Question: Refer to Practice 14-10. Make the

> Newlyweds Jamie Lee and Ross have had several milestones in the past year. They are newlyweds, recently purchased their first home and now have twins on the way! Jamie Lee and Ross have to seriously consider their insurance needs. A family, a home and

> What are the two types of insurance companies?

> What are the four forms of whole life insurance?

> What are the five forms of term insurance?

> For each of the following statements, indicate your response by writing “T” or “F”. a. Stock life insurance companies generally sell participating (or par) policies. b. Mutual life insurance companies specialize in the sale of nonparticipating (nonpar)

> What is life insurance? What is its purpose?

> For each of the following statements, indicate your response by writing “T” or “F”. a. Life insurance is one of the least important and inexpensive purchases. b. A beneficiary is a person named to receive the benefits from the insurance policy c. Life i

> What are the four methods of determining life insurance needs?

> What are various groups doing to curb the high costs of health care?

> What are the reasons for rising health care expenditures?

> What can individuals do to reduce health care costs?

> 1. Using Your Personal Financial Plan Sheet 22, compare the advantages and the disadvantages of renting a home or apartment versus the purchase of a home. 2. Jamie Lee and Ross are estimating that they will be putting $40,000 from their savings as a down

> 1. Based on Mackenzie’s experiences, what benefits and drawbacks are associated with online car buying? 2. What additional actions might Mackenzie consider before buying a motor vehicle? 3. What actions might a car buyer take if a lemon is purchased?

> The company issued 10,000 shares of $1 par common stock for cash of $40 per share. Make the necessary journal entry.

> The manager is entitled to a bonus equal to 5% of her store’s earnings. The difficult part is that calculation of the store’s earnings includes a subtraction for the amount of the bonus. The store’s earnings before the bonus total $200,000. Calculate the

> The company has the following three loans payable scheduled to be repaid in February of next year. As of December 31 of this year, compute (1) Total current liabilities and (2) Total noncurrent liabilities. (a) The company intends to repay Loan A, for

> On January 1, the company purchased investment securities for $1,000. The securities are classified as trading. By December 31, the securities had a fair value of $1,800 but had not yet been sold. Excluding the trading securities, income before taxes for

> Van Etten Company declared and paid a cash dividend of $3.25 per share on its $1 par common stock. Van Etten has 100,000 shares of common stock outstanding and total paid-in capital from common stock of $800,000. As part of the dividend announcement, Van

> MedQuest Enterprises is threatened with bankruptcy due to its inability to meet interest payments and fund requirements to retire $5,000,000 of long-term notes. The notes are all held by Dynasty Insurance Company. In order to prevent bankruptcy, MedQuest

> A machine is purchased at the beginning of 2013 for $38,400. Its estimated life is eight years. Freight costs on the machine are $3,000. Installation costs are $1,600. The machine is estimated to have a residual value of $600 and a useful life of 32,000

> The company has bonds payable with a total face value of $150,000 and a carrying value of $142,000. In addition, unpaid interest on the bonds has been accrued in the amount of $8,000. The lender has agreed to the settlement of the bonds in exchange for 2

> The company has outstanding bonds payable with a total face value of $100,000. On July 1, the company redeemed the bonds by purchasing them on the open market for a total of $102,700. Make the necessary journal entry on the issuer’s books to record the r

> Refer to Practice 14-10. Make the adjusting journal entries for (a) and (b) and the computations for (c) and (d), Assuming that the securities are classified as available for sale. In Practice 14-10 On December 1, the company purchased securities for $3

> On December 1, the company purchased securities for $3,850. On December 31, the company still held the securities. Make the necessary adjusting journal entry to record a change in value of the securities assuming that their December 31 fair value was (a

> Florence Clark purchased a house for $300,000. She paid cash of 10% of the purchase price and signed a mortgage for the remainder. She will repay the mortgage in monthly payments for 30 years, with the first payment to occur in one month. The interest ra

> On January 1, the lessee company signed an operating lease contract. The lease contract calls for $3,000 payments at the end of each year for 10 years. The rate implicit in the lease is 10%. Make the journal entries necessary on the books of the lessee c

> Fredco’s defined benefit pension plan had a PBO of $10,000,000 at the beginning of the year. This was based on a 10% discount rate (obligation discount rate). The fair value of pension plan assets at the beginning of the year was $10,400,000. These asset

