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intermediate accounting 11th
Intermediate Accounting 11th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions
(Equity Transactions and Statement Preparation) Amado Company has two classes of capital stock outstanding: 8%, $20 par preferred and $5 par common. At December 31, 2007, the following accounts were included in stockholders’ equity.Preferred Stock, 150,000 shares $ 3,000,000 Common Stock,
Letterman Company computed earnings per share as follows. Net income Common shares outstanding at year-end
Maria Shriver Corporation reported 2004 earnings per share of $7.21. In 2005, Maria Shriver reported earnings per share as followsIs the increase in earnings per share from $7.21 to $8.28 a favorable trend? On income before extraordinary item $6.40 On extraordinary item 1.88 On net income $8.28
Identify the uses and limitations of an income statement.
How to Prepare a single-step income statement.
How to Prepare a multiple-step income statement.
Explain how irregular items are reported.
Explain intraperiod tax allocation.
Explain where earnings per share information is reported.
Explain how other comprehensive income is reported.
Tim Allen Co. had sales revenue of $540,000 in 2004. Other items recorded during the year were:Prepare a single-step income statement for Allen for 2004. Allen has 100,000 shares of stock outstanding. Cost of goods sold $320,000 Wage expense 120,000 Income tax expense 25,000 Increase in value of
Shawn Bradley Company changed from straight-line depreciation to double-declining balance depreciation at the beginning of 2004. The plant assets originally cost $1,500,000 in 2002. Using straight-line depreciation, depreciation expense is $60,000 per year. Under the double-declining balance
(Computation of Net Income) Presented below are changes in all the account balances of Fritz Reiner Furniture Co. during the current year, except for retained earnings.Instructions Compute the net income for the current year, assuming that there were no entries in the Retained Earnings account
(Income Statement Items) Presented below are certain account balances of Paczki Products Co.Instructions From the foregoing, compute the following: (a) total net revenue, (b) net income, (c) dividends declared during the current year. Rental revenue Interest expense Beginning retained earnings
(Multiple-step and Single-step) Two accountants for the firm of Elwes and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following 2004 information related to P. Bride Company ($000
(Multiple-step and Extraordinary Items) The following balances were taken from the books of Maria Conchita Alonzo Corp. on December 31, 2004.Assume the total effective tax rate on all items is 34%.Instructions Prepare a multiple-step income statement; 100,000 shares of common stock were outstanding
(Multiple-step and Single-step) The accountant of Whitney Houston Shoe Co. has compiled the following information from the company’s records as a basis for an income statement for the year ended December 31, 2004.There were 20,000 shares of common stock outstanding during the year.Instructions
(Income Statement, EPS) Presented below are selected ledger accounts of Tucker Corporation as of December 31, 2004.Instructions (a) Compute net income for 2004.(b) Prepare a partial income statement beginning with income from continuing operations before income tax, and including appropriate
(Multiple-step Statement with Retained Earnings) Presented below is information related to Ivan Calderon Corp. for the year 2004.Instructions (a) Prepare a multiple-step income statement for 2004. Assume that 60,000 shares of common stock are outstanding.(b) Prepare a separate retained earnings
(Earnings Per Share) The stockholders’ equity section of Tkachuk Corporation appears below as of December 31, 2004.Net income for 2004 reflects a total effective tax rate of 34%. Included in the net income figure is a loss of $18,000,000 (before tax) as a result of a major casualty.Instructions
(Condensed Income Statement—Periodic Inventory Method) Presented below are selected ledger accounts of Spock Corporation at December 31, 2004.Spock’s effective tax rate on all items is 34%. A physical inventory indicates that the ending inventory is $686,000.Instructions Prepare a condensed
(Retained Earnings Statement) Eddie Zambrano Corporation began operations on January 1, 2001. During its first 3 years of operations, Zambrano reported net income and declared dividends as follows.The following information relates to 2004.Instructions (a) Prepare a 2004 retained earnings statement
