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Financial Accounting 11th Edition Robert Libby, Patricia Libby, Frank Hodge - Solutions

On June 1, Gamma Company acquired all of the net assets of Pi Company for $140,000 cash. The two companies merged, with Gamma Company surviving. On the date of acquisition, Pi Company’s balance sheet included the following:On the date of acquisition, the inventory had a fair value of $12,000 and
In your web browser, search for the investor relations page of a public company you are interested in (e.g., Papa Johns investor relations). Select SEC Filings or Annual Report or Financials to obtain the 10-K for the most recent year available.*Required:1. Go to the Balance Sheets and/or the Notes
Bott Company acquired 500 shares of Barus Company at $53 per share as a long-term investment. This represents 40 percent of the outstanding voting shares of Barus. During the year, Barus paid stockholders $3 per share in dividends. At year-end, Barus reported net income of $60,000. Barus’s stock
Electronic Arts Inc. “is a global leader in digital interactive entertainment. We develop, market, publish and deliver games, content and services that can be played and watched on game consoles, PCs, mobile phones and tablets.” Popular brands include Battlefield, The Sims, Madden NFL, and Star
Jordan Company purchased 100 percent of the outstanding voting shares of Phil Corporation in the open market for $230,000 cash, and Phil was merged into Jordan Company. On the date of acquisition, the fair value of Phil Corporation’s property and equipment was $300,000 and the fair value of its
Using the following categories, indicate the effects of the transactions listed in MA-8. Use + for increase and − for decrease and indicate the amounts.Data from in MA-8On January 1 of the current year, PurchaseAgent.com acquired 35 percent (800,000 shares) of the common stock of E-Transaction
Cisco Systems, Inc., is a global conglomerate that develops, manufactures, and sells networking hardware (e.g., switches, routers, and cybersecurity), software, telecommunications equipment, and other high technology services and products. Its balance sheet recently reported goodwill in the amount
Financial data for Safety Hire as of 30 June 2015 are:RequiredA. Prepare an income statement for the month of June and a balance sheet in account format for Safety Hire as at 30 June 2015.B. Discuss if, and how, the financial reports that you have prepared would change if you were aware that the
Asset, liability, equity, income and expense amounts for Sadoka’s Interior Decorating at 30 June 2016 are presented below:RequiredA. Prepare an income statement for the business for the year ended 30 June 2016.B. Prepare a balance sheet in narrative format as at 30 June 2016.C. Explain succinctly
Oxfam is a ‘not-for-profit’ entity. Discuss what it means to be a ‘not-for-profit’ entity.
Calculate the two missing amounts for each independent case below. Case ABCDE Total assets $ 90 000 $110 000 ? $93 000 ? Total liabilities $37.000 ? $18.000 ? $55 000 Equity ? $ 82000 $ 53000 $ 50 000 $120 000 Total income $76000 $45000 $80000 ? ? Total expenses ? $56 000 ? $32000 $60
During October 2016, Cleo organised a new business, Cleo’s Cafe. After each October transaction, Cleo prepared a balance sheet, as shown overleaf.RequiredA. Describe the nature of each of the four transactions that took place during October.B. Comment on the type of financial information conveyed
Dawson Industries began operations early in January 2017. On 31 December 2017, records showed the following asset, liability, equity, income and expense amounts:RequiredA. Prepare an income statement for Dawson Industries for the year ended 31 December 2017.B. Prepare a balance sheet as at 31
A new business graduate with one subject of accounting prepared the financial statements below for Helen’s Dancing School at the end of the first year of operations.Additional analysis revealed the following.1. Dancing fees of $7500 (owed by customers) were unrecorded at 30 June.2. Additional
Financial balances for the car hire business of John’s Limos on 31 March 2016 are provided below in a table in accounting equation form similar to the chapter illustrations.During April, the business of John’s Limos entered into the following transactions.1. Collected $8000 of the accounts
The Marketing Store was established as a sole trader business, specialising in providing marketing services, on 1 January 2016. The owner, Jenny Smart, contributed $100 000 in cash to the business and did not withdraw funds for the year. For the year ended 31 December 2016, the following events
Financial balances for Ho Ming Wee, Solicitor, on 30 June 2016 are given below in a table in accounting equation form similar to the chapter illustrations.During the early part of July, the business entered into the following transactions.1. Paid $2360 on accounts payable.2. Collected $6400 of the
Emma Lu obtained registration to practice as a naturopath, and spent the month of July 2016 setting up her business — E. Lu, Naturopath. Emma prepared a new balance sheet after each transaction which occurred. During July, the following balance sheets were prepared.RequiredA. Describe each of the
Tran’s Clothing Alterations began operations on 1 August 2016 and completed the following transactions during the first month.1. Tran deposited $18 000 of her personal funds in a current account at a bank opened in the name of the business.2. Sewing equipment was purchased at a cost of $9000, of
Baker’s Bread Shop was established on 1 April 2016 with an initial investment of $100 000 by the owner. During the first few weeks of business, the owner employed a part-time accountant (with only a few months experience) who recorded the following list of assets:The accountant also recorded the
Jason Vu offers tutoring services to first-year university students. He has set up a sole proprietorship business named JV Tutoring. Jason has collected the following information relating to his business activities at the end of the financial year:The following information was disclosed from
Lana Priest set up a home sewing business on 1 July 2016. Usually, Lana collects $20 per hour for sewing on the completion of each day’s work and pays for the maintenance of her machine with cash. Lana did an accounting subject at secondary school and so has kept her own accrual-based accounting
How is profit determined under (a) the cash basis of accounting and (b) the accrual basis of accounting?
