Darrington and Darling borrowed $100,000 from Commercial Financing to finance the purchase of fixed (i.e., property, plant, and equipment) assets. The loan contract provides for a 5 percent annual interest rate and states that the principal must be paid in full in ten years. The contract also requires that Darrington and Darling maintain a current ratio of 1.5: 1. Before Darrington and Darling borrowed the $100,000, the company's current assets and current liabilities were $130,000 and $80,000, respectively. a. Compute the company's current ratio if it invests $50,000 of the borrowed funds in fixed assets and keeps the rest as cash or short-term investments. To what dollar amount can current liabilities grow before the company violates the debt contract? b. Compute the company's current ratio if it invests $80,000 of the borrowed funds in fixed assets and keeps the rest as cash or short-term investments. To what dollar amount can current liabilities grow before the company violates the debt contract? c. Compute the company's current ratio if it invests the entire $100,000 of the borrowed funds in fixed assets. To what dollar amount can current liabilities grow before the company violates the debt contract?
> Deming Contractors was involved in the following events involving stock during 2021 : 1. Authorized to issue (a) 100,000 shares of $100 par value, 8 percent preferred stock; (b) 150,000 shares of no-par, $5 preferred stock; and (c) 250,000 shares of $5 p
> The balance sheet of Lamont Bros. follows: a. What portions of Lamont's assets were provided by debt, contributed capital, and earned capital? Reduce contributed capital by the cost of the treasury stock. b. Compute the company's capital structure levera
> A footnote to the financial statements of Allegheny Teledyne Incorporated stated the following: The straight-line method of depreciation was adopted for all property placed into service after July I , 1996. Buildings and equipment acquired prior to that
> Taylor Manufacturing entered into a borrowing arrangement that requires the company to maintain a retained earnings balance of $500,000. The company also wishes to finance internally a major plant addition in the not-too-distant future. Accordingly, the
> The December 31, 2020, balances in retained earnings and additional paid-in capital for Railway Shippers Company are $135,000 and $50,000, respectively. Five thousand no par value common shares are outstanding with a market value of $85 each. The company
> The shareholders' equity section of Pioneer Enterprises as of December 31, 2021, follows: Answer the questions below for the following independent transactions: a. How many common shares are outstanding after the company declares and distributes a 2 perc
> The shareholders' equity section of Mayberry Corporation, as of the end of 2021, follows. Mayberry began operations in 2017. The 5,000 shares of preferred stock have been outstanding since 2017. The company has paid the following total cash dividends sin
> The board of directors of Enerson Manufacturing is in the process of declaring a dividend. The company is considering paying a cash dividend of $12 per share. Enerson Manufacturing is authorized to issue 800,000 shares of common stock. The company has is
> The following information was taken from the statement of shareholders' equity of Kidd Sports as of December 31, 2021. The par value of Kidd stock is $1, and as of the beginning of 2021, the company held 1,500 shares in treasury. a. Kidd issued common st
> The following information was taken from the statement of shareholders' equity of Zielow Siding as of December 31, 2021. The par value of the Zielow stock is $5, and as of the beginning of 2021 , the company held 400 shares in treasury. a. Zielow issued
> The following are possible transactions that affect shareholders' equity: 1. A company issues common stock above par value for cash. 2. A company declares a 3-for-1 stock split. 3. A company repurchases 10,000 shares of its own common stock for retiremen
> The following information was extracted from the financial records of Leong Cosmetics: a. What is the effective interest rate on the notes payable? b. Prepare the journal entry to record interest expense during 2022.
> Morrow Enterprises purchased a building on January 1, 2021, in exchange for a three-year, non-interest-bearing note with a face value of $693,000. Independent appraisers valued the building at $550,125. a. At what amount should this building be capitaliz
> John Deere uses the LIFO inventory cost flow assumption, reporting inventories on its 2019 balance sheet of $5.975 billion and a LIFO reserve of approximately $ 1.670 billion. What would be Deere's 2019 inventory balance if it used the FIFO assumption in
> On January 1, 2021, Wilmes Floral Supplies borrowed $2,413 from Bower Financial Services. Wilmes Floral Supplies gave Bower a $2,500 note with a maturity date of December 31, 2022. The note specified an annual stated interest rate of 8 percent. a. Comput
> Candleton borrowed cash, signing a two-year, interest-bearing note payable with a face value of $8,000 and an effective interest rate of 8 percent. Interest payments on the note are made annually. Provide the journal entries that would be recorded over t
> Tradewell Rentals purchased a piece of equipment with an FMV of $11 ,348 in exchange for a five-year, non-interest-bearing note with a face value of $20,000. a. Compute the effective interest rate on the note payable. b. Prepare the journal entry to reco
> Compute the proceeds from the following notes payable. Interest payments are made annually.
