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Entries for installment note transactions On January 1 of 20Y2, Hebron Company issued a 175,000, five-year, 8% installment note to Ventsam Bank. The note requires annual payments of 43,830, beginning on December 31 of 20Y2. Journalize the entries to record the following: 20Y2 Jan. 1. Issued the note for cash at its face amount. Dec. 31. Paid the annual payment on the note, which consisted of interest of 14,000 and principal of 29,830. 20Y5 Dec. 31. Paid the annual payment on the note, included 6,253 of interest. The remainder of the payment reduced the principal balance on the note.Entries for installment note transactions On January 1 of Year 1, Bryson Company obtained a 147,750, four-year, 7% installment note from Campbell Bank. The note requires annual payments of 43,620, beginning on December 31 of Year 1. A. Prepare a table for this installment note, similar to the one presented in Exhibit 4. Round to the nearest dollar. B. Journalize the entries for the issuance of the note and the four annual note payments. C. Describe how the annual note payment would be reported on the Year 1 income statement.10.22EX 10.23EX 10.24EX Liability transactions The following items were selected from among the transactions completed by Sherwood Co. during the current year: Mar. 1. Purchased merchandise on account from Kirkwood Co., 175,000, terms n/30. 31. Issued a 30-day, 6% note for 175,000 to Kirkwood Co., on account. Apr. 30. Paid Kirkwood Co. the amount owed on the note of March 31. June 1. Borrowed 400,000 from Triple Creek Bank, issuing a 45-day, 5% note. July 1. Purchased tools by issuing a 45,000,60-day note to Poulin Co., which discounted the note at the rate of 7%. 16. Paid Triple Creek Bank the interest due on the note of June 1 and renewed the loan by issuing a new 30-day, 6% note for 400,000. (Journalize both the debit and credit to the notes payable account.) Aug. 15. Paid Triple Creek Bank the amount due on the note of July 16. 30. Paid Poulin Co. the amount due on the note of July 1. Dec. 1. Purchased equipment from Greenwood Co. for 260,000, paying 40,000 cash and issuing a series of ten 9% notes for 22,000 each, coming due at 30-day intervals. 22. Settled a product liability lawsuit with a customer for 50,000, payable in January. Accrued the loss in a litigation claims payable account. 31. Paid the amount due to Greenwood Co. on the first note in the series issued on December 1. Instructions 1. Journalize the transactions. 2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year: A. Product warranty cost, 80,000. B. Interest on the nine remaining notes owed to Greenwood Co.Entries for payroll and payroll taxes The following information about the payroll for the week ended December 30 was obtained from the records of Boltz. Co.: Salaries: Deductions: Sales salaries 540,000 Income tax withheld 160,000 Warehouse salaries 155,000 U.S. savings bonds 10,500 Office salaries 85,000 Group insurance 9,000 780,000 Tax rates assumed: Social security, 6% State unemployment (employer only), 5.4% Medicare, 1.5% Federal unemployment (employer only), 0.8% Instructions 1.Assuming that the payroll for the last week of the year is to be paid on December 31, journalize the following entries: A. December 30, to record the payroll. B. December 30, to record the employers payroll taxes on the payroll to be paid on December 31. Of the total payroll for the last week of the year, 48,000 is subject to unemployment compensation taxes. 2.Assuming that the payroll for the last week of the year is to be paid on January 5 of the following fiscal year, journalize the following entries: A. December 30, to record the payroll. B. January 5, to record the employers payroll taxes on the payroll to be paid on January 5. Since it is a new fiscal year, all 780,000 in salaries is subject to unemployment compensation taxes.Wage and tax statement data on employer FICA tax Ehrlich Co. began business on January 2. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in the following year, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees earnings records were inadvertently destroyed. None of the employees resigned or were discharged during the year, and there were no changes in salary rates. The social security tax was withheld at the rate of 6.0% and Medicare tax at the rate of 1.5% on salary. Data on dates of employment, salary rates, and employees income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records: Employee Date First Employed Monthly Salary Monthly Income Tax Withheld Arnett Nov. 16 5,500 944 Cruz Jan. 2 4,800 833 Edwards Oct. 1 8,000 1,592 Harvin Dec. 1 6,000 1,070 Nicks Feb. 1 10,000 2,350 Shiancoe Mar. 1 11,600 2,600 Ward Nov. 16 5,220 876 Instructions 1.Compute the amounts to he reported for the year on each employees Wage and Tax Statement (Form W-2), arranging the data as follows (round to the nearest cent): Employee Gross Earnings Federal Income Tax Withheld Social Security Tax Withheld Medicare Tax Withheld 2.Compute the following employer payroll taxes for the year: (A) social security, (B) Medicare, (C) state unemployment compensation at 5.4% on the first 10,000 of each employees earnings, (D) federal unemployment compensation at 0.8% on the first 10,000 of each employees earnings, (E) total.10.4APR Payroll accounts and year-end entries The following accounts, with the balances indicated, appear in the ledger of Garcon Co. on December 1 of the current year: 211 Salaries Payable 218 Bond Deductions Payable 3,400 212 Social Security Tax Payable 9,273 219 Medical Insurance Payable 27,000 213 Medicare Tax Payable 2,318 411 Operations Salaries Expense 950,000 214 Employees Federal Income Tax Payable 15,455 511 Officers Salaries Expense 600,000 215 Employees State Income Tax Payable 13,909 512 Office Salaries Expense 150,000 216 State Unemployment Tax Payable 1,400 519 Payroll Tax Expense 137,951 217 Federal Unemployment Tax Payable 500 The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December: Dec. 2. Issued Check No.410 for 3,400 to Jay Bank to purchase U.S. savings bonds for employees. 2. Issued Check No.411 to Jay Bank for 27,046 in payment of 9,273 of social security tax, 2,318 of Medicare tax, and 15,455 of employees federal income tax due. 13. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: Salary distribution: Operations 43,200 Officers 27,200 Office 6,800 77,200 Deductions: Social security tax 4,632 Medicare tax 1,158 Federal income tax withheld 15,440 State income tax withheld 3,474 Savings bond deductions 1,700 Medical insurance deductions 4,500 30,904 Net amount 46,296 13. Issued Check No. 420 in payment of the net amount of the biweekly payroll. 13. Journalized the entry to record payroll taxes on employees earnings of December 13: social security tax, 4,632; Medicare tax, 1,158; state unemployment tax, 350; federal unemployment tax, 125. 16. Issued Check No. 424 to Jay Bank for 27,020, in payment of 9,264 of social security tax, 2,316 of Medicare tax, and 15,440 of employees' federal income tax due. 19. Issued Check No. 429 to Sims-Walker Insurance Company for 31,500 in payment of the semiannual premium on the group medical insurance policy. 27. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: Salary distribution: Operations 42,800 Officers 28,000 Office 7,000 77,800 Deductions: Social security tax 4,668 Medicare tax 1,167 Federal income tax withheld 15,404 State income tax withheld 3,501 Savings bond deductions 1,700 26,000 Net amount 46,296 Dec. 27. Issued Check No. 541 in payment of the net amount of the biweekly payroll. 27. Journalized the entry to record payroll taxes on employees' earnings of December 27: social security tax, 4,668; Medicare tax, 1,167; state unemployment tax, 225; federal unemployment tax, 75. 27. Issued Check No. 543 for 20,884 to State Department of Revenue in payment of employees state income tax due on December 31. 31. Issued Check No. 545 to Jay Bank for 3,400 to purchase U.S. savings bonds for employees. 31. Paid 45,000 to the employee pension plan. The annual pension cost is 60,000. (Record both the payment and unfunded pension liability.) Instructions 1.Journalize the transactions. 2.Journalize the following adjusting entries on December 31: A. Salaries accrued: operations salaries, 8,560; officers salaries, 5,600; office salaries, 1,400. The payroll taxes are immaterial and are not accrued. B. Vacation pay, 15,000.10.1BPR 10.2BPR Wage and tax statement data and employer FICA tax Jocame Inc. began business on January 2. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in the following year, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees earnings records were inadvertently destroyed. None of the employees resigned or were discharged during the year, and there were no changes in salary rates. The social security tax was withheld at the rate of 6.0% and Medicare tax at the rate of 1.5% on salary. Data on dates of employment, salary' rates, and employees income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records: Employee Date First Employed Monthly Salary Monthly Income Tax Withheld Addai July. 16 8,160 1,704 Kasay June. 1 3,600 533 McGahee Feb. 16 6,420 1,238 Moss Jan. 1 4,600 738 Stewart Dec. 1 4,500 758 Tolbert Nov. 16 3,250 446 Ward May. 1 10,500 2,359 Instructions 1.Compute the amounts to he reported for the year on each employees Wage and Tax Statement (Form W-2), arranging the data as follows (round to the nearest cent): Employee Gross Earnings Federal Income Tax Withheld Social Security Tax Withheld Medicare Tax Withheld 2.Compute the following employer payroll taxes for the year: (A) social security, (B) Medicare, (C) state unemployment compensation at 5.4% on the first 10,000 of each employees earnings, (D) federal unemployment compensation at 0.8% on the first 10,000 of each employees earnings, (E) total.10.4BPR Payroll accounts and year-end entries The following accounts, with the balances indicated, appear in the ledger of Garcon Co. on December 1 of the current year: 101 Salaries Payable 108 Bond Deductions Payable 2,300 102 Social Security Tax Payable 2,913 109 Medical Insurance Payable 2,520 103 Medicare Tax Payable 728 201 Operations Salaries Expense 700,000 104 Employees Federal Income Tax Payable 4,490 301 Officers Salaries Expense 340,000 105 Employees State Income Tax Payable 4,078 401 Office Salaries Expense 155,000 106 State Unemployment Tax Payable 1,260 408 Payroll Tax Expense 59,491 107 Federal Unemployment Tax Payable 360 The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December: Dec. 1. Issued Check No. 815 to Aberderas Insurance Company for 2,520, in payment of the semiannual premium on the group medical insurance policy. 