The adjusted trial balance columns of the worksheet for Chris’ Cleaning Services are as shown below.RequiredComplete the worksheet and prepare an income statement, a statement of changes in equity and a classified balance sheet. Account Cash Accounts Receivable Prepaid Rent Equipment Accumulated
Different equity accounts are used depending on the type of organisation. Illustrate and explain.
Refer to the data presented in exercise 8.2. Assume further that Pike and Smith agree that their opening capital balances in the new partnership should be the same and set the amount at $90 000.Data from in Exercise 8.2Tammie Pike and Gail Smith agree to combine their businesses and form a
Selected accounts taken from the general ledger of Hampsteads showed the following balances at 31 December.RequiredA. Prepare adjusting entries for the accounts based on the following data that are not yet recorded.1. Insurance expired during the year, $1400.2. Wages earned by employees but not
Using the perpetual inventory system, record transactions (1) to (7) in exercise 6.2 in the general journal, assuming the business is registered for the GST, and that GST has to be added to the figures given.Data from in exercise 6.2Using the perpetual inventory system, record the following
‘The perpetual inventory system is superior to the periodic system.’ Discuss.
Scone Ltd was registered on 1 February 2016. The following events occurred in that year: Feb. 1 50 000 ordinary shares were allotted to the original members. The shares were paid for in full at a price of $1 each. A prospectus was issued for 100 000 10% preference shares and 150 000 ordinary
On 1 July 2016, Grafton Ltd was incorporated, and on 4 July a prospectus was issued inviting applications for 80 000 shares payable $4.50 on application, $2.50 on allotment and $2.50 on each of two calls to be made at intervals of 3 months after the date of allotment.By 31 July, applications were
Visit the websites of the IASB (www.ifrs.org) and the AASB (www.aasb.com.au).RequiredA. Find out the major issues currently on the agenda for consideration in future accounting standards, and present a report to the class on the basic requirements of those standards.B. Determine and report to the
Outline the regulatory process in Australia in relation to accounting standard setting, and discuss the influence of international bodies in the standard-setting process.
The statement of cash flows for Carsales.com Ltd, a company listed on the Australian Securities Exchange, follows.RequiredA. Explain the information that would be presented in Note 29 of Carsales.com Ltd’s financial statements.B. Explain the information that would be presented in Note 9 of
Needy Ltd has issued convertible notes under an agreement to maintain net assets, defined in the agreement as assets minus all liabilities except the convertible notes, at an amount not less than 2 times the amount of the convertible notes issued. Also under the agreement, working capital is to be
In analysing the financial statements of an entity, the following ratios were calculated:Evaluate the entity’s liquidity. Current ratio Quick ratio Receivables turnover Inventory turnover Profit margin 2017 1.1:1 0.5:1 30 days 3 times 10% 2016 1.3:1 0.7:1 45 days 4 times 7%
You are provided with the following information from the statement of cash flows for Precedent Ltd:RequiredCalculate the following cash sufficiency ratios for Precedent Ltd for 2017 and 2016:1. Cash flow adequacy ratio2. Repayment of long-term borrowings ratio3. Dividend payment ratio. Cash flow
As the accountant for Sam & Ben’s Ice Cream you are required to perform a bank reconciliation at the end of June 2016. The bank reconciliation statement for the previous month is set out below:Abridged cash receipts and cash payments journals before finalisation and posting are:The following
The owner of Smith Hardware has completed a bank reconciliation and cannot get the bank’s records to agree with the cash records of his business. He concludes that internal control has somehow failed and cash is being misappropriated. He asks you to check the records and confirm or otherwise his
The following information relating to Mount Athos Ltd has been obtained from the balance sheet as at 30 June 2018.In addition to the above, it is noted that during the year ended 30 June 2019:(a) 100 000 shares were issued at $1.50 per share(b) Comprehensive income after taxation was $631 000(c) An
Which account would not be included in the debt-to-equity ratio calculation?a. Unearned Revenue.b. Retained Earnings.c. Income Taxes Payable.d. All of the above are included.