> The stated and effective interest rates for several notes and bonds follow: Indicate whether each note/bond would be issued at a discount, par value, or a premium.
> On January 1, 2020, Tracy Supply purchased ten bonds on the open market, paying $9,260. The bonds had a total face value of $10,000, a stated interest rate of interest of 5 percent, and a time to maturity of ten years. As of the end of 2020, the bonds ha
> Dylander bonds are selling on the open market at 89 .16. The bonds have a stated interest rate of 8 percent and mature in ten years. Interest payments are made semiannually. a. Assume that your required rate of return is 12 percent. Would you buy the bon
> Compute the effective rate of interest on the following long-term debts. Interest payments on the notes are made annually, and interest payments on the bonds are made semiannually:
> Watts Motors plans to acquire a building and can either borrow cash from a bank to finance the purchase or lease the building from the current owner. The sales price of the building is $149,388. If the company wishes to finance the purchase with a bank l
> Tradeall Inc. leases automobiles for its sales force. On January 1, 2020, the company leased 100 automobiles and agreed to make lease payments of $10,000 per automobile each year. Assume an effective rate of 10 percent. a. Compute the annual rental expen
> The following information was taken from the footnotes in the 2019 annual report of Johnson & Johnson: a. From information in the footnote alone, indicate whether Johnson & Johnson is a retailer, manufacturer, or service firm. Explain. b. From in
> On January 1, 2020, Q-Mart entered into a five-year lease agreement requiring annual payments of $10,000 on December 31 of each year. The fair market value of the building was estimated by appraisers to be $39,927. a. Compute the effective interest rate
> The following information was taken from the balance sheet of Cohort Enterprises as of December 31, 2021: The bonds have a stated interest rate of 5 percent paid annually and will mature on December 31, 2023. The market value of the bonds as of December
> The following information was taken from the balance sheet of Beasley Brothers as of December 31, 2020: The bonds have a stated interest rate of 5 percent paid annually and will mature on December 31, 2022. The market value of the bonds as of December 31
> Hathaway Manufacturing issued long-term debt on January 1, 2020. The debt has a face value of $300,000 and an annual stated interest rate of 10 percent. The debt matures on January 1, 2025. a. Assume that the debt agreement requires Hathaway Manufacturin
> Marker Musical Products issued bonds with a face value of $100,000 and an annual stated interest rate of 8 percent on January 1, 2018. The effective interest rate on the bonds was 10 percent. Interest is paid semiannually on July 1 and January 1. As of D
> American Greetings Corporation, a large producer of greetings cards, repurchased some of its outstanding long-term debt. Shortly thereafter, the company issued new debt. At the time of the refinancing, where old debt was replaced by new debt, the balance
> When Eli Lilly, a major pharmaceutical company, chose to refinance some of its outstanding bonds payable, the company paid off the outstanding debt and replaced it with a new bond issuance. At the time of the refinancing, the balance sheet value of the o
> On September 10, 2018, Mooney Plastic Products issued bonds with a face value of $500,000 for a price of 96. During 2021, Mooney exercised a call provision and redeemed the bonds for 101. At the time of the redemption, the bonds had a balance sheet value
> Treadway Company issued bonds with a face value of $20,000 on January 1, 2020. The bonds were due to mature in five years and had a stated annual interest rate of 8 percent. The bonds were issued at face value. Interest is paid semiannually. a. As of Dec
> Coral Sands Marina issued 100 five-year bonds on July 1, 2021. The interest payments are due semiannually (January 1 and July 1) at an annual rate of 8 percent. The effective rate on the bonds is 6 percent. The face value of each bond is $1,000. a. Prepa
> In its fiscal 2019 annual report, Hewlett-Packard (commonly referred to as HP) reported beginning inventory of $6.1 billion, ending inventory of $5. 7 billion on the balance sheet, and cost of goods sold of $47.6 billion on the income statement. Compute
> Tingham Village issued 500 five-year bonds on July 1, 2021. The interest payments are due semiannually (January 1 and July 1) at an annual rate of 6 percent. The effective interest rate on the bonds is 8 percent. The face value of each bond is $1,000. a.
