Part -1:
Question 1:
Payable discount basis On August 1, 2013, Colombo Co. s treasurer signed a note promising to pay $120,000 on December 31, 2013. The proceeds of the note were $114,000.
Required:
a. Calculate the discount rate used by the lender.
b. Calculate the effective interest rate (APR) on the loan.
c. Use the horizontal model (or write the journal entry) to show the effects of
1. Signing the note and the receipt of the cash proceeds on August 1, 2013.
2. Recording interest expense for the month of September.
3. Repaying the note on December 31, 2013.
Question 2:
Unearned revenues ticket sales Kirkland Theater sells season tickets for six events at a price of $378. For the 2013 season, 1,200 season tickets were sold.
Required:
a. Use the horizontal model (or write the journal entry) to show the effect of the sale of the season tickets.
b. Use the horizontal model (or write the journal entry) to show the effect of presenting an event.
c. Where on the balance sheet would the account balance representing funds received for performances not yet presented be classified?
Question 3: Bonds payable various issues Atom Endeavour Co. issued $500 million face amount of 9% bonds when market interest rates were 9.14% for bonds of similar risk and other characteristics.
Required:
a. How much interest will be paid annually on these bonds?
b. Were the bonds issued at a premium or discount? Explain your answer.
c. Will the annual interest expense on these bonds be more than, equal to, or less than the amount of interest paid each year? Explain your answer.
Question 4: Other accrued liabilities payroll and payroll taxes. The following summary data for the payroll period ended December 27, 2012, are available for Cayman Coating Co.:
Gross pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,000
FICA tax withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?
Income tax withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,320
Group hospitalization insurance. . . . . . . . . . . . . . . . . . . . . . . . . 1,270
Employee contributions to pension plan . . . . . . . . . . . . . . . . . . ?
Total deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,825
Net pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?
Additional information
For employees, FICA tax rates for 2012 were 5.65% on the first $110,100 of each employee s annual earnings and 1.45% on any earnings in excess of $110,100. However, no employees had accumulated earnings for the year in excess of the $110,100 limit.
For employers, FICA tax rates for 2012 were 7.65% on the first $110,100 of each employee s annual earnings and 1.45% on any earnings in excess of $110,100.
The federal and state unemployment compensation tax rates are 0.6% and 5.4%, respectively. These rates are levied against the employer for the first $7,000 of each employee s annual earnings. Only $9,000 of the gross pay amount for the December 27, 2012, pay period was owed to employees who were still under the annual limit.
Required:
Assuming that Cayman Coating Co. s payroll for the last week of the year is to be paid on January 3, 2013, use the horizontal model (or write the journal entry) to record the effects of the December 27, 2012, entries for
a. Accrued payroll.
b. Accrued payroll taxes.
Question 5: Bonds payable calculate issue price and amortize premium On January 1, 2013, Learned, Inc., issued $90 million face amount of 20-year, 14% stated rate bonds when market interest rates were 16%. The bonds pay interest semiannually each June 30 and December 31 and mature on December 31, 2032.
Required:
a. Using the present value tables in Chapter 6, calculate the proceeds (issue price) of Learned, Inc. s, bonds on January 1, 2013, assuming that the bonds were sold to provide a market rate of return to the investor.
b. Assume instead that the proceeds were $93,000,000. Use the horizontal model (or write the journal entry) to record the payment of semiannual interest and the related premium amortization on June 30, 2013, assuming that the premium of $3,000,000 is amortized on a straight-line basis.
c. If the premium in part b were amortized using the compound interest method, would interest expense for the year ended December 31, 2013, be more than, less than, or equal to the interest expense reported using the straight-line method of premium amortization? Explain.
d. In reality, the difference between the stated interest rate and the market rate would be substantially less than 2%. The dramatic difference in this problem was designed so that you could use present value tables to answer part a. What causes the stated rate to be different from the market rate, and why is the difference likely to be much less than depicted in this problem?
Question 6: Calculate stock dividend shares and cash dividend amounts Assume that you own 4,000 shares of Blueco, Inc. s, common stock and that you currently receive cash dividends of $0.84 per share per year.
Required:
a. If Blueco, Inc., declared a 5% stock dividend, how many shares of common stock would you receive as a dividend?
b. Calculate the cash dividend per share amount to be paid after the stock dividend that would result in the same total cash dividend (as was received before the stock dividend).
c. If the cash dividend remained at $0.84 per share after the stock dividend, what per share cash dividend amount without a stock dividend would have accomplished the same total cash dividend?
d. Why would a company have a dividend policy of paying a $0.10 per share cash dividend and issuing a 5% stock dividend every year?
