Your parents have just retired and have asked you for some financial advice. They have decided to invest $100,000 in a company very similar to Kroger. The company has issued both common and preferred stock. What factors would you consider in giving them advice? Which type of stock would you recommend?
> Sonic Corp. operates and franchises a chain of quick-service drive-in restaurants in most of the United States and in Mexico. Customers drive up to a canopied parking space and order food through an intercom speaker system. A carhop then delivers the foo
> Selma International, Inc., reported the following information regarding its investment portfolio in the company’s 2012 annual report: Required: 1. Compute the economic return from investing ratio for 2012. 2. What do the results in re
> On June 1, 2011, Gamma Company acquired all of the net assets of Pi Company for $140,000 cash. The two companies merged, with Gamma Company surviving. On the date of acquisition, Pi Company’s balance sheet included the following: Balance Sheet at June 1
> For each of the transactions in AP12-4, indicate how the operating activities and investing activities sections of the cash flow statement (indirect method) will be affected. Information from AP12-4 Cardinal Company purchased, as a long-term investment,
> Cardinal Company purchased, as a long-term investment, some of the 200,000 shares of the outstanding common stock of Arbor Corporation. The annual accounting period for each company ends December 31. The following transactions occurred during 2012: Jan.
> What is the charter of a corporation?
> Owners’ equity is accounted for by source. What does source mean?
> What are the usual characteristics of preferred stock?
> Differentiate between common stock and preferred stock.
> Explain each of the following terms: (a) authorized capital stock, (b) issued capital stock, and (c) outstanding capital stock.
> On January 1, 2011, Frog Corporation sold a $2,000,000, 10 percent bond issue (8.5 percent market rate). The bonds were dated January 1, 2011, pay interest each June 30 and December 31, and mature in 10 years. Required: 1. Give the journal entry to reco
> Define the term corporation and identify the primary advantages of this form of business organization.
> Define retained earnings. What are the primary components of retained earnings at the end of each period?
> Identify and explain the three important dates with respect to dividends.
> What are the primary reasons for issuing a stock dividend?
> Define stock dividend. How does a stock dividend differ from a cash dividend?
> Differentiate between cumulative and noncumulative preferred stock.
> What are the two basic requirements to support the declaration of a cash dividend? What are the effects of a cash dividend on assets and stockholders’ equity?
> How is treasury stock reported on the balance sheet? How is the “gain or loss” on treasury stock that has been sold reported on the financial statements?
> Define treasury stock. Why do corporations acquire treasury stock?
> What are the two basic sources of stockholders’ equity? Explain each.
> On January 1, 2011, Victor Corporation sold a $1,400,000, 8 percent bond issue (6 percent market rate). The bonds were dated January 1, 2011, pay interest each June 30 and December 31, and mature in four years. Required: 1. Give the journal entry to rec
> Explain the distinction between par value and no-par value capital stock.
> 1. Compare a stock dividend with a cash dividend. 2. Compare a large stock dividend with a small stock dividend. 3. Describe the impact of the sale of treasury stock for more than cost on the income statement and the statement of cash flows. 4. Explain w
> Tim Hortons restaurants operate in a variety of formats. A standard Tim Hortons restaurant is a freestanding building typically ranging in size from 1,400 to 3,090 square feet with a dining room and single or double drive-thru window. The Company also ha
> United Resources Company obtained a charter from the state in January 2011, which authorized 200,000 shares of common stock, $1 par value. During the first year, the company earned $475,000 and the following selected transactions occurred in the order gi
> The following press release was issued by Haynes International: NEW YORK, March 19 (Reuters)—Haynes International Inc., a producer of high-performance nickel and cobalt-based alloys, on Monday raised $136.5 million with a U.S. initial public offering th
> King Corporation began operations in January 2011. The charter authorized the following capital stock: Preferred stock: 10 percent, $10 par, authorized 40,000 shares Common stock: $5 par, authorized 85,000 shares During 2011, the following transactions
> Witt Corporation received its charter during January 2011. The charter authorized the following capital stock: Preferred stock: 10 percent, par $10, authorized 21,000 shares Common stock: par $8, authorized 50,000 shares During 2011, the following tran
> At December 31, 2011, the records of NCIS Corporation provided the following selected and incomplete data: Common stock (par $10; no changes during the year). Shares authorized, 200,000. Shares issued, ? ; issue price $17 per share; cash coll
> Assume for each of the following independent cases that the annual accounting period ends on December 31, 2011, and that the revenue and expense accounts at that date reflect a loss of $20,000. Case A: Assume that the company is a sole proprietorship own
> Procter & Gamble is a well-known consumer products company that owns a variety of popular brands. A recent news article contained the following information: CINCINNATI, March 9 /PRNewswire-FirstCall/—The Procter & Gamble Company (NYSE: PG) today said tha
> You are a personal financial planner working with a married couple in their early 40s who have decided to invest $100,000 in corporate bonds. You have found two bonds that you think will interest your clients. One is a zero coupon bond issued by PepsiCo
> Uno Company has outstanding 52,000 shares of $10 par value common stock and 25,000 shares of $20 par value preferred stock (8 percent). On December 1, 2011, the board of directors voted an 8 percent cash dividend on the preferred stock and a 30 percent s
> Heather and Scott, two young financial analysts, were reviewing financial statements for Dell, one of the world’s largest manufacturers of personal computers. Scott noted that the company did not report any dividends in the Financing Activity section of
> Chicago Company had the following stock outstanding and retained earnings at December 31, 2011: Common stock (par $8; outstanding, 35,000 shares)........................ $280,000 Preferred stock, 10% (par $15; outstanding, 8,000 shares) ................
