Wefald Company sold bonds with a face value of $600,000 for $580,000. The bonds have a coupon rate of 10 percent, mature in 10 years, and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Record the sale of the bonds on January 1 and the payment of interest on June 30 of this year, without the use of a discount account. Wefald uses the straight-line amortization method.
> How does the production possibilities frontier illustrate scarcity?
> Tim Hortons has exploded to become a dominant player among quick-serve restaurants. In 2001, it took the risk by switching to centralized production of baked goods, which lowered its labour costs and increased its sales volume. Draw a graph to show the e
> Why is the price at which the quantity demanded equals the quantity supplied the equilibrium price?
> Over what range of prices does a surplus arise? What happens to the price when there is a surplus?
> Over what range of prices does a shortage arise? What happens to the price when there is a shortage?
> What is the equilibrium price of a good or service?
> What happens to the quantity of cellphones supplied and the supply of cellphones if the price of a cellphone falls?
> What does the supply curve tell us about the producer’s minimum supply price?
> Define the quantity supplied of a good or service.
> Why does demand not change when the price of a good changes with no change in the other influences on buying plans?
> Define the quantity demanded of a good or service.
> Music retailing is changing: Sony Music and Amazon are selling online, discount stores are selling at low prices, and downtown music retailers are all struggling. a. Draw the PPF curves for downtown music retailers and online music retailers before and a
> Think of examples of goods whose relative price has risen or fallen by a large amount.
> If the virus in Problem 22 hits just as the new dip in Problem 21 comes onto the market, how do the equilibrium price and equilibrium quantity of chips change? Problem 22: In Problem 20, if a virus destroys potato crops and the quantity of potato chips
> In Problem 20, if a virus destroys potato crops and the quantity of potato chips produced decreases by 40 million bags a week at each price, how does the supply of chips change? Problem 20: The demand and supply schedules for potato chips are: Quant
> Explain why a relative price is an opportunity cost.
> What features of the world market for crude oil make it a competitive market?
> What is the source of the gains from trade?
> Capital accumulation and technological change bring economic growth: Production that was unattainable yesterday becomes attainable today; production that is unattainable today will become attainable tomorrow. Why doesn’t economic growth bring an end to s
> What are the main functions of markets?
> In response to the Gates Malaria Forum in October 2007, countries are debating the pros and cons of eradication. Dr. Arata Kochi of the World Health Organization believes that with enough money malaria cases could be cut by 90 percent, but it would be ve
> Does economic growth overcome scarcity?
> Explain why Hong Kong has experienced faster economic growth than Canada.
> How does economic growth influence the production possibilities frontier?
> What generates economic growth?
> How does the marginal benefit from a good change as the quantity produced of that good increases?
> How does the production possibilities frontier illustrate opportunity cost?
> Calculate the slope across the arc AB . 100 40 1.5 10
> How does the production possibilities frontier show that every choice involves a tradeoff?
> Which of the following statements is positive, which is normative, and which can be tested? a. Canada should cut its imports. b. China is Canada’s largest trading partner. c. The federal government should increase the production of biofuels.
> Calculate the slope of the relationship in Problem 4 between 2,253 and 3,372 theatres Problem 4: Draw a graph of the relationship between the revenue per theatre on the y -axis and the number of theatres on the x -axis. Reven The unbe dolan Movia pe
> Calculate the slope of the relationship in Problem 4 between 3,775 and 2,253 theatres. Problem 4: Draw a graph of the relationship between the revenue per theatre on the y -axis and the number of theatres on the x -axis. Reven The unbe dolan Movia p
> Eminem will hit the road with Rihanna offering an awesome deal—buy one and get one free! When Eminem gave away tickets, what was free and what was scarce? Explain your answer.
> Super Savers Department Store’s balance sheet revealed the following information: Current assets ………………………………………$750,000 Noncurrent assets ………………………………….450,000 Noncurrent liabilities ……………………………..400,000 Stockholders’ equity ……………………………….380,000 Determ
> What is the present value of $500,000 to be paid in 10 years? The annual interest rate is 8%.
