Question: Bott Company acquired 500 shares of stock

> An analysis of Courtney Corporation’s operational asset accounts provided the following information: a. Acquired a large machine that cost $36,000, paying for it by giving a $15,000, 12 percent interest bearing note due at the end of two years and 500 sh

> Gibraltar Industries is a Buffalo, New York–based manufacturer of high-value-added steel products. In a recent year, it reported the following activities: Acquisitions (investments in other companies) ...........................$ (8,724) Decrease in inv

> Deep Waters Company was started several years ago by two diving instructors. The company’s comparative balance sheets and income statement are presented below, along with additional information. Additional Data: a. Prepaid expenses re

> Oering’s Furniture Corporation is a Virginia-based manufacturer of furniture. In a recent year, it reported the following activities: Net income ..................................................................................$ 5,135 Purchase of proper

> A recent annual report for PepsiCo contained the following information for the period (dollars in millions): Net income .........................................................$5,142 Depreciation and amortization ............................1,543 Incre

> During the period, Wong Company sold some excess equipment at a loss. The following information was collected from the company’s accounting records: From the Income Statement Depreciation expense.................................................. $ 820 L

> During two recent years Perez Construction, Inc., disposed of the following plant and equipment: Required: 1. Determine the cash flow from the sale of property for each year that would be reported in the investing activities section of the cash flow st

> A recent statement of cash flows for Apple contained the following information (dollars in millions): Operations Net income..................................................... $11,875 Depreciation........................................................

> A recent statement of cash flows for Colgate-Palmolive reported the following information (dollars in millions): Operating Activities Net income............................................................ $1,957.2 Depreciation...........................

> Using data from the previous exercise, complete each of the requirements in Exercise 10-9 without using a discount account. Exercise 10-9 On January 1, 2011, Park Corporation sold a $600,000, 7.5 percent bond issue (8.5 percent market rate). The bonds w

> Time Warner Inc. is a leading media and entertainment company with businesses in television networks, filmed entertainment, and publishing. The company’s 2008 annual report contained the following information (dollars in millions): Net loss.............

> New Vision Company completed its income statement and balance sheet for 2011 and provided the following information: Required: Present the operating activities section of the statement of cash flows for New Vision Company using the indirect method.

> Rocky Mountain Chocolate Factory manufactures an extensive line of premium chocolate candies for saleat its franchised and company-owned stores in malls throughout the United States. Its balance sheet forthe first quarter of a recent year is presented al

> Carlyle Golf, Inc., was formed in September of last year. The company designs, contracts for themanufacture of, and markets a line of men’s golf apparel. A portion of the statement of cash flows forCarlyle follows: CURRENT YEAR Cash flows from operating

> In a February 19, 2004, press release, the Securities and Exchange Commission described a numberof fraudulent transactions that Enron executives concocted in an effort to meet the company’s financialtargets. One particularly well-known scheme is called t

> Refer to the financial statements of American Eagle Outfitters given in Appendix B at the end of this book. Required: 1. On the statement of cash flows, what was the largest item (in absolute value) listed under “Adjustments to reconcile net income to n

> Refer to the financial statements of American Eagle Outfitters (Appendix B) and Urban Outfitters (Appendix C) and the Industry Ratio Report (Appendix D) at the end of this book. Required: 1. Compute the quality of income ratio for both companies for the

> Refer to the financial statements of Urban Outfitters given in Appendix C at the end of this book. Required: 1. Does Urban Outfitters use the direct or indirect method to report cash flows from operating activities? 2. What amount of tax payments did th

> Ingersol Construction Supply Company is developing its annual financial statements at December 31,2012. The statements are complete except for the statement of cash flows. The completed comparativebalance sheets and income statement are summarized as fol

> Use the information concerning Ingersol Construction Supply Company provided in Alternate Problem 13-1 to fulfill the following requirements. Required: 1. Prepare the statement of cash flows using the direct method for the year ended December 31, 2012.

> On January 1, 2011, Park Corporation sold a $600,000, 7.5 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 four years. Required: 1. Give the journal entry to rec

> Audio House , Inc., is developing its annual financial statements at December 31, 2013. The statementsare complete except for the statement of cash flows. The completed comparative balance sheets andincome statement are summarized as follows: Additiona

> Explain how bonds held to maturity are reported on the balance sheet.

