Problems Problem 14-4AFinancial information for Ernie Bisho.docx
- 1. Problems: Problem 14-4A Financial information for Ernie Bishop Company is presented below. ERNIE BISHOP COMPANY Balance Sheets December 31 Assets 2013 2012 Cash $ 137,900 $ 128,050 Short-term investments 102,440 78,800 Receivables (net) 193,060 157,600 Inventory 246,250 265,950 Prepaid expenses
- 2. 57,130 45,310 Land 256,100 256,100 Building and equipment (net) 330,960 344,750 $1,323,840 $1,276,560 Liabilities and Stockholders’ Equity Notes payable $197,000 197,000 Accounts payable 94,560 82,740 Accrued liabilities
- 3. 86,680 78,800 Bonds payable, due 2016 295,500 295,500 Common stock, $10 par 394,000 394,000 Retained earnings 256,100 228,520 $1,323,840 $1,276,560 ERNIE BISHOP COMPANY Income Statement For the Years Ended December 31 2013 2012 Net sales $1,690,260
- 4. $1,572,060 Cost of goods sold 1,203,670 1,132,750 Gross profit 486,590 439,310 Operating expenses 402,865 356,570 Net income $ 83,725 $ 82,740 Additional information: 1. Inventory at the beginning of 2012 was $232,460. 2. Total assets at the beginning of 2012 were $1,245,040. 3. No common stock transactions occurred during 2012 or 2013. 4. All sales were on account. 5.
- 5. Receivables (net) at the beginning of 2012 were $173,360. (a) Indicate, by using ratios, the change in liquidity and profitability of Ernie Bishop Company from 2012 to 2013. (Round Earnings per share to 2 decimal places, e.g. 1.65, and all others to 1 decimal place, e.g. 6.8 or 6.8% .) 2012 2013 Change LIQUIDITY Current :1 :1 Acid-test :1
- 7. % Asset turnover times times Return on assets % % Earnings per share $ $ (b) Given below are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2013, and (2) as of December 31, 2014, after giving effect to the situation. Net income for 2014 was $98,500. Total assets on December 31, 2014, were $1,379,000.
- 8. Situation Ratio (1) 35,460 shares of common stock were sold at par on July 1, 2014. Return on common stockholders’ equity (2) All of the notes payable were paid in 2014. The only change in liabilities was that the notes payable were paid. Debt to total assets (3) Market price of common stock was $18 on December 31, 2013, and $24.63 on December 31, 2014. Price-earnings ratio 2013 2014 Change Return on common stockholders’ equity % %
- 9. Debt to total assets % % Price-earnings ratio times times Warning Don't show me this message again for the assignment Ok Cancel Click if you would like to Show Work for this question: Open Show Work Modify Show Work Problem 14-6A
- 10. The comparative statements of Beulah Company are presented below. BEULAH COMPANY Income Statement For the Years Ended December 31 2014 2013 Net sales (all on account) $501,000 $419,000 Expenses Cost of goods sold 315,000 254,000 Selling and administrative 120,000 114,000 Interest expense 8,400 6,400 Income tax expense
- 11. 20,700 13,400 Total expenses 464,100 387,800 Net income $ 36,900 $ 31,200 BEULAH COMPANY Balance Sheets December 31 Assets 2014 2013 Current assets Cash $ 21,900 $ 18,100 Short-term investments 18,500
- 12. 14,400 Accounts receivable (net) 86,000 75,000 Inventory 80,800 61,000 Total current assets 207,200 168,500 Plant assets (net) 422,000 384,000 Total assets $629,200 $552,500 Liabilities and Stockholders’ Equity Current liabilities
- 13. Accounts payable $122,000 $111,000 Income taxes payable 11,700 11,700 Total current liabilities 133,700 122,700 Long-term liabilities Bonds payable 120,000 80,100 Total liabilities 253,700 202,800 Stockholders’ equity
