Questions and Answers of Fundamentals Financial Accounting

Lynn Company has outstanding 60,000 common shares of $10 par value and 25,000 preferred shares of $20 par value (8 percent). On December 1, 2017, the board of directors voted an 8 percent cash
Superior Corporation has the following shares outstanding: Preferred shares: 6 percent; par $15; 8,000 outstanding sharesCommon shares: par $8; 30,000 outstanding sharesOn October 1, 2017, the
In 2016, Rec Room Sports reported earnings per share of $8.50 when its share price was $212.50. In 2017, its earnings increased by 20 percent. If the P/E ratio remains constant, what is the price of
Indicate the direction of effect (+ for increase, ? for decrease, or NE for no effect) of each of the following transactions on the accounting equation in the table below. The first transaction is
On July 1, 2017, Jones Limited had the following share structure: Common shares (par $1; 200,000 authorized shares; 150,000issued and
A press release contained the following announcement:Castleton, Sask., April 30, 2017: Ridgeton Corporation announced today that its Board of Directors declared a quarterly cash dividend of $0.12 per
Colliers Inc. has 100,000 shares of cumulative preferred shares outstanding. The preferred shares pay dividends in the amount of $2 per share, but because of cash flow problems, the company did not
On December 31, 2016, the shareholders’ equity section of the balance sheet of R & L Corporation reflected the following:Common shares (no-par value; authorized 60,000 shares;
The 2017 annual report for Sneer Corporation disclosed that the company declared and paid preferred dividends in the amount of $119.9 million in 2017. It also declared and paid dividends on common
Two music companies reported the following in their 2017 financial statements (in thousands of dollars, except earnings per share amounts and share prices): Required: 1. Compute the 2017 ROE for
Two magazine companies reported the following in their 2017 financial statements (in thousands of dollars, except earnings per share amounts and share prices): Required: 1. Compute the 2017 ROE
Avery?s Rentals, Inc. and Rent-A-Matic, Inc. are two publicly traded rental companies. They reported the following in their 2017 financial statements (in millions of dollars, except per-share
Ava School of Learning obtained a charter at the start of 2017 that authorized 50,000 shares of no-par value common shares and 20,000 no-par value preferred shares. During 2017, the following
At December 31, 2017, Carlos Company had the following Retained Earnings and shares outstanding:Common shares (490,000 outstanding shares)........................................$490,000Preferred
Ritz Company had the following shares outstanding and Retained Earnings at December 31, 2017:Common shares (500,000 outstanding shares)...............................................$500,000Preferred
Water Tower Company had the following shares outstanding and Retained Earnings at December 31, 2017:Common shares (outstanding 30,000 shares)..............................$240,000Preferred shares
RiteSide Limited was issued a charter on January 15, 2017, that authorized the following shares:Common shares: no-par value; 100,000 shares; one vote per sharePreferred shares: 7 percent; no-par
Your parents have just retired and have asked you for some financial advice. They have decided to invest $100,000 in a company very similar to Molson Coors Brewing Company. The company has issued
At December 31, 2017, the records of Seacrest Enterprises provided the following selected and incomplete data:Common shares: no changes during 2017Shares authorized: 5,000,000.Shares issued,___;
At December 31, 2017, the records of Kozmetsky Corporation provided the following selected and incomplete data:Common shares: no changes during 2017Shares authorized: 5,000,000.Shares issued,___;
At December 31, the records of Nortech Corporation provided the following selected and incomplete data:Common shares: no changes during the current yearShares authorized: 5,000,000Shares issued, ___
Shelby Corporation was organized in January 2017 by ten shareholders to operate an air-conditioning sales and service business. The charter issued by the province authorized the following
Norwest Aviation received its charter during January 2017. The charter authorized the following shares:Preferred shares: 8 percent; no-par value; authorized 20,000 sharesCommon shares: no-par value;
Doulane Marine obtained a charter from the province in January 2017 that authorized 1,000,000 common shares. During the first year, the company earned $429,000 and the following selected transactions
Beamsley Corporation was organized in 2017 to operate a financial consulting business. The charter authorized 12,000 common shares, no par value. During the first year, the following selected
Refer to the information in E10-14 and assume Selton Corporation accounts for the bond using the simplified effective-interest method shown in Supplement 10C.E10-14On January 1, 2017, when the market
Refer to the information in E10-14 and assume Selton Corporation uses the effective-interest method to amortize the bond discount.E10-14On January 1, 2017, when the market interest rate was 9
On January 1, 2014, Buchheit Enterprises reported $95,000 in a liability called Bonds Payable, Net. This liability related to a $100,000 bond with a stated interest rate of 5 percent that was issued
On January 1, 2017, when the market interest rate was 9 percent, Selton Corporation completed a $200,000, 8 percent bond issue for $187,163. The bonds were dated January 1, 2017, pay interest each
Clem Company issued $800,000 of ten-year, 5 percent bonds on January 1, 2017. The bonds sold for $741,000. Interest is payable annually on December 31. Using effective-interest amortization, prepare
What is a contingent liability? How is a contingent liability reported under ASPE? How does this differ under IFRS?