> When one company acquires control of another, how are the acquired company’s assets and liabilities recorded?

> Under the fair value method, when and how does the investor company measure revenue?

> Explain the difference in accounting methods used for passive investments, investments in which the investor can exert significant influence, and investments in which the investor has control over another entity.

> Explain the difference between a short-term investment and a long-term investment.

> What is goodwill?

> Under the equity method, dividends received from the affiliate company are not recorded as revenue. To record dividends as revenue involves double counting. Explain.

> Under the equity method, why does the investor company measure revenue on a proportionate basis when income is reported by the affiliate company rather than when dividends are declared?

> Explain the application of the cost principle to the purchase of capital stock in another company.

> The Mira Vista Company issued $500,000 in bonds at a discount five years ago. The current book value of the bonds is $475,000. The company now has excess cash on hand and plans to retire the bonds. The company must pay a 7 percent (of par) call premium t

> On August 4, 2012, Glenn Corporation purchased 3,000 shares of Riley Company for $150,000. The following information applies to the stock price of Riley Company: Price 12/31/2012 ...................$57 12/31/2013 ......................51 12/31/2014 ....

> During January 2011, Pareto Glass Company purchased the following securities as its long-term securities available for sale investment portfolio: D Corporation Common Stock: 11,000 shares (95,000 outstanding) at $9 per share F Corporation Bonds: $300,00

> Below are selected T-accounts for the RunnerTech Company. Required: Complete the following journal entries and answer the following questions: a. Purchased securities available for sale for cash. Prepare the journal entry. b. Received cash dividends on

> On March 1, 2011, Lightning Technology purchased 8,000 shares of Computing Services Company for $17 per share. The following information applies to the stock price of Computing Services: Price 12/31/2011........................... $15 12/31/2012........

> Starbucks is a global company that provides high-quality coffee products. Assume that as part of itsexpansion strategy, Starbucks plans to open numerous new stores in Mexico in three years. The companyhas $7 million to support the expansion and has decid

> Verizon Communications Inc. was formed by the merger of Bell Atlantic Corporation and GTE Corporationin 2000. It is the largest provider of wireline and wireless communication services in the UnitedStates, with a presence in over 150 other countries. The

> On January 4, 2011, D’Angelo Company acquired all of the net assets (assets and liabilities) of Barato Company for $124,000 cash. The two companies merged, with D’Angelo Company surviving. On the date of acquisition, Barato’s balance sheet included the f

> During 2011, Bradford Company purchased some of the 90,000 shares of common stock, par $6, of Hall,Inc., as a long-term investment. The annual accounting period for each company ends December 31. Thefollowing transactions occurred during 2011: Jan. 7 Pu

> Below are selected T-accounts for Gauge Company. Required: Complete the following journal entries and answer the following questions: a. Purchased additional investments in affiliated companies for cash. Prepare the journal entry. b. Received cash divi

> Cruise Corporation had outstanding 100,000 shares of no-par common stock. On January 10, 2011, DockCompany purchased a block of these shares in the open market at $20 per share for long-term investmentpurposes. At the end of 2011, Cruise reported net inc

> Several years ago, Walters Company issued a $600,000 bond at par value. As a result of declining interest rates, the company has decided to call the bond at a call premium of 5 percent. Record the retirement of the bonds.

> Company T had outstanding 25,000 shares of common stock, par value $10 per share. On January 1, 2011, Company P purchased some of these shares as a long-term investment at $25 per share. At the end of 2011, Company T reported the following: income, $45,0

> Company W purchases 10 percent of Company Z and Company W intends to hold the stock for at least five years. At the end of the current year, how would Company W’s investment in Company Z be reported on Company W’s December 31 (year-end) balance sheet? a.

