Chapter 1
A Framework for Financial Accounting
BE1-12. True
BE1-23. a
BE1-31. c
BE1-45. a
BE1-54. a
BE1-63. e
BE1-72. a
BE1-84. b
BE1-92. d
BE1-105. Yes
BE1-111. True
BE1-122. a
BE1-133. a
E1-14. b
E1-23. Revenue, Operating
E1-32. Asset, Investing
E1-4Req. 1, net income = $5,000
E1-5Req. 2, stockholders’ equity = $4,000
E1-6Net income = $5,900
E1-7Total stockholders’ equity = $32,500
E1-8Total assets = $50,000
E1-9Req. 2, net increase in cash = $32,000
E1-10Req. 1, net income = $22,000
E1-11Req. 2, total assets = $290,000
E1-12Req. 2, net decrease in cash = $4,500
E1-131. Net income = $9,000
E1-14Retained earnings in year 4 = $7,000
E1-151. Dividends = $3.7
E1-163. liabilities = $4.4 billion
E1-175. operating cash flows = $0.41 billion
E1-185. f
E1-198. H
E1-203. d
P 1-1A9. Operating
P 1-2A4. Revenue
P 1-3ATotal liabilities and stockholders’ equity = $73,600
P 1-4A(d) = $4,900
P 1-5ATotal assets = $33,000
P 1-6A2. Economic entity
P 1-7A5. a
P 1-1B3. Operating
P 1-2B4. Asset
P 1-3BTotal stockholders’ equity = $146,100
P 1-4B(i) = $29,000
P 1-5BTotal assets = $103,000
P 1-6B3. Going concern
P 1-7B8. b
Chapter 2
The Accounting Cycle: During the Period
BE2-1(f) is the fourth step
BE2-2(b) liabilities and stockholders’ equity increase
BE2-3Equipment = $16,000
BE2-4(a) Assets and stockholders’ equity increase $50,000
BE2-5Revenue, Debit (−) and Credit (+)
BE2-6(c) Credit, Debit
BE2-7(a) Debit Equipment, credit Notes Payable for $15,000
BE2-8(b) Debit Prepaid Insurance, Credit Cash $4,200
BE2-9Cash = $5,300
BE2-10(b) Assets and liabilities increase
BE2-11Total debits = $18,000
BE2-12Total credits = $24,400
E2-13. a.
E2-22. Assets and liabilities increase
E2-35. Assets and stockholders’ equity decrease
E2-44. Assets and stockholders’ equity decrease
E2-5Ending retained earnings = $18,100
E2-69. Debit
E2-74. Debit Supplies and credit Accounts Payable
E2-85. Debit Salaries Expense for $2,100
E2-93. Pay current month’s salaries, $1,900.
E2-10February 14, credit Service Revenue for $2,900
E2-11March 10, debit Equipment for $25,000
E2-124. Debit Prepaid Rent for $600
E2-132. Debit Accounts Receivable for $3,400
E2-14Ending cash balance = $12,000
E2-15Ending cash balance = $10,000
E2-163. Receive cash from customers on account, $4,000.
E2-17Total debits = $95,000
E2-18Total credits = $75,300
E2-19Req. 3, total debits $82,000
E2-20Req. 3, total credits = $65,200
P2-1A6. Assets and stockholders’ equity increase
P2-2A2. Assets and stockholders’ equity decrease by $400
P2-3A5. Expense, debit
P2-4AJuly 18, Debit Advertising Expense for $110
P2-5AJuly 18, no entry
P2-6A Equipment = $60,800
P2-7AReq. 4, Total debits = $7,330
P2-8AReq. 4, Total credits = $42,500
P2-9AReq. 4, Total credits = $296,900
P2-1B2. No effect to accounting equation
P2-2B4. Assets and liabilities increase by $2,400
P2-3B11. Revenue, credit
P2-4BMay 5, credit Accounts Payable for $425
P2-5BMay 5, credit Service Revenue for $425
P2-6B Service Revenue = $55,100
P2-7BReq. 4, total credits = $129,000
P2-8BReq. 4, total debits = $48,900
P2-9BReq. 4, total credits = $504,700
Chapter 3
The Accounting Cycle: End of the Period
BE3-1(c) $2,300
BE3-2(b) $200
BE3-3Net income = $5,000
BE3-4Cash-basis net income = $700 and accrual-basis net income = $2,200
BE3-5Accrual-basis net income = $38,000
BE3-6(3) Supplies = $300
BE3-7(3) Prepaid Rent = $18,900
BE3-8(3) Prepaid Insurance = $6,000
BE3-9(3) Accumulated Depreciation = $5,400
BE3-10(3) Unearned Revenue = $2,000
BE3-11(3) Salaries Payable = $1,200
BE3-12(3) Interest Payable = $900
BE3-13(3) Interest Receivable = $900
BE3-144. Balance sheet
BE3-153. a.
