Questions and Answers of Financial Managerial Accounting

On January 1, 2010, Huang Corporation acquired 40 percent of the voting stock of Lee Corporation, an amount sufficient to exercise significant influence over Lee Corporation’s activities, for
On January 1, Caviar Corporation purchased, as long-term investments, 8 percent of the voting stock of Union Corporation for $500,000 and 45 percent of the voting stock of Boss Corporation for $4
Owen Corporation, which has begun investing in trading securities, engaged in the following transactions:Jan. 6 Purchased 7,000 shares of Google stock, $60 per share.Feb. 15 Purchased 9,000 shares of
Canalle Corporation has the following portfolio of long-term available-for sale securities at year end, December 31, 2010:Both the Unrealized Loss on Long-Term Investments account and the Allowance
Develop brief answers to each of the following questions:1. Under what conditions would a company have both minority interest and goodwill in a consolidation?2. Why must the financial statements of
Develop brief answers to each of the following questions:1. Where in the financial statements are investment transactions reported?2. What would cause an Allowance to Adjust Short-Term Investments
X Company owns 100 percent of Y Company. The following are accounts from the balance sheets and income statements of both companies:What would be the combined amount of each of the above accounts on
Assume the same facts as in SE 6 except that the purchase of 100 percent of Family Season Corporation was for $240,000. After the purchase, what would be the amount, if any, of the following accounts
Assume the same facts as in SE 6 except that Omega purchased 80 percent of Family Season Corporation for $160,000. After the purchase, what would be the amount, if any, of the following accounts on
Omega Corporation buys 100 percent ownership of Family Season Corporation for $200,000. At the time of the purchase, Family Season’s stockholders’ equity consisted of $40,000 in common stock and
Perk Company owns 30 percent of Storm Company. In 2009, Storm Company earned $120,000 and paid $80,000 in dividends. Prepare entries in journal form for Perk Company’s records on December 31 to
Refer to your answer to SE 2. Assume that on December 31, 2010, the cost of Logan Tech Company’s portfolio of long-term available-for-sale securities was $285,000 and that its market value was
On December 31, 2009, the market value of Logan Tech Company’s portfolio of long-term available-for-sale securities was $320,000. The cost of these securities was $285,000. Prepare the entry in
Market Corporation began investing in trading securities in 2009. At the end of 2009, it had the following trading portfolio:Prepare the necessary year-end adjusting entry on December 31 and the
Many companies in recent years have bought back their common stock. For example, IBM, with large cash holdings, spent almost $37.5 billion over three years repurchasing its stock.18 What are the
The Murphy Corporation had the following treasury stock transactions during 2011:a. Purchased 80,000 shares of its $1 par value common stock on the market for $2.50 per share.b. Purchased 16,000
Stavski Plastics Corporation was chartered in the state of Massachusetts. The company was authorized to issue 10,000 shares of $100 par value, 6 percent preferred stock and 50,000 shares of no-par
Glass Corporation began operations on September 1, 2010. The corporation’s charter authorized 150,000 shares of $8 par value common stock. Glass Corporation engaged in the following transactions
The Vegas Corporation had both common stock and preferred stock outstanding from 2009 through 2011. Information about each stock for the three years is as follows:The company paid $70,000, $400,000,
Kras, Inc., was organized and authorized to issue 5,000 shares of $100 par value, 9 percent preferred stock and 50,000 shares of no-par, $5 stated value common stock on July 1, 2010. Stock-related
On March 1, 2010, Dora Corporation began operations with a charter it received from the state that authorized 50,000 shares of $4 par value common stock. Over the next quarter, the company engaged
Record in T accounts the following stock transactions of Pigua Company, which represent all of the company’s treasury stock transactions during 2010:May 5 Purchased 1,600 shares of its own $2 par
On July 1, 2010, Kosa, a new corporation, issued 20,000 shares of its common stock to finance a corporate headquarters building. The building has a fair market value of $600,000 and a book value of
Dylan Corporation pays dividends at the end of each year. The dividends that it paid for 2009, 2010, and 2011 were $80,000, $60,000, and $180,000, respectively. Calculate the total amount of
Ghana Corporation has 10,000 shares of its $100 par value, 7 percent cumulative preferred stock outstanding, and 50,000 shares of its $1 par value common stock outstanding. In Ghana’s first four
Shark School Supply Corporation was organized in 2010. It was authorized to issue 200,000 shares of no-par common stock with a stated value of $5 per share, and 40,000 shares of $100 par value, 6
The following accounts and balances are from the records of Stuard Corporation on December 31, 2010:Preferred Stock, $100 par value, 9 percent cumulative,10,000 shares authorized, 3,000 shares issued
On October 28, 2010, the Seoul Company (SE 10) retired the remaining 1,500 shares of treasury stock. The shares were originally issued at $5 per share. Prepare the necessary entry in journal form.In
Prepare in journal form the entries necessary to record the following stock transactions of the Seoul Company during 2010:Oct. 1 Purchased 2,000 shares of its own $2 par value common stock for $20
The Ferris Corporation has 2,000 shares of $100, 8 percent cumulative preferred stock outstanding and 40,000 shares of $1 par value common stock outstanding. In the company’s first three years of
Prepare the stockholders’ equity section of Fina Corporation’s balance sheet from the following accounts and balances on December 31, 2010:Common Stock, $10 par value, 30,000 sharesauthorized,
On June 6, Aretha Dafoe received an option to purchase 20,000 shares of Shalom Company $1 par value common stock at an option price of $8 per share, which is equal to the market price on that date.
