Introduction To AccountingAn Integrated Approach 8th Edition Penne Ainsworth, Dan Deines - Solutions

Zhu Corporation is authorized to issue 1,500,000 shares of its $1 par value common stock and 400,000 shares of $50 par value preferred stock. Zhu plans to sell 20,000 shares of common stock at $35 and 1,000 shares of its preferred stock at $25 per share. How much capital will Zhu generate by this
What is unlimited liability and why is it considered a disadvantage for a partnership?
Rogers Corporation plans to issue 7,500 shares of its $1 par value common stock for $52 per share and 800 shares of its $30 par value preferred stock for $63 per share. What would Roger’s legal capital be? What would be the amount of capital received in excess of the par value of common and
Ashley Golden is a sole proprietor offering cooking classes for clients throughout the region. She is considering starting a syndicated television cooking show for one year. She estimates that she will need $500,000 to start this venture. She believes the television show will earn her $50,000 this
Why is a salary allowance used in the allocation of income in a partnership?
Dillon Corporation has 5,000 shares of $100 par value 8 percent cumulative preferred stock included in its total owners’ equity of $2,000,000. Its budgeted income for the period is $300,000. If the preferred stock has a liquidating value of $400,000, what is the expected return on common equity?
Why is an interest allowance used in the allocation of income in a partnership?
Why is it possible for a partner’s equity to increase when the partnership generates a loss?
The board of directors of Petrisin Manufacturing, Inc., may declare a dividend this year but has not declared a dividend for the past two years. The corporation has 800,000 shares of $1 par value common stock authorized and 200,000 shares issued and outstanding. It also has 40,000 shares of 5
Compare and contrast callable versus redeemable preferred stock.
Ady, Inc., is authorized to issue 1,000,000 shares of common stock and has 250,000 shares of $1 stated value common stock issued and outstanding. The stock has a market value of $32 per share on October 14 when the board of directors is considering a 10 percent stock dividend to holders of record
Distinguish among authorized shares, issued shares, and outstanding shares of stock.
What is the distinction between the par value and market value of a stock?
How does a cash dividend differ from a stock dividend or a property dividend?
Discuss the ethical implications of using derivatives to shift risk from one entity to another.
On November 30, 2019, Harris Company plans to purchase a $350,000 piece of equipment by making a 20 percent down payment and signing a 15-year installment loan contract with a 7 percent interest rate for the balance. The loan is to be repaid using monthly installments starting on December 31, 2019.
Springer Inc., plans to acquire a trenching machine on June 1, 2019, with a list price of $62,000, by paying $12,000 down and signing a four-year, $50,000 noninterest-bearing note. The market rate of interest is 9 percent, compounded annually. Springer prepares its budgeted financial statements on
XYZ Corporation plans to acquire a building (with a useful life of 10 years) by issuing a $5,000,000, 10-year, 3 percent note to the former owner of the building. XYZ will value the building and the note using an interest rate of 10 percent. What impact will this decision have on XYZ’s budgeted
Messier Company is planning to finance several projects and wants you to determine the cash inflows and outflows of the following bonds. The market interest rate for Messier Company is 8 percent.1. $100,000, 8 percent note, interest payable quarterly, due in eight years.2. $500,000, 6 percent note,
Borthick Basketball Company is going to expand its manufacturing operations and plans to borrow some of the funds necessary for the expansion. Borthick wants to issue a 10-year, 9 percent, $600,000 note that pays interest semiannually but is concerned about the impact of the note. Assume the market
Larkins is planning to issue debentures with a face value of $1,000,000 on September 1, 2020. The debenture matures in 10 years and have a face interest rate of 8 percent that is paid semiannually on March 1 and September 1 each year. Larkins is uncertain about what the market interest rate will be
Describe the interest expense reflected on the budgeted income statement over the life of a lumpsum payment (noninterest-bearing) note.
Jing Leasing service recently purchased drilling equipment for $200,000 and wants to lease it to Huss Excavation Company. If Huss accepts, it will sign a lease agreement on May 1, 2019. The equipment has an estimated life of five years, and the lease term is for five years. During the period of the
Describe the interest expense reflected on the budgeted income statement over the life of a periodic payment (installment) note.
Double J Construction Company plans to buy a used dump truck that has a price of $78,000. Double J is going to put $10,000 down and the dealer has offered to finance the remaining $68,000 with an installment note at 5 percent interest for 48 months.Required:A. What cost will be assigned to the
Li Delivery Corporation is planning to issue $10,000,000, 10-year, 7 percent bonds. The bonds are dated May 1, 2019, with interest paid annually on May 1. If the bonds are sold on May 1, 2019, to yield the 5 percent market rate of interest, how much cash will Li Delivery raise by issuing the bonds?
