1. Use the selected financial statement information for Target Corp. to determine the following:
a. Accounts payable turnover
b. Accounts payable days outstanding.
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(in millions)
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2014
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Year-end accounts payable
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$ 7,683
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Average accounts payable
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7,370
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Sales
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72,596
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Cost of goods sold
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51,160
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2. Gilligan Corp. sells $100,000 of bonds to private investors. The bonds have a 6% coupon rate and interest is paid semiannually. The bonds were sold to yield 5%. What periodic interest payment does Gilligan make?
3. Leahy Corp. sells $300,000 of bonds to private investors. The bonds are due in five years, have a 4% coupon rate and interest is paid semiannually. The bonds were sold to yield 6%. What proceeds does Leahy receive from the investors?
4. On July 1, 2014, Crack Coffee took out a short-term loan of $25,000 to be repaid in one year. The annual interest rate is 4% with no interest payments due until the loan is repaid. How much interest should Crackle accrue by year-end December 31, 2014? How should it be recorded in the financial statements?
5. Electronics Incorporated (EI) purchased 120 computers from its supplier on credit at a cost of $400 per computer. The computers were purchased to be held for sale to customers. By the end of the month, EI had sold all 120 computers for $700 each. The store received payment for these computers but waited until the end of the month to settle its account payable with the supplier. Use the financial statement effects template below to record these transactions.
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Balance Sheet
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Income Statement
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Transaction
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Cash Asset
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Noncash Assets
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Liabil-
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Contrib. Capital
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Earned
Capital
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Rev-enues
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Expen-ses
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Net
Income
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Purchase computers
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Sell computers
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Record cost of goods sold
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Pay for computers
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6. Inline Incorporated manufactures skates and equipment for in-line skating. The company offers a one-year warranty on all products. During 2014, the company recorded net sales of $4,127.8 million. Historically, about 1.5% of all sales revenue for the year are the cost of repairing and or replacing goods under warranty. Assume that at the start of the year Inline's balance sheet included an accrued warranty liability of $15.4 million and at the end of the year, the accrued warranty liability balance was $11.5 million.
a. How should Inline account for warranty claims?
b. Calculate Inline's warranty expense for 2014.
c. How much did Inline pay during the year to repair and or replace goods under warranty?
7. The Good Store reported the following figures, note the company's fiscal year ends on January 31 each year:
Retained Earnings, January 31, 2014.........................$20,000,000
Retained Earnings, January 31, 2015.........................$15,000,000
Dividends declared for the fiscal year ending January 31, 2015 are $1 million.
8. What is the net income or net loss for the fiscal year ending January 31, 2015?
On June 5, 2014, Grout Group, a tile manufacturer, repurchased 2,000 of its $0.50 par value common shares for $15 cash per share. On October 5, 2014, Grout Group reissues the 2,000 common shares for $27 cash per share.
a. What is the change in the treasury stock account on June 5, 2014?
b. What is the change in the treasury stock account as a result of the October 5, 2014 transaction?
c. What is the change in the additional paid-in capital account as a result of the October 5, 2014 transaction?
9. Following is the stockholders' equity section of a recent balance sheet for Ham Inc. (all values in thousands except share data):
| Common stock, $1 par value, authorized shares, - 400,000,000, issued shares - 241,763,357 |
$241,763 |
| Capital in excess of par |
685,498 |
| Retained earnings |
5,840,053 |
| Accumulated other comprehensive loss |
-100,304 |
| Common stock in treasury, at cost - 72,227,834 shares |
-2,645,500 |
| Total stockholders' equity |
$4,021,384 |
a. Verify the $241,763 thousand balance for the common stock account.
b. What was the average issue price for the common shares issued?
c. How many common shares are outstanding as of year-end?
d. What was the average cost at which the treasury stock was purchased?
10. Tu Exports has the following stock outstanding:
25,000 shares of $80 par value, 6% cumulative preferred stock
150,000 shares of $2.50 par value, common stock
The company declares and pays the following dividends for the past four years:
2011 $ 65,000
2012 $412,000
2013 $303,000
2014 No dividends are paid
Compute the total cash dividends paid to each class of stock in 2011 through 2014.1. Company declares and distributes a 10% common stock dividend. There are 100,000 shares outstanding (when the market value of the $1 par common stock is $12 per share). What is the effect on Retained Earnings of this small stock dividend?
1. A company can change accounting methods within GAAP (such as the straight-line method of calculate depreciation expense to an accelerated method to calculate depreciation expense) or (the LIFO method to calculate cost of goods sold expense to the FIFO method to calculate cost of goods sold expense).
HOW DOES GAAP REQUIRE YOU TO HANDLE A CHANGE IN ACCOUNTING PRINIPLE?
A company can change estimates used in GAAP (such as the useful life in years under the straight-line method of depreciation expense or the % of uncollectible accounts used to calculate the uncollectible accounts expense).
HOW DOES GAAP REQUIRE YOU TO HANDLE CHANGE IN ACCOUNTING ESTIMATES?
2. Pro forma earnings numbers exclude expenses and losses (and sometimes revenues and gains) that managers believe are nonrecurring or "one-time", items that capture unusual activity, or that do not reflect operating results. Managers reporting proforma earnings believe that they present a truer picture of their firm's operating results.
HOW DOES GAAP REQUIRE YOU TO HANDLE PRO-FORMA EARNINGS SO AS NOT TO MISLEAD INVESTORS?
3. Why is it advantageous for a company, like Darden Restaurants, to spin its real-estate assets into a Real Estate Investment Trust (REIT)? One of the main reasons is to maintain "Off-balance Sheet" financing (to keep the liabilities off the books). This is done by carefully structuring the purchase of assets with "operating" versus "capital" leases.
WHAT IS THE DIFFERENCE IN THE ACCOUNTING RULES FOR OPERATING LEASES versus CAPITAL LEASES?
2. Company declares and distributes a 50% common stock dividend. There are 100,000 shares outstanding when the market value of the $1 par common stock is $12 per share. What is the effect on Retained Earnings of this large stock dividend?