> On January 1, 2020, Collins Copy Machine Company issued thirty $1,000 face-value bonds with a stated annual rate of 10 percent that mature in ten years. Interest is paid semiannually on June 30 and December 31. The bonds were issued at face value. a. Pre
> Three different bond issuances are listed here with interest payments made semiannually: a. Compute the proceeds of each bond issuance. b. For each bond issuance, indicate whether the balance sheet value of the bond liability will increase, decrease, or
> During November 2017, Southwest Airlines issued five-year notes with a face value of $300 million. The stated interest rate on the notes was 2.8 percent, and proceeds from the issuance approximated $300 million. a. Estimate the effective interest rate o
> The balance sheet as of December 31, 2020, for Melrose Enterprises follows: During 2020, Melrose entered into a loan agreement that required the company to maintain a debt/equity ratio of less than 2: 1. a. How much additional debt can Melrose take on be
> Jordan Brothers recently instituted a bonus plan to pay its executives. The plan specifies that net income must exceed $200,000 before any bonus payments are made. Cash in the amount of 10 percent of net income in excess of $200,000 is placed in a bonus
> Zeus Power has brought suit against Regional Supply in the amount of $825,000 for patent infringement. As of December 31, the suit is in process, and the attorneys have determined that there is a greater than 50 percent chance that Zeus Power will win th
> The following information was taken from the 2019 annual report of Bed Bath & Beyond, a leading household retailer (dollars in thousands): a. Assume that accounts payable reflects only accounts with inventory suppliers, and compute the cash payments
> Norsums Department Store sells gift certificates that are redeemable in merchandise. During 2020, Norsums sold gift certificates for $88,000. Merchandise with the total price of $52,000 was redeemed during the year. The cost of the sold merchandise to No
> On January 1, 2016, Lacey Treetoppers borrowed $300,000. The principal is to be paid back in annual payments of $20,000 on December 30 of each year. a. Assuming that Lacey has met all principal payments on a timely basis, how should this liability be rep
> CIT Group is a holding company for consumer and commercial financial services companies that provide lending products to customers. The following information concerning the Allowance for Loan Losses (Bad Debts) account was taken from CIT's 2019 10-K (dol
> On December 1, Spencer Department Store borrowed $19,250 from First Bank and Trust. Spencer signed a 90-day note with a face amount of $20,000. The interest rate stated on the face of the note is 15 percent per year. a. Provide the journal entry recorded
> Lily May Electronics recognizes expenses for wages, interest, and rent when cash payments are made. The following related cash payments were made during December 2020: As of December 31, the current assets and current liabilities reported on Lily May's b
> The following information was taken from the annual report of Sega-Venus Enterprises: a. Compute Sega-Venus's conservatism ratio, and comment on how conservative the company's reporting methods are. b. Explain why the conservatism ratio provides a measur
> The following information was taken from the annual report of Busytown Industries: a. Compute Busytown's conservatism ratio, and comment on how conservative the company's reporting methods are. b. Explain why the conservatism ratio provides a measure of
> Swingley Company uses an accelerated method to depreciate its fixed assets for tax purposes and the straight-line method for financial reporting purposes. In 2020, the accelerated method recognized depreciation of $35,000, while the straight-line method
> Seasaw Seasons instituted a defined benefit pension plan for its employees three years ago. Each year since the adoption of the plan, Seasaw has contributed $ 16,000 to the pension fund, which is managed by Fiduciary Trust Associates. As of the end of th
> DuPont, the giant chemical company, booked restructuring charges (expenses) on its income statement in 2019, 2018, and 2017. The 2019 charge was $138 million, which included a $34 million asset write-down and $104 million to cover employee severance cost
> Southwest Airlines is paid in advance for its ticket sales, recognizing a deferred revenue, called air traffic liability, when it receives the cash. The liability is then converted to revenue when the passenger takes the flight. During 2019, Southwest re
> During 2020, Seagul Outboards sold 200 outboard engines for $250 each. The engines are under a one-year warranty for parts and labor, and from past experience, the company estimates that, on average, warranty costs will equal $20 per engine. As of Decemb
> The following information was taken from the 2019 annual report of Emerson Electric Co., a leader in the network power sector (dollars in millions): a. Compute total accounts receivable as of the end of 2019 and 2018, and compute the uncollectible allowa
> Winslow Enterprises reports $40,000 in accounts payable on the balance sheet as of December 31, 2020. These payables, on average, will be paid in ten days. Using a 12 percent discount rate, assume the present value of the $40,000 note is $39,868.80. Why
