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Accounting 23rd Edition Jonathan E. Duchac, James M. Reeve, Carl S. Warren - Solutions
The following table shows the revenue and average net fixed assets (in millions) for a recent fiscal year for Best Buy and Circuit City Stores, Inc.: (a) Compute the fixed asset turnover for each company. Round to two decimal places(b) Which company uses its fixed assets more efficiently?Explain.
Catherine Simpkins owns and operates Speedy Print Co. During February, Speedy Print Co. incurred the following costs in acquiring two printing presses. One printing press was new, and the other was used by a business that recently filed for bankruptcy.Costs related to new printing press:1. Sales
Bridger Ski Co. has developed a tract of land into a ski resort. The company has cut the trees, cleared and graded the land and hills, and constructed ski lifts. (a) Should the tree cutting, land clearing, and grading costs of constructing the ski slopes be debited to the land account? (b) If such
Fastball Delivery Company acquired an adjacent lot to construct a new warehouse, paying $30,000 and giving a short-term note for $270,000. Legal fees paid were $1,425, delinquent taxes assumed were $12,000, and fees paid to remove an old building from the land were $18,500. Materials salvaged from
Connect Lines Co. incurred the following costs related to trucks and vans used in operating its delivery service:1. Replaced a truck’s suspension system with a new suspension system that allows for the delivery of heavier loads.2. Installed a hydraulic lift to a van.3. Repaired a flat tire on one
Jaime Baldwin owns and operates Love Transport Co. During the past year, Jaime incurred the following costs related to an 18-wheel truck:1. Changed engine oil.2. Installed a wind deflector on top of the cab to increase fuel mileage.3. Replaced fog and cab light bulbs.4. Modified the
Easy Move Company made the following expenditures on one of its delivery trucks:Feb. 16. Replaced transmission at a cost of $3,150July 15. Paid $1,100 for installation of a hydraulic liftOct. 3. Paid $72 to change the oil and air filterPrepare journal entries for each expenditure.
Legacy Ironworks Co. reported $3,175,000 for equipment and $2,683,000 for accumulated depreciation–equipment on its balance sheet.Does this mean. (a) That the replacement cost of the equipment is $3,175,000 and(b) That $2,683,000 is set aside in a special fund for the replacement of the
Convert each of the following estimates of useful life to a straight-line depreciation rate, stated as a percentage, assuming that the residual value of the fixed asset is to be ignored: (a) 2 years, (b) 8 years, (c) 10 years, (d) 20 years, (e) 25 years, (f) 40 years, (g) 50 years.
A refrigerator used by a meat processor has a cost of $93,750, an estimated residual value of $10,000, and an estimated useful life of 25 years. What is the amount of the annual depreciation computed by the straight-line method?
A diesel-powered tractor with a cost of $145,000 and estimated residual value of $7,000 is expected to have a useful operating life of 75,000 hours. During July, the generator was operated 150 hours. Determine the depreciation for the month.
Prior to adjustment at the end of the year, the balance in Trucks is $250,900 and the balance in Accumulated Depreciation?Trucks is $88,200. Details of the subsidiary ledger are as follows: (a) Determine the depreciation rates per mile and the amount to be credited to the accumulated depreciation
A Kubota tractor acquired on January 9 at a cost of $75,000 has an estimated useful life of 20 years. Assuming that it will have no residual value, determine the depreciation for each of the first two years(a) By the straight-line method and (b) By the double declining-balance method.
