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Financial Accounting 7th Edition LibbyShort - Solutions

Computing Outstanding Checks and Deposits in Transit and Preparing a Bank Reconciliation and Journal EntriesThe December 31, 2011, bank statement for Rivas Company and the December 2011 ledger accounts for cash follow.The November 2011 bank reconciliation showed the following: correct cash balance
Finding Financial InformationRefer to the financial statements of American Eagle Outfitters given in Appendix B at the end of this book.Required:1. What does the company include in its category of cash and cash equivalents? How close do you think the disclosed amount is to actual fair market
Finding Financial InformationRefer to the financial statements of Urban Outfitters given in Appendix C at the end of this book.Required:1. How much cash and cash equivalents does the company report at the end of the current year?2. What was the change in accounts receivable and how did it affect
Comparing Companies within an IndustryRefer to the financial statements of American Eagle Outfitters (Appendix B) and Urban Outfitters (Appendix C) and the Industry Ratio Report (Appendix D) at the end of this book.Required:1. Compute the gross profit percentage for both companies for the current
Making a Decision as a Manager: Choosing among Alternative Recognition PointsWhen companies involved in long-term construction projects can estimate the percentage of work completed and the total expected costs with reasonable accuracy, GAAP allows them to recognize revenues based on the incurred
Evaluating an Ethical Dilemma: Management Incentives, Revenue Recognition, and Sales with the Right of Return Symbol Technologies, Inc., was a fast-growing maker of bar-code scanners. According to the federal charges, Tomo Razmilovic, the CEO at Symbol, was obsessed with meeting the stock
Evaluating Internal Control Cripple Creek Company has one trusted employee who, as the owner said, “handles all of the bookkeeping and paperwork for the company.” This employee is responsible for counting, verifying, and recording cash receipts and payments, making the weekly bank deposit,
Define the term corporation and identify the primary advantages of this form of business organization.
What is the charter of a corporation?
Explain each of the following terms: (a) Authorized capital stock, (b) Issued capital stock, and(c) Outstanding capital stock.
Differentiate between common stock and preferred stock.
Explain the distinction between par value and no-par value capital stock.
What are the usual characteristics of preferred stock?
What are the two basic sources of stockholders’ equity? Explain each.
Owners’ equity is accounted for by source. What does source mean?
Define treasury stock. Why do corporations acquire treasury stock?
How is treasury stock reported on the balance sheet? How is the “gain or loss” on treasury stock that has been sold reported on the financial statements?
What are the two basic requirements to support the declaration of a cash dividend? What are the effects of a cash dividend on assets and stockholders’ equity?
Differentiate between cumulative and noncumulative preferred stock.
Define stock dividend. How does a stock dividend differ from a cash dividend?
What are the primary reasons for issuing a stock dividend?
Identify and explain the three important dates with respect to dividends.
Define retained earnings. What are the primary components of retained earnings at the end of each period?
(Multiple Choice)1. Katz Corporation has issued 400,000 shares of common stock and holds 20,000 shares in treasury. The charter authorized the issuance of 500,000 shares. The company has declared and paid a dividend of $1 per share. What is the total amount of the dividend?a. $400,000 b. $20,000 c.
Name three rights of common stockholders. Which of these is most important in your opinion? Why?
The balance sheet for Ronlad Corporation reported 168,000 shares outstanding, 268,000 shares authorized, and 10,000 shares in treasury stock. Compute the maximum number of new shares that the company could issue.
To expand operations, Aragon Consulting issued 170,000 shares of previously unissued stock with a par value of $1. The selling price for the stock was $21 per share. Record the sale of this stock. Would your answer be different if the par value was $2 per share? If so, record the sale of stock
Your parents have just retired and have asked you for some financial advice. They have decided to invest $100,000 in a company very similar to Kroger. The company has issued both common and preferred stock. What factors would you consider in giving them advice? Which type of stock would you
Carbide Corporation purchased 20,000 shares of its own stock for $45 per share. The next year, the company sold 5,000 shares for $50 per share and the following year, it sold 10,000 shares for $37 per share.Determine the impact (increase, decrease, or no change) of each of these transactions on the
Cole Company has 288,000 shares of common stock authorized, 260,000 shares issued, and 60,000 shares of treasury stock. The company’s board of directors has declared a dividend of 65 cents per share. What is the total amount of the dividend that will be paid?
