Why are large corporations often described as publicly owned?
> Sarah Miller is the proprietor of a small manufacturing business. She is considering the possibility of joining in partnership with Will Bracken, whom she believes will be a highly competent and congenial partner. Prepare a brief statement outlining the
> Old Victrola, Inc., produces top-quality stereos and uses process costing. The manufacture of stereos is such that direct materials, labor, and overhead are all added evenly throughout the production process. Due to the smooth production process, only on
> At the beginning of the current year, Wexler Corporation had dividends payable of $1,600,000. During the current year, the company declared cash dividends of $4,500,000, of which $970,000 appeared as a liability in the statement of financial position (ba
> Briefly explain the distinction between controllable fixed costs and committed fixed costs. Also explain the nature and purpose of performance margin in a responsibility income statement.
> Sanlucas, Inc., provides home inspection services to its clients. The following is the company’s trial balance dated June 1, current year. Sanlucas engaged in the following transactions in June Instructions: a. Record the company&acir
> Glen Pool Club, Inc., has an installment loan outstanding with a current balance of $150.000. The company makes monthly installments of $1,543, which include interest computed at an annual rate of 6 percent. a. Prepare a partial amortization table showi
> What amounts are debited to the Work in Process Inventory account during the year? What amounts are credited to this account? What does the year-end balance in this account represent?
> Describe the usual nature of the following features as they apply to a share of preferred stock: (a) cumulative, and (b) convertible.
> In a recent annual report the chief executive officer of Kimberly-Clark outlined his plans as follows. We have four reportable global business segments: Personal Care, Consumer Tissue, K-C Professional (KCP) and Health Care . . . Key strategies for our s
> Assume that on May 1, Zavior Corporation (a U.S. company) sells goods to a Portuguese corporation at a price of 100,000 euros, with payment due within three months. At the date of the sale, the exchange rate is $1.20 per euro. The Portuguese customer wai
> Fifteen transactions or events affecting Phil mar, Inc., are as follows. a. Made a year-end adjusting entry to accrue interest on a note payable that has the interest rate stated separately from the principal amount. b. A liability classified for severa
> Distinguish between paid-in capital and retained earnings of a corporation. Why is such a distinction useful?
> Arrow Products typically earns a contribution margin ratio of 25 percent and has current fixed costs of $80,000. Arrow’s general manager is considering spending an additional $20,000 to do one of the following. 1. Start a new ad campaign that is expected
> The balances in the perpetual inventory accounts of Anditon Manufacturing Corporation at the beginning and end of the current year are as follows. The total dollar amounts debited and credited during the year to the accounts used in recording manufactur
> Lind Manufacturing had the following account balances as of January 1. During the month of January, all of the following occurred. 1. Direct labor costs were $460,000 for 18,400 hours worked. 2. Direct materials costing $340,000 and indirect materials c
> Darby Press publishes two lines of books—fiction and nonfiction. Cost and revenue data for each product line for the current month are as follows In addition to the costs shown, the company incurs monthly fixed costs of $260,000 common
> Distinguish between corporations and sole proprietorships in terms of the following characteristics. a. Owners’ liability for debts of the business. b. Transferability of ownership interest. c. Continuity of existence. d. Federal taxation on income.
> The following information was reported in a recent balance sheet issued by Microsoft Corporation. 1. The book value of property and equipment is listed at $23.8 billion (net of depreciation). Related notes to the financial statements reveal that accumul
> An analysis of the income statement and the balance sheet accounts of RPZ Imports at December 31 of the current year, provides the following information. Additional Information: 1. Except as noted in 4, payments and proceeds relating to investing transa
> Identify whether each of the following costs of Granite Construction, Inc., would be classified as direct labor, direct materials, manufacturing overhead, or as selling, general, and administrative costs. a. Hourly wages paid to backhoe operators. b. C
> MURDER TO GO! writes and manufactures murder mystery parlor games that it sells to retail stores. The following is per-unit information relating to the manufacture and sale of this product. Determine the following, showing as part of your answer the for
> If you were going to start a corporation and expected to need to raise capital from several investors, would you include preferred stock in your capital structure? Why or why not? If your answer is that you would include preferred stock, what features wo
> Tom Klee is the controller of Watson Manufacturing, Inc. He estimates that the company’s breakeven point in sales dollars is $2 million. However, he recently told all of the regional sales managers that sales of $3 million were needed to break even. He a
> Of the three types of business activities summarized in a statement of cash flows, which type is least likely to show positive net cash flows in a successful, growing business? Explain your reasoning.
