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Accounting 22nd Edition Carl S. Warren, James M. Reeve, Jonathan E. Duchac - Solutions

At the market close on May 12, 2006, Bank of America Corporation had a closing stock price of $49.69. In addition, Bank of America had earnings per share of $4.05 and dividend per share was $1.95. Determine Bank of America's dividend yield. Round to one decimal place.
General Electric Company had earnings per share of $1.72 for 2005 and $1.56 for 2004. In addition, the dividends per share were $0.91 for 2005 and $0.82 for 2004. The market price of GE's stock closed at $35.05 and $36.50 on December 31, 2005 and 2004, respectively.a. Determine the dividend yield
Olympic Theatre Inc. owns and operates movie theaters throughout Texas and California.Olympic Theatre has declared the following annual dividends over a six-year period: 2003, $21,000; 2004, $50,000; 2005, $15,000; 2006, $80,000; 2007, $90,000; and 2008, $140,000. During the entire period, the
On January 31 of the current year, the following accounts and their balances appear in the ledger of Gargantuan Corp., a meat processor:Preferred 3% Stock, $25 par (50,000 shares authorized,30,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 750,000Paid-In
The following selected accounts appear in the ledger of Clear Skies Environmental Corporation on July 1, 2008, the beginning of the current fiscal year:Preferred 2% Stock, $100 par (25,000 shares authorized,18,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eureka Enterprises Inc. manufactures bathroom fixtures. The stockholders' equity accounts of Eureka Enterprises Inc., with balances on January 1, 2008, are as follows:Common Stock, $10 stated value (500,000 shares authorized,380,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected transactions completed by Oceano Boating Corporation during the current fiscal year are as follows:Jan. 3. Split the common stock 2 for 1 and reduced the par from $50 to $25 per share.After the split, there were 400,000 common shares outstanding.Feb. 20. Purchased 50,000 shares of the
Rainer Bike Corp. manufactures mountain bikes and distributes them through retail outlets in Oregon and Washington. Rainer Bike Corp. has declared the following annual dividends over a six-year period: 2003, $60,000; 2004, $8,000; 2005, $30,000; 2006, $40,000; 2007, $80,000; and 2008, $115,000.
I-Can-See Optics produces medical lasers for use in hospitals. The accounts and their balances appear in the ledger of I-Can-See Optics on November 30 of the current year at the top of the following page.Preferred 2% Stock, $80 par (40,000 shares authorized,25,000 shares issued) . . . . . . . . . .
Buellton Welding Corporation sells and services pipe welding equipment in California. The following selected accounts appear in the ledger of Buellton Welding Corporation on January 1, 2008, the beginning of the current fiscal year:Preferred 2% Stock, $50 par (100,000 shares authorized,50,000
GPS Enterprises Inc. produces aeronautical navigation equipment. The stockholders' equity accounts of GPS Enterprises Inc., with balances on January 1, 2008, are as follows:Common Stock, $20 stated value (250,000 shares authorized,150,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . .
Moro Bay Corporation manufactures and distributes leisure clothing. Selected transactions completed by Moro Bay during the current fiscal year are as follows:Jan. 10. Split the common stock 4 for 1 and reduced the par from $20 to $5 per share.After the split, there were 500,000 common shares
Gigi Liken and Ron Bobo are organizing Gold Unlimited Inc. to undertake a high-risk gold-mining venture in Canada. Gigi and Ron tentatively plan to request authorization for 75,000,000 shares of common stock to be sold to the general public. Gigi and Ron have decided to establish par of $1 per
Las Animas Inc. began operations on January 2, 2008, with the issuance of 100,000 shares of $50 par common stock. The sole stockholders of Las Animas Inc. are Cindy Stern and Dr. Kassay Heyen, who organized Las Animas Inc. with the objective of developing a new flu vaccine. Dr. Heyen claims that
The Wall Street Journal reported the following stock exchange information for General Electric Company (GE) on May 12, 2006:a. If you owned 500 shares of GE, what amount would you receive as a quarterly dividend?b. Calculate and prove the dividend yield. Round to two decimal places.c. What is GE's
Sentinel Inc. has paid quarterly cash dividends since 1995. These dividends have steadily increased from $0.05 per share to the latest dividend declaration of $0.40 per share. The board of directors would like to continue this trend and is hesitant to suspend or decrease the amount of quarterly
The inventory at the end of the year was understated by $8,750. (a) Did the error cause an overstatement or an understatement of the gross profit for the year? (b) Which items on the balance sheet at the end of the year were overstated or understated as a result of the error?