(Earnings per Share) At December 31, 2003, Shiga Naoya Corporation had the following stock outstanding.10% cumulative preferred stock, $100 par, 107,500 shares $10,750,000 Common stock, $5 par, 4,000,000 shares 20,000,000 During 2004, Shiga Naoya’s only stock transaction was the issuance of
(Change in Accounting Principle) Tom Kothe Company placed an asset in service on January 2, 2002. Its cost was $450,000 with an estimated service life of 6 years. Salvage value was estimated to be$30,000. Using the double-declining-balance method of depreciation, the depreciation for 2002, 2003,
(Comprehensive Income) Roxanne Carter Corporation reported the following for 2004: net sales$1,200,000; cost of goods sold $750,000; selling and administrative expenses $320,000; and an unrealized holding gain on available-for-sale securities $18,000.Instructions Prepare a statement of
(Comprehensive Income) C. Reither Co. reports the following information for 2004: sales revenue$700,000; cost of goods sold $500,000; operating expenses $80,000; and an unrealized holding loss on available-for-sale securities for 2004 of $60,000. It declared and paid a cash dividend of $10,000 in
(Various Reporting Formats) The following information was taken from the records of Roland Carlson Inc. for the year 2004. Income tax applicable to income from continuing operations $187,000;income tax applicable to loss on discontinued operations $25,500; income tax applicable to extraordinary
(Multi-step Income, Retained Earnings) Presented below is information related to American Horse Company for 2004.Instructions Prepare a multi-step income statement and a retained earnings statement. American Horse Company decided to discontinue its entire wholesale operations and to retain its
(Single-step Income, Retained Earnings, Periodic Inventory) Presented below is the trial balance of Mary J. Blige Corporation at December 31, 2004.A physical count of inventory on December 31 resulted in an inventory amount of $124,000.Instructions Prepare a single-step income statement and a
(Multiple- and Single-step Income, Retained Earnings) The following account balances were included in the trial balance of J.R. Reid Corporation at June 30, 2004.The Retained Earnings account had a balance of $337,000 at June 30, 2004, before closing. There are 80,000 shares of common stock
(Irregular Items) Presented below is a combined single-step income and retained earnings statement for Sandy Freewalt Company for 2004Additional facts are as follows.1. “Selling, general, and administrative expenses” for 2004 included a usual but infrequently occurring charge of $10,500,000.2.
(Retained Earnings Statement, Prior Period Adjustment) Below is the retained earnings account for the year 2004 for LeClair Corp.Instructions (a) Prepare a corrected retained earnings statement. LeClair Corp. normally sells investments of the type mentioned above.(b) State where the items that do
(Identification of Income Statement Deficiencies) John Amos Corporation was incorporated and began business on January 1, 2004. It has been successful and now requires a bank loan for additional working capital to finance expansion. The bank has requested an audited income statement for the year
(Income Reporting Deficiencies) The following represents a recent income statement for Boeing Company.It includes only five separate numbers (two of which are in billions of dollars), two subtotals, and the net earnings figure.Instructions (a) Indicate the deficiencies in the income statement.(b)
(All-inclusive vs. Current Operating) Information concerning the operations of a corporation is presented in an income statement. Some believe that income statements should be prepared on a “current operating performance” basis (earning power concept), whereas others prefer an
(Extraordinary Items) Jeff Foxworthy, vice-president of finance for Red Neck Company, has recently been asked to discuss with the company’s division controllers the proper accounting for extraordinary items. Jeff Foxworthy prepared the factual situations presented below as a basis for
(Earnings Management) Grace Inc. has recently reported steadily increasing income. The company reported income of $20,000 in 2001, $25,000 in 2002, and $30,000 in 2003. A number of market analysts have recommended that investors buy the stock because they expect the steady growth in income to
(Earnings Management) Arthur Miller, controller for the Salem Corporation, is preparing the company’s income statement at year-end. He notes that the company lost a considerable sum on the sale of some equipment it had decided to replace. Since the company has sold equipment routinely in the