A storage tank acquired at the beginning of the fiscal year at a cost of $172,000 has an estimated residual value of $20,000 and an estimated useful life of eight years. Determine the following: (a) The amount of annual depreciation by the straight-line method and (b) The amount of depreciation for
Sandblasting equipment acquired at a cost of $85,000 has an estimated residual value of $5,000 and an estimated useful life of 10 years. It was placed in service on October 1 of the current fiscal year, which ends on December 31. Determine the depreciation for the current fiscal year and for the
A building with a cost of $1,050,000 has an estimated residual value of $420,000, has an estimated useful life of 36 years, and is depreciated by the straight-line method. (a) What is the amount of the annual depreciation? (b) What is the book value at the end of the twentieth year of use? (c) If
Crane Company purchased and installed carpet in its new general offices on March 30 for a total cost of $12,000. The carpet is estimated to have a 15-year useful life and no residual value.(a) Prepare the journal entries necessary for recording the purchase of the new carpet.(b) Record the December
Equipment acquired on January 3, 2007, at a cost of $504,000, has an estimated useful life of 12 years, has an estimated residual value of $42,000, and is depreciated by the straight-line method.(a) What was the book value of the equipment at December 31, 2010, the end of the year?(b) Assuming that
Equipment acquired on January 3, 2007, at a cost of $265,500, has an estimated useful life of eight years and an estimated residual value of $31,500.(a) What was the annual amount of depreciation for the years 2007, 2008, and 2009, using the straight-line method of depreciation?(b) What was the
Cikan Mining Co. acquired mineral rights for $16,200,000. The mineral deposit is estimated at 90,000,000 tons. During the current year, 13,750,000 tons were mined and sold.(a) Determine the amount of depletion expense for the current year.(b) Journalize the adjusting entry to recognize the
Isolution Company acquired patent rights on January 4, 2007, for $750,000. The patent has a useful life equal to its legal life of 15 years. On January 7, 2010, Isolution successfully defended the patent in a lawsuit at a cost of $90,000.(a) Determine the patent amortization expense for the current
Apple Computer, Inc., designs, manufactures, and markets personal computers and related software. Apple also manufactures and distributes music players (Ipod) along with related accessories and services including the online distribution of third-party music. The following information was taken from
List the errors you find in the following partial balancesheet:
On May 27, Linoleum Associates Co. paid $950 to repair the transmission on one of its delivery vans. In addition, Linoleum Associates paid $450 to install a GPS system in its van. Journalize the entries for the transmission and GPS system expenditures.
On October 9, Wonder Inflatable Co. paid $1,150 to install a hydraulic lift and $40 for an air filter for one of its delivery trucks. Journalize the entries for the new lift and air filter expenditures.
A building acquired at the beginning of the year at a cost of $485,000 has an estimated residual value of $75,000 and an estimated useful life of 25 years. Determine (a) The depreciable cost, (b) The straight-line rate, and (c) The annual straight-line depreciation
Equipment acquired at the beginning of the year at a cost of $125,000 has an estimated residual value of $5,000 and an estimated useful life of eight years. Determine (a) The depreciable cost, (b) The straight-line rate, and (c) The annual straight-line depreciation.
A truck acquired at a cost of $134,000 has an estimated residual value of $35,000, has an estimated useful life of 300,000 miles, and was driven 52,000 miles during the year. Determine (a) The depreciable cost, (b) The depreciation rate, and (c) The units-of production depreciation for the year.
A tractor acquired at a cost of $95,000 has an estimated residual value of $15,000, has an estimated useful life of 40,000 hours, and was operated 5,100 hours during the year. Determine (a) The depreciable cost, (b) The depreciation rate, and (c) The units-of production depreciation for the year.
A building acquired at the beginning of the year at a cost of $650,000 has an estimated residual value of $125,000 and an estimated useful life of 40 years. Determine (a) The double-declining-balance rate and (b) The double-declining-balance depreciation for the first year.
Equipment acquired at the beginning of the year at a cost of $145,000 has an estimated residual value of $18,000 and an estimated useful life of five years. Determine (a) The double-declining-balance rate and (b) The double-declining-balance depreciation for the first year.
Equipment with a cost of $250,000 has an estimated residual value of $34,000, has an estimated useful life of 18 years, and is depreciated by the straight-line method.(a) Determine the amount of the annual depreciation. (b) Determine the book value at the end of the tenth year of use. (c) Assuming
A truck with a cost of $80,000 has an estimated residual value of $15,000, has an estimated useful life of eight years, and is depreciated by the straight-line method.(a) Determine the amount of the annual depreciation. (b) Determine the book value at the end of the fourth year of use.(c) Assuming
Equipment was acquired at the beginning of the year at a cost of $324,000. The equipment was depreciated using the double-declining-balance method based on an estimated useful life of eight years and an estimated residual value of $43,000.(a) What was the depreciation for the first year?(b)
Equipment was acquired at the beginning of the year at a cost of $160,000. The equipment was depreciated using the straight-line method based on an estimated useful life of 15 years and an estimated residual value of $17,500.(a) What was the depreciation for the first year?(b) Assuming the
Montana Mining Co. acquired mineral rights for $120,000,000. The mineral deposit is estimated at 200,000,000 tons. During the current year, 31,155,000 tons were mined and sold.(a) Determine the depletion rate.(b) Determine the amount of depletion expense for the current year.(c) Journalize the
