Financial Accounting Theory Ch Partial Solutions

2. The knowledge is helpful to present potential investors, creditors and others in assessing the amounts, timings, and uncertainty of future cash flows,

Middlesex Plastics Manufacturing had 2011 Net Income of $15.0 Million. Its 2012 Net Income is forecast to increase by 8%. The company’s capital structure has been 35% Debt and 65% Equity since 2010, and the company plans to maintain this capital structure in 2012. The company paid $3.0 Million cash dividends in 2011. The company is planning to invest in a major capital project in 2012. The capital budget for this project is $12.0 Million in 2012.

3. Equity financing = $8,400,000(0.60) = $5,040,000 2011 Dividends = Net income - Equity financing = $14,400,000 - $5,040,000 = $9,360,000 All of the equity financing is done with retained earnings as long as they are available.

A corporation had 40,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $24. The entry to record this dividend is:

8. What is the net present value of the following cash flows discounted at 12%?

Suppose that P.V. Ltd. paid a dividend of $10 at the end of year 1 (any portion of

| (TCO D) The basis for classifying assets as current or noncurrent is conversion to cash within

It can be used to pay the dividends, no matter the preferred dividend and common dividends. So the company need enough retaining earnings to pay these dividends to let the shareholders invest in the company. So there will be a retaining earnings.

period a 10% stock dividend was declared and distributed. The market value was $25 a

-Martin Industries just paid an annual dividend of $1.30 a share. The market price of the stock is $36.80 and the growth rate is 6.0 percent. What is the firm's cost of equity?

uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the company 's manufacturing overhead data:

equity per share at year-end was $40. If year-end total debt was $120 million, and no

| A corporation declares a dividend of $.75 per share on 12,500 shares of common stock. Which of the following would be included in the entry to record the declaration?

The two fundamental qualities that make accounting information useful for decision making are relevant and faithful representation. In my opinion, I think both are important quality of accounting information. In order to be relevant you need to have predictive value, and confirmatory value, or both for making decisions. For example, investors form their own expectations about the future based on the predictable value. They were able to evaluate. To be more clear, events such as in the past, present, or future like daily cash transitions are making a difference in the decision. While confirmatory value helps them confirms or

By: Charn Gek Cheng, Chiang Soo Ling, Kummar Sokali Muthu Mogan, Lee Siew Fen Samantha