On January 1, 2012, Agassi Corporation had the following stockholders’ equity accounts. Common Stock ($10 par value, 60,000 shares issued and outstanding) ……….. $600,000 Paid-in Capital in Excess of Par …………………………………………………………………… 500,000 Retained Earnings ……………………………………………………………………………………… 620,000 During 2012, the following transactions occurred. Jan. 15 Declared and paid a $1.05 cash dividend per share to stockholders. Apr. 15 Declared and paid a 10% stock dividend. The market price of the stock was $14 per share. May 15 Reacquired 2,000 common shares at a market price of $15 per share. Nov. 15 Reissued 1,000 shares held in treasury at a price of $18 per share. Dec. 31 Determined that net income for the year was $370,000. Accounting Journalize the above transactions. (Include entries to close net income to Retained Earnings.) Determine the ending balances for Paid-in Capital, Retained Earnings, and Stockholders’ equity. Analysis Calculate the payout ratio and the return on common stock equity ratio. Principles R. Federer is examining Agassi’s financial statements and wonders whether the “gains” or “losses” on Agassi’s treasury stock transactions should be included in income for the year. Briefly explain whether, and the conceptual reasons why, gains or losses on treasury stock transactions should be recorded in income.
> Lexington Co. has the following available-for-sale securities outstanding on December 31, 2012 (its first year of operations). During 2013, Summerset Company stock was sold for $9,200, the difference between the $9,200 and the “fair v
> What features or rights may alter the character of preferred stock?
> On January 1, 2012, Novotna Company purchased $400,000, 8% bonds of Aguirre Co. for $369,114. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2017. Novotna Company u
> On January 1, 2012, Jennings Company purchased at par 10% bonds having a maturity value of $300,000. They are dated January 1, 2012, and mature January 1, 2017, with interest receivable December 31 of each year. The bonds are classified in the held-to-ma
> Use the information from BE17-1, but assume the bonds are purchased as an available-for-sale security. Prepare Garfield’s journal entries for (a) The purchase of the investment, (b) The receipt of annual interest and discount amortization, and (c) The ye
> What purpose does the variety in bond features (types and characteristics) serve?
> Access the glossary (“Master Glossary”) to answer the following. (a) What are trading securities? (b) What is the definition of “holding gain or loss”? (c) What is a cash flow hedge? (d) What is a fair value hedge?
> Assume the bonds in BE14-2 were issued at 103. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Colson Company records straight-line amortization semiannually. In BE14-2 The Colson Company issued $300,000 of 10%
> Four years after issue, debentures with a face value of $1,000,000 and book value of $960,000 are tendered for conversion into 80,000 shares of common stock immediately after an interest payment date. At that time, the market price of the debentures is 1
> Distinguish between a current liability and a long-term debt.
> The financial statements of P&G are presented in Appendix 5B or can be accessed at the book’s companion website, www.wiley.com/college/kieso. Instructions Refer to these financial statements and the accompanying notes to answer the following questions.
> Access the glossary (“Master Glossary”) to answer the following. (a) What is an asset retirement obligation? (b) What is the definition of “current liabilities”? (c) What does it mean if something is “reasonably possible”? (d) What is a warranty?
> Discuss the propriety of showing: (a) Treasury stock as an asset. (b) “Gain” or “loss” on sale of treasury stock as additions to or deductions from income. (c) Dividends received on treasury stock as income.
> Under what conditions should a short-term obligation be excluded from current liabilities?