BE3-16Net income = $57,000
BE3-17Total stockholders’ equity = $40,000
BE3-18Total assets = $108,000
BE3-19To close expenses, debit retained earnings for $625,000
BE3-20Total credits = $22,000
E3-13. April 2.
E3-21. August 16.
E3-32. February 2.
E3-44. February 23.
E3-5Net income (adjusted) = $90,650
E3-6Final step is (e)
E3-7(d) Debit Unearned Revenue for $1,500
E3-8(b) Credit Interest Revenue for $1,750
E3-9Net income isoverstated by $1,250
E3-10(a) Credit Service Revenue for $1,500
E3-11(b) Assets and stockholders’ equity are overstated by $900
E3-12(d) Debit Interest Expense for $250
E3-13(b) Debit Rent Expense for $3,000
E3-14Req. 2, total debits = $71,900
E3-152015 retained earnings for Raiders Inc = $635 million
E3-16Req. 3, total assets = $463,000
E3-17Req. 1, to close dividends account, debit retained earnings for $3,000
E3-18Req. 1, to close revenues, credit retained earnings for $54,000
E3-19Req. 1, to close expense accounts, debit retained earnings for $465,000
E3-20Req. 3, total debits = $191,000
P3-1A5. Accrual-basis expense = $1,000 and cash-basis expense = $0
P3-2ANet income = $17,000
P3-3A(d) debit Interest Expense $800
P3-4A(a) debit Depreciation Expense $6,000
P3-5ANet income = $86,000
P3-6AReq. 2, total credits = $126,900
P3-7A Req. 3, total debits = $155,000
P3-8A Req. 7, total debits = $111,600
P3-1B10. Accrual-basis expense = $0 and cash-basis expense = $540
P3-2BNet income = 15,900
P3-3B(b) credit Salaries Payable $4,000
P3-4B(c) debit Interest Expense $1,050
P3-5BTotal assets = $119,000
P3-6BReq. 2, total credits = $137,800
P3-7B Req. 3, total debits = $373,250
P3-8BReq. 7, total debits = $160,500
Chapter 4
Cash and Internal Controls
BE4-13. d
BE4-22. d
BE4-35. b
BE4-44. Yes
BE4-5Total cash sales = $1,630,000
BE4-62. Credit Accounts Payable $1,000
BE4-72. c
BE4-82. Subtract from company balance
BE4-9Reconciled bank balance = $1,750
BE4-10Reconciled company balance = $3,220
BE4-11Credit cash $435
BE4-12Reconciled cash balance = 4,542
BE4-13Credit Petty Cash $220 to recognize expenditures
BE4-141. C
BE4-15Total operating cash flows = $5,000
BE4-16Total investing cash flows = $13,000
BE4-17Total financing cash flows = $43,000
BE4-18Oher Corporation free cash flow = $20,900
E4-13. True
E4-25. False
E4-32. False
E4-44. Reconciliations
E4-5Total cash = $18,460
E4-6Cash should be recorded and deposited more than once per week (on Friday).
E4-7The petty cash fund of $10,000 is too large.
E4-8Jim should not deposit the checks and also record them.
E4-9Reconciled bank balance = $22,915
E4-10Reconciled company balance = $7,955
E4-11Debit Service Fee Expense $150
E4-12To replenish the petty cash fund, credit Cash $370
E4-13To establish the petty cash fund, debit Petty Cash for $500
E4-14g. Yes, Operating, Inflow
E4-15e. +$6,000, Operating
E4-16Cash flows from operating activities = +$4,900
E4-17Cash flows from investing activities = −$70,500
E4-18Cash flows from financing activities = +$25,000
E4-19Req. 1, net operating cash flows = $16,000
E4-20Glasco will have a larger increase in net income in year 5
P4-1AInternal controls include tickets are serially numbered.