- 14. Common stock ($5 par) 149,000 149,000 Retained earnings 226,500 200,700 Total stockholders’ equity 375,500 349,700 Total liabilities and stockholders’ equity $629,200 $552,500 Additional data: The common stock recently sold at $19.50 per share. Compute the following ratios for 2014. (Round Earnings per share and Acid-test ratio to 2 decimal places, e.g. 1.65, and all others to 1 decimal place, e.g. 6.8 or 6.8% .) (a) Current ratio :1 (b)
- 15. Acid-test ratio :1 (c) Accounts receivable turnover times (d) Inventory turnover times (e) Profit margin % (f) Asset turnover times (g) Return on assets % (h)
- 16. Return on common stockholders’ equity % (i) Earnings per share $ (j) Price-earnings ratio times (k) Payout ratio % (l) Debt to total assets % (m) Times interest earned times Warning Don't show me this message again for the assignment
- 17. Ok Cancel Click if you would like to Show Work for this question: Open Show Work Problem 13-3A The income statement of Toby Zed Company is presented here. Toby Zed Company Income Statement For the Year Ended November 30, 2014 Sales revenue $7,432,500 Cost of goods sold Beginning inventory $1,907,200 Purchases 4,312,100
- 18. Goods available for sale 6,219,300 Ending inventory 1,301,100 Total cost of goods sold 4,918,200 Gross profit 2,514,300 Operating expenses 1,067,700 Net income $1,446,600 Additional information: 1. Accounts receivable increased $195,800 during the year, and inventory decreased $606,100.
- 19. 2. Prepaid expenses increased $176,200 during the year. 3. Accounts payable to suppliers of merchandise decreased $342,900 during the year. 4. Accrued expenses payable decreased $106,800 during the year. 5. Operating expenses include depreciation expense of $85,100. Prepare the operating activities section of the statement of cash flows for the year ended November 30, 2014, for Toby Zed Company, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) TOBY ZED COMPANY Partial Statement of Cash Flows For the Year Ended November 30, 2014 $ Adjustments to reconcile net income to $
- 20. $ Warning Don't show me this message again for the assignment Ok Cancel Click if you would like to Show Work for this question: Open Show Work Problem 13-7A Presented below are the financial statements of Rajesh Company.
- 21. Rajesh Company Comparative Balance Sheets December 31 Assets 2014 2013 Cash $37,710 $19,220 Accounts receivable 32,530 18,280 Inventory 30,850 20,350 Equipment 59,320 77,250
- 22. Accumulated depreciation—equipment (29,550 ) (23,910 ) Total $130,860 $111,190 Liabilities and Stockholders’ Equity Accounts payable $28,310 $ 16,070 Income taxes payable
- 23. 7,440 8,460 Bonds payable 27,310 32,960 Common stock 18,730 14,590 Retained earnings 49,070 39,110 Total $130,860 $111,190 Rajesh Company
- 24. Income Statement For the Year Ended December 31, 2014 Sales revenue $242,430 Cost of goods sold 175,030 Gross profit 67,400 Operating expenses 24,190 Income from operations 43,210 Interest expense 3,680 Income before income taxes 39,530 Income tax expense 8,920 Net income $30,610 Additional data: 1. Depreciation expense is 13,840. 2.
- 25. Dividends declared and paid were $20,650. 3. During the year equipment was sold for $9,730 cash. This equipment cost $17,930 originally and had accumulated depreciation of $8,200 at the time of sale. (a) Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) RAJESH COMPANY Statement of Cash Flows For the Year Ended December 31, 2014 $ Adjustments to reconcile net income to $
- 27. $ (b) Compute free cash flow. Free cash flow $ Warning Don't show me this message again for the assignment Ok Cancel Click if you would like to Show Work for this question: Open Show Work Problem 12-2A (Part Level Submission) In January 2014, the management of Stefan Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities. During the year, the following transactions occurred.