Question 7: Common and preferred stock issuances and dividends Permabilt Corp. was incorporated on January 1, 2013, and issued the following stock for cash:
4,000,000 shares of no-par common stock were authorized; 1,250,000 shares were issued on January 1, 2013, at $35 per share.
1,500,000 shares of $100 par value, 8.5% cumulative, preferred stock were authorized, and 640,000 shares were issued on January 1, 2013, at $105 per share.
Net income for the years ended December 31, 2013, 2014, and 2015, was $18,400,000, $24,600,000, and $28,750,000, respectively.
No dividends were declared or paid during 2013 or 2014. However, on December 17, 2015, the board of directors of Permabilt Corp. declared dividends of $42,300,000, payable on February 9, 2016, to holders of record as of January 4, 2016.
Required:
a. Use the horizontal model (or write the entry) to show the effects of
1. The issuance of common stock and preferred stock on January 1, 2013.
2. The declaration of dividends on December 17, 2015.
3. The payment of dividends on February 9, 2016.
b. Of the total amount of dividends declared during 2015, how much will be received by preferred shareholders?
Question 8: Treasury stock transactions On January 1, 2013, Metco, Inc., reported 622,100 shares of $3 par value common stock as being issued and outstanding. On March 15, 2013, Metco, Inc., purchased for its treasury 5,200 shares of its common stock at a price of $64 per share. On August 10, 2013, 1,900 of these treasury shares were sold for $76 per share. Metco s directors declared cash dividends of $2.10 per share during the second quarter and again during the fourth quarter, payable on June 30, 2013, and December 31, 2013, respectively. A 3% stock dividend was issued at the end of the year. There were no other transactions affecting common stock during the year.
Required:
a. Use the horizontal model (or write the entry) to show the effect of the treasury stock purchase on March 15, 2013.
b. Calculate the total amount of the cash dividends paid in the second quarter.
c. Use the horizontal model (or write the entry) to show the effect of the sale of the treasury stock on August 10, 2013.
d. Calculate the total amount of cash dividends paid in the fourth quarter.
e. Calculate the number of shares of stock issued in the stock dividend.
Question 9: Transaction analysis various accounts Enter the following column headings across the top of a sheet of paper:
|
Transaction
|
Cash
|
Other Assets
|
Liabilities
|
Paid-in Capital
|
Retained Earnings
|
Treasury Stock
|
Net Income
|
Enter the transaction letter in the first column and show the effect (if any) of each of the following transactions on each financial statement category by entering a plus (+) or minus ( ) sign and the amount in the appropriate column. Do not show items that affect net income in the retained earnings column. You may also write the entries to record these transactions. You should assume that the transactions occurred in the same chronological sequence as listed here:
a. Sold 1,700 shares of $50 par value preferred stock at $52.50 per share.
b. Declared the annual cash dividend of $4.10 per share on common stock. There were 9,300 shares of $1 par value common stock issued and outstanding throughout the year.
c. Issued 2,500 shares of $50 par value preferred stock in exchange for a building when the market price of preferred stock was $54 per share.
d. Purchased 700 shares of preferred stock for the treasury at a price of $56 per share.
e. Sold 250 shares of the preferred stock held in treasury (see d ) for $57 per share.
f. Declared and issued a 15% stock dividend on the $1 par value common stock when the market price per share was $36.
Question 10: Transaction analysis various accounts Enter the following column headings across the top of a sheet of paper:
|
Transaction
|
Cash
|
Other Assets
|
Liabilities
|
Paid-in Capital
|
Retained Earnings
|
Treasury Stock
|
Net Income
|
Enter the transaction letter in the first column and show the effect (if any) of each of the following transactions on each financial statement category by entering a plus (1) or minus ( ) sign and the amount in the appropriate column. Do not show items that affect net income in the retained earnings column. You may also write the entries to record these transactions. You should assume that the transactions occurred in the listed chronological sequence and that no stock had been previously issued. (Hint: Remember to consider appropriate effects of previous transactions.)
a. Issued 3,000 shares of $100 par value preferred stock at par.
b. Issued 4,800 shares of $100 par value preferred stock in exchange for land that had an appraised value of $612,000.
c. Issued 34,000 shares of $5 par value common stock for $24 per share.
d. Purchased 14,000 shares of common stock for the treasury at $27 per share.
e. Sold 9,000 shares of the treasury stock purchased in transaction d for $29 per share.
f. Declared a cash dividend of $3.50 per share on the preferred stock outstanding, to be paid early next year.
g. Declared and issued a 12% stock dividend on the common stock when the market price per share of common stock was $30.
