Sergey Co. has net cash provided by operating activities of $1,200,000. Its average current liabilities for the period are $1,000,000, and its average total liabilities are $1,500,000. Comment on the company’s liquidity and financial flexibility, given this information.
> Answer each of these unrelated questions. (a) On January 1, 2014, Fishbone Corporation sold a building that cost $250,000 and that had accumulated depreciation of $100,000 on the date of sale. Fishbone received as consideration a $240,000 non-interest
> Killroy Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Killroy
> Keith Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 2 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 2 years, by conducting s
> Regina Henry deposited $20,000 in a money market certificate that provides interest of 10% compounded quarterly if the amount is maintained for 3 years. How much will Regina Henry have at the end of 3 years?
> For each of the following, determine the expected cash flows. Cash Flow Probability Estimate Assessment $ 4,800 6,300 7,500 (a) 20% 50% 30% (b) $ 5,400 30% 7,200 8,400 50% 20% $(1,000) 3,000 5,000 (c) 10% 80% 10%
> Assuming the same facts as those in E6-18 except that the payments must begin now and be made on the first day of each of the 15 years, what payment method would you recommend?
> Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two means of settlement. It can either make immediate payment of $2,600,000, or it can make annual payments of $300,000 for 15 years, each payment due on the la
> Your client, Keith Moreland Leasing Company, is preparing a contract to lease a machine to Souvenirs Corporation for a period of 25 years. Moreland has an investment cost of $365,755 in the machine, which has a useful life of 25 years and no salvage valu
> JesperParnevik borrowed $70,000 on March 1, 2012. This amount plus accrued interest at 12% compounded semiannually is to be repaid March 1, 2022. To retire this debt, Jesper plans to contribute to a debt retirement fund five equal amounts starting on Mar
> Andrew Bogut just received a signing bonus of $1,000,000. His plan is to invest this payment in a fund that will earn 8%, compounded annually. Instructions (a) If Bogut plans to establish the AB Foundation once the fund grows to $1,999,000, how ma
> Nerwin, Inc. is a furniture manufacturing company with 50 employees. Recently, after a long negotiation with the local labor union, the company decided to initiate a pension plan as a part of its compensation plan. The plan will start on January 1, 2014.
> George Hincapie Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the company’s bikes. After a careful evaluation of the reques
> The Black Knights Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in the Sunbelt. In order to do so, Black Knights has decided to locate a new factory in the Panama City area. Black Knigh
> Sosa Excavating Inc. is purchasing a bulldozer. The equipment has a price of $100,000. The manufacturer has offered a payment plan that would allow Sosa to make 10 equal annual payments of $16,274.53, with the first payment due one year after the purchas
> Jose Oliva is considering two investment options for a $1,500 gift he received for graduation. Both investments have 8% annual interest rates. One offers quarterly compounding; the other compounds on a semiannual basis. Which investment should he choose?
> Consider the following independent situations. (a) Mike Finley wishes to become a millionaire. His money market fund has a balance of $92,296 and has a guaranteed interest rate of 10%. How many years must Mike leave that balance in the fund in order t
> LEW Company purchased a machine at a price of $100,000 by signing a note payable, which requires a single payment of $123,210 in 2 years. Assuming annual compounding of interest, what rate of interest is being paid on the loan?
> Clarence Weatherspoon, a super salesman contemplating retirement on his fifty-fifth birthday, decides to create a fund on an 8% basis that will enable him to withdraw $20,000 per year on June 30, beginning in 2018 and continuing through 2021. To develop
> Presented below are three unrelated situations. (a) Dwayne Wade Company recently signed a lease for a new office building, for a lease period of 10 years. Under the lease agreement, a security deposit of $12,000 is made, with the deposit to be returned a
> Using the appropriate interest table, compute the present values of the following periodic amounts due at the end of the designated periods. (a) $30,000 receivable at the end of each period for 8 periods compounded at 12%. (b) $30,000 payments to be made
> Using the appropriate interest table, answer the following questions. (Each case is independent of the others). (a) What is the future value of 20 periodic payments of $4,000 each made at the beginning of each period and compounded at 8%? (b) What is the
> Using the appropriate interest table, answer each of the following questions. (Each case is independent of the others.) (a) What is the future value of $7,000 at the end of 5 periods at 8% compounded interest? (b) What is the present value of $7,000 due
> Alan Jackson invests $20,000 at 8% annual interest, leaving the money invested without withdrawing any of the interest for 8 years. At the end of the 8 years, Alan withdraws the accumulated amount of money. Instructions (a) Compute the amount Alan would
> For each of the following cases, indicate (a) to what rate columns, and (b) to what number of periods you would refer in looking up the interest factor. 1. In a future value of 1 table 2. In a present value of an annuity of 1 table
> Consider the loan in BE6-16. What payments must Zach Taylor make to settle the loan at the same interest rate but with the 6 payments beginning on the day the loan is signed?
