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Financial Accounting An Integrated Statements Approach 2nd Edition Jonathan E. Duchac, James M. Reeve, Carl S. Warren - Solutions

The following note to the consolidated financial statements for The Goodyear Tire and Rubber Co. relates to investments in affiliated companies:Goodyear’s investments in 20% to 50% owned companies in which it has the ability to exercise significant influence over operating and financial policies
Laser Vision Co. sells optical supplies to opticians and ophthalmologists. Prepare the entries to record the following selected transactions of Laser Vision Co.:a. Purchased for cash $450,000 of Pierce Co. 8% bonds at 1011–2 plus accrued interest of $9,000.b. Received first semiannual interest.c.
Inez Company develops and sells graphics software for use by architects. Prepare the entries to record the following selected transactions of Inez Company:a. Purchased for cash $270,000 of Theisen Co. 5% bonds at 98 plus accrued interest of $2,250.b. Received first semiannual interest.c. Amortized
The following comparative net income and earnings per share data are provided for Research in Motion Ltd., developer of the BlackBerryÂ® wireless handheld device, for three recent fiscal years:The stock market prices at the end of each of the three fiscal years were as follows:March 1, 2003
Below are some financial statistics for Google, the Web search engine provider, and Burlington Northern Santa Fe, a large North American railroad (all numbers in thousands, except per share amounts).a. Determine the price-book ratio for each company. Round to two decimal places.b. Explain the
ExxonMobil Corporation is one of the largest companies in the world. The company explores, develops, refines, and markets petroleum products. The basic earnings per share for three comparative years were as follows:The company disclosed the following information from the statement of stockholders'
MotoSport, Inc., produces and sells off-road motorcycles and jeeps. The following data were selected from the records of MotoSport, Inc., for the current fiscal year ended October 31, 2006:Advertising expense .......................$ 64,000Cost of merchandise sold
The following data were taken from the records of Surf’s Up Corporation for the year ended July31, 2006:Retained earnings and balance sheet data:Accounts payable ...........................$ 9,500Accounts receivable .........................276,050Accumulated depreciation
Theater Arts Company produces and sells theater costumes. The following transactions relate to certain securities acquired by Theater Arts Company, which has a fiscal year ending on December 31: 2006Feb. 10 Purchased 4,000 shares of the 150,000 outstanding common shares of Haslam Corporation at
Danka, Inc., develops and leases databases of publicly available information. The following selected transactions relate to certain securities acquired as a long-term investment by Danka, Inc., whose fiscal year ends on December 31. 2006Sept. 1 Purchased $480,000 of Sheehan Company 10-year, 8%
The following data were selected from the records of Healthy Pantry, Inc., for the current fiscal year ended June 30, 2006:Advertising expense ...................$ 46,000Cost of merchandise sold ..................279,000Depreciation expense—office equipment ............6,000Depreciation
The following data were taken from the records of Skate N’ Ski Corporation for the year endedOctober 31, 2006:Income statement data:Administrative expenses .........................$ 100,000Cost of merchandise sold ..........................732,000Gain on condemnation of land
Samson Company is a wholesaler of men’s hair products. The following transactions relate to certain securities acquired by Samson Company, which has a fiscal year ending on December 31: 2006Jan. 3 Purchased 3,000 shares of the 40,000 outstanding common shares of Davidson Corporation at 67 per
The following selected transactions relate to certain securities acquired by Wildflower Blueprints, Inc., whose fiscal year ends on December 31: 2006Sept. 1 Purchased $400,000 of Churchill Company 20-year, 9% bonds dated July 1, 2006, directly from the issuing company, for $385,720 plus accrued
Recent year-end market price and financial statement information for Wal-Mart Stores, Inc., the largest retailer in the world, is provided as follows:a. How has the market price of Wal-Mart compared to earnings per share for 2002â€“2004? Round to two decimal places.b. What information should
In the notes to its 2004 annual report, Boeing Co. provided the following information regarding the 717 airplane termination:On January 12, 2005 we decided to conclude production of the 717 commercial airplane . . . due to the lack of overall market demand for the airplane. The decision is expected
The notes to the financial statements for Maytag Corporation provided the following table of special charges.The special charges include both severance-related and asset impairments. The columns of the table indicate the balances and change in balances of the balance sheet accounts affected by
Citigroup, Inc., one of the largest financial services firms in the world, disclosed the following retained earnings information in its statement of stockholders' equity:The average common shares for determining basic earnings per share for the three most recent years were as follows:2004:
Berkshire Hathaway, Inc., is a public company holding the investments of Warren Buffet, one of the wealthiest people in the world. Recent financial statements revealed the following:Accumulated other comprehensive income:Unrealized appreciation of investments .........$ 2,599Applicable income
Taylor Company made a long-term investment in 100,000 shares of Summit Company at $50 per share. This investment represented less than 1% of the outstanding shares of Summit. By yearend, the share price climbed to $75 per share for an appreciation of $2,500,000. Near the end of the year, the CEO,
Dillon Matthews is the president and chief operating officer of Ratchet Corporation, a developer of personal financial planning software. During the past year, Ratchet Corporation was forced to sell 10 acres of land to the city of Houston for expansion of a freeway exit. The corporation fought the
Fuhlmer, Inc., is in the process of preparing its annual financial statements. Fuhlmer, Inc., is a large citrus grower located in central Florida. The following is a discussion between Jason Kirk, the controller, and April Gwinn, the chief executive officer and president of Fuhlmer, Inc. April:
The two-year comparative income statements and a note disclosure for Fleet Shoes, Inc., were as follows:A fixed asset impairment of $102,000 was recognized in 2007 as the result of abandoning an order management software system. The system project was started in early 2006 and ran into significant
Deana Moran is the owner of First Delivery Service. Recently, Deana paid interest of $3,600 on a personal loan of $60,000 that she used to begin the business. Should First Delivery Service record the interest payment? Explain.
For the year ending January 31, 2004, The Limited Inc. had revenues of $8,934 million and total expenses of $8,217 million. Did The Limited (a) Incur a net loss or(b) Realize net income?
The total assets and total liabilities of Coca-Cola and PepsiCo are shown below.Determine the stockholders€™ equity of eachcompany.
The total assets and total liabilities of Toys€œR€Us Inc. and EstÃ©e Lauder Inc. are shown below.Determine the stockholders€™ equity of eachcompany.
Determine the missing amount for each of thefollowing:
Determine the missing amounts (in millions) for the balance sheets (summarized below) for The Limited Inc., FedEx Corporation, and Ford MotorCo.
The income statement of a corporation for the month of January indicates a net income of $112,750. During the same period, $128,000 in cash dividends were paid. Would it be correct to say that the business incurred a net loss of $15,250 during the month? Discuss.
Four different proprietorships, M, N, O, and P, show the same balance sheet data at the beginning and end of a year. These data, exclusive of the amount of owners€™ equity, are summarized as follows:On the basis of the above data and the following additional information for the year,
Staples, Inc., is a leading office products distributor, with retail stores in the United States, Canada, Asia, Europe, and South America. The following financial statement data were taken from Staples€™ financial statements as of January 29, 2005 and 2004:a. Determine the missing data
From the following list of selected items taken from the records of Ishmael Appliance Service as of a specific date, identify those that would appear on the balance sheet.1. Supplies 2. Wages Expense 3. Cash 4. Land 5. Utilities Expense 6. Fees Earned7. Supplies Expense8. Accounts Payable9. Capital
Financial information related to Madras Company for the month ended April 30, 2006, is as follows:Net income for April .............. $ 73,000Dividends during April .............. 12,000Retained earnings, April 1, 2006 ........ 297,200Prepare a retained earnings statement for the month ended
Hercules Services was organized on November 1, 2006. A summary of the revenue and expense transactions for November follows:Fees earned ............... $232,120Wages expense ............ 100,100Miscellaneous expense ......... 3,150Rent expense ............. 35,000Supplies expense
One item is omitted in each of the following summaries of balance sheet and income statement data for four different corporations, A, B, C, and D.Determine the missing amounts, identifying them byletter.
Financial information related to Derby Interiors for October and November 2006 is as follows:a. Prepare balance sheets for Derby Interiors as of October 31 and as of November 30, 2006. b. Determine the amount of net income for November, assuming that no additional capital stock was issued and no
Hoist Inc. was organized on March 1, 2007. A summary of cash flows for March is shown below.Cash receipts:Cash received from customers ............ $ 37,600Cash received for capital stock ........... 144,000Cash received from note payable ........... 16,000Cash payments:Cash paid out for
Starbucks Corporation purchases and roasts high-quality whole bean coffees and sells them, along with fresh, rich-brewed coffees and a variety of other complementary items, primarily through company-operated retail stores. The following items were adapted from the annual report of Starbucks
Based on the Starbucks Corporation financial statement data shown in Exercise 1-22, prepare an income statement for the year ending October 3, 2004.
