Why is it necessary to convert accrual-basis net income to cash-basis net income when preparing a statement of cash flows?
> The stockholders’ equity section of Maley Corporation’s balance sheet consists of common stock ($8 par) $1,000,000 and retained earnings $300,000. A 10% stock dividend (12,500 shares) is declared when the market price per share is $19. Show the before an
> Prophet Company issued $500,000, 6%, 30-year bonds on January 1, 2014, at 103. Interest is payable annually on January 1. Prophet uses straight-line amortization for bond premium or discount. Instructions: Prepare the journal entries to record the follo
> Indicate whether each of the following costs of an automobile manufacturer would be classified as direct materials, direct labor, or manufacturing overhead. (a) ______ Windshield. (e) ______ Factory machinery lubricants. (b) ___
> Determine whether each of the following costs should be classified as direct materials (DM), direct labor (DL), or manufacturing overhead (MO). (a) ______ Frames and tires used in manufacturing bicycles. (b) ______ Wages paid to production workers. (c) _
> On June 1, Tucker Inc. issues 3,000 shares of no-par common stock at a cash price of $7 per share. Journalize the issuance of the shares.
> Presented below is a list of costs and expenses usually incurred by Barnum Corporation, a manufacturer of furniture, in its factory. 1. Salaries for assembly line inspectors. 2. Insurance on factory machines. 3. Property taxes on the factory building. 4.
> Putnam Corporation had these transactions during 2014. (a) Purchased a machine for $30,000, giving a long-term note in exchange. (b) Issued $50,000 par value common stock for cash. (c) Issued $200,000 par value common stock upon conversion of bonds havin
> The Institute of Management Accountants (IMA) is an organization dedicated to excellence in the practice of management accounting and financial management. Address: www.imanet.org, or go to www.wiley.com/college/kimmel Instructions: At the IMA’s home pa
> Anchor Glass Container Corporation, the third largest manufacturer of glass containers in the United States, supplies beverage and food producers and consumer products manufacturers nationwide. Parent company Consumers Packaging Inc. (Toronto Stock Excha
> Tenrack is a fairly large manufacturing company located in the southern United States. The company manufactures tennis rackets, tennis balls, tennis clothing, and tennis shoes, all bearing the company’s distinctive logo, a large green question mark on a
> Wendall Company specializes in producing fashion outfits. On July 31, 2014, a tornado touched down at its factory and general office. The inventories in the warehouse and the factory were completely destroyed as was the general office nearby. Next mornin
> Mike Cichanowski founded Wenonah Canoe and later purchased Current Designs, a company that designs and manufactures kayaks. The kayak-manufacturing facility is located just a few minutes from the canoe company’s headquarters in Winona,
> Suppose 3M Company reported the following financial data for 2014 and 2013 (in millions). Instructions: (a) Calculate the current ratio for Sedgewick Boutique for 2014 and 2013. (b) Suppose that at the end of 2014, Sedgewick Boutique used $1.5 million
> The Coca-Cola Company and PepsiCo, Inc. provide refreshments to every corner of the world. Suppose selected data from the 2014 consolidated financial statements for The Coca-Cola Company and for PepsiCo, Inc. are presented here (in millions). Instructi
> The April 21, 2008, issue of the Wall Street Journal Online included an article by David Reilly entitled “A Way Charges Stay off Bottom Line.” Instructions: Read the article and answer the following questions. (a) According to the article, how do compan
> Your parents are considering investing in Tootsie Roll Industries common stock. They ask you, as an accounting expert, to make an analysis of the company for them. Fortunately, excerpts from a recent annual report of Tootsie Roll are presented in Appendi
> The financial statements of Tootsie Roll Industries are presented in Appendix A. Appendix A: Instructions: Answer the following questions. (a) What was the amount of net cash provided by operating activities for 2011? For 2010? (b) What was the amount
> Marriott Corporation split into two companies: Host Marriott Corporation and Marriott International. Host Marriott retained ownership of the corporation’s vast hotel and other properties, while Marriott International, rather than owning
> The November 10, 2011, edition of the Financial Times contains an article by Alan Rappeport entitled “McDonald’s Looks to Buy More Property.” Instructions: Read the article and answer the following questions. (a) Why is McDonald’s shifting away from lea
> The March 15, 2010, edition of the Wall Street Journal includes an article by Martin Peers entitled “Media’s Cash Focus Is Paying Dividends.” Instructions: Read the article and answer the following questions. (a) What action did Viacom take with its exc
> The financial statements of The Hershey Company are presented in Appendix B, following the financial statements for Tootsie Roll in Appendix A. Appendix A: Appendix B: Instructions: (a) Based on the information in these financial statements, compute
> The stockholders’ equity section of Tootsie Roll Industries’ balance sheet is shown in the Consolidated Statement of Financial Position in Appendix A. You will also find data relative to this problem on other pages of Appendix A. (Note that Tootsie Roll