> In this simulation, you are asked to address questions related to the accounting for current liabilities. Prepare responses to all parts. • KwW_Professional_Simulation Current Time Remaining O hour 20 minutes Liabilities Unspit Spk Hortz Spit Vertic
> Pleasant Co. manufactures specialty bike accessories. The company is known for product quality, and it has offered one of the best warranties in the industry on its higher-priced products—a lifetime guarantee, performing all the warranty work in its own
> YellowCard Company manufactures accessories for iPods. It had the following selected transactions during 2012. 1. YellowCard provides a 2-year warranty on its docking stations, which it began selling in 2012. During 2012, YellowCard spent $6,000 servicin
> Despite being a publicly traded company only since 1987, Northland Cranberries of Wisconsin Rapids, Wisconsin, is one of the world’s largest cranberry growers. During its short life as a publicly traded corporation, it has engaged in an
> Described below are certain transactions of Edwardson Corporation. The company uses the periodic inventory system. 1. On February 2, the corporation purchased goods from Martin Company for $70,000 subject to cash discount terms of 2/10, n/30. Purchases a
> How would each of the following items be reported on the balance sheet? (a) Accrued vacation pay. (b) Estimated taxes payable. (c) Service warranties on appliance sales. (d) Bank overdraft. (e) Personal injury claim pending. Be paid from current assets.
> Assume the bonds in BE14-2 were issued at 98. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Colson Company records straight-line amortization semiannually. In BE14-2 The Colson Company issued $300,000 of 10%
> Access the glossary (Master Glossary) to answer the following. (a) What does the term “callable obligation” mean? (b) What is an imputed interest rate? (c) What is a long-term obligation? (d) What is the definition of “effective interest rate”?
> Presented below is the current liabilities section of Micro Corporation. Instructions Answer the following questions. (a) What are the essential characteristics that make an item a liability? (b) How does one distinguish between a current liability and
> For what reasons might a corporation purchase its own stock?
> Go to the book’s companion website and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc. (a) How much working capital do each of these companies have at the end of 2009? (b) Compute both comp
> Union Planters is a Tennessee bank holding company (that is, a corporation that owns banks). (Union Planters is now part of Regions Bank.) Union Planters manages $32 billion in assets, the largest of which is its loan portfolio of $19 billion. In additio
> The financial statements of P&G are presented in Appendix 5B or can be accessed at the book’s companion website, www.wiley.com/college/kieso. Instructions Refer to P&G’s financial statements and the accompanying notes to answer the following questions.
> Where can authoritative IFRS be found related to investments?
> In this simulation, you are asked to address questions related to investments. Prepare responses to all parts. KwW_Professional_Simulation Investments Time Remaining 3 hours 20 minutes Unsplt Spit Horiz Spt Verical Spreadsheet Calculator Ext Situati
> Your client, Cascade Company, is planning to invest some of its excess cash in 5-year revenue bonds issued by the county and in the stock of one of its suppliers, Teton Co. Teton’s shares trade on the over-the-counter market. Cascade plans to classify th
> Instar Company has several investments in the securities of other companies. The following information regarding these investments is available at December 31, 2012. 1. Instar holds bonds issued by Dorsel Corp. The bonds have an amortized cost of $320,00
> For the following investments, identify whether they are: 1. Trading 2. Available-for-Sale 3. Held-to-Maturity Each case is independent of the other. (a) A bond that will mature in 4 years was bought 1 month ago when the price dropped. As soon as the val
> Petrenko Corporation has outstanding 2,000 $1,000 bonds, each convertible into 50 shares of $10 par value common stock. The bonds are converted on December 31, 2012, when the unamortized discount is $30,000 and the market price of the stock is $21 per sh
> Go to the website and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc. (a) Based on the information contained in these financial statements, determine each of the following for each company
> Explain how underwriting costs and accounting and legal fees associated with the issuance of stock should be recorded.
> How is compensation expense computed using the fair value approach?
> Distinguish between a debt security and an equity security.
> If a company chooses to purchase its own shares and then either (1) Retires the repurchased shares and issues additional shares, or (2) Resells the repurchased shares, can a gain or loss be recognized by the company? Why or why not?
> At what percentage point can the issuance of additional shares still qualify as a stock dividend, as opposed to a stock split?
