Questions and Answers of Financial Accounting 6th Edition

Why do companies report a gain or loss on the repurchase of their bonds (assuming the repurchase price is different from bond book value)?
How do debt ratings affect the cost of borrowing for a company?
How would you interpret a company's reported gain or loss on the repurchase of its bonds?
What do the following terms mean?(a) Bonds payable(b) Call provision(c) Face value(d) Coupon,(e) Bond discount(f) Bond premium(g) Amortization of bond premium or discount.
What are the advantages and disadvantages of issuing bonds rather than common stock?
A $3,000,000 issue of 10-year, 9% bonds was sold at 98 plus accrued interest three months after the bonds were dated. What net amount of cash is received?
How does issuing bonds at a premium or discount "adjust the contract rate to the applicable market rate of interest"?
Regardless of whether premium or discount is involved. what generalization can be made about the change in the book value of bonds payable during the period in which they are outstanding?
If the effective interest amortization method is used for bonds payable. how does the periodic interest expense change over the life of the bonds when they are issued(a) At a discount(b) At a premium?
How should premium and discount on bonds payable be presented in the balance sheet?
On April 30, 2019. one year before maturity. Weber Company retired $200.000 of 9% bonds payable at 101. The book value of the bonds on April 30 was $197,600. Bond interest was last paid on April 30 ,
Brownlee Company borrowed money by issuing a 20-year mortgage note payable. The note will be repaid in equal monthly installments. The interest expense component of each payment decreases with each
On November 15, 2018, Shields Company purchased inventory costing $6,200 on credit. The credit terms were 2/10, n/30.a. Assume that Shields Company paid the invoice on November 23, 2018. Prepare
Schrand Corporation purchases materials from a supplier that offers credit terms of 2/ I 5, n/60. It purchased $12,500 of merchandise inventory from that supplier on January20, 2019.a. Assume that
Huddart Company gave a creditor a 90-day. 8% note payable for $7.200 on December 16.a. Prepare the journal entry to record the year-end December 31st accounting adjustment Huddart must make. (Round
For each of the following situations, indicate the liability amount. if any, which is reported on the balance sheet of Hirst. Inc., at December 31, 2018.a. Hirst owes $110,000 at year-end 2018 for
In January 2017, Microsoft Corporation issued $17 billion of bonds in seven parts, with maturities ranging from 2020 to 2057. The bond issue was rated Aaa by Moody's. Two of the bond offerings are
On January 1, 2019, two years before maturity, Easton Company retires $400,000 of its 8.5% bonds payable at the current market price of 102 (102% of the bond face amount, or $400,000 x 1.02 =
In its 2017 balance sheet, Pfizer, Inc., reports a value of $3,546 million as current portion of long term debt. In addition, Pfizer reports the following maturity schedule for its remaining $32,783
Indicate the proper financial statement classification (balance sheet or income statement) for each of the following accounts:a. Gain on Bond Retirementb. Discount on Bonds Payablec. Mortgage Notes
Cencosud SA is a leading Latin American retailer, with approximately US$4.12 billion in shortand long-term debt outstanding as of December 31, 2017. ln its 20-F filing with the Securities and
Holthausen Corporation issued $400,000 of 11 %, 20-year bonds at 108 on January 1, 2013. Interest is payable semiannually on June 30 and December31. Through January1, 2019, Holthausen amortized
Dechow, Inc., issued $250,000 of 8%, 15-year bonds at 96 on July1, 2012. Interest is payable semiannually on December 31 and June 30. Through June 30, 2019, Dechow amortized $3,186 of the bond
Compute any interest accrued for each of the following notes payable owed by Penman, Inc., as of December 31, 2018 (use a 365-day year): Lender Issuance Date Principal Interest Rate (%) Term Nissim.