Cooke City Mining Co. acquired mineral rights for $50,000,000. The mineral deposit is estimated at 125,000,000 tons. During the current year, 42,385,000 tons were mined and sold.(a) Determine the depletion rate.(b) Determine the amount of depletion expense for the current year.(c) Journalize the
On December 31, it was estimated that goodwill of $500,000 was impaired. In addition, a patent with an estimated useful economic life of eight years was acquired for $388,000 on July 1.(a) Journalize the adjusting entry on December 31 for the impaired goodwill.(b) Journalize the adjusting entry on
On December 31, it was estimated that goodwill of $875,000 was impaired. In addition, a patent with an estimated useful economic life of 17 years was acquired for $425,000 on April 1.(a) Journalize the adjusting entry on December 31 for the impaired goodwill.(b) Journalize the adjusting entry on
The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale apparel business. The receipts are identified by an asterisk. a. Finder?s fee paid to real estate agency . . . . . . . . . . . . . . . . . . . . . . . . $ 4,000 b. Cost of real
Newbirth Coatings Company purchased waterproofing equipment on January 2, 2009, for $380,000. The equipment was expected to have a useful life of four years, or 8,000 operating hours, and a residual value of $36,000. The equipment was used for 3,000 hours during 2009, 2,500 hours in 2010, 1,400
Razar Sharp Company purchased tool sharpening equipment on July 1, 2008, for $48,600. The equipment was expected to have a useful life of three years, or 7,500 operating hours, and a residual value of $3,000. The equipment was used for 1,800 hours during 2008, 2,600 hours in 2009, 2,000 hours in
New tire retreading equipment, acquired at a cost of $144,000 at the beginning of a fiscal year, has an estimated useful life of four years and an estimated residual value of $10,800. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense
The following transactions, adjusting entries, and closing entries were completed by King Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used. 2008Jan. 7. Purchased a used delivery truck for
Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows:(a) On December 31, the company determined that $20,000,000 of goodwill was impaired.(b) Governmental and legal costs of $675,000 were incurred on June 30 in obtaining a
The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale ceramic business. The receipts are identified by an asterisk. a. Fee paid to attorney for title search . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,500 b. Cost of
The equipment was expected to have a useful life of three years, or 25,000 operating hours, and a residual value of $4,500. The equipment was used for 12,000 hours during 2008, 9,000 hours in 2009, and 4,000 hours in 2010.InstructionsDetermine the amount of depreciation expense for the years ended
New lithographic equipment, acquired at a cost of $131,250 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of $11,250. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense
Why are most large businesses organized as corporations?
A stockbroker advises a client to “buy preferred stock. . . . With that type of stock, . . . [you] will never have to worry about losing the dividends.” Is the broker right?
What are some of the factors that influence the market price of a corporation’s stock?
(a) What are the three conditions for the declaration and payment of a cash dividend?(b) The dates in connection with the declaration of a cash dividend are February 16, March 18, and April 17. Identify each date.
An owner of 500 shares of Microshop Company common stock receives a stock dividend of 5 shares. (a) What is the effect of the stock dividend on the stockholder’s proportionate interest (equity) in the corporation? (b) How does the total equity of 505 shares compare with the total equity of 500
(a) Where should a declared but unpaid cash dividend be reported on the balance sheet?(b) Where should a declared but unissued stock dividend be reported on the balance sheet?
(a) In what respect does treasury stock differ from unissued stock?(b) How should treasury stock be presented on the balance sheet?
A corporation reacquires 10,000 shares of its own $25 par common stock for $450,000, recording it at cost. (a) What effect does this transaction have on revenue or expense of the period? (b) What effect does it have on stockholders’ equity?
The treasury stock in Eye Opener 12 is resold for $615,000. (a) What is the effect on the corporation’s revenue of the period? (b) What is the effect on stockholders’ equity?
What are the three classifications of restrictions of retained earnings, and how are such restrictions normally reported in the financial statements?
Taiwanese Company has 5,000shares of 4% cumulative preferred stock of $40 par and 10,000 shares of $90 par common stock. The following amounts were distributed as dividends:Year 1 $15,000Year 2 5,000Year 3 62,000Determine the dividends per share for preferred and common stock
Master Craftmen Company has 10,000 shares of 2% cumulative preferred stock of $50 par and 25,000 shares of $75 par common stock. The following amounts were distributed as dividends:Year 1 $30,000Year 2 6,000Year 3 80,000Determine the dividends per share for preferred and common
On July 3, Hanoi Artifacts Corporation issued for cash 450,000 shares of no-par common stock at $2.50. On September 1, Hanoi Artifacts issued 10,000 shares of 2%, $25 preferred stock at par for cash. On October 30, Hanoi Artifacts issued for cash 7,500 shares of 2%, $25 par preferred stock at
On February 13, Elman Corporation issued for cash 75,000 shares of no-par common stock (with a stated value of $125) at $140. On September 9, Elman issued 15,000 shares of 1%, $60 preferred stock at par for cash. On November 23, Elman issued for cash 8,000 shares of 1%, $60 par preferred stock at
The important dates in connection with a cash dividend of $112,750 on a corporation’s common stock are October 6, November 5, and December 5. Journalize the entries required on each date.