> For many years, Borders Group and Barnes and Noble were the dominant booksellers in the United States. They experienced rapid growth, and in the process they forced many small, independent bookstores out of business. Recently, Borders filed for bankruptc
> Klinger Corporation’s balance sheet at December 31, 2013, is presented below. During 2014, the following transactions occurred. 1. On January 1, 2014, Klinger issued 1,200 shares of $40 par, 7% preferred stock for $49,200. 2. On Janua
> The financial statements of The Hershey Company are presented in Appendix B, following the financial statements for Tootsie Roll Industries in Appendix A. Appendix A: Appendix B: Instructions: (a) Based on the information contained in these financial
> Refer to the financial statements of Tootsie Roll Industries and the Notes to Consolidated Financial Statements in Appendix A. Appendix A: Instructions: Answer the following questions. (a) What were Tootsie Roll’s total current liabi
> For many years, Borders Group and Barnes and Noble were the dominant booksellers in the United States. They experienced rapid growth, and in the process they forced many small, independent bookstores out of business. Recently, Borders filed for bankruptc
> The financial statements of The Hershey Company are presented in Appendix B, following the financial statements for Tootsie Roll Industries in Appendix A. Appendix A: Appendix B: Instructions: (a) Based on the information contained in these financial
> Refer to the financial statements of Tootsie Roll Industries and the Notes to Consolidated Financial Statements in Appendix A. Appendix A: Instructions: Answer the following questions. (a) What were Tootsie Roll’s total current liabi
> Tony Andres is studying for his next accounting examination. Explain to Tony what he should know about the differences between the income statements for a manufacturing and for a merchandising company.
> What new rules were enacted under the Sarbanes Oxley Act to address unethical accounting practices?
> Explain the primary difference between line positions and staff positions, and give examples of each.
> Linda Olsen is studying for the next accounting midterm examination. Summarize for Linda what she should know about management functions.
> In what ways can the budgeting process create incentives for unethical behavior?
> Trevor Corporation’s balance sheet at December 31, 2013, is presented below. During 2014, the following transactions occurred. 1. Trevor paid $2,500 interest on the bonds on January 1, 2014. 2. Trevor purchased $241,100 of inventory o
> Linton Company has these obligations at December 31: (a) a note payable for $100,000 due in 2 years, (b) a 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments, (c) interest payable of $15,000 on the mortgage, and (d) accounts
> How do the content of reports and the verification of reports differ between managerial and financial accounting?
> What is an enterprise resource planning (ERP) system? What are its primary benefits?
> Discuss whether the product costing techniques discussed in this chapter apply equally well to manufacturers and service companies.
> How does the output of manufacturing operations differ from that of service operations?
> Distinguish between managerial and financial accounting as to (a) primary users of reports, (b) types and frequency of reports, and (c) purpose of reports.
> Mel Finney claims that the distinction between direct and indirect materials is based entirely on physical association with the product. Is Mel correct? Why?
> The return on assets for Espino Corporation is 7.6%. During the same year, Espino’s return on common stockholders’ equity is 12.8%. What is the explanation for the difference in the two rates?
> Tom Vernon is puzzled. His company had a profit margin of 10% in 2014. He feels that this is an indication that the company is doing well. Andrea Travis, his accountant, says that more information is needed to determine the company’s financial well-being
> (a) Jennifer Gorman believes that the analysis of financial statements is directed at two characteristics of a company: liquidity and profitability. Is Jennifer correct? Explain. (b) Are short-term creditors, long-term creditors, and stockholders interes
> Hosemer Inc. has been in operation for 3 years and uses the FIFO method of pricing inventory. During the fourth year, Hosemer changes to the average-cost method for all its inventory. How will Hosemer report this change?
> Trevor Corporation’s balance sheet at December 31, 2013, is presented below. During 2014, the following transactions occurred. 1. Trevor paid $2,500 interest on the bonds on January 1, 2014. 2. Trevor purchased $241,100 of inventory o
> Garvey Inc. reported 2013 earnings per share of $3.26 and had no extraordinary items. In 2014, earnings per share on income before extraordinary items was $2.99, and earnings per share on net income was $3.49. Do you consider this trend to be favorable?
> The president of Selby Company is puzzled. During the last year, the company experienced a net loss of $800,000, yet its cash increased $300,000 during the same period of time. Explain to the president how this could occur.
> Hatch Inc.’s common stock has a par value of $1 and a current market price of $15. Explain why these amounts are different.
