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financial accounting
Financial Accounting in an Economic Context 10th edition Jamie Pratt - Solutions
Pendleton Enterprises began operations on January 1, 2016. Balance sheet and income statement information for 2016, 2017, and 2018 follow:REQUIRED:a. Prepare the operating sections of the statement of cash flows for 2016, 2017, and 2018 under the direct method.b. Assume that the $4,000 of
Excerpts from the 2014 financial statements of SUPERVALU supermarkets are as follows (dollars in millions):Compute estimates of cash receipts from customers and cash payments to suppliers. Assume that all sales are on account and that accounts payable includes only accounts with suppliers. 2014
The 2017 and 2018 balance sheets and related income statement of Watson and Holmes Detective Agency follow:REQUIRED:Prepare a statement of cash flows under both the direct and indirect methods for 2018. 2018 2017 BALANCE SHEET ASSETS $ 6,000 $10,000 Cash Accounts receivable 7,000 2,000 (1,000)
Income statement and balance sheet excerpts of Shevlin and Liberty for the period ending December 31, 2018, follow. Compute cash provided (used) by operating activities for the period ending December 31, 2018. Use both the direct and indirect forms of presentation. INCOME STATEMENT EXCERPTS $48,000
ISS Inc. began operations on January 1, 2018. It engaged in the following economic events during 2018:1. Issued 6,000 shares of no-par common stock for $10 per share.2. Purchased on account 20,000 units of inventory for $1 per unit.3. Paid and capitalized $7,000 for rent covering 2018 and 2019.4.
The following information was taken from the records of Grimes Pools. Prepare a statement of cash flows (direct method) for the period ending December 31, 2018. Assume that all transactions involve cash. 2018 2017 $ 4,000 $ 6,000 Cash Noncash operating assets 15,000 15,000 Nonoperating assets
Sunshine Enterprises included the following statements in its 2018 financial report:REQUIRED:a. Convert each of the accrual-basis income statement accounts to a cash basis. Would you classify this method as directly or indirectly computing cash provided (used) by operating activities?b. Prepare a
The following information was taken from the records of Romora Supply House. Prepare a statement of cash flows (direct method) for the period ending December 31, 2018. Assume that all transactions involve cash. 2018 2017 $ 5,000 $12,000 Cash Noncash operating assets 18,000 23,000 Nonoperating
The following information was taken from the financial records of Bower Manufacturing Industries:The company purchased equipment in exchange for 10,000 shares of common stock. The stock was selling for $20 per share at that time. The notes receivable was received from a customer in exchange for the
The operating cash flows and balance sheet excerpts of Schlee and Associates for the period ending December 31, 2018, follow. Compute net income for the period ending December 31, 2018. OPERATING ACTIVITIES $ 65,000 Cash inflows from sales $(40,000) Cash payments for inventories Cash payments for
Lynch Engineering Firm provided the following income statement for 2018 in its annual financial report:1. The company declared and paid a dividend of $550,000 in 2017 but did not declare any dividends in 2018.2. 2017:(a) 35 percent of the sales were on account.(b) The accounts receivable balance
The following information was taken from the 2018 financial records of Price Restaurant Supply Company:The company sold a piece of equipment for cash that had originally cost $100,000. The accumulated depreciation associated with the equipment at the time of sale was $20,000.REQUIRED:Prepare a
The following balance sheet and income statement data were taken from the records of L. L. Beeno for the year ended December 31, 2018:Prepare the operating section of the statement of cash flows, and present it under both the direct and indirect methods. 2018 2017 BALANCE SHEET $ 3,000 $ 2,800 Cash
The following balance sheet and income statement data were taken from the records of Martland Stores for the year ended December 31, 2018:Prepare the operating section of the statement of cash flows, and present it under both the direct and indirect methods. 2018 2017 BALANCE SHEET $ 6,000 $ 1,400
Mick’s Photographic Equipment began operations on January 1, 2017. During 2017, the company entered into the following transactions:1. Issued 50,000 shares of $15 par value common stock for $30 per share in exchange for cash. Also issued, for cash, 1,000 shares of 10 percent, $100 par value
The following balance sheet and income statement data were taken from the records of Mako Retail Supply for the year ended December 31, 2018:Prepare the operating section of the statement of cash flows, and present it under both the direct and indirect methods. 2018 2017 BALANCE SHEET $ 6,000 $
