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Accounting
Give the section of a multiple-step income statement in which each of the following is shown.(a) Loss on inventory write-down.(b) Loss from strike.(c) Bad debt expense.(d) Loss on disposal of a
Barry Bonds Land Development, Inc. purchased land for $70,000 and spent $30,000 developing it. It then sold the land for $160,000. Tom Glavine Manufacturing purchased land for a future plant site for
You run into Rex Grossman at a party and begin discussing financial statements. Rex says, “I prefer the single-step income statement because the multiple-step format generally overstates income.”
Federov Corporation has eight expense accounts in its general ledger which could be classified as selling expenses. Should Federov report these eight expenses separately in its income statement or
Jose Deleon Investments reported an unusual gain from the sale of certain assets in its 2004 income statement. How does intra period tax allocation affect the reporting of this unusual gain?
What effect does intra period tax allocation have on reported net income?
Letterman Company computed earnings per share as follows.Net incomeCommon shares outstanding at year-endLetterman has a simple capital structure. What possible errors might the company have made in
Maria Shriver Corporation reported 2004 earnings per share of $7.21. In 2005, Maria Shriver reported earnings per share as follows.On income before extraordinary item
What is meant by “tax allocation within a period”? What is the justification for such practice?
When does tax allocation within a period become necessary? How should this allocation be handled?
During 2004, Natsume Sozeki Company earned income of $1,000,000 before income taxes and realized a gain of $450,000 on a government-forced condemnation sale of a division plant facility. The income
On January 30, 2003, a suit was filed against Pierogi Corporation under the Environmental Protection Act. On August 6, 2004, Pierogi Corporation agreed to settle the action and pay $920,000 in
Tiger Paper Company decided to close two small pulp mills in Conway, New Hampshire, and Corvallis, Oregon. Would these closings be reported in a separate section entitled “Discontinued operations
What major types of items are reported in the retained earnings statement?
Generally accepted accounting principles usually require the use of accrual accounting to “fairly present” income. If the cash receipts and disbursements method of accounting will “clearly
State some of the more serious problems encountered in seeking to achieve the ideal measurement of periodic net income. Explain what accountants do as a practical alternative.
What is meant by the terms components, elements, and items as they relate to the income statement? Why might items have to be disclosed in the income statement?
What are the three ways that other comprehensive income may be displayed (reported)?
How should the disposal of a component of a business be disclosed in the income statement?
Tim Allen Co. had sales revenue of $540,000 in 2004. Other items recorded during the year were:Cost of goods sold
Turner Corporation had net sales of $2,400,000 and interest revenue of $31,000 during 2004. Expenses for 2004 were: cost of goods sold $1,250,000; administrative expenses $212,000; selling expenses
Using the information provided in BE4-2, prepare a condensed multiple-step income statement for Turner Corporation.
Green Day Corporation had income from continuing operations of $12,600,000 in 2004. During 2004, it disposed of its restaurant division at an after-tax loss of $189,000. Prior to disposal, the
Boyz II Men Corporation had income before income taxes for 2004 of $7,300,000. In addition, it suffered an unusual and infrequent pretax loss of $770,000 from a volcano eruption. The corporation’s
The mean lifetime of stationary muons is measured to be 2.2000 ps. The mean lifetime of high-speed muons in a burst of cosmic rays observed from Earth is measured to be 16.000μs. To five significant
In 2004, Kirby Puckett Corporation reported net income of $1,200,000. It declared and paid preferred stock dividends of $250,000. During 2004, Puckett had a weighted average of 190,000 common shares
Lincoln Corporation has retained earnings of $675,000 at January 1, 2004. Net income during 2004 was $2,400,000, and cash dividends declared and paid during 2004 totaled $75,000. Prepare a retained
Using the information from BE4-9, prepare a retained earnings statement for the year ended December 31, 2004. Assume an error was discovered: land costing $80,000 (net of tax) was charged to repairs
On January 1, 2004, Creative Works Inc. had cash and common stock of $60,000. At that date the company had no other asset, liability or equity balances. On January 2, 2004, it purchased for cash
(Computation of Net Income) Presented below are changes in all the account balances of Fritz Reiner Furniture Co. during the current year, except for retained earnings.