Simko Company issued $600,000 of ten-year, 5 percent bonds on January 1, 2017. The bonds were issued for $580,000. Interest is payable annually on December 31. Using straight-line amortization,
According to one report, Kraft Foods Inc. sells enough Kool-Aid? mix to make 4,500 litres of the drink every minute during the summer and over 2.5 billion litres each year. Assume at December 31,
Grocery Corporation received $300,328 for 11 percent bonds issued on January 1, 2018, at a market interest rate of 8 percent. The bonds had a total face value of $250,000, stated that interest would
Assume the same facts as PA10-7, except that Surreal uses the simplified effective-interest bond amortization method, as shown in Supplement 10C.PA10-7On January 1, 2017, Surreal Manufacturing issued
Hondor Corporation issued bonds and received cash in full for the issue price. The bonds were dated and issued on January 1, 2017. The stated interest rate was payable at the end of each year. The
E-Tech Initiatives Limited plans to issue $500,000 of ten-year, 4 percent bonds. Interest is payable annually on December 31. All of the bonds will be issued on January 1, 2018.a. Show how the bonds
On January 1, 2017, Surreal Manufacturing issued 600 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually on December 31, and a maturity date of December 31,
The Peg Corporation (TPC) issued bonds and received cash in full for the issue price. The bonds were dated and issued on January 1, 2017. The stated interest rate was payable at the end of each year.
On January 1, 2017, Loop de Loop Raceway issued 600 bonds, each with a face value of $1,000, a stated interest rate of 5 percent paid annually on December 31, and a maturity date of December 31,
Reader’s Digest Association is a publisher of magazines, books, and music collections. The following note is from a recent annual report:RevenuesSales of our magazine subscriptions are deferred (as
Barton Chocolates used a promissory note to borrow $1,000,000 on July 1, 2017, at an annual interest rate of 6 percent. The note is to be repaid in yearly instalments of $200,000, plus accrued
Greener Pastures Corporation borrowed $1,000,000 on November 1, 2017. The note carried a 6 percent interest rate with the principal and interest payable on June 1, 2018. Show the accounting equation
Marshalls Corporation completed a $500,000, 7 percent bond issue on January 1, 2017. The bonds pay interest each December 31 and mature ten years from January 1, 2017. Required: 1. Provide the
Net Work Corporation, whose annual accounting period ends on December 31, issued the following bonds: Date of bonds: January 1, 2017Maturity amount and date: $200,000 due in 10 years (December 31,
SWest Corporation issued bonds with the following details:Face value: $600,000Interest: 9 percent per year payable each December 31Terms: Bonds dated January 1, 2014, due five years from that dateThe
Assume that on December 1, 2017, your company borrowed $14,000, a portion of which is to be repaid each year on November 30. Specifically, your company will make the following principal payments:
Lakeview Company completed the following two transactions. The annual accounting period ends December 31.a. On December 31, calculated the payroll, which indicates gross earnings for wages ($80,000),
Macier Company completed the salary and wage payroll for March 2017. The payroll provided the following details:Salaries and wages earned............................................$230,000Employee
Lightning Electronics is a mid-size manufacturer of lithium batteries. The company’s payroll records for the November 1–14 pay period show that employees earned wages totalling $100,000 but that
Define liability. What is the difference between a current liability and a long-term liability?