- 28. Feb. 1 Purchased 600 shares of Superior common stock for $30,000, plus brokerage fees of $610. Mar. 1 Purchased 710 shares of Pawlik common stock for $17,750, plus brokerage fees of $500. Apr. 1 Purchased 60 $1,200, 8% Venice bonds for $72,000, plus $1,100 brokerage fees. Interest is payable semiannually on April 1 and October 1. July 1 Received a cash dividend of $0.60 per share on the Superior common stock. Aug. 1 Sold 180 shares of Superior common stock at $63 per share less brokerage fees of $210. Sept. 1 Received a $1 per share cash dividend on the Pawlik common stock. Oct. 1 Received the semiannual interest on the Venice bonds. Oct. 1 Sold the Venice bonds for $72,000 less $1,100 brokerage fees. At December 31, the fair value of the Superior common stock was $52 per share. The fair value of the Pawlik common stock was $24 per share. Warning
- 29. Don't show me this message again for the assignment Ok Cancel (a) Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use the T-account form.) (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Feb. 1 Stock Investments Cash Mar. 1
- 30. Stock Investments Cash Apr. 1 Debt Investments Cash July 1 Cash Dividend Revenue Aug. 1 Cash Stock Investments Gain on Sale of Stock Investments Sept. 1
- 31. Cash Dividend Revenue Oct. 1 Cash Interest Revenue Oct. 1 Cash Loss on Sale of Debt Investments Debt Investments Stock Investments res_EAT_1317806561579_0_6394574809135353_109_resp_1 res_EAT_1317806561579_0_6394574809135353_118_resp_4 res_EAT_1317806561579_0_6394574809135353_127_resp_2
- 32. res_EAT_1317806561579_0_6394574809135353_145_resp_6 Debt Investments res_EAT_1317806561579_0_6394574809135353_163_resp_3 res_EAT_1317806561579_0_6394574809135353_172_resp_5 res_EAT_1317806561579_0_6394574809135353_199_resp_6 Warning Don't show me this message again for the assignment Ok Cancel Click if you would like to Show Work for this question: Open Show Work Problem 12-6A The following data, presented in alphabetical order, are taken from the records of Radar Corporation. Accounts payable $239,220 Accounts receivable 139,920
- 33. Accumulated depreciation—buildings 179,190 Accumulated depreciation—equipment 52,720 Allowance for doubtful accounts 6,760 Bonds payable (10%, due 2020) 499,040 Buildings 950,390 Cash 41,330 Common stock ($10 par value; 501,710 shares authorized, 149,650 shares issued) 1,496,500 Dividends payable 80,750 Equipment 275,960 Fair value adjustment—non-trading securities (Dr) 8,880 Goodwill 199,750 Income taxes payable
- 34. 120,390 Inventory 170,480 Investment in Mara common stock (30% ownership), at equity 379,920 Investment in Sasse common stock (10% ownership), at cost 277,700 Land 389,730 Notes payable (due 2015) 70,960 Paid-in capital in excess of par—common stock 132,860 Premium on bonds payable 40,470 Prepaid insurance 15,680 Retained earnings 102,950 Short-term investment, at fair value (and cost) 180,950 Unrealized gain—non-trading securities 8,880 The investment in Sasse common stock is considered to be a
- 35. long-term non-trading security. Prepare a classified balance sheet at December 31, 2014. (List assets in order of liquidity. Property, plant and equipment list in order of land, buildings and equipment.) RADAR CORPORATION Balance Sheet December 31, 2014 Assets $ $
- 36. :
- 38. $ : :
- 39. $ Liabilities and Stockholders' Equity $
- 40. $
- 41. $ :
- 43. : $ Warning Don't show me this message again for the assignment Ok Cancel Click if you would like to Show Work for this question: Open Show Work Problem 11-3A (Part Level Submission) The stockholders’ equity accounts of Terrell Corporation on January 1, 2014, were as follows.
- 44. Preferred Stock (9%, $49 par, cumulative, 10,800 shares authorized) $ 406,700 Common Stock ($1 stated value, 2,061,400 shares authorized) 1,191,700 Paid-in Capital in Excess of Par—Preferred Stock 129,300 Paid-in Capital in Excess of Stated Value—Common Stock 1,466,000 Retained Earnings 1,810,600 Treasury Stock (20,100 common shares) 46,230 During 2014, the corporation had the following transactions and events pertaining to its stockholders’ equity. Feb. 1 Issued 25,200 shares of common stock for $117,700. Apr. 14 Sold 8,800 shares of treasury stock—common for $45,300. Sept. 3 Issued 7,000 shares of common stock for a patent valued at $42,800. Nov. 10 Purchased 1,000 shares of common stock for the treasury at a cost of $5,800.
