The income statement for Stretch-Tape Corporation reports net sales of $540,000 and net income of $65,700. Average total assets for the year are $900,000. Stockholders’ equity at the beginning of the year was $600,000, and $30,000 was paid to stockholders as dividends during the year. There were no other stockholders’ equity transactions that occurred during the year. Required: Calculate the return on assets, profit margin, asset turnover, and return on equity ratios.
> The general ledger of Red Storm Cleaners at January 1, 2021, includes the following account balances: The following is a summary of the transactions for the year: 1. March 12 Provide services to customers, $60,000, of which $21,000 is on account. 2. May
> Crimson Tide Music Academy offers lessons in playing a wide range of musical instruments. The unadjusted trial balance as of December 31, 2021, appears below. December 31 is the company’s fiscal year-end. In addition, the company had th
> The year-end financial statements of Rattlers Tax Services are provided below. Required: 1. Record year-end closing entries. 2. Prepare a post-closing trial balance. (Hint: The balance of Retained Earnings will be the amount shown in the balance sheet.)
> Tony and Suzie have purchased land for a new camp. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow an additional $1 million,
> You may refer to the opening story of Tony and Suzie and their decision to start Great Adventures in AP 1–1. More of their story and the first set of transactions for the company in July are presented in AP 2–1 and repeated here. July 1 Sell $10,000 of c
> Boilermaker Unlimited specializes in building new homes and remodeling existing homes. Remodeling projects include adding game rooms, changing kitchen cabinets and countertops, and updating bathrooms. Below is the year-end adjusted trial balance of Boile
> Buzzard Bicycle specializes in custom painting and design of bicycles. December 31 is the company’s fiscal year-end. Information necessary to prepare the year-end adjusting entries appears below. 1. A three-year fire insurance policy was purchased on Jul
> The information necessary for preparing the 2021 year-end adjusting entries for Gamecock Advertising Agency appears below. Gamecock’s fiscal year-end is December 31. 1. On July 1, 2021, Gamecock receives $6,000 from a customer for advertising services to
> Minutemen Law Services maintains its books using cash-basis accounting. However, the company decides to borrow $100,000 from a local bank, and the bank requires Minutemen to provide annual financial statements prepared using accrual-basis accounting as p
> Consider the following transactions. Required: For each transaction, determine the amount of revenue or expense, if any, that is recorded under accrual-basis accounting and under cash-basis accounting in the current period.
> RiverHawk Expeditions provides guided tours in scenic mountainous areas. After the first 11 months of operations in 2021, RiverHawk has the following account balances. The following transactions occur during December 2021: December 1 Pay rent for mountai
> Pirates Incorporated had the following balances at the beginning of September. The following transactions occur in September. September 1 Provide services to customers for cash, $4,700. September 2 Purchase land with a long-term note for $6,400 from Crim
> Below are the transactions for Ute Sewing Shop for March, the first month of operations. March 1 Issue common stock in exchange for cash of $3,000. March 3 Purchase sewing equipment by signing a note with the local bank, $2,700. March 5 Pay rent of $600
> Below are the account balances of Bruins Company at the end of November. Required: Prepare a trial balance by placing amounts in the appropriate debit or credit column and determining the balance of the Equipment account.
> Refer to the transactions described in P2–4A. Keep in mind that Jake may not need to record all transactions. Required: 1. Record each transaction for Luke’s Repair Shop. Keep in mind that Luke may not need to record a
> Adrenaline Entertainment is struggling financially and its CFO, David Plesko, is starting to feel the heat. Back on January 1, 2017, Adrenaline Entertainment issued $100 million of 6% bonds, due in 15 years, with interest payable semiannually on June 30
> Jake owns a lawn maintenance company, and Luke owns a machine repair shop. For the month of July, the following transactions occurred. July 3 Jake provides lawn services to Luke’s repair shop on account, $500. July 6 One of Jake’s mowers malfunctions. Lu
> Below is a list of typical accounts. Required: For each account, indicate (1) the type of account and (2) whether the normal account balance is a debit or credit. For the type of account, choose from asset, liability, stockholders’ equi
> Below is a list of activities for Purple Cow Incorporated. Required: For each activity, indicate the impact on the accounting equation. After doing so for all transactions, ensure that the accounting equation remains in balance.