General Mills, Inc., reports the following information in cash flow statement for the year ended May 27,2018:a. General Mills reported net income of $2,163,0 million in the year ended May 2018. What
Bushman, Inc., issues $500,000 of 9% bonds that pay interest semiannually and mature in 10 years. Compute the bond issue price assuming that the bonds' market rate is:a. 8% per year compounded
Baiman, Inc., issues $500,000 of zero-coupon bonds that mature in 10 years. Compute the bond issue price assuming that the bonds' market rate is:a. 8% per year compounded semiannually.b. 10% per year
Petroni Company engages in the following sequence of transactions every month:1. Purchases $300 of inventory on credit.2. Sells $300 of inventory for $420 on credit.3. Pays other operating expenses
On December 31, 2018, Kaplan, Inc., issues $500,000 of 9% bonds that pay interest semiannually and mature in 10 years (December 31, 2028).a. Using the Excel PV worksheet function, compute the issue
Waymire Company sells a motor that carries a 60-day unconditional warranty against product failure. Waymire estimates that between the sale and lapse of the product warranty, 2% of the 69,000 units
On December 31, 2018, Thomas, Inc., borrowed $700,000 on a 12%, 15-year mortgage note pay-able. The note is to be repaid in equal semiannual installments of $50,854 (payable on June 30 and December
Indicate the proper financial statement classification for each of the following accounts:a. Gain on Bond Retirement (material amount)b. Discount on Bonds Payablec. Mortgage Notes Payabled. Bonds
Demski Company pays its employees on the 1st and 15th of each month. It is March 31 and Demski is preparing financial statements for this quarter. Its employees have earned $25,000 since the 15th of
On January 1, 2019, Hutton Corp. issued $300,000 of 15-year, 11 % bonds payable for $377,814, yielding an effective interest rate of 8%. Interest is payable semiannually on June 30 and December 31.a.
The following independent situations represent various types of liabilities. Analyze each situation and indicate which of the following is the proper accounting treatment for each company: (1) record
D'Souza, Inc., issues $900,000 of 11 % bonds that pay interest semiannually and mature in seven years. Assume that the market interest (yield) rate is 12% per year compounded semiannually. Compute
Lundholm, Inc., which reports financial statements each December 31, is authorized to issued $500,000 of9%, 15-year bonds dated May 1, 2018, with interest payments on October 31 and April 30. Assume
On January 1, 2019, McKeown, Inc., issued $250,000 of 8%, 9-year bonds for $220,776, yielding market (yield) rate of 10%. Semiannual interest is payable on June 30 and December 31 of each year.a.
On January 1, 2019, Shields, Inc., issued $800,000 of 9%, 20-year bonds for $879,172, yielding market (yield) rate of 8%. Semiannual interest is payable on June 30 and December 31 of each year.a.
Following is a price quote for $200 million of 6.55% coupon bonds issued by Deere & Company that mature in October 2028:This quote indicates that, on this day, Deere's bonds have a market price
The adjusted trial balance for the Hass Corporation at the end of 2018 contains the following account:Prepare the long-term liabilities section of the balance sheet. Indicate the proper balance:
On December 31, Dehning, Inc .. borrowed $500,000 on an 8%. 10-year mortgage note payable. The note is to be repaid in equal quarterly installment???? of $18,278 (beginning March 31).a. Prepare
The following information was extracted from the 10-K reports for the years ended in 2018 for Hewlett-Packard Enterprise and Cisco Systems, Inc.REQUIRED:a. Compute the amount of warranty costs
CVS Health Corp. discloses the following footnote in its 10-K relating to its debt: Following is a summary of the Company's borrowings as reported in note 5 to the firm's 10-K.CVS also discloses that
BP operates off-shore oil drilling platforms including rigs in the Gulf of Mexico. In April 2010, explosions and a fire on the Deepwater Horizon rig led to the death of 11 crew members and a
Petroni, Inc., which closes its books on December 31, is authorized to issue $800,000 of 9%, 20- year bonds dated March 1, 2019, with interest payments on September 1 and March 1.REQUIRED:Assuming
On April 30, 2019, Cheng, Inc., issued $250,000 of 6%, 15-year bonds for $206,770, yielding an effective interest rate of 8%. Semiannual interest is payable on October 31 and April 30 each year. The
On December 31, 2018, Wasley Corporation borrowed $500,000 on a 10%, 10-year mortgage note payable. The note is to be repaid with equal semiannual installments, beginning June 30, 2019.REQUIREDa.