> Refer to the information in Exercsie 7. Information given in Exercise 7: Hulme Company operates a small manufacturing facility as a supplement to its regular service activities. At the beginning of 2017, an asset account for the company showed the follo
> GMAC Corporation is planning to issue bonds with a face value of $250,000 and a coupon rate of 6 percent. The bonds mature in five years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. De
> The balance sheet for Stevenson Corporation reported the following: noncurrent assets, $240,000; total assets, $360,000; noncurrent liabilities, $176,000; total stockholders’ equity, $94,000. Compute Stevenson’s working capital.
> RKO Company sold bonds with a face value of $850,000 for $910,000. The bonds have a coupon rate of 8 percent, mature in 10 years, and pay interest annually every December 31. All of the bonds were sold on January 1 of this year. Using a premium account,
> Waterhouse Company plans to issue bonds with a face value of $500,000 and a coupon rate of 10 percent. The bonds will mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds are sold on January 1 of this year. Det
> Coffman Company sold bonds with a face value of $1,000,000 for $940,000. The bonds have a coupon rate of 10 percent, mature in 10 years, and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Re
> Coffman Company sold bonds with a face value of $1,000,000 for $940,000. The bonds have a coupon rate of 10 percent, mature in 10 years, and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Us
> Trew Company plans to issue bonds with a face value of $900,000 and a coupon rate of 6 percent. The bonds will mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds are sold on January 1 of this year. Determine
> Oak Corporation’s financial statements for the current year showed the following: Income Statement Revenues ………………………………………………………$800,000 Expenses ………………………………………………………(620,000) Interest expense ……………………………………………...(12,600) Pretax income …………………………………………
> You purchased a new car and promised to pay the dealership five payments of $8,000 at the end of each of the next five years. The applicable interest rate is 8%. What is the present value of this annuity?
> Using the data from the previous exercise, complete the following requirements. Data from previous Exercise: Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. Neiman Marcus is one of
> Using Table E.1 in Appendix E, fill in the present value factors for the following interest rates and periods: Table E1: Present Value Factors i = 5% i = 10% i = 14% n = 4 n = 7 n = 10 PV of $1 PV of annuity of $1 Pariad 1.a% 2.0% 3
> On April 1 of the current year, a company borrowed $4,000 from a bank. The annual interest rate was 12%. When the company prepares its year-end financial statements on December 31, how much will it report as interest expense associated with this note?
> If you hold a valid contract that will pay you $8,000 cash in 10 years and the going annual rate of interest is 10%, what is the contract’s present value? Show your computations.
> Wefald Company sold bonds with a face value of $600,000 for $580,000. The bonds have a coupon rate of 10 percent, mature in 10 years, and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Using
> RKO Company sold bonds with a face value of $850,000 for $910,000. The bonds have a coupon rate of 8 percent, mature in 10 years, and pay interest annually every December 31. All of the bonds were sold on January 1 of this year. Record the sale of the bo
> Using the data from the previous problem, complete the following: Required: For each transaction (including adjusting entries) listed in the previous problem, indicate the effects (e.g., cash + or −) using the format below. You do not need to include am
> Several years ago, Cyclop Company issued bonds with a face value of $1,000,000 for $1,045,000. As a result of declining interest rates, the company has decided to call the bonds at a call premium of 5 percent over par. The bonds have a current book value
> Several years ago, Cyclop Company issued bonds with a face value of $1,000,000 for $1,045,000. As a result of declining interest rates, the company has decided to call the bonds at a call premium of 5 percent over par. The bonds have a current book value
> After hearing a knock at your front door, you are surprised to see the Prize Patrol from your state’s online lottery agency. Upon opening your door, you learn you have won the lottery of $12.5 million. You discover that you have three options: (1) you ca
> Calculate the book value of a three-year-old machine that has a cost of $31,000, an estimated residual value of $1,000, and an estimated useful life of five years. The company uses straight-line depreciation.