> RadioShack Corporation primarily engages in the retail sale of consumer electronics goods and services through 4,467 company-operated stores under the RadioShack brand, located throughout the United States, as well as in Puerto Rico and the U.S. Virgin I
> A company issued 100,000 shares of common stock with a par value of $1 per share. The stock sold for $20 per share. By what amount does stockholders’ equity increase? a. $100,000 b. $1,900,000 c. $2,000,000 d. No change in stockholders’ equity
> Which order best describes the largest number of shares to the smallest number of shares? a. Shares authorized, shares issued, shares outstanding. b. Shares issued, shares outstanding, shares authorized. c. Shares outstanding, shares issued, shares autho
> Which of the following statements about stock dividends is true? a. Stock dividends are reported on the statement of cash flows. b. Stock dividends are reported on the statement of retained earnings. c. Stock dividends increase total equity. d. Stock div
> Which statement regarding treasury stock is false? a. Treasury stock is considered to be issued but not outstanding. b. Treasury stock has no voting, dividend, or liquidation rights. c. Treasury stock reduces total equity on the balance sheet. d. None of
> Katz Corporation has issued 400,000 shares of common stock and holds 20,000 shares in treasury. The charter authorized the issuance of 500,000 shares. The company has declared and paid a dividend of $1 per share. What is the total amount of the dividend?
> Does a stock dividend increase an investor’s personal wealth immediately? a. No, because the stock price falls when a stock dividend is issued. b. Yes, because the investor has more shares. c. Yes, because the investor acquired additional shares without
> The annual report for Walt Disney Company contained the following note: The Company has outstanding $1.3 billion of convertible senior notes due on April 15, 2023. The notes bear interest at a fixed annual rate of 2.13%. The notes are convertible into co
> When treasury stock is purchased with cash, what is the impact on the balance sheet equation? a. No change: the reduction of the asset cash is offset with the addition of the asset treasury stock. b. Assets decrease and stockholders’ equity increases. c.
> Which statement regarding dividends is false? a. Dividends represent a sharing of corporate profits with owners. b. Both stock and cash dividends reduce retained earnings. c. Cash dividends paid to stockholders reduce net income. d. None of the above sta
> A company has net income of $225,000 and declares and pays dividends in the amount of $75,000. What is the net impact on retained earnings? a. Increase of $225,000 b. Decrease of $75,000 c. Increase of $150,000 d. Decrease of $150,000
> A journal entry is not recorded on what date? a. Date of declaration. b. Date of record. c. Date of payment. d. A journal entry is recorded on all of these dates.
> The balance sheet for Ronlad Corporation reported 168,000 shares outstanding, 268,000 shares authorized, and 10,000 shares in treasury stock. Compute the maximum number of new shares that the company could issue.
> To expand operations, Aragon Consulting issued 170,000 shares of previously unissued stock with a par value of $1. The selling price for the stock was $21 per share. Record the sale of this stock. Would your answer be different if the par value was $2 pe
> Name three rights of common stockholders. Which of these is most important in your opinion? Why?