BRHC Corporation has issued bonds with a $12,000,000 face value that has a carrying value of $11,232,125 on September 1, 2019. For each of the following assumptions, describe the cash flow that will occur and the impact each scenario will have on BRHC’s budgeted balance sheet and income
Describe the carrying value shown on the budgeted balance sheet over the life of a periodic payment (installment) note.
Using the information in E14.7, how much cash will Li Delivery Corporation receive if the bonds have a market interest rate of 8 percent? How much interest expense will Li Delivery incur during the first year of the bonds’ life? How much cash will the corporation pay out during the first year of
Hunsacker Corporation’s capital expenditure budget calls for the construction of a new addition to the plant and the corporation’s controller plans to borrow $8,000,000 to finance a portion of the construction. While the controller has decided to issue a three-year note, she is undecided on
Describe the carrying value shown on the budgeted balance sheet over the life of a lump-sum payment (noninterest-bearing) note.
Why does a discount on a note arise?
What distinguishes a bond from other types of debt instruments?
On October 1, 2019, Wenke Corp signs a lease to use a piece of equipment for seven years. The lease requires Wenke to make seven payments of $27,865 the first of which is on October 1, 2019, the date the lease is signed. Wenke’s market interest rate is 9 percent. What is the lease liability that
Why does a premium on a note arise?
Annabel Corporation’s bonds have a face value of $11,000,000 and a call price of 103. On February 1, 2019, the bonds have a carrying value of $11,200,000 on Annabel’s books and a market price of 99 1/8 in the secondary market. If Annabel wants to retire the entire bond issue, how much will it
The Harter Corporation has issued bonds with a face value of $4,000,000 that are convertible on a 50:1 basis (50 shares of common stock for one bond) and have a call price of 104. Describe the cash flows if the bonds are called when their carrying (book) value is $3,900,000. Describe the cash flows
Refer to E17.3. How does your answer change if the toy division showed a loss from operations of $800,000 and if Hora experiences a gain on disposal of the toy division of $500,000? Show your calculations.Data from E17.3Hora Sporting Goods decided to sell its children’s toy division during 2019.
Describe how a corporation raises money by issuing bonds.
Glatt Enterprises needs to borrow $100,000. It plans to sign a noninterest-bearing note payable for eight years when the market rate of interest is 6 percent compounded quarterly. How much money will Glatt receive when it signs the note? How much money will Glatt pay the lender? What is the
Clifton, Inc., needs to borrow some money. It prepares an eight-year periodic and lump-sum payment note with a face value of $100,000 and a face rate of interest of 7 percent paid semiannually. If the market rate of interest is 6 percent, how much money will Clifton receive? How much is the
When planning to issue a bond, why would a company use a conversion feature?
When planning to issue a bond, why would a company use a call feature?
What is the distinction between a bearer bond and a registered bond?
What factors should be considered when choosing a debt instrument?
What does the Paid-in Capital from Treasury Stock account represent? How is it reported on a firm’s financial statements?
On April 1, 2019, Arnwine Supply issued $50,000,000 in 15-year, 10 percent bonds that pay interest annually on April 1. The bonds were issued on April 1, 2019, when the market interest rate was 11 percent. Arnwine Supply’s fiscal year ends December 31.Required:A. Make the amortization schedule
On June 20, 2019, the board of directors of Henk Company declared a $164,000 dividend for its common shareholders. The date of payment for the dividend is July 15, 2019, to shareholders of record on June 30, 2019. Record all the appropriate journal entries.
Burrell Industries’ board of directors authorized the issuance of $60,000,000 in 10-year, 9 percent bonds. The bonds are dated November 1, 2019, and interest is paid semiannually on May 1 and November 1. Burrell closes its books on June 30 each year. The bonds were issued on November 1, 2019,
On July 1, 2019, Badertscher Corporation purchased 2,000 shares of its $0.10 par common stock for $15 per share. Make the entries for the following treasury stock transactions:A. Make the entry to record the purchase of treasury stock on July 1, 2019.B. On July 18, 2019, it sold 600 of the treasury
On August 15, 2019, the accounts and information that would appear in its shareholders’ equity section of Gilman Company’s balance sheet are listed below:1. On August 15, 2019, the board of directors declared a 5 percent stock dividend. The date of distribution was September 25, 2019, to the
What does a deficit balance in Retained Earnings indicate?
Noble Corporation has a 7 percent market interest rate and a December 31 fiscal yearend. During 2019 the following notes were issued to acquire equipment:June 1 Issued a $140,000, two-year, 6 percent note for a fabrication machine. The face interest is paid semiannually on December 1 and June
The Glassburn Corporation made the following transactions in 2019 when its market rate of interest was 6 percent. Glassburn has a December 31 fiscal year-end.March 1 Purchased $42,000 of office equipment from Office World by paying $5,000 down and signing a two-year installment note with
What distinguishes par value from no-par stock in the shareholders’ equity section of the balance sheet?
