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Accounting Principles 9th Edition Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso - Solutions
Yadier Corporation has income from continuing operations of $290,000 for the year ended December 31, 2010. It also has the following items (before considering income taxes).1. An extraordinary loss of $80,000.2. A gain of $30,000 on the discontinuance of a division.3. A correction of an error in
Comparative statement data for Douglas Company and Maulder Company, two competitors, appear below. All balance sheet data are as of December 31, 2011, and December 31, 2010.Instructions(a) Prepare a vertical analysis of the 2011 income statement data for Douglas Company and Maulder Company in
The comparative statements of Villa Tool Company are presented below.All sales were on account. The allowance for doubtful accounts was $3,200 on December 31, 2011, and $3,000 on December 31, 2010.InstructionsCompute the following ratios for 2011. (Weighted average common shares in 2011 were
Condensed balance sheet and income statement data for Kersenbrock Corporation appear below.Additional information:1. The market price of Kersenbrock’s common stock was $4.00, $5.00, and $8.00 for 2009, 2010, and 2011, respectively.2. All dividends were paid in cash.Instructions(a) Compute the
Financial information for Hanshew Company is presented below. Additional information:1. Inventory at the beginning of 2010 was $118,000.2. Receivables (net) at the beginning of 2010 were $88,000.The allowance for doubtful accounts was $4,000 at the end of 2011, $3,800 at the end of 2010, and
Selected financial data of Target and Wal-Mart for a recent year are presented here (in millions).Instructions(a) For each company, compute the following ratios.(1) Current.(2) Receivables turnover.(3) Average collection period.(4) Inventory turnover.(5) Days in inventory.(6) Profit margin.(7)
The comparative statements of Dillon Company are presented below.Additional data:The common stock recently sold at $19.50 per share.The year-end balance in the allowance for doubtful accounts was $3,000 for 2011 and $2,400 for 2010.InstructionsCompute the following ratios for 2011.(a) Current.(b)
Presented below is an incomplete income statement and an incomplete comparative balance sheet of Cotte Corporation. Additional information:1. The receivables turnover for 2011 is 10 times.2. All sales are on account.3. The profit margin for 2011 is 14.5%.4. Return on assets is 22% for 2011.5.
Cheaney Corporation owns a number of cruise ships and a chain of hotels. The hotels, which have not been profitable, were discontinued on September 1, 2010. The 2010 operating results for the company were as follows.Operating revenues $12,850,000Operating expenses 8,700,000Operating income $
The ledger of LaRussa Corporation at December 31, 2010, contains the following summary data.Net sales ......... $1,700,000Cost of goods sold ..... $1,100,000Selling expenses ........ 120,000Administrative expenses .... 150,000Other revenues and gains .... 20,000Other expenses and losses ...
Your parents are considering investing in PepsiCo, common stock. They ask you, as an accounting expert, to make an analysis of the company for them. Fortunately, excerpts from a current annual report of PepsiCo are presented in Appendix A of this textbook. Note that all dollar amounts are in
PepsiCo’s financial statements are presented in Appendix A. Financial statements of The Coca-Cola Company are presented in Appendix B.Instructions(a) Based on the information contained in these financial statements, determine each of the following for each company.(1) The percentage increase
The Management Discussion and Analysis section of an annual report addresses corporate performance for the year, and sometimes uses financial ratios to support its claims.Steps1. From IBM’s Investor Tools, choose Investment Guides.2. Choose Guide to Annual Reports.3. Choose Anatomy of an Annual
As the CPA for Carismo Manufacturing Inc., you have been asked to develop some key ratios from the comparative financial statements. This information is to be used to convince creditors that the company is solvent and will continue as a going concern. The data requested and the computations
General Dynamics develops, produces, and supports innovative, reliable, and highly sophisticated military and commercial products. In July of a recent year, the corporation announced that its Quincy Shipbuilding Division (Quincy) will be closed following the completion of the Maritime
Beth Harlan is the CEO of Lafferty’s Electronics. Harlan is an expert engineer but a novice in accounting. She asks you to explain(1) The bases for comparison in analyzing Lafferty’s financial statements, and(2) The factors affecting quality of earnings.InstructionsWrite a letter to Beth Harlan
Jack McClintock, president of McClintock Industries, wishes to issue a press release to bolster his company’s image and maybe even its stock price, which has been gradually falling. As controller, you have been asked to provide a list of twenty financial ratios along with some other operating
What are the reasons that corporations invest in securities?