P4-2AReconciled bank balance = $12,825
P4-3AReconciled company balance = $5,840
P4-4ANet cash flows from investing activities = ($10,000)
P4-5AReq. 4, Net cash flows from financing activities = $7,600
P4-1BReconciled bank balance = $9,288
P4-2BReconciled bank balance = $11,729
P4-3BReconciled company balance = $4,170
P4-4BNet cash flows from operating activities = 10,900
P4-5BReq. 4, Net cash flows from investing activities = ($8,400)
Chapter 5
Receivables and Sales
BE5-1Debit Accounts Receivable for $3,080 for trade discount
BE5-2Net sales = $650,000
BE5-3Debit Bad Debt Expense for $2,000
BE5-4Debit Bad Debt Expense for $2,400
BE5-5Credit Allowance for Uncollectible Accounts for $3,600
BE5-6Credit Allowance for Uncollectible Accounts for $12,000
BE5-7Credit Allowance for Uncollectible Accounts for $18,000
BE5-8Estimated amount uncollectible = $5,700
BE5-9Debit Bad Debt Expense for $5,000
BE5-10Debit Allowance for Uncollectible Accounts for $17,000
BE5-11Credit Allowance for Uncollectible Accounts for $7,000
BE5-12No entry on the direct write-off method
BE5-13(b) = 12 months
BE5-14Interest revenue for 2016 = $2,700
BE5-15Debit Bad Debt Expense for $4,050
BE5-16Debit Bad Debt Expense for $4,050
E5-1May 13, credit Accounts Receivable for $4,000
E5-2Credit Service Revenue for $270
E5-3March 20, debit Sales Discounts for $220
E5-4March 31, credit Accounts Receivable for $11,000
E5-5March 31, debit Accounts Payable for $11,000
E5-6Req. 4, net sales = $2,900
E5-7Req. 2, net realizable value = $37,500
E5-8Req. 3, net realizable value = $51,000
E5-9Req. 3, net realizable value = $104,000
E5-10Req. 3, net realizable value = $53,900
E5-11Req. 3, net realizable value = $90,800
E5-123. NE on all account totals
E5-13Req. 3, in 2016, bad debt expense under direct write-off method = $8,000
E5-14(b) debit Notes Receivable $11,000
E5-15March 1, Debit Notes Receivable for $11,000
E5-16Sep. 1, credit Cash for $11,495
E5-17Req. 3, credit Interest Receivable for $49,500
E5-18Average collection period for CostGet is 3.4 days
E5-19Req. 2, debit Bad Debt Expense for $7,800
E5-20Req. 1, debit Bad Debt Expense for $7,700
P5-1AScenario 2: revenue = $1,200
P5-2AReq. 2, net revenues = $789.60
P5-3AReq. 3, net realizable value in 2016 = $6,050
P5-4AReq. 2, debit Bad Debt Expense for $12,950
P5-5AReq. 3, understate expenses by $119,000
P5-6AReq. 4, overstateoperating income by $33,000
P5-7AReq. 2, understate total assets by $155,000
P5-8AReq. 3, credit Interest Revenue for $8,250
P5-9AReq. 1, Target’s average collection period is 32.3 days
P5-1BScenario 4: revenue = $260,000
P5-2BReq. 4, net revenues = $1,852.20
P5-3BReq. 3, net realizable value in 2016 = $4,500
P5-4BReq. 2, debit Bad Debt Expense for $3,170
P5-5BReq. 3, understate expenses by $82,500
P5-6BReq. 3, understate assets by $370,000
P5-7BReq. 2, Underestimate uncollectible accounts by $80,500
P5-8BReq. 3, credit Interest Revenue for $3,850
P5-9BReq. 1, Select Medical’s average collection period is 62.9 days
Chapter 6
Inventory and Cost of Goods Sold
BE6-13. c.
BE6-21. c.