On April 15, 2011, the board of directors for Auction.com declared a cash dividend of 65 cents per share payable to stockholders of record on May 20. The dividends will be paid on June 14. The company has 100,000 shares of stock outstanding. Prepare any necessary journal entries for each date.
Lipscomb, Inc., has 200,000 shares of cumulative preferred stock outstanding. The preferred stock pays dividends in the amount of $2 per share but because of cash flow problems, the company did not pay any dividends last year. The board of directors plans to pay dividends in the amount of $1.4
Reliable Tools, Inc., announced a 100 percent stock dividend. Determine the impact (increase, decrease, no change) of this dividend on the following:1. Total assets2. Total liabilities3. Common stock4. Total stockholders’ equity5. Market value per share of common stockAssume that the company
University Food Systems, Inc., has issued a 40 percent stock dividend. The company has 752,000 shares authorized and 200,000 shares outstanding. The par value of the stock is $10 per share, and the market value is $130 per share. Record the payment of this stock dividend.
The annual report for Philip Morris Companies, Inc., disclosed that 4 billion shares of common stock have been authorized. At the end of last year, 2,805,961,317 shares had been issued and the number of shares in treasury stock was 380,474,028. During the current year, no additional shares were
The charter of Vista West Corporation specifies that it may issue 200,000 shares of common stock. Since the company was incorporated, it has sold a total of 160,000 shares to the public but bought back a total of 20,000. The par value of the stock is $3 and the stock was sold at an average price
Tandy, Incorporated, was issued a charter on January 15, 2011, that authorized the following capital stock:Common stock, no-par, 103,000 sharesPreferred stock, 9 percent, par value $8 per share, 4,000 sharesThe board of directors established a stated value on the no-par common stock of $10 per
The financial statements for Highland Publications Corporation included the following selected information:Common stock $1,600,000Retained earnings $900,000Net income $1,000,000Shares issued 90,000Shares outstanding 80,000Dividends declared and paid $800,000The
Tarrant Corporation was organized in 2011 to operate a financial consulting business. The charter authorized the following capital stock: common stock, par value $10 per share, 11,500 shares. During the first year, the following selected transactions were completed:a. Sold and issued 5,600 shares
The stockholders' equity section on the balance sheet of Dillard's, a popular department store, is shown below. The company reported a net loss of $241,065,000 and declared and paid dividends of $11,898,000 in 2009.Required:Complete the following statements and show your computations.1. Common
Williamson Corporation was organized in 2011 to operate a tax preparation business. The charter authorized the following capital stock: common stock, par value $2 per share, 80,000 shares. During the first year, the following selected transactions were completed:a. Sold and issued 50,000 shares of
Ruth’s Chris Steakhouse is the largest upscale steakhouse company in the United States, based on total company- and franchisee-owned restaurants. The company’s menu features a broad selection of high quality USDA prime grade steaks and other premium offerings. Currently, there are 100 Ruth’s
Quick Fix-it Corporation was organized in January 2011 to operate several car repair businesses in a large metropolitan area. The charter issued by the state authorized the following capital stock:Common stock, $10 par value, 98,000 sharesPreferred stock, $50 par value, 8 percent, 59,000
On-line Learning Corporation obtained a charter at the start of 2011 that authorized 52,000 shares of nopar common stock and 23,000 shares of preferred stock, par value $10. The corporation was organized by four individuals who purchased 16,000 shares of the common stock. The remaining shares were