> For each of the following transactions, determine whether cash flows from operating activities will increase, decrease, or remain the same: a. Purchased merchandise on credit. b. Paid an account payable in cash. c. Accrued payroll for the month but did n
> StarGaze Company leased a truck for three months. Accounting guidance classifies the lease as an operating lease. StarGaze makes lease payments of $800 at the end of each month. What journal entry will StarGaze enter upon signing the lease? What journal
> For each of the following scenarios, indicate whether an asset has been impaired (Y for yes and N for no) and, if so, the amount of loss that should be recorded. Is Asset Impaired? Book Estimated Fair Amount Value Future Cash Flows Value of Loss $ 15
> Wygant Corporation borrowed $290,000 on October 1 last year. The note carried a 10% interest rate with the principal and interest payable on May 1 this year. Prepare the journal entry to record the note on October 1. Prepare the adjusting entry to record
> Ospry Company has working capital in the amount of $1,240,000. For each of the following transactions, determine whether working capital will increase, decrease, or remain the same. a. Paid accounts payable in the amount of $50,000. b. Recorded accrued s
> What is the present value of 10 equal payments of $15,000 to be made at the end of each year for the next 10 years? The annual interest rate is 10%.
> A number of events over the life of a bond have effects that are reported on the statement of cash flows. For each of the following events, determine whether the event affects the statement of cash flows and, if so, whether it affects operating, investin
> Several years ago, Nicole Company issued bonds with a face value of $1,000,000 for $945,000. As a result of declining interest rates, the company has decided to call the bond at a call premium of 5 percent over par. The bonds have a current book value of
> Several years ago, Nicole Company issued bonds with a face value of $1,000,000 for $945,000. As a result of declining interest rates, the company has decided to call the bond at a call premium of 5 percent over par. The bonds have a current book value of
> Several years ago, Walters Company issued bonds with a face value of $1,000,000 at par. As a result of declining interest rates, the company has decided to call the bond at a call premium of 5 percent over par. Record the retirement of the bonds.
> Kieso Company borrowed $600,000 for three months. The annual interest rate on the loan was 11%. Kieso’s fiscal year ends on December 31. Kieso borrowed the $600,000 one month prior to the end of its current fiscal year and paid the $600,000 plus interest
> Judge Drago has decided to set up an educational fund for his favorite granddaughter, Emma, who will start college in one year. The judge plans to deposit an amount in a savings account that pays 9% annual interest. He wants to deposit an amount that is
> You are a financial adviser working with a client who wants to retire in eight years. The client has a savings account with a local bank that pays 9% annual interest. The client wants to deposit an amount that will provide her with $1,000,000 when she re
> You have just won the state lottery and have two choices for collecting your winnings. You can collect $100,000 today or receive $20,000 at the end of each year for the next seven years. A financial analyst has told you that you can earn 10% on your inve
> You have decided to buy a used car. The dealer has offered you two options: a. Pay $500 per month for 20 months and an additional $10,000 at the end of 20 months. The dealer is charging an annual interest rate of 24%. b. Make a one-time payment of $14,90
> The Jenkins Corporation has purchased an executive jet. The company has agreed to pay $200,000 per year for the next 10 years and an additional $1,000,000 at the end of the 10th year. The seller of the jet is charging 6% annual interest. Determine the li
> An investment will pay $15,000 at the end of each year for eight years and a one-time payment of $150,000 at the end of the eighth year. Determine the present value of this investment using a 7% annual interest rate.
> An investment will pay $20,000 at the end of the first year, $30,000 at the end of the second year, and $50,000 at the end of the third year. Determine the present value of this investment using a 10% annual interest rate.
> On January 1 of this year, Shannon Company completed the following transactions (assume a 10% annual interest rate): a. Bought a delivery truck and agreed to pay $60,000 at the end of three years. b. Rented an office building and was given the option of
> MoonShine Company signed a note for $50,000 to purchase a new piece of equipment. MoonShine will pay the $50,000 back at the end of two years along with any accrued interest. The annual interest rate on the loan is 6%. Compute the present value of this l
> Global Stores is downsizing and must let some employees go. Employees volunteering to leave are being offered a severance package of $118,000 cash, another $129,000 to be paid in one year, and an annuity of $27,500 to be paid each year for six years with
> Refer to the financial statements of American Eagle Outfitters in Appendix B at the end of this book. Financial Statement of American Eagle Outfitters: Required: 1. Did American Eagle pay any interest during the year? (Hint: You may need to look in the
> During the current year, Merkley Company disposed of three different assets. On January 1 of the current year, prior to the disposal of the assets, the accounts reflected the following: The machines were disposed of during the current year in the follow
> You are a financial analyst for Ford Motor Company and have been asked to determine the impact of alternative depreciation methods. For your analysis, you have been asked to compare methods based on a machine that cost $106,000. The estimated useful life
> Best Buy Co., Inc., headquartered in Richfield, Minnesota, is one of the leading consumer electronics retailers, operating more than 1,200 stores in the United States, Canada, China, and Mexico. The following was reported in a recent annual report: Requ
> At the beginning of the year, Plummer’s Sports Center bought three used fitness machines from Advantage, Inc. The machines immediately were overhauled, installed, and started operating. The machines were different; therefore, each had t
> A recent annual report for FedEx included the following note: NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PROPERTY AND EQUIPMENT. Expenditures for major additions, improvements and flight equipment modifications are cap
> On January 2, Summers Company bought a machine for use in operations. The machine has an estimated useful life of eight years and an estimated residual value of $2,600. The company provided the following expenditures: a. Invoice price of the machine, $85
> If interest rates fell after the issuance of a bond and the company decided to retire the debt early, would you expect the company to report a gain or loss on debt retirement? How would the company’s balance sheet and income statement be affected?