(Identification of Income Statement Weaknesses) The following financial statement was prepared by employees of Cynthia Taylor Corporation.Note 1: New styles and rapidly changing consumer preferences resulted in a $71,500 loss on the disposal of discontinued styles and related accessories.Note 2:
(Classification of Income Statement Items) As audit partner for Noriyuki and Morita, you are in charge of reviewing the classification of unusual items that have occurred during the current year.The following material items have come to your attention.1. A merchandising company incorrectly
(Comprehensive Income) Ferguson Arthur, Jr., controller for Jenkins Corporation, is preparing the company’s financial statements at year-end. Currently, he is focusing on the income statement and determining the format for reporting comprehensive income. During the year, the company earned net
3M Company The financial statements of 3M are presented in Appendix 5B or can be accessed on the Take Action! CD.Instructions Refer to 3M’s financial statements and the accompanying notes to answer the following questions.(a) What type of income statement format does 3M use? Indicate why this
Bankruptcy Prediction The Z-score bankruptcy prediction model uses balance sheet and income information to arrive at a Z-Score, which can be used to predict financial distress:EBIT is earnings before interest and taxes. MV Equity is the market value of common equity, which can be determined by
Dresser Industries Dresser Industries provides products and services to oil and natural gas exploration, production, transmission and processing companies. A recent income statement is reproduced below. Dollar amounts are in millions.Instructions Assume that 177,636,000 shares of stock were issued
The Coca-Cola Company and PepsiCo, Inc.Instructions Go to the Take Action! CD and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc.(a) What type of income format(s) is used by these two companies? Identify any differences in income
Most libraries maintain the annual reports of large companies on file or on microfiche.Instructions Obtain the 2001 annual reports for UAL Corp. and The Boeing Company, and answer the following questions concerning their income statements. (Note: Larger libraries may have CD-ROM products such as
The April 1996 issue of the Journal of Accountancy includes an article by Dennis R. Beresford, L. Todd Johnson, and Cheri L. Reither, entitled “Is a Second Income Statement Needed?”Instructions Read the article and answer the following questions.(a) On what basis would the “second income
In this simulation, you will be asked to compute various income amounts. Assume a tax rate of 30%and 100,000 shares of common stock outstanding during the year. Prepare responses to all parts.Ritter Corporation provides you with the following pre-tax information for the period.Explain the proper
At the beginning of 2004, Beausoleil Inc. entered into an 8-year nonrenewable lease agreement. Provisions in the lease require the client to make substantial reconditioning and restoration expenditures at the end of the lease.What type of disclosure do you believe is necessary for this type of
The following information was described in a note of Cebar Packing Co.“During August, A. Belew Products Corporation purchased 311,003 shares of the Company’s common stock which constitutes approximately 35% of the stock outstanding.A. Belew has since obtained representation on the Board of
Review the full disclosure principle and describe problems of implementation.
Explain the use of notes in financial statement preparation.
Describe the disclosure requirements for major segments of a business.
Describe the accounting problems associated with interim reporting.
Identify the major disclosures found in the auditor’s report.
Understand management’s responsibilities for financials.
Identify issues related to financial forecasts and projections.
Describe the profession’s response to fraudulent financial reporting.
Understand the approach to financial statement analysis.
Identify major analytic ratios and describe their calculation.
Describe techniques of comparative analysis.
Describe techniques of percentage analysis.
Linden Corporation is preparing its December 31, 2003, financial statements. Two events that occurred between December 31, 2003, and March 10, 2004, when the statements were issued, are described below.1. Aliability, estimated at $150,000 at December 31, 2003, was settled on February 26, 2004, at
Ferrari Company’s net accounts receivable were $1,000,000 at December 31, 2003, and $1,200,000 at December 31, 2004. Net cash sales for 2004 were $400,000. The accounts receivable turnover for 2004 was 5.0. Determine Ferrari’s total net sales for 2004.