> Below is a list of activities for Jayhawk Corporation. Required: For each activity, indicate whether the transaction increases, decreases, or has no effect on assets, liabilities, and stockholders’ equity.
> Listed below are nine terms and definitions associated with the FASB’s conceptual framework. Required: Pair each term with its related definition.
> The four underlying assumptions of generally accepted accounting principles are economic entity, monetary unit, periodicity, and going concern. Consider the four independent situations below. 1. Jumbo’s is a local restaurant. Due to a bad shipment of pot
> Cornhusker Company provides the following information at the end of 2021. Required: Prepare the income statement, statement of stockholders’ equity, and balance sheet for Corn- husker Company on December 31, 2021. No common stock is iss
> Below are incomplete financial statements for Bulldog, Inc. Required: Calculate the missing amounts.
> Longhorn Corporation provides low-cost food delivery services to senior citizens. At the end of the year on December 31, 2021, the company reports the following amounts: In addition, the company had common stock of $40,000 at the beginning of the year an
> Account classifications include assets, liabilities, stockholders’ equity, dividends, revenues, and expenses. Required: For each transaction, indicate whether the related account would be classified in the balance sheet as (a) an asset,
> Western Entertainment is considering issuing bonds to finance its business expansion. The company contacts you, a business consultant charging $200 an hour, to answer the following questions. 1. What are the advantages of issuing bonds over borrowing fun
> Below are typical transactions for Hewlett-Packard. Required: Indicate whether each transaction is classified as a financing, investing, or operating activity.
> On January 1, Twister Enterprises issues $600,000 of 6% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate on the issue date is 7%. National Hydraulics, a supplier of mechanical parts
> As a long-term investment at the beginning of the year, Willie Winn Track Shoes purchased 25% of Betty Will Company’s 34 million shares outstanding for $178 million. During the year, Betty Will earned net income of $130 million and distributed cash divid
> Ray and Rachel are considering the purchase of two deluxe kitchen ovens. The first store offers the two ovens for $3,500 with payment due today. The second store offers the two ovens for $3,700 due in one year. Required: Assuming an annual discount rate
> The four actors below have just signed a contract to star in a dramatic movie about relationships among hospital doctors. Each person signs independent contracts with the following terms: Required: Assuming an annual discount rate of 9%, which of the fou
> You want to save for retirement. Assuming you are now 25 years old and you want to retire at age 55, you have 30 years to watch your investment grow. You decide to invest in the stock market, which has earned about 13% per year over the past 80 years and
> The four people below have the following investments. Required: Determine which of the four people will have the greatest investment accumulation in six years.
> The following condensed information is reported by Sporting Collectibles. Required: 1. Calculate the following profitability ratios for 2021: a. Gross profit ratio. b. Return on assets. c. Profit margin. d. Asset turnover. e. Return on equity. 2.Determin
> Refer to the information provided for Plasma Screens Corporation in E12–7. Required: 1. Calculate the following profitability ratios for 2021: a. Gross profit ratio. b. Return on assets. c. Profit margin. d. Asset turnover. e. Return on equity. 2. When w
> The balance sheets for Plasma Screens Corporation and additional information are provided below. Required: 1. Calculate the following risk ratios for 2021: a. Receivables turnover ratio. b. Inventory turnover ratio. c. Current ratio. d. Acid-test ratio.