At the beginning of 2009, Patel Company incurred the following start-up and organization costs: (1) attorneys’ fees with a market value of $20,000, paid with 12,000 shares of $1 par value common
Bio-Phar Technology, Inc., a biotech company, has a $24,000,000 bond issue outstanding. The bond indenture has several restrictive provisions, including requirements that current assets exceed
The Fertile Corporation plans to build or lease a new plant that will produce liquid fertilizer for the agricultural market. The plant is expected to cost $800,000,000 and will be located in the
The Wall Street Journal reported recently that many public companies are “loading up on debt to improve returns for the shareholders. . . . Domino’s Pizza Inc., Health Management Associates,
Many companies use long-term leases to finance long-term assets. Although these leases are similar to mortgage payments, they are structured in such a way that they qualify as operating leases. As a
Rago Corporation issued bonds twice during 2010. A summary of the transactions involving the bonds follows.2010Jan. 1 Issued $3,000,000 of 9.9 percent, ten-year bonds dated January 1, 2010, with
Jose Corporation has $4,000,000 of 9.5 percent, 25-year bonds dated March 1, 2010, with interest payable on February 28 and August 31. The company’s fiscal year end is February 28. It uses the
Murcia Corporation has $4,000,000 of 9.5 percent, 25-year bonds dated May 1, 2009, with interest payable on April 30 and October 31. The company’s fiscal year ends on December 31, and it uses the
Arif Corporation sold $400,000 of 12 percent, ten-year bonds at face value on September 1, 2010. The issue date of the bonds was May 1, 2010.1. Record the sale of the bonds on September 1 and the
Anna’s, Inc., has a $350,000, 8 percent bond issue that was issued a number of years ago at face value. There are now ten years left on the bond issue, and the market interest rate is 16 percent.
The long-term debt section of the Midwest Corporation’s balance sheet at the end of its fiscal year, December 31, 2009, is as follows:Prepare entries in journal form relevant to the interest
On March 1, 2010, Knap Corporation issued $1,200,000 of 10 percent, five-year bonds. The semiannual interest payment dates are February 28 and August 31. Because the market rate for similar
Smart Toy Company sold $500,000 of 9.5 percent, 20-year bonds on April 1, 2009, at 106. The semiannual interest payment dates are March 31 and September 30. The market interest rate is 8.9 percent.