> The basic accounting equation for a corporation is Assets = Liabilities + Stockholders ‘Equity. Stockholders’ equity is further divided into two categories: paid-in capital and retained earnings. What are the major transactions and other financial activi
> Wharton, Inc., pays income taxes on capital gains (including gains on marketable securities) at a rate of 30 percent. At December 31, year 1, the company owns marketable securities that cost $180,000 but have a current market value of $220,000. a. How w
> Donegal’s Lawn Care Service began operations in July, current year. The company uses the following general ledger accounts The company engaged in the following transactions during its first month of operations Instructions: a. Record
> Leases most of its commercial aircraft and is currently committed to pay almost $15 billion in future lease obligations. However, notes to the company’s financial statements reported only $297 million of these commitments as long-term capital lease obli
> Nicholls Produce has two product lines—fresh and frozen. Cost and revenue data for each product line for the current month are as follows In addition to the costs shown, the company incurs monthly fixed costs of $30,000 common to both
> The pharmaceutical industry spends billions of dollars each year on research and development. Rather than capitalize these R&D expenditures as intangible assets, companies are required to charge them to expense in the year incurred. Perform a keyword sea
> For each of the six independent situations that follow, compute the missing amounts. a. Using contribution margin per unit: b. Using the contribution margin ratio:
> Moor-n-More operates a boat mooring service in the downtown harbor with 80 docking spaces. The business is open 3,000 hours per year. The mooring charge per boat is $5 per hour; the average boater docks for two hours. Moor-n-More rents the harbor space f
> In many states, corporation law requires that retained earnings be restricted for dividend purposes to the extent of the cost of treasury shares. What is the reason for this legal rule?
> Determine the following: a. The unit contribution margin. b. The number of units that must be sold each month to break even. c. The number of units that must be sold to earn an operating income of $7,600,000 per month. a. What total monthly sales revenu
> What is treasury stock? Why do corporations purchase their own shares? Is treasury stock an asset? How should it be reported in the balance sheet?
> Safe-Haul manufactures custom trailer equipment. In June, the company built 400 utility trailers for Cole’s Trailer Sales. Assembly of these units required 1,200 hours of direct labor at a cost of $30,000, direct materials costing $333,000, and 600 hours
> Hernandez Enterprises has two divisions—Retail and Wholesale. Cost and revenue data for each division for the current month are as follows. In addition, fixed costs that are common to both divisions amount to $96,000. Instructions: a.
> The following is information concerning a product manufactured by Ames Brothers. Determine the following: a. The unit contribution margin. b. The number of units that must be sold each month to break even. c. The number of units that must be sold to ear
> What is the purpose of a stock split?
> Discuss each of the following situations, indicating whether the situation is a loss contingency that should be recorded or disclosed in notes to the financial statements of Freedom Airlines. If the situation is not a loss contingency, explain how (if at
> One of your responsibilities as division manager of an important component of Paramount Industries is to oversee accounting for the division. One of the issues you are responsible for on a continuous basis is whether particular costs should be expensed i
> Several years ago Benet Security purchased a well-known trademark for padlocks and other security products for$150,000. After using the trademark for three years, Benet Security discontinued it altogether when the company withdrew from the lock business
> Beverley Products, has two divisions—Residential Products and Commercial Products. Cost and revenue data for each division for the current month are as follows. In addition, fixed costs that are common to both divisions amount to $60,0
> The following information is available regarding the total manufacturing overhead of Bursa Mfg. Co. for a recent four-month period. a. Use the high-low method to determine: 1. The variable element of manufacturing overhead costs per machine-hour. 2. The
> An analysis of the income statement and the balance sheet accounts of Holmes Export Co. at December 31 of the current year, provides the following information. Additional Information: 1. Except as noted in 4, payments and proceeds relating to investin
> In the stock market crash of October 19, 1987, the market price of IBM’s capital stock fell by over $31 per share. Explain the effects, if any, of this decline on the recorded stockholders’ equity in IBM’s balance sheet.
> Water World sells three products: ski vests, slalom skis, and ski ropes. Information related to each product line is provided as follows. The company’s annual fixed costs are approximately $741,000. a. Compute total annual sales that t
> In an effort to make the company more competitive, Fast Guard, Inc., incurred significant expenses related to a reduction in the number of employees, consolidation of offices and facilities, and disposition of assets that are no longer productive. Explai
> When Mary Potts arrived at her store on the morning of January 29, she found empty shelves and display racks; thieves had broken in during the night and stolen the entire inventory. Accounting records showed that Potts had inventory costing $50,000 on Ja
> Nicholls Provisions has been asked to submit a bid on supplying tents to the Boy Scouts of America. The company’s current cost structure per cent is as follows. a. Assume that there would be no variable sales commission on this special
> The following T accounts summarize the flow of manufacturing costs during the current year through the ledger accounts of Double Bar Corporation. Instructions: From the data supplied, indicate the following amounts. Some amounts are shown in the T accou
> In the past, Abbott Labs had two bond issues outstanding with the following characteristics. Instructions Answer the following questions regarding these bond issues. a. Which issue, A or B, has the higher effective rate of interest? How can you tell?