> Standard & Poor’s is a global leader in credit ratings and credit risk analysis. Go to its website at standardandpoors.com. Required: 1. Click on “ABOUT US” then “Key Statistics” under “S&P Rating Services.” About how much debt is covered by Standard & P
> Refer to the information for Adrian Express in E12–5. Industry averages for the following profitability ratios are as follows: Required: 1. Calculate the five profitability ratios listed above for Adrian Express. 2. Do you think the com
> The 2021 income statement of Adrian Express reports sales of $19,310,000, cost of goods sold of $12,250,000, and net income of $1,700,000. Balance sheet information is provided in the following table. Industry averages for the following four risk ratios
> The balance sheets for Federer Sports Apparel for 2022 and 2021 are presented below. Required: 1. Prepare a vertical analysis of the balance sheet data for 2022 and 2021. Express each amount as a percentage of total assets. 2. Prepare a horizontal analys
> Refer to the information provided in E12–2. Required: Prepare a horizontal analysis for 2022 using 2021 as the base year.
> The income statements for Federer Sports Apparel for 2022 and 2021 are presented below. Required: Prepare a vertical analysis of the data for 2022 and 2021.
> Attached is a schedule of five proposed changes at the end of the year. Required: 1. Indicate whether each of the proposed changes is conservative, aggressive, or neutral. 2. Indicate whether the total effect of all the changes is conservative, aggressiv
> Dwight’s Trophy Shop is considering the following accounting changes: a. Increase the allowance for uncollectible accounts. b. When costs are going up, change from LIFO to FIFO. c. Change from the straight-line method of depreciation to declining-balance
> Shaquille Corporation has operating income of $1.7 million, a loss on write-down of inventory of $200,000, and income tax expense of $425,000 for the year ended December 31, 2021, before considering the following item: a $275,000 gain, after tax, from th
> LeBron’s Bookstores has two divisions: books and electronics. The electronics division had another great year in 2021 with net sales of $11 million, cost of goods sold of $6.5 million, operating expenses of $3 million, and income tax expense of $375,000.
> As an auditor for Bernard and Thomas, you are responsible for determining the proper classification of income statement items in the audit of California Sports Grill. a. One of the company’s restaurants was destroyed in a forest fire that raged through S
> The Tony Hawk Skate Park was built in early 2021. The construction was financed by a $3,000,000, 7% note due in 6 years, with payments of $51,147 required each month. The first year has not been as profitable as hoped. The discussion at the executive boa
> Match (by letter) the following items with the description or example that best fits. Each letter is used only once. Descriptions a. A company’s ability to pay its current liabilities. b. Accounting choices that result in reporting lowe
> Software Distributors reports net income of $65,000. Included in that number is depreciation expense of $15,000 and a loss on the sale of land of $6,000. A comparison of this year’s and last year’s balance sheets reveals a decrease in accounts receivable
> Hardware Suppliers reports net income of $165,000. Included in net income is a gain on the sale of land of $20,000. A comparison of this year’s and last year’s balance sheets reveals an increase in accounts receivable of $35,000, an increase in inventory
> Technology Solutions’ format for the statement of cash flows was corrupted by a computer virus, as follows: Required: Prepare a correct format for Technology Solutions to use in preparing the statement of cash flows.
> Refer to the transactions between Ernie’s Electronics and Bert’s Bargain House recorded in E11–5. Required: Analyze each of the four transactions from the perspective of Bert’s Bargain House. Indicate in which section of the statement of cash flows each
> Ernie’s Electronics had the following transactions with Bert’s Bargain House: 1. Ernie sold Bert land, originally purchased for $180,000, at a sales price of $195,000, resulting in a gain on sale of land of $15,000. 2. Ernie borrowed $100,000 from Bert,
> Wi-Fi, Inc., has the following selected transactions during the year. 1. Issues $20 million in bonds. 2. Purchases equipment for $80,000. 3. Pays a $20,000 account payable. 4. Collects a $15,000 account receivable. 5. Exchanges land for a new patent. Bot
> Analysis of an income statement, balance sheet, and additional information from the accounting records of Gadgets, Inc., reveals the following items. 1. Purchase of a patent. 2. Depreciation expense. 3. Decrease in accounts receivable. 4. Issuance of a n
> Consider the four independent situations below. Required: 1. Calculate cash paid for operating expenses. 2. Prepare the summary journal entry for each situation.