(Post-Balance-Sheet Events) Madrasah Corporation issued its financial statements for the year ended December 31, 2005, on March 10, 2006. The following events took place early in 2006.(a) On January 10, 10,000 shares of $5 par value common stock were issued at $66 per share.(b) On March 1, Madrasah
(Post-Balance-Sheet Events) For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.______ 1. Settlement of federal tax case at a
(General Disclosures, Inventories, Property, Plant, and Equipment) Dan D. Lion Corporation is in the process of preparing its annual financial statements for the fiscal year ended April 30, 2004.Because all of Lion’s shares are traded intrastate, the company does not have to file any reports with
(Disclosures Required in Various Situations) You have completed your audit of Keesha Inc.and its consolidated subsidiaries for the year ended December 31, 2004, and were satisfied with the results of your examination. You have examined the financial statements of Keesha for the past 3 years. The
(Effect of Transactions on Financial Statements and Ratios) The transactions listed below relate to Botticelli Inc. You are to assume that on the date on which each of the transactions occurred the corporation’s accounts showed only common stock ($100 par) outstanding, a current ratio of 2.7:1,
3M Company In response to the investing public’s demand for greater disclosure of corporate expectations for the future, safe-harbor rules and legislation have been passed to encourage and protect corporations that issue financial forecasts and projections. Review 3M’s Analysis of Financial
The Coca-Cola Company versus PepsiCo, Inc.Instructions Go to the Take Action! CD and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc.(a) (1) What specific items does Coca-Cola discuss in its Note 1—Accounting Policies? (Prepare a
Read the article entitled “FASB Is Criticized for Inaction on Off-Balance-Sheet Debt Issue,” by Steve Liesman, Jonathan Weil, and Scott Paltrow in the January 18, 2002, Wall Street Journal. (Subscribers to Business Extra can access the article at that site.)Instructions Answer the following
Identify the three categories of debt securities and describe the accounting and reporting treatment for each category.
Understand the procedures for discount and premium amortization on bond investments.
Identify the categories of equity securities and describe the accounting and reporting treatment for each category.
Explain the equity method of accounting and compare it to the fair value method for equity securities.
Describe the disclosure requirements for investments in debt and equity securities.
Discuss the accounting for impairments of debt and equity investments.
Describe the accounting for transfer of investment securities between categories
Explain who uses derivatives and why
Understand the basic guidelines for accounting for derivatives
Describe the accounting for derivative financial instruments
Explain how to account for a fair value hedge
Explain how to account for a cash flow hedge.
Identify special reporting issues related to derivative financial instruments that cause unique accounting problems
Describe the disclosure requirements for traditional and derivative financial instruments.
Describe the accounting for variable-interest entities.
(Available-for-Sale Investments) Octavio Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits (see page 894).Feb. 1, 2006 Chiang Kai-Shek Company common stock, $100 par, 200 shares $ 37,400 April 1 U.S. government
The Procter & Gamble Company (P&G)The financial statements of P&G are presented in Appendix 5B or can be accessed on the KWW website.Instructions Refer to P&G’s financial statements and the accompanying notes to answer the following questions.(a) What investments does P&G report in 2004, and
Your client, Cascade Company, is planning to invest some of its excess cash in 5-year revenue bonds issued by the county and in the stock of one of its suppliers, Teton Co. Teton’s shares trade on the overthe-counter market. Cascade plans to classify these investments as available-for-sale. They
Describe the accounting for the issuance, conversion, and retirement of convertible securities.
Explain the accounting for convertible preferred stock.
Contrast the accounting for stock warrants and for stock warrants issued with other securities.
Describe the accounting for stock compensation plans under generally accepted accounting principles.
Discuss the controversy involving stock compensation plans.
Compute earnings per share in a simple capital structure.
Compute earnings per share in a complex capital structure.
Explain the accounting for various share-based compensation plans
How to Compute earnings per share in a complex situation
(EPS: Simple Capital Structure) On January 1, 2008, Wilke Corp. had 480,000 shares of common stock outstanding. During 2008, it had the following transactions that affected the common stock account.February 1 Issued 120,000 shares March 1 Issued a 10% stock dividend May 1 Acquired 100,000 shares of
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