1. Issued Check No. 816 to Alvarez Bank for 8,131, in payment for 2,913 of social security tax, 728ofMedicare tax, and 4,490 of employees federal income tax due. 2. Issued Check No. 817 for 2,300 to Alvarez Bank to purchase U.S. savings bonds for employees. Dec. 12. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: Salary distribution: Operations 14,500 Officers 7,100 Office 2,600 24,200 Deductions: Social security tax 1,452 Medicare tax 363 Federal income tax withheld 4,308 State income tax withheld 1,089 Savings bond deductions 1,150 Medical insurance deductions 420 8,782 Net amount 15,418 12. Issued Check No. 822 in payment of the net amount of the biweekly payroll. 12. Journalized the entry to record payroll taxes on employees earnings of December 12: social security tax, 1,452; Medicare tax, 363; state unemployment tax, 315; federal unemployment tax, 90. 15. Issued Check No. 830 to Alvarez Bank for 7,938, in payment of 2,904 of social security tax, 726 of Medicare tax, and 4,308 of employees federal income tax due. 26. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: Salary distribution: Operations 14,250 Officers 7,250 Office 2,750 24,250 Deductions: Social security tax 1,455 Medicare tax 364 Federal income tax withheld 4,317 State income tax withheld 1,091 Savings bond deductions 1,150 8,377 Net amount 15,873 Dec. 26. Issued Check No. 840 for the net amount of the biweekly payroll. 26. Journalized the entry to record payroll taxes on employees earnings of December 26: social security tax, 1,455; Medicare tax, 364; state unemployment tax, 150; federal unemployment tax, 40. 30. Issued Check No. 851 for 6,258 to State Department of Revenue, in payment of employees state income tax due on December 31. 31. Issued Check No. 852 to Alvarez Bank for 2,300 to purchase U.S. savings bonds for employees. 31. Paid 55,400 to the employee pension plan. The annual pens1on cost is 65,500. (Record both the payment and the unfunded pension liability.) Instructions 1.Journalize the transactions. 2.Journalize the following adjusting entries on December 31: A. Salaries accrued: sales salaries, 4,275; officers salaries, 2,175; office salaries, 825. The payroll taxes are immaterial and are not accrued. B. Vacation pay, 13,350.3COP 10.1ADM 10.2ADM Neiman Marcus and Kohls: Short-term liquidity analysis Neiman Marcus Group is one of the largest luxury fashion retailers in the world. Kohls Corporation sells moderately priced private and national branded products through more than 1,100 department stores located throughout the United States. The current assets and current liabilities at the end of a recent year for both companies are as follows (in millions): Neiman Marcus Kohls Current assets: Cash 197 1,407 Inventories 1,069 3,814 Other current assets 144 477 Total current assets 1,410 5,698 Current liabilities: Accounts payable 375 1,511 Other current liabilities 482 1,348 Total current liabilities 857 2,859 A. Would an analysis of working capital between the two companies be meaningful? Explain. B. Compute the quick ratio for both companies. (Round to the nearest decimal.) C. Interpret your results.Cabelas and Dicks Sporting Goods: Short-term liquidity analysis Cabelas Incorporated is a leading specialty retailer of outdoor sports merchandise. Dicks Sporting Goods, Inc. is a leading full-line retailer of sporting equipment and apparel. The current assets and current liabilities of both companies are provided as follows from recent financial statements (in millions): Cabelas Dicks Current assets: Cash 478 345 Accounts receivable 62 35 Credit card loans 4,422 Inventories 760 1,096 Other current assets 216 120 Total current assets 5,938 1,596 Current liabilities: Accounts payable 336 508 Gift cards 340 Other current liabilities 1,445 493 Total current liabilities 2,121 1,001 Cabelas has a branded credit card that is the basis for its financial services business. Credit card loans in Cabelas current assets represent the amounts due from Cabelas CLUB Visa credit card customers. The credit card loans represent 1,817,012 active accounts with an average balance of 2,167. The credit card holders have a median FICO score of 795, which denotes highly creditworthy customers. Cabelas other current liabilities include, among other items, short-term funding to support credit card purchases from its CLUB members. A. What do the gift cards listed under Cabelas current liabilities represent? B. Should the credit card loans be considered part of quick assets for Cabelas computation of the quick ratio? Explain. C. Compute the current ratio for Cabelas and Dicks Sporting Goods. (Round to one decimal place.) D. Compute the quick ratio for Cabelas and Dicks Sporting Goods. (Round to one decimal place.) E. Compare the two companies using the computations in (C) and (D).Ethics in Action Tonya Latirno is a staff accountant for Cannally and Kennedy, a local CPA firm. For the past 10 years, the firm has given employees a year-end bonus equal to two weeks' salary. On November 15, the firm's management team announced that there would be no annual bonus this year. Because of the firm's long history of giving a year-end bonus, Tonya and her co-workers had come to expect the bonus and felt that Cannally and Kennedy had breached an implicit agreement by discontinuing the bonus. As a result, Tonya decided that she would make up for the lost bonus by working an extra six hours of overtime per week for the rest of the year. Cannally and Kennedy's policy is to pay overtime at 150% of straight time. Tonya's supervisor was surprised to see overtime being reported, because there is generally very little additional or unusual client service demands at the end of the calendar year. However, the overtime was not questioned, because employees are on the "honor system" in reporting their work hours. 1. Is Cannally and Kennedy acting in an ethical manner by eliminating the bonus? Explain your answer. 2. Is Tonya behaving ethically by making up the bonus with unnecessary overtime? Why?10.3TIF Describe the two distinct obligations incurred by a corporation when issuing bonds.Explain the meaning of each of the following terms as they relate to a bond issue: (A) convertible, and (B) callable.If you asked your broker to purchase for you a 12% bond when the market interest rate for such bonds was 11%, would you expect to pay more or less than the face amount for the bond? Explain.A corporation issues 26,000,000 of 9% bonds to yield interest at the rate of 7%. (A) Was the amount of cash received from the sale of the bonds greater or less than 26,000,000? (B) Identify the following amounts as they relate to the bond issue: (1) face amount, (2) market or effective rate of interest, (3) contract rate of interest, and (4) maturity amount.If bonds issued by a corporation are sold at a discount, is the market rate of interest greater or less than the contract rate?6DQ Bonds Payable has a balance of 5,000,000 and Discount on Bonds Payable has a balance of 150,000. If the issuing corporation redeems the bonds at 98, is there a gain or loss on the bond redemption?8DQ 9DQ Issuing bonds at face amount On January 1, the first day of the fiscal year, Designer Fabric Inc. issues a 5,000,000, 6%, 10-year bond that pays semiannual interest of 150,000 (5,000,000 6% year), receiving cash of 5,000,000. Journalize the entries to record (A) the issuance of the bonds. (B) the first interest payment on June 30, and (C) the payment of the principal on the maturity date.Issuing bonds at a discount On the first day of the fiscal year, a company issues a 2,500,000, 4%, five-year bond that pays semiannual interest of 50,000 (2,500,000 4% ), receiving cash of 2,400,000. Journalize the bond issuance.11.3BE 11.4BE 11.5BE Redemption of bonds payable A 500,000 bond issue on which there is an unamortized premium of 67,000 is redeemed for 490,000. Journalize the redemption of the bonds.11.1EX Entries for issuing bonds Thomson Co. produces and distributes semiconductors for use by computer manufacturers. Thomson issued 900,000 of 10-year, 7% bonds on May 1 of the current year at face value, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions for the current year: May 1. Issued the bonds for cash at their face amount. Nov. 1. Paid the interest on the bonds. Dec. 31. Recorded accrued interest for two months.11.3EX 11.4EX Entries for issuing and calling bonds; loss Hoover Corp., a wholesaler of music equipment, issued 30,000,000 of 20-year, 8% callable bonds on March 1, Year 1, at their face amount, with interest payable on March 1 and September 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions: Year 1 Mar. 1. Issued the bonds for cash at their face amount. Sept. 1. Paid the interest on the bonds. Year 3 Sept. 1. Called the bond issue at 101.5, the rate provided in the bond indenture. (Omit entry for payment of interest.)Entries for issuing and calling bonds; gain Mia Breen Corp. produces and sells wind-energy-driven engines. To finance its operations, Mia Breen issued 18,000,000 of 20-year, 4% callable bonds on May 1, Year 1, at their face amount, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions: Year 1 May 1. Issued the bonds for cash at their face amount. Nov. 1. Paid the interest on the bonds. Year 5 Nov. 1. Called the bond issue at 99, the rate provided in the bond indenture. (Omit entry for payment of interest.)11.7EX Present value of amounts due Assume that you are going to receive 50,000 in 10 years. The current market rate of interest is 4%. A. Using the present value of 1 table in Exhibit 5, determine the present value of this amount compounded annually. B. Why is the present value less than the 50,000 to be received in the future?11.9EX Present value of an annuity On January 1 you win 50,000,000 in the state lottery. The 50,000,000 prize will be paid in equal installments of 6,250,000 over eight years. The payments will be made on December 31 of each year, beginning on December 31 of this year. If the current interest rate is 5%, determine the present value of your winnings. Use the present value tables in Appendix A.11.11EX 11.12EX Present value of bonds payable; premium Moss Co. issued 42,000,000 of five-year, 11% bonds, with interest payable semiannually, at a market (effective) interest rate of 9% Determine the present value of the bonds payable using the present value tables in Exhibits 5 and 7. (Round to the nearest dollar.)Amortize discount by interest method On the first day of its fiscal year, Ebert Company issued 50,000,000 of 10-year, 7% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 9%, resulting in Ebert receiving cash of 43,495,895. The company uses the interest method. A. Journalize the entries to record the following: 1. Sale of the bonds. 2. First semiannual interest payment, including amortization of discount. (Round to the nearest dollar.) 3. Second semiannual interest payment, including amortization of discount. (Round to the nearest dollar.) B. Compute the amount of the bond interest expense for the first year. C. Explain why the company was able to issue the bonds for only 43,495,895 rather than for the face amount of 50,000,000.Amortize premium by interest method Shunda Corporation wholesales parts to appliance manufacturers. On January 1, Shunda issued 22,000,000 of five-year, 9% bonds at a market (effective) interest rate of 7%, receiving cash of 23,829,684. Interest is payable semiannually. Shundas fiscal year begins on January 1. The company uses the interest method. A. Journalize the entries to record the following: 1. Sale of the bonds. 2. First semiannual interest payment, including amortization of premium. (Round to the nearest dollar.) 3. Second semiannual interest payment, including amortization of premium. (Round to the nearest dollar.) B. Determine the bond interest expense for the first year. C. Explain why the company was able to issue the bonds for 23,829,684 rather than for the face amount of 22,000,000.11.16EX 11.17EX Bond discount, entries for bonds payable transactions On July 1, Year 1, Danzer Industries Inc. issued 40,000,000 of 10-year, 7% bonds at a market (effective) interest rate of 8%, receiving cash of 37,282,062. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Instructions 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. 2. Journalize the entries to record the following: A. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) B. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) 3. Determine the total interest expense for Year 1. 4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? 5. (Appendix 1) Compute the price of 37,282,062 received for the bonds by using the present value tables in Appendix A at the end of the text. (Round to the nearest dollar.)11.2APR Entries for bonds payable, including bond redemption The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: Year 1. July 1 Issued 74,000,000 of 20-year, 11 % callable bonds dated July 1, Year 1, at a market (effective) rate of 13%, receiving cash of 63,532,267. Interest is payable semiannually on December 31 and June 30. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of 261,693 is combined with the semiannual interest payment. 31. Closed the interest expense account. Year 2 June 30. Paid the semiannual interest on the bonds. The bond discount amortization of 261,693 is combined with the semiannual interest payment. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of 261,693 is combined with the semiannual interest payment. 31. Closed the interest expense account. Year 3 June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is 9,420,961 after payment of interest and amortization of discount have been recorded. (Record the redemption only.) Instructions 1. Journalize the entries to record the transactions. (Round all amounts to the nearest dollar.) 2. Indicate the amount of the interest expense in (A) Year 1 and (B) Year 2. 3. Determine the carrying amount of the bonds as of December 31, Year 2.11.4APR 11.5APR Bond discount, entries for bonds payable transactions On July 1, Year 1, Livingston Corporation, a wholesaler of manufacturing equipment, issued 46,000,000 of 20-year, 10% bonds at a market (effective) interest rate of 11%, receiving cash of 42,309,236. Interest on the builds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Instructions 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. 2. Journalize the entries to record the following: A. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) B. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) 3. Determine the total interest expense for Year 1. 4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? 5. (Appendix 1) Compute the price of 42,309,256 received for the bonds by using the present value tables in Appendix A at the end of the text. (Round to the nearest dollar.)11.2BPR 11.3BPR Bond discount, entries for bonds payable transactions, interest method of amortizing bond discount On July 1, Year 1, Livingston Corporation, a wholesaler of manufacturing equipment, issued 46,000,000 of 20-year, 10% bonds at a market (effective) interest rate of 11%, receiving cash of 42,309,236. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Instructions 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds. 2. Journalize the entries to record the following: A. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the interest method. (Round to the nearest dollar.) B. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the interest method. (Round to the nearest dollar.) 3. Determine the total interest expense for Year 1.11.5BPR Continuing Company AnalysisAmazon: Times interest earned Amazon.com, Inc. is one of the largest Internet retailers in the world. Walmart Stores, Inc. is the largest retailer in the United States. Amazon and Walmart compete in similar markets; however, Walmart sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Interest expense and income before income tax expense from the financial statements of both companies for two recent years follow (in millions): Amazon Walmart Year 2 Year 1 Year 2 Year 1 Interest expense 210 141 2/461 2,335 Income (loss) before income tax expense (111) 274 24,799 24,656 A. Compute the times interest earned ratio for both companies for the two years. (Round to one decimal place.) B. Interpret Amazons interest coverage from Year 1 to Year 2. C. Does a times interest earned ratio less than 1.0 mean that creditors will not get paid interest? D. Interpret Walmarts interest coverage from Year 1 to Year 2. E. Which company appears to have the greater protection for creditors?Arch Coal:Times interest earned Arch Coal, Inc. is a major coal mining company in the United States. Condensed income statement information for three recent years follows (in millions): Year 3 Year 2 Year 1 Revenues 2,937 3,014 3,768 Costs and expenses 3,087 3,677 4,52 Loss from operations (150) (663) (757) Interest expense (net) 383 375 312 Loss before income taxes (533) (1,038) (1,069) A. Compute the times interest earned ratio for the three years. (Round to one decimal place.) B. How would you interpret a negative ratio? C. Is the trend improving or deteriorating?Aeropostale: Times interest earned Aeropostale, Inc. is a specialty fashion retailer targeting young adults. The income before income tax expense and interest expense for four recent years follow (in millions): Year 4 Year 3 Year 2 Year 1 Income (loss) before income tax expense (132.1) (135.6) 91.7 129.1 Interest expense 8.8 0.9 0.5 0.4 A. Compute the time interest earned ratio for each year. (Round to one decimal place.) B. Plot the four points on a graph with the year numbers on the horizontal axis, beginning with Year 1. C. Interpret the trend in the ratio from your graph. D. What happened to interest expense in Year 4? What might be the cause?11.4ADM Ethics in Action CLG Capital Inc. is a large holding company that uses long-term debt extensively to fund its operations. At December 31, the company reported total assets of 100 million, total debt of 55 million, and total equity of 45 million. In January, the company issued 11 billion in long-term bonds to investors at par value. This was the largest debt issuance in the companys history, and it significantly increased the companys ratio of total debt to total equity. Five days after the debt