(a) What is the cost of an investment in bonds?(b) When is interest on bonds recorded?
Tino Martinez is confused about losses and gains on the sale of debt investments. Explain to Tino(a) How the gain or loss is computed, and(b) The statement presentation of the gains and losses.
To acquire Kinston Corporation stock, R. Neal pays $62,000 in cash, plus $1,200 broker’s fees. What entry should be made for this investment?
(a). When should a long-term investment in common stock be accounted for by the equity method?(b). When is revenue recognized under this method?
Rijo Corporation uses the equity method to account for its ownership of 30% of the common stock of Pippen Packing. During 2010 Pippen reported a net income of $80,000 and declares and pays cash dividends of $10,000. What recognition should Rijo Corporation give to these events?
What constitutes “significant influence” when an investor’s financial interest is below the 50% level?
Distinguish between the cost and equity methods of accounting for investments in stocks.
What are consolidated financial statements?
What are the valuation guidelines for investments at a balance sheet date?
Tina Eddings is the controller of Mendez Inc.At December 31, the company’s investments in trading securities cost $74,000. They have a fair value of $70,000. Indicate how Tina would report these data in the financial statements prepared on December 31.
Using the data in question 13, how would Tina report the data if the investment were long-term and the securities were classified as available-for-sale?
Hashmi Company’s investments in available-for-sale securities at December 31 show total cost of $195,000 and total fair value of $205,000. Prepare the adjusting entry.
Using the data in question 15, prepare the adjusting entry assuming the securities are classified as trading securities.
What purposes are served by reporting Unrealized Gains (Losses)—Equity in the stockholders’ equity section?
What does PepsiCo’s state regarding its accounting policy involving consolidated financial statements?
Coffey Corporation purchased debt investments for $52,000 on January 1, 2010. On July 1, 2010, Coffey received cash interest of $2,340. Journalize the purchase and the receipt of interest. Assume that no interest has been accrued.
On August 1, Wade Company buys 1,000 shares of Morgan common stock for $35,000 cash, plus brokerage fees of $700. On December 1, Wade sells the stock investments for $40,000 in cash. Journalize the purchase and sale of the common stock.
Kayser Company owns 25% of Fort Company. For the current year Fort reports net income of $180,000 and declares and pays a $50,000 cash dividend. Record Kayser’s equity in Fort’s net income and the receipt of dividends from Fort.
The cost of the trading securities of Cepeda Company at December 31, 2010, is $62,000. At December 31, 2010, the fair value of the securities is $59,000. Prepare the adjusting entry to record the securities at fair value.
For the data presented in BE16-4, show the financial statement presentation of the trading securities and related accounts.
Garrett Corporation holds as a long-term investment available-for-sale stock securities costing $72,000. At December 31, 2010, the fair value of the securities is $66,000. Prepare the adjusting entry to record the securities at fair value.
For the data presented in BE16-6, show the financial statement presentation of the available-for-sale securities and related accounts. Assume the available-for-sale securities are noncurrent.
