income and (b) the stockholders’ equity section at year-end.
> Diaz Inc.’s common stock has a par value of $1 and a current market price of $15. Explain why these amounts are different.
> The treasury stock purchased in Question 14 is resold by Meng, Inc. for $16,000. What eff ect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, an (d) total stockholders’ equity?
> Meng, Inc. purchases 1,000 shares of its own previously issued $5 par common stock for $12,000. Assuming the shares are held in the treasury, what effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d) t
> Land appraised at $80,000 is purchased by issuing 1,000 shares of $20 par value common stock. The market price of the shares at the time of the exchange, based on active trading in the securities market, is $95 per share. Should the land be recorded at $
> Why is common stock usually not issued at a price that is less than par value?
> What effect does the issuance of stock at a price above par value have on the issuer’s net income? Explain.
> 1. Mark Kemp, a student, asks your help in understanding the following characteristics of a corporation: (a) separate legal existence, (b) limited liability of stockholders, and (c) transferable ownership rights. Explain these characteristics to Mark.
> How is a deceased partner’s equity determined?
> Your roommate argues that partnership assets should be revalued in situations like those in Question 21. Why is this generally not done? Data from Question 21: Jaime Keller has a $41,000 capital balance in a partnership. She sells her interest to Sam Pa
> Andrea Riley retires from the partnership of Jaggard, Pester, and Riley. She receives $85,000 of partnership assets in settlement of her capital balance of $81,000. Assuming that the income-sharing ratios are 5:3:2, respectively, how much of Riley’s bonu
> Jurgens Company has had 4 years of net income. Due to this success, the market price of its 400,000 shares of $3 par value common stock has increased from $12 per share to $46. During this period, paid-in capital remained the same at $2,800,000. Retained
> Jaime Keller has a $41,000 capital balance in a partnership. She sells her interest to Sam Parmenter for $45,000 cash. What entry is made by the partnership for this transaction?
> Jill Parsons purchases for $72,000 Jamar’s interest in the Tholen-Jamar partnership. Assuming that Jamar has a $68,000 capital balance in the partnership, what journal entry is made by the partnership to record this transaction?
> Jerry Park decides to invest $25,000 in a partnership for a one-sixth capital interest. How much do the partnership’s net assets increase? Does Park also acquire a one-sixth income ratio through this investment?
> Susan Turnbull decides to purchase from an existing partner for $50,000 a one-third interest in a partnership. What effect does this transaction have on partnership net assets?
> Why is Apple not a partnership?
> Before the final distribution of cash, account balances are Cash $27,000; S. Shea, Capital $19,000 (Cr.); L. Seastrom, Capital $12,000 (Cr.); and M. Luthi, Capital $4,000 (Dr.). Luthi is unable to pay any of the capital deficiency. If the income-sharing
> Norris, Madson, and Howell have income ratios of 5:3:2 and capital balances of $34,000, $31,000, and $28,000, respectively. Noncash assets are sold at a gain and allocated to the partners. After creditors are paid, $103,000 of cash is available for distr
> In continuing their discussion from Question 13, Mike says that even in the case of a capital deficiency, all cash should still be distributed on the basis of capital balances. Is Mike correct? Explain. Data from Question 13: Roger Fuller and Mike Range
> How does the liquidation of a partnership differ from the dissolution of a partnership?
> Herr Corporation has 3,000 shares of 7%, $100 par value preferred stock outstanding at December 31, 2020. At December 31, 2020, the company declared a $105,000 cash dividend. Determine the dividend paid to preferred stockholders and common stockholders u
> Are the financial statements of a partnership similar to those of a proprietorship? Discuss.
> Tran Corporation is authorized to issue both preferred and common stock. The par value of the preferred is $50. During the first year of operations, the company had the following events and transactions pertaining to its preferred stock. Feb. 1 Issued 20
> Rinehart Corporation purchased from its stockholders 5,000 shares of its own previously issued stock for $255,000. It later resold 2,000 shares for $54 per share, then 2,000 more shares for $49 per share, and finally 1,000 shares for $43 per share. Inst
> The financial statements of Louis Vuitton are presented in Appendix F. The complete annual report, including the notes to its financial statements, is available at the company’s website. Instructions Use the company’s
> Meenen Corporation has the following accounts at December 31 (in euros): Share Capital— Ordinary, €10 par, 5,000 shares issued, €50,000; Share Premium—Ordinary €10,000; Retained Earnings €45,000; and Treasury Shares—Ordinary, 500 shares, €11,000. Prepare
> The stockholders’ meeting for Percival Corporation has been in progress for some time. The chief financial officer for Percival is presently reviewing the company’s financial statements and is explaining the items that
> Partners T. Greer and R. Parks are provided salary allowances of $30,000 and $25,000, respectively. They divide the remainder of the partnership income in a ratio of 3:2. If partnership net income is $40,000, how much is allocated to Greer and Parks?