> Company X owns 40 percent of Company Y and exercises significant influence over the management of Company Y. Therefore, Company X uses what method of accounting for reporting its ownership of stock in Company Y? a. The amortized cost method. b. The equit

> Lamichael Company purchased 100 percent of the outstanding voting shares of Darrell Corporation in the open market for $200,000 cash and Darrell was merged into Lamichael Company. On the date of acquisition, the fair value of Darrell Corporation’s proper

> Which of the following is true regarding the economic return from investing ratio? a. This ratio is used to evaluate how efficiently a company manages its total assets. b. This ratio is used to evaluate the efficiency of a company given the capital contr

> Bott Company acquired 500 shares of stock of Barus Company at $50 per share as a long-term investment. This represents 40 percent of the outstanding voting shares of Barus. During the year, Barus paid stockholders $2 per share in dividends. At year-end,

> When using the equity method of accounting, when is revenue recorded on the books of the investor company? a. When a dividend is received from the affiliate. b. When the fair value of the affiliate stock increases. c. When the affiliate company reports n

> When recording dividends received from a stock investment accounted for using the equity method, which of the following statements is true? a. Total assets are increased and net income is increased. b. Total assets are increased and total stockholders’ e

> Realized gains and losses are recorded on the income statement for which of the following transactions in trading securities and available-for-sale securities? a. When adjusting a trading security to its fair value. b. Only when recording the sale of a t

> Gateway Company issued a $1 million bond that matures in 10 years. The bond has a 10 percent stated rate of interest. When the bond was issued, the market rate was 8 percent. The bond pays interest eachsix months. Record the issuance of the bond on June

> Dividends received from stock that is reported as a security available for sale in the long-term assets section of the balance sheet are reported as which of the following? a. An increase to cash and a decrease to the investment in stock account. b. An i

> The Walt Disney Company owns theme parks, movie studios, television and radio stations, newspapers, and television networks, including ABC and ESPN. Its balance sheet recently reported goodwill in the amount of $22 billion, which is more than 35 percent

> Ceiling Company purchased $1,300,000, 8 percent bonds issued by Melissa Company on January 1, 2011. The purchase price of the bonds was $1,350,000. Interest is payable semiannually each June 30 and December 31. Record the purchase of the bonds on January

> Match the following. Answers may be used more than once: Measurement Method A. Amortized cost 1. Less than 20 percent ownership. B. Equity method C. Purchase method and consolidation 2. Current fair value. 3. More than 50 percent ownership. 4. At le

> N.M.S. Company held securities available for sale and reported the following information at the end of each year: Compute the economic return from investing ratio for 2012, 2013, and 2014. What do the results suggest about N.M.S. Company? Ending Fa

> England Textile Company acquired Belgium Fabric Company for $660,000 cash when Belgium’s only assets, property and equipment, had a book value of $660,000 and a fair value of $750,000. England also assumed Belgium’s bonds payable of $175,000. After the m

> Using the following categories, indicate the effects of the transactions listed in M12-7. Use + for increaseand − for decrease and indicate the amounts. Data from M12-7. On January 1, 2011, PurchaseAgent.com acquired 30 percent (1,200,

> On January 1, 2011, PurchaseAgent.com acquired 30 percent (1,200,000 shares) of the common stock of E-Transaction Corporation. The accounting period for both companies ends December 31. Give the journal entries for each of the following transactions that

> Using the following categories, indicate the effects of the transactions listed in M12-3 assuming the securities are trading securities. Use + for increase and − for decrease and indicate the amounts. Data from M12-3 During 2011, Yale

> Using the following categories, indicate the effects of the transactions listed in M12-3 assuming the securities are available for sale. Use + for increase and − for decrease and indicate the amounts. Data from M12-3 During 2011, Yale

> Denver Corporation sold a $300,000, 6 percent bond issue on January 1, 2011, at a market rate of 3 percent. The bonds were dated January 1, 2011, with interest to be paid each December 31; they mature in 10 years. The company uses the straight-line metho

> On January 1, 2011, Bidden Corporation sold and issued $100,000, five-year, 10 percent bonds. The bond interest is payable each June 30 and December 31. Assume three separate and independent selling scenarios: Case A, at par; Case B, at 95; and Case C, a

> Using the data in M12-3, assume that Yale Company purchased the voting stock of Carol Corporation for the trading securities portfolio instead of the available-for-sale securities portfolio. Give the journal entries for each of the transactions listed.