- 45. Dec. 31 Determined that net income for the year was $442,700. No dividends were declared during the year. Warning Don't show me this message again for the assignment Ok Cancel (a) Journalize the transactions and the closing entry for net income. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Feb. 1 Cash
- 46. Common Stock Paid-in Capital in Excess of Stated Value-Common Stock Apr. 14 Cash Paid-in Capital from Treasury Stock Treasury Stock Sept. 3 Patents Common Stock Paid-in Capital in Excess of Stated Value-Common Stock Nov. 10 Treasury Stock
- 47. Cash Dec. 31 Income Summary Retained Earnings Warning Don't show me this message again for the assignment Ok Cancel Click if you would like to Show Work for this question: Open Show Work Problem 11-7A (Part Level Submission) On January 1, 2014, Primo Corporation had the following stockholders' equity accounts. Common Stock ($10 par value, 78,400 shares issued and outstanding) $784,000 Paid-in Capital in Excess of Par Value-Common Stock 198,700 Retained Earnings
- 48. 560,700 During the year, the following transactions occurred. Jan. 15 Declared a $1.10 cash dividend per share to stockholders of record on January 31, payable February 15. Feb. 15 Paid the dividend declared in January. Apr. 15 Declared a 5% stock dividend to stockholders of record on April 30, distributable May 15. On April 15, the market price of the stock was $15 per share. May 15 Issued the shares for the stock dividend. July 1 Announced a 2-for-1 stock split. The market price per share prior to the announcement was $15. (The new par value is $5.) Dec. 1 Declared a $0.90 per share cash dividend to stockholders of record on December 15, payable January 10, 2015. Dec. 31 Determined that net income for the year was $277,800. Warning Don't show me this message again for the assignment Ok Cancel
- 49. (a) Journalize the transactions and the closing entries for net income and dividends. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account/Description Debit Credit Jan. 15 Feb. 15
- 50. Apr. 15 May 15 July 1
- 51. Dec.1 Dec. 31 (To close net income.) Dec.31
- 52. (To close cash dividends.) Dec. 31 (To close stock dividends.) Warning Don't show me this message again for the assignment Ok Cancel Click if you would like to Show Work for this question: Open Show Work Modify Show Work Show List of Accounts
- 53. Problem 9-3A (Part Level Submission) On January 1, 2014, Thao Company purchased the following two machines for use in its production process. Machine A: The cash price of this machine was $48,100. Related expenditures included: sales tax $1,600, shipping costs $130, insurance during shipping $80, installation and testing costs $100, and $190 of oil and lubricants to be used with the machinery during its first year of operations. Thao estimates that the useful life of the machine is 5 years with a $5,300 salvage value remaining at the end of that time period. Assume that the straight-line method of depreciation is used. Machine B: The recorded cost of this machine was $200,000. Thao estimates that the useful life of the machine is 4 years with a $12,500 salvage value remaining at the end of that time period. Warning Don't show me this message again for the assignment Ok Cancel
- 54. (a) Your answer is correct. Prepare the following for Machine A. (Round answers to 0 decimal places, e.g. $2,125. Credit account titles are automatically indented when amount is entered. Do not indent manually.) 1. The journal entry to record its purchase on January 1, 2014. 2. The journal entry to record annual depreciation at December 31, 2014. No. Account Titles and Explanation Debit Credit 1. Equipment 50010 Cash 50010 2.