Fargo Co. sold merchandise to Keepsakes Company on December 31, FOB shipping point. If the merchandise is in transit on December 31, the end of the fiscal year, which company would report it in its financial statements? Explain.
Three identical units of Item T4W are purchased during July, as shown below.Assume that one unit is sold on July 28 for $150.Determine the gross profit for July and ending inventory on July 31 using the (a) First in, first-out (FIFO); (b) Last-in, first-out (LIFO); (c) Average costmethods.
Three identical units of Item S77 are purchased during October, as shown below.Assume that one unit is sold on October 26 for $100.Determine the gross profit for October and ending inventory on October 31 using the(a) First-in, first-out (FIFO); (b) Last-in, first-out (LIFO); (c) Average
Beginning inventory, purchases, and sales for Item SJ68 are as follows:Assuming a perpetual inventory system and using the first-in, first-out (FIFO) method, determine(a) The cost of merchandise sold on August 30(b) The inventory on August31.
Beginning inventory, purchases, and sales for Item FC33 are as follows:Assuming a perpetual inventory system and using the first-in, first-out (FIFO) method, determine(a) The cost of merchandise sold on March 29(b) The inventory on March31.
Beginning inventory, purchases, and sales for Item SJ68 are as follows:Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine(a) The cost of merchandise sold on August 30(b) The inventory on August31.
Beginning inventory, purchases, and sales for Item FC33 are as follows:Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine(a) The cost of merchandise sold on March 29 and(b) The inventory on March31.
The units of an item available for sale during the year were as follows:There are 20 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using (a) The first-in, first-out (FIFO) method; (b) The last-in, first-out (LIFO)
The units of an item available for sale during the year were as follows:There are 38 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using (a) The first-in, first-out (FIFO) method; (b) The last-in, first-out (LIFO)
On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item as shown in Exhibit7.
On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item as shown in Exhibit7.
During the taking of its physical inventory on December 31, 2008, Genesis Company incorrectly counted its inventory as $126,000 instead of the correct amount of $135,000. Indicate the effect of the misstatement on Genesis's December 31, 2008, balance sheet and income statement for the year ended
During the taking of its physical inventory on December 31, 2008, Poindexter Company incorrectly counted its inventory as $769,000 instead of the correct amount of $740,000. Indicate the effect of the misstatement on Poindexter's December 31, 2008, balance sheet and income statement for the year
Based upon the following data, estimate the cost of ending merchandise inventory:Sales (net) ............... $1,500,000Estimated gross profit rate .......... 35%Beginning merchandise inventory ........ $ 180,000Purchases (net) .............. 1,200,000Merchandise available for sale
Based upon the following data, estimate the cost of ending merchandise inventory:Sales (net) .............. $800,000Estimated gross profit rate ....... 36%Beginning merchandise inventory ..... $ 75,000Purchases (net) ........... 625,000Merchandise available for sale..... $700,000
Handy Hardware Store currently uses a periodic inventory system. Peggy Yang, the owner, is considering the purchase of a computer system that would make it feasible to switch to a perpetual inventory system.Peggy is unhappy with the periodic inventory system because it does not provide timely
PacTec Luggage Shop is a small retail establishment located in a large shopping mall. This shop has implemented the following procedures regarding inventory items:a. Since the display area of the store is limited, only a sample of each piece of luggage is kept on the selling floor. Whenever a
Beginning inventory, purchases, and sales data for portable MP3 players are as follows:The business maintains a perpetual inventory system, costing by the first-in, first-out method. Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the
Beginning inventory, purchases, and sales data for cell phones for July are as follows:Assuming that the perpetual inventory system is used, costing by the LIFO method, determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form
The following units of a particular item were available for sale during the year:Beginning inventory ....... 100 units at $60Sale ............... 75 units at $112First purchase ............ 155 units at $65Sale ............... 135 units at $112Second purchase .......... 200 units at $72Sale
The units of an item available for sale during the year were as follows:There are 33 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost by (a) The first-in, first-out method,(b) The last-in, first-out method, (c) The
The units of an item available for sale during the year were as follows:There are 140 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost and the cost of merchandise sold by three methods, presenting your answers in the
Assume that a firm separately determined inventory under FIFO and LIFO and then compared the results.1. In each space below, place the correct sign [less than (), or equal (=)] for each comparison, assuming periods of rising prices.a. FIFO inventory __________ LIFO inventoryb. FIFO cost of goods
Morena White Water Co. sells canoes, kayaks, whitewater rafts, and other boating supplies.During the taking of its physical inventory on December 31, 2008, Morena White Water incorrectly counted its inventory as $279,150 instead of the correct amount of $285,780.a. State the effect of the error on
Megan's Motorcycle Shop sells motorcycles, jet skis, and other related supplies and accessories.During the taking of its physical inventory on December 31, 2008, Megan's Motorcycle Shop incorrectly counted its inventory as $315,200 instead of the correct amount of $300,750.a. State the effect of
During 2008, the accountant discovered that the physical inventory at the end of 2007 had been understated by $8,175. Instead of correcting the error, however, the accountant assumed that an $8,175 overstatement of the physical inventory in 2008 would balance out the error.Are there any flaws in
On the basis of the following data, estimate the cost of the merchandise inventory at September 30 by the retailmethod:
The merchandise inventory was destroyed by fire on August 19. The following data were obtained from the accounting records:a. Estimate the cost of the merchandise destroyed.b. Briefly describe the situations in which the gross profit method isuseful.