In 2002, Sherron Watkins along with Cynthia Cooper and Coleen Rowley were named Time magazine’s Persons of the Year 2002. Each of these women faced personal risks to reveal the wrongdoings at Enron, WorldCom, and the FBI, respectively. Although Sherron Watkins never really “blew” the whistle,
The promotions manager of Waterbed World is interested in running a “36 months, no interest sale.” He wants to offer customers the opportunity to buy waterbeds and to finance the purchase by merely dividing the price of the waterbed by 36 to determine the customer’s monthly payment. However,
In 2002, Cynthia Cooper, Sherron Watkins, and Coleen Rowley were named Time magazine’s Persons of the Year 2002. Each of these women faced personal risks to reveal the wrongdoings at WorldCom, Enron, and the FBI, respectively. Cynthia Cooper was the head of the internal audit department at
The Shepersky Corporation was authorized to issue 2,000,000 shares of $0.01 par value common stock and 200,000 shares of $50 par value, 10 percent preferred stock. To date, Shepersky has issued 600,000 shares of common stock and no preferred stock. Shepersky is contemplating the acquisition of a
Johnson Corporation decided to pay a dividend of $2.00 per share. The corporation has 2,500,000 shares authorized, 800,000 shares issued, and 750,000 shares outstanding on the date of declaration. Make the entries necessary for the dividend on the following dates: June 15, 2019 Date of declaration
The following partial payment schedule is for a $75,000 note the Steiner Corporation issued for cash on October 31, 2019. If Steiner has a December 31 fiscal year-end, make the entries for the issuance of the note and through December 31, 2019. Period Payment Interest Principal Carrying
Sprague, Inc., has 10,000,000 shares of $2 par value common stock authorized and 1,500,000 shares issued and outstanding. The stock had a fair market value of $20 per share on November 15, 2019, when the board of directors declared a 5 percent stock dividend to holders of record on November 27,
Huss has signed a lease agreement with Jing Leasing Co. on January 1, 2019. The equipment being signed has an estimated life of five years, and the lease term is for 5 years. During the period of the lease, Huss will be responsible for all repairs and maintenance of the drilling equipment. The
When is an installment note classified as both a current liability and a long-term liability?
Refer to Dell Computer (www.dell.com, or SEC.gov) and answer the following questions:A. Does it have preferred stock? If so, how many shares are authorized, issued, and outstanding, and what is the par value?B. Does it have common stock? If so, how many shares are authorized, issued, and
Refer to Walt Disney Company (www.disney.com or SEC.gov) and answer the following questions:A. Does it have preferred stock? If so, how many shares are authorized, issued, and outstanding, and what is the par value?B. Does it have common stock? If so, how many shares are authorized, issued, and
On September 1, 2019, Purinton Telescopes borrowed $100,000 cash at 6 percent on an eight-year installment note. Monthly payments start on October 1, 2019. Prepare an installment loan repayment schedule for the first three months of the note and make the entries for the three months.
Gland Corporation issued for cash a $400,000, 7 percent, three-year bond on September 1, 2019, that pays interest annually. Gland Corporation has a December 31 fiscal year-end. Make the entries for the first year of the note’s life if the market rate of interest is 6.5 percent.
Baugh Travel, whose year-end is December 31, purchased $55,500 worth of office furniture on January 7, 2019, and has an estimated useful life of five years and a salvage value of $500. Calculate the depreciation expense for the first three years of the office furniture and show how the office
Glenda Eichman is responsible for the Available-for- Sale Securities of the Walk-On Shoe Company. At December 31, 2019, the cost of the Available-for-Sale Securities was $900,000 and the market value was $925,000. During 2020, she sold Available-for- Sale Securities that cost $100,000 for $105,000.
Using the information in E15.13, show how the installment note is reported on Steiner Corporation’s income statement, balance sheet, and statement of cash flows for the year ended December 31, 2019 (don’t worry about current versus long-term debt).Data from E15.13The following partial payment
On November 1, 2019, Phillips Corporation raised $2,382,041.19 by issuing a five-year, $3,500,000 noninterest-bearing note. The amortization table for the note follows. Make the entries for the note from November 1, 2019, to December 31, 2020. Period Payment Interest 11/1/19 11/1/20 $0.00
Using the information in E15.15, show how Phillips Corporation’s income statement and balance sheet report the impact of this note for the years ended December 31, 2019, and December 31, 2020.Data from E15.15On November 1, 2019, Phillips Corporation raised $2,382,041.19 by issuing a five-year,
On June 1, 2019, Jorgensen Corporation purchased a piece of equipment with a list price of $200,000 and signed a five-year noninterest-bearing note. The market rate at the time the note was signed was 8 percent. Given the following amortization schedule for the note and the fact that Jorgensen has
What constitutes the carrying value of a noninterest-bearing note?