issuance. CEG filed legal documents to prepare for an additional 50 billion long-term bond issue. As a result of this filing, the price of the 11 billion in bonds that the company issued earlier in the week dropped to 94 because of the increased risk associated with the companys debt. The investors in the original 11 billion bond issuance were not informed of the companys plans to issue additional debt so quickly after the initial bond issue. Did CEG Capital act unethically by not disclosing to initial bond investors its immediate plans to issue an additional 50 billion debt offering?11.3TIF Of two corporations organized at approximately the same time and engaged in competing businesses, one issued 80 par common stock, and the other issued 1 par common stock. Do the par designations provide any indication as to which stock is preferable as an investment? Explain.A stockbroker advises a client to buy preferred stock, saying With that type of stock, you will never have to worry about losing the dividends. Is the broker right?A corporation with both preferred stock and common stuck outstanding has a substantial credit balance in its retained earnings account at the beginning of the current fiscal year. Although net income for the current year is sufficient to pay the preferred dividend of 150,000 each quarter and a common dividend of 90,000 each quarter, the board of directors declares dividends only on the preferred stock. Suggest possible reasons for not paying dividends-on the common stock.An owner of 2,500 shares of Simmons Company common stock receives a stock dividend of 50 shares. A. What is the effect of the stock dividend on the stockholders proportionate interest (equity) in the corporation? B. How does the total equity of 2,550 shares compare with the total equity of 2,500 shares before the stock dividend?5DQ 6DQ A corporation reacquires 60,000 shares of its own 10 par common stock for 3,000,000, recording it at cost. A. What effect does this transaction have on revenue or expense of the period? B. What effect does it have on stockholders equity?The treasury stock in Discussion Question 7 is resold for 3,750,000. A. What is the effect on the corporations revenue of the period? B. What is the effect on stockholders equity?9DQ 10DQ 12.1BE 12.2BE Entries for cash dividends The declaration, record, and payment dates in connection with a cash dividend of 335,000 on a corporations common stock are October 1, November 7, and December 15. Journalize the entries required on each date.Entries for stock dividends Alpine Energy Corporation has 1,500,000 shares of 40 par common stock outstanding. On August 2, Alpine Energy declared a 4% stock dividend to be issued October 8 to stockholders of record on September 15. The market price of the stock was 70 per share on August 2. Journalize the entries required on August 2, September 15, and October 8.12.5BE Reporting stockholders equity Using the following accounts and balances, prepare the Stockholders Equity section of the balance sheet. Five-hundred thousand shares of common stock are authorized, and 40,000 shares have been reacquired. Common Stock, 120 par 48,000,000 Paid-In Capital from Sale of Treasury Stock 4,500,000 Paid-In Capital in Excess of ParCommon Stock 6,400,000 Retained Earnings 63,680,000 Treasury Stock 5,200,000 Retained earnings statement Noric Cruises Inc. reported the following results for the year ended October 31: Retained earnings, October 1 12,400,000 Net income 2,350,000 Cash dividends declared 175,000 Stock dividends declared 300,000 Prepare a retained earnings statement for the month ended October 31.Dividends per share Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 80,000 shares of cumulative preferred 3% stock, 20 par and 400,000 shares of 25 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, 36,000: second year, 72,000; third year, 80,000; fourth year, 100,000. Determine the dividends per share on each class of stock for each of the four years.12.2EX Entries for issuing par stock On January 22, Jefferson County Rocks Inc., a marble contractor, issued for cash 180,000 shares of 20 par common stock at 23, and on February 27, it issued for cash 25,000 shares of preferred stock, 7 par at 9. A. Journalize the entries for January 22 and February 27. B. What is the total amount invested (total paid-in capital) by all stockholders as of February 27?12.4EX Issuing stock for assets other than cash On November 23, Elder Lift Corporation, a wholesaler of hydraulic lifts, acquired land in exchange for 12,500 shares of 25 par common stock with a current market price of 38. Journalize the entry to record the transaction.Selected stock transactions Alpha Sounds Corp., an electric guitar retailer, was organized by Michele Kirby, Paul Glenn, and Gretchen Northway. The charter authorized 1,000,000 shares of common stock with a par of 1. The following transactions affecting stockholders equity were completed during the first year of operations: A. Issued 100,000 shares of stock at par to Paul Glenn for cash. B. Issued 3,000 shares of stock at par to Michele Kirby for promotional services provided in connection with the organization of the corporation, and issued 45,000 shares of stock at par to Michele Kirby for cash. C. Purchased land and a building from Gretchen Northway in exchange for stock issued at par. The building is mortgaged for 180,000 for 20 years at 6%, and there is accrued interest of 5,200 on the mortgage note at the time of the purchase. It is agreed that the land is to be priced at 60,000 and the building at 225,000 and that Gretchen Northways equity will be exchanged for stock at par. The corporation agreed to assume responsibility for paying the mortgage note and the accrued interest. Journalize the entries to record the transactions.Issuing stock Willow Creek Nursery, with an authorization of 75,000 shares of preferred stock and 200,000 shares of common stock, completed several transactions involving its stock on October 1, the first day of operations. The trial balance at the close of the day follows: Cash 3,780,000 Land 840,000 Buildings 2,380,000 Preferred 1% Stock, 80 par 2,800,000 Paid-In Capital In Excess of ParPreferred Stock 420,000 Common Stock, 30 par 3,600,000 Paid-In Capital in Excess of ParCommon Stock 180,000 7,000,000 7,000,000 All shares within each class of stock were sold at the same price. The preferred stock was issued in exchange for the land and buildings. Journalize the two entries to record the transactions summarized in the trial balance.Issuing stock Professional Products Inc., a wholesaler of office products, was organized on February 5 of the current year, with an authorization of 50,000 shares of preferred 2% stock, 40 par and 1,000,000 shares of 8 par common stock. The following selected transactions were completed during the first year of operations: Feb. 5. Issued 600,000 shares of common stock at par for cash. 5. Issued 1,500 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation. Apr. 9. Issued 45,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of 100,000, 310,000, and 85,000 respectively. June 14. Issued 30,000 shares of preferred stock at 53 for cash. Journalize the transactions.Entries for cash dividends The declaration, record, and payment dates in connection with a cash dividend of 1,250,000 on a corporations common stock are July 9, August 31, and October 1. Journalize the entries required on each date.Entries for stock dividends Healthy Life Co. is an HMO for businesses in the Fresno area. The following account balances appear on Healthy Lifes balance sheet: Common stock (3,000,000 shares authorized; 2,200,000 shares issued), 15 par, 33,000,000; Paid-in capital in excess of parcommon stock, 9,000,000; and Retained earnings, 89,550,000. The board of directors declared a 5% stock dividend when the market price of the stock was 18 a share. Healthy Life reported no income or loss for the current year. A. Journalize the entries to record (1) the declaration of the dividend, capitalizing an amount equal to market value, and (2) the issuance of the stock certificates. B. Determine the following amounts before the stock dividend was declared: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders equity. C. Determine the following amounts after the stock dividend was declared and closing entries were recorded at the end of the year: (1) total paid in capital, (2) total retained earnings, and (3) total stockholders equity.12.11EX Effect of cash dividend and stock split Indicate whether the following actions would (+) increase, () decrease, or (0) not affect Indigo Inc.s total assets, liabilities, and stockholders equity: Assets Liabilities Stockholders Equity A. Authorizing and issuing stock certificates in a stock split B. Declaring a stock dividend C. Issuing stock certificates for the stock dividend declared in (B) D. Declaring a cash dividend E. Paying the cash dividend declared in (D)Selected dividend transactions, stock split Selected transactions completed by Canyon Ferry Boating Corporation during the current fiscal year are as follows: Jan. 8.Split the common stock 2 for 1 and reduced the par from 100 to 50 per share. After the split, there were 300,000 common shares outstanding. Apr. 30.Declared semiannual dividends of 0.60 per share on 16,000 shares of preferred stock and 0.22 per share on the common stock payable on July 1. July 1.Paid the cash dividends. Oct 31.Declared semiannual dividends of 0.60 per share on the preferred stock and 0.11 per share on the common stock (before the stock dividend). In addition, a 5% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at 56. Dec 31.Paid the cash dividends and issued the certificates for the common stock dividend. Journalize the transactions.12.14EX Treasury stock transactions SprayCo Inc. develops and produces spraying equipment for lawn maintenance and industrial uses. On March 9 of the current year, SprayCo reacquired 62,000 shares of its common stock at 51 per share. On June 9, 48,000 of the reacquired shares were sold at 60 per share, and on November 13, 7,500 of the reacquired shares were sold at 54. A. Journalize the transactions of March 9, June 9, and November 13. B. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year? C. What is the balance in Treasury Stock on December 31 of the current year? D. How will the balance in Treasury Stock be reported on the balance sheet?12.16EX Reporting paid-in capital The following accounts and their balances were selected from the unadjusted trial balance of Point Loma Group Inc., a freight forwarder, at October 31, the end of the current fiscal year: Common Stock, no par, 14 stated value 4,480,000 Paid-In Capital from Sale of Treasury Stock 45,000 Paid-In Capital in Excess of ParPreferred Stock 210,000 Paid-In Capital in Excess of Stated ValueCommon Stock 480,000 Preferred 2% Stock, 120 par 8,400,000 Retained Earnings 39,500,000 Prepare the Paid-In Capital portion of the Stockholders Equity section of the balance sheet using Method 1 of Exhibit 9. There are 375,000 shares of common stock authorized and 85,000 shares of preferred stock authorized.Stockholders Equity section of balance sheet The following accounts and their balances appear in the ledger of Goodale Properties Inc. on June 30 of the current year: Common Stock, 45 par 3,060,000 Paid-In Capital from Sale of Treasury Stock 115,000 Paid-In Capital in Excess of ParCommon Stock 272,000 Retained Earnings 20,553,000 Treasury Stock 324,000 Prepare the Stockholders Equity section of the balance sheet as of June 30. Eighty thousand shares of common stock are authorized, and 9,000 shares have been reacquired.Stockholders Equity section of balance sheet Specialty Auto Racing Inc. retails racing products for BMWs, Porsches, and Ferraris. The following accounts and their balances appear in the ledger of Specialty Auto Racing on July 31, the end of the current year: Common Stock, 36 par 10,080,000 Paid-In Capital from Sale of Treasury StockCommon 340,000 Paid-In Capital in Excess of ParCommon Stock 420,000 Paid-In Capital in Excess of ParPreferred Stock 384,000 Preferred 1 % Stock, 150 par 7,200,000 Retained Earnings 71,684,000 Treasury 5tockCommon 1,008,000 Fifty thousand shares of preferred and 300,000 shares of common stock are authorized. There are 24,000 shares of common stock held as treasury stock. Prepare (he Stockholders Equity section of the balance sheet as of July 31, the end of the current year, using Method 1 of Exhibit 9 Retained earnings statement Sumter Pumps Corporation, a manufacturer of industrial pumps, reports the following results for the year ended December 31, 20Y3: Retained earnings January 1,20Y3 59,650,000 Net income 8,160,000 Cash dividends declared 1,000,000 Stock dividends declared 2,600,000 Prepare a retained earnings statement for the year ended December 31, 20Y3-Stockholders Equity section of balance sheet List the errors in the following Stockholders Equity section of the balance sheet prepared as of the end of the current year: Stockholders Equity Paid-in capital: Preferred 2% stock, 80 par (125,000 shares authorized and issued) 10,000,000 Excess of issue price over par 500,000 Paid-in capital, preferred stock 10,500,000 Retained earnings 96,700,000 Treasury stock (75,000 shares at cost 1,755,000 Dividends payable 430,000 Total paid-in capital 109,385,000 Common stock, 20 par (1,000,000 shares authorized, 825,000 shares issued 17,655,000 Organizing costs 300,000 Total stockholdersequity 127,340,000 12.22EX Dividends on preferred and common stock Pecan Theatre Inc. owns and operates movie theaters throughout Florida and Georgia. Pecan Theatre has declared the following annual dividends over a six-year period: Year 1, 80,000; Year 2, 90,000; Year 3, 150,000; Year 4, 150,000; Year 5, 160,000; and Year 6, 180,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 250,000 shares of cumulative, preferred 2% stock, 20 par, and 500,000 shares of common stock, 15 par. Instructions 1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears at the beginning of Year 1. Summarize the data in tabular form, using the following column headings: Total Preferred Dividends Common Dividends Year Dividends Total Per Share Total Per Share Year 1 80,000 Year 2 90,000 Year 3 150,000 Year 4 150,000 Year5 160,000 Year 6 180,000 2. Determine the average annual dividend per share for each class of stock for the six-year period. 3. Assuming a market price per share of 25.00 for the preferred stock and 17.50 for the common stock, determine the average annual percentage return on initial shareholders investment. based on the average annual dividend per share (A) for preferred stock and (B) for common stock.12.2APR Stock transactions for corporate expansion On December 1 of the current year, the following accounts and their balances appear in the ledger of Latte Corp., a coffee processor: Preferred 2% Stock, 50 par (250,000 shares authorized, 80,000 shares issued) 4,000,000 Paid-In Capital in Excess of ParPreferred Stock 560,000 Common Stock, 35 par (1,000,000 shares authorized, 400,000 shares issued) 14,000,000 Paid-In Capital in Excess of ParCommon Stock 1,200,000 Retained Earnings 180,000,000 At the annual stockholders meeting on March 31, the board of directors presented a plan for modernizing and expanding plant operations at a cost of approximately 11,000,000. The plan provided (A) that a building, valued at 3,375,000, and the land on which it is located, valued at 1,500,000, be acquired in accordance with preliminary negotiations by the issuance issued through an underwriter, and (C) that the corporation borrow 4,000,000. The plan approved by the stockholders and accomplished by the following transactions: May 11. Issued 125,000 shares of common stock in exchange for land and a building, according to the plan. 20. Issued 40,000 shares of preferred stock, receiving 52 per share in cash. 31. Borrowed 4,000,000 from Laurel National, giving a 5% mortgage note. Instructions Journalize the entries to record the May transactions.Entries for selected corporate transactions Morrow Enterprises Inc. manufactures bathroom fixtures. Morrow Enterprises stockholders equity accounts, with balances on January 1, 20Y6, are as follows: Common Stock, 20 stated value (500,000 shares authorized, 375,000 shares issued) 7,500,000 Paid-In Capital in Excess of Stated ValueCommon Stock 825,000 Retained Earnings 33,600,000 Treasury Stock (25,000 shares, at cost 450,000 The following selected transactions occurred during the year: Jan. 22. Paid cash dividends of 0.08 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for 28,000. Apr. 10. Issued 75,000 shares of common stock for 24 per share. June 6. Sold all of the treasury stock for 26 per share. July 5. Declared a 4% stock dividend on common stock, to be capitalized at the market price of the stock, which is 25 per share. Aug. 15. Issued shares of stock for the stock dividend declared on July 5. Nov. 23. Purchased 30,000 shares of treasury stock for 19 per share. Dec. 28. Declared a 0.10-per-share dividend on common stock. 31. Closed the credit balance of the income summary account, 1,125,000. 31. Closed the two dividends accounts to Retained Earnings. Instructions 1. Enter the January 1 balances in T accounts for the stockholders equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends. 2. Journalize the entries to record the transactions, and post to the eight selected accounts. 3. Prepare a retained earnings statement for the year ended December 31, 20Y6. 4. Prepare the Stockholders Equity section of the December 31, 20Y6, balance sheet.Entries for selected corporate transactions Selected transactions completed by Primo Discount Corporation during the current fiscal year are as follows: Jan. 9. Split the common stock 3 for 1 and reduced the par from 75 to 25 per share. After the split, there were 1,200,000 common shares outstanding. Feb. 28. Purchased 40,000 shares of the corporations own common stock at 28, recording the stock at cost. May 1. Declared semiannual dividends of 0.80 on 75,000 shares of preferred stock and 0.12 on the common stock to stockholders of record on June 1, payable on July 10. July 10. Paid the cash dividends. Sept. 7. Sold 30,000 shares of treasury stock at 34, receiving cash. Oct 1. Declared semiannual dividends of 0.80 on the preferred stock and 0.12 on the common stock (before the stock dividend). In addition, a 2% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at 36. Dec 1. Paid the cash dividends and issued the certificates for the common stock dividend Instructions Journalize the transactions.12.1BPR Stock transaction for corporate expansion Pulsar Optics produces medical lasers for use in hospitals. The accounts and their balances appear in the ledger of Pulsar Optics on April 30 of the current year as follows: Preferred 1% Stock, 120 par (300,000 shares authorized, 36,000 shares issued) 4,320,000 Paid-In Capital in Excess of ParPreferred Stock 180,000 Common Stock, 15 par (2,000,000 shares authorized, 1,400,000 shares issued) 21,000,000 Paid-In Capital in Excess of ParCommon Stock 3,500,000 Retained Earnings 78,000,000 At the annual stockholders meeting on August 5, the board of directors presented a plan for modernizing and expanding plant operations at a cost of approximately 9,000,000. The plan provided (A) that the corporation borrow 1,500,000, (B) that 20,000 shares of the unissued preferred stock be issued through an underwriter, and (C) that a building, valued at 4,150,000, and the land on which it is located, valued at 800,000, be acquired in accordance with preliminary negotiations by the issuance of 300,000 shares of common stock. The plan was approved by the stockholders and accomplished by the following transactions: Oct. 9. Borrowed 1,500,000 from St. Peter City Bank, giving a 4% mortgage note. 17. Issued 20,000 shares of preferred stock, receiving 126 per share in cash. 28. Issued 300,000 shares of common stock in exchange for land and a building, according to the plan. Instructions Journalize the entries to record the October transactions.Selected stock transactions Diamondback Welding Fabrication Corporation sells and services pipe welding equipment in Illinois. The following selected accounts appear in the ledger of Diamondback Welding Fabrication Corporation at the beginning of the current fiscal year: Preferred 2% Stock, 80 par (100,000 shares authorized, 60,000 shares issued) 4,800,000 Paid-In Capital in Excess of Par- Preferred Stock 210,000 Common Stock, 9 par (3,000,000 shares authorized, 1,750,000 shares issued) 15,750,000 Paid-In Capital in Excess of Par-Common Stock. 