Question 11: Analytical case (part 1) calculate missing stockholders equity amounts for 2013 (Note: The information presented in this case is also used for Case 8.35. For now you can ignore the 2014 column in the balance sheet; all disclosures presented here relate to the June 30, 2013, balance sheet.) DeZurik Corp. had the following stockholders equity section in its June 30, 2013, balance sheet (in thousands, except share and per share amounts):
|
June 30 (in thousands)
|
|
2014
|
2013
|
|
Paid-in capital:
$4.50 Preferred stock, $ ____ par value, cumulative,
200,000 shares authorized, 96,000 shares issued
and outstanding
|
_______________
|
$5,760
|
|
Common stock, $5 par value, 4,000,000 shares authorized,
3,280,000 shares issued, 3,000,000 shares outstanding
|
_______________
|
_______________
|
|
Additional paid-in capital on common stock
|
_______________
|
22,960
|
|
Retained earnings
|
_______________
|
_______________
|
|
Less: Treasury common stock, at cost, __?__ shares
|
_______________
|
_______________
|
|
Total stockholders equity
|
$66,168
|
$60,000
|
Required:
a. Calculate the par value per share of preferred stock and determine the preferred stock dividend percentage.
b. Calculate the amount that should be shown on the balance sheet for common stock at June 30, 2013.
c. What was the average issue price of common stock shown on the June 30, 2013, balance sheet?
d. How many shares of treasury stock does DeZurik Corp. own at June 30, 2013?
e. Assume that the treasury shares were purchased for $18 per share. Calculate the amount that should be shown on the balance sheet for treasury stock at June 30, 2013.
f. Calculate the retained earnings balance at June 30, 2013, after you have completed parts a e . (Hint: Keep in mind that Treasury Stock is a contra account.)
g. (Optional) Review the solutions to parts a f of this case on the website for this book at www.mhhe.com/marshall10e. Assume that the Retained Earnings balance on July 1, 2012, was $19,200 (in thousands) and that net income for the year ended June 30, 2013, was $1,152 (in thousands). The 2013 preferred dividends were paid in full, and no other dividend transactions were recorded during the year. Verify that the amount shown in the solution to part f is correct. (Hint: Prepare a statement of retained earnings or do a T-account analysis to determine the June 30, 2013, balance.)
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Part -2:
Question.1 Crow, Inc., had net income of $516,050 for its fiscal year ended September 30, 2014. During the year, the company had outstanding 24,000 shares of 8%, $50 par value preferred stock, and 135,500 shares of common stock.
Required:
Calculate the basic earnings per share of common stock for the 2014 fiscal year.
Question.2 Wood s Cabinets, Inc., had net income of $424,800 for its fiscal year ended October 31, 2014. During the year, the company had outstanding 53,000 shares of 9%, $60 par value preferred stock, and 36,960 shares of common stock.
Required:
Calculate the Basic Earnings per share of common stock for the 2014 fiscal year.
Question.3 Blue Glass, Inc. had cash dividends of $3.96 per share of common stock for calendar 2013. In 2014, the stock was split 3-for-1, and in 2015 a 10% stock dividend was issued.
Required:
Calculate the Dividends per share to be reported in the firm's annual report for 2014, and 2015.
Question.4 Silver Co. had cash dividends reported for 2013 of $3.64 per share of common stock. During 2014, the firm had a 4% common stock dividend.
Required:
Calculate the 2013 earnings per share to be reported in the annual report for 2014.
Question.5 Use gross profit ratio to calculate inventory loss On April 8, 2013, a flood destroyed the warehouse of Stuco Distributing Co. From the waterlogged records of the company, management was able to determine that the firm s gross profit ratio had averaged 40% for the past several years and that the inventory at the beginning of the year was $314,200. It also was determined that during the year until the date of the flood, sales had totaled $638,400 and purchases totaled $355,140.
Required:
Calculate the amount of inventory loss from the flood.
Question.6 Prepare a statement of cash flows indirect method The financial statements of Pouchie Co. included the following information for the year ended December 31, 2013 (amounts in millions):
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . $ 260
Cash dividends declared and paid . . . . . . . . . . . . . . . . . . . . . . . 330
Purchase of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384
Beginning cash balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Proceeds of common stock issued . . . . . . . . . . . . . . . . . . . . . . 148
Proceeds from sale of building (at book value) . . . . . . . . . . . . . . 212
Accounts receivable increase . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Ending cash balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Inventory decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Accounts payable increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Required:
Complete the following statement of cash flows, using the indirect method:
POUCHIE CO.