Based on the Starbucks Corporation financial statement data shown in Exercise 1-22, prepare a retained earnings statement for the year ending October 3, 2004. The retained earnings as of October 4, 2003, was $1,058,340, and Starbucks paid no dividends during the year.
Americana Realty, organized October 1, 2007, is owned and operated by Marlene Laney. How many errors can you find in the following financial statements for Americana Realty, prepared after its first month of operations? Assume that the cash balance on October 31, 2007, is $11,650 and that cash
Bechler Sports sells hunting and fishing equipment and provides guided hunting and fishing trips. Bechler Sports is owned and operated by Lefty Wisman, a well-known sports enthusiast and hunter. Lefty’s wife, Betsy, owns and operates Eagle Boutique, a women’s clothing store. Lefty and Betsy
The amounts of the assets and liabilities of Chickadee Travel Service at April 30, 2006, the end of the current year, and its revenue and expenses for the year are listed below. The retained earnings were $35,000, and the capital stock was $15,000 at May 1, 2005, the beginning of the current year.
The financial statements at the end of Ameba Realty€™s first month of operations are shown below.Instructions1. Would you classify a realty business like Ameba Realty as a manufacturing, merchandising, or service business?2. By analyzing the interrelationships between the financial
The following financial data were adapted from the annual report of Best Buy Inc. for the period ending February 28, 2004:_______________________________________________In millionsAccounts payable .............. $ 2,535Accrued liabilities .............. 1,598Capital stock ................
The following cash data were adapted from the annual report of Apple Computer Inc. for the period ended September 25, 2004. The cash balance as of September 26, 2003, was $3,396 (in millions). In millionsReceipts
Conwell Corporation began operations on January 1, 2007, as an online retailer of computer software and hardware. The following financial statement data were taken from Conwell’s records at the end of its first year of operations, December 31, 2007.Accounts payable ............ $ 42,000Accounts
Following are the amounts of the assets and liabilities of Greco Travel Agency at December 31, 2006, the end of the current year, and its revenue and expenses for the year. The retained earnings were $8,700, and the capital stock was $7,500 on January 1, 2006, the beginning of the current year.
The financial statements at the end of Zeppelin Realty€™s first month of operations are shown below.Instructions1. Would you classify a realty business like Zeppelin Realty as a manufacturing, merchandising, or service business?2. By analyzing the interrelationships among the four
The following financial data were adapted from the annual report of Home Depot for the period ended February 1, 2004. In millionsAccounts payable ............. $ 7,764Accounts receivable ............ 1,097Capital stock ............... 2,727Cash ...................
The following cash data were adapted from the annual report of Harley-Davidson, Inc., for the period ended December 31, 2004. The cash balance as of January 1, 2004, was $329,329 (in thousands). In thousandsCash receipts from issuing debt ......... $ 305,047Cash payments for
Shiver Corporation began operations on September 1, 2006, as an online retailer of camping and outdoor recreational equipment. The following financial statement data were taken from Shiver’s records at the end of its first year of operations, August 31, 2007:Accounts payable ................ $
The financial statements of Hershey Foods Corporation are shown in Exhibits 4 through 7 of this chapter. Based upon these statements, answer the following questions.1. What are Hershey’s sales (in millions)?2. What is Hershey’s cost of sales (in millions)?3. What is Hershey’s net income (in
The following data (in thousands of dollars) were adapted from the December 31, 2004, financial statements of Tootsie Roll Industries Inc.:Sales ...............$420,110Cost of goods sold ........... 244,501Net income .............. 64,1741. What is Tootsie Roll’s percent of the cost of sales to
The following data (in millions of dollars) were adapted from the January 29, 2005 and 2004 financial statements of The GAP Inc.:1. Prepare a horizontal analysis income statement for GAP that includes gross profit and operating income before taxes. Round to one decimal place.2. Comment on the
The telecommunications industry suffered a severe business downturn during the early part of this decade. Lucent Technologies Inc. is one of the major equipment providers to this industry. Below are the comparative income statements for Lucent Technologies for the fiscal years ended September 30,
Enron Corporation, headquartered in Houston, Texas, provides products and services for natural gas, electricity, and communications to wholesale and retail customers. Enron’s operations are conducted through a variety of subsidiaries and affiliates that involve transporting gas through pipelines,
United Parcel Service provides parcel delivery services around the world. The following table shows the various revenue sources for the comparative years ended December 31, 2004 and 2003:1. Provide a horizontal analysis of UPS revenues.2. Why is the total percentage change not equal to the sum of
The management of Hershey Foods has asked union workers in two of their highest cost Pennsylvania plants to accept higher health insurance premiums and take a wage cut. The worker’s portion of the insurance cost would double from 6% of the premium to 12%. In addition, workers hired after January
Sue Alejandro, president of Tobago Enterprises, applied for a $300,000 loan from First National Bank. The bank requested financial statements from Tobago Enterprises as a basis for granting the loan. Sue has told her accountant to provide the bank with a balance sheet. Sue has decided to omit the
Assume that you are the chief executive officer for Gold Kist Inc., a national poultry producer. The company’s operations include hatching chickens through the use of breeder stock and feeding, raising, and processing the mature chicks into finished products. The finished products include breaded
Indicate whether the following error would cause the accounting equation to be out of balance and, if so, indicate how it would be out of balance. The payment of wages of $6,750 was recorded as a decrease in cash of $6,750 and a decrease in retained earnings (wages expense) of $6,570.