> A lease involves payments of $1,000 per month for five years. The payments are made at the end of each month. The lease also involves a guaranteed residual value of $10,000 to be paid at the end of the 5-year period. The fair value of the leased asset is

> On December 31, the company, a lessee, purchased some machinery that it had been leasing under a capital lease arrangement. The leased asset and lease liability were originally recorded at $1,000,000. At the time of the purchase, the accumulated amortiza

> A lease involves payments of $2,000 per month for two years. The payments are made at the end of each month. The lease also involves a guaranteed residual value of $20,000 to be paid at the end of the 2-year period. The appropriate interest rate is 12% c

> The company owns 2,000 shares of Stock A and 6,000 shares of Stock B. The company received dividends of $1.75 per share from Stock A and $0.97 per share from Stock B. The company classifies Stock A as a trading security and Stock B as an available-for-sa

> Identify how each of the following investments in equity securities should be classified by the investor company: Number of Total Shares Shares Owned of Investee Company by Investor Company Outstanding 1,200 10,000 2. 6,000 8,000 3 20,000 55,000

> The company purchased 2,000 shares of equity securities for $27 per share. The shares were purchased as an available-for-sale investment. Make the journal entry necessary to record the purchase.

> The company, based in the United Kingdom, has the following equity accounts: Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000 Asset revaluation reserve . . .

> The company started business on January 1, 2011. Net income and dividends for the first three years of the company’s existence are as follows: The company has some foreign subsidiaries and also maintains a portfolio of available-for-s

> The company arranged a line of credit for $500,000 on January 1. The commitment fee is 0.05% (five one-hundredths of 1%) of the total credit line. In addition, the company must pay interest of 5.9% (compounded annually) on any actual loans acquired under

> Indicate which of the following items are temporary differences and which are nontaxable or nondeductible. For each temporary difference, indicate whether the item considered alone would create a deferred tax asset or a deferred tax liability. (a) Tax de

> Anderson Company paid dividends at the end of each year as follows: 2011, $150,000; 2012, $240,000; and 2013, $560,000. Determine the amount of dividends per share paid on common and preferred stock for each year, assuming independent capital structures

> The records of Burtone Company contain the following cost categories. Burtone manufactures exercise equipment and iron weights. (a) Cost of materials used to repair factory equipment (b) Depreciation on the fleet of salespersons’ cars (c) Cost to purchas

> The board of directors of the company has decided that the interests of the shareholders will be best served if the company is liquidated in an orderly fashion, with the proceeds to be distributed to the shareholders. As the first installment in this liq

> Illinois Wholesale Company has an agreement with its sales manager entitling that individual to 7% of company earnings as a bonus. Company income for the calendar year before bonus and income tax is $350,000. Income tax is 30% of income after bonus. 1. C

> The company has bonds payable with a total face value of $100,000 and a carrying value of $103,000. In addition, unpaid interest on the bonds has been accrued in the amount of $6,000. The lender has agreed to the settlement of the bonds in exchange for l

> Refer to Practice 16-3. Compute the effective tax rate. In Practice 16-3 The company reported pretax financial income in its income statement of $50,000. Among the items included in the computation of pretax financial income were the following: Interes

> Refer to Practice 12-18. Compute the times interest earned ratio. In Practice 12-18 Consider the following information: Short-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

> The company manufactures a single product and has decided to adopt the dollar-value LIFO inventory method. The inventory value on that date using the newly adopted dollar-value LIFO method was $100,000. Inventory at year-end prices was $120,000, and the

> The company has one LIFO pool. Information relating to the products in this pool is as follows: Beginning inventory, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 units @ $20 each Purchase, February 12. . . . .

> Total wages and salaries for the month of January were $50,000. Because it is January, no employee has yet reached the FICA tax cap amount, so the full FICA tax percentage is applicable to the entire amount of wages and salaries. The same is true of the

> A building has a cost of $700,000 and accumulated depreciation of $340,000. The building is exchanged for land. Make the necessary journal entry if (1) The land has a market value of $400,000 and (2) The land has a market value of $200,000.