Nina Corporation issued $8,000,000 in 8.5 percent, five-year bonds on March 1, 2010, at 96. The semiannual interest payment dates are September 1 and March 1. Prepare entries in journal form for the
DNA Corporation issued $4,000,000 in 10.5 percent, ten-year bonds on February 1, 2010, at 104. Semiannual interest payment dates are January 31 and July 31. Use the straight-line method and ignore
Downey Corporation sold $400,000 of 9 percent, ten-year bonds for face value on September 1, 2010. The issue date of the bonds was May 1, 2010. The company’s fiscal year ends on December 31, and
The Tramot Corporation has $2,000,000 of 6 percent bonds outstanding. There is $40,000 of unamortized discount remaining on the bonds after the March 1, 2009, semiannual interest payment. The bonds
On March 1, 2010, Fast Freight Company sold $400,000 of its 9.5 percent, 20-year bonds at 106. The semiannual interest payment dates are March 1 and September 1. The market interest rate is 8.9
On April 1, 2009, Morimoto Corporation issued $8,000,000 in 8.5 percent, five-year bonds at 98. The semiannual interest payment dates are April 1 and October 1. Prepare entries in journal form for
Is it ethical to choose aggressive accounting practices to advance a company’s business? During the 1990s, America Online (AOL), the largest Internet service provider in the United States, was one
Depreciation expense is a significant cost for companies in which plant assets are a high proportion of assets. The amount of depreciation expense in a given year is affected by estimates of useful
Hilton Hotels Corporation and Marriott International provide hospitality services. Hilton Hotels’ well-known brands include Hilton, Doubletree, Hampton Inn, Embassy Suites, Red Lion Hotels and
Roman’s Construction Company purchased a new crane for $721,000 at the beginning of year 1. The crane has an estimated residual value of $70,000 and an estimated useful life of six years. The crane
Assume that the step machine in SE 5 is depreciated using the double declining-balance method. How much would depreciation expense be in each year? Data From Problem SE5.Assume that the step
Assume that the step machine in SE 5 has an estimated useful life of 8,000 hours and was used for 2,400 hours in year 1, 2,000 hours in year 2, 2,200 hours in year 3, and 1,400 hours in year 4. How
Assume that the step machine in SE 5 has an estimated useful life of 8,000 hours and was used for 2,400 hours in year 1, 2,000 hours in year 2, 2,200 hours in year 3, and 1,400 hours in year 4. How
Ford Credit ran an advertisement offering three alternatives for a 24-month lease on a new Lincoln automobile. The three alternatives were zero dollars down and $587 per month for 24 months, $1,975
Pain medications have been in the news. The big drug company Merck had to withdraw its pain killer Vioxx from the market when it became known that the drug increased the risk of heart attacks. Other
Harbor Restaurant is a large steak restaurant in the suburbs of Detroit. Jake Takas, an accounting student at a nearby college, recently secured a full-time accounting job at the restaurant. He felt
The Houston Texans’ fifth-year pitcher Juan Alvarez made the All-Star team in 2010. Alvarez has three years left on a contract that is to pay him $2.4 million a year. He wants to renegotiate his
Kowalski Corporation’s management took the following actions, which went into effect on January 2, 2009. Each action involved an application of present value. a. Kowalski Corporation enters
Linda Lopez opened a beauty studio, Linda’s Salon, on January 2, 2010. The salon also sells beauty supplies. In January 2011, Lopez realized she had never filed any tax reports for her business and
Part A: Nazir Corporation, whose fiscal year ended June 30, 2010, completed the following transactions involving notes payable: May 21 Obtained a 60-day extension on an $18,000 trade account
Tony Garcia opened a small motorcycle repair shop, Garcia Cycle Repair, on January 2, 2009. The shop also sells a limited number of motorcycle parts. In January 2010, Garcia realized he had never
Eva Prokop is attempting to sell her business to Joseph Kahn. The company has assets of $3,600,000, liabilities of $3,200,000, and stockholders’ equity of $400,000. Both parties agree that the
Larson Equipment Corporation sold a precision tool machine with computer controls to Bondie Corporation for $200,000 on January 2 and agreed to take payment nine months later on October 2. Assuming
Ursus Motors, Inc., receives a one-year note that carries a 12 percent annual interest rate on $6,000 for the sale of a used car. Compute the maturity value under each of the following
Access the annual reports of J.C. Penney and Dillard’s. Find the accounts receivable on each company’s balance sheet and the notes to the financial statements that are related to those
Makay Products Co. is a major consumer goods company that sells over 3,000 products in 135 countries. The company’s annual report to the Securities and Exchange Commission presented the following
The following information is available for Prime Corporation as of April 30, 2010: a. Cash on the books as of April 30 amounted to $113,175.28. Cash on the bank statement for the same date was
The following information is available for Unique Globe, Inc., as of May 31, 2010: a. Cash on the books as of May 31 amounted to $43,784.16. Cash on the bank statement for the same date was
Colby Company, which uses the allowance method, has Accounts Receivable of $65,000 and an allowance for uncollectible accounts of $6,400 (credit). The company sold merchandise to Irma Hegerman for
At the beginning of 2010, the balances for Accounts Receivable and Allowance for Uncollectible Accounts were $430,000 and $31,400 (credit), respectively. During the year, credit sales were
At year end, Lam Company had currency and coins in cash registers of $2,800, money orders from customers of $5,000, deposits in checking accounts of $32,000, U.S. Treasury bills due in 80 days of
Yamaha Corporation and Pioneer Corporation are two large, diversified Japanese electronics companies. Both use the average-cost method and the lower-of-cost-or-market rule to account for inventories.