> The debt-to-equity and times interest earned ratios were discussed in this chapter. Which is a better indicator of a company’s ability to meet its required interest payment? Explain.
> Williams Company plans to issue bonds with a face value of $600,000 and a coupon rate of 8 percent. The bonds will mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds are sold on January 1 of this year. Determ
> Garrett Company had the following activities for a recent year ended December 31: Sold land that cost $20,000 for $20,000 cash; purchased $181,000 of equipment, paying $156,000 in cash and signing a note payable for the rest; and recorded $5,500 in depre
> Refer to the financial statements of American Eagle Outfitters in Appendix B and Urban Outfitters in Appendix C. Financial statements of American Eagle: Financial statements of Urban Outfitters: Required: 1. Compute the average number of days that acco
> Elizabeth Pie Company has been in business for 50 years and has developed a large group of loyal restaurant customers. Giant Bakery Inc. has made an offer to buy Elizabeth Pie Company for $5,000,000. The book value of Elizabeth Pie’s recorded assets and
> As part of a major renovation at the beginning of the year, Bonham’s Bakery sold shelving units (store fixtures) that were 10 years old for $1,800 cash. The original cost of the shelves was $6,500 and they had been depreciated on a straight-line basis ov
> Buzz Coffee Shops is famous for its large servings of hot coffee. Last year a customer spilled a cup of hot coffee on himself and decided to file a lawsuit against Buzz for $1,000,000. Buzz’s management thinks the chances of the company having to pay any
> Calculate the book value of a three-year-old machine that has a cost of $26,000, an estimated residual value of $1,000, and an estimated useful life of 50,000 machine hours. The company uses units-of production depreciation and ran the machine 3,200 hour
> Calculate the book value of a three-year-old machine that has a cost of $55,000, an estimated residual value of $5,000, and an estimated useful life of five years. The company uses double-declining-balance depreciation. Round to the nearest dollar.
> Nelson Company reported cost of goods sold of $690,000 last year and $720,000 this year. Nelson also reported accounts payable of $250,000 last year and $230,000 this year. Compute this year’s accounts payable turnover ratio for Nelson. Interpret the num
> Which of the following will improve liquidity? 1. A company purchases a new truck with cash. 2. A company receives cash from taking out a long-term loan that is due in five years. 3. A company substantially increases credit sales and expects to collect a
> The following information was reported by Young’s Air Cargo Service for 2014: Net fixed assets (beginning of year) $1,500,000 Net fixed assets (end of year) 2,300,000 Net operating revenues for the year 3,600,000 Net income for the year 1,600,000 Compute
> For each of the following long-lived assets, indicate its nature and the related cost allocation concept. Use the following symbols: Nature Cost Allocation Concept Land Depreciation Depletion Amortization L DR Building Equipment Natural resource B DP
> You are researching the housing market in Bloomington, Indiana, and you come upon an advertisement offering to sell a house for $240,000 with a zero interest rate mortgage. All you have to do is agree to make $4,000 payments ($240,000 ÷ 60 months) at the
> Refer to the financial statements of Urban Outfitters in Appendix C at the end of this book Financial statements of Urban Outfitters: Required: 1. What is the amount of accrued compensation at the end of the most recent reporting year? 2. Does Urban Ou