> University Food Systems, Inc., has issued a 40 percent stock dividend. The company has 752,000 shares authorized and 200,000 shares outstanding. The par value of the stock is $10 per share, and the market value is $130 per share. Record the payment of th
> Reliable Tools, Inc., announced a 100 percent stock dividend. Determine the impact (increase, decrease, no change) of this dividend on the following: 1. Total assets 2. Total liabilities 3. Common stock 4. Total stockholders’ equity 5. Market value per s
> Assume that you are a portfolio manager for a large insurance company. The majority of the moneyyou manage is from retired school teachers who depend on the income you earn on their investments.You have invested a significant amount of money in the bonds
> Lipscomb, Inc., has 200,000 shares of cumulative preferred stock outstanding. The preferred stock pays dividends in the amount of $2 per share but because of cash flow problems, the company did not pay any dividends last year. The board of directors plan
> On April 15, 2011, the board of directors for Auction.com declared a cash dividend of 65 cents per share payable to stockholders of record on May 20. The dividends will be paid on June 14. The company has 100,000 shares of stock outstanding. Prepare any
> Cole Company has 288,000 shares of common stock authorized, 260,000 shares issued, and 60,000 shares of treasury stock. The company’s board of directors has declared a dividend of 65 cents per share. What is the total amount of the dividend that will be
> Carbide Corporation purchased 20,000 shares of its own stock for $45 per share. The next year, the company sold 5,000 shares for $50 per share and the following year, it sold 10,000 shares for $37 per share. Determine the impact (increase, decrease, or n
> The annual report for Philip Morris Companies, Inc., disclosed that 4 billion shares of common stockhave been authorized. At the end of last year, 2,805,961,317 shares had been issued and the number ofshares in treasury stock was 380,474,028. During the
> The financial statements for Highland Publications Corporation included the following selected information: Common stock .......................................................$1,600,000 Retained earnings ................................................
> The charter of Vista West Corporation specifies that it may issue 200,000 shares of common stock. Since the company was incorporated, it has sold a total of 160,000 shares to the public but bought back a total of 20,000. The par value of the stock is $3
> On-line Learning Corporation obtained a charter at the start of 2011 that authorized 52,000 shares of no par common stock and 23,000 shares of preferred stock, par value $10. The corporation was organized by four individuals who purchased 16,000 shares o
> Quick Fix-it Corporation was organized in January 2011 to operate several car repair businesses in a large metropolitan area. The charter issued by the state authorized the following capital stock: Common stock, $10 par value, 98,000 shares Preferred st
> Ruth’s Chris Steakhouse is the largest upscale steakhouse company in the United States, based on total company- and franchisee-owned restaurants. The company’s menu features a broad selection of highqualityUSDA prime grade steaks and other premium offeri
> You work for a small company considering investing in a new Internet business. Financial projections suggest that the company will be able to earn in excess of $40 million per year on an investment of $100 million. The company president suggests borrowin
> Williamson Corporation was organized in 2011 to operate a tax preparation business. The charter authorizedthe following capital stock: common stock, par value $2 per share, 80,000 shares. During the firstyear, the following selected transactions were com
> The stockholders’ equity section on the balance sheet of Dillard’s, a popular department store, is shown below. The company reported a net loss of $241,065,000 and declared and paid dividends of $11,898,000 in 2009.
> Tarrant Corporation was organized in 2011 to operate a financial consulting business. The charter authorized the following capital stock: common stock, par value $10 per share, 11,500 shares. During the first year, the following selected transactions wer
> Tandy, Incorporated, was issued a charter on January 15, 2011, that authorized the following capital stock: Common stock, no-par, 103,000 shares Preferred stock, 9 percent, par value $8 per share, 4,000 shares The board of directors established a state
> Archon Corporation operates the Pioneer Hotel & Gambling Hall in Nevada. In addition, the Company owns real estate on Las Vegas Boulevard South (the “Strip”) in Las Vegas, Nevada, and investment properties in Dorchester, Massachusetts, and Gaithersburg,
> Ford Motor Company is an internationally known manufacturer of automobiles and trucks. The company recently lost over $12 billion in a single year of operations. Despite that staggering loss, the company issued the following press release: DEARBORN, Mich
> Weil Corporation has 80,000 shares of common stock (par value $8) outstanding. Required: Complete the following comparative tabulation based on two independent cases: Case 1: The board of directors declared and issued a 40 percent stock dividend when th
> GameStop issued the following press release when the company’s stock was selling for $27 per share: GRAPEVINE, Texas—(BUSINESS WIRE)—Feb. 12, 2007—GameStop Corp. (NYSE: GME), the world’s largest video game and entertainment software retailer, today annou
> On July 1, 2011, Davidson Corporation had the following capital structure: Common stock (par $3)................... $600,000 Capital in excess of par ......................900,000 Retained earnings.............................. 700,000 Treasury stock ..