> Stockton Corporation purchased a new computer system on January 1, 2020, for $300,000 cash. The company also incurred $25,000 in installation costs and $10,000 to train its employees on the new system. The computer system has an estimated useful life of
> Benick Industries purchased a new lathe on January 1, 2020, for $300,000. Benick estimates that the lathe will have a useful life of four years and that the company will be able to sell it at the end of the fourth year for $60,000. a. Compute the depreci
> The controller of Elton Furniture Store is currently trying to decide what depreciation method to use for a particular fixed asset. The controller has prepared the following list of possible objectives that might be accomplished through a depreciation me
> Portland Products purchased a machine on January 1, 2017, for $60,000 and estimated its useful life and salvage value at five years and $12,000, respectively. On January 1, 2020, the company added three years to the original useful-life estimate. a. Comp
> Stork Freight Company owns and operates 15 planes that deliver packages worldwide. The planes were purchased on January 1, 2017, for $1 million each. The company estimates that the planes will be scrapped after 12 years. Stork Freight uses straight-line
> The condensed balance sheet as of December 31, 2020, for Van Den Boom Enterprises follows: Sales and operating expenses (other than amortization) are predicted to be $65,000 and $20,000, respectively, across all three years in the future - 2021, 2022, an
> The following items represent common postacquisition expenditures incurred on machinery: a. Lubrication service b. Painting costs c. Cleaning expenditures d. Rewiring costs to increase operating speed e. Repairs f. Replacement of defective parts g. An ov
> In the footnotes to its IFRS-based financial statements, European Aeronautical Defense and Space Company (EADS), parent company for Airbus, includes a description of a long-lived asset account called " investment property," which is leased to a third par
> When Salesforce purchased MuleSoft for $6.4 billion in cash, it acquired assets with a fair market value of $1.9 billion and assumed the liabilities of MuleSoft valued at $0.2 billion. INSTRUCTIONS: a. How much goodwill was recognized on the acquisition?
> The following information was taken from the financial statements of Coca-Cola and PepsiCo (dollar amounts in millions). a. Compute return on equity, return on assets, capital structure leverage, profit margin, and asset turnover for each company for 201
> Firton Brothers purchased for $90,000 a tract of land that included an abandoned warehouse. The warehouse was razed, and the site was prepared for a new building at a cost of $10,000. Scrap materials from the warehouse were sold for $7,000. A building wa
> The following information was taken from the internal financial records of Southern Robotics regarding a patent filed in 2020 for a new robotics arm used for manufacturing: 1. Legal and filing fees of $50,000 were paid during 2020 for filing the patent.
> Swift Corporation incorporated on January 1, 2020, and incurred $45,000 in organization costs. a. Should Swift Corporation capitalize or expense these costs? Defend your answer. b. If these costs are capitalized, over what period of time should they be a
> The following financial information was taken from the records of Frederickson and Peffer. a. Reconstruct the entry that recorded the sale of equipment during 2020. b. How much equipment was purchased during 2020?
> The following information was taken from the 2019 annual report of Intel, a world-leading supplier to the Internet economy (dollars in millions). a. From which of the financial statements was each figure taken? b. Estimate the cost of property, plant, an
> The following financial information was taken from the records of White Bones Inc. Note: The company purchased equipment for $12,000 during 2020. a. How much cash was collected on the sale of equipment during 2020? b. Reconstruct the entry that recorded
> Paris Company purchased equipment on January 1, 2018, for $25,000. The estimated useful life of the equipment is five years, the salvage value is $5,000, and the company uses the double-declining balance method to depreciate fixed assets. a. Provide the
> Savory Enterprises reported the following information regarding the company's property, plant, and equipment in the footnotes to the company's 2020 financial statements: a. Assume that Savory Enterprises sells all of its equipment for $235,000 in cash on
> Lewis Real Estate purchased a new photocopy machine on January 1, 2020, for $120,000. The company's bookkeeper made the following entry to record the acquisition: The photocopy machine has an estimated useful life of four years and an estimated salvage v
> Natural Extraction Industries paid $4 million for the right to drill for oil on a tract of land in western Texas. Engineers estimated that this oil deposit would produce 100,000 barrels of crude oil. a. During the first year of operations, Natural Extrac
> The following ratios were computed from the 2019 financial statements of Nordstrom and Macy's. Explain why Nordstrom has a higher ROE and a higher ROA.