BE6-3Cost of goods sold = $21,000
BE6-4(b) Gross profit = $9,000
BE6-5Ending inventory = $3,600
BE6-6Cost of goods sold = $40,890
BE6-7Ending inventory = $3,464.31
BE6-8Cost of goods sold = $40,670
BE6-9Declining, LIFO results in higher total assets
BE6-10March 17, debit Cost of Goods Sold for $40,000
BE6-11To purchase inventory on account, credit Accounts Payable for $40,000
BE6-12February 5, credit Inventory for $4,000
BE6-13February 10, credit Cash for $38,800
BE6-14Ending inventory = $9,400
BE6-15Ending inventory = $7,200
BE6-16Gross profit ratio = 28%
BE6-17March 17, credit Sales Revenue for $60,000
BE6-18February 2, debit Freight-In for $600
BE6-19February 5, credit Purchase Returns for $4,000
BE6-20February 10, credit Purchase Discounts for $1,200
BE6-212016, gross profit is understated by $15,000
BE6-222015, retained earnings is overstated by $15,000
E6-1Cost of goods sold = $920,000
E6-2Operating income = $140,000
E6-3Req. 1, income before income taxes = $70,000
E6-4Req. 2, (b) cost of goods sold = $20,400
E6-5Req. 2, (d) gross profit = $849
E6-6Credit Inventory for $335,000 for sale
E6-7June 16, debit Cost of Goods Sold for $3,200
E6-8Req. 1, June 12, credit Inventory for $76
E6-9Req. 1, May 5, debit Accounts Payable for $400
E6-10July 13, credit Inventory for $2,850
E6-11August 23, credit Sales Revenue for $11,000
E6-12August 6, debit Cost of Goods Sold for $12,600
E6-13Req. 2, credit Inventory for $5,000
E6-14Req. 2, debit Cost of Goods Sold for $1,650
E6-15Req. 2, inventory turnover ratio for Lewis = 12.0 times
E6-16Req. 2, gross profit ratio for Henry = 0.85
E6-17Req. 1, May 3, debit Freight In for $200
E6-18Req. 1, July 8, credit Purchase Returns for $5,000
E6-19Req. 1, August 14, credit Purchase Discounts for $128
E6-20Req. 2, in the following year, gross profit is overstated
P6-1AReq. 1, ending inventory = $7,410
P6-2AReq. 2, cost of goods sold = $9,100
P6-3AReq. 1, July 11, credit Inventory for $21
P6-4AReq. 3, write-down = $27,000
P6-5AReq. 2, cost of goods sold = $2,400
P6-6AReq. 1, October 15, debit Cost of Goods Sold for $8,440
P6-7AReq. 1, operating income = $16,000
P6-8AReq. 1, inventory turnover ratio for Company 1 = 4.5
P6-9AReq. 1, July 4, debit Freight-In for $110
P6-10AReq. 3, Corrected gross profit from 2012-2015= $136,000
P6-1BReq. 1, ending inventory = $4,560
P6-2BReq. 2, cost of goods sold = $3,620
P6-3BReq. 1, June 10, credit Inventory for $23
P6-4BReq. 3, write-down = $245
P6-5BReq. 2, cost of goods sold = $27,150
P6-6BReq. 1, November 16, debit Cost of Goods Sold for $9,640
P6-7BReq. 1, operating income = $16,100
P6-8BReq. 1, inventory turnover ratio for Company 1 = 3.71
P6-9BReq. 1, June 4, debit Freight-In for $400
P6-10BReq. 3, (a) overstate, no effect
Chapter 7
Long-Term Assets
BE7-1 Cost of the land = $555,900
BE7-2 Cost of the bread machine = $37,500
BE7-3 Goodwill = $7.2 million
BE7-4 Research and development expense = $705,000
BE7-5 (4) Capitalize and depreciate over the useful life of the asset.
BE7-6 Depreciation in accounting is not based on the decrease in value.
BE7-7 2015 depreciation expense = $1,300
BE7-8 (2) $15,000
BE7-9 Amortization expense = $800,000
BE7-10Loss = $3,000
BE7-11Gain = $10,000
BE7-12Loss = $1,600
BE7-13Net income = $177,000
BE7-14No impairment loss
BE7-15Impairment loss = $3.5 million
E7-1 Cost of the land = $1,068,000
E7-2 Equipment = $84,000
E7-3Land = $150,000
E7-4Building receives a tax deduction for depreciation, land does not.