> Use the stockholders’ equity section of an annual report and identify the major components. Instructions Go to the Annual Reports website, select a company of your choice, and then answer the following questions. a. What is the company’s name? b. What c
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. The complete annual reports of Amazon and Wal-Mart, including the notes to the financial sta
> PepsiCo, Inc.’s financial statements are presented in Appendix B. Financial statements of The Coca-Cola Company are presented in Appendix C. The complete annual reports of PepsiCo and Coca-Cola, including the notes to the financial stat
> The stockholders’ equity section for Apple Inc. is shown in Appendix A. The complete annual report, including the notes to the financial statements, is available at the company’s website. Instructions a. What is the p
> In this textbook, you learned that in response to the Sarbanes-Oxley Act, many companies have implemented formal ethics codes. Many other organizations also have ethics codes. Instructions Obtain the ethics code from an organization that you belong to (
> In the past year, Gosser Corporation declared a 10% stock dividend, and Jenks, Inc. announced a 2-for-1 stock split. Your parents own 100 shares of each company’s $50 par value common stock. During a recent phone call, your parents ask you, as an account
> The stockholders’ equity accounts of Gonzalez, Inc., at January 1, 2020, are as follows. Preferred Stock, no par, 4,000 shares issued ……………………………………………. $400,000 Common Stock, no par, 140,000 shares issued …………………………………………… 700,000 Retained Earnings ………
> Use the stockholders’ equity section of an annual report and identify the major components. Instructions Go to the Annual Reports website, select a company of your choice, and then answer the following questions. a. What is the company’s name? b. What c
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. The complete annual reports of Amazon and Wal-Mart, including the notes to the financial sta
> PepsiCo’s financial statements are presented in Appendix B. Financial statements of The Coca-Cola Company are presented in Appendix C. The complete annual reports of PepsiCo and Coca-Cola, including the notes to the financial statements
> S. Pletcher and F. Holt share net income and net loss equally. (a) Which account(s) is (are) debited and credited to record the division of net income between the partners? (b) If S. Pletcher withdraws $30,000 in cash for personal use instead of salary,
> The financial statements of Apple Inc. are presented in Appendix A. The complete annual report, including the notes to the financial statements, is available at the company’s website. Instructions Refer to Apple’s fin
> If your school has a subscription to the FASB Codification, log in and prepare responses to the following. a. How is common stock defined? b. How is preferred stock defined? c. What is the meaning of the term shares?
> A high percentage of Americans own stock in corporations. As a shareholder in a corporation, you will receive an annual report. One of the goals of this course is for you to learn how to navigate your way around an annual report. Instructions Use Apple’
> Joe Moyer, your uncle, is an inventor who has decided to incorporate. Uncle Joe knows that you are an accounting major at U.N.O. In a recent letter to you, he ends with the question, “I’m filling out a state incorporation application. Can you tell me the
> This exercise is an introduction to the Big Four accounting firms, all of which are partnerships: Deloitte & Touche, Ernst & Young, KPMG, and PricewaterhouseCoopers. Instructions Select a firm that is of interest to you, go to the firm’s homepage, and t
> You are an expert in the field of forming partnerships. Ronald Hrabik and Meg Percival want to establish a partnership to start “Pasta Shop,’’ and they are going to meet with you to discuss their plans. Prior to the meeting, you will send them a memo dis
> Stephen Wadson and Mary Shively, two professionals in the finance area, have worked for Morrisen Leasing for a number of years. Morrisen Leasing is a company that leases high-tech medical equipment to hospitals. Stephen and Mary have decided that, with t
> Karen Noonan opened Clean Sweep Inc. on February 1, 2020. During February, the following transactions were completed. Feb. 1 Issued 5,000 shares of Clean Sweep common stock for $13,000. Each share has a $1.50 par. 1 Borrowed $8,000 on a 2-year, 6% note p
> Hawkeye Corporation’s balance sheet at December 31, 2019, is presented below. During 2020, the following transactions occurred. 1. On January 1, 2020, Hawkeye issued 1,200 shares of $40 par, 7% preferred stock for $49,200. 2. On Janua
> Alexandra and Kellie operate a beauty salon as partners who share profits and losses equally. The success of their business has exceeded their expectations; the salon is operating quite profitably. Kellie is anxious to maximize profits and schedules appo
> M. Elston and R. Ogle have partnership capital balances of $40,000 and $80,000, respectively. The partnership agreement indicates that net income or net loss should be shared equally. If net income for the partnership is $42,000, how should the net incom
> Molina Corporation has paid 60 consecutive quarterly cash dividends (15 years). The last 6 months, however, have been a cash drain on the company, as profit margins have been greatly narrowed by increasing competition. With a cash balance sufficient to m
> The R&D division of Piqua Chemical Corp. has just developed a chemical for sterilizing the vicious Brazilian “killer bees” which are invading Mexico and the southern United States. The president of the company is anxious to get the chemical on the market
> The partners in Crawford Company decide to liquidate the firm when the balance sheet shows the following. The partners share income and loss 5:3:2. During the process of liquidation, the following transactions were completed in the following sequence.