The following data were taken from recent annual reports of Apple Computer, Inc., a manufacturer of personal computers and related products, and American Greetings Corporation, a manufacturer and distributor of greeting cards and related products:a. Determine the inventory turnover for Apple and
Kroger, Albertson's, Inc., and Safeway Inc. are the three largest grocery chains in the United States. Inventory management is an important aspect of the grocery retail business. Recent balance sheets for these three companies indicated the following merchandise inventory information:The cost of
The beginning inventory at Continental Office Supplies and data on purchases and sales for a three-month period are shown in Problem 7-1A.Instructions1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 4,
Del Mar Appliances uses the periodic inventory system. Details regarding the inventory of appliances at August 1, 2007, purchases invoices during the year, and the inventory count at July 31, 2008, are summarized as follows:Instructions1. Determine the cost of the inventory on July 31, 2008, by the
Data on the physical inventory of Exchange Company as of December 31, 2008, are presented in the working papers. The quantity of each commodity on hand has been determined and recorded on the inventory sheet. Unit market prices have also been determined as of December 31 and recorded on the sheet.
Selected data on merchandise inventory, purchases, and sales for Hacienda Co. and San Lucas Co. are as follows:Instructions1. Determine the estimated cost of the merchandise inventory of Hacienda Co. on June 30 by the retail method, presenting details of the computations.2. a. Estimate the cost of
The beginning inventory of merchandise at Citrine Co. and data on purchases and sales for a three-month period are as follows:Instructions1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 3, using the
The beginning inventory and data on purchases and sales for a three-month period are shown in Problem 7-1B.Instructions1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 4, using the last-in, first-out
Concord Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, 2008, purchases invoices during the year, and the inventory count at December 31, 2008, are summarized as follows:Instructions1. Determine the cost of the inventory on December 31,
Data on the physical inventory of Satchell Co. as of December 31, 2008, are presented in the working papers. The quantity of each commodity on hand has been determined and recorded on the inventory sheet. Unit market prices have also been determined as of December 31 and recorded on the sheet. The
Selected data on merchandise inventory, purchases, and sales for Miramar Co. and Boyar's Co. are as follows:Instructions1. Determine the estimated cost of the merchandise inventory of Miramar Co. on March 31 by the retail method, presenting details of the computations.2. a. Estimate the cost of the
Beeson Co. is experiencing a decrease in sales and operating income for the fiscal year ending December 31, 2008. Julia Faure, controller of Beeson Co., has suggested that all orders received before the end of the fiscal year be shipped by midnight, December 31, 2008, even if the shipping
The following is an excerpt from a conversation between Jack O'Brien, the warehouse manager for Murrieta Wholesale Co., and its accountant, Carole Timmons. Murrieta Wholesale operates a large regional warehouse that supplies produce and other grocery products to grocery stores in smaller
Kowalski Company began operations in 2007 by selling a single product. Data on purchases and sales for the year were as follows:On January 6, 2008, the president of the company, Jolly Zondra, asked for your advice on costing the 4,000-unit physical inventory that was taken on December 31, 2007.