- 55. Depreciation Expense 8942 Accumulated Depreciation-Equipment 8942 Warning Don't show me this message again for the assignment Ok Cancel Click if you would like to Show Work for this question: Open Show Work Show List of Accounts Show Solution SHOW ANSWER HIDDEN Show Answer Link to Text Link to Video
- 56. Attempts: 2 of 3 used (b) Your answer is partially correct. Try again. Calculate the amount of depreciation expense that Thao should record for Machine B each year of its useful life under the
- 57. following assumptions. (Round answers to 0 decimal places, e.g. $2,125. Round cost per unit to 2 decimal place, e.g. 1.25.) (1) Thao uses the straight-line method of depreciation. (2) Thao uses the declining-balance method. The rate used is twice the straight-line rate. (3) Thao uses the units-of-activity method and estimates that the useful life of the machine is 165,770 units. Actual usage is as follows: 2014, 53,400 units; 2015, 44,710 units; 2016, 37,580 units; 2017, 30,080 units. 2014 2015 2016 2017
- 58. Straight-line method $46875 $46875 $46875 $46875 Declining-balance method $100000 $50000 $25000 $12500 Units-of-activity method $53400 $44710 $37580
- 59. $30080 Problem 9-7A (Part Level Submission) The intangible assets section of Glover Company at December 31, 2013, is presented below. Patents ($61,400 cost less $6,140 amortization) $55,260 Franchises ($36,200 cost less $14,480 amortization) 21,720 Total $76,980 The patent was acquired in January 2013 and has a useful life of 10 years. The franchise was acquired in January 2010 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2014. Jan. 2
- 60. Paid $40,860 legal costs to successfully defend the patent against infringement by another company. Jan.–June Developed a new product, incurring $137,570 in research and development costs. A patent was granted for the product on July 1. Its useful life is equal to its legal life. Sept. 1 Paid $55,760 to an extremely large defensive lineman to appear in commercials advertising the company’s products. The commercials will air in September and October. Oct. 1 Acquired a franchise for $135,000. The franchise has a useful life of 50 years. Warning Don't show me this message again for the assignment Ok Cancel
- 61. (a) Prepare journal entries to record the transactions above. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit
- 63. Prepare journal entries to record the 2014 amortization expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31 (To record patents amortization.) Dec. 31
- 64. (To record franchises amortization.) Warning Don't show me this message again for the assignment Ok Cancel Click if you would like to Show Work for this question: Open Show Work Modify Show Work Problem 10-1A (Part Level Submission) On January 1, 2014, the ledger of Shumway Company contains
- 65. the following liability accounts. Accounts Payable $55,910 Sales Taxes Payable 7,600 Unearned Service Revenue 16,570 During January, the following selected transactions occurred. Jan. 5 Sold merchandise for cash totaling $22,256, which includes 7% sales taxes. 12 Provided services for customers who had made advance payments of $11,630. (Credit Service Revenue.) 14 Paid state revenue department for sales taxes collected in December 2013 ($7,600). 20
- 66. Sold 620 units of a new product on credit at $50 per unit, plus 7% sales tax. 21 Borrowed $24,750 from DeKalb Bank on a 3-month, 8%, $24,750 note. 25 Sold merchandise for cash totaling $10,571, which includes 7% sales taxes. Warning Don't show me this message again for the assignment Ok Cancel
- 67. (a) Journalize the January transactions. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 5 Cash Sales Revenue Sales Taxes Payable Jan. 12
- 68. Unearned Service Revenue Service Revenue Jan. 14 Sales Taxes Payable Cash Jan. 20 Accounts Receivable Sales Revenue Sales Taxes Payable
- 69. Jan. 21 Cash Notes Payable Jan. 25 Cash Sales Revenue Sales Taxes Payable Warning Don't show me this message again for the assignment Ok
- 70. Cancel Click if you would like to Show Work for this question: Open Show Work Modify Show Work Show List of Accounts Stock Invest Cash Stock Invest Cash Debt Investm
- 71. Cash Cash Dividend Re Cash Stock Invest Gain on Sal Cash Dividend Re Cash Interest Rev Cash Loss on Sal Debt Investm
- 72. Feb. 1 Aug. 1 Mar. 1 Dec. 31 Bal. Apr. 1 Oct. 1 Dec. 31 Bal. Cash Common St Paid-in Capi Cash
- 73. Paid-in Capi Treasury Sto Patents Common St Paid-in Capi Treasury Sto Cash Income Sum Retained Ea Equipment 50010
- 75. 25000 12500 53400 44710 37580 30080 Cash Sales Reven Sales Taxes Unearned S Service Reve Sales Taxes
- 76. Cash Accounts R Sales Reven Sales Taxes Cash Notes Paya Cash Sales Reven Sales Taxes