(Income Statement Items) Presented below are certain account balances of Paczki Products Co.From the foregoing, compute the following:(a) Total net revenue,(b) Net income,(c) Dividends declared
(Single-step Income Statement) The financial records of LeRoi Jones Inc. were destroyed by fire at the end of 2004. Fortunately the controller had kept certain statistical data related to the income
(Multiple-step and Single-step) Two accountants for the firm of Elwes and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The
(Multiple-step and Extraordinary Items) The following balances were taken from the books of Maria Conchita Alonzo Corp. on December 31, 2004.Interest revenue
(Multiple-step and Single-step) The accountant of Whitney Houston Shoe Co. has compiled the following information from the company’s records as a basis for an income statement for the year ended
(Income Statement, EPS) Presented below are selected ledger accounts of Tucker Corporation as of December 31, 2004. (a) Compute net income for 2004. (b) Prepare a partial income statement beginning
(Multiple-step Statement with Retained Earnings) Presented below is information related to Ivan Calderon Corp. for the year 2004.Net sales
(Earnings Per Share) The stockholders’ equity section of Tkachuk Corporation appears below as of December 31, 2004.8% cumulative preferred stock, $50 par value, authorized 100,000 shares,
(Retained Earnings Statement) Eddie Zambrano Corporation began operations on January 1, 2001. During its first 3 years of operations, Zambrano reported net income and declared dividends as
(Earnings per Share) At December 31, 2003, Shiga Naoya Corporation had the following stock outstanding.10% cumulative preferred stock, $100 par, 107,500 shares
(Comprehensive Income) Roxanne Carter Corporation reported the following for 2004: net sales $1,200,000; cost of goods sold $750,000; selling and administrative expenses $320,000; and an unrealized
(Comprehensive Income) C. Reither Co. reports the following information for 2004: sales revenue $700,000; cost of goods sold $500,000; operating expenses $80,000; and an unrealized holding loss on
(Various Reporting Formats) The following information was taken from the records of Roland Carlson Inc. for the year 2004. Income tax applicable to income from continuing operations $187,000; income
(Multi-step Income, Retained Earnings) Presented below is information related to American Horse Company for 2004. Prepare a multi-step income statement and a retained earnings statement. American
(Single-step Income, Retained Earnings, Periodic Inventory) Presented below is the trial balance of Mary J. Blige Corporation at December 31, 2004. A physical count of inventory on December 31
(Irregular Items) Tony Rich Inc. reported income from continuing operations before taxes during 2004 of $790,000. Additional transactions occurring in 2004 but not considered in the $790,000 are as
(Multiple- and Single-step Income, Retained Earnings) The following account balances were included in the trial balance of J.R. Reid Corporation at June 30, 2004. The Retained Earnings account had a
(Irregular Items) Presented below is a combined single-step income and retained earnings statement for Sandy Freewalt Company for 2004. 1. ?Selling, general, and administrative expenses? for 2004
(Retained Earnings Statement, Prior Period Adjustment) Below is the retained earnings account for the year 2004 for LeClair Corp. (a) Prepare a corrected retained earnings statement. LeClair Corp.
(Income Statement, Irregular Items) Rap Corp. has 100,000 shares of common stock outstanding. In 2004, the company reports income from continuing operations before taxes of $1,210,000. Additional
How does information from the balance sheet help users of the financial statements?
What is meant by solvency? What information in the balance sheet can be used to assess a company’s solvency?
A recent financial magazine indicated that the airline industry has poor financial flexibility. What is meant by financial flexibility, and why is it important?
Discuss at least two situations in which estimates could affect the usefulness of information in the balance sheet.
Perez Company reported an increase in inventories in the past year. Discuss the effect of this change on the current ratio (current assets ÷ current liabilities). What does this tell a statement
What is meant by liquidity? Rank the following assets from one to five in order of liquidity.(a) Goodwill.(b) Inventories.(c) Buildings.(d) Short-term investments.(e) Accounts receivable.
What are the major limitations of the balance sheet as a source of information?