The stockholders’ equity section on the December 31, 2011, balance sheet of American Corporation follows:Stockholders’ Equity___________________________________________________________Contributed capitalPreferred stock (par $20; authorized 10,000 shares, ? issued,of which 500 shares are held
Procter & Gamble is a $77 billion company that sells products that are part of most of our daily lives, including Mr. Clean, Cheer, Crest, Vicks, Scope, Pringles, Folgers, Vidal Sassoon, Zest, and Charmin. The annual report for P&G contained the following information:a. Retained earnings at
The business section of The New York Times recently contained the following article:Freeport-McMoRan Copper & Gold Inc., one of the world’s largest copper producers, said yesterday that it would repurchase up to five million shares of its common stock in the open market and through private
The following account balances were selected from the records of TEAC Corporation at December 31, 2011, after all adjusting entries were completed:Common stock (par $20; authorized 100,000 shares, issued34,000 shares, of which 2,000 shares are held as treasury stock) $680,000Capital in excess of
During 2011 the following selected transactions affecting stockholders’ equity occurred for Orlando Corporation:a. Apr. 1 Purchased in the market 200 shares of the company’s own common stock at $20 per share.b. Jun. 14 Sold 40 shares of treasury stock for $25 cash per share.c. Sept. 1 Sold 30
During 2011 the following selected transactions affecting stockholders’ equity occurred for TARP Corporation:a. Feb. 1 Purchased in the open market 160 shares of the company’s own common stock at $20 cash per share.b. Jul. 15 Sold 80 of the shares purchased on February 1 for $21 cash per
Peters and Associates is a small manufacturer of electronic connections for local area networks. Consider three independent situations.Case 1: Peters increases its cash dividends by 50 percent, but no other changes occur in the company’s operations.Case 2: The company’s income and cash flows
The records of Hollywood Company reflected the following balances in the stockholders’ equity accounts at December 31, 2010:Common stock, par $12 per share, 30,000 shares outstandingPreferred stock, 10 percent, par $10 per share, 5,000 shares outstandingRetained earnings, $216,000On September 1,
Service Corporation has the following capital stock outstanding at the end of 2011:Preferred stock, 6 percent, par $15, outstanding shares, 8,000Common stock, par $8, outstanding shares, 30,000On October 1, 2011, the board of directors declared dividends as follows:Preferred stock: Full cash
A recent annual report for Sears, Roebuck and Co. disclosed that the company paid preferred dividends in the amount of $119.9 million. It declared and paid dividends on common stock in the amount of $2 per share. During the year, Sears had 1,000,000,000 shares of common authorized; 387,514,300
Duke Energy is a utility company that provides gas and electric service in North Carolina, South Carolina, Ohio, Kentucky, and Indiana. The company’s dividend yield is 6.6 percent. Starbucks, a wellknown retailer of coffee products, does not pay dividends, resulting in a dividend yield of 0.0
At the beginning of the year, the stockholders’ equity section of the balance sheet of Solutions Corporation reflected the following:Common stock (par $12; authorized 65,000 shares, outstanding 30,000 shares) $360,000Capital in excess of par 120,000Retained earnings 736,000On February 1, 2011,
Two billion times a day, Proctor & Gamble (P&G) brands touch the lives of people around the world. The company has one of the largest and strongest portfolios of trusted, quality brands, including Pampers, Tide, Bounty, Pringles, Folgers, Charmin, Downy, Crest, and Clairol Nice ’n Easy.