The following balance sheet and income statement data were taken from the records of Steeler and Jones for the year ended December 31, 2018:Prepare the operating section of the statement of cash flows, and present it under both the direct and indirect methods. 2018 2017 BALANCE SHEET $ 7,400 $
The following balance sheet and income statement data were taken from the records of Harbaugh Auto Supply for the year ended December 31, 2018:The company sells goods and provides services. All sales are made on account, and cash is received in advance on services with service revenues being
The following balance sheet and income statement data were taken from the records of Standard Center Manufacturing for the year ended December 31, 2018.The company sells goods and provides services. All sales are made on account, and cash is received in advance on services with service revenues
The following information was taken from the IFRS-based 2014 financial statements published by Carrefour, a French retailer (in million euros):Income before tax ..........................................................................2,010Tax
Revenues for United Technologies, Corporation (UTC) increased from $45.3 billion in 2013 to $47.6 billion in 2014 (a 5.1 percent increase), but earnings increased by over 8.7 percent from $5.7 billion to $6.2 billion. In recent years the company has reported losses from debt retirements, accounting
Several transactions entered into by Travis Retail during 2018 follow:1. Received $50,000 for wine previously sold on account.2. Paid $55,000 in salaries and wages.3. Sold a building for $100,000. The building had cost $170,000, and the related accumulated depreciation at the time of sale was
The financial press often uses the term cash flow to refer to a company’s “net income + depreciation.” In a well-known article in Barron’s titled “No Substitutions, Please,” Intel was criticized for relying heavily on a number the company called “cash earnings,” computed by adding
Taylor Brothers began operations in 2017. The following selected information was extracted from its financial records:REQUIRED:a. Compute gross sales (accrual basis) for 2017 and 2018.b. Calculate the amount of cash paid to suppliers during 2018 for inventory.c. Compute the balance in the prepaid
The following information was extracted from the December 31, 2017, balance sheets of four different companies:There were no transactions in equity securities during 2018, and as of December 31, 2018, the controllers of each company collected the following information:a. Compute the change in the
Groomer purchased a controlling interest in three companies during 2017. Financial information concerning the three companies follows:All other assets and liabilities on the balance sheet are at FMV.Groomer purchased 8,000, 600, and 1,500 shares of Company X, Company Y, and Company Z,
Lowery Inc. purchased new plant equipment on January 1, 2017. The company paid $920,000 for the equipment, $62,000 for transportation of the equipment, and $10,000 for insurance on the equipment while it was being transported. The company also estimates that over the equipment’s useful life it
Mammoth Enterprises purchased 50 percent of the outstanding stock of Atom Inc. on December 31 for $60,000 cash. On that date, the book value of Atoms net assets was $70,000. The market value of Atoms assets was $180,000, $20,000 above book value. Mammoths
Gidley Inc. purchased a piece of equipment on January 1, 2017. The following information is available for this purchase:Purchase price .........................$950,000Transportation .......................$100,000aInstallation ..............................$130,000bSalvage value
West miller Construction Company purchased a new truck on December 31, 2017, for $48,000. The truck has an estimated useful life of three years and an estimated salvage value of $12,000. When the truck was purchased, the company’s accountant mistakenly made the following entry:Depreciation
In the footnotes to the IFRS-based 2014 financial statements of European Aeronautical Defense and Space Company (EADS), parent company for Airbus, research and development (R&D) expenses were reported at 3,391 million euros. Also included in the footnotes is a chart describing the activity
The footnote below was taken from the 2014 annual report of Johnson & Johnson (dollars in millions).a. Approximately how much land did Johnson & Johnson sell during 2014? For simplicity, assure there was no land purchased during 2014.b. Why did accumulated depreciation increase during
McCartney Manufacturing purchased a dryer for $100,000 on January 1, 2014. The estimated life of the dryer is five years, and the salvage value is estimated to be $10,000. McCartney uses the straight-line method of depreciation.On January 1, 2018, McCartney paid $160,000 to have the dryer