> The following are a number of values taken from compound interest tables involving the same number of periods and the same rate of interest. Indicate what each of these four values represents. (a) 6.71008. (b) 2.15892. (c) .46319. (d) 14.48656.
> Clancey Inc. issues $2,000,000 of 7% bonds due in 10 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 8%. What amount will Clancey receive when it issues the bonds?
> Amy Monroe wants to create a fund today that will enable her to withdraw $25,000 per year for 8 years, with the first withdrawal to take place 5 years from today. If the fund earns 8% interest, how much must Amy invest today?
> Adams Inc. will deposit $30,000 in a 12% fund at the end of each year for 8 years beginning December 31, 2014. What amount will be in the fund immediately after the last deposit?
> Maria Alvarez is investing $300,000 in a fund that earns 8% interest compounded annually. What equal amounts can Maria withdraw at the end of each of the next 20 years?
> Leon Tyler’s VISA balance is $793.15. He may pay it off in 12 equal end-of-month payments of $75 each. What interest rate is Leon paying?
> Henry Quincy wants to withdraw $30,000 each year for 10 years from a fund that earns 8% interest. How much must he invest today if the first withdrawal is at year-end? How much must he invest today if the first withdrawal takes place immediately?
> Morgan Freeman is investing $16,380 at the end of each year in a fund that earns 10% interest. In how many years will the fund be at $100,000?
> Refer to the data in BE6-7. Assuming quarterly compounding of amounts invested at 12%, how much of John Fillmore’s inheritance must be invested to have enough at retirement to buy the boat? In BE6-7 John has recently come into an inheritance of $400,000.
> John Fillmore’s lifelong dream is to own his own fishing boat to use in his retirement. John has recently come into an inheritance of $400,000. He estimates that the boat he wants will cost $300,000 when he retires in 5 years. How much of his inheritance
> Steve Madison needs $250,000 in 10 years. How much must he invest at the end of each year, at 11% interest, to meet his needs?
> What are the components of an interest rate? Why is it important for accountants to understand these components?
> Sally Medavoy will invest $8,000 a year for 20 years in a fund that will earn 12% annual interest. If the first payment into the fund occurs today, what amount will be in the fund in 20 years? If the first payment occurs at year-end, what amount will be
> Bo Newman will invest $10,000 today in a fund that earns 5% annual interest. How many years will it take for the fund to grow to $17,100?
> Candice Willis will invest $30,000 today. She needs $150,000 in 21 years. What annual interest rate must she earn?
> Tony Bautista needs $25,000 in 4 years. What amount must he invest today if his investment earns 12% compounded annually? What amount must he invest if his investment earns 12% annual interest compounded quarterly?
> Recently, Glenda Estes was interested in purchasing a Honda Acura. The salesperson indicated that the price of the car was either $27,600 cash or $6,900 at the end of each of 5 years. Compute the effective-interest rate to the nearest percent that Glenda
> Answer the following questions. (a) On May 1, 2014, Goldberg Company sold some machinery to Newlin Company on an installment contract basis. The contract required five equal annual payments, with the first payment due on May 1, 2014. What present valu
> Alexander Enterprises leases property to Hamilton, Inc. Because Hamilton, Inc. is experiencing financial difficulty, Alexander agrees to receive five rents of $20,000 at the end of each year, with the rents deferred 3 years. What is the present value of
> In a book named Treasure, the reader has to figure out where a 2.2 pound, 24 kt gold horse has been buried. If the horse is found, a prize of $25,000 a year for 20 years is provided. The actual cost to the publisher to purchase an annuity to pay for the
> Explain how the future value of an ordinary annuity interest table is converted to the future value of an annuity due interest table.
> Assume the same situation as in Question 11, except that the four equal amounts are deposited at the beginning of the period rather than at the end. In this case, what amount must be deposited at the beginning of each period? (Round to two decimals.)
> What is the nature of interest? Distinguish between “simple interest” and “compound interest.”
> Discuss at least two situations in which estimates could affect the usefulness of information in the balance sheet.