Gowdy Corporation has the following long-term investments:(1) Common stock of Dixen Co. (10% ownership) held as available-for-sale securities, cost $108,000, fair value $115,000.(2) Common stock of Ely Inc. (30% ownership), cost $210,000, equity $270,000. Prepare the investments section of the
Odlaw Corporation had the following transactions relating to debt investments:Jan. 1 Purchased 50, $1,000, 12% Clinton Company bonds for $50,000 plus broker’s fees of $1,500. Interest is payable semiannually on January 1 and July 1July 1 Received semiannual interest from Clinton Company
Presented below are two independent situations:1. Potomac Inc. acquired 10% of the 500,000 shares of common stock of Maryland Corporation at a total cost of $11 per share on June 17, 2010. On September 3, Maryland declared and paid a $160,000 dividend. On December 31, Maryland reported net income
Some of Grand Junction Corporation’s investment securities are classified as trading securities and some are classified as available-for-sale.The cost and market value of each category at December 31, 2010, was as follows.At December 31, 2009, the Market Adjustment—Trading account had a debit
Identify where each of the following items would be reported in the financial statements.1. Loss on sale of investments in stock.2. Unrealized gain on available-for-sale securities.3. Market adjustment—trading.4. Interest earned on investments in bonds.5. Unrealized loss on trading securities.Use
Max Weinberg is studying for an accounting test and has developed the following questions about investments.1. What are three reasons why companies purchase investments in debt or stock securities?2. Why would a corporation have excess cash that it does not need for operations?3. What is the
Foren Corporation had the following transactions pertaining to debt investments. Jan. 1 Purchased 50 8%, $1,000 Choate Co. bonds for $50,000 cash plus brokerage fees of $900. Interest is payable semiannually on July 1 and January 1.July 1 Received semiannual interest on Choate Co. bonds.July 1 Sold
EmmyLou Company purchased 70 Harris Company 12%, 10-year, $1,000 bonds on January 1, 2010, for $73,000. EmmyLou Company also had to pay $500 of broker’s fees. The bonds pay interest semiannually on July 1 and January 1. On January 1, 2011, after receipt of interest, EmmyLou Company sold 40 of the
Dossett Company had the following transactions pertaining to stock investments. Feb. 1 Purchased 600 shares of Goetz common stock (2%) for $6,000 cash, plus brokerage fees of $200.July 1 Received cash dividends of $1 per share on Goetz common stock.Sept. 1 Sold 300 shares of Goetz common stock for
Wyrick Inc. had the following transactions pertaining to investments in common stock.Jan. 1 Purchased 2,500 shares of Murphy Corporation common stock (5%) for $140,000 cash plus $2,100 broker’s commission.July 1 Received a cash dividend of $3 per share.Dec. 1 Sold 500 shares of Murphy Corporation
On February 1, Neil Company purchased 500 shares (2% ownership) of Young Company common stock for $30 per share plus brokerage fees of $400. On March 20, Neil Company sold 100 shares of Young stock for $2,900, less a $50 brokerage fee. Neil received a dividend of $1.00 per share on April 25. On
On January 1 Kwun Corporation purchased a 25% equity in Connors Corporation for $180,000. At December 31 Connors declared and paid a $60,000 cash dividend and reported net income of $200,000.Instructions(a) Journalize the transactions.(b) Determine the amount to be reported as an investment in
Presented below are two independent situations.1. Heath Cosmetics acquired 15% of the 200,000 shares of common stock of Van Fashion at a total cost of $13 per share on March 18, 2010. On June 30,Van declared and paid a $60,000 dividend. On December 31,Van reported net income of $122,000 for the
Ryan Company purchased 70% of the outstanding common stock of Wayne Corporation.Instructions(a) Explain the relationship between Ryan Company and Wayne Corporation.(b) How should Ryan account for its investment in Wayne?(c) Why is the accounting treatment described in (b) useful?
At December 31, 2010, the trading securities for Natoli, Inc. are as follows. Instructions(a) Prepare the adjusting entry at December 31, 2010, to report the securities at fair value.(b) Show the balance sheet and income statement presentation at December 31, 2010, after adjustment to fairvalue.