> Apex Trucking purchased a truck for $ 100,000 on January 1, 2020. The useful life of the truck was estimated to be either five years or 200,000 miles. Salvage value was estimated at $20,000. Over the actual life of the truck, it logged the following mile
> Lowery Inc. purchased new plant equipment on January 1, 2020. The company paid $920,000 for the equipment, $62,000 for transportation of the equipment, and $10,000 for insurance on the equipment while it was being transported. The company also estimates
> Watkins Corporation began operations on January 1, 2019. The 2019 and 2020 schedules of inventory purchases and sales are as follows: Complete the following schedule, and briefly discuss the trade-offs associated with choosing an inventory cost flow assu
> Vinnie's House of Televisions has 75 identical 27-inch color monitors in stock on January 1, 2021. Vinnie maintains records of the serial number of each monitor to track its costs. Vinnie purchased the 75 monitors on December 5, 2020, for $450 each. He a
> Marian's Furs specializes in full-length mink coats. As of January 1, Marian had four top-ofthe-line coats. Although the four coats are equivalent, they were purchased the previous year at different costs: During January, a customer decided to buy any on
> Designer Shoe Warehouse reported the following items in its fiscal 2019 financial report (dollars in millions): Assume that counting errors caused the ending inventory in 2018 to be understated by $50 and the ending inventory in 2019 to be overstated by
> The following information comes from the records of Telly's Supply: An inventory count taken at year-end indicates that inventory with a cost of $50,000 is on hand as of December 31, 2020. Assume that inventory purchases and freight-in are both reflected
> The following information was extracted from annual reports of 3M (dollars in millions): Compute the missing information.
> Baymont Corporation purchased inventory on account on March 3, 2020, for a gross price of $50,000. The company purchased additional inventory on account on March 10, 2020, for a gross price of $140,000. Baymont Corporation paid for the first purchase on
> Nick's Fish Market purchased Maine lobster on account on October 10, 2020, for a gross price of $76,000. Nick also purchased Alaskan king crab on account on October 11, 2020, for a gross price of $36,000. Nick paid for the first purchase on October 20, 2
> The following information was taken from the 2019 financial statements of Nordstrom and Macy's. Using this information, compute the following ratios for 2019: ROE, ROA, capital structure leverage, profit margin, total asset turnover (dollars in millions)
> For all quality of earnings cases except Liberty, when making ratio calculations that include balance sheet accounts, use ending and not average balances. The ratio calculations for Liberty are already calculated for you.
> Repeat Problems 8.11 and 8.12 using (incorrectly) Bernoulli’s equation for incompressible flow. Calculate the percent error induced by using Bernoulli’s equation
> Consider a flow with a pressure and temperature of 2116 lb/ft2 and 519 ◦R, respectively. A Pitot tube is inserted into this flow and measures a pressure of 7712.8 lb/ft2. What is the velocity of this flow?
> Consider a flow with a pressure and temperature of 1 atm and 288 K. A Pitot tube is inserted into this flow and measures a pressure of 1.555 atm. What is the velocity of the flow?
> The flow just upstream of a normal shock wave is given by p1=1800 lb/ft2, T1=480 ◦R, and M1=3.1. Calculate the velocity and M∗ behind the shock.
> Consider air at a temperature of 230 K. Calculate the speed of sound.
> An airfoil is in a freestream where p∞ = 0.61 atm, ρ∞ = 0.819 kg/m3, and V∞=300 m/s. At a point on the airfoil surface, the pressure is 0.5 atm. Assuming isentropic flow, calculate the velocity at that point.
> In the reservoir of a supersonic wind tunnel, the velocity is negligible, and the temperature is 1000 K. The temperature at the nozzle exit is 600 K. Assuming adiabatic flow through the nozzle, calculate the velocity at the exit.
> Consider a point in a flow where the velocity and temperature are 1300 ft/s and 480 ◦R, respectively. Calculate the total enthalpy at this point.
> Consider air at a pressure of 0.2 atm. Calculate the values of τT and τs . Express your answer in SI units.