The condensed balance sheet as of December 31, 2017, for Van Den Boom Enterprises follows:Sales and operating expenses (other than amortization) are predicted to be $65,000 and $20,000, respectively, for 2018, 2019, and 2020. All sales and operating expenses are received or paid in cash. On
Burke Copy Center purchased a machine on January 1, 2012, for $180,000 and estimated its useful life and salvage value at ten years and $30,000, respectively. On January 1, 2017, the company added three years to the original useful-life estimate.REQUIRED:a. Compute the book value of the machine as
The footnotes to the 2014 financial statements of McDonald’s Corporation contain the following statement:Long-lived assets are reviewed for impairment annually . . . and . . . if an individual restaurant is determined to be impaired, the loss is measured by the excess of the carrying amount of
Stork Freight Company owns and operates 15 planes that deliver packages worldwide. The planes were purchased on January 1, 2014, for $1 million each. The company estimates that the planes will be scrapped after 12 years. Stork Freight uses straight-line depreciation.a. Assume that in a typical year
Portland Products purchased a machine on January 1, 2014, for $60,000 and estimated its useful life and salvage value at five years and $12,000, respectively. On January 1, 2017, the company added three years to the original useful-life estimate.a. Compute the book value of the machine as of
Knowledge of the time value of money is necessary for this problem (see Appendix A). Kimberly Sisters purchased equipment for $80,000 on January 1, 2017. Kimberly can use the double-declining balance method for tax purposes but does not understand why it should be preferred over straight-line. The
Bently Poster Company pays income taxes on net income at the rate of 32 percent. The company pays a bonus to its officers of 8 percent of net income after taxes and pays dividends to its shareholders in the amount of 75 percent of net income after taxes. On January 1, 2017, the company purchased
Benick Industries purchased a new lathe on January 1, 2017, for $300,000. Benick estimates that the lathe will have a useful life of four years and that the company will be able to sell it at the end of the fourth year for $60,000.a. Compute the depreciation expense that Benick Industries would
Stockton Corporation purchased a new computer system on January 1, 2017, for $300,000 cash. The company also incurred $25,000 in installation costs and $10,000 to train its employees on the new system. The computer system has an estimated useful life of five years and an estimated salvage value of
On January 1, 2017, Diversified Industries purchased Specialists Inc. for $1.8 million. The balance sheet of Specialists Inc. at the time of purchase follows:The total FMV of the individual assets of Specialists is $1.35 million, and the liabilities are valued on the balance sheet at
You can review the Disney SEC Form 10-K by searching for “Disney Annual Report” online.REQUIRED:Review the 2015 (10/3/2015) Disney SEC Form 10-K, and answer the following questions:a. What percentage of total assets do property, plant, and equipment and long-lived assets in total make up?b.
Lewis Real Estate purchased a new photocopy machine on January 1, 2017 for $120,000. The companys bookkeeper made the following entry to record the acquisition:Depreciation Expense (E, RE) 120,000 Cash (A)
The following financial information was taken from the records of White Bones Inc.The company purchased equipment for $12,000 during 2017.a. How much cash was collected on the sale of equipment during 2017?b. Reconstruct the entry that recorded the sale of equipment during 2017. 2017 2016 BALANCE
The information was taken from the 2014 annual report of Intel, a world-leading supplier to the Internet economy (dollars in millions).a. From which of the financial statements was each figure taken?b. Estimate the cost of property, plant, and equipment sold during 2014.c. Estimate the accumulated
In the 2014 operating section of its IFRS-based statement of cash flows, European retailer Carrefour reported the following (in millions of euros):Net income ...............................................................2,010Depreciation and amortization ..............................1,451Change
Assume the same facts as in P811, except that the FMVs for the inventory and property, plant, and equipment of Rachel are not as precisely specified. That is, appraisers have indicated that the FMV of the inventory is between $65,000 and $75,000 and that the FMV of the property, plant,
You can review the Disney SEC Form 10-K by searching for “Disney Annual Report” online.REQUIRED:Review the Disney SEC Form 10-K, for 2015 and answer the following questions:a. Under current accounting rules, how much has Disney invested in investment securities?b. Has Disney exercised the fair