Data for investments in stock classified as trading securities are presented in E16-10. Assume instead that the investments are classified as available-for-sale securities. They have the same cost and fair value. The securities are considered to be a long-term investment.Instructions(a) Prepare the
McGee Company has the following data at December 31, 2010. The available-for-sale securities are held as a long-term investment.Instructions(a) Prepare the adjusting entries to report each class of securities at fair value.(b) Indicate the statement presentation of each class of securities and
Davison Carecenters Inc. provides financing and capital to the health-care industry, with a particular focus on nursing homes for the elderly. The following selected transactions relate to bonds acquired as an investment by Davison, whose fiscal year ends on December 31.2010Jan. 1 Purchased at face
In January 2010, the management of Noble Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities. During the year, the following transactions occurred.Feb. 1 Purchased 600 shares of Hiens common stock for $31,800, plus brokerage fees of
On December 31, 2010, Ramey Associates owned the following securities, held as a long-term investment. The securities are not held for influence or control of the investee. On December 31, 2010, the total fair value of the securities was equal to its cost. In 2011, the following transactions
Glaser Services acquired 30% of the outstanding common stock of Nickels Company on January 1, 2010, by paying $800,000 for the 45,000 shares. Nickels declared and paid $0.30 per share cash dividends on March 15, June 15, September 15, and December 15, 2010. Nickels reported net income of $320,000
The following securities are in Pascual Company’s portfolio of long-term available for- sale securities at December 31, 2010.Cost1,000 shares of Abel Corporation common stock ... $52,0001,400 share of Frey Corporation stock .......... 84,0001,200 shares of Weiss Corporation preferred stock ...
The following data, presented in alphabetical order, are taken from the records of Urbina Corporation.Accounts payable $ ................... 240,000Accounts receivable ................... 140,000Accumulated depreciation—building ............ 180,000Accumulated depreciation—equipment
Groneman Farms is a grower of hybrid seed corn for Ogle by Genetics Corporation. It has had two exceptionally good years and has elected to invest its excess funds in bonds. The following selected transactions relate to bonds acquired as an investment by Groneman Farms, whose fiscal year ends on
In January 2010, the management of Prasad Company concludes that it has sufficient cash to purchase some short-term investments in debt and stock securities. During the year, the following transactions occurred.Feb. 1 Purchased 500 shares of DET common stock for $30,000, plus brokerage fees of
On December 31, 2010, Sauder Associates owned the following securities, held as long-term investments. On this date, the total fair value of the securities was equal to its cost. The securities are not held for influence or control over the investees. In 2011, the following transactions
Terry’s Concrete acquired 20% of the outstanding common stock of Blakeley, Inc. on January 1, 2010, by paying $1,100,000 for 40,000 shares. Blakeley declared and paid a $0.50 per share cash dividend on June 30 and again on December 31, 2010. Blakeley reported net income of $600,000 for the year.
The following are in Jamison Company’s portfolio of long-term available-for-sale securities at December 31, 2010.Cost700 shares of Adler Corporation common stock .. $35,000900 shares of Lynn Corporation common stock ...42,000800 shares of Swanson Corporation preferred stock . 22,400On December
The following data, presented in alphabetical order, are taken from the records of Nichols Corporation.Accounts payable ................... $ 375,000Accounts receivable ................... 135,000Accumulated depreciation—building ............. 270,000Accumulated depreciation—equipment
Mindy Feldkamp and her two colleagues, Oscar Lopez and Lori Melton, are personal trainers at an upscale health spa/resort in Tampa, Florida. They want to start a health club that specializes in health plans for people in the 50+ age range.The growing population in this age range and strong consumer
After deciding to incorporate, each of the three investors receives 20,000 shares of $2 par common stock on June 12, 2009, in exchange for their co-owned building ($200,000 market value) and $100,000 total cash they contributed to the business. The next decision that Mindy, Oscar, and Lori need to
During the discussion about financing, Lori mentions that one of her clients, Roberto Marino, has approached her about buying a significant interest in the new club. Having an interested investor sways the three to issue equity securities to provide the financing they need. On July 21, 2009, Mr.
