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College Accounting 20th Edition Heintz and Parry - Solutions

CALCULATION OF MARKET MEASURES Based on the financial statement data in Exercise 24-1A, compute the following market measures for 20-2 (round all calculations to two decimal places).(a) Price-earnings ratio (The market price of Ace Kitchen Works’ common stock was $28.00 on December 31, 20-2.)(b)
HORIZONTAL ANALYSIS OF COMPARATIVE FINANCIAL STATEMENTS Amounts from the comparative income statement and balance sheet of Miller Electronics Corporation for the last two years are as follows:REQUIREDPrepare a horizontal analysis. Add columns to show the amount of increase (decrease) and the
VERTICAL ANALYSIS OF COMPARATIVE FINANCIAL STATEMENTS Refer to the financial statements in Problem 24-8A.REQUIREDPrepare a vertical analysis of the income statement and balance sheet. Show each item on the income statement as a percentage of the net sales for each year. On the balance sheet, show
RATIO ANALYSIS OF COMPARATIVE FINANCIAL STATEMENTS Refer to the financial statements in Problem 24-8A.REQUIREDCalculate the following ratios and amounts for 20-1 and 20-2 (round all calculations to two decimal places):(a) Return on assets (Total assets on January 1, 20-1, were $175,750.)(b)
ANALYSIS OF LIQUIDITY Based on the comparative income statement and balance sheet for Falcon Designers, Inc., given below and on the next page, compute the following liquidity measures for 20-2 (round all calculations to two decimal places):(a) Quick or acid-test ratio(b) Current ratio(c) Working
ANALYSIS OF ACTIVITY MEASURES Based on the financial statement data in Exercise 24-1B, compute the following activity measures for 20-2 (round all calculations to two decimal places):(a) Accounts receivable turnover(b) Merchandise inventory turnover(c) Assetturnover
ANALYSIS OF PROFITABILITY Based on the financial statement data in Exercise 24-1B, compute the following profitability measures for 20-2 (round all calculations to two decimal places):(a) Profit margin ratio(b) Return on assets(c) Return on common stockholders’ equity(d) Earnings per share of
ANALYSIS OF LEVERAGE Based on the financial statement data in Exercise 24-1B, compute the following leverage measures for 20-2 (round all calculations to two decimal places):(a) Debt-to-equity ratio(b) Times interest earned ratio (Bond interest is $18,200.)(c) Assets-to-equity ratio
ANALYSIS OF ROA COMPONENTS Based on the financial statement data in Exercise 24-1B, compute ROA using its two basic components (round all calculations to two decimal places).
ANALYSIS OF ROE COMPONENTS Based on the financial statement data in Exercise 24-1B, compute ROE using its three basic components (round all calculations to two decimal places).
CALCULATION OF MARKET MEASURES Based on the financial statement data in Exercise 24-1B, compute the following market measures for 20-2 (round all calculations to two decimal places).(a) Price-earnings ratio (The market price of Falcon Designers’ common stock was $38.00 on December 31, 20-2.)(b)
HORIZONTAL ANALYSIS OF COMPARATIVE FINANCIAL STATEMENTS Amounts from the comparative income statement and balance sheet of Johnson Stores, Inc., for the last two years are as follows:REQUIREDPrepare a horizontal analysis of the statements. Add columns to show the amount of increase (decrease) and
VERTICAL ANALYSIS OF COMPARATIVE FINANCIAL STATEMENTS Refer to the financial statements in Problem 24-8B.REQUIREDPrepare a vertical analysis of the income statement and balance sheet. Show each item on the income statement as a percentage of the net sales for each year. On the balance sheet, show
RATIO ANALYSIS OF COMPARATIVE FINANCIAL STATEMENTS Refer to the financial statements in Problem 24-8B.REQUIREDCalculate the following ratios and amounts for 20-1 and 20-2 (round all calculations to two decimal places).(a) Return on assets (Total assets on January 1, 20-1, were $111,325.)(b)
Many libraries have corporate annual reports and reports on the financial health of companies by financial analysts and rating agencies such as Standard and Poor’s and Moody’s. Go to the library and review financial information on two corporations in your favorite industry. Write a brief memo
Jim Tennison, L & B Corporation’s president, called the company’s chief financial officer, Fred Harden, into his office late Friday afternoon. Jim had been reviewing the projected financial statements of L & B Corporation that would be issued as of yearend.Jim told Fred he was worried
Comparative financial statements for Na Pali Coast Company for the years ending December 31, 20-1 and 20-2 are provided.REQUIRED1. Perform horizontal analysis of the comparative income statement and balance sheet. Round percentages to one decimal place.2. Perform vertical analysis of the
Combining the information provided by various ratios can enhance your understanding of the financial condition of a business. Review the information provided for Na Pali Coast Company in the Mastery Problem. Using this information, respond to the following questions:REQUIRED1. Compute the average
Financial statement analysis generally focuses on five main aspects of the business’s financial health. What are they?