> Two billion times a day, Proctor & Gamble (P&G) brands touch the lives of people around the world. The company has one of the largest and strongest portfolios of trusted, quality brands, including Pampers, Tide, Bounty, Pringles, Folgers, Charmin, Downy,
> Refer to the financial statements of American Eagle Outfitters given in Appendix B at the end of this book. Required: 1. How much interest was paid in cash during the most recent reporting year? 2. Explain why the company does not report bonds payable o
> At the beginning of the year, the stockholders’ equity section of the balance sheet of Solutions Corporation reflected the following: Common stock (par $12; authorized 65,000 shares, outstanding 30,000 shares) ...........................................
> Duke Energy is a utility company that provides gas and electric service in North Carolina, South Carolina, Ohio, Kentucky, and Indiana. The company’s dividend yield is 6.6 percent. Starbucks, a well known retailer of coffee products, does not pay dividen
> A recent annual report for Sears, Roebuck and Co. disclosed that the company paid preferred dividends in the amount of $119.9 million. It declared and paid dividends on common stock in the amount of $2 per share. During the year, Sears had 1,000,000,000
> Service Corporation has the following capital stock outstanding at the end of 2011: Preferred stock, 6 percent, par $15, outstanding shares, 8,000 Common stock, par $8, outstanding shares, 30,000 On October 1, 2011, the board of directors declared divi
> The records of Hollywood Company reflected the following balances in the stockholders’ equity accounts at December 31, 2010: Common stock, par $12 per share, 30,000 shares outstanding Preferred stock, 10 percent, par $10 per share, 5,000 shares outstand
> Peters and Associates is a small manufacturer of electronic connections for local area networks. Consider three independent situations. Case 1: Peters increases its cash dividends by 50 percent, but no other changes occur in the company’s operations. Cas
> During 2011 the following selected transactions affecting stockholders’ equity occurred for TARP Corporation: a. Feb. 1 Purchased in the open market 160 shares of the company’s own common stock at $20 cash per share. b. Jul. 15 Sold 80 of the shares pur
> During 2011 the following selected transactions affecting stockholders’ equity occurred for OrlandoCorporation: a.Apr. 1 Purchased in the market 200 shares of the company’s own common stock at $20 per share. b.Jun. 14 Sold 40 shares of treasury stock fo
> The following account balances were selected from the records of TEAC Corporation at December 31, 2011, after all adjusting entries were completed: Common stock (par $20; authorized 100,000 shares, issued 34,000 shares, of which 2,000 shares are held as
> The business section of The New York Times recently contained the following article: Freeport-McMoRan Copper & Gold Inc., one of the world’s largest copper producers, said yesterday that it would repurchase up to five million shares of its common stock
> JCPenney Company was one of the first companies to issue zero coupon bonds. It issued bonds with a face (maturity) value of $400 million due eight years after issuance. When the bonds were sold to the public, similar bonds paid 15 percent effective inter
> On January 1, 2011, Trucks R Us Corporation issued $2,000,000 in bonds that mature in five years. The bonds have a stated interest rate of 10 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of inte
> Which of the following prevents a company from switching its inventory costing method to a different method each year? a. Consistency principle b. Materiality concept c. Matching principle d. Disclosure principle
> What kind of account is accumulated depreciation? How is it reported on the financial statements?
> What is the primary way in which corporations differ from proprietorships and partnerships? What are some of the factors that might affect a person’s decision about the formof organization that would be best in a given situation?
> In order to purchase equipment and supplies, Sinclair Bike Shop, Inc., borrowed $28,000 on August 1 by signing a note payable to Community One Bank. Interest expense for Sinclair Bike Shop, Inc., is $140 per month. Journalize an adjusting entry to accrue
> The adjusted trial balance shows a. assets, liabilities, and common stock only. b. revenues and expenses only. c. amounts that may be out of balance. d. amounts that are ready for the financial statements.
> What are some similarities and differences between assets and expenses?
> In what order should the financial statements be prepared? Why?
> Suppose you work summers mowing yards. Most of your customers pay you immediately after their lawn is mowed, but a few customers ask you to bill them at the end of the month. It is now July 31, and you have collected $750 from cash-paying customers for s
> For each of the following accounts, indicate if the account’s normal balance is a debitbalance (DR) or a credit balance (CR). DR Cash 1. Rent Expense 2. Accounts Payable 3. Service Revenue 4. Office Furniture 5. Common Stock 6. Land 7. Dividends
> Which of the following is not a closing entry?
> Haskins, Inc., began operations on January 1, 2016. The seven transactions recorded during January by the company accountant are shown in the following T-accounts:
> Christopher Foley, an attorney, has a law corporation, Christopher Foley, Attorney, Inc.,that began the year with total assets of $145,000, total liabilities of $70,000, and stockholders’ equity of $75,000. During the year, Christopher Foley, Attorney, I