> At the end of its first year of operations on December 31, 2020, NBS Company’s accounts show the following. The capital balance represents each partner’s initial capital investment. Therefore, net income or net loss
> The post-closing trial balances of two proprietorships on January 1, 2020, are presented below. Sorensen and Lucas decide to form a partnership, Solu Company, with the following agreed upon valuations for noncash assets. All cash will be transferred
> The following stockholders’ equity accounts arranged alphabetically are in the ledger of Westin Corporation at December 31, 2020. Common Stock ($10 stated value) ………………………………………………………. $1,500,000 Paid-in Capital from Treasury Stock ………………………………………………………
> On January 1, 2020, Goodhue Inc. had the following stockholders’ equity balances. Common Stock (400,000 shares issued) ………………………………………. $800,000 Paid-in Capital in Excess of Par—Common Stock ……………………………. 500,000 Common Stock Dividends Distributable …………
> On January 1, 2020, Ven Corporation had the following stockholders’ equity accounts. Common Stock (no par value, 90,000 shares issued and outstanding) ………………… $1,600,000 Retained Earnings ……………………………………………………………………………………………… 500,000 During the year, th
> The post-closing trial balance of Storey Corporation at December 31, 2020, contains the following stockholders’ equity accounts. Preferred Stock (15,000 shares issued) ……………………………………………….. $ 750,000 Common Stock (250,000 shares issued) ……………………………………………
> On January 1, 2020, Geff rey Corporation had the following stockholders’ equity accounts. Common Stock ($20 par value, 60,000 shares issued and outstanding) …………… $1,200,000 Paid-in Capital in Excess of Par—Common Stock …………………………………………..……. 200,000 Ret
> Mutt and Jeff are discussing how income and losses should be divided in a partnership they plan to form. What factors should be considered in determining the division of net income or net loss?
> The following stockholders’ equity accounts arranged alphabetically are in the ledger of Galindo Corporation at December 31, 2020. Common Stock ($5 stated value) …………………………………………………………… $2,000,000 Paid-in Capital from Treasury Stock ……………………………………………………
> Peck Corporation is authorized to issue 20,000 shares of $50 par value, 10% preferred stock and 125,000 shares of $5 par value common stock. On January 1, 2020, the ledger contained the following stockholders’ equity balances. Preferred Stock (10,000 sh
> The stockholders’ equity accounts of Castle Corporation on January 1, 2020, were as follows. Preferred Stock (8%, $50 par, 10,000 shares authorized) ………………………………. $ 400,000 Common Stock ($1 stated value, 2,000,000 shares authorized) ……………………… 1,000,000
> Fechter Corporation had the following stockholders’ equity accounts on January 1, 2020: Common Stock ($5 par) $500,000, Paid-in Capital in Excess of Par— Common Stock $200,000, and Retained Earnings $100,000. In 2020, the company had the following treasu
> DeLong Corporation was organized on January 1, 2020. 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 $2 per share. The following stock transactions were compl
> Irwin Corporation has been authorized to issue 20,000 shares of $100 par value, 10%, preferred stock and 1,000,000 shares of no-par common stock. The corporation assigned a $2.50 stated value to the common stock. At December 31, 2020, the ledger containe
> On December 31, the capital balances and income ratios in TEP Company are as follows. Instructions a. Journalize the withdrawal of Posada under each of the following assumptions. 1. Each of the continuing partners agrees to pay $18,000 in cash from per
> At April 30, partners’ capital balances in PDL Company are G. Donley $52,000, C. Lamar $48,000, and J. Pinkston $18,000. The income sharing ratios are 5:4:1, respectively. On May 1, the PDLT Company is formed by admitting J. Terrell to the firm as a part
> McGill and Smyth have capital balances on January 1 of $50,000 and $40,000, respectively. The partnership income-sharing agreement provides for (1) annual salaries of $22,000 for McGill and $13,000 for Smyth, (2) interest at 10% on beginning capital bala