How does the use of a perpetual inventory system affect the accounts on the work sheet?
Why must Work in Process Inventory be adjusted for factory overhead applied at year-end?
What is the relationship between the debit and credit balances in the factory overhead account when the overhead is said to be underapplied? Overapplied?
Why are the balances in the factory overhead account not extended to the Income Statement and Balance Sheet columns of the work sheet?
What are the distinctive features of ToyJoy’s income statement? Its retained earnings statement? Its balance sheet?
When the adjustment is made to apply overhead to ending work in process, why are no entries made in the job cost ledger?
Describe the procedures for closing the factory overhead account.
Which adjusting entries are reversed by ToyJoy?
ADJUSTING ENTRIES INCLUDING ADJUSTMENT FOR UNDERAPPLIED/ OVERAPPLIED FACTORY OVERHEAD Prepare the December 31 adjusting journal entries for Johnson Company. Data are as follows:(a) Factory overhead is applied at a rate of 60% of direct labor costs. At the end of the year, the direct labor costs
SCHEDULE OF COST OF GOODS MANUFACTURED Prepare a schedule of cost of goods manufactured for Tomas Company for the year ended June 30, 20-2. Information to prepare the schedule is as follows:Work in process, July 1, 20-1 ....$ 6,400Materials inventory, July 1, 20-1 .....4,875Materials purchases
ADJUSTING JOURNAL ENTRIES Prepare the December 31 adjusting journal entries for Hanna Company. Data for the end of the year adjustments are as follows:Factory overhead to be applied to work in process ending inventory .....$8,200Interest receivable ..........................680Provision for
CLOSING JOURNAL ENTRIES Prepare closing journal entries for Medina Company for the year ended December 31. Data for the closing entries are as follows:Factory overhead, debit and credit balance .......$193,460Sales for the year .................840,300Interest revenue ....................800Cost of
REVERSING JOURNAL ENTRIES Prepare reversing journal entries for Rogerson Company on January 1, 20-2. The following year-end adjustments weremade:
WORK SHEET, ADJUSTING ENTRIES, AND FINANCIAL STATEMENTS Herrera Company had the following trial balance columns on its work sheet:Data for adjusting the accounts are as follows:(a) Factory overhead to be applied to work inprocess ending inventory ...................$3,100(b) Interest receivable
FINANCIAL STATEMENTS The Income Statement and Balance Sheet columns of Endo Company's work sheet are shown on the next page.Additional information needed to prepare the financial statements is as follows:Materials inventory, January 1 .........$ 3,760Work in process inventory, January 1
ADJUSTING, CLOSING, AND REVERSING ENTRIES A partial work sheet for Baldwin Company is shown on the next page.Data for adjusting the accounts are as follows:(a) Factory overhead to be applied to work in process ending inventory ...$3,600(b) Interest receivable ........................140(c) Interest
ADJUSTING ENTRIES INCLUDING ADJUSTMENT FOR UNDERAPPLIED/ OVERAPPLIED FACTORY OVERHEAD Prepare the December 31 adjusting journal entries for Keiser Company. Data are as follows:(a) Factory overhead is applied at a rate of 80% of direct labor costs. At the end of the year, the direct labor costs
SCHEDULE OF COST OF GOODS MANUFACTURED Prepare a schedule of cost of goods manufactured for Verdi Company for the year ended June 30, 20-2. Assume that all materials inventory items are direct materials. Information to prepare the schedule is as follows:Work in process, July 1, 20-1 .......$
ADJUSTING JOURNAL ENTRIES FOR A MANUFACTURING BUSINESS Prepare the December 31 adjusting journal entries for Ortiz Company. Data for the end of the year adjustments are as follows:Factory overhead to be applied to work in processending inventory ....................$7,780Interest receivable
CLOSING JOURNAL ENTRIES Prepare closing journal entries for Armour Company for the year ended December 31. Data for the closing entries are as follows:Factory overhead, debit and credit balance ........$186,250Sales for the year .....................930,600Interest revenue
REVERSING ENTRIES Prepare reversing journal entries for Hendrix Company on January 1, 20-2. The following year-end adjustments weremade:
WORK SHEET, ADJUSTING ENTRIES, AND FINANCIAL STATEMENTS Woods Company's trial balance columns from its work sheet are shown on the next page. Data for adjusting the accounts are as follows:(a) Factory overhead to be applied to work in process ending inventory ..$ 4,300(b) Interest receivable