Dell Inc. and Hewlett-Packard Development Company, L.P. (HP) are both manufacturers of computer equipment and peripherals. However, the two companies follow two different strategies. Dell follows a build-to-order strategy, where the consumer orders the computer from a Web page. The order is then
On the basis of the following data, (a) Journalize the adjusting entries at December 31, the end of the current fiscal year, and (b) Journalize the reversing entries on January 1, the first day of the following year.1. Sales salaries are uniformly $14,000 for a five-day workweek, ending on Friday.
On the basis of the following data, (a) Journalize the adjusting entries at June 30, the end of the current fiscal year, and (b) Journalize the reversing entries on July 1, the first day of the following year.1. Wages are uniformly $9,375 for a five-day workweek, ending on Friday. The last payday
Portions of the wages expense account of a business are the following.a. Indicate the nature of the entry (payment, adjusting, and closing, reversing) from which each numbered posting was made.b. Journalize the complete entry from which each numbered posting wasmade.
Portions of the salaries expense account of a business are shown below.a. Indicate the nature of the entry (payment, adjusting, closing, reversing) from which each numbered posting was made.b. Journalize the complete entry from which each numbered posting wasmade.
The accounts and their balances in the ledger of Stones Co. on December 31, 2008, are as follows:The data needed for year-end adjustments on December 31 are as follows:Instructions1. Prepare an end-of-period spreadsheet (work sheet) for the fiscal year ended December 31, 2008. List all accounts in
The accounts and their balances in the ledger of LeClassic Sports Co. on December 31, 2008, are as follows:The data needed for year-end adjustments on December 31 are as follows:Instructions1. Prepare an end-of-period spreadsheet (work sheet) for the fiscal year ended December 31, listing all
Determine the average rate of return for a project that is estimated to yield total income of $234,000 over four years, has a cost of $450,000, and has a $50,000 residual value.
Determine the average rate of return for a project that is estimated to yield total income of $72,000 over three years, has a cost of $125,000, and has a $25,000 residual value.
A project has estimated annual net cash flows of $150,000. It is estimated to cost $885,000. Determine the cash payback period.
A project has estimated annual net cash flows of $27,200. It is estimated to cost $68,000. Determine the cash payback period.
A project has estimated annual net cash flows of $65,000 for six years and is estimated to cost $265,000. Assume a minimum acceptable rate of return of 10%. Using Exhibit 2, determine (1) The net present value of the project and (2) The present value index, rounded to two decimal places.
A project has estimated annual net cash flows of $22,000 for four years and is estimated to cost $70,000. Assume a minimum acceptable rate of return of 12%. Using Exhibit 2, determine(1) The net present value of the project and (2) The present value index, rounded to two decimal places.
A project is estimated to cost $175,665 and provide annual net cash flows of $35,000 for 10 years. Determine the internal rate of return for this project, using Exhibit 2.
A project is estimated to cost $745,200 and provide annual net cash flows of $120,000 for eight years. Determine the internal rate of return for this project, using Exhibit 2.
Project 1 requires an original investment of $80,000. The project will yield cash flows of $14,000 per year for eight years. Project 2 has a calculated net present value of $5,000 over a five-year life. Project 1 could be sold at the end of five years for a price of $50,000. (a) Determine the net
Project A requires an original investment of $35,000. The project will yield cash flows of $8,000 per year for seven years. Project B has a calculated net present value of $1,000 over a five-year life. Project A could be sold at the end of five years for a price of $20,000. (a) Determine the net
The following data are accumulated by Green Mountain Testing Services Inc. in evaluating two competing capital investment proposals:Determine the expected average rate of return for eachproposal.
International Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $85,000, with a $5,000 residual value and a 10 year life. The equipment will replace one employee who has an average wage of $23,000 per year. In addition, the
Airwave Communications Inc. is considering an investment in new equipment that will be used to manufacture a PDA (personal data assistant). The PDA is expected to generate additional annual sales of 4,800 units at $350 per unit. The equipment has a cost of $910,000, residual value of $50,000, and a
Gardeneer Inc. is planning to invest $184,000 in a new garden tool that is expected to generate additional sales of 7,500 units at $38 each. The $184,000 investment includes $54,000 for initial launch-related expenses and $130,000 for equipment that has a 10-year life and a $17,500 residual value.