Statement of Cash Flows
For the Year Ended December 31, 2013
Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 384
Add (deduct) items not affecting cash:
____________________________________. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
____________________________________. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
____________________________________. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
____________________________________. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __________
Net cash provided (used) by operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ __________
Cash Flows from Investing Activities:
____________________________________. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
____________________________________. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __________
Net cash provided (used) by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ __________
Cash Flows from Financing Activities:
____________________________________. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
____________________________________. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __________
Net cash provided (used) by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ __________
Net increase (decrease) in cash for the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ __________
Cash balance, January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Cash balance, December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40
Question.7 Complete balance sheet and prepare a statement of changes in retained earnings Following is a statement of cash flows (indirect method) for Hartford, Inc., for the year ended December 31, 2014. Also shown is a partially completed comparative balance sheet as of December 31, 2014 and 2013:
HARTFORD, INC.
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,000
Add (deduct) items not affecting cash:
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,000
Decrease in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,000
Increase in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,000)
Increase in notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000
Decrease in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,000)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 228,000
Cash Flows from Investing Activities:
Purchase of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (150,000)
Purchase of buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (144,000)
Net cash used by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (294,000)
Cash Flows from Financing Activities:
Proceeds from short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,000
Cash used for retirement of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (75,000)
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Payment of cash dividends on common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,000)
Net cash used by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (39,000)
Net decrease in cash for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (105,000 )
HARTFORD, INC.
Comparative Balance Sheets
At December 31, 2014 and 2013
|
|
2014
|
2013
|
|
ASSETS
Current Assets:
Cash
Accounts Receivable
Inventory
Total Current Assets
Land
Buildings and equipment
Less: Accumulated depreciation
Total land, buildings, and equipment
Total Assets
|
$
168,000
$ ________
$
780,000
___________
$ _________
$ _________
|
$264,000
219,000
_________
$ ________
$ 120,000
(369,000)
$ _________
$ _________
|
|
LIABILIITIES
Current Liabilities:
Accounts payable
Short-term debt
Notes payable
Total current liabilities
Long-term debt
|
$
96,000
___________
$ __________
$ _255,000
|
$ 87,000
108,000
$_______
$ _______
|
|
STOCKHOLDERS EQUITY
Common stock
Retained earnings
Total Stockholders equity
Total liabilities and stockholders equity
|
$ 120,000
__________
$ ________
$ ________
|
$
_________
$ ________
$ ________
|
Required:
a. Complete the December 31, 2014 and 2013, balance sheets.
b. Prepare a statement of changes in retained earnings for the year ended December 31, 2014.
Question.8 Calculate EPS and effect of stock split on EPS During the year ended December 31, 2014, Gluco, Inc., split its stock on a 3-for-1 basis. In its annual report for 2013, the firm reported net income of $7,407,840 for 2013, with an average 1,073,600 shares of common stock outstanding for that year. There was no preferred stock.
Required:
a. What amount of net income for 2013 will be reported in Gluco s 2014 annual report?
b. Calculate Gluco s earnings per share for 2013 that would have been reported in the 2013 annual report.
c. Calculate Gluco s earnings per share for 2013 that will be reported in the 2014 annual report for comparative purposes.
Question.9 Calculate EPS and dividends per share before stock split For several years Orbon, Inc., has followed a policy of paying a cash dividend of $0.75 per share and having a 10% stock dividend. In the 2014 annual report, Orbon reported restated earnings per share for 2012 of $3.60.
Required:
a. Calculate the originally reported earnings per share for 2012. Round your answer to two decimal places.
b. Calculate the restated cash dividend per share for 2012 reported in the 2014 annual report for comparative purposes. Round your answer to two decimal places.
Question.10 Understanding note disclosures and financial summary data This problem is based on the 2011 annual report of Campbell Soup Company in the appendix. Find in the Selected Financial Data (also known as the Five-Year Review), or calculate, the following data:
a. Dividends per share declared in 2011.
b. Capital expenditures in 2010.
c. Year in which total equity grew by the greatest amount over the previous year.
d. Change in total debt from 2007 to 2011.
Find the following data for 2011 in the Notes to Consolidated Financial Statements:
e. Amount of finished products inventory.
f. The company s effective income tax rate.
g. Total assets of the Global Baking and Snacking segment.
h. Market price range of common stock for the fourth quarter of 2011.