The important dates in connection with a cash dividend of $61,500 on a corporation’s common stock are July 1, August 1, and September 30. Journalize the entries required on each date.
Self Storage Corporation has 100,000 shares of $40 par common stock outstanding. On May 10, Self Storage Corporation declared a 2% stock dividend to be issued August 1 to stockholders of record on June 9. The market price of the stock was $48 per share on May 10.Journalize the entries required on
Spectrum Corporation has 600,000 shares of $75 par common stock outstanding. On February 13, Spectrum Corporation declared a 4% stock dividend to be issued April 30 to stockholders of record on March 14. The market price of the stock was $90 per share on February 13.Journalize the entries required
On October 3, Valley Clothing Inc. reacquired 10,000 shares of its common stock at $9 per share. On November 15, Valley Clothing sold 6,800 of the reacquired shares at $12 per share. On December 22, Valley Clothing sold the remaining shares at $7 per share.Journalize the transactions of October 3,
On February 1, Motorsports Inc. reacquired 7,500 shares of its common stock at $30 per share. On March 15, Motorsports sold 4,500 of the reacquired shares at $34 per share.On June 2, Motorsports sold the remaining shares at $28 per share.Journalize the transactions of February 1, March 15, and June
Using the following accounts and balances, prepare the Stockholders’ Equity section of the balance sheet. Seventy thousand shares of common stock are authorized, and 7,500 shares have been reacquired.Common Stock, $75 par
Using the following accounts and balances, prepare the Stockholders’ Equity section of the balance sheet. Seventy thousand shares of common stock are authorized, and 7,500 shares have been reacquired.Common Stock, $75 par
Hornblower Cruises Inc. reported the following results for the year ending October 31, 2010:Retained earnings, November 1, 2009 $1,500,000Net income 475,000Cash dividends declared 50,000Stock
Frontier Leaders Inc. reported the following results for the year ending July 31, 2010:Retained earnings, August 1, 2009 $875,000Net income 260,000Cash dividends declared 20,000Stock dividends declared
Fairmount Inc., a developer of radiology equipment, has stock outstanding as follows: 15,000 shares of cumulative 2%, preferred stock of $150 par, and 50,000 shares of $5 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $30,000;
Michelangelo Inc., a software development firm, has stock outstanding as follows:20,000 shares of cumulative 1%, preferred stock of $25 par, and 25,000 shares of $100 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $3,000;
On February 10, Peerless Rocks Inc., a marble contractor, issued for cash 40,000 shares of $10 par common stock at $34, and on May 9, it issued for cash 100,000 shares of $5 par preferred stock at $7.(a) Journalize the entries for February 10 and May 9.(b) What is the total amount invested (total
On June 4, Magic Carpet Inc., a carpet wholesaler, issued for cash 250,000 shares of no-par common stock (with a stated value of $3) at $12, and on October 9, it issued for cash 25,000 shares of $75 par preferred stock at $80.(a) Journalize the entries for June 4 and October 9, assuming that the
On January 30, Lift Time Corporation, a wholesaler of hydraulic lifts, acquired land in exchange for 18,000 shares of $10 par common stock with a current market price of $15.Journalize the entry to record the transaction.
Rocky Mountain Sounds Corp., an electric guitar retailer, was organized by Cathy Dewitt, Melody Leimbach, and Mario Torres. The charter authorized 250,000 shares of common stock with a par of $40. The following transactions affecting stockholders’ equity were completed during the first year of
Cashman Nursery, with an authorization of 25,000 shares of preferred stock and 300,000 shares of common stock, completed several transactions involving its stock on July 30, the first day of operations. The trial balance at the close of the day follows: All shares within each class of stock were
Newgen Products Inc., a wholesaler of office products, was organized on February 20 of the current year, with an authorization of 75,000 shares of 2% preferred stock, $50 par and 400,000 shares of $15 par common stock. The following selected transactions were completed during the first year of
The important dates in connection with a cash dividend of $69,500 on a corporation’s common stock are May 3, June 17, and August 1. Journalize the entries required on each date.