> State the generally accepted accounting principle applicable to balance sheet valuation of each of the following assets. (a) Trade accounts receivable. (b) Land. (c) Inventories. (d) Trading securities (common stock of other companies). (e) Prepai
> Each of the following items must be considered in preparing a statement of cash flows. Indicate where each item is to be reported in the statement, if at all. Assume that net income is reported as $90,000. (a) Accounts receivable increased from $34,00
> What is meant by solvency? What information in the balance sheet can be used to assess a company’s solvency?
> Differentiate between operating activities, investing activities, and financing activities.
> Net income for the year for Carrie, Inc. was $750,000, but the statement of cash flows reports that net cash provided by operating activities was $860,000. What might account for the difference?
> Where should the following items be shown on the balance sheet, if shown at all? (a) Allowance for doubtful accounts. (b) Merchandise held on consignment. (c) Advances received on sales contract. (d) Cash surrender value of life insurance. (e) Lan
> In what section of the balance sheet should the following items appear, and what balance sheet terminology would you use? (a) Treasury stock (recorded at cost). (b) Checking account at bank. (c) Land (held as an investment). (d) Sinking fund. (e)
> Crane Corporation has the following accounts included in its December 31, 2014, trial balance: Equity Investments (trading) $21,000; Goodwill $150,000; Prepaid Insurance $12,000; Patents $220,000; Franchises $130,000. Prepare the intangible assets sect
> Lowell Company’s December 31, 2014, trial balance includes the following accounts: Inventory $120,000; Buildings $207,000; Accumulated Depreciation—Equipment $19,000; Equipment $190,000; Land (held for investment) $46,000; Accumulated Depre
> What is the purpose of a free cash flow analysis?
> A recent financial magazine indicated that the airline industry has poor financial flexibility. What is meant by financial flexibility, and why is it important?
> How does information from the balance sheet help users of the financial statements?
> The net income for the year for Genesis, Inc. is $750,000, but the statement of cash flows reports that the net cash provided by operating activities is $640,000. What might account for the difference?
> Rainmaker Company prepares its financial statements in accordance with IFRS. In 2014, Rainmaker recorded the following revaluation adjustments related to its buildings and land: The Company’s building increased in value by $200,000; its land decl
> Briefly describe the convergence efforts related to financial statement presentation.
> Included in Outkast Company’s December 31, 2014, trial balance are the following accounts: Prepaid Rent $5,200; Debt Investments (trading) $56,000; Unearned Fees $17,000; Land (held for investment) $39,000; Notes Receivable (long-term) $42,000. P
> In its December 31, 2014, balance sheet Oakley Corporation reported as an asset, “Net notes and accounts receivable, $7,100,000.” What other disclosures are necessary?
> Briefly describe some of the similarities and differences between GAAP and IFRS with respect to statement of financial position (balance sheet) reporting.
> Where can authoritative IFRS guidance be found related to the statement of financial position (balance sheet) and the statement of cash flows?
> The partner in charge of the Kappeler Corporation audit comes by your desk and leaves a letter he has started to the CEO and a copy of the cash flow statement for the year ended December 31, 2014. Because he must leave on an emergency, he asks you to f
> Carol Keene, corporate comptroller for Dumaine Industries, is trying to decide how to present “Property, plant, and equipment” in the balance sheet. She realizes that the statement of cash flows will show that the company made a significant
> Presented below is the balance sheet of Sameed Brothers Corporation (000s omitted). Instructions Evaluate the balance sheet presented. State briefly the proper treatment of any item criticized.
> FONZARELLI CORPORATION BALANCE SHEET (PARTIAL) DECEMBER 31, 2014 Assets Current assets $ 100,000 27,500 37,000 75,000 Cash Unclaimed payroll checks Debt investments (trading) (fair value $30,000) at cost Accounts receivable (less bad debt reserve) Inv
> In an examination of Arenes Corporation as of December 31, 2014, you have learned that the following situations exist. No entries have been made in the accounting records for these items. 1. The corporation erected its present factory building in 1999
> What is the purpose of a statement of cash flows? How does it differ from a balance sheet and an income statement?
> Aero Inc. had the following balance sheet at December 31, 2013. During 2014, the following occurred. 1. Aero liquidated its available-for-sale investment portfolio at a loss of $5,000. 2. A tract of land was purchased for $38,000. 3. An additio
> Koch Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2014: Cash $7,000; Land $40,000; Patents $12,500; Accounts Receivable $90,000; Prepaid Insurance $5,200; Inventory $30,000; Allowance for Doubtful Ac
> Lansbury Inc. had the following balance sheet at December 31, 2013. During 2014, the following occurred. 1. Lansbury Inc. sold part of its investment portfolio for $15,000. This transaction resulted in a gain of $3,400 for the firm. The company
> Presented below is the balance sheet of Sargent Corporation for the current year, 2014. The following information is presented. 1. The current assets section includes cash $150,000, accounts receivable $170,000 less $10,000 for allowance for doub
> How does separating current assets from property, plant, and equipment in the balance sheet help analysts?
