Question: The balance sheet of Innovative Products reports

> On December 28, Summit purchased Microsoft common shares for $485,000. On December 31, the shares had a fair value of $487,000. Record the initial investment by Summit and, if appropriate, an adjustment to record the investment at fair value.

> On December 28, Summit purchased Microsoft common shares for $485,000. On December 31, the shares had a fair value of $483,000. Record the initial investment by Summit and, if appropriate, an adjustment to record the investment at fair value.

> On September 1, Leather Suppliers, Inc., purchases 150 shares of Western Wear Clothing for $13 per share. On November 1, Leather Suppliers sells the investment for $17 per share. Record the transactions made by Leather Suppliers for the purchase and sale

> Salt Foods purchases forty $1,000, 7%, 10-year bonds issued by Pretzelmania, Inc., for $42,975 on January 1. The market interest rate for bonds of similar risk and maturity is 6%. Salt Foods receives interest semiannually on June 30 and December 31. 1. R

> Salt Foods purchases forty $1,000, 7%, 10-year bonds issued by Pretzelmania, Inc., for $37,282 on January 1. The market interest rate for bonds of similar risk and maturity is 8%. Salt Foods receives interest semiannually on June 30 and December 31. 1. R

> Salt Foods purchases forty $1,000, 7%, 10-year bonds issued by Pretzelmania, Inc., for $40,000 on January 1. The market interest rate for bonds of similar risk and maturity is 7%. Salt Foods receives interest semiannually on June 30 and December 31. 1. R

> You have recently been hired as the assistant controller for Stanton Industries. Your immediate superior is the controller who, in turn, reports to the vice president of finance. The controller has assigned you the task of preparing the year-end adjustme

> Indicate with an “X” any of the following that represent a common reason why companies invest in other companies. 1. To invest excess cash created by operating in seasonal industries. 2. To increase employees’ morale. 3. To build strategic alliances. 4.

> Calculate the present value of the following annuities, assuming each annuity payment is made at the end of each compounding period.

> Monroe Corporation is considering the purchase of new equipment. The equipment will cost $35,000 today. However, due to its greater operating capacity, Monroe expects the new equipment to earn additional revenues of $5,000 by the end of each year for the

> Tatsuo has just been awarded a four-year scholarship to attend the university of his choice. The scholarship will pay $8,000 each year for the next four years to reimburse normal school-related expenditures. Each $8,000 payment will be made at the end of

> Calculate the future value of the following annuities, assuming each annuity payment is made at the end of each compounding period.

> Matt plans to start his own business once he graduates from college. He plans to save $3,000 every six months for the next five years. If his savings earn 10% annually (or 5% every six months), determine how much he will save by the end of the fifth year

> Tom and Suri decide to take a worldwide cruise. To do so, they need to save $30,000. They plan to invest $4,000 at the end of each year for the next seven years to earn 8% compounded annually. Determine whether Tom and Suri will reach their goal of $30,0

> Calculate the present value of the following single amounts.

> Ronald has an investment opportunity that promises to pay him $55,000 in three years. He could earn a 6% annual return investing his money elsewhere. What is the most he would be willing to invest today in this opportunity?

> Maddy works at Burgers R Us. Her boss tells her that if she stays with the company for five years, she will receive a bonus of $6,000. With an annual discount rate of 8%, calculate the value today of receiving $6,000 in five years.

> Financial information for American Eagle is presented in Appendix A at the end of the book, and financial information for Buckle is presented in Appendix B at the end of the book. Required: Try to estimate each company’s ratio of total current receivable

> Calculate the future value of the following single amounts.