FINANCIAL STATEMENTS The Income Statement and Balance Sheet columns of Wen Company's work sheet are shown on the next page.Additional information needed to prepare the financial statements is as follows:Materials inventory, January 1 ..........$ 4,750Work in process inventory, January ........1
ADJUSTING, CLOSING, AND REVERSING ENTRIES A partial work sheet for Milnor Company is shown on the next page. Data for adjusting the accounts are as follows:(a) Factory overhead to be applied to work in process ending inventory .....$4,400(b) Interest receivable
You and a fellow student are arguing about the “value” of Chapter 27. She says that the chapter is mostly review. The work sheet and financial statements were fully covered in Chapter 15. Chapter 27 is a similar story with some cosmetic differences. You have just begun an impressive defense of
Kevin Ryan is an accountant for Warick Corporation, a medium-size manufacturing firm. One of his responsibilities is to review the adjusting entries at the end of each accounting period. Mary Sellers is a new accountant at Warick Corporation. She is a recent graduate and this is her first
Reese Manufacturing Company manufactures and sells a limited line of products made to customer order. The company uses a perpetual inventory system and keeps its accounts on a calendar year basis. A 10-column work sheet is presented on page 1086. Additional information needed to prepare the income
Drafts of the condensed income statement and balance sheet of Allofe Co. for the current year are shown below. Shortly after preparing these draft financial statements, Allofe discovered that an error had been made in the year-end adjustment process. Overhead of $2,500 had not been applied to the
What accounts and related adjustments are new in the work sheet of ToyJoy Manufacturing Co.?
Tim Hoover is uncertain about the applicability of the cost principle to plant assets. Explain the principle to Tim.
What are some examples of land improvements?
Goodwill has been defined as the value of all favorable attributes that relate to a business enterprise. What types of attributes could result in goodwill?
A worksheet is a permanent accounting record and its use is required in the accounting cycle. Do you agree? Explain.
Explain the purpose of the worksheet.
What is the relationship, if any, between the amount shown in the adjusted trial balance column for an account and that account’s ledger balance?
Why is it necessary to prepare formal financial statements if all of the data are in the statement columns of the worksheet?
What are the content and purpose of a post-closing trial balance?
Which of the following accounts would not appear in the post-closing trial balance? Interest Payable; Equipment; Depreciation Expense; Jennifer Shaeffer, Drawing; Unearned Revenue; Accumulated Depreciation—Equipment; and Service Revenue.
Rick Marsh, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Marsh’s law firm prepares monthly financial statements, when should it recognize revenue from this engagement? Why?
In completing the engagement in question 3, Marsh pays no costs in March, $2,000 in April, and $2,500 in May (incurred in April). How much expense should the firm deduct from revenues in the month when it recognizes the revenue? Why?
Adjusting entries are required by the cost principle of accounting. Do you agree? Explain.
Distinguish between the two categories of adjusting entries, and identify the types of adjustments applicable to each category. Discuss.
What is the debit/credit effect of a prepaid expense adjusting entry?
What is the debit/credit effect of an unearned revenue adjusting entry?
A company fails to recognize revenue earned but not yet received. Which of the following accounts are involved in the adjusting entry? (a) Asset, (b) Liability, (c) Revenue, or(d) Expense? For the accounts selected, indicate whether they would be debited or credited in the entry.
A company fails to recognize an expense incurred but not paid. Indicate which of the following accounts is debited and which is credited in the adjusting entry:(a) Asset,(b) Liability,(c) Revenue, or(d) Expense.
A company makes an accrued revenue adjusting entry for $900 and an accrued expense adjusting entry for $700. How much was net income understated prior to these entries? Explain.
An adjusting entry may affect more than one balance sheet or income statement account. Do you agree? Why or why not?
What was PepsiCo’s depreciation expense for 2007 and 2006?
What costs should be included when measuring the total cost to acquire a long-term asset?
How should the cost of such activities as planting trees and shrubs be entered?
What are the two major types of depreciation?
What is meant by the “depreciable cost” of a plant asset?