Since the club opened, a major concern has been the pool facilities. Although the existing pool is adequate, Mindy, Oscar, and Lori all desire to make LifePath a cutting-edge facility. Until the end of 2010, financing concerns prevented this improvement. However, because there has been steady
Mr. Marino’s purchase of LifePath Fitness was done through his business. The investment has always been accounted for using the cost method on his firm’s books. However, early in 2012 he decided to take his company public. He is preparing an IPO (initial public offering), and he needs to have
The annual report of PepsiCo. is presented in Appendix A.Instructions(a) See Note 1 to the financial statements and indicate what the consolidated financial statements include.(b) Using PepsiCo’s consolidated statement of cash flows, determine how much was spent for capital acquisitions during
PepsiCo’s financial statements are presented in Appendix A. Financial statements of The Coca-Cola Company are presented in Appendix B.Requirements:(a) Based on the information contained in these financial statements, determine each of the following for each company.(1) Net cash used for
Most publicly traded companies are analyzed by numerous analysts. These analysts often don’t agree about a company’s future prospects. In this exercise you will find analysts’ ratings about companies and make comparisons over time and across companies in the same industry. You will also see
At the beginning of the question and answer portion of the annual stockholders’ meeting of Kemper Corporation, stockholder Mike Kerwin asks,“Why did management sell the holdings in UMW Company at a loss when this company has been very profitable during the period its stock was held by
Bunge Corporation has purchased two securities for its portfolio. The first is a stock investment in Longley Corporation, one of its suppliers. Bunge purchased 10% of Longley with the intention of holding it for a number of years, but has no intention of purchasing more shares. The second
Bartlet Financial Services Company holds a large portfolio of debt and stock securities as an investment. The total fair value of the portfolio at December 31, 2010, is greater than total cost. Some securities have increased in value and others have decreased. Deb Faust, the financial vice
The Securities and Exchange Commission (SEC) is the primary regulatory agency of U.S. financial markets. Its job is to ensure that the markets remain fair for all investors. The following SEC sites provide useful information for investors.Instructions(a) Go to the first SEC site and find the
(a) Your roommate says, “Sales taxes are reported as an expense in the income statement.” Do you agree? Explain.(b) Planet Hollywood has cash proceeds from sales of $7,400.This amount includes $400 of sales taxes. Give the entry to record the proceeds.
Baylor University sold 10,000 season football tickets at $80 each for its five-game home schedule. What entries should be made(a) When the tickets were sold, and(b) After each game?
What is a contingent liability? Give an example of a contingent liability that is usually recorded in the accounts.
What is the difference between gross pay and net pay? Which amount should a company record as wages or salaries expense?
Are the federal and state income taxes withheld from employee paychecks a payroll tax expense for the employer? Explain your answer.
Distinguish between the two types of payroll deductions and give examples of each.
What are the primary uses of the employee earnings record?
(a). Identify the three types of employer payroll taxes.(b). How are tax liability accounts and payroll tax expense accounts classified in the financial statements?
You are a newly hired accountant with Batista Company. On your first day, the controller asks you to identify the main internal control objectives related to payroll accounting. How would you respond?
What are the four functions associated with payroll activities?
Identify two additional types of fringe benefits associated with employees’ compensation.
Often during job interviews, the candidate asks the potential employer about the firm’s paid absences policy. What are paid absences? How are they accounted for?
What are two types of post-retirement benefits?
Explain how a 401(k) plan works.
Buffaloe Company has the following obligations at December 31:(a) A note payable for $100,000 due in 2 years,(b) A 10-year mortgage payable of $300,000 payable in ten $30,000 annual payments,(c) Interest payable of $15,000 on the mortgage, and(d) Accounts payable of $60,000. For each obligation,
Hanna Company borrows $80,000 on July 1 from the bank by signing a $80,000, 10%, one-year note payable.(a) Prepare the journal entry to record the proceeds of the note.(b) Prepare the journal entry to record accrued interest at December 31, assuming adjusting entries are made only at the end of the
Leister Auto Supply does not segregate sales and sales taxes at the time of sale. The register total for March 16 is $15,540. All sales are subject to a 5% sales tax. Compute sales taxes payable, and make the entry to record sales taxes payable and sales.
Emporia State University sells 4,000 season basketball tickets at $180 each for its 12-game home schedule. Give the entry to record(a) The sale of the season tickets and(b) The revenue earned by playing the first home game.
Yahoo! Inc.’s 2006 financial statements contain the following selected data (in thousands).Current assets ... $3,449,533Current liabilities . $1,204,052Total assets .... 10,831,834Total liabilities .... 2,265,419Compute(a) Working capital and(b) Current ratio.
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