> The balance sheet of Kishwaukee Corporation as of December 31, 2014, is as follows. Note 1: Buildings are stated at cost, except for one building that was recorded at appraised value. The excess of appraisal value over cost was $570,000. Depreciatio
> The adjusted trial balance of Eastwood Company and other related information for the year 2014 are presented as follows. Additional information: 1. The LIFO method of inventory value is used. 2. The cost and fair value of the long-term investmen
> Presented below are a number of balance sheet items for Montoya, Inc., for the current year, 2014. Instructions Prepare a classified balance sheet in good form. Common stock authorized was 400,000 shares, and preferred stock authorized was 20,000
> Presented below is a list of accounts in alphabetical order. Instructions Prepare a classified balance sheet in good form. (No monetary amounts are to be shown.)
> The comparative balance sheets of Madrasah Corporation at the beginning and end of the year 2014 appear below. Net income of $44,000 was reported, and dividends of $33,000 were paid in 2014. New equipment was purchased and none was sold. Instruct
> A comparative balance sheet for Shabbona Corporation is presented below. Additional information: 1. Net income for 2014 was $125,000. No gains or losses were recorded in 2014. 2. Cash dividends of $60,000 were declared and paid. 3. Bonds payabl
> The creditors of Chester Company agree to accept promissory notes for the amount of its indebtedness with a proviso that two-thirds of the annual profits must be applied to their liquidation. How should these notes be reported on the balance sheet of t
> Harding Corporation has the following accounts included in its December 31, 2014, trial balance: Accounts Receivable $110,000; Inventory $290,000; Allowance for Doubtful Accounts $8,000; Patents $72,000; Prepaid Insurance $9,500; Accounts Payable $77,0
> Presented below is a condensed version of the comparative balance sheets for Zubin Mehta Corporation for the last two years at December 31. Additional information: Investments were sold at a loss (not extraordinary) of $10,000; no equipment was so
> The comparative balance sheets of Constantine Cavamanlis Inc. at the beginning and the end of the year 2014 are as follows Net income of $44,000 was reported, and dividends of $23,000 were paid in 2014. New equipment was purchased and none was sold.
> The major classifications of activities reported in the statement of cash flows are operating, investing, and financing. Classify each of the transactions listed below as: 1. Operating activity—add to net income. 2. Operating activity—ded
> Presented below is the trial balance of Scott Butler Corporation at December 31, 2014. Instructions Prepare a balance sheet at December 31, 2014, for Scott Butler Corporation. (Ignore income taxes.)
> Discuss at least two items that are important to the value of companies like Intel or IBM but that are not recorded in their balance sheets. What are some reasons why these items are not recorded in the balance sheet?
> Presented below is the adjusted trial balance of Kelly Corporation at December 31, 2014. Additional information: 1. Net loss for the year was $2,500. 2. No dividends were declared during 2014. Instructions Prepare a classified balance sheet as
> Norma Smith is the controller of Baylor Corporation and is responsible for the preparation of the year-end financial statements. The following transactions occurred during the year. (a) On December 20, 2014, a former employee filed a legal action agai
> The current assets and current liabilities sections of the balance sheet of Allessandro Scarlatti Company appear as follows The following errors in the corporation’s accounting have been discovered: 1. January 2015 cash disbursements entere
> Frederic Chopin Corporation is preparing its December 31, 2014, balance sheet. The following items may be reported as either a current or long-term liability. 1. On December 15, 2014, Chopin declared a cash dividend of $2.50 per share to stockholders
> Presented below are selected accounts of Yasunari Kawabata Company at December 31, 2014. The following additional information is available. 1. Inventories are valued at lower-of-cost-or-market using LIFO. 2. Equipment is recorded at cost. Accumu
> What is the profession’s recommendation in regard to the use of the term “surplus”? Explain.
> Kathleen Battle says, “Retained earnings should be reported as an asset, since it is earnings which are reinvested in the business.” How would you respond to Battle?
> The bookkeeper for Geronimo Company has prepared the following balance sheet as of July 31, 2014. The following additional information is provided. 1. Cash includes $1,200 in a petty cash fund and $15,000 in a bond sinking fund. 2. The net accou