Week 5 FINAL
Brief Exercise 3-1
Transactions for Mehta Company for the month of May are presented below. Prepare journal entries for each of these transactions. (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 amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
May 1 Stockholders invests $4,000 cash in exchange for common stock of Mehta Company.
3 Buys equipment on account for $1,100.
13 Pays $400 to landlord for May rent.
21 Bills Noble Corp. $500 for welding work done.
Brief Exercise 3-3
On July 1, 2014, Crowe Co. pays $15,000 to Zubin Insurance Co. for a 3-year insurance policy. Both companies have fiscal years ending December 31. For Crowe Co., journalize the entry on July 1 and the adjusting entry on December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)
Brief Exercise 3-7
Dresser Company’s weekly payroll, paid on Fridays, totals $8,000. Employees work a 5-day week. Prepare Dresser’s adjusting entry on Wednesday, December 31, and the journal entry to record the $8,000 cash payment on Friday, January 2. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)
Brief Exercise 3-11
Side Kicks has year-end account balances of Sales Revenue $808,900; Interest Revenue $13,500; Cost of Goods Sold $556,200; Administrative Expenses $189,000; Income Tax Expense $35,100; and Dividends $18,900. Prepare the year-end closing entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)
Multiple Choice Question 56
At the time a company prepays a cost
it debits an asset account to show the service or benefit it will receive in the future.
its credits a liability account to show the obligation to pay for the service in the future.
it credits an asset account and debits an expense account.
it debits an expense account to match the expense against revenues recognized
Brief Exercise 4-1
Starr Co. had sales revenue of $540,000 in 2014. Other items recorded during the year were:
Cost of goods sold $330,000
Salaries and wages expense 120,000
Income tax expense 25,000
Increase in value of company reputation 15,000
Other operating expenses 10,000
Unrealized gain on value of patents 20,000
Prepare a single-step income statement for Starr for 2014. Starr has 100,000 shares of stock outstanding. (Round earnings per share to 2 decimal places, e.g. 1.48.)
Brief Exercise 4-10
Portman Corporation has retained earnings of $675,000 at January 1, 2014. Net income during 2014 was $1,400,000, and cash dividends declared and paid during 2014 totaled $75,000. Prepare a retained earnings statement for the year ended December 31, 2014. Assume an error was discovered: land costing $80,000 (net of tax) was charged to maintenance and repairs expense in 2011. (List items that increase retained earnings first.)
Brief Exercise 4-11
On January 1, 2014, Richards Inc. had cash and common stock of $60,000. At that date, the company had no other asset, liability, or equity balances. On January 2, 2014, it purchased for cash $20,000 of equity securities that it classified as available-for-sale. It received cash dividends of $3,000 during the year on these securities. In addition, it has an unrealized holding gain on these securities of $4,000 net of tax. Determine the following amounts for 2014: (a) net income; (b) comprehensive income; (c) other comprehensive income; and (d) accumulated other comprehensive income (end of 2014).
(a) Net income $
(b) Comprehensive income $
(c) Other comprehensive income $
(d) Accumulated other comprehensive income $
Brief Exercise 5-1
Harding Corporation has the following accounts included in its December 31, 2014, trial balance: Accounts Receivable $110,000; Inventory $290,000; Allowance for Doubtful Accounts $8,000; Patents $72,000; Prepaid Insurance $9,500; Accounts Payable $77,000; Cash $30,000.
Prepare the current assets section of the balance sheet. (List Current Assets in order of liquidity.)
Brief Exercise 5-6
Patrick Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2014: Prepaid Rent $12,000; Goodwill $50,000; Franchise Fees Receivable $2,000; Franchises $47,000; Patents $33,000; Trademarks $10,000.
Prepare the intangible assets section of the balance sheet.
Brief Exercise 5-10
Hawthorn Corporation’s adjusted trial balance contained the following accounts at December 31, 2014: Retained Earnings $120,000; Common Stock $750,000; Bonds Payable $100,000; Paid-in Capital in Excess of Par-Common Stock $200,000; Goodwill $55,000; Accumulated Other Comprehensive Loss $150,000; Noncontrolling Interest $35,000.
Prepare the stockholders’ equity section of the balance sheet.
Brief Exercise 5-12
Keyser Beverage Company reported the following items in the most recent year.
Net income $40,000
Dividends paid 5,000
Increase in accounts receivable 10,000
Increase in accounts payable 7,000
Purchase of equipment (capital expenditure) 8,000
Depreciation expense 4,000
Issue of notes payable 20,000
Compute net cash provided by operating activities, the net change in cash during the year. (Show amounts that decrease cash flow with either a – sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Compute free cash flow.