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
How does separating current assets from property, plant, and equipment in the balance sheet help analysts?
Should available-for-sale securities always be reported as a current asset? Explain.
What is the relationship between current assets and current liabilities?
The New York Knicks, Inc. sold 10,000 season tickets at $2,000 each. By December 31, 2010, 16 of the 40 home games had been played. What amount should be reported as a current liability at December
What is working capital? How does working capital relate to the operating cycle?
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
Where should the following items be shown on the balance sheet, if shown at all?(a) Allowance for doubtful accounts receivable.(b) Merchandise held on consignment.(c) Advances received on sales
State the generally accepted accounting principle applicable to the balance sheet valuation of each of the following assets.(a) Trade accounts receivable.(b) Land.(c) Inventories.(d) Trading
Refer to the definition of assets on page 180. Discuss how a leased building might qualify as an asset of the lessee (tenant) under this definition.
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 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
What are some of the techniques of disclosure for the balance sheet?
What is a “Summary of Significant Accounting Policies”?
What types of contractual obligations must be disclosed in great detail in the notes to the balance sheet? Why do you think these detailed provisions should be disclosed?
What is the profession’s recommendation in regard to the use of the term “surplus”? Explain.
What is the purpose of a statement of cash flows? How does it differ from a balance sheet and an income statement?
The net income for the year for Genesis, Inc. is $750,000, but the statement of cash flows reports that the cash provided by operating activities is $640,000. What might account for the difference?
Net income for the year for Carrie, Inc. was $750,000, but the statement of cash flows reports that cash provided by operating activities was $860,000. What might account for the difference?
Differentiate between operating activities, investing activities, and financing activities.
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
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
Net income for the year for Tanizaki, Inc. was $750,000, but the statement of cash flows reports that cash provided by operating activities was $860,000. Tanizaki also reported capital expenditures
What is the purpose of a free cash flow analysis?
What is the time value of money? Why should accountants have an understanding of compound interest, annuities, and present value concepts?
Identify three situations in which accounting measures are based on present values. Do these present value applications involve single sums or annuities, or both single sums and annuities? Explain.
What is the nature of interest? Distinguish between “simple interest” and “compound interest.”
What are the components of an interest rate? Why is it important for accountants to understand these components?
Presented 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)
Bill Jones is considering two investment options for a $1,000 gift he received for graduation. Both investments have 8% annual interest rates. One offers quarterly compounding; the other compounds on
Brenda Starr deposited $18,000 in a money market certificate that provides interest of 10% compounded quarterly if the amount is maintained for 3 years. How much will Brenda Starr have at the end of
Charlie Brown will receive $50,000 on December 31, 2009 (5 years from now) from a trust fund established by his father. Assuming the appropriate interest rate for discounting is 12% (compounded
What are the primary characteristics of an annuity? Differentiate between an “ordinary annuity” and an “annuity due.”
Linus, Inc. owes $30,000 to Peanuts Company. How much would Linus have to pay each year if the debt is retired through four equal payments (made at the end of the year), given an interest rate on the
The Lock horns are planning for a retirement home. They estimate they will need $160,000, 4 years from now to purchase this home. Assuming an interest rate of 10%, what amount must be deposited at
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
Explain how the future value of an ordinary annuity interest table is converted to the future value of an annuity due interest table.
Explain how the present value of an ordinary annuity interest table is converted to the present value of an annuity due interest table.
In a book named Treasure, the reader has to figure out where a 2.2 pound, 24kt 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
Greg Norman Enterprises leases property to Tiger Woods, Inc. Because Tiger Woods, Inc. is experiencing financial difficulty, Norman agrees to receive five rents of $10,000 at the end of each year,
Answer the following questions.(a) On May 1, 2004, Liselotte Neumann Company sold some machinery to Tee-off Company on an installment contract basis. The contract required five equal annual payments,
Recently Vickie Maher was interested in purchasing a Honda Acura. The salesperson indicated that the price of the car was either $27,000 cash or $6,900 at the end of each of 5 years. Compute the
Recently, property/casualty insurance companies have been criticized because they reserve for the total loss as much as 5 years before it may happen. Recently the IRS has joined the debate because
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