> Dungy Training Company has a current ratio of 0.70 to 1, based on current assets of $3.43 million and current liabilities of $4.90 million. How, if at all, will a $900,000 cash purchase of inventory affect the current ratio? How, if at all, will a $900,0

> The Intramural Sports Club reports sales revenue of $1,140,000. Inventory at both the beginning and end of the year totals $200,000. The inventory turnover ratio for the year is 4.9. What amount of gross profit does the company report in its income state

> Universal Sports Supply began the year with an inventory balance of $65,000 and a year-end balance of $75,000. Sales of $750,000 generate a gross profit of $250,000. Calculate the inventory turnover ratio for the year.

> Universal Sports Supply began the year with an accounts receivable balance of $200,000 and a year-end balance of $220,000. Credit sales of $750,000 generate a gross profit of $250,000. Calculate the receivables turnover ratio for the year.

> If sales are $1,150,000 in 2022 and this represents a 15% increase over sales in 2021, what were sales in 2021?

> Sales are $2.6 million in 2020, $2.7 million in 2021, and $2.5 million in 2022. What is the percentage change from 2020 to 2021? What is the percentage change from 2021 to 2022? Be sure to indicate whether the percentage change is an increase or a decrea

> Athletic World reports the following vertical analysis percentages. Did Athletic World’s income before tax as a percentage of sales increase, decrease, or stay the same? If net income as a percentage of sales increases, does that mean n

> Using the information presented in BE12–1, perform a horizontal analysis providing both the amount and percentage change.

> Classify each of the following accepted accounting practices as conservative or aggressive. 1. Use lower-of-cost-or-market to value inventory. 2. Expense all research and development costs rather than recording some research and development costs as an a

> Financial information for Buckle is presented in Appendix B at the end of the book. Required: 1. Determine whether the trend in net sales has been increasing or decreasing for the past three years. 2. Where is accounts receivable reported? Explain why us

> Classify each of the following accounting practices as conservative or aggressive. 1. Increase the allowance for uncollectible accounts. 2. When costs are rising, change from LIFO to FIFO. 3. Change from declining-balance to straight-line depreciation in

> Game Time Sports owns a recreational facility with basketball courts, pitching machines, and athletic fields. Determine whether the firm should report each of the following items as discontinued operations, other revenues, or other expenses. 1. Due to in

> Kobe’s Clinics provides health services and career counseling. Net income from the health services business this year is $32 million after tax. During the year, Kobe’s Clinics sold the career counseling side of the business at a loss after tax of $7.5 mi

> LaDanion’s Limos reports net income of $130,000, average total assets of $700,000, and average total liabilities of $340,000. Calculate LaDanion’s return on assets and return on equity ratios.

> Peyton’s Palace has net income of $15 million on sales revenue of $130 million. Total assets were $96 million at the beginning of the year and $104 million at the end of the year. Calculate Peyton’s return on assets, profit margin, and asset turnover rat

> Perform a vertical analysis on the following information.

> On April 1, 2020, Teleworks Company lent $100,000 to IT Industries. IT Industries pays back in full the note plus 10% interest on April 1, 2021. Determine the investing cash flows to be reported by Teleworks Company in 2021.

> Creative Sound Systems sold investments, land, and its own common stock for $40 million, $16 million, and $42 million, respectively. Creative Sound Systems also purchased treasury stock, equipment, and a patent for $22 million, $26 million, and $13 milli

> Engineering Wonders reports net income of $70 million. Included in that number is building depreciation expense of $6 million and a gain on the sale of land of $2 million. Records reveal decreases in accounts receivable, accounts payable, and inventory o

> Hi-Tech, Inc., reports net income of $70 million. Included in that number are depreciation expense of $6 million and a loss on the sale of equipment of $2 million. Records reveal increases in accounts receivable, accounts payable, and inventory of $3 mil

> Financial information for American Eagle is presented in Appendix A at the end of the book. Required: 1. Determine whether the trend in net sales has been increasing or decreasing for the past three years. 2. Where is accounts receivable reported? Explai

> Macrosoft Company reports net income of $75,000. The accounting records reveal depreciation expense of $90,000 as well as increases in prepaid rent, accounts payable, and income tax payable of $70,000, $10,000, and $23,000, respectively. Prepare the oper

> Laser World reports net income of $650,000. Depreciation expense is $50,000, accounts receivable increases $11,000, and accounts payable decreases $30,000. Calculate net cash flows from operating activities using the indirect method.