> During 2011, Yale Company acquired some of the 50,000 outstanding shares of the common stock, par $12, of Carol Corporation as available-for-sale investments. The accounting period for both companies ends December 31. Give the journal entries for each of

> Using the data in E12-7, answer the following questions. Required: 1. On the current year cash flow statement, how would the investing section of the statement be affected by the preceding transactions? 2. On the current year cash flow statement (indire

> Company A purchased a certain number of Company B’s outstanding voting shares at $20 per share as a long-term investment. Company B had outstanding 20,000 shares of $10 par value stock. Complete the following table relating to the measu

> Macy’s, Inc., operates over 850 Macy’s and Bloomingdale’s department stores nationwide. The company does more than $24 billion in sales each year. Assume that as part of its cash management strategy, Macy’s purchased $10 million in bonds at par for cash

> Kukenberger, Inc., reported the following in its portfolio of securities available for sale: Required: 1. Determine the economic return from investing ratio for the years 2011, 2012, and 2013. 2. What do your results suggest about Kukenbergerâ&#1

> The notes to recent financial statements of Colgate-Palmolive contained the following information(dollar amounts in millions): Assume that Colgate-Palmolive acquired 100 percent of the fair value of the net assets of Tom’s ofMaine in

> Gioia Company acquired some of the 65,000 shares of outstanding common stock (no par) of Tristezza Corporation during 2011 as a long-term investment. The annual accounting period for both companies ends December 31. The following transactions occurred du

> Using the data in E12-5, assume that Patton management purchased the Eisenhower stock for the trading securities portfolio instead of the available-for-sale securities portfolio. Prepare any journal entries that are required by the facts presented in the

> On March 10, 2011, Patton, Inc., purchased 10,000 shares of Eisenhower stock for $48 per share. Management recorded it in the securities available for sale portfolio. The following information pertains to the price per share of Eisenhower stock: Price 1

> Houston Company issued a $10,000, three-year, 5 percent bond on January 1, 2011. The bond interest ispaid each December 31. The bond was sold to yield 4 percent. Required: 1. Complete a bond amortization schedule. Use the effective-interest method. 2. W

> Using the data in E12-3, assume that Slick Books management purchased the Syntax stock for the trading securities portfolio instead of the securities available for sale portfolio. Prepare any journal entries that are required by the facts presented in th

> On June 30, 2011, Slick Books, Inc., purchased 9,000 shares of Syntax stock for $20 per share. Management recorded the stock in the securities available for sale portfolio. The following information pertains to the price per share of Syntax stock: Price

> Diageo is a major international company located in London, best known for its Smirnoff, JohnnieWalker, and Bailey’s brands of spirits. Its financial statements are accounted for under IFRS. A recentannual report contained the following information concer

> On January 1, 2012, Sheena Company purchased 30 percent of the outstanding common stock of Maryn Corporation at a total cost of $660,000. Management intends to hold the stock for the long term. On the December 31, 2012, balance sheet, the investment in M

> Assume that you are on the board of directors of a company that has decided to buy 80 percent of the outstanding stock of another company within the next three or four months. The discussions have convinced you that this company is an excellent investmen

> Assume that you are a financial analyst for a large investment banking firm. You are responsible for analyzing companies in the retail sales industry. You have just learned that a large West Coast retailer has acquired a large East Coast retail chain for

> Refer to the financial statements of Urban Outfitters in Appendix C at the end of this book. Required: 1. What is the balance in short-term and long-term marketable securities reported by the company on January 31, 2009? What types of securities are inc

> Refer to the financial statements of American Eagle Outfitters in Appendix B at the end of this book. Required: 1. What types of securities are included in the short-term investments and the long-term investments reported on the company’s balance sheet

> During January 2011, Pentagon Company purchased 12,000 shares of the 200,000 outstanding common shares (no-par value) of Square Corporation at $25 per share. This block of stock was purchased as a long-term investment. Assume that the accounting period f

> On September 15, 2011, Hill-Nielson Corporation purchased 7,000 shares of Community Communications Company for $32 per share. The following information applies to the stock price of Community Communications: Price 12/31/2011 ............................

> Using data from the previous exercise, complete each of the requirements in Exercise 10-17 without using a premium account. Data from Exercise 10-17 On January 1, 2011, Frog Corporation sold a $2,000,000, 10 percent bond issue (8.5 percent market rate).

> 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?