1,400,000 Retained Earnings 52,840,000 During the year, the corporation completed a number of transactions affecting the stockholders equity. They are summarized as follows: a. Purchased 87,500 shares of treasury common for 8 per share. b. Sold 55,000 shares of treasury common for 11 per share. c. Issued 20,000 shares of preferred 2% stock at 84. d. Issued 400,000 shares of common stock at 13, receiving cash. e. Sold 18,000 shares of treasury common for 7.50 per share. f. Declared cash dividends of 1.60 per share on preferred stock and 0.05 per share on common stock. g. Paid the cash dividends. Instructions Journalize the entries to record the transactions. Identify each entry by letter.Entries for selected corporate transactions Nav-Go Enterprises Inc. produces aeronautical navigation equipment. Navo-Go Enterprises stockholders equity accounts, with balances on January 1, 20Y1, are as follows: Common Stock, 5 stated value (900,000 shares authorized, 620,000 shares issued) 3,100,000 Paid-In Capital in Excess of Stated ValueCommon Stock 1,240,000 Retained Earnings 4,875,000 Treasury Stock (48,000 shares, at cost) 288,000 The following selected transactions occurred during the year: Jan. 15. Paid cash dividends of 0.06 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for 34,320. Mar. 15. Sold all of the treasury stock for 6.75 per share. Apr. 13. Issued 200,000 shares of common stock for 8 per share. June 14. Declared a 3% stock dividend on common stock, to be capitalized at the market price of the stock, which is 7.50 per share. July 16. Issued stock for stock dividend declared on June 14. Oct. 30. Purchased 50,000 shares of treasury stock for 6 per share. Dec. 30. Declared an 0.08-per-share dividend on common stock. 31. Closed the credit balance of the income summary account, 775,000. 31. Closed the two dividends accounts to Retained Earnings. Instructions 1. Enter the January 1 balances in T accounts for the stockholders equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable: Stock Dividends: Cash Dividends. 2. Journalize the entries to record the transactions, and post to the eight selected accounts. 3. Prepare a retained earnings statement for the year ended December 31, 20Y1. 4. Prepare the Stockholders Equity section of the December 31, 20Y1, balance sheet.Entries for selected corporate transactions West Yellowstone Outfitters Corporation manufactures and distributes leisure clothing. Selected transactions completed by West Yellowstone Outfitters during the current fiscal year are as follows: Jan. 15. Split the common stock 4 for 1 and reduced the par from 120 to 30 per share. After the split there were 800,000 common shares outstanding. Mar. 1. Declared semiannual dividends of 0.25 on 100,000 shares of preferred stock and 0.07 on the 800,000 shares of 30 par common stock to stockholders of record on March 31, payable on April 30. Apr. 30. Paid the cash dividends. May 31. Purchased 60,000 shares of the corporations own common stock at 32, recording the stock at cost. Aug. 17. Sold 40,000 shares of treasury stock at 38, receiving cash. Sept. 1. Declared semiannual dividends of 0.25 on the preferred stock and 0.09 on the common stock (before the stock dividend). In addition, a 1 % common stock dividend was declared on the common stock outstanding, to be capitalized at the fair market value of the common stock, which is estimated at 40. Oct. 31. Paid the cash dividends and issued the certificates for the common stock dividend. Instructions Journalize the transactions.Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 20Y8, were as follows: A. Issued 15,000 shares of 20 par common stock at 30, receiving cash. B. Issued 4,000 shares of 80 par preferred 5% stock at 100, receiving cash. C. Issued 500,000 of 10-year, 5% bonds at 104, with interest payable semiannually. D. Declared a quarterly dividend of 0.50 per share on common stock and 1.00 per share on preferred stock. On the date of record, 100,000 shares of common stock were outstanding, no treasury shares were held, and 20,000 shares of preferred stock were outstanding. E. Paid the cash dividends declared in (D). F. Purchased 8,000 shares of treasury common stock at 33 per share. G. Declared a 1.00 quarterly cash dividend per share on preferred stock. On the date of record, 20,000 shares of preferred stock had been issued. H. Paid the cash dividends to the preferred stockholders. I. Sold, at 38 per share, 2,600 shares of treasury common stock purchased in (F). J. Recorded the payment of semiannual interest on the bonds issued in (C) and the amortization of the premium for six months. The amortization is determined using the straight-line method. Instructions 1. Journalize the selected transactions. 2. After all of the transactions for the year ended December 31, 20Y8, had been posted [including the transactions recorded in part (1) and all adjusting entries], the data that follow were taken from the records of Equinox Products Inc. Income statement data: Advertising expense 150,000 Cost of goods sold 3,700,000 Delivery expense 30,000 Depreciation expenseoffice buildings and equipment 30,000 Depreciation expensestore buildings and equipment 100,000 Income tax expense 140,500 Interest expense 21,000 Interest revenue 30,000 Miscellaneous administrative expense 7,500 Miscellaneous selling expense 14,000 Office rent expense 50,000 Office salaries expense 170,000 Office supplies expense 10,000 Sales 5,313,000 Sales commissions 185,000 Sales salaries expense 385,000 Store supplies expense 21,000 Retained earnings and balance sheet data: Accounts payable 194,300 Accounts receivable 545,000 Accumulated depreciationoffice buildings and equipment 1,580,000 Accumulated depreciationstore buildings and equipment 4,126,000 Allowance for doubtful accounts 8,450 Bonds payable, 5%, due in 10 years 500,000 Cash 282,850 Common stock, 20 par (400,000 shares authorized; 100,000 shares issued, 94,600 outstanding) 2,000,000 Dividends: Cash dividends for common stock 155,120 Cash dividends for preferred stock 100,000 Goodwill 700,000 Income tax payable 44,000 Interest receivable 1,200 Inventory (December 31, 20Y8),at lower of cost (FIFO) or market 778,000 Office buildings and equipment 4,320,000 Paid-in capital from sale of treasury stock 13,000 Excess of issue price over parcommon stock 886,800 Excess of issue price over parpreferred stock 150,000 Preferred 5% stock, 80 par (30,000 shares authorized; 20,000 shares issued) 1,600,000 Premium on bonds payable 19,000 Prepaid expenses 27,400 Retained earnings, January 1, 20Y8 8,197,220 Store buildings and equipment 12,560,000 Treasury stock (5,400 shares of common stock at cost of 33 per share) 178,200 A. Prepare a multiple-step income statement for the year ended December 31, 20Y8. B. Prepare a retained earnings statement for the year ended December 31, 20Y8. C. Prepare a balance sheet in report form as of December 31, 20Y8.12.1ADM 12.2ADM 12.3ADM BBT and Regions Financial: Earnings per share BBT Corporation and Regions Financial Corporation are large regional banking companies. The net income and average common shares outstanding for both companies were reported in recent financial reports as follows (in millions): BBT Regions Financial Net income 2,151 1,090 Average number of common shares outstanding 718 1,375 In addition, BBT had 2,603,000,000 in par value preferred stock outstanding during the period. The preferred stock had an average dividend rate of 5.7%. Regions Financial did not pay any preferred cash dividends. A. Determine the preferred dividend for BBT. (Round to the nearest million dollars.) B. Determine the earnings per share for each company. (Round to the nearest cent.) C. Which company appears more profitable from a total net income perspective? D. Which company appears more profitable from an earnings per share perspective? E. From a stockholders perspective, is net income or earnings per share the better relative earnings measure between the two banks?Ethics In Action Tommy Gunn is a division manager for K-Cern Inc., a .small pharmaceutical company. Tommys division has been working on a new drug that has the potential to revolutionize the treatment of skin cancer. Once the drug is proven to be effective in clinical trials, it will be approved for sale by the government and patented by the company. Because of the potential market for this drug, it is highly likely that the