First Union Bank Corporation is evaluating two capital investment proposals for a driveup ATM kiosk, each requiring an investment of $300,000 and each with an eight-year life and expected total net cash flows of $480,000. Location 1 is expected to provide equal annual net cash flows of $60,000, and
Family Care Products Company is considering an investment in one of two new product lines. The investment required for either product line is $600,000. The net cash flows associated with each product are as follows:a. Recommend a product offering to Family Care Products Company, based on the cash
The following data are accumulated by Zadok Company in evaluating the purchase of $370,000 of equipment, having a four-year useful life:a. Assuming that the desired rate of return is 12%, determine the net present value for the proposal. Use the table of the present value of $1 appearing in Exhibit
Metro-Goldwyn-Mayer Studios Inc. (MGM) is a major producer and distributor of theatrical and television filmed entertainment. Regarding theatrical films, MGM states, “Our feature films are exploited through a series of sequential domestic and international distribution channels, typically
Maddox Excavation Company is planning an investment of $205,000 for a bulldozer. The bulldozer is expected to operate for 1,600 hours per year for five years. Customers will be charged $95 per hour for bulldozer work. The bulldozer operator is paid an hourly wage of $25 per hour. The bulldozer is
Blue Ridge Development Company has two competing projects: an apartment complex and an office building. Both projects have an initial investment of $720,000. The net cash flows estimated for the two projects are as follows:The estimated residual value of the apartment complex at the end of year 4
IHOP Corp. franchises breakfast-oriented restaurants throughout North America. The average development costs for a new restaurant were reported by IHOP as follows:Land ...... $ 667,000Building ...... 800,000Equipment ..... 341,000Site improvements . 185,000Total ...... $1,993,000IHOP develops and
Carnival Corporation has recently placed into service some of the largest cruise ships in the world. One of these ships, the Carnival Glory, can hold up to 3,000 passengers and cost $530 million to build. Assume the following additional information:• The average occupancy rate for the new ship is
Drive By Doughnuts has computed the net present value for capital expenditure locations A and B, using the net present value method. Relevant data related to the computation are as follows:Determine the present value index for eachproposal.
MVP Sporting Goods Company is considering an investment in one of two machines. The sewing machine will increase productivity from sewing 120 baseballs per hour to sewing 180 per hour. The contribution margin is $0.80 per baseball. Assume that any increased production of baseballs can be sold. The
Southern Rail Inc. is considering acquiring equipment at a cost of $442,500. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $88,500. The company’s minimum desired rate of return for net present value analysis is
The plant manager of O’Brien Equipment Company is considering the purchase of a new robotic assembly plant. The new robotic line will cost $1,250,000. The manager believes that the new investment will result in direct labor savings of $250,000 per year for 10 years.a. What is the payback period
The internal rate of return method is used by Timberframe Renovations Inc. in analyzing a capital expenditure proposal that involves an investment of $62,818 and annual net cash flows of $14,000 for each of the eight years of its useful life.a. Determine a present value factor for an annuity of
IBM recently saved $250 million over three years by implementing supply chain software that reduced the cost of components used in its manufacture of computers. If we assume that the savings occurred equally over the three years and the cost of implementing the new software was $175,500,000, what
Southwest Chip Company is considering two possible investments: a delivery truck or a bagging machine. The delivery truck would cost $39,918 and could be used to deliver an additional 36,250 bags of taquitos chips per year. Each bag of chips can be sold for a contribution margin of $0.40. The
Buckeye Healthcare Corp. is proposing to spend $96,030 on an eight-year project that has estimated net cash flows of $18,000 for each of the eight years.a. Compute the net present value, using a rate of return of 12%. Use the table of present values of an annuity of $1 in the chapter.b. Based on
Integrated Technologies Inc. is considering the purchase of automated machinery that is expected to have a useful life of four years and no residual value. The average rate of return on the average investment has been computed to be 25%, and the cash payback period was computed to be 4.5 years.Do
The capital investment committee of Estate Landscaping Company is considering two capital investments. The estimated income from operations and net cash flows from each investment are as follows:Each project requires an investment of $70,000. Straight-line depreciation will be used, and no residual
Unique Boutique Inc. is considering two investment projects. The estimated net cash flows from each project are as follows:Each project requires an investment of $770,000. A rate of 15% has been selected for the net present value analysis.Instructions1. Compute the following for each project:a.
Continental Railroad Company wishes to evaluate three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows:Instructions1. Assuming that the desired rate of return is 20%, prepare a net present value analysis for each

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