For each of the following errors, indicate whether the error would cause the accounting equation to be out of balance, and if so, indicate how it would be out of balance. (a) The purchase of land for $50,000 cash was recorded as an increase in land of $50,000 and a decrease in cash of $5,000. (b)
Fathom Consulting Services acquired land three years ago for $25,000. Fathom recently signed an agreement to sell the land for $80,000. In accordance with the sales agreement, the buyer transferred $80,000 to Fathom’s bank account on October 6. How would elements of the accounting equation be
(a) How does the payment of dividends of $30,000 affect the three elements of the accounting equation? (b) Is net income affected by the payment of dividends? Explain.
Assume that Donahue Consulting erroneously recorded the payment of $11,500 of dividends as salary expense.(a) How would this error affect the equality of the accounting equation? (b) How would this error affect the income statement, retained earnings statement, balance sheet, and statement of cash
Assume that Kilgore Realty, Inc., borrowed $80,000 from First City Bank and Trust. In recording the transaction, Kilgore erroneously recorded the receipt of $80,000 as an increase in cash, $80,000, and an increase in fees earned, $80,000. (a) How would this error affect the equality of the
Assume that as of January 1, 2007, Milliken Consulting has total assets of $562,500 and total liabilities of $350,000. As of December 31, 2007, Milliken has total liabilities of $375,000 and total stockholders’ equity of $281,250. (a) What was Milliken’s stockholders’ equity as of December
Using the January 1 and December 31, 2007, data given in Question 10, answer the following question. If Milliken paid $22,500 of dividends during 2007, what was the amount of net income for 2007?
In Chapter 1, we described and illustrated horizontal analysis. (a) What is the difference between horizontal and vertical analysis? (b) Can horizontal and vertical analysis be used together in analyzing a company?
Determine the missing amount for each of thefollowing:
The Walt Disney Company had the following assets and liabilities (in millions) as of September 30, 2003.Assets ........ $49,988Liabilities ...... 26,197a. Determine the stockholders’ equity of Walt Disney as of September 30, 2003.b. If assets increased by $3,914 and stockholders’ equity
Campbell Soup Co. had the following assets and liabilities (in millions) as of August 3, 2003.Assets ......... $6,205Liabilities ...... 5,818a. Determine the stockholders’ equity of Campbell Soup as of August 3, 2003.b. If assets increased by $470 and liabilities decreased by $17, what was the
One item is omitted in each of the following summaries of balance sheet and income statement data (in millions) for General Motors and Coca-Cola as of December 31, 2004 and 2003.Determine the amounts of the missing items (a) through(i).
Chris Lund is the sole stockholder and operator of Saluki, a motivational consulting business. At the end of its accounting period, December 31, 2005, Saluki has assets of $475,000 and liabilities of $200,000. Using the accounting equation and considering each case independently, determine the
For Kroger Co., indicate whether the following transactions would(1) Increase, (2) Decrease, or(3) Have no effect on stockholders’ equity.a. Purchased store equipment. b. Paid dividends. c. Paid store rent. d. Borrowed money from the bank. e. Paid creditors. f. Made cash sales to customers.g.
A vacant lot acquired for $50,000, on which there is a balance owed of $30,000, is sold for $130,000 in cash. The seller pays the $30,000 owed. What is the effect of these transactions on the total amount of the seller’s? (1) Assets, (2) Liabilities, and (3) Stockholders’ equity?