> 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. Calculate the debt to equity ratio for American Eagle and Buc
> Discount Computers is in its second year of business providing computer repair services in the local community and reselling used computers on the Internet. The company is owned by 10 investors, each investing $100,000. Justin Lake was hired as president
> Consider the four independent situations below. Required: 1. Calculate cash paid to suppliers. 2. Prepare the summary journal entry for each situation.
> Consider the three independent situations below (amounts are $ in millions): Required: 1. Calculate cash received from customers. 2. Prepare the summary journal entry for each situation.
> The income statement for Electronic Wonders reports net sales of $91,758 million and cost of goods sold of $69,278 million. An examination of balance sheet amounts indicates accounts receivable increased $1,733 million, inventory increased $883 million,
> Mega Screens, Inc., reports net sales of $3,200,000, cost of goods sold of $2,000,000, and income tax expense of $150,000 for the year ended December 31, 2021. Selected balance sheet accounts are as follows: Required: Calculate cash received from custome
> Refer to the information provided for Peach Computer in E11–11. Required: Prepare the operating activities section of the statement of cash flows for Peach Computer using the direct method.
> Zoogle has the following selected data ($ in millions): Required: 1. Calculate the return on assets. 2. Calculate the cash return on assets. 3. Calculate the cash flow to sales ratio and the asset turnover ratio.
> Refer to the information in E11–12. Required: Calculate net cash flows from financing activities.
> Dristell Inc. had the following activities during the year (all transactions are for cash unless stated otherwise): a. A building with a book value of $400,000 was sold for $500,000. b. Additional common stock was issued for $160,000. c. Dristell purchas
> Portions of the financial statements for Peach Computer are provided below. Required: Prepare the operating activities section of the statement of cash flows for Peach Computer using the indirect method.
> Financial information for Buckle is presented in Appendix B at the end of the book. Required: 1. Calculate the debt to equity ratio for the past two years. Did the ratio increase or decrease in the more recent year? 2. Calculate the return on assets for
> The balance sheets for Plasma Screens Corporation, along with additional information, are provided below: Required: Prepare the statement of cash flows using the indirect method.
> Match (by letter) the following items with the description or example that best fits. Each letter is used only once. Descriptions a. Begins with net income and then lists adjustments to net income in order to arrive at operating cash flows. b. Item inclu
> Power Drive Corporation designs and produces a line of golf equipment and golf apparel. Power Drive has 100,000 shares of common stock outstanding as of the beginning of 2021. Power Drive has the following transactions affecting stockholders’ equity in 2
> On March 15, American Eagle declares a quarterly cash dividend of $0.125 per share payable on April 13 to all stockholders of record on March 30. Required: Record American Eagle’s declaration and payment of cash dividends for its 210 million shares.
> Refer to the information in E10–6. In its first year of operations, Finishing Touches has net income of $160,000 and pays dividends at the end of the year of $94,500 ($1 per share) on all common shares outstanding and $2,400 on all preferred shares outst
> Finishing Touches has two classes of stock authorized: 8%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2021, its first year of operations: January 2 Issues 100,000 shares of common stock for $
> Italian Stallion has the following transactions during the year related to stockholders’ equity. February 1 Issues 6,000 shares of no-par common stock for $16 per share. May 15 Issues 700 shares of $10 par value preferred stock for $13 per share. October
> Nathan’s Athletic Apparel has 2,000 shares of 5%, $100 par value preferred stock the company issued at the beginning of 2020. All remaining shares are common stock. The company was not able to pay dividends in 2020, but plans to pay dividends of $22,000
> Clothing Frontiers began operations on January 1 and engages in the following transactions during the year related to stockholders’ equity. January 1 Issues 700 shares of common stock for $50 per share. April 1 Issues 110 additional shares of common stoc
> Your friend, Jonathon Fain, is an engineering major with an entrepreneurial spirit. He wants to start his own corporation and needs your accounting expertise. He has no idea what the following terms mean: (1) authorized stock, (2) issued stock, (3) outst
> Financial information for American Eagle is presented in Appendix A at the end of the book. Required: 1. Calculate the debt to equity ratio for the past two years. Did the ratio increase or decrease the more recent year? 2. Calculate the return on assets
> On January 1, 2021, the general ledger of Grand Finale Fireworks includes the following account balances: During January 2021, the following transactions occur: January 2 Issue an additional 2,000 shares of $1 par value common stock for $40,000. January
> Financial information for Forever 18 includes the following selected data: Required: 1. Calculate earnings per share in 2020 and 2021. Did earnings per share increase in 2021? 2. Calculate the price-earnings ratio in 2020 and 2021. In which year is the s
> The financial statements of Friendly Fashions include the following selected data (in millions): Required: 1. Calculate the return on equity in 2021. 2. Calculate the dividend yield in 2021. 3. Calculate earnings per share in 2021. 4. Calculate the price
> United Apparel has the following balances in its stockholders’ equity accounts on December 31, 2021: Treasury Stock, $850,000; Common Stock, $600,000; Preferred Stock, $3,600,000; Retained Earnings, $2,200,000; and Additional Paid-in Capital, $8,800,000.