> Place the following items in the correct order as they would appear in the statement of cash flows. Financing activities. Net increase (decrease) in cash. Operating activities. Beginning cash balance. Ending cash balance. Investing activities.

> Wifi Around reports net income for the year of $220,000. Retained earnings at the beginning and end of the year are $810,000 and $930,000, respectively. What is the cash paid for dividends during the year (assume any dividends declared were paid)?

> The following selected transactions occur during the first year of operations. Determine how each should be reported in the statement of cash flows. 1. Issued one million shares of common stock at $20 per share. 2. Paid $75,000 to suppliers for inventory

> Computer World reports income tax expense of $340,000. Income taxes payable at the beginning and end of the year are $60,000 and $75,000, respectively. What is the cash paid for income taxes during the year?

> Wireless Solutions reports operating expenses of $985,000. Operating expenses include both rent expense and salaries expense. Prepaid rent increases during the year by $30,000 and salaries payable increases by $20,000. What is the cash paid for operating

> Electronic Superstore’s inventory increases during the year by $5 million, and its accounts payable to suppliers increases by $7 million during the same period. What is the amount of cash paid to suppliers of merchandise during the reporting period if it

> Video Shack’s accounts receivable decreases during the year by $9 million. What is the amount of cash received from customers during the reporting period if its net sales are $73 million?

> Tony and Suzie are ready to expand Great Adventures even further in 2022. Tony believes that many groups in the community (for example, Boy Scouts, church groups, civic groups, and local businesses) would like to hold one-day outings for their members. G

> Financial information for American Eagle is presented in Appendix A at the end of the book, and financial information for Buckle is presented in Appendix B at the end of the book. Required: Determine which company’s growth rate in total assets, net sales

> The balance sheet of Cranium Gaming reports total assets of $500,000 and $800,000 at the beginning and end of the year, respectively. Sales revenues are $2.10 million, net income is $75,000, and operating cash flows are $60,000. Calculate the cash return

> A-2-Z Design Services engaged in the following significant activities during the year: a. The company issued common stock for $250,000. Management expects to use the proceeds to purchase land next year. b. A new office building was purchased by issuing a

> Refer to the situation described in BE11–9. Determine the financing cash flows to be reported by IT Industries in 2021.

> Refer to the situation described in BE11–8. What amount should Creative Sound Systems report as net cash flows from financing activities?

> Technologies Worldwide purchased land for $850,000 in 2020 with the intent to expand operations. In 2021, the company decides the land is no longer needed, and the land is sold for $900,000. Determine the investing cash flows to be reported in 2021. Dete

> Classify each of the following items as an operating, investing, or financing activity. 1. Dividends paid. 2. Repayment of notes payable. 3. Payment for inventory. 4. Purchase of equipment. 5. Interest paid.

> Refer to the situation described in BE10–8. Record the transaction if California Surf resells the 100 shares of treasury stock at $40 per share.

> California Surf Clothing Company issues 1,000 shares of $1 par value common stock at $35 per share. Later in the year, the company decides to purchase 100 shares at a cost of $38 per share. Record the purchase of treasury stock.

> Rachel’s Designs has 2,000 shares of 7%, $50 par value cumulative preferred stock issued at the beginning of 2019. All remaining shares are common stock. Due to cash flow difficulties, the company was not able to pay dividends in 2019 or 2020. The compan

> Match each of the following preferred stock features with its description.

> Consider the following independent situations: 1. John Smith is the petty-cash custodian. John approves all requests for payment out of the $200 fund, which is replenished at the end of each month. At the end of each month, John submits a list of all acc

> Equinox Outdoor Wear issues 1,000 shares of its $0.01 par value preferred stock for cash at $32 per share. Record the issuance of the preferred shares.