Salvo Delivery Service had the following selected transactions during February:1. Received cash from issuance of capital stock, $35,000.2. Received cash for providing delivery services, $15,000.3. Paid creditors, $1,800.4. Billed customers for delivery services, $11,250.5. Paid advertising expense,
Mike Renner operates his own catering service. Summary financial data for March are presented in equation form as follows. Each line designated by a number indicates the effect of a transaction on the balance sheet. Each increase and decrease in owners€™ equity, except transaction (4),
The income statement of a corporation for the month of October indicates a net income of $158,250. During the same period, $180,000 in cash dividends were paid. Would it be correct to say that the business incurred a net loss of $21,750 during the month? Discuss.
Four different corporations, E, F, G, and H, show the same balance sheet data at the beginning and end of a year. These data, exclusive of the amount of stockholders€™ equity, are summarized as follows:On the basis of the above data and the following additional information for the year,
One item is omitted from each of the following summaries of balance sheet and income statement data for four different corporations, O, P, Q, and R.Determine the amounts of the missing items, identifying them by letter. (Suggestion: First determine the amount of increase or decrease in
Use the following data (in millions) for Campbell Soup Co. for the year ending August 1, 2004, to answer the following questions.Retained earnings August 3, 2003 ...... $5,254Retained earnings August 1, 2004 ...... 5,642Net cash from operating activities ...... 1,106Net decrease in cash
Financial information related to Thorstad Interiors for June and July of 2007 is as follows:a. Prepare balance sheets for Thorstad Interiors as of June 30 and July 31, 2007.b. Determine the amount of net income for July, assuming that dividends of $6,000 were paid.c. Determine the net cash flows
After its first month of operation, the following amounts were taken from the accounting records of Three Rivers Realty, Inc., as of November 30, 2007.Prepare an income statement for the month ending November 30,2007.
Using the financial data shown in Exercise 2-17 for Three Rivers Realty, Inc., prepare a retained earnings statement for the month ending November 30, 2007.
Using the financial data shown in Exercise 2-17 for Three Rivers Realty, Inc., prepare a balance sheet as of November 30, 2007.
Using the financial data shown in Exercise 2-17 for Three Rivers Realty, Inc., prepare a statement of cash flows for the month ending November 30, 2007.
Describe how transactions of Lucent Technologies, Inc., would affect the three elements of the accounting equation.a. Received cash from issuing stock.b. Paid off long-term debt.c. Received proceeds from selling a portion of manufacturing operations for a gain on the sale.d. Paid dividends.e. Made
Based upon the financial transactions for Lucent Technologies, Inc., shown in Exercise 2-21, indicate whether the transaction would be reported in the cash flows from operating, investing, or financing sections of the statement of cash flows.
Debbie Woodall established an insurance agency on July 1, 2007, and completed the following transactions during July:a. Opened a business bank account in the name of Woodall Insurance, Inc., with a deposit of $18,000 in exchange for capital stock.b. Borrowed $10,000 by issuing a note payable.c.
Chris Darby established Top-Gun Computer Services on January 1, 2007. The effect of each transaction and the balances after each transaction for January are shown in the integrated financial statement framework at the top of the following page.Instructions1. Prepare an income statement for the
The following amounts were taken from the accounting records of Lisko Services, Inc., as of December 31, 2007. Lisko Services began its operations on January 1, 2007.Capital stock ........... $ 14,000Cash ............... 38,500Dividends ............ 7,000Fees earned .............
After its second year of operations, the following amounts were taken from the accounting records of Lisko Services, Inc., as of December 31, 2008. Lisko Services began its operations on January 1, 2007.Capital stock ........... $ 35,000Cash ............... ?Dividends ............
The financial statements at the end of Sciatic Realty, Inc.€™s first month of operation are shown below. By analyzing the interrelationships between the financial statements, fill in the proper amounts for (a) through(s).
Crazy Creek Realty, Inc., organized October 1, 2007, is operated by Jane Eckhart. How many errors can you find in the following financial statements for Crazy Creek Realty, Inc., prepared after its first month of operation?Jane EckhartRetained Earnings StatementOctober 31, 2006Net income for the
Whitney Tomas established a real estate agency on March 1, 2007, and completed the following transactions during March:a. Opened a business bank account in the name of Tomas Realty, Inc., with a deposit of $25,000 in exchange for capital stock.b. Borrowed $15,000 by issuing a note payable.c.
Kay Larsh established Kodiak Architectural Services on October 1, 2007. The effect of each transaction and the balances after each transaction for October are shown in the integrated financial statement framework at the top of the following page.Instructions1. Prepare an income statement for the
The following amounts were taken from the accounting records of Rainbow Consulting Services, Inc., as of July 31, 2007. Rainbow Consulting Services began its operations on August 1, 2006.Capital stock ............ $ 20,000Cash ............... 79,000Dividends ............. 50,000Fees earned

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