Free Cash Flow $
Brief Exercise 5-13
Ames Company reported 2014 net income of $151,000. During 2014, accounts receivable increased by $13,000 and accounts payable increased by $9,500. Depreciation expense was $44,000.
Prepare the cash flows from operating activities section of the statement of cash flows. (Show amounts that decrease cash flow with either a – sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Brief Exercise 5-14
Martinez Corporation engaged in the following cash transactions during 2014.
Sale of land and building $191,000
Purchase of treasury stock 40,000
Purchase of land 37,000
Payment of cash dividend 95,000
Purchase of equipment 53,000
Issuance of common stock 147,000
Retirement of bonds 100,000
Compute the net cash provided (used) by investing activities. (Show amounts that decrease cash flow with either a – sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Brief Exercise 5-16
Martinez Corporation engaged in the following cash transactions during 2014.
Sale of land and building $191,000
Purchase of treasury stock 40,000
Purchase of land 37,000
Payment of cash dividend 95,000
Purchase of equipment 53,000
Issuance of common stock 147,000
Retirement of bonds 100,000
Determine Martinez’s free cash flow, assuming that it reported net cash provided by operating activities of $400,000.
Free cash flow $
Exercise 5-16
A comparative balance sheet for Shabbona Corporation is presented below.
December 31
Assets 2014 2013
Cash $ 73,000 $ 22,000
Accounts receivable 82,000 66,000
Inventory 180,000 189,000
Land 71,000 110,000
Equipment 260,000 200,000
Accumulated Depreciation-Equipment (69,000 (42,000)
Total $597,000 $545,000
Liabilities and Stockholders’ Equity
Accounts payable $ 34,000 $ 47,000
Bonds payable 150,000 200,000
Common stock ($1 par) 214,000 164,000
Retained earnings 199,000 134,000
Total $597,000 $545,000
Additional information:
1. Net income for 2014 was $125,000.
2. Cash dividends of $60,000 were declared and paid.
3. Bonds payable amounting to $50,000 were retired through issuance of common stock.
Prepare a statement of cash flows for 2014 for Shabbona Corporation. (Show amounts that decrease cash flow with either a – sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Determine Shabbona Corporation’s current cash debt coverage ratio, cash debt coverage ratio, and free cash flow. (Round ratios to 2 decimal places., e.g. 0.67.)
Current cash debt coverage ratio :1
Cash debt coverage ratio :1
Current cash debt coverage ratio :1
Cash debt coverage ratio :1
Free cash flow$
Comment on its liquidity and financial flexibility.
Shabbona has
liquidity. Its financial flexibility is
Brief Exercise 6-1
Chris Spear invested $15,000 today in a fund that earns 8% compounded annually. (Use the tables below.)
To what amount will the investment grow in 3 years? To what amount would the investment grow in 3 years if the fund earns 8% annual interest compounded semiannually? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)
Investment at 8% annual interest $
Investment at 8% annual interest, compounded semiannually $
Brief Exercise 6-14
Amy Monroe wants to create a fund today that will enable her to withdraw $25,000 per year for 8 years, with the first withdrawal to take place 5 years from today. (Use the tables below.)
If the fund earns 8% interest, how much must Amy invest today? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)
Investment amount $
Brief Exercise 6-17
Zach Taylor is settling a $20,000 loan due today by making 6 equal annual payments of $4,727.53. (Use the tables below.)
What payments must Zach Taylor make to settle the loan at the same interest rate but with the 6 payments beginning on the day the loan is signed? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)
Payments $
Exercise 6-2
Alan Jackson invests $20,000 at 8% annual interest, leaving the money invested without withdrawing any of the interest for 8 years. At the end of the 8 years, Alan withdraws the accumulated amount of money.
Compute the amount Alan would withdraw assuming the investment earns simple interest. (Round answers to 0 decimal places, e.g. 458,581.)
Total withdrawn $
Compute the amount Alan would withdraw assuming the investment earns interest compounded annually. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)
Total withdrawn $
Compute the amount Alan would withdraw assuming the investment earns interest compounded semiannually. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)
Total withdrawn $
Brief Exercise 18-10
Guillen, Inc. began work on a $7,000,000 contract in 2014 to construct an office building. Guillen uses the completed-contract method. At December 31, 2014, the balances in certain accounts were Construction in Process $1,715,000; Accounts Receivable $240,000; and Billings on Construction in Process $1,000,000.