Mainmont Industries uses the equity method to account for its long-term equity investments from affiliates. The following information from the financial statements of Mainmont refers to an investment in the securities of Tumbleweed Construction, a company 30 percent owned by Mainmont:Mainmont
If a company owns over 50 percent of another company (subsidiary), the financial statements of the two entities are consolidated into one larger entity. For example, the 2013 financial statements of Verizon Communications Inc. include the financial statements of Verizon Wireless, the cellular
Duke Energy Corporation accounts for certain investments under the equity method, and as of December 31, 2014, Duke reported equity method investments of $358 million on its balance sheet and $390 million on its 2013 balance sheet. Equity income on the income statement totaled $130 million for
The condensed balance sheets as of December 31 for Rice and Associates and Rachel Excavation are as follows:As of December 31, the market values of Rachels inventories and property, plant, and equipment were $70,000 and $120,000, respectively. Liabilities are at FMV on the balance
Large U.S. corporations, especially banks, tend to hold larger portfolios of securities. On its 2014 balance sheet, for example, Bank of New York Mellon reported short-term equity investment securities of $108.2 billion. Some have commented that these investments give management greater ability to
Excerpts from the financial statements of Macy Limited are as follows. (Numbers are in thousands.)Footnotes:Short-term equity investments. As of December 31, 2016, trading securities were valued at $130; during 2017.Long-term investments. On January 30, 2017, the company purchased 40 percent
In its 2014 annual report the Unilever Group, which published IFRS-based financial statements, reported the following in the inventory footnote (in million euros).During 2014, 126 million euros (2013: 198 million euros) was charged to the income statement for damaged, obsolete, and lost
Central Incorporated has two items in inventory as of December 31, 2017. Each item was purchased for $40. Company management chose to write down Item 1 to $28, which at year-end was assessed to be its market value. Management did not write down Item 2 because its market value was estimated to be
You can review the Disney SEC Form 10-K by searching for “Disney Annual Report” online. Review it and answer the following questions:REQUIRED:a. How large is inventory compared to the other assets on Disney’s balance sheet? Did inventory increase, decrease, or remain the same as a percent of
The following disclosure was included in the footnotes of Caterpillars 2014 annual report. The company uses the LIFO cost fl ow assumption and reported net income of $3,695 for 2014. The companys effective tax rate is 27 percent (dollars in millions).a. Compute 2014 ending
The 2017 inventory activity for Helio Brothers, a discount retailer that prepares financial statements under IFRS using the FIFO cost fl ow assumption, is provided below.Many of the items in the companys inventory at the end of 2017 were judged to be outdated, and on average the market
Heller Bottling Company began business in 2014. Inventory units purchased and sold for the first year of operations and each of the following four years follow:Inadequate cash flows forced Heller Bottling Company to cease operations at the end of 2018.a. Compute cost of goods sold for each of the
IBT has used the LIFO inventory cost flow assumption for five years. As of December 31, 2016, IBT had 700 items in its inventory, and the $9,000 inventory dollar amount reported on the balance sheet consisted of the following costs:During 2017, IBT sold 900 items for $75 each and purchased 350
Watkins Corporation began operations on January 1, 2016. The 2016 and 2017 schedules of inventory purchases and sales are as follows:Complete the following schedule, and briefly discuss the trade-offs associated with choosing an inventory cost flow assumption. 2016: Purchase 1 Purchase 2 Total
Target Corp. is a major U.S. retailer that historically has carried inventory balances in excess of 15 percent of its total assets, and in a typical year the cost of its sold inventory approximates 70 percent of total sales. In the operating section of its 2014 statement of cash flows, Target
You are a financial analyst currently reviewing the financial statements of Danner International and Brady Enterprises, two companies of similar size within the same industry. Net incomes of $39,300 and $42,700 were reported for 2017 by Danner and Brady, respectively. After a thorough comparison
Vinnie’s House of Televisions has 75 identical 27-inch color monitors in stock on January 1, 2018. Vinnie maintains records of the serial number of each monitor to track its costs. Vinnie purchased the 75 monitors on December 5, 2017, for $450 each. He also purchased 50 on January 2, 2018, for