> Tops manufacture TVs. The company’s high-definition TVs are very popular, but it has an Inventory of 400 large-screens, standard-definition TVs for which there is little demand. Tops is considering the following options for disposing of these TVs. 1. Sel
> Some bonds now being bought and sold by investors on organized securities exchanges were issued when interest rates were much higher than they are today. Would you expect these bonds to be trading at prices above or below their face values? Explain
> Shown is the information needed to prepare a bank reconciliation for Warren Electric at December 31. 1. At December 31, cash per the bank statement was $15,200; cash per the company’s records was $17,500. 2. Two debit memoranda accompanied the bank sta
> The following T accounts summarize the flow of manufacturing costs during the current year through the ledger accounts of Payback Corporation. Instructions: From the data supplied, indicate the following amounts. Some amounts are shown in the T accounts
> J.C. Penney Company, Inc., uses LIFO in applying the lower-of-cost-or-market. Recent financial statements were used to compile the following information (dollar figures in millions). Instructions: a. Using the information provided, compute the followin
> Schreiner Instruments currently produces and sells 80,000 financial calculators monthly. At this level, its variable cost per calculator is $9 and its fixed cost per calculator is $6. The company’s monthly break-even point is 24,000 calculators. Determin
> Wilson Dynamics makes flanges in a continuous process through two departments: Forging and Assembly. All direct materials are added at the beginning of the process in the Forging Department, whereas all direct materials are added at the end of the proces
> An analysis of the income statement and the balance sheet accounts of Hampton, Inc., at December 31 of the current year, provides the following information. Additional Information: 1. Except as noted in 4, payments and proceeds relating to investing tr
> Why do bond prices vary inversely with interest rates?
> One of Spa Magic’s products is a whirlpool spa. Two processing departments are involved in the whirlpool spa’s manufacture. The tub is assembled in one department, and a second department assembles and installs the mot
> Guthrie Industries manufactures and sells dog collars. The collars sell for $12 each. Information about the company’s costs is as follows. a. Determine the company’s monthly break-even point in units. b. Determine the
> Frisbee Hardware uses a perpetual inventory system. At year-end, the Inventory account has a Balance of $250,000, but a physical count shows that the merchandise on hand has a cost of only $246,000. a. Explain the probable reason(s) for this discrepanc
> Insightful Instruments produces two models of binoculars. Information for each model is as follows. Total manufacturing overhead amounts to $180,000 per month, one-third of which is fixed. The demand for either product is sufficient to keep the plant
> Seattle Boat Company pays federal income taxes at a rate of 35 percent on taxable income. Compute the company’s annual after-tax cost of borrowing on a 5 percent, $5 million bond issue. Express this after-tax cost as a percentage of the borrowed $5 milli
> The following information relates to the only product sold by Mastrolia Manufacturing. a. Compute the contribution margin ratio and the dollar sales volume required to break even. b. Assuming that the company sells 30,000 units during the current year,
> Briefly explain the income tax advantage of raising capital by issuing bonds rather than by selling capital stock.
> Branson Electric prepared the following condensed income statements for two successive years. At the end of 2020 (right-hand column), the inventory was understated by $40,000, but the error was not discovered until after the accounts had been closed and
> Research China and write a brief comparison of Chinese political-legal, economic, cultural, and infrastructure factors as contrasted to those in the United States. Explain how these factors might affect accounting practices in the two countries.
> Use the financial statements of Home Depot, Inc., in Appendix A of this text to answer the following questions.
> Song Meister is a popular music store. During the current year, the company’s cost of goods available for sale amounted to $330,000. The retail sales value of this merchandise amounted to $600,000. Sales for the year were $520,000. Instructions: a. Us
> Fenwick Corporation’s manufacturing and finished goods warehouse facilities burned to the ground on January 31. The loss was fully covered by insurance. The insurance company wanted to know the cost of the inventories destroyed in the f
> Prepare general journal entries to a. Summarize the manufacturing costs charged to job no. 321. (Use one compound entry.) b. Record the completion of job no. 321. c. Record the credit sale of 4,000 units from job no. 321 at a unit sales price of $10. R
> Prepare common size income statements for Price Company, a sole proprietorship, for the two years shown as follows by converting the dollar amounts into percentages. For each year, sales will appear as 100 percent and other items will be expressed as a p
> In the long run, is it more important for a business to have positive cash flows from its operating activities, investing activities, or financing activities? Why?