What are the four most commonly used methods of calculating depreciation for financial reporting purposes? How do they differ in their application?
Which depreciation method provides the fastest write-off of an asset?
Explain how the depreciation method selected affects the balance sheet and income statement.
For assets acquired after 1986, what depreciation methods are allowed for federal income tax purposes?
How should additions or improvements representing an increase in the usefulness of plant assets be entered?
Explain what is meant by the “replacement” of a component of a plant asset.
What are the three major ways of disposing of a plant asset?
For what time interval should depreciation expense be entered on the date of an asset’s disposal?
When a plant asset is sold, what must be known about the asset in order to determine the proper amount of gain or loss on the sale?
What details about a particular asset are provided by a property, plant, and equipment record?
What is the purpose of depletion?
Which depreciation method is similar to the method used to compute depletion expense?
Over what period of time should the cost of a patent be allocated if its economic life is expected to be less than its legal life?
How should the unamortized portion of the cost of a copyright be reported on the balance sheet?
How does conservatism suggest that the cost of a trademark or trade name be accounted for subsequent to acquisition?
Consider the following list of expenditures and indicate whether each would be debited to Land, Building, or Equipment as part of the cost to purchase these assets. Place a check mark in the appropriatecolumn.
A light truck is purchased on January 1 at a cost of $27,000. It is expected to serve for eight years and have a salvage value of $3,000. Calculate the depreciation expense for the first and third years of the truck’s life using the following methods:1. Straight-line2. Double-declining-balance3.
The truck purchased in Exercise 18-2A is expected to be used for 96,000 miles over its eight-year useful life. Using the units-of production method, calculate the depreciation expense for the first and third years of use if the truck is driven 20,000 miles in year 1 and 18,000 miles in year 3.
Prepare the entries for the following transactions for Stepanski’s Food Mart using a general journal:1. Replaced the checkout computer in Checkout Stand A for $2,000 cash. The computer is part of the Checkout Stand. The replacement is expected to extend the life of the checkout stand.2. Added a
Prepare the entries for the following transactions using a general journal:1. Discarding an asset.(a) On January 4, shelving units, which had a cost of $6,400 and had accumulated depreciation of $5,900, were discarded.(b) On June 15, a hand cart, which had a cost of $1,500 and had accumulated
Prepare the following entries using a general journal:1. A coal mine was acquired at a cost of $1,500,000 and estimated to contain 6,000,000 tons of ore. During the year, 100,000 tons were mined and sold. Prepare the journal entry for the year’s depletion expense.2. A silver mine was acquired at
A machine is purchased January 1 at a cost of $59,000. It is expected to serve for eight years and have a salvage value of $3,000.REQUIREDPrepare a schedule showing depreciation for each year and the book value at the end of each year using the following methods:(a) Straight-line(b)
A machine is purchased January 1 at a cost of $59,000. It is expected to produce 130,000 units and have a salvage value of $3,000 at the end of its useful life.Units produced are as follows:Year 1 ... 10,000Year 2 ... 8,000Year 3 .... 12,000Year 4 .... 16,000Year 5 .... 11,000REQUIREDPrepare a
Equipment records for Johnson Machine Co. for the year follow. Johnson Machine uses the straight-line method of depreciation. In the case of assets acquired by the fifteenth day of the month, depreciation should be computed for the entire month. In the case of assets acquired after the fifteenth
On January 1, 20-1, two flight simulators were purchased by a space camp for $68,000 each with a salvage value of $4,000 each and estimated useful lives of eight years. On January 1, 20-2, the hydraulic system for Simulator A was replaced for $3,000 cash and an updated computer for more advanced
Mitchell Parts Co. had the following plant asset transactions during the year:1. Assets discarded or sold:Jan. 1 Motor #12, which had a cost of $2,800 and accumulated depreciation of $2,800, was discarded.8 Motor #8, which had a cost of $4,400 and accumulated depreciation of $4,000, was sold for
Mineral Works Co. acquired a salt mine at a cost of $1,700,000. The estimated number of units available for production from the mine is 3,400,000 tons.(a) During the first year, 200,000 tons are mined and sold.(b) During the second year, 600,000 tons are mined and sold.REQUIRED1. Calculate the
Track Town Co. had the following transactions involving intangible assets:Jan. 1 Purchased a patent for leather soles for $10,000 and estimated its useful life to be 10 years.Apr. 1 Purchased a copyright for a design for $15,000 with a life left on the copyright of 25 years. The estimated remaining

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