On July 1, 2011, Davidson Corporation had the following capital structure:Common stock (par $3) ..... $600,000Capital in excess of par ...... 900,000Retained earnings ......... 700,000Treasury stock ............ ˆ’0ˆ’Required:Complete the following comparative tabulation based
GameStop issued the following press release when the company’s stock was selling for $27 per share: GRAPEVINE, Texas—(BUSINESS WIRE)—Feb. 12, 2007—GameStop Corp. (NYSE: GME), the world’s largest video game and entertainment software retailer, today announced that its Board of Directors
Weil Corporation has 80,000 shares of common stock (par value $8) outstanding.Required:Complete the following comparative tabulation based on two independent cases:Case 1: The board of directors declared and issued a 40 percent stock dividend when the stock was selling at $15 per share. The
Ford Motor Company is an internationally known manufacturer of automobiles and trucks. The company recently lost over $12 billion in a single year of operations. Despite that staggering loss, the company issued the following press release:DEARBORN, Mich., July 13 /PRNewswire-FirstCall/—The Board
Archon Corporation operates the Pioneer Hotel & Gambling Hall in Nevada. In addition, the Company owns real estate on Las Vegas Boulevard South (the “Strip”) in Las Vegas, Nevada, and investment properties in Dorchester, Massachusetts, and Gaithersburg, Maryland. An investor found the following
At December 31, 2011, the records of NCIS Corporation provided the following selected and incomplete data:Common stock (par $10; no changes during the year).Shares authorized, 200,000.Shares issued, _____?____; issue price $17 per share; cash collected in full, $2,125,000.Shares held as treasury
Witt Corporation received its charter during January 2011. The charter authorized the following capital stock:Preferred stock: 10 percent, par $10, authorized 21,000 sharesCommon stock: par $8, authorized 50,000 sharesDuring 2011, the following transactions occurred in the order given:a. Issued a
King Corporation began operations in January 2011. The charter authorized the following capital stock:Preferred stock: 10 percent, $10 par, authorized 40,000 sharesCommon stock: $5 par, authorized 85,000 sharesDuring 2011, the following transactions occurred in the order given:a. Issued 22,000
The following press release was issued by Haynes International:NEW YORK, March 19 (Reuters)—Haynes International Inc., a producer of high-performance nickel and cobalt-based alloys, on Monday raised $136.5 million with a U.S. initial public offering that was priced above the forecast range.The
United Resources Company obtained a charter from the state in January 2011, which authorized 200,000 shares of common stock, $1 par value. During the first year, the company earned $475,000 and the following selected transactions occurred in the order given:a. Sold 100,000 shares of the common
Tim Hortons restaurants operate in a variety of formats. A standard Tim Hortons restaurant is a freestanding building typically ranging in size from 1,400 to 3,090 square feet with a dining room and single or double drive-thru window. The Company also has nonstandard restaurants designed to fit
1. Compare a stock dividend with a cash dividend.2. Compare a large stock dividend with a small stock dividend.3. Describe the impact of the sale of treasury stock for more than cost on the income statement and the statement of cash flows.4. Explain why a company might purchase treasury stock.
RadioShack Corporation primarily engages in the retail sale of consumer electronics goods and services through 4,467 company-operated stores under the RadioShack brand, located throughout the United States, as well as in Puerto Rico and the U.S. Virgin Islands. These stores are located in major
Chicago Company had the following stock outstanding and retained earnings at December 31, 2011:Common stock (par $8; outstanding, 35,000 shares) $280,000Preferred stock, 10% (par $15; outstanding, 8,000 shares) 120,000Retained earnings 281,000The board of directors is considering the distribution
Heather and Scott, two young financial analysts, were reviewing financial statements for Dell, one of the world’s largest manufacturers of personal computers. Scott noted that the company did not report any dividends in the Financing Activity section of the statement of cash flows and said, “I
Uno Company has outstanding 52,000 shares of $10 par value common stock and 25,000 shares of $20 par value preferred stock (8 percent). On December 1, 2011, the board of directors voted an 8 percent cash dividend on the preferred stock and a 30 percent stock dividend on the common stock. At the
Procter & Gamble is a well-known consumer products company that owns a variety of popular brands. A recent news article contained the following information:CINCINNATI, March 9 /PRNewswire-FirstCall/—The Procter & Gamble Company (NYSE: PG) today said that earnings per share for the January
Assume for each of the following independent cases that the annual accounting period ends on December 31, 2011, and that the revenue and expense accounts at that date reflect a loss of $20,000.Case A: Assume that the company is a sole proprietorship owned by Proprietor A. Prior to the closing
At December 31, 2011, the records of Duo Corporation provided the following selected and incomplete data:Common stock (par $1; no changes during the year).Shares authorized, 5,000,000.Shares issued, _____?____ ; issue price $80 per share.Shares held as treasury stock, 100,000 shares, cost $60 per
Granderson Company was granted a charter that authorized the following capital stock:Common stock: 100,000 shares, par value per share is $40Preferred stock: 8 percent; par $5; 20,000 sharesDuring the first year, 2011, the following selected transactions occurred in the order given:a. Sold 30,000
Luther Company obtained a charter from the state in January 2011 which authorized 1,000,000 shares of common stock, $5 par value. During the first year, the company earned $429,000, and the following selected transactions occurred in the order given:a. Sold 700,000 shares of the common stock at $54
Whole Foods Market, Inc., is the world€™s leading natural and organic foods supermarket. The company is based in Austin, Texas, and conducts business through various wholly-owned subsidiaries. The following information was contained in the company€™s balance sheet (amounts in
Carlton Company had the following stock outstanding and retained earnings at December 31, 2011:Common stock (par $1; outstanding, 500,000 shares) $500,000Preferred stock, 8% (par $10; outstanding, 21,000 shares) 210,000Retained earnings 900,000The board of directors is considering the distribution
Finding Financial InformationRefer to the financial statements of American Eagle Outfitters given in Appendix B at the end of this book.Required:1. Does the company have any treasury stock? If so, how much?2. Does the company pay dividends? If so, how much per share?3. Did the company buy or sell
Finding Financial Information Refer to the financial statements of Urban Outfitters given in Appendix C at the end of this book.Required:1. How many shares of common stock are authorized at the end of the current year? How many shares are issued and outstanding at the end of the current year?2.