On December 31, 2018, Watts Corporation borrowed $950,000 on an 8%, 5-year mortgage note payable. The note is to be repaid with equal quarterly installments, beginning March 31, 2019.REQUIRED:a.
Comcast Corporation's 2017 income statement and partial balance sheet (liabilities and equity, only) are presented below. In addition, footnote IO pertaining to Comcast's long-term debt obligations
Foster Corporation is in the third quarter of the current year. and projections are that net income will be down about $600.000 from the previous year. Foster's return on assets is also projected to
On January 1, 2019. Trueman Corp. issued $600,000 of 20-year. 11 % bonds for $554.860, yielding a market (yield) rate of 12%. Interest is payable semiannually on June 30 and December 31.a. Confirm
Following is the balance sheet for 3M Company. Prepare common-size balance sheets for 2017 and 2016. 3M COMPANY AND SUBSIDIARIES December 31 ($ millions) 2017 2016 Assets Cash, cash equivalents and
Following is the income statement for 3M Company. Prepare common-size income statements for 2017 and 2016. 3M COMPANY AND SUBSIDIARIES Year ended December 31 ($ millions) 2017 2016 Net sales. $31,657
Refer to the balance sheet and income statement information for 3M Company, presented in M5-19 and M5-20.a. Compute 3M's 2017 return on assets (ROA). Use 35% as the effective tax rate.b. Disaggregate
Selected balance sheet and income statement information from Urban Outfitters, Inc. and TJX Companies, clothing retailers in the high-end and value-priced segments, respectively, follows.a. Compute
Selected data from recent financial statements of The Procter & Gamble Company, CVS Health Corporation, and Valero Energy Corporation are presented below:a. Compute the asset turnover (AT) ratio
Selected balance sheet and income statement information from Verizon Communications, Inc .. follows.a. Compute the current ratio for each year and discuss any change in liquidity. How does Verizon 's
Selected balance sheet and income statement information for McDonald's Corporation and Yum! Brands, Inc., follows.a. Compute the return on assets (ROA) for each company. Use the 35% statutory tax
Basic income statement and balance sheet information is given below for six different cases. For each case, the assets are financed with a mix of non-interest-bearing liabilities, 10% interest
Selected balance sheet and income statement information for the drug retailers CVS Health Corporation and Walgreens Boots Alliance follows. Assume an incremental tax rate of 35%.a. Compute the 2017
Selected fiscal year balance sheet and income statement information for the computer chip maker, Intel Corporation, follows($ millions).a. Calculate lntel's return on equity (ROE) for fiscal years
The following tables provide information from the recent annual reports of HD Rinker, AG. a. Calculate HD Rinker's return on equity (ROE) for fiscal years 2019, 2018, and 2017.b. Calculate HD
Selected balance sheet and income statement information from the software company, Intuit Inc., follows ($ millions).a. Compute the 2017 return on equity (ROE), return on assets (ROA), and return on
Selected balance sheet and income statement information from Office Depot, Inc., follows ($ millions).a. Compute the 2017 return on equity (ROE), return on assets (ROA), and return on financial
Selected balance sheet and income statement information from Siemens, AG, for 2015 through 2017 follows(€ millions).a. Compute the current ratio for each year and discuss any trend in liquidity.
Income statements for The Gap, Inc., follow, along with selected balance sheet information ($ millions).a. Compute the return on equity (ROE), return on assets (ROA), and return on financial leverage
Refer to the income statements for The Gap, Inc., presented in ES-34.a. Prepare common-size income statements for fiscal years 2017 (ending February 3, 2018) and 2016 (ending January 28, 2017).b.
Balance sheets and income statements for Nike, Inc., and Adidas Group follow. Refer to these financial statements to answer the requirements.REQUIRED:a. Compute return on equity (ROE), return on
Refer to the financial statements of Home Depot and Lowe's presented in PS-38.REQUIRED:a. Compute each company's current ratio and quick ratio for each year. Comment on any changes that you
Refer to the financial statements of Nike and Adidas presented in PS-36.REQUIRED:a. Compute each company's current ratio and quick ratio for each year. Comment on any changes that you observe.b.