> Access the glossary (“Master Glossary”) to answer the following. (a) What is a “convertible security”? (b) What is a “stock dividend”? (c) What is a “stock split”? (d) What are “participation rights”?
> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://corporate.marksandspencer.com/documents/publications/2010/Annual_Report_2010. Instructions Refer to M&S’s financial statem
> Recall from Chapter 13 that Hincapie Co. (a specialty bike-accessory manufacturer) is expecting growth in sales of some products targeted to the low-price market. Hincapie is contemplating a preference share issue to help finance this expansion in operat
> Weisberg Corporation has 10,000 shares of $100 par value, 6%, preference shares and 50,000 ordinary shares of $10 par value outstanding at December 31, 2012. Instructions Answer the questions in each of the following independent situations. (a) If the p
> Case 1 Kellogg Company Kellogg Company is the world’s leading producer of ready-to-eat cereal products. In recent years, the company has taken numerous steps aimed at improving its profitability and earnings per share. Presented below a
> Where can authoritative IFRS guidance related to stockholders’ equity be found?
> Why is a preemptive right important?
> What are the different bases for stock valuation when assets other than cash are received for issued shares of stock?
> In this simulation, you are asked to address questions related to the accounting for stockholders, equity. Prepare responses to all parts. KWW Professional Simulation Stockholders Equity Time Remaining 4 hours 10 minutes Unspit Spit Hotz Spit Vertic
> Hincapie Co. (a specialty bike-accessory manufacturer) is expecting growth in sales of some products targeted to the low-price market. Hincapie is contemplating a preferred stock issue to help finance this expansion in operations. The company is leaning
> Go to the book’s companion website and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc. (a) Compute the debt to total assets ratio and the times interest earned ratio for these two companies
> The financial statements of P&G are presented in Appendix 5B or can be accessed at the book’s companion website, www.wiley.com/college/kieso. Instructions Refer to P&G’s financial statements and the accompanying notes to answer the following questions.
> Donald Lennon is the president, founder, and majority owner of Wichita Medical Corporation, an emerging medical technology products company. Wichita is in dire need of additional capital to keep operating and to bring several promising products to final
> Matt Ryan Corporation is interested in building its own soda can manufacturing plant adjacent to its existing plant in Partyville, Kansas. The objective would be to ensure a steady supply of cans at a stable price and to minimize transportation costs. Ho
> Part I. The appropriate method of amortizing a premium or discount on issuance of bonds is the effective-interest method. Instructions (a) What is the effective-interest method of amortization and how is it different from and similar to the straight-lin
> On March 1, 2013, Sealy Company sold its 5-year, $1,000 face value, 9% bonds dated March 1, 2013, at an effective annual interest rate (yield) of 11%. Interest is payable semiannually, and the first interest payment date is September 1, 2013. Sealy uses
> On January 1, 2013, Nichols Company issued for $1,085,800 its 20-year, 11% bonds that have a maturity value of $1,000,000 and pay interest semiannually on January 1 and July 1. Bond issue costs were not material in amount. Below are three presentations o
> Explain the difference between the proportional method and the incremental method of allocating the proceeds of lump-sum sales of capital stock.
> In the absence of restrictive provisions, what are the basic rights of stockholders of a corporation?
> Crocker Corp. owes D. Yaeger Corp. a 10-year, 10% note in the amount of $330,000 plus $33,000 of accrued interest. The note is due today, December 31, 2012. Because Crocker Corp. is in financial trouble, D. Yaeger Corp. agrees to forgive the accrued inte
> Martin Corporation is planning to issue 3,000 shares of its own $10 par value common stock for two acres of land to be used as a building site. Instructions (a) What general rule should be applied to determine the amount at which the land should be reco
> Wallace Computer Company is a small, closely held corporation. Eighty percent of the stock is held by Derek Wallace, president. Of the remainder, 10% is held by members of his family and 10% by Kathy Baker, a former officer who is now retired. The balanc
> Samantha Cordelia, an intermediate accounting student, is having difficulty amortizing bond premiums and discounts using the effective-interest method. Furthermore, she cannot understand why GAAP requires that this method be used instead of the straight-
> Presented below are four independent situations. (a) On March 1, 2013, Wilke Co. issued at 103 plus accrued interest $4,000,000, 9% bonds. The bonds are dated January 1, 2013, and pay interest semiannually on July 1 and January 1. In addition, Wilke Co.