TigerCom completed the following transactions. The annual accounting period ends December 31. Jan. 3 Purchased merchandise on account at a cost of $24,000 (Assume a perpetual inventory system.) Jan.
Assume that EZ Curb completed the following transactions during 2017. December 31, 2017 is the end of the annual accounting period. Jan. 8 Purchased merchandise on account at a cost of $14,000
Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. Hudson?s Bay Company (HBC) is Canada?s largest departmentstore. Each
Zoom Car Corporation (ZCC) plans to purchase approximately 100 vehicles on December 31, 2017, spending $2 million plus 11 percent total sales tax. ZCC expects to use the vehicles for five years and
Blue Sky Flights reports the cost of its aircraft in a single category called Flight Equipment. What impact will IFRS have on this aspect of Blue Sky’s accounting?
Refer to E9-4. Data From E9-4.Wiater Company operates a small manufacturing facility. On January 1, 2017, an asset account for the company showed the following balances: Manufacturing
Assume the following data were included in a recent Apple Inc. annual report (in millions): Required: 1. Compute Apple’s fixed asset turnover ratio for 2015, 2016, and 2017. Round your
The following information was reported by Amuse Yourself Parks (AYP) for 2012: Net fixed assets (beginning of year).......... $8,450,000Net fixed assets (end of year)......................
Conrad Inc. purchased a patent for $1,000,000 for “a specialty line of patented switch plate covers and outlet plate covers specifically designed to light up automatically when the power fails.”
Kreiser Company had three intangible assets at the end of 2017 (end of the accounting year): a. A patent was purchased from J. Miller on January 1, 2017, for a cash cost of $5,640. When
As part of a major renovation at the beginning of the year, Hunter Pharmaceuticals, Inc. sold shelving units (store fixtures) that were ten years old for $1,000 cash. The shelves originally cost
Refer to E9-8. Data From E9-8. On January 1, 2017, the records of Great Grass Corp. (GGC) showed the following regarding production equipment: Equipment (estimated residual value,
Prepare journal entries to record the transactions that follow. a. Mortell Limited disposed of two computers at the end of their useful lives. The computers had cost $4,800 and their Accumulated
Sonin Company purchased and installed electronic payment equipment at its drive-in restaurant at the beginning of the year at a cost of $27,000. The equipment has an estimated residual value of
Calculate the amount of depreciation to report during the year ended December 31, 2017, for equipment that was purchased at a cost of $33,000 on September 1, 2017. The equipment has an estimated
Calculate the book value of a two-year-old machine that cost $200,000, has an estimated residual value of $40,000, and has an estimated useful life of four years. The company uses the
The following transactions and adjusting entries were completed by Super Swift, a local delivery company. The company uses straight-line depreciation for delivery vehicles, double-declining balance
Refer to the information in E9-4. Data From E9-4.Wiater Company operates a small manufacturing facility. On January 1, 2017, an asset account for the company showed the following
Calculate the book value of a two-year-old machine that cost $200,000, has an estimated residual value of $40,000, and has an estimated useful life of 20,000 machine hours. The company uses
Casting Crown Construction entered into the following transactions during a recent year: January 2 Purchased a bulldozer for $200,000 by paying $20,000 cash and signing a $180,000
Calculate the book value of a two-year-old machine that cost $200,000, has an estimated residual value of $40,000, and has an estimated useful life of four years. The company uses straight-line
During 2017, Rayon Corporation disposed of two different assets. On January 1, 2017, prior to disposal of the assets, the accounts reflected the following: The machines were disposed of in the
During 2017, Ly Company disposed of two different assets. On January 1, 2017, prior to disposal of the assets, the accounts reflected the following: The machines were disposed of in the
Conover Corp. ordered a machine on January 1, 2017, at a purchase price of $30,000. On delivery, January 2, 2017, the company paid $8,000 on the machine and signed a note payable for the balance. On
What is the term for recording costs as assets rather than as expenses? Describe how the decision to record costs as assets rather than expenses affects the balance sheet and income statement in the