> Refer to Practice 17-17. Prepare the note disclosure necessary to reconcile the beginning balance in the pension fund and the ending balance in the pension fund. In Practice 17-17 On January 1 of Year 1, the company had a projected benefit obligation (P

> On January 1 of Year 1, the company had a projected benefit obligation (PBO) of $10,000 and a pension fund with a fair value of $9,200. Prior service cost was $2,000; it was being amortized on a straight-line basis over the 5-year average remaining life

> On January 1, the company purchased the rights to a valuable Internet domain name for $250,000. Given current market conditions, the company estimates that these rights have an economic life of four years at which time they will have no residual value. M

> The company had the following pension-related balances as of January 1: Projected benefit obligation (PBO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(20,000) Fair value of pension fund . . . . . . . . . . . .

> A building has a cost of $500,000 and accumulated depreciation of $40,000. The current value of the building is estimated to be $730,000. The company that owns the building is based in Genovia and uses international financial reporting standards. The com

> On August 17, the company declared cash dividends of $35,000. The dividends were paid on September 16. Make the journal entries necessary to record both events.

> The Retained Earnings balance at the end of last year was $42,000. In June of this year, well after last year’s books were closed, it was found that a mistake had been made in computing depreciation expense last year. The mistake resulted in reported dep

> Stockholders of the company converted 12,000 shares of $40 par preferred stock into 60,000 shares of $1 par common stock. The preferred shares were originally issued for $44 per share. Make the journal entry necessary to record the conversion.

> The company acquired a machine on January 1 at an original cost of $108,000. The machine’s estimated residual value is $20,000, and its estimated life is five years. (1) Compute the annual straight-line depreciation amount, (2) Make the journal entry n

> On January 1, the company adopted a new defined benefit pension plan. Existing employees were given credit in the new plan for their past service to the company. This created an immediate projected benefit obligation of $1,000,000. The company has 30 emp

> Refer to Practice 14-10. Make the adjusting journal entries for (a) and (b) and the computations for (c) and (d), assuming that the securities are classified as held to maturity. The changes in value are not deemed to be “other than temporary.” In Pract

> The company repurchased 10,000 shares of $1 par common stock for a total of $300,000. None of the shares were retired. A month later, the company sold 4,000 of these shares for $144,000. The shares were initially issued for $20 per share. Make the necess

> The company had planned to issue bonds with a face value of $100,000 on January 1. Because of regulatory delays, the bonds were not issued until February 1. The bonds have a coupon rate of 9%, which is equal to the market rate of interest (for companies

> Refer to Practice 17-8. Compute pension expense for the year. In Practice 17-8 On January 1 of Year 1, the company had a projected benefit obligation (PBO) of $10,000 and a pension fund with a fair value of $9,200. There was no prior service cost, nor w

> Bonds with a face value of $1,000 were issued for $920. Make the necessary journal entry on the books of the issuer.

> On January 1, the company purchased investment securities for $1,000. The securities are classified as trading. By December 31, the securities had a fair value of $100 but had not yet been sold. Excluding the trading securities, income before taxes for t

> Bonds with a face value of $1,000 were issued for $1,083. Make the necessary journal entry on the books of the issuer.

> The company is experiencing a cash flow shortfall and has asked certain key employees to accept shares of common stock (instead of cash) in payment of salaries. The employees accepted 35,000 shares of $0.50 par common stock in place of salaries of $623,0

> Refer to Practice 16-4. Assume that the income tax rate is 40% for the current year but that the enacted tax rate for all future years is 46%. Prepare the journal entry or entries necessary to record income tax expense for the year. In Practice 16-4 On

> Depreciation expense for the year was $1,000. Make the necessary journal entry.

> There is frequently a difference between the purchase price and the selling price of treasury stock. Why isn’t this difference shown as a gain or a loss on the income statement?

> Cheng Company computed taxable income of $8,000 for the first year of its operations ended December 31, 2013. Tax depreciation exceeded depreciation for financial reporting purposes by $24,000. Receipt of $13,000 cash was reported as revenue for tax purp

> (a) What is the basic difference between the cost method and the par value method of accounting for treasury stock? (b) How will total stockholders’ equity differ, if at all, under the two methods?

> Stratco Corporation computed a pretax financial income of $40,000 for the first year of its operations ended December 31, 2013. Included in financial income was $50,000 of nontaxable revenue, $20,000 gross profit on installment sales that was deferred fo

> Why might a company repurchase its own stock?