> Gothic Architecture is a new chain of clothing stores specializing in the color black. Gothic issues 1,000 shares of its $1 par value common stock at $30 per share. Record the issuance of the stock. How would the entry differ if Gothic issued no-par valu

> Western Wear Clothing issues 3,000 shares of its $0.01 par value common stock to provide funds for further expansion. Assuming the issue price is $11 per share, record the issuance of common stock.

> Renaldo heard that an S corporation combines the benefits of a corporation with the benefits of a partnership. Explain to Renaldo the specific benefits of an S corporation and any drawbacks to organizing as an S corporation.

> The financial statements of Colorado Outfitters include the following selected data ($ in millions): sales, $9,543; net income, $320; beginning stockholders’ equity, $3,219; and ending stockholders’ equity, $2,374. Calculate the return on equity.

> Summit Apparel has the following accounts at December 31: Common Stock, $1 par value, 2,000,000 shares issued; Additional Paid-in Capital, $18 million; Retained Earnings, $11 million; and Treasury Stock, 60,000 shares, $1.32 million. Prepare the stockhol

> Indicate whether each of the following transactions increases (+), decreases (−), or has no effect (NE) on total assets, total liabilities, and total stockholders’ equity. The first transaction is completed as an examp

> Refer to the situation described in BE10–11, but assume a 2-for-1 stock split instead of the 100% stock dividend. Explain why Sandals did not record a 2-for-1 stock split. What are the number of shares, par value per share, and market price per share imm

> On June 30, the board of directors of Sandals, Inc., declares a 100% stock dividend on its 30,000, $1 par, common shares. The market price of Sandals common stock is $35 on June 30. Record the stock dividend.

> Divine Apparel has 4,000 shares of common stock outstanding. On October 1, the company declares a $0.75 per share dividend to stockholders of record on October 15. The dividend is paid on October 31. Record all transactions on the appropriate dates for c

> Financial accounting information can often be found at financial websites. These websites are useful for collecting information about a company’s stock price, analysts’ forecasts, dividend history, historical financial accounting information, and much mo

> Waldo is planning to start a clothing store helping big and tall men blend in with the crowd. Explain to Waldo the advantages and disadvantages of a corporation in comparison to a sole proprietorship or partnership.

> Pretzelmania, Inc., issues 7%, 10-year bonds with a face amount of $70,000 for $70,000 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 7%. Interest is paid annually on December 31. 1. Record the bond issue. 2. Recor

> Pretzelmania, Inc., issues 7%, 15-year bonds with a face amount of $70,000 for $76,860 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 6%. Interest is paid semiannually on June 30 and December 31. 1. Record the bond

> Pretzelmania, Inc., issues 7%, 15-year bonds with a face amount of $70,000 for $63,948 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 8%. Interest is paid semiannually on June 30 and December 31. 1. Record the bond

> Pretzelmania, Inc., issues 7%, 10-year bonds with a face amount of $70,000 for $70,000 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 7%. Interest is paid semiannually on June 30 and December 31. 1. Record the bond

> Listed below are terms and definitions associated with bonds. Match (by letter) the bond terms with their definitions. Each letter is used only once. Definitions a. Allows the issuer to pay off the bonds early at a fixed price. b. Matures in installments

> Suppose a company signs a three-year lease agreement. The lease payments have a present value of $40,000. Prior to signing the lease, the company had total assets of $600,000, total liabilities of $400,000, and total stockholders’ equity of $200,000. Cal

> On April 1, 2021, Primer Corp. signs a five-year lease to use office space. The present value of the monthly lease payments is $100,000. Record the lease.

> Surf’s Up, a manufacturer of surfing supplies and training equipment, has the following selected data ($ in millions): Based on these amounts, calculate the following ratios for 2021: 1. Debt to equity ratio. 2. Return on assets ratio.