Balance sheets and income statements for The Home Depot, Inc., and Lowe's Companies, Inc., follow. Refer to these financial statements to answer the requirements.REQUIRED:a. Compute return on equity
Balance sheets and income statements for United Parcel Service, Inc., (UPS) follow. Refer to these financial statements to answer the following requirements.REQUIRED:a. Compute ROA and disaggregate
Refer to the financial statements of Home Depot and Lowe's presented in PS-38.REQUIREDa. Compute each company's net operating profit after taxes (NOPAT) for 2017 and net operating assets (NOA) for
Refer to the financial information of United Parcel Service in PS-41 to answer the following requirements.REQUIREDa. Compute its current ratio and quick ratio for 2017 and 2016. Comment on any
Refer to the financial statements of United Parcel Service in PS-41 to answer the following requirements.REQUIRED:a. Compute net operating profit after taxes (NOPAT) for 2017 and net operating assets
Selected income statement data for Abbott Laboratories, Bristol-Myers Squibb Company. Johnson & Johnson. GlaxoSmithKline pie. and Pfizer, Inc. is presented in the following table:REQUIRED:a.
Refer to the financial statements of United Parcel Service in PS-41 to answer the following requirements. The following assumptions should be useful: UPS's sales forecast for 2018 is $70,000
Selected financial statement data for Best Buy Co., Inc., The Kroger Co .. Nordstrom, Inc., Office Depot, Inc., and Walgreens Boots Alliance, Inc. is presented in the following table:REQUIREDa.
What is the process that guides firms in the recognition of revenue? What does each of the steps mean? How does this process work for a company like Abercrombie & Fitch Co., a clothing retailer?
Identify the two typical categories of restructuring costs and their effects on the balance sheet and the income statement.
What is the concept of non-GAAP income or proforma income and why has this income measure been criticized?
Explain how management can shift income from one period into another by its estimation of uncollectible accounts.
Increasing net operating asset turnover requires some combination of increasing sales and/or decreasing net operating assets. For the latter, many companies consider ways to reduce their investment
Companies are aware that analysts focus on profitability in evaluating financial performance. Managers have historically utilized a number of methods to improve reported profitability that are
Why are discontinued operations reported separately from continuing operations in the income statement?
Explain the concept of a big bath and why restructuring costs are often identified with this event.
Why might companies want to manage earnings? Describe some of the tactics that some companies use to manage earnings.
Why does GAAP allow management to make estimates of amounts that are included in financial statements? Does this improve the usefulness of financial statements? Explain.
How might earnings forecasts that are published by financial analysts encourage companies to manage earnings?
During an examination of Wallace Company's financial statements, you notice that the allowance for uncollectible accounts has decreased as a percentage of accounts receivable. What are the possible
Under what circumstances would it be correct to say that a company would be better off with more uncollectible accounts?
Estimating the bad debts expense by aging accounts receivable generally results in smaller errors than the percentage of credit sales approach. Can you explain why?
Bartov Corporation agreed to build a warehouse for $2,500,000. Expected (and actual) costs for the warehouse follow: 2019, $400,000; 2020, $1,000,000; and 2021, $500,000. The company completed the
Identify and explain when each of the following companies should recognize revenue.a. The GAP Inc.: The GAP is a retailer of clothing items for all ages.b. Merck & Company Inc.: Merck engages in
The Unlimited Company offers an unconditional return policy for its retail clothing business. Its normally expects 2% of sales at retail selling prices to be returned at some point prior to the
Halsey Building Company signed a contract to build an office building for $40,000,000. The scheduled construction costs follow.The building should be completed in 2021.For each year, compute the
A.J. Smith Electronics is a retail consumer electronics company that also sells extended warranty contracts for many of the products that it carries. The extended warranty provides coverage for three
Mohan Company estimate its uncollectible accounts by aging its accounts receivable and applying percentages to various and categories???? of accounts. Mohan computes a total of $2,100 in estimated
At a recent board of directors meeting of Ascot. Inc., one of the directors expressed concern over the allowance for uncollectible accounts appearing in the company's balance sheet. "I don't

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