companys revenues and net income will increase significantly when it is approved. Tommy recently saw an internal company memo indicating that the drug passed its final clinical trial and that the company has received government approval to sell the drug. The company will issue a press release announcing this news in the next two days, and this announcement is expected to result in a dramatic increase in the companys stock price. Tommy knows that there is free money to be made if he invests in the stock before the announcement is made. However, K-Cern has a strict policy against employee purchases of company stock outside of established employee stock purchase plans. To get around this rule, Tommy asks his father to purchase the stock for him. The next morning, Tommys father purchases the stock with the understanding that he will split the profits with Tommy. Is Tommy behaving ethically? Why or why not?12.3TIF What is the principal disadvantage of the direct method of reporting cash flows from operating activities?What are the major advantages of the indirect method of reporting cash flows from operating activities?A corporation issued 2,000,000 of common stock in exchange for 2,000,000 of fixed assets. Where would this transaction be reported on the statement of cash flows?A retail business, using the accrual method of accounting, owed merchandise creditors (accounts payable) 320,000 at the beginning of the year and 350,000 at the end of the year. How would the 30,000 increase be used to adjust net income in determining the amount of cash flows from operating activities by the indirect method? Explain.If salaries payable was 100,000 at the beginning of the year and 75,000 at the end of the year, should the 25,000 dccrea.se be added to or deducted from income to determine the amount of cash flows from operating activities by the indirect method? Explain.6DQ A corporation issued 2,000,000 of 20-year bonds for cash at 98. How would the transaction he reported on the statement of cash flows?Fully depreciated equipment costing 50,000 was discarded. What was the effect of the transaction on cash flows if (A) 15,000 cash is received for the equipment, and (B) no cash is received for the equipment?9DQ Name five common major classes of operating cash receipts or operating cash receipts or presented on the statement of cash flows when the cash flows from operating activities are reported by the direct method.Classifying cash flows Identify whether each of the following would be reported as an operating, investing, or financing activity on the statement of cash flows: A. Purchase of investments B. Disposal of equipment C. Payment for selling expenses D. Collection of accounts receivable E. Cash sales F. Issuance of bonds payable Adjustments to net incomeindirect method Ripley Corporations accumulated depreciationequipment account increased by 11,575 while 2,500 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of 33,190 from the sale of investments. Reconcile a net income of 224,500 to net cash flow from operating activities.13.3BE 13.4BE 13.5BE Common stock transactions on the statement of cash flows Jones Industries received 800,000 from issuing shares of its common stock and 700,000 from issuing bonds. During the year, Jones Industries also paid dividends of 90,000. How are the effects of these transactions reported on the statement of cash flows?Appendix 2 Cash received from customersdirect method Sales reported on the income statement were 225,000. The accounts receivable balance decreased 14,300 over the year. Determine the amount of cash received from customers.Reporting changes in equipment on statement of cash flows An analysis of the general ledger accounts indicates that delivery equipment, which cost 75,000 and on which accumulated depreciation totaled 58,000 on the date of sale, was sold for 20,200 during the year. Using this information, indicate the items to be reported on the statement of cash flows.13.1EX Effect of transactions on cash flows State the effect (cash receipt or cash payment and amount) of each of the following transactions, considered individually, on cash flows: A. Retired 400,000 of bonds, on which there was 3,000 of unamortized discount, for 411,000. B. Sold 20,000 shares of 5 par common stock for 22 per share. C. Sold equipment with a book value of 55,800 for 60,000. D. Purchased land for 650,000 cash. E. Purchased a building by paying 50,000 cash and issuing a 450,000 mortgage note payable. F. Sold a new issue of 500,000 of bonds at 98. G. Purchased 10,000 shares of 10 par common stock as treasury stock at 33.25 per share. H. Paid dividends of 1.50 per share. There were 1,000,000 shares issued and 120,000 shares of treasury stock.Classifying cash flows Identify the type of cash flow activity for each of the following events (operating, investing, or financing): A. Net income B. Paid cash dividends C. Issued common stock D. Issued bonds E. Redeemed bonds F. Sold long-term investments G. Purchased treasury stock H. Sold equipment I. Issued preferred stock J. Purchased buildings K. Purchased patents 13.4EX Cash flows from operating activities indirect method The net income reported on the income statement for the current year was 73,600. Depreciation recorded on sore equipment for the year amounted to 27,400. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash 23,500 18,700 Accounts receivable (net) 56,000 48,000 Inventories 35,500 40,000 Prepaid expenses 4,750 7,000 Accounts payable (merchandise creditors) 21,800 16,800 Wages payable 4,900 5,800 A. Prepare the Cash Mows from Operating Activities section of the statement of cash flows, using the indirect method. B. Briefly explain why net cash flow from operating activities is different than net income.13.6EX Cash flows from operating activitiesindirect method The income statement disclosed the following items for the year: Depreciation expense 57,600 Gain on disposal of equipment 33,600 Net income 508,000 The changes in the current asset and liability accounts for the year are as follows: Increase (Decrease) Accounts receivable 8,960 Inventory (5,120) Prepaid insurance (1,920) Accounts payable (6,080) Income taxes payable 1,410 Dividends payable 2,200 A. Prepare the Clash flows from Operating Activities section of the statement of cash flows, using the indirect method. B. Briefly explain why net cash flow from operating activities is different than net income.13.8EX 13.9EX 13.10EX Determining cash payments to stockholders The board of directors declared cash dividends totaling 1,200,000 during the current year. The comparative balance sheet indicates dividends payable of 5250,000 at the beginning of the year and 100,000 at the end of the year. What was the amount of cash payments to stockholders during the year?13.12EX Reporting land acquisition for cash and mortgage note on statement of cash flows On the basis of the details of the following fixed asset account, indicate the items to be reported on the statement of cash flows:Reporting issuance and retirement of long-term debt On the basis of the details of the following bonds payable and related discount accounts, indicate the items to be reported in the Financing Activities section of the statement of cash flows, assuming no gain or loss on retiring the bonds:13.15EX 13.16EX Statement of cash flowsindirect method The comparative balance sheet of Olson-Jones Industries Inc for December 31 20Y2 and 20Y1, is as follows: Dec. 31,20Y2 Dec.31,20Y1 Assets Cash 183 14 Accounts receivable (net) 55 49 Inventories 117 99 Land 250 330 Equipment 205 175 Accumulated depreciationequipment (68) (42) Total assets 742 625 Liabilities and Stockholders' Equity Accounts payable (merchandise creditors) 51 37 Dividends payable 5 Common stock, 1 par 125 80 Paid in capital: Excess of issue price over parcommon stock 85 70 Retained earnings 476 438 Total liabilities and stockholders' equity 742 625 The following additional information is taken from the records: A. Land was sold for 120. B. Equipment was acquired for cash C. There were no disposals of equipment during the year. D. The common stock was issued for cash E. There was a 62 credit to Retained Earrings fur net income. F. There was a 24 debit to Retained Earnings for cash dividends declared. A. Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities B. Was Olson-Jones net cash flow from operations more or less than net income? What is the source of this difference?Statement of cash flowsindirect method List the errors you find in the following statement of cash flows. The cash balance at the beginning of the year was 240,000. All other amounts are correct, except the cash balance at the end of the year. Shasta Inc. Statement of Cash Flows For the Year Ended December 31,20Y9 Cash flows from operating activities: Net income........................................... 360,000 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation......................................... 100,800 Gain on sale of investments........................... 17,280 Changes in current operating assets and liabilities: Increase in accounts receivable......................... 27,360 Increase in inventories................................. (36,000) Increase in accounts payable........................... (3,600) Decrease in accrued expenses payable................ (2,400) Net cash flow from operating activities............... 463,440 Cash flows from investing activities: Cash received from sale of investments................... 240,000 Cash paid for purchase of land........................... (259,200) Cash paid for purchase of equipment..................... (432,000) Net cash flow used for investing activities.............. (415,200) Cash flows from financing activities: Cash received from sale of common stock................. 