What constitutes the carrying value of a bond?
The Brinkerhoff Company signed a $400,000, 6 percent, four-year bond dated May 1, 2019, when the market rate of interest was 6 percent. Interest on the bond is payable semiannually on November 1 and May 1 each year. The company closes its books annually on December 31. Prepare the entries for the
What is the difference between the accounting for capital and operating leases?
Scott Corporation issued a $100,000, eight-year, 7 percent note for cash on June 1, 2019. The note pays interest semiannually and the market rate of interest was 6 percent when the note was issued. Given this information, make the entries for the first year of the note’s life if Scott Corporation
Using the information from E15.21 and assuming the market rate of interest was 8 percent, make the entries for the first year of the bond’s life and show how Scott would report its bond activities on its 2019 financial statements.Data from E15.21Scott Corporation issued a $100,000, eight-year, 7
On January 1, 2019, Wenke Corp signs a lease to use a piece of equipment for seven years. The lease requires Wenke to make seven payments of $27,865, the first of which is on January 1, 2019, the date the lease is signed. Wenke’s market interest rate is 9 percent. Assuming this is a capital
Use the same facts as E15.23, but assume the lease is considered an operating lease. What entry will Wenke make when the lease is signed? What entry(s) are made on December 31, 2019? What is reported on the financial statements? How would Wenke know this is an operating lease? What entry is made on
What incentives might management have to classify investments as trading securities versus available-for-sale securities? What are the ethical implications of classifying securities according to “management’s intent”?
What factors do companies consider in determining the cost of plant assets?
Refer to the financial statement of a publicly traded company of your choice (See EDGAR at SEC.gov) and answer the following questions:A. Which depreciation method is used?B. Does the company have intangible assets? If so, how are they amortized?C. What is the carrying value of its property, plant,
Jackson Barton is the CFO of Games Inc. a software company that designs video games. His company uses investments to manage their cash and he has presented you with the following financial information about the investments Games Inc. has on December 31, 2019. This is the first year Games Inc. has
As you know, extraordinary repairs and betterments are recorded as capital expenditures while maintenance and normal repairs are recorded as expenses in the period incurred. What incentives might management have to classify expenditures as “extraordinary” or “ordinary”? What are the ethical
Should the cost of paving a parking lot be treated as a capital or revenue expenditure? Why?
Whispering Recording Company (WRC) acquired the following assets at the beginning of 2019:1. The patent to manufacture a revolutionary compact disc. The purchase price was $2,300,000, and there are 16 years remaining in the legal life of the patent.2. The copyright to an album by the newest country
Winters Company purchased a new van to expand its business. The invoice price of the van was $35,400, with additional costs of $950 for dealer prep and $675 in destination charges. Winters also had the dealer install special roof racks at a cost of $1,450 and paid $2,255 in sales tax, $175 in
Alexander, Inc., whose year-end is December 31, purchased a delivery truck on May 2, 2019. The invoice price was $63,500 and included dealer prep and destination charges of $4,850. Alexander also paid sales tax of $4,785, registration fees of $395, anda $100 fee to obtain a title. On May 5, 2019,
Prager, Inc., acquired a mine for $870,000 at the beginning of the year. Of the total purchase price, $100,000 was allocated to the land while the remainder was allocated to the minerals in the mine itself. Prager estimates that 15,400,000 tons of ore are in the mine. During the year, Prager mined
What is depreciation?
What is the carrying value of an asset?
Bundy Company purchased several computerized cash registers on April 2, 2019, at a total cost of $36,600. Estimated useful life of the registers is four years, and their total expected salvage value is $1,600. Bundy uses the straight-line method of depreciation and has a December 31 year-end.
Refer to Walt Disney Company (www.disney.com) and answer the following questions:A. Which depreciation method is used?B. Does the company have intangible assets? If so, how are they amortized?C. What is the carrying value of its property, plant, and equipment? What is the balance of accumulated
Refer to Dell Computers (www.dell.com) and answer the following questions:A. Which depreciation method is used?B. Does the company have intangible assets? If so, how are they amortized?C. What is the carrying value of its property, plant, and equipment? What is the balance of accumulated
McKain, Inc., closes its books on October 31 and prepares depreciation adjustments annually. On July 27, 2019, McKain sold some equipment with an original cost of $36,250 for $18,500. The equipment was purchased on November 4, 2014, and was depreciated using the straight-line method and had an
Under what circumstances are gains and losses not recognized in a noncash exchange?
When gains and losses are not recognized in a noncash exchange, how is the cost of the new asset determined?

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Introduction To AccountingAn Integrated Approach 8th Edition Penne Ainsworth, Dan Deines - Solutions

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