Grocery chain Safeway Inc. discloses its inventory in the following manner on the balance sheet itself (dollars in millions).Rival grocer SUPERVALU Inc., on the other hand, disclosed information about its LIFO and FIFO values in a footnote to its 2014 financial statements. The balance sheet
Ruhe Auto Supplies began operations in 2004. The companys inventory purchases and sales in the first and subsequent years of operations are as follows:The companys federal income tax rate is 30 percent and the inventory at December 31, 2016 was $112,500. For the year ended
Financial statements as of December 31, 2014, for Johnson & Johnson are as follows. The company used the FIFO inventory cost flow assumption to prepare these statements (dollars in millions).Assume that on December 30, 2014, Johnson & Johnson decided to change from the FIFO to the LIFO
The Japanese firm Sony prepares its financial statements using U.S. GAAP. Two items related to its inventory appeared in the operating section of a recent statement of cash flows, both in millions of yen: loss on impairment of assets (38,308) and change in inventories (160,432). On the statement
The Magic Teddy Bear Toy Company entered into the following transactions during January 2017:January 3: Purchased 7,000 teddy bears at $20 each.3: Sold 2,000 teddy bears at $50 each for cash.9: Sold 4,000 teddy bears at $50 each on account.10: Settled the purchase made on January 3.15: Purchased
The Finish Line Inc. reported the following items in its fiscal 2014 financial report (dollars in millions):Assume that counting errors caused the ending inventory in 2013 to be understated by $50 and the ending inventory in 2014 to be overstated by $50.a. Compute the impact of these errors on cost
The 2014 annual report of Sherwin Williams, a manufacturer of paint products, contained the following footnote (dollars in thousands):Note 3-InventoriesInventories were stated at the lower of cost or market with cost determined principally on the last-in, first-out (LIFO) method. The following
The following information comes from the records of Telly’s Supply:Beginning inventory .......................................$32,000Inventory purchases ........................................85,000Freight-in .............................................................4,300An inventory count
The Wall Street Journal reported that “Chevron Corp. took a change in 2015 of $1.96 billion, related to lower prices for crude oil and refined products. The article characterized the write-down as an accounting ‘to reduce the carrying value of crude oil and refined products inventories to their
Baymont Corporation purchased inventory on account on March 3, 2017, for a gross price of $50,000. The company purchased additional inventory on account on March 10, 2017, for a gross price of $140,000. Baymont Corporation paid for the first purchase on April 25, 2017, and for the second purchase
Nick’s Fish Market purchased Maine lobster on account on October 10, 2017, for a gross price of $76,000. Nick also purchased Alaskan king crab on account on October 11, 2017, for a gross price of $36,000. Nick paid for the first purchase on October 20, 2017, and for the second purchase on October
The following information was taken from the footnotes in the 2014 annual report of Johnson & Johnson:a. From information in the footnote alone, indicate whether Johnson & Johnson is a retailer, manufacturer, or service firm. Explain.b. From information in the footnote alone, indicate
JP Morgan Chase carries portfolios of short-term equity investment securities. At the end of 2014 and 2013, the securities were valued at $747 billion and $728.7 billion, respectively. The investments compose about 30 percent of the company’s total assets as of December 31, 2014. Unrealized gains
In 2014, Chevron reported net income of $19.3 billion, $7.1 billion of which was income recognized on investments in affiliate companies accounted for under the equity method. In that same year, Chevron received much less than that amount in dividends from these affiliates. Some accountants have
Tom Miller and Larry Rogers each started separate businesses on December 1, 2017, by contributing $6,000 of their own funds. Early in December, both men purchased 120 shares of Diskette common stock, which was selling at the time for $26 per share. During December, they both also purchased $1,500
Sony Corporation, the Japanese electronics manufacturer, prepares U.S. GAAP-based financial statements (in million yen). On its fiscal 2014 balance sheet, it reported investments in affiliate companies of 171,063 and 181,263 for 2014 and 2013, respectively. It also reported income from equity