Refer to the financial statements and footnotes of Target given in Appendix B at the end of this book. All dollar amounts are in millions.Data from in appendix BRequired:1. What is the amount of accrued wages and benefits at the end of the most recent fiscal year?a. $1,931b. $1,677c. $6,122d.
For each of the 10 long-lived assets shown below, indicate its nature and the related cost allocation concept. Use the following abbreviations: L LBE Nature Land Building Equipment Natural resource E NR I Intangible Other 0 Cost Allocation
The following is a list of account titles and amounts (dollars in millions) from a recent annual report of Hasbro, Inc., a leading manufacturer of games, toys, and interactive entertainment software for children and families:Required:Prepare the asset section of the balance sheet for Hasbro, Inc.,
On June 1, the Wallace Corp. received a machine it had ordered with an invoice price of $60,000. Freight costs of $650 were paid by the vendor per the sales agreement. The company exchanged the following on June 1 to acquire the machine:a. Issued 2,000 shares of Wallace Corp. common stock, par
How is the fixed asset turnover ratio computed? Explain its meaning.
The following data were included in a recent Apple Inc. annual report ($ in millions):Required:1. Compute Apple’s fixed asset turnover ratio for 2018, 2019, and 2020. Round your answers to two decimal points.2. How might a financial analyst interpret the results? In millions Net sales Net
The following information was reported by Young’s Air Cargo Service for 2020:Compute the company’s fixed asset turnover ratio (rounded to two decimal places) for the year. What can you say about Young’s ratio when compared to FedEx’s 2020 ratio of 2.16? Net fixed assets (beginning of
A recent annual report for Delta Air Lines included the following note:Assume that Delta made extensive repairs on an airplane engine, increasing the fuel efficiency and extending the useful life of the airplane. The existing airplane originally cost $45,000,000, and by the end of last year, it was
As stated in its recent annual report, “Sysco Corporation . . . is the largest global distributor of food and related products primarily to the foodservice or food-away-from-home industry. We provide products and related services to over 625,000 customer locations, including restaurants,
Best Buy Co., Inc., headquartered in Richfield, Minnesota, is one of the leading consumer electronics retailers, operating more than 1,100 stores across the globe. The following was reported in a recent annual report:Required:1. Assuming that Best Buy did not sell any property, plant, and equipment
Under the cost measurement concept, what amounts should be included in the acquisition cost of a long-lived asset?
The Gap, Inc., is a global retailer of apparel, accessories, and personal care products for women, men, and children under the Gap, Banana Republic, Old Navy, Athleta, Intermix, Janie and Jack, and Hill City brands. The Company operates approximately 3,900 stores across the globe, as well as
During the current year, Yost Company disposed of three different assets. On January 1 of the current year, prior to the disposal of the assets, the accounts reflected the following:The machines were disposed of during the current year in the following ways:a. Machine A: Sold on January 1 for
What assets should be amortized using the straight-line method?a. Intangible assets with definite livesb. Intangible assets with indefinite livesc. Natural resourcesd. All of the above
The notes to a recent annual report from Lakshmi Financial Services Corporation indicated that the company acquired another company, Sanjeev Insurance Company. Assume that Lakshmi finalized the purchase of Sanjeev on January 2 of the current year. Lakshmi acquired all of Sanjeev’s assets and
Distinguish between ordinary repairs and improvements. How is each accounted for?
In computing depreciation, three pieces of information must be known or estimated; identify and explain the nature of each.