Semi Truck Sales Company (STS Company) buys large trucks from the manufacturer and sells them to companies and independent truckers who haul goods over long distances. STS has been successful in this
Sixty-nine percent of chemical companies use the LIFO inventory method for the costing of inventories, whereas only 10 percent of computer equipment companies use LIFO.12 Describe the LIFO inventory
J. C. Penney, a large retail company, has an inventory turnover of 3.4 times. Dell Computer Corporation, a well-known computer manufacturer, has an inventory turnover of 75.0. Dell achieves its high
Pearly Tooth Corporation is a large retailer of medical equipment. It operates in two adjacent warehouses. One warehouse is a showroom, and the other is used to store merchandise. On the night of May
Decent Company operates a large discount store and uses the retail method to estimate the cost of ending inventory. Management suspects that in recent weeks there have been unusually heavy losses
Rudy Brothers is a large retail furniture company that operates in two adjacent warehouses. One warehouse is a showroom, and the other is used to store merchandise. On the night of April 22, 2010, a
Ptak Company operates a large discount store and uses the retail method to estimate the cost of ending inventory. Management suspects that in recent weeks there have been unusually heavy losses from
Condensed income statements for Ken-Du Company for two years are shown below. After the end of 2010, the company discovered that an error had resulted in a $36,000 understatement of the 2009
Just a Buck Discount Stores is assessing its levels of inventory for 2009 and 2010 and has gathered the following data: Compute the inventory turnover and days’ inventory on hand for 2009 and
During 2009, Gabriella’s Fashion had beginning inventory of $960,000, ending inventory of $1,120,000, and cost of goods sold of $4,400,000. Compute the inventory turnover and days’ inventory on
Dan Markus runs a small company called Markus Construction. In the past, Markus’s site managers have each purchased construction materials for their jobs. Markus thinks that a centralized
At the end of the fiscal year, August 31, 2010, selected accounts from the adjusted trial balance for Pasha’s Delivery, Inc., appeared as follows: Required 1. Using the information given,
Selected accounts from the adjusted trial balance for Louise’s Gourmet Shop, Inc., as of March 31, 2010, the end of the fiscal year, are shown below. The merchandise inventory for Louise’s
Mega Hits Video Store maintains the following policies with regard to purchases of new videotapes at each of its branch stores: 1. Employees are required to take vacations, and the duties of
Anna Clapa, who operates a small grocery store, has established the following policies with regard to the checkout cashiers: 1. Each Cashier has his or her own cash drawer, to which no one else
Determine the missing data for each letter in the following three income statements for Sampson Paper Company (in thousands): 2010 2009 2008 Sales $572 Sales returns and allowances 48 38 Net
Using the selected year-end account balances at December 31, 2010, for the Morris General Store shown below, prepare a 2010 income statement. Show detail of net sales. The company uses the periodic
Using the selected account balances at December 31, 2010, for Receptions, Etc. that follow, prepare an income statement for the year ended December 31, 2010. Show detail of net sales. The company
An appliance dealer buys refrigerators from a manufacturer and resells them. a. The manufacturer sets a list or catalogue price of $2,500 for a refrigerator. The manufacturer offers its dealers
Develop a brief answer to each of the following questions: 1. Can a company have a “negative” financing period? 2. If you sold goods to a company in Europe and the exchange rate for
On April 15, Meier Company sold merchandise to Curran Company for $5,000 on terms of 2/10, n/30. Assume a return of merchandise on April 20 of $850, and payment in full on April 25. What is the
Bell Systems, located outside Atlanta, develops computer software and licenses it to financial institutions. The firm uses an aggressive accounting method that records revenues from the software it
The following information is from the June 30, 2011, post-closing trial balance of Beauty Supplies Corporation. Required 1. From the information provided, prepare a classified balance sheet

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