> Sabonis Cosmetics Co. purchased machinery on December 31, 2011, paying $50,000 down and agreeing to pay the balance in four equal installments of $40,000 payable each December 31. An assumed interest of 8% is implicit in the purchase price. Instructions
> On December 31, 2012, Faital Company acquired a computer from Plato Corporation by issuing a $600,000 zero-interest-bearing note, payable in full on December 31, 2016. Faital Company’s credit rating permits it to borrow funds from its several lines of cr
> On April 1, 2012, Seminole Company sold 15,000 of its 11%, 15-year, $1,000 face value bonds at 97. Interest payment dates are April 1 and October 1, and the company uses the straight-line method of bond discount amortization. On March 1, 2013, Seminole t
> Presented below are selected transactions on the books of Simonson Corporation. May 1, 2012 Bonds payable with a par value of $900,000, which are dated January 1, 2012, are sold at 106 plus accrued interest. They are coupon bonds, bear interest at 12% (p
> Describe the accounting for the issuance for cash of no-par value common stock at a price in excess of the stated value of the common stock.
> In each of the following independent cases the company closes its books on December 31. 1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2012. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2015. The bo
> McNabb Corp. had $100,000 of 7%, $20 par value preferred stock and 12,000 shares of $25 par value common stock outstanding throughout 2012. (a) Assuming that total dividends declared in 2012 were $64,000, and that the preferred stock is not cumulative bu
> Holiday Company issued its 9%, 25-year mortgage bonds in the principal amount of $3,000,000 on January 2, 1998, at a discount of $150,000, which it proceeded to amortize by charges to expense over the life of the issue on a straight-line basis. The inden
> Good-Deal Inc. developed a new sales gimmick to help sell its inventory of new automobiles. Because many new car buyers need financing, Good-Deal offered a low down payment and low car payments for the first year after purchase. It believes that this pro
> Venezuela Co. is building a new hockey arena at a cost of $2,500,000. It received a downpayment of $500,000 from local businesses to support the project, and now needs to borrow $2,000,000 to complete the project. It therefore decides to issue $2,000,000
> The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2006, and the subsequent interest payments and charges. The company’s year-end is December 31, and financial st
> Vargo Corp. owes $270,000 to First Trust. The debt is a 10-year, 12% note due December 31, 2012. Because Vargo Corp. is in financial trouble, First Trust agrees to extend the maturity date to December 31, 2014, reduce the principal to $220,000, and reduc
> Johnstone Inc. began operations in January 2011 and reported the following results for each of its 3 years of operations. 2011 …………………………….. $260,000 net loss 2012 ……………………………… $40,000 net loss 2013 ……………………….. $700,000 net income At December 31, 2013,
> Using the same information as in E14-22 and E14-24, answer the following questions related to American Bank (creditor). In E14-22 On December 31, 2012, the American Bank enters into a debt restructuring agreement with Barkley Company, which is now exper
> Use the same information as in E14-22 above except that American Bank reduced the principal to $1,900,000 rather than $2,400,000. On January 1, 2016, Barkley pays $1,900,000 in cash to American Bank for the principal. In E14-22 On December 31, 2012, the
> What is meant by par value, and what is its significance to stockholders?
> Using the same information as in E14-22, answer the following questions related to American Bank (creditor). In E14-22 On December 31, 2012, the American Bank enters into a debt restructuring agreement with Barkley Company, which is now experiencing fin
> On December 31, 2012, the American Bank enters into a debt restructuring agreement with Barkley Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $3,000,000 note receivable by the following modific
> Briefly explain why corporations issue convertible securities.