You are a financial analyst charged with evaluating the asset efficiency of companies in the hotel industry. Recent financial statements for Marriott International include the following note:Required:1. Assume that Marriott followed this policy for a major construction project this year. Explain
Company X is going to retire equipment that is fully depreciated with no residual value. The equipment will simply be disposed of, not sold. Which of the following statements is true?1 – Total assets will not change as a result of this transaction.2 – Net income will not be impacted as a result
Starn Tool & Manufacturing Company, located in Meadville, PA, provides component machining for robotics, drones, vision systems, and special machines and assemblies for the aerospace, military, commercial, automotive, and medical industries. Assume the company has five different intangible
Springer International Publishing, headquartered in Berlin, Germany, is a leading global publisher of scientific, technical, and medical journals and books for researchers in academia, scientific institutions, and corporate R&D departments. For print publications, assume that Springer owns a
At the beginning of the year, Palermo Brothers, Inc., purchased a new plastic water bottle-making machine at a cost of $45,000. The estimated residual value was $5,000. Assume that the estimated useful life was four years and the estimated productive life of the machine was 400,000 units. Actual
Ramirez Foods Company acquired a corn flour milling machine for $20,000 and depreciated it on a straight-line basis over an eight-year useful life with a residual value of $3,000. At the end of the prior year, the machine had been depreciated for a full five years. At the beginning of January of
A recent annual report for FedEx includes the following information:Required:Explain why FedEx uses different depreciation methods for financial reporting and tax purposes. For financial reporting purposes, we record depreciation and amortization of property and equipment on a straight-line basis
In your web browser, search for the investor relations page of a public company you are interested in (e.g., Papa Johns investor relations). Select SEC Filings or Annual Report or Financials to obtain the 10-K for the three most recent years available.*Required:1. Go to the Balance Sheets and/or
Microsoft Corporation is a leading technology company with products ranging from operating systems, productivity applications, server applications, business solution applications, software development tools, to devices including PCs, tablets, and gaming and entertainment consoles. Its recent
Irish Industries purchased a machine for $65,000 and is depreciating it using the straight-line method over a life of 10 years, with a residual value of $3,000. At the beginning of the sixth year, a major overhaul was made costing $5,000, and the total estimated useful life was extended to 13 years
In a recent 10-K report, United Parcel Service states it “is the world’s largest package delivery company, a leader in the United States less-than-truckload industry, and the premier provider of global supply chain management solutions.” The following note and data were reported:Required:1.
What is asset impairment? How is it accounted for?
Delta Air Lines owns hundreds of aircraft, with about 60 percent of its fleet consisting of Boeing aircraft, while Airbus aircraft make up about 40 percent. It sold seven used Boeing 767-300 jets to Amazon.com as Amazon plans to expand its growing Amazon Air cargo service. The average age of the
On January 1 of the current year, the records of Khouri Corporation showed the following regarding a truck:On December 31 of the current year, the delivery truck was a total loss as the result of an accident.Required:1. Based on the data given, compute the estimated useful life of the truck that
Freeport-McMoRan Copper & Gold Inc., headquartered in Phoenix, Arizona, is a leading international mining company of copper, gold, and molybdenum. Its revenues were over $14 billion in a recent year. Assume that in February of last year, Freeport-McMoRan paid $800,000 for a mineral deposit in
Yukelson Company owns the building occupied by its administrative office. The office building was reflected in the accounts at the end of last year as follows:During January of this year, on the basis of a careful study, management decided that the total estimated useful life should be changed to
Springer Company had three intangible assets at the end of 2023 (end of the accounting year):a. A copyright purchased on January 1, 2023, for a cash cost of $14,500. The copyright is expected to have a 10-year useful life to Springer.b. Goodwill of $65,000 from the purchase of the Hartford Company
Cauce Corporation is preparing its year-end balance sheet. The company records show the following selected amounts at the end of the year:Required:1. Identify current liabilities and compute working capital. Why is working capital important to management?2. Would your computation be different if
Chukanut Company completed the following transactions during Year 1. Chukanut’s fiscal year ends on December 31.Required:1. Prepare journal entries for each of these transactions.2. Prepare all adjusting entries required on December 31. Assume that $10,000 of the office supplies purchased were
Vigeland Company completed the following transactions during Year 1. Vigeland’s fiscal year ends on December 31.Required:1. Prepare journal entries for each of these transactions.2. Prepare all adjusting entries required on December 31. Jan. 15 Apr. 1 June 14 July 15 Dec. 12 31 Purchased and paid
What is the present value factor for an annuity of five periods and an interest rate of 10 percent?a. 0.62092b. 4.32948c. 3.79079d. 7.72173
Pool Corporation, Inc., sells swimming pool supplies and equipment. It is a publicly traded corporation that trades on the NASDAQ exchange. The majority of Pool’s customers are small, family-owned businesses. Assume Pool Corporation completed the following transactions during the current year.