E7-5 Patents = $42,500
E7-6 Goodwill = $5 million
E7-7 Req. 1, capitalized costs = $118,000
E7-8 7. a
E7-9 6. Land improvements
E7-10Req. 1, $2,600 per year
E7-11Req. 1, $7,400 per year
E7-122015 depreciation expense = $2,400
E7-132015 depreciation expense = $850
E7-14$2,450
E7-152015 depreciation expense = $950
E7-16Req. 2, $161,250
E7-17Req. 2, loss on sale = $5,000
E7-18Req. 1, $151,000
E7-19Asset turnover ratio = 1.7 times
E7-20Req. 1, impairment loss = $2.7 million
P7-1A Land = $80,900
P7-2A Req. 1, total equipment = $780,200
P7-3A Req. 1, goodwill = $1.5 million
P7-4A 6. Expense
P7-5A Req. 1, $41,000 per year
P7-6A Req. 2, total intangible assets = $695,000
P7-7A Req. 2, amortization expense = $50,000
P7-8A Req. 1, $170,000
P7-9A Req. 1, return on assets = 27.1%
P7-10AReq. 2, return on assets = 28.9%
P7-1B Land = $98,100
P7-2B Req. 1, total equipment = $379,900
P7-3B Req. 1, goodwill = $200,000
P7-4B 6. Capitalize
P7-5B Req. 1, $26,250 per year
P7-6B Req. 2, total intangible assets = $406,500
P7-7B Req. 2, amortization expense = $25,000
P7-8B Req. 1, $127,500
P7-9B Req. 1, return on assets = 14.6%
P7-10BReq. 2, return on assets = 36.8%
Chapter 8
Current Liabilities
BE8-1 Interest expense = $40,000
BE8-2 Interest revenue = $40,000
BE8-3 Interest expense = $4,800
BE8-4 Interest expense = $877,500
BE8-5 Employer will contribute $16,292
BE8-6 December 18, credit unearned revenue for $260,000
BE8-7 Sales tax payable = $272
BE8-8 Current portion of long-term debt = $10,000,000
BE8-9 Warranty liability at the end of year = $630,000
BE8-10Reduces income before taxes by $8 million
BE8-11Record a loss of $6 million
BE8-12Gain contingencies are not recorded until the gain is certain
BE8-13Disclose, but do not record the potential loss
BE8-14(3) Recorded
BE8-15Current ratio = 2.67
E8-1 9. C
E8-2 Req. 2, interest expense = $700
E8-3 Req. 2, interest expense = $787,500
E8-4 Req. 2, interest revenue = $787,500
E8-5 Req. 4, $245,000
E8-6 January 13, no entry
E8-7 Req. 2, payroll tax expense = $11,080
E8-8 Req. 3, payroll tax expense = $415,500
E8-9 Salaries payable = $434,100
E8-10Req. 1, credit unearned revenue for $21,000,000
E8-11Req. 2, sales taxes payable = $900
E8-12Req. 4, debit loss for $4 million
E8-13Req. 3, no entry, but disclose in a note to the financial statements
E8-14Req. 2, warranty expense = $36,000
E8-15Req. 3, debit loss for $381 million
E8-16Req. 1, current ratio = 0.33
P8-1A 10. e
P8-2A Req. 2 (a), interest expense = $922,500
P8-3A Req. 3, payroll tax expense = $83,100
P8-4A Req. 3, payroll tax expense = $207,750
P8-5AReq. 1, average price per season ticket is $900
P8-6A Req. 3, unearned revenue = $2,772
P8-7A Req. 1, no entry, but disclose in a note to the financial statements
P8-8A Req. 2, debit loss for $150 million
P8-9A Req. 2, acid-test ratio for Home Depot = 0.34
P8-1B 1. i
P8-2B Req. 2 (a), interest expense = $245,000
P8-3B Req. 3, payroll tax expense = $69,250
P8-4B Req. 3, payroll tax expense = $346,250
P8-5BReq. 1, average price per season ticket is $560
P8-6B Req. 3, unearned revenue = $1,558
P8-7B Req. 1, bad debt expense = $870,000
P8-8B Req. 2, debit loss for $1.5 million
P8-9B Req. 2, acid-test ratio for Southwest Airlines = 0.76
Chapter 9
Long-Term Liabilities
BE9-1 1. Convertible bonds require a lower interest rate
BE9-2 Issue price = $60,000
BE9-3 Issue price = $54,812
BE9-4 Issue price = $66,934
BE9-5 2. Interest expense = $2,450
BE9-6 2. Interest expense = $2,558
BE9-7 2. Interest expense = $2,306
BE9-82. Interest expense = $4,900
BE9-92. Interest expense = $5,121