Organic Health Co. is an HMO for businesses in the Chicago area. The following account balances appear on the balance sheet of Organic Health Co.: Common stock (300,000 shares authorized), $100 par, $10,000,000; Paid-in capital in excess of par–common stock, $2,000,000; and Retained earnings,
Beaverhead Creek Inc. bottles and distributes spring water. On March 4 of the current year, Beaverhead Creek reacquired 5,000 shares of its common stock at $90 per share.On August 7, Beaverhead Creek sold 3,500 of the reacquired shares at $100 per share.The remaining 1,500 shares were sold at $88
Augusta Gardens Inc. develops and produces spraying equipment for lawn maintenance and industrial uses. On August 30 of the current year, Augusta Gardens Inc. reacquired 17,500 shares of its common stock at $42 per share. On October 31, 14,000 of the reacquired shares were sold at $45 per share,
Sweet Water Inc. bottles and distributes spring water. On July 15 of the current year, Sweet Water Inc. reacquired 24,000 shares of its common stock at $60 per share. On August 10, Sweet Water Inc. sold 19,000 of the reacquired shares at $63 per share. The remaining 5,000 shares were sold at $56
The following accounts and their balances were selected from the unadjusted trial balance of REO Inc., a freight forwarder, at October 31, the end of the current fiscal year: Preferred 2% Stock, $100 par $ 750,000Paid-In Capital in Excess of
The following accounts and their balances appear in the ledger of Newberry PropertiesInc. on June 30 of the current year:Common Stock, $75 par $1,350,000Paid-In Capital in Excess of Par 108,000Paid-In Capital from Sale of Treasury Stock
Race Car Inc. retails racing products for BMWs, Porsches, and Ferraris. The following accounts and their balances appear in the ledger of Race Car Inc. on April 30, the end of the current year:Common Stock, $10 par $ 400,000Paid-In Capital in
Bancroft Corporation, a manufacturer of industrial pumps, reports the following results for the year ending January 31, 2010:Retained earnings, February 1, 2009 $3,175,500Net income 415,000Cash dividends declared
List the errors in the following Stockholders' Equity section of the balance sheet prepared as of the end of the current year.
The stockholders' equity T accounts of For All Occasions Greeting Cards Inc. for the current fiscal year ended December 31, 2010, are as follows. Prepare a statement of stockholders' equity for the fiscal year ended December 31,2010.
Mia Restaurant Corporation wholesales ovens and ranges to restaurants throughout the Southwest. Mia Restaurant Corporation, which had 40,000 shares of common stock outstanding, declared a 4-for-1 stock split (3 additional shares for each share issued).(a) What will be the number of shares
Indicate whether the following actions would (+) increase, (-) decrease, or (0) not affect Indigo Inc.'s total assets, liabilities, and stockholders' equity:
Selected transactions completed by Hartwell Boating Supply Corporation during the current fiscal year are as follows:Feb. 3. Split the common stock 2 for 1 and reduced the par from $40 to $20 per share. After the split, there were 250,000 common shares outstanding.Apr. 10. Declared semiannual
Crystal Arts, Inc., had earnings of $160,000 for 2010. The company had 20,000 shares of common stock outstanding during the year. In addition, the company issued 2,000 shares of $100 par value preferred stock on January 3, 2010. The preferred stock has a dividend of $7 per share. There were no
Procter & Gamble (P&G) is one of the largest consumer products companies in the world, famous for such brands as Crest? and Tide?. Financial information for the company for three recent years is as follows: (a) Determine the earnings per share for fiscal years 2007, 2006, and 2005.(b)
Staples and OfficeMax are two companies competing in the retail office supply business. OfficeMax had a net income of $91,721,000 for a recent year, while Staples had a net income of $973,577,000. OfficeMax had preferred stock of $54,735,000 with a preferred dividend of 7.375% on that amount.
Bridger Bike Corp. manufactures mountain bikes and distributes them through retail outlets in Montana, Idaho, Oregon, and Washington. Bridger Bike Corp. has declared the following annual dividends over a six-year period ending December 31 of each year: 2005, $5,000; 2006, $18,000; 2007, $45,000;
Sheldon Optics produces medical lasers for use in hospitals. The accounts and their balances appear in the ledger of Sheldon Optics on October 31 of the current year as follows: At the annual stockholders' meeting on December 7, the board of directors presented a plan for modernizing and
Coil Welding Corporation sells and services pipe welding equipment in California. The following selected accounts appear in the ledger of Coil Welding Corporation on February 1, 2010, the beginning of the current fiscal year: During the year, the corporation completed a number of transactions
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