At the beginning of the year, Oak mountain Company bought three used machines from Canadian Manufacturing, Inc. The machines immediately were overhauled, installed, and started operating. Because the
During 2017, Bhumika Company disposed of two different assets. On January 1, 2017, prior to the assets’ disposal, the accounts reflected the following: The machines were disposed of in the
The following is a list of account titles and amounts (in thousands) reported at December 31, 2017, by Megan’s Veterinary Clinic: Required: 1. Prepare the asset section of a classified
The following is a list of account titles and amounts (in thousands) reported at June 30, 2017, by Darian’s Dirt Bikes, Inc., a retail distributor of motorcycles: Required: 1. Prepare the
To attract retailers to its shopping centre, the Makepiece Mall is going to lend money to tenants under formal contracts, provided that they use it to renovate their store space. On November 1, 2017,
Innovations Corp (IC) uses the percentage of credit sales method to estimate bad debts each month and then uses the aging method at year-end. During November 2017, IC sold services on account for
Fleet Events Corporation has provided event-planning services for several years. The company uses the percentage of credit sales method to estimate bad debts for internal monthly reporting purposes.
Peterson Furniture Designs is preparing its annual financial statements dated December 31. Ending inventory information about the five major items stocked for regular sale
Assume you recently obtained a job with Perfume Passion, the largest specialty retailer of discounted fragrances in Canada. Your job is to estimate the amount of write-down required to value
Aircard Corporation tracks the number of units purchased and sold throughout each accounting period, but applies its inventory costing method at the end of each period as if it uses a periodic
The chapter discussed three inventory costing methods that are acceptable in Canada. List the three methods and briefly explain each.
Custom College Coasters specializes in logo-imprinted drink coasters. The company reported the following balances in its unadjusted trial balance at December 1. The company buys coasters from
Assume it is now December 31, 2017, and Nicole has just completed her first year of operations at Nicole’s Getaway Spa. Looking through her trial balance, she notices that there are some items that
Assume Amazon.com reported the following amounts in its financial statements (in millions): Required: 1. Determine the inventory turnover ratio and average days to sell inventory for 2017
Wheelys, Inc. designs and sells footwear with a wheel in the heel, worn by sometimes annoying kids at shopping malls. It recently disclosed the following information concerning the Allowance for
McDonald’s Corporation is the world’s largest chain of hamburger fast-food restaurants. It has an Allowance for Doubtful Accounts that relates to its accounts and notes receivable. Assume that in
Xerox Corporation is the company that made the photocopier popular, although it now describes itself as a technology and services enterprise that helps businesses deploy document management
a. Nutware Productions Inc. generated sales of $30,000 and gross profit of $10,000 last year. The company estimates that it would have generated sales of $60,000 if it had extended credit, but this
At the end of 2017, Blackberry Hill Productions, Inc. used the aging of accounts receivable method to estimate that its Allowance for Doubtful Accounts should be $19,750. The account had an
Intel Corporation is a well-known supplier of computer chips, boards, systems, and software building blocks. Assume the company recently reported the following amounts (in millions) in its unadjusted
Assume the 2017 ending inventory of Shea’s Shrimp Shack was understated by $10,000. Explain how this error would affect the amounts reported for cost of goods sold and gross profit for 2017 and
Repeat M7-8, except assume Literacy for the Illiterate uses a perpetual inventory system and it sold 600 units between January 9 and January 28. Data From M7-8.In its first month of
Polaris Industries Inc. is the biggest snowmobile manufacturer in the world. Assume that it reported the following amounts in its financial statements (in millions): Required: 1. Calculate
Stintson Company recently agreed to loan an employee $100,000 for the purchase of a new house. The loan was executed on May 31, 2017, and is a one-year, 6 percent note, with interest payments

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