Palouse Company completed the salary and wage payroll for the month of March. The payroll provided the following details:Required:1. Provide the journal entry to record the payroll for March, including employee deductions. Assume employees have been paid but that Palouse has yet to transfer any
Roger Company completed the following transactions during Year 1. Roger’s fiscal year ends on December 31.Required:1. Prepare journal entries for each of these transactions.2. Prepare all adjusting entries required on December 31.3. What is the total amount of liabilities arising from these
What financial statement is the primary source of information about the liabilities of a company?
Oaks Company has completed the payroll for the month of January, reflecting the following data:Required:1. What was the total labor cost to the company? What was the amount of the employees’ take-home pay?2. List the liabilities and their amounts reported on the company’s January 31 balance
The university golf team needs to buy a car to travel to tournaments. A dealership in Bellevue has agreed to the following terms: $4,000 down plus 20 monthly payments of $750. A dealership in Seattle will agree to $1,000 down plus 20 monthly payments of $850. The local bank is currently charging an
Which of the following best describes accrued liabilities?a. Long-term liabilities.b. Current amounts owed to suppliers of inventory.c. Current liabilities to be recognized as revenue in a future period.d. Current amounts owed, but not yet paid, to various parties at the end of an accounting period.
Rainier Company borrowed $600,000 for three months. The annual interest rate on the loan was 11 percent. Rainiers fiscal year ends on December 31. Rainier borrowed the $600,000 one month prior to the end of its current fiscal year and paid back the $600,000 plus interest two months into its current
You are researching the housing market in Bloomington, Indiana, and you come upon an advertisement offering to sell a house for $240,000 with a zero interest rate mortgage. All you have to do is agree to make $4,000 payments ($240,000 ÷ 60 months) at the end of each month for five years. If you do
Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. Nordstrom, Inc., is one of America’s most prestigious retailers. Each Christmas season, Nordstrom builds up its inventory to meet the needs of Christmas shoppers. A large
Brad & Kelly Company has borrowed $100,000 from the bank to be repaid over the next five years, with payments beginning next month. Which of the following best describes the presentation of this debt in the balance sheet as of today (the date of borrowing)?a. $100,000 in the Long-Term Liability
Danali Corporation borrowed $290,000 on October 1. The note carried a 10 percent interest rate with the principal and interest payable on May 1 of next year. Prepare the journal entry to record the note on October 1. Prepare the adjusting entry to record accrued interest on December 31, the end of
During its first year of operations, Chestnut Company completed the following two transactions. The annual accounting period ends December 31.a. Paid and recorded wages of $89,000 during Year 1; however, at the end of Year 1, three days’ wages are unpaid and have not yet been recorded because the
Define accrued liability. What is an example of an accrued liability?
A company is facing a lawsuit from a customer. It is possible, but not probable, that the company will have to pay a settlement that management estimates to be $2,000,000. How would this fact be reported in the financial statements to be issued at the end of the current month?a. $2,000,000 in the
Jose Company sells a wide range of goods through two retail stores operated in adjoining cities. Jose purchases most of the goods it sells in its stores on credit, promising to pay suppliers later. Occasionally,a short-term note payable is used to obtain cash for current use. The following
Dell Computers is a leader in the computer industry with over $90 billion in sales each year. A recent annual report for Dell contained the following note:1. Assume that estimated warranty costs for the current year are $500 million and that $400 million of warranty work was performed during the
Which of the following transactions would usually cause accounts payable turnover to increase?a. Payment of cash to a supplier for merchandise previously purchased on credit.b. Collection of cash from a customer.c. Purchase of merchandise on credit.d. None of the above.
The balance sheet for Yakima Corporation reported the following: noncurrent assets, $240,000; total assets, $360,000; noncurrent liabilities, $176,000; total stockholders’ equity, $94,000. Compute Stevenson’s working capital.
Columbia Sportswear is an outdoor and active lifestyle apparel and footwear company. Assume that last year, Columbia reported cost of goods sold of $941 million. This year, cost of goods sold was $1,146 million. Accounts payable was $174 million at the end of last year and $214 million at the end
The present value of an annuity of $10,000 per year for 10 years discounted at 8 percent is what amount?a. $5,002b. $67,101c. $53,349d. $80,000

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