BE9-102. Interest expense = $4,612
BE9-11$2,653
BE9-12$4,157
BE9-132. Interest expense = $2,558
BE9-142. Interest expense = $2,306
BE9-15Loss = $3,832
BE9-16Gain = $4,567
BE9-17First monthly payment, interest expense = $125.00
BE9-183. Return on equity = 46.0%
E9-1 Issue bonds, net income = $5,557,500
E9-2 8. h
E9-3 Req. 3, issue price = $37,482,387
E9-4 Req. 1, issue price = $27,934,072
E9-5 June 30, debit interest expense for $22,500
E9-6 Req. 2, June 30, debit interest expense for $22,855
E9-7 Req. 2, June 30, debit interest expense for $21,979
E9-8 June 30, debit interest expense for $21,000
E9-9 Req. 2, June 30, debit interest expense for $22,369
E9-10Req. 2, June 30, debit interest expense for $19,339
E9-11Interest expense, $42,000
E9-12Req. 2, December 31, 2015, debit interest expense for $44,779
E9-13Req. 2, December 31, 2015, debit interest expense for $38,650
E9-14Req. 2, loss = $142,819
E9-15Req. 2, gain = $65,576
E9-16January 31, debit interest expense for $250.00
E9-17Req. 2, debt to equity ratio is 1.50
E9-18Req. 1, debt to equity ratio for E-Travel is 1.34
P9-1A Req. 2, issue price = $1,187,602
P9-2A Req. 1, June 30, debit interest expense for $24,000
P9-3A Req. 3, $40,000,000
P9-4A Req. 3, June 30, debit interest expense for $37,866
P9-5AReq. 3, debit interest expense for $1,750.00
P9-6A Req. 2, debt to equity ratio = 1.79
P9-7A Req. 3, Hyatt’s times interest earned ratio = 2.4
P9-1B Req. 2, issue price = $789,597
P9-2B Req. 1, June 30, debit interest expense for $135,000
P9-3B Req. 3, $60,000,000
P9-4B Req. 3, June 30, debit interest expense for $32,940
P9-5BReq. 3, debit interest expense for $3,750.00
P9-6B Req. 2, debt to equity ratio = 3.10
P9-7B Req. 3, Carnival’s times interest earned ratio = 4.9
Chapter 10
Stockholders’ Equity
BE10-1 Disadvantages include additional taxes and more paperwork.
BE10-2 A drawback is that the number of stockholders is restricted.
BE10-3 Credit common stock for $30
BE10-4 If no-par stock, credit common stock for $30,000
BE10-5 Credit preferred stock for $10
BE10-6 3. a
BE10-7$21,000 will be paid to preferred stockholders
BE10-8 Debit treasury stock for $3,800
BE10-9 Credit treasury stock for $3,800
BE10-10October 1, credit dividends payable for $3,000
BE10-11Debit stock dividends for $30,000
BE10-12Market price per share = $17.50
BE10-13Sale of treasury stock increases total assets and total stockholders’ equity
BE10-14Total stockholders’ equity = $29,680,000
BE10-15Return on equity = 11.4%
E10-1 8. c
E10-2 (5) Treasury stock is the corporation’s own stock that it reacquired
E10-3 Req. 1, April 1, credit common stock for $5,940
E10-4Req. 1, $20,000 will be paid to preferred stockholders
E10-5 October 15, no entry
E10-6 December 15, credit treasury stock for $220,000
E10-7 Total stockholders’ equity = $3,403,600
E10-8 March 15, debit dividends for $26,250,000
E10-9 June 1, debit dividends for $318,000
E10-10Req. 1, debit stock dividends $30,000
E10-11Total stockholders’ equity = $12,832,000
E10-12Balance, December 31 in retained earnings is $3,382,000
E10-13Sale of treasury stock increases total assets and total stockholders’ equity
E10-14Total stockholders’ equity = $14,350,000
E10-15Req. 1, return on equity = 15.0%
E10-16Req. 1, earnings per share in 2014 = $0.73
P10-1A 10. c
P10-2A Req. 1, July 10, credit treasury stock for $7,000
P10-3A Req. 1, after 100% stock dividend common stock is $2,200
P10-4A Req. 5, $32 per share
P10-5A Req. 1, total stockholders’ equity = $164,140
P10-6A Req. 2, total stockholders’ equity = $8,545,375