> Deane Corporation has 10,000 shares of $15 par value common stock outstanding when it announces a 3-for-1 split. Before the split, the stock had a market price of $120 per share. After the split, how many shares of stock will be outstanding, and what wil
> Krause Corp. has a return on assets of 12%. It plans to issue bonds at 8% and use the cash to repurchase stock. What effect will this have on its debt to assets ratio and on its return on common stockholders’ equity?
> The management of Hinrichs Corporation is concerned because survey data suggest that many potential customers do not buy vehicles due to quality concerns. It is considering taking the bold step of increasing the length of its warranty from the industry s
> Whitson Corporation issues $400,000 of 9%, 5-year bonds on January 1, 2014, at 104. If Whitson uses the effective-interest method in amortizing the premium, will the annual interest expense increase or decrease over the life of the bonds? Explain.
> Glenda Hope is discussing the advantages of the effective-interest method of bond amortization with her accounting staff. What do you think Glenda is saying?
> Knobler Corporation issues $200,000 of 6%, 5-year bonds on January 1, 2014, at 103. Assuming that the straight-line method is used to amortize the premium, what is the total amount of interest expense for 2014?
> The Sarbanes-Oxley Act (SOX) has important implications for the financial community. Explain two implications of SOX.
> Norman Corporation has a current ratio of 1.1. Tim has always been told that a corporation’s current ratio should exceed 2.0. The company maintains that its ratio is low because it has a minimal amount of inventory on hand so as to reduce operating costs
> Matt Higgins needs a few new trucks for his business. He is considering buying the trucks but is concerned that the additional debt he will need to borrow will make his liquidity and solvency ratios look bad. What options does he have other than purchasi
> Whitson Corporation issues $400,000 of 9%, 5-year bonds on January 1, 2014, at 104. If Whitson uses the effective-interest method in amortizing the premium, will the annual interest expense increase or decrease over the life of the bonds? Explain.
> Glenda Hope is discussing the advantages of the effective-interest method of bond amortization with her accounting staff. What do you think Glenda is saying?
> Knobler Corporation issues $200,000 of 6%, 5-year bonds on January 1, 2014, at 103. Assuming that the straight-line method is used to amortize the premium, what is the total amount of interest expense for 2014?
> Norman Corporation has a current ratio of 1.1. Tim has always been told that a corporation’s current ratio should exceed 2.0. The company maintains that its ratio is low because it has a minimal amount of inventory on hand so as to reduce operating costs
> Matt Higgins needs a few new trucks for his business. He is considering buying the trucks but is concerned that the additional debt he will need to borrow will make his liquidity and solvency ratios look bad. What options does he have other than purchasi
> The management of Hinrichs Corporation is concerned because survey data suggest that many potential customers do not buy vehicles due to quality concerns. It is considering taking the bold step of increasing the length of its warranty from the industry s
> Natalie Pendlay, the chief financial officer of Mullins Inc., is considering the options available to her for financing the company’s new plant. Shortterm interest rates right now are 6%, and long-term rates are 8%. The company’s current ratio is 2.2:1.
> Natalie Pendlay, the chief financial officer of Mullins Inc., is considering the options available to her for financing the company’s new plant. Shortterm interest rates right now are 6%, and long-term rates are 8%. The company’s current ratio is 2.2:1.
> Use the same data from BE14–10 above and the data below. Determine the missing amounts. Data from BE 14: Costs of Goods Total Work in Process (1/1) Work in Process (12/31) Manufacturing Cost Manufactured (1) (2) (3) $120,000 $82,
> Angie Diltz asks, “Since stock dividends don’t change anything, why declare them?” What is your answer to Angie?
> Diaz, Inc. purchases 1,000 shares of its own previously issued $5 par common stock for $11,000. Assuming the shares are held in the treasury, what effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (
> The corporate charter of Gagne Corporation allows the issuance of a maximum of 100,000 shares of common stock. During its first 2 years of operation, Gagne sold 70,000 shares to shareholders and reacquired 4,000 of these shares. After these transactions,
> Janie Null believes a corporation must be incorporated in the state in which its headquarters office is located. Is Janie correct? Explain
> (a) Your friend C. J. Gibson cannot understand how the characteristic of corporate management is both an advantage and a disadvantage. Clarify this problem for C. J. (b) Identify and explain two other disadvantages of a corporation
> Rob, a student, asks your help in understanding some characteristics of a corporation. Explain each of these to Rob. (a) Separate legal existence. (b) Limited liability of stockholders. (c) Transferable ownership rights.
> Assume the same information for Ling Company as in IFRS13-1. Prepare the income statement using the two-statement approach.