Zimmer Bio-net (Zimmer Holdings, Inc.) provided the following disclosures in Note 7 of its 2014 annual report. It describes the companys investments in short-term equity securities (dollars in millions).a. Under current accounting standards, compute the fair market value of
The 2014 IFRS-based financial statements of Airbus Group, the French-based airline manufacturer, included the following account information (in million euros):REQUIRED:a. Explain the meaning of each of the 2014 disclosures.b. Estimate the balance sheet carrying amount of the investments in
Procter & Gamble’s 2014 balance sheet reported a goodwill balance of $47.3 billion. Describe what goodwill is, how it was originally recorded, and what it indicates about Procter & Gamble. Further, P&G carried over $53.7 billion in goodwill in 2013. Discuss what happened to the
On October 18, 2017, Daley Inc. purchased 100 shares of Orthon at $32 per share. The shares were held throughout the remainder of 2017 and 2018, and by December 31, 2017 and 2018, the per-share market price had risen to $40 and $50, respectively.REQUIRED:a. Provide the journal entries recorded at
The following excerpts, all of which related to the equity investment account, were taken from the 2014 annual report of AT&T (dollars in millions):REQUIRED:a. The footnotes indicate that $226 in equity investments in affiliates was made in 2014. Estimate how much was sold in affiliates during
The 2014 annual report of The Coca-Cola Company shows the following information: (dollars in millions)REQUIRED:a. What does the financial statement presentation tell you about the business model of Coca-Cola?b. Provide the journal entry to record affiliate net income in 2014.c. How many cash
Anderson Cabinets began operations during 2011. During the initial years of operations, the company invested primarily in fixed assets to promote growth. During 2017, H. Hurst, the company president, decided that the company was sufficiently stable that it could now invest in short-term equity
The following was taken from the 2014 annual report of General Motors (dollars in millions):GM reported that it purchased $9,154 of securities in 2014 and that unrealized gains and losses were insignificant in 2014.REQUIRED:a. Describe the current accounting treatment for
On the 2014 income statement, Bristol-Myers Squibb included a $3 million line item called unrealized gain from short term equity investments. During 2014, the company maintained a portfolio of marketable securities in the current asset section of the balance sheet of $1,864 million.REQUIRED:Under
OLeary Enterprises began investing in short-term equity securities in 2017. The following information was extracted from its 2017 internal financial records.REQUIRED:Compute the effect on reported 2017 income from all investment transactions and price changes. 12/31/17 Market Total
H&R Block reported the following account on its statement (dollars in thousands): Assume no purchases were made of marketable securities during 20132015.REQUIRED:a. Did the market value of H&R Blocks marketable securities increase or decrease in 2013, 2014, and
Monroe Auto Supplies engaged in several transactions involving short-term equity securities during 2017, shown in the following list. The company had never invested in equity securities prior to 2017.1. Purchased 1,000 shares of IBM for $50 per share.2. Purchased 500 shares of General Motors for
The following table was taken from the 2014 annual report of Merck & Company, a major U.S. pharmaceutical company (dollars in millions).REQUIRED:a. How much did mark-to-market accounting impact net income?b. This table indicates that Merck carries investments on its balance sheet. What are
The following information was taken from the 2017 annual report of Orleans Enterprises:Related footnote: The 2017 and 2016 balances in the short-term equity investment account consist of 1,600 and 1,800 shares of At water Company, respectively. During 2017, in the only transaction related to these
The following information was taken from the records of Eli Lilly, a major pharmaceutical (dollars in millions).Assume that ending inventory was overstated by $500 in 2012, understated by $150 in 2013, and overstated by $320 in 2014.REQUIRED:Compute the corrected cost of goods sold and net income
General Electric uses the LIFO inventory cost flow assumption, reporting inventories on its 2014 balance sheet of $17.6 billion and a LIFO reserve of approximately $62 million. What would be GE’s 2014 inventory balance if it used the FIFO assumption instead? Why is the disclosure of the LIFO
Harley-Davidson manufactures motorcycles and accessories. Financial information from the 2014 annual report is excerpted as follows:Inventory obsolescence reserves deducted from FIFO cost were $17.8 million and $17.5 million as of December 31, 2014 and 2013, respectively.REQUIRED:a. Why would a
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