P10-7A Req. 1, Abercrombie’s return on equity = 7.5%
P10-1B 10. d
P10-2B Req. 1, October 1, credit treasury stock for $875
P10-3B Req. 1, after 100% stock dividend common stock is $22
P10-4B Req. 5, 185,000 shares
P10-5B Req. 1, total stockholders’ equity = $78,225
P10-6B Req. 2, total stockholders’ equity = $69,124,750
P10-7B Req. 1, The Gap’s return on equity = 24.4%
Chapter 11
Statement of Cash Flows
BE11-1 5. Operating activity
BE11-2 4. Investing activity
BE11-3 Operating activities is first
BE11-4 Net cash flows from operating activities = $659,000
BE11-5 Net cash flows from operating activities = $128,000
BE11-6 Net cash flows from operating activities = $74
BE11-7 Net cash flows from operating activities = $78
BE11-8 Net cash flows from investing activities = $17
BE11-9 Net cash flows from financing activities = $20
BE11-10Cash return on assets = 9.2%
BE11-11Net cash flows from operating activities = $180,000
BE11-12Cash received from customers = $82
BE11-13Cash paid to suppliers = $43
BE11-14Cash paid to suppliers = $995,000
BE11-15Cash paid for income taxes = $325,000
E11-1 8. c
E11-2 Insist the $25,000 increase in notes payable be recorded as a financing activity
E11-3 1. Investing activities
E11-4 3. Operating activities
E11-5 3. Investing activities
E11-6 3. Financing activities
E11-7 Noncash Activities are listed last
E11-8 Net cash flows from operating activities = $35,000
E11-9 Net cash flows from operating activities = $196,000
E11-10Net cash flows from operating activities = $237,100
E11-11Net cash flows from operating activities = $180,000
E11-12Req. 2, cash return on assets = 20.2%
E11-13Cash received from customers = $2,058,000
E11-14Cash paid to suppliers = $1,977,000
E11-15Cash paid to suppliers = $72,128
P11-1A 9. Type of activity = NC
P11-2A Net cash flows from operating activities = $14,395
P11-3A Net cash flows from operating activities = $97,000
P11-4A Net cash flows from investing activities = ($84,000)
P11-5A Req. 2, Yahoo’s cash return on assets = 8.9%
P11-6A Cash paid to suppliers = $258,000
P11-7A Cash paid to suppliers = $2,426,000
P11-8A Net sales = $4,108
P11-1B 8. Type of activity = O
P11-2B Net cash flows from operating activities = $8,000
P11-3B Net cash flows from operating activities = $142,000
P11-4B Net cash flows from investing activities = ($33,000)
P11-5B Req. 2, Hewlett-Packard’s cash return on assets = 10.0%
P11-6B Cash paid to suppliers = $400,000
P11-7B Cash paid to suppliers = $1,728,000
P11-8B Net sales = $96,000
Chapter 12
Financial Statement Analysis
BE12-1 Cash is 7.0% of total assets in 2015
BE12-2 Cash decreased $630,000 or 60.0%
BE12-3 Income before tax as a percentage of sales increased
BE12-4 Percentage change from 2014 to 2015 = 3.9% increase
BE12-5 Sales in 2015 = $1,000,000
BE12-6 Receivables turnover ratio = 3.6 times
BE12-7 Inventory turnover ratio = 7.1 times
BE12-8 Gross profit = $160,000
BE12-9 A cash purchase of inventory will not affect the current ratio
BE12-10Return on assets = 15.0%
BE12-11Return on equity = 36.1%
BE12-12Net income = $24,500,000
BE12-131. Other expenses
BE12-142. Aggressive
BE12-153. Conservative
E12-1 8. b
E12-2 Net income is 4.5% of revenues in 2016
E12-3 Revenues increased $3,300,000 or 21.3%
E12-4 Req. 1, cash is 14.7% of total assets in 2016
E12-5 Req. 2, more risky
E12-6 Req. 1, return on equity = 40.4%
E12-7 Req. 1, debt to equity ratio = 20.3%
E12-8 Req. 1, return on equity = 7.4%
E12-9 Req. 1, asset turnover = 3.9 times
E12-10Profit margin = 12.2%
E12-11c. Other expenses
E12-12Net income = $450,000
E12-13Net income = $1,350,000