> 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 information in E10–9. Power Drive Corporation has the following beginning balances in its stockholders’ equity accounts on January 1, 2021: Common Stock, $100,000; Additional Paid-in Capital, $5,500,000; a
> Refer to the information in E10–9. Power Drive Corporation has the following beginning balances in its stockholders’ equity accounts on January 1, 2021: Common Stock, $100,000; Additional Paid-in Capital, $5,500,000; and Retained Earnings, $3,000,000. Ne
> On September 1, the board of directors of Colorado Outfitters, Inc., declares a stock dividend on its 10,000, $1 par, common shares. The market price of the common stock is $30 on this date. Required: 1. Record the stock dividend assuming a small (10%) s
> Match (by letter) the following terms with their definitions. Each letter is used only once. Definitions a. Shareholders can lose no more than the amount they invest in the company. b. Corporate earnings are taxed twice—at the corporate
> On January 1, 2021, Splash City issues $500,000 of 9% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. Required: Assuming the market interest rate on the issue date is 8%, the bonds will issue at $549,482.
> Tony’s favorite memories of his childhood were the times he spent with his dad at camp. Tony was daydreaming of those days a bit as he and Suzie jogged along a nature trail and came across a wonderful piece of property for sale. He turned to Suzie and sa
> On January 1, 2021, Splash City issues $500,000 of 9% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. Required: Assuming the market interest rate on the issue date is 10%, the bonds will issue at $457,102.
> On January 1, 2021, Splash City issues $500,000 of 9% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. Required: Assuming the market interest rate on the issue date is 9%, the bonds will issue at $500,000.
> On June 30, 2021, Exploration Inc. signs a lease requiring quarterly payments each year for the next five years. Each of the 20 quarterly payments is $29,122.87, with the first lease payment beginning September 30. The company’s normal borrowing rate is
> On June 1, 2021, Florida National leased a building. The lease agreement calls for Florida National to make lease payments of $3,618.18 each month for the next two years, with the first lease payment beginning June 30. The company’s normal borrowing rate
> Coney Island enters into a lease agreement for a new ride. The lease payments have a present value of $2 million. Prior to this agreement, the company’s total assets are $25 million and its total liabilities are $15 million. Required: 1. Calculate total
> On January 1, 2021, Jalen Company purchased land costing $800,000. Instead of paying cash at the time of purchase, Jalen plans to make four installment payments of $215,221.64 on June 30 and December 31 in 2021 and 2022. The payments include interest at
> On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances: During January 2021, the following transactions occur: January 1 Borrow $100,000 from Captive Credit Corporation. The installment note bears interest at
> Two online travel companies, E-Travel and Pricecheck, provide the following selected financial data: Required: 1. Calculate the debt to equity ratio for E-Travel and Pricecheck. Which company has the higher ratio? 2. Calculate the times interest earned r