Indicate how these accounts would be reported in Guillen’s December 31, 2014, balance sheet.
Brief Exercise 18-13
Lazaro Inc. sells goods on the installment basis and uses the installment-sales method. Due to a customer default, Lazaro repossessed merchandise that was originally sold for $800, resulting in a gross profit rate of 40%. At the time of repossession, the uncollected balance is $520, and the fair value of the repossessed merchandise is $275.
Prepare Lazaro’s entry to record the repossession. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Brief Exercise 24-3 (Essay)
Morlan Corporation is preparing its December 31, 2014, financial statements. Two events that occurred between December 31, 2014, and March 10, 2015, when the statements were issued, are described below.
1. A liability, estimated at $160,000 at December 31, 2014, was settled on February 26, 2015, at $170,000.
2. A flood loss of $80,000 occurred on March 1, 2015.
What effect do these subsequent events have on 2014 net income?
Brief Exercise 24-5
Foley Corporation has seven industry segments with total revenues as follows
Penley $600 Cheng $225
Konami 650 Takuhi 200
KSC 250 Molina 700
Red Moon 275
Based only on the revenues test, which industry segments are reportable?
Penley Cheng
Konami Takuhi
KSC Molina
Red Moon
Brief Exercise 24-6
Operating profits and losses for the seven industry segments of Foley Corporation are:
Penley $90 Cheng $(20)
Konami (40) Takuhi 34
KSC 25 Molina 150
Red Moon 50
Based only on the operating profit (loss) test, which industry segments are reportable?
Penley Cheng
Konami Takuhi
KSC Molina
Red Moon
Brief Exercise 24-9
Heartland Company’s budgeted sales and budgeted cost of goods sold for the coming year are $144,000,000 and $99,000,000, respectively. Short-term interest rates are expected to average 10%. If Heartland can increase inventory turnover from its present level of 9 times a year to a level of 12 times per year.
Compute its expected cost savings for the coming year
Expected Cost Savings$
Multiple Choice Question 51
The payout ratio is calculated by dividing
cash dividends by net income plus preferred dividends
cash dividends by market price per share
dividends per share by earnings per share.
cash dividends by net income less preferred dividends.
Multiple Choice Question 56
Presented below are four segments that have been identified by Haley Productions:
Total Revenue Operating
Segments (Unaffiliated) Profit (Loss) Identifiable Assets
A $255,000 $30,000 $900,000
B 600,000 (55,000) 800,000
C 225,000 6,000 450,000
D 90,000 4,000 225,000
For which of the segments would information have to be disclosed in accordance with professional pronouncements?
Segments A and B
Segments A and D
Segments A, B, C, and D
Segments A, B, and C
Brief Exercise 18-14
At December 31, 2014, Grinkov Corporation had the following account balances.
Installment Accounts Receivable, 2013 $65,000
Installment Accounts Receivable, 2014 110,000
Deferred Gross Profit, 2013 23,400
Deferred Gross Profit, 2014 41,800
Most of Grinkov’s sales are made on a 2-year installment basis.
Indicate how these accounts would be reported in Grinkov’s December 31, 2014, balance sheet. The 2013 accounts are collectible in 2015, and the 2014 accounts are collectible in 2016.
Grinkov Corporation
Balance Sheet
December 31, 2014
Current Assets Current Liabilities Intangible Assets Long-term Investments Long-term Liabilities Property, Plant and Equipment Stockholders’ Equity Total Assets Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders’ Equity Total Long-term Investments Total Long-term Liabilities Total Property, Plant and Equipment Total Stockholders’ Equity
Deferred Gross Profit Installment Accounts Receivable Due in 2014 Installment Accounts Receivable Due in 2015 Installment Accounts Receivable Due in 2016 $
Deferred Gross Profit Installment Accounts Receivable Due in 2014 Installment Accounts Receivable Due in 2015 Installment Accounts Receivable Due in 2016 $
Current Assets Current Liabilities Intangible Assets Long-term Investments Long-term Liabilities Property, Plant and Equipment Stockholders’ Equity Total Assets Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders’ Equity Total Long-term Investments Total Long-term Liabilities Total Property, Plant and Equipment Total Stockholders’ Equity
Deferred Gross Profit Installment Accounts Receivable Due in 2014 Installment Accounts Receivable Due in 2015 Installment Accounts Receivable Due in 2016 $