> Explain the fair value adjustment procedure for marketable equity securities
> The accounting staff of Lambert Company has assembled the following information for the year ended December 31 of the current year. Instructions: Prepare a statement of cash flows in the format illustrated in Exhibit 13–1. Place br
> A friend of yours just purchased a small tract of land and has taken out a $50,000, 11 percent mortgage, payable at $476.17 per month. (The relatively high 11 percent interest rate reflects the fact that your friend is still in school and considered a hi
> Home Depot, Inc.’s income statements for 2016, 2017, and 2018 show basic earnings per share of $6.47, $7.33, and $9.78, respectively. Diluted earnings per share figures are slightly lower than these numbers, indicating the impact of potential capital sto
> Explain why an employer’s total cost of a payroll may exceed by a substantial amount the wages and salaries earned by employees.
> Hound Havens produces plastic doghouses as part of a continuous process through two departments: Molding and Finishing. Direct materials and conversion are added throughout the month in both departments, but at different rates. The information presented
> Thompson Tools produces dampers in a continuous process through two departments: Assembly and Packaging. All direct materials are added at the beginning of the process in the Assembly Department, whereas all direct materials are added at the end of the p
> Purcell’s, Inc., sells a single product (Pulse) exclusively through newspaper advertising. The comparative income statements and balance sheets are for the past two years. Additional Information: The following information regarding t
> Osier Company has outstanding 500,000 shares of $50 par value common stock that originally sold for $60 per share. During the three most recent years, the company carried out the following activities in the order presented: declared and distributed a 10
> Define current liabilities and long-term liabilities. Under what circumstances a 10-year bond issue might be classified as a current liability? Under what circumstances might a note payable maturing 30 days after the balance sheet date be classified as a
> Caster Corporation is considering implementation of a JIT inventory system. The company’s industrial engineer recently conducted a study to determine the average number of days spent in each activity of the production process. The follo
> Minor, Inc., had revenue of $572,000 and expenses (other than income taxes) of $282,000 for the current year. The company is subject to a 35 percent income tax rate. In addition, Minor had a gain from foreign currency translation of $1,700 before income
> Listed are seven publicly owned corporations and a liability that regularly appears in each corporation’s balance sheet? a. Wells Fargo & Company (banking): Deposits—interest bearing b. The New York Times Company (newspaper publisher): Unexpired subscr
> Explain the relative priority of the claims of owners and of creditors to the assets of a business. Do all creditors have equal priority? Explain.
> Rogers Products uses a periodic inventory system. The company’s records show the beginning inventory of PH4 oil filters on January 1 and the purchases of this item during the current year to be as follows. A physical count indicates 20
> Fick Psychological Services, Inc., closes its temporary accounts once each year on December 31. The company recently issued the following income statement as part of its annual report. Fick’s statement of retained earnings indicates th
> What does the account Unrealized Holding Gain (or Loss) on Investment represent? How is this account presented in the financial statements for short-term marketable equity securities?
> The accounting staff of Welch Company has assembled the following information for the year ended December 31 of the current year. Instructions: Prepare a statement of cash flows in the format illustrated in Exhibit 13–1. Place bracket
> Define liabilities. Identify several characteristics that distinguish liabilities from owners’ equity
> You have now learned about the following financial statements issued by corporations: statementof financial position (balance sheet), income statement, statement of retained earnings, statementof stockholders’ equity, statement of comprehensive income, a
> Delray Industries manufactures plastic wading pools as part of a continuous process through two departments: Molding and Finishing. Direct materials and conversion are added throughout the month in both departments, but at different rates. The informatio
> Sea Travel sells motor boats. One of Sea Travel’s most popular models is the Wing. During the current year, Sea Travel purchased 12 Wings at the following costs. On April 28, Sea Travel sold five Wings to the Jack Sport racing team. Th
> S & X Co. is a retail store owned solely by Joe Saunder. During the month of November, the equity accounts were affected by the following events. Instructions: a. Assuming that the business is organized as a sole proprietorship: 1. Prepare the jou
> On December 31, Richland Farms sold a tract of land, which had cost $930,000, to Skyline Developers in exchange for $150,000 cash and a 5-year, 4 percent note receivable for $900,000. Interest on the note is payable annually, and the principal amount is
