Chapter 5 Set B Exercises Libby 7E

Chapter 05 - Communicating and Interpreting Accounting Information

Chapter 5 – Set B Exercises – Libby 8e

E5-1B (Similar to E5-6) [LO 3] Preparing and Interpreting a Classified Balance Sheet with Discussion of Terminology (Challenging)

Kingston, Inc., manufactures, markets, and distributes fishing gear. Presented here are the items listed on its recent balance sheet (dollars in millions) in alphabetical order:

Required:

1. Prepare a classified consolidated balance sheet for Kingston, Inc., for the current year (ended December 31) using the categories presented in the chapter.

2. Three of the items end in the term net. Explain what this term means in each case.

E5-2B (Similar to E5-7) [LO 3] Recording Stock Issuances with Par Value

In a recent year, Swish, Inc., a designer and marketer of computer accessories, issued 15,200

shares of its $0.01 par value stock for $63,000 (these numbers are rounded). These additional shares were issued under an employee stock option plan. Prepare the journal entry required to record the stock issuance.

E5-3B (Similar to E5-8) [LO3] Inferring Stock Issuances and Cash Dividends from Changes in Stockholders’ Equity

The Corner Co. is a large retailer that processes food. Corner reported the following January 31 balances in its stockholders’ equity accounts (dollars in millions):

During the current year, Corner reported net income of $3,249.

Required:

1. How much did Corner declare in dividends for the year?

2. Assume that the only other transaction that affected stockholders’ equity during the current year was

a single stock issuance. Recreate the journal entry reflecting the stock issuance.

E5-4B (Similar to E5-12) [LO 3] Preparing a Multiple-Step Income Statement

The following data were taken from the records of Kramer Corporation at December 31, 2015:

Required:

Prepare a complete multiple-step income statement for the company (showing both gross profit and

income from operations). Show all computations. ( Hint: Set up the side captions or rows starting with

sales revenue and ending with earnings per share; rely on the amounts and percentages given to infer

missing values.)

E5-5B (Similar to E5-13) [LO 3] Preparing a Multiple-Step Income Statement

The following data were taken from the records of Colins Industries at December 31, 2015:

Required:

Prepare a complete multiple-step income statement for the company (showing both gross profit and

income from operations). Show all computations. ( Hint: Set up the side captions or rows starting with

sales revenue and ending with earnings per share; rely on the amounts and percentages given to infer missing values.)

E5-6B (Similar to E 5-14) [LO 3] Determining the Effects of Transactions on Balance Sheet and Income Statement Categories

Hall Inc. is a large manufacturer. Listed here are selected aggregate transactions from the

first quarter of a recent year (dollars in millions). Complete the following tabulation, indicating the sign

( + for increase, − for decrease, and NE for no effect) and amount of the effect of each transaction. Consider each item independently.

a. Recorded sales on account of $812.2 and related cost of goods sold of $323.5.

b. Took out a loan, which must be repaid in 6 months with a principal amount of $429.0.

c. Incurred research and development expense of $44.5, which was paid in cash.

E5-7B (Similar to E 5-18) [LO 4] Analyzing and Evaluating Return on Assets from a Security Analyst’s Perspective Parker Inc. is a large restaurant chain. Presented here are selected income statement and balance sheet amounts (dollars in thousands).

Required:

1. Compute ROA for the current and prior years and explain the meaning of the change.

2. Would security analysts more likely increase or decrease their estimates of share value on the basis

of this change? Explain.

E5-8B (Similar to E5-17) [LO 4] Analyzing and Interpreting Return on Assets

Dailey Company is a large housewares retailer. Presented here are selected income statement and balance sheet amounts (dollars in thousands).

Required:

1. Compute ROA for the current and prior years and explain the meaning of the change.

2. Explain the major cause(s) of the change in ROA using ROA profit driver analysis.

E5-9B (Similar to E5-16) [LO 3] Preparing a Simple Statement of Cash Flows Using the Indirect Method

Hernandez Corporation is preparing its annual financial statements at December 31, 2014. Listed here are the items on its statement of cash flows presented in alphabetical order. Parentheses indicate that a listed amount should be subtracted on the cash flow statement. The beginning balance in cash was $27,000 and the ending balance was $78,600.

Required:

Prepare the 2014 statement of cash flows for Hernandez Corporation. The section reporting cash flows from operating activities should be prepared using the indirect method discussed in the chapter.

E5-10B (Similar to E5-15) [LO 3] Determining the Effects of Transactions on Balance Sheet, Income Statement, and Statement of Cash Flows Categories Listed here are selected aggregate transactions for Great Designs Company from the first quarter of a recent year (dollars in millions).

a. Recorded collections of cash from customers owed on open account of $37.2.

b. Repaid $3.8 on a 6-month note owed to a bank. The remainder of the principal is due in two months.

Required:

1. Complete the following tabulation, indicating the sign ( + for increase, − for decrease, and NE for no effect) and amount of the effect of each additional transaction. Consider each item independently.

2. Make the related journal entries and using CA and CL to denote current asset and current liability, respectively.

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