> As of December 31, 2013, its first year in business, Kukui Company had taxable temporary differences totaling $110,000. Of this total, $45,000 relates to current items. Kukui also had deductible temporary differences totaling $42,000, $14,000 of which re

> What rights of ownership are given up by preferred shareholders? What additional protections are enjoyed by preferred shareholders?

> Davidson Gasket Inc. computed a pretax financial loss of $25,000 for the first year of its operations, ended December 31, 2013. Analysis of the tax and book bases of its liabilities disclosed $55,000 in unearned rent revenue on the books that had been re

> In accounting for the equity of foreign companies, what is the primary purpose of equity reserves?

> Olympus Motors, Inc., computed a pretax financial income of $90,000 for its first year of operations ended December 31, 2013. In preparing the income tax return for the year, the tax accountant determined the following differences between 2013 financial

> Distinguish between time-factor and use-factor methods of depreciation.

> What three types of unrealized gains and losses are shown as direct equity adjustments (part of accumulated other comprehensive income), bypassing the income statement? Briefly explain each.

> Polytechnic Corporation reported taxable income of $2,340,000 for the year ended December 31, 2013. The controller is unfamiliar with the required treatment of temporary and permanent differences in reconciling taxable income to pretax financial income a

> The directors of The Dress Shoppe are considering declaring either a stock dividend or a stock split. They have asked you to explain the difference between a stock dividend and a stock split and the accounting for a small stock dividend versus a large st

> A. J. Johnson & Co. recorded certain revenues on its books in 2013 and 2014 of $15,400 and $16,600, respectively. However, such revenues were not subject to income taxation until 2015. The company records reveal pretax financial income and taxable in

> What is the historical significance of par value?

> Victoria Clothing reported the following amounts related to income taxes on its 2013 income statement. Income tax benefit from NOL carryback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,000 Income tax benefit from N

> The following announcement appeared on the financial page of a newspaper: The board of directors of Benton Co., at its meeting on June 15, 2013, declared the regular quarterly dividend on outstanding common stock of $1.40 per share, payable on July 10, 2

> Joyce Smithers Inc. reported the following amounts related to income taxes on its 2013 income statement. Income tax expense—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,

> How can retained earnings be restricted by law? In what other ways can retained earnings be restricted?

> The following historical financial data are available for Lexis Company. In 2013, Lexis Company suffered a $1 million net operating loss. The company will use the carryback provision of the tax law. 1. Using the information given, calculate the refund

> Distinguish between (a) A defined benefit pension plan and a defined contribution pension plan, (b) A contributory pension plan and a noncontributory pension plan, and (c) A multiemployer pension plan and a single-employer pension plan.

> How are errors corrected when they are discovered in the current year? In a subsequent year?

> The historical financial data shown below are available for the Bradshaw Manufacturing Company. In 2013, Bradshaw suffered an $820,000 net operating loss due to an economic recession. The company elects to use the carryback provision in the tax law. 1.

> What distinguishes a situation in which an obligation to issue shares is recorded as equity from a situation in which an obligation to issue shares is recorded as a liability?

> Dixon Type and Supply Company reported taxable income of $75,000 for 2013, its first fiscal year. The enacted tax rate for 2013 is 40%. Enacted tax rates and deductible amounts for 2014–2017 are as follows: 1. Prepare the journal entr

> What basic rights are held by each common stockholder?

> Friedman Construction reported taxable income of $50,000 for 2013, its first fiscal year. The enacted tax rate for 2013 is 40%. Enacted tax rates and deductible amounts for 2014–2016 are as follows: 1. Prepare the journal entries nece

> When money is borrowed and monthly payments are made, how does one determine the portion of the payment that is interest and the portion that is principal?

> Flatworld Shipping Company reports taxable income of $912,000 on its income tax return for the year ended December 31, 2013, its first year of operations. Temporary differences between financial income and taxable income for the year are as follows: Tax

> Why is it important to use present value concepts in properly valuing long-term liabilities?

> Fibertek, Inc., computed a pretax financial income of $40,000 for the first year of its operations ended December 31, 2013. Included in financial income was $25,000 of nondeductible expenses, $22,000 gross profit on installment sales that was deferred fo