E12-14c. Conservative
E12-15(d) Aggressive
P12-1A Req. 1, cost of goods sold is 57.8% of Sales in the Sporting Goods segment
P12-2A Req. 1, net sales increased $880,000 or 33.6%
P12-3A Req. 2, cash increased $33,100 or 47.0%
P12-4A 6. Acid-test ratio = 2.8 to 1
P12-5A 4. Asset turnover = 3.5 times
P12-6A Req. 1, receivables turnover ratio for 2015 = 38.3 times
P12-1B Req. 1, cost of goods sold is 44.3% of Sales in the Athletic Equipment segment
P12-2B Req. 1, net sales decreased $100,000 or 1.6%
P12-3B Req. 2, cash decreased $54,200 or 20.7%
P12-4B 6. Acid-test ratio = 6.2 to 1
P12-5B 4. Asset turnover = 2.8 times
P12-6B Req. 1, receivables turnover ratio for 2015 = 11.1 times
Appendix C
Time Value of Money
BEC-1Oprah should choose the second option
BEC-2Future value = $25,156.50
BEC-3Future value = $30,912.30
BEC-42. Future value = $9,563.09
BEC-5Present value = $4,083.50
BEC-6Present value = $46,179.06
BEC-73. Present value = $3,739.00
BEC-8Future value of annuity = $35,691.21
BEC-9Future value of annuity = $37,733.68
BEC-101. Future value of annuity = $21,459.87
BEC-11Present value of annuity = $27,720.88
BEC-12Present value of annuity = $30,722.84
BEC-132. Present value of annuity = $47,179.23
EC-1Kramer’s future value = $33,659.66
EC-2Future value = $78,231.80
EC-3Isabel’s present value = $494,197.43
EC-4Store 2’s present value = $3,394.50
EC-5Total cost of Option 3 = $155,405.41
EC-6With annual rate of 7%, future value of annuity = $192,894.00
EC-7Future value of annuity = $586,398.43
EC-8Option 2’s present value of annuity = $39,816.02
PC-1AAlec’s investment = $28,531.17
PC-2ATotal present value = $423,053.79
PC-3ACamera 1, total cost = $7,509.89
PC-1BElle’s maximum purchase = $113,033.56
PC-2BPresent value of future cash flows = = $654,771.27
PC-3BOption 3, present value of annuity = $1,677,520.35
Appendix D
Investments
BED-15. is a reason why companies invest in other companies
BED-2 November 1, credit Investments for $1,950
BED-3 December 31, debit Unrealized Holding Loss-Net Income for $2,000
BED-4 December 31, debit Unrealized Holding Loss-Other Comprehensive Income for $2,000
BED-5 Trading securities
BED-6 Available-for-sale securities
BED-7 Increases investments and equity income
BED-8 Increases cash and decreases investments
BED-9 $22,000
BED-102. Interest revenue = $1,400
BED-112. Interest revenue = $1,491
BED-122. Interest revenue = $1,289
ED-16. False (F)
ED-2 Req. 2, $1,440,000
ED-3 Req. 2, $1,200
ED-4 Req. 2, 168,750
ED-5 Req. 2, Comprehensive income = $116,000
ED-6 Credit Equity Income for $40,000
ED-7 Credit Equity Income for $45,500
ED-8 Req. 2, Credit Equity Income for $27,000
ED-9 7. Would use the consolidation method
ED-10Req. 2, June 30 credit interest revenue for $6,395
ED-11Req. 2, June 30 credit interest revenue for $16,470
PD-1AReq. 2, $96,000
PD-2ACredit Equity Income for $32.50
PD-3AReq. 2, June 30 credit interest revenue for $4,689
PD-4AReq. 2, credit interest revenue for $7,600
PD-1BReq. 2, $52,100
PD-2BCredit Equity Income for $2.7 million
PD-3BReq. 2, June 30 credit interest revenue for $16,777
PD-4BReq. 2, credit interest revenue for $4,989
Appendix E
International Financial Reporting Standards
EE-17. a
EE-2Req. 1, legal system for Austria = (b) Code law
EE-3Against, U.S. GAAP is customized to fit the U.S. business environment
EE-4Req. 4, principles-based
EE-5Req. 2, (b) interest revenue or a gain on sale of assets
EE-6Req. 1, ending inventory = $6,660
EE-7Req. 1, $700,000 would be expensed
EE-8Req. 1, a liability is an amount owed to a creditor