> Ultimate Butter Popcorn issues 7%, 20-year bonds with a face amount of $60,000. The market interest rate for bonds of similar risk and maturity is 6%. Interest is paid semiannually. At what price will the bonds issue?

> Between his freshman and sophomore years of college, Jack takes a job as ticket collector at a local movie theatre. Moviegoers purchase a ticket from a separate employee outside the theatre and then enter through a single set of doors. Jack takes half th

> On January 1, 2021, Beaver Tours financed the purchase of a new building by borrowing $600,000 from the bank using a 30-year, 6% note payable. Payments of $3,597.30 are due at the end of each month, with the first installment due on January 31, 2021. Rec

> Ultimate Butter Popcorn issues 7%, 15-year bonds with a face amount of $60,000. The market interest rate for bonds of similar risk and maturity is 8%. Interest is paid semiannually. At what price will the bonds issue?

> Ultimate Butter Popcorn issues 7%, 10-year bonds with a face amount of $60,000. The market interest rate for bonds of similar risk and maturity is 7%. Interest is paid semiannually. At what price will the bonds issue?

> Premium Pizza retires its 7% bonds for $72,000 before their scheduled maturity. At the time, the bonds have a face amount of $70,000 and a carrying value of $76,567. Record the early retirement of the bonds.

> Discount Pizza retires its 7% bonds for $68,000 before their scheduled maturity. At the time, the bonds have a face amount of $70,000 and a carrying value of $64,168. Record the early retirement of the bonds.

> Presented below is a partial amortization schedule for Premium Pizza. 1. Record the bond issue assuming the face amount of bonds payable is $70,000. 2. Record the first interest payment. 3. Explain why interest expense decreases each period.

> Presented below is a partial amortization schedule for Discount Pizza. 1. Record the bond issue assuming the face amount of bonds payable is $70,000. 2. Record the first interest payment. 3. Explain why interest expense increases each period.

> On January 1, 2021, Lyle’s Limeade issues 4%, 10-year bonds with a face amount of $90,000 for $82,985, priced to yield 5%. Interest is paid semiannually. What amount of interest expense will be recorded in the December 31, 2021, annual income statement?

> On January 1, 2021, Lizzy’s Lemonade issues 5%, 20-year bonds with a face amount of $100,000 for $88,443, priced to yield 6%. Interest is paid semiannually. What amount of interest expense will be recorded on June 30, 2021, the first interest payment dat

> Pretzelmania, Inc., issues 7%, 15-year bonds with a face amount of $70,000 for $76,799 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 6%. Interest is paid annually on December 31. 1. Record the bond issue. 2. Recor

> Financial information for American Eagle is presented in Appendix A at the end of the book, and financial information for Buckle is presented in Appendix B at the end of the book. Required: 1. Which company has a higher ratio of cash to noncash assets? W

> Pretzelmania, Inc., issues 7%, 15-year bonds with a face amount of $70,000 for $64,008 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 8%. Interest is paid annually on December 31. 1. Record the bond issue. 2. Recor

> On January 1, 2021, Corvallis Carnivals borrows $30,000 to purchase a delivery truck by agreeing to a 5%, five-year loan with the bank. Payments of $566.14 are due at the end of each month, with the first installment due on January 31, 2021. Record the i

> On September 1, 2021, Southwest Airlines borrows $41 million, of which $10 million is due next year. Show how Southwest Airlines would record the $41 million debt on its December 31, 2021, balance sheet.

> During December, Far West Services makes a $3,200 credit sale. The state sales tax rate is 6% and the local sales tax rate is 2.5%. Record sales and sales tax payable.

> On May 31, Marty’s Ice Cream Shop sells gift cards for $5,000. Customers redeem $1,200 in June, $2,100 in July, and $1,400 in August. Marty’s experience is that any unredeemed gift cards as of August 31 are not likely to be redeemed. Calculate the amount