Refer to the financial statements of American Eagle (Appendix B) and Urban Outfitters (Appendix C).Required:1. A few years ago, American Eagle Outfitters split its stock. Describe the impact that the split would have on the market value of the stock compared to a company that did not split its
A recent annual report for Halliburton Company contained the following information (in millions of dollars):In the current year, Halliburton declared and paid cash dividends of $1 per share. What would be the total amount of dividends declared and paid if they had been based on the amount of stock
You are a member of the board of directors of a large company that has been in business for more than 100 years. The company is proud of the fact that it has paid dividends every year it has been in business. Because of this stability, many retired people have invested large portions of their
You are the president of a very successful Internet company that has had a remarkably profitable year. You have determined that the company has more than $10 million in cash generated by operating activities not needed in the business. You are thinking about paying it out to stockholders as a
Complete the following requirements for each independent case.Case A: The charter for Rogers, Incorporated, authorized the following capital stock:Common stock, par $10, 103,000 sharesPreferred stock, 9 percent, par value $8 per share, 4,000 sharesThe company sold 40,000 shares of common stock and
What does the debt-to-equity ratio reflect?
What are market tests?
Identify two factors that limit the effectiveness of ratio analysis.
(Multiple choice)1. A company has total assets of $500,000 and noncurrent assets of $400,000. Current liabilities are $40,000. What is the current ratio?a. 12.5b. 10.0c. 2.5d. Cannot be determined without additional information.2. Which of the following would not change the receivables turnover
A large retailer reported revenue of $1,665,000. The company’s gross profit percentage was 44 percent. What amount of cost of goods sold did the company report?
A consumer products company reported a 5.4 percent increase in sales from 2011 to 2012. Sales in 2011 were $29,600. In 2012, the company reported cost of goods sold in the amount of $9,107. What was the gross profit percentage in 2012?
Compute the return on equity ratio for 2012 given the followingdata:
Compute the financial leverage percentage for 2012 given the followingdata:
A manufacturer reported an inventory turnover ratio of 8.6 during 2011. During 2012, management introduced a new inventory control system that was expected to reduce average inventory levels by 25 percent without affecting sales volume. Given these circumstances, would you expect the inventory
Tiana Company reported total assets of $1,400,000 and noncurrent assets of $480,000. The company also reported a current ratio of 3.5. What amount of current liabilities did the company report?
Ramesh Company has prepared draft financial results now being reviewed by the accountants. You notice that the financial leverage percentage is negative. You also note that the current ratio is 2.4 and the quick ratio is 3.7. You recognize that these financial relationships are unusual. Does either
In 2011, Pringle Company reported earnings per share of $9.50 when its stock was selling for $228. In 2012, its earnings increased by 13 percent. If all other relationships remain constant, what is the price of the stock?
An Internet company earned $6.50 per share and paid dividends of $3.50 per share. The company reported a dividend yield of 5 percent. What was the price of the stock?

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