> Strickland Company owes $200,000 plus $18,000 of accrued interest to Moran State Bank. The debt is a 10-year, 10% note. During 2012, Strickland’s business deteriorated due to a faltering regional economy. On December 31, 2012, Moran State Bank agrees to
> At December 31, 2012, Redmond Company has outstanding three long-term debt issues. The first is a $2,000,000 note payable which matures June 30, 2015. The second is a $6,000,000 bond issue which matures September 30, 2016. The third is a $12,500,000 sink
> Fallen Company commonly issues long-term notes payable to its various lenders. Fallen has had a pretty good credit rating such that its effective borrowing rate is quite low (less than 8% on an annual basis). Fallen has elected to use the fair value opti
> On January 1, 2012, Durdil Co. borrowed and received $500,000 from a major customer evidenced by a zero-interest-bearing note due in 3 years. As consideration for the zero-interest-bearing feature, Durdil agrees to supply the customer’s inventory needs f
> Presented below are two independent situations: (a) On January 1, 2013, Spartan Inc. purchased land that had an assessed value of $390,000 at the time of purchase. A $600,000, zero-interest-bearing note due January 1, 2016, was given in exchange. There w
> On January 1, 2013, McLean Company makes the two following acquisitions. 1. Purchases land having a fair value of $300,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $505,518. 2. Purchases equipment by issuing a 6%,
> Friedman Company had bonds outstanding with a maturity value of $500,000. On April 30, 2013, when these bonds had an unamortized discount of $10,000, they were called in at 104. To pay for these bonds, Friedman had issued other bonds a month earlier bear
> Explain each of the following terms: authorized capital stock, unissued capital stock, issued capital stock, outstanding capital stock, and treasury stock.
> On June 30, 2004, Mendenhal Company issued 12% bonds with a par value of $600,000 due in 20 years. They were issued at 98 and were callable at 104 at any date after June 30, 2012. Because of lower interest rates and a significant change in the company’s
> Robinson, Inc. had outstanding $5,000,000 of 11% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $7,000,000 of 10%, 15-year bonds (interest payable July 1 and January 1) at 98. A portion of the proceeds was used to c
> On January 2, 2007, Prebish Corporation issued $1,500,000 of 10% bonds at 97 due December 31, 2016. Legal and other costs of $24,000 were incurred in connection with the issue. Interest on the bonds is payable annually each December 31. The $24,000 issue
> What is meant by a dilutive security?
> Pawnee Inc. has issued three types of debt on January 1, 2012, the start of the company’s fiscal year. (a) $10 million, 10-year, 13% unsecured bonds, interest payable quarterly. Bonds were priced to yield 12%. (b) $25 million par of 10-year, zero-coupon
> On January 1, 2012, Osborn Company sold 12% bonds having a maturity value of $800,000 for $860,651.79, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2012, and mature January 1, 2017, with interest payable December 31 of
> On June 30, 2012, Mackes Company issued $5,000,000 face value of 13%, 20-year bonds at $5,376,150, a yield of 12%. Mackes uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 3
> Presented below are three independent situations. (a) Chinook Corporation incurred the following costs in connection with the issuance of bonds: (1) Printing and engraving costs, $15,000; (2) Legal fees, $49,000, and (3) Commissions paid to underwriter,
> Assume the same information as E14-6. In E14-6 Spencer Company sells 10% bonds having a maturity value of $3,000,000 for $2,783,724. The bonds are dated January 1, 2012, and mature January 1, 2017. Interest is payable annually on January 1. Instruction
> Spencer Company sells 10% bonds having a maturity value of $3,000,000 for $2,783,724. The bonds are dated January 1, 2012, and mature January 1, 2017. Interest is payable annually on January 1. Instructions Set up a schedule of interest expense and disc