> The financial statements of Zetar plc are presented in Appendix C. The company’s complete annual report, including the notes to its financial statements, is available in the Investors section at www.zetarplc.com. Instructions: Use the company’s annual r
> The April 23, 2012, edition of the Wall Street Journal Online contains an article by Christopher Bjork entitled “Santander Prepares Record Mexico IPO.” Instructions: Read the article and answer the following questions. (a) Why is the Spanish lender Sant
> Many multinational companies find it beneficial to have their shares listed on securities exchanges in foreign countries. In order to do this, they must comply with the securities laws of those countries. Some of these laws relate to the form of financia
> Complete the following comparison table between managerial and financial accounting. Financial Accounting Managerial Accounting Primary users of reports Types of reports Frequency of reports Purpose of reports Content of reports Verification process
> Many multinational companies find it beneficial to have their shares listed on securities exchanges in foreign countries. In order to do this, they must comply with the securities laws of those countries. Some of these laws relate to the form of financia
> Explain how IFRS defines a contingent liability and give an example.
> Explain how IFRS defines a contingent liability and give an example.
> Ling Company reports the following information for the year ended December 31, 2014: sales revenue $1,000,000, cost of goods sold $700,000, operating expenses $200,000, and an unrealized gain on non-trading securities of $75,000. Prepare a statement of c
> Ortiz Company is a manufacturer of toys. Its controller resigned in August 2014. An inexperienced assistant accountant has prepared the following income statement for the month of August 2014. Prior to August 2014, the company had been profitable every
> The following data were taken from the records of Moxie Company for the year ended December 31, 2014. Instructions: (a) Prepare a cost of goods manufactured schedule. (Assume all raw materials used were direct materials.) (b) Prepare an income statemen
> Incomplete manufacturing costs, expenses, and selling data for two different cases are as follows. Instructions: (a) Indicate the missing amount for each letter. (b) Prepare a condensed cost of goods manufactured schedule for Case A. (c) Prepare an inc
> Elliott Company, a manufacturer of tennis rackets, started production in November 2013. For the preceding 5 years, Elliott had been a retailer of sports equipment. After a thorough survey of tennis racket markets, Elliott decided to turn its retail store
> Agler Company specializes in manufacturing motorcycle helmets. The company has enough orders to keep the factory production at 1,000 motorcycle helmets per month. Agler’s monthly manufacturing cost and other expense data are shown below
> Suppose selected financial data of Edgewater Company and The Ritter Company for 2014 are presented here (in millions). Instructions: (a) For each company, compute the following ratios. (1) Current ratio. (8) Return on assets. (2) Accounts receivabl
> Horizontal analysis (trend analysis) percentages for Roswell Company’s sales revenue, cost of goods sold, and expenses are listed here. Explain whether Roswell’s net income increased, decreased, or remained unchanged
> Financial information for Bradford Company is presented here. Additional information: 1. Inventory at the beginning of 2013 was $330,000. 2. Accounts receivable at the beginning of 2013 were $80,000. 3. Total assets at the beginning of 2013 were $1,175
> The condensed balance sheet and income statement data for Symbiosis Corporation are presented below. Additional information: 1. The market price of Symbiosis common stock was $5.00, $3.50, and $2.80 for 2012,2013, and 2014, respectively. 2. You must co
> The comparative statements of Simpson Company are shown below. All sales were on account. Net cash provided by operating activities was $108,000. Capital expenditures were $47,000, and cash dividends were $30,900. Instructions: Compute the following r
> Here are comparative statement data for Dean Company and Gerald Company, two competitors. All balance sheet data are as of December 31, 2014, and December 31, 2013 Instructions: (a) Prepare a vertical analysis of the 2014 income statement data for Dean
> Condensed financial data of Turner Inc. follow. Additional information: 1. New plant assets costing $90,000 were purchased for cash during the year. 2. Old plant assets having an original cost of $30,000 were sold for $2,000 cash. 3. Bonds matured and
> Data for Filmore Company are presented in P12-7B. Further analysis reveals the following. 1. Accounts payable pertains to merchandise creditors. 2. All operating expenses except for depreciation are paid in cash. 3. All depreciation expense is in the sel
> Shown below are the financial statements of Filmore Company. Additional data: 1. Depreciation expense was $6,000. 2. Dividends of $28,000 were declared and paid. 3. During the year, equipment was sold for $10,000 cash. This equipment cost $13,000 origi
> Data for Mosley Company are presented in P12-5B. Data given in P12-5B: Mosley Company’s income statement contained the condensed information below. Mosley’s balance sheet contained the comparative data at December 3
> Mosley Company’s income statement contained the condensed information below. Mosley’s balance sheet contained the comparative data at December 31, below. Accounts payable pertain to operating expenses. Instruction
> Data for Hubble Company are presented in P12-3B. Data given in P12-3B: The income statement of Hubble Company is presented below. Additional information: 1. Accounts receivable decreased $290,000 during the year, and inventory increased $140,000. 2. Pre