312,000 Cash paid for dividends.................................. 1132,000) Net cash flow from financing activities................. 180,000 Change in cash............................................. 47,760 Cash at the end of the year.................................. 192,240 Cash at the beginning of the year............................ 240,000 13.19EX 13.20EX 13.21EX 13.22EX Statement of cash flowsindirect method The comparative balance sheet of Livers Inc. for December 31, 20Y3 and 20Y2, is shown as follows: Dec. 31, 20Y3 Dec. 31, 20Y2 Assets Cash 155,000 150,000 Accounts receivable (net) 450,000 400,000 Inventories 770,000 750,000 Investments 0 100,000 Land 500,000 0 Equipment 1,400,000 1,200,000 Accumulated depreciationequipment (600,000) (500,000) Total assets 2,675,000 2,100,000 Liabilities and Stockholders Equity Accounts payable (merchandise creditors) 340,000 300,000 Accrued expenses payable (operating expenses) 45,000 50,000 Dividends payable 30,000 25,000 Common stock. 4 par 700,000 600,000 Paid-in capital: Excess of issue price over parcommon stock 200,000 175,000 Retained earnings 1,360,000 950,000 Total liabilities and stockholders equity 2,675,000 2,100,000 Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows: A. The investments were sold for 175,000 cash. B. Equipment and land were acquired for cash. C. There were no disposals of equipment during the year. D. The common stock was issued for cash. E. There was a 500,000 credit to Retained Earnings for net income. F. There was a 90,000 debit to Retained Earnings for cash dividends declared. Instructions Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.13.2APR 13.3APR 13.4APR Statement of cash flows direct method applied to PR 131A The comparative balance sheet of Livers Inc. for December 31, 20Y3 and 20Y2 is as follows: Dec. 31, 20Y3 Dec. 31, 20Y2 Assets Cash 155,000 150,000 Accounts receivable (net) 450,000 400,000 Inventories 770,000 750,000 Investments 0 100,000 Land 500,000 0 Equipment 1,400,000 1,200,000 Accumulated depreciationequipment (600,000) (500,000) Total assets Liabilities and Stockholders' Equity 2,675,000 2,100,000 Accounts payable (merchandise creditors) 340,000 300,000 Accrued expenses payable (operating expenses) 45,000 50,000 Dividends payable 30,000 25,000 Common stock, 4 par 700,000 600,000 Paid-in capital: Excess of issue price over parcommon stock 200,000 175,000 Retained earnings 1,360,000 950,000 Total liabilities and stockholders' equity 2,675,000 2,100,000 The income statement for the year ended December 31, 20Y3, is as follows: Sales 3,000,000 Cost of goods sold 1,400,000 Gross profit 1,600,000 Operating expenses: Depreciation expense 100,000 Other operating expenses. 950,000 Total operating expenses 1,050,000 Operating income 550,000 Gain on sale of investments 75,000 Income before income tax 625,000 Income tax expense 125,00 Net income 500,000 Additional data obtained from an examination of the accounts in the ledger for 20Y3 are as follows: A. The investments were sold for 175,000 cash. B. Equipment and land were acquired for cash. C. There were no disposals of equipment during the year. D. The common stock was issued for cash. E. There was a 90,000 debit to Retained Earnings for cash dividends declared. Instructions Prepare a .statement of cash flows, using the direct method of presenting cash flows from operating activities.13.1BPR 13.2BPR 13.3BPR 13.4BPR Statement of cash flowsdirect method applied to PR 131B The comparative balance sheet of Merrick Equipment Co. for Dec. 31, 20Y9 and 20Y8, is: Dec. 31, 20Y9 Dec. 31, 20Y8 Assets Cash 70,720 47,940 Accounts receivable (net) 207,230 188,190 Inventories 298,520 289,850 Investments 0 102,000 Land 295,800 0 Equipment 438,600 358,020 Accumulated depreciationequipment (99,110) (84,320) Total assets 1,211,760 901,680 Liabilities and Stockholders' Equity Accounts payable (merchandise creditors).................. 205,700 194,140 Accrued expenses payable (operating expenses) 30,600 26,860 Dividends payable 25,500 20,400 Common stock. 1 par 202,000 102,000 Paid-in capital: Excess of issue price over parcommon stock 354,000 204,000 Retained earnings 393,960 354,280 Total liabilities and stockholders' equity 1,211,760 901,680 The income statement for the year ended December 31,20Y9, is as fallow s: Sales 2,023,898 Cost of goods sold 1,245,476 Gross profit 778,422 Operating expenses: Depreciation expense 14,790 Other operating expenses 517,299 Total operating expenses 532,089 Operating income 246,333 Other expenses: Loss on sale of investments (10,200) Income before income tax 236,133 Income tax expense 94,453 Net income 141,680 Additional data obtained from an examination of the- accounts in the ledger for 20Y9 are as follows: A. Equipment and land were acquired for cash. B. There were no disposals of equipment during the year. C. The investments were sold for 91,800 cash. D. The common stock was issued for cash. E. There was a 102,000 debit to Retained Earnings for cash dividends declared. Instructions Prepare a statement of cash flows, using the direct method of presenting cash flows from operating activities.13.1ADM 13.2ADM 13.3ADM Priceline: Free cash flow Priceline Group, Inc. is a leading provider of online travel reservation services, including brand names Priceline, KAYAK, and OpenTable. Selected cash flow information from the statement of cash flows for three recent years is as follows (in millions): Year 3 Year 2 Year 1 Net cash provided by operating activities 2,914 2,301 1,786 Net cash used in investing activities (2,349) (2,162) (1,563) Net cash provided by (used in) financing activities 1,429 (404) 669 Additions to property, plant, and equipment (132) (84) (55) Repurchase common stock (750) (884) (257) Acquisitions and investments (2,146) (1,997) (1,587) A. Determine the net change in cash for each year. B. Determine the free cash flow for each year. C. How is the free cash flow being used based on the data provided? D. Which is better for measuring the cash flow available for investment, dividends, debt repayments, and stock repurchases: the change in cash for the period or the free cash flow? Explain.Ethics in Action Head Donuts Inc. is a retailer of designer headphones, earphones, and hands-free audio devices. Polly Ester, the company president, is reviewing the companys financial statements after the dose of the fiscal year and is troubled that earnings decreased by 10%. She shares her concerns with the companys chief accountant, Lucas Simmons, who points out that the drop in earnings was balanced by a 20% increase in cash flows, from operating activities. Polly is encouraged by the increase in cash flows from operating activities, but Ls worried that investors might miss this information because it is buried in the statement of cash flows. To make it easier for investors to find this information, she instructs Lucas to include an operating cash flow per share number on the face of the income statement, directly below earnings per share. While Lucas is concerned about using such an unconventional financial reporting tactic, he agrees to include the information on the income statement. Is Lucas behaving in an ethical and professional manner? Explain your answer.13.3TIF Briefly explain the difference between liquidity, solvency, and profitability analysis.What is the advantage of using comparative statements for financial analysis rather than statements for a single date or period?3DQ How would the current and quick ratios of a service business compare?5DQ What do the following data, taken from a comparative balance sheet, indicate about the company's ability to borrow additional long-term debt in the current year as compared to the preceding year? Current Year Preceding Year Fixed assets (net) 1,260,000 1,360,000 Total long-term liabilities 300,000 400,000 A. How does the rate earned on total assets differ from the rate earned on stockholders' equity? B. Which ratio is normally higher? Why?Kroger, a grocery store, recently had a price-earnings ratio of 13-7, while the average price-earnings ratio in the grocery store industry was 22.5. What might explain this difference?9DQ 10DQ Horizontal analysis The comparative accounts payable and long-term debt balances for a company follow. Current Year Previous Year Accounts payable 111,000 100,000 Long-term debt 132,680 124,000 Based on the information, what is the amount and percentage of increase or decrease that would be shown on a balance sheet with horizontal analysis?Vertical analysis Income statement information for Einsworth Corporation follows: Sales 1,200,000 Cost of goods sold 780,000 Gross profit 420,000 Prepare a vertical analysis of the income statement for Einsworth Corporation. (Round percent-ages to one decimal place.)Current position analysis The following items are reported on a company's balance sheet: Cash 210,000 Marketable securities 120,000 Accounts receivable (net) 110,000 Inventory 160,000 Accounts payable 200,000 Determine (A) the current ratio and (U) the quick ratio. (Round lo one decimal place.)Accounts receivable analysis A company reports the following: Sales 3,150,000 Average accounts receivable (net) 210,000 Determine (A) the accounts receivable turnover and (B) the number of days sales in receivables. (Round to one decimal place.)Inventory analysis A company reports the following: Cost of goods sold 435,000 Average inventory 72,500 Determine (A) the inventor turnover and (B) the number of days' sales in inventory. (Round to one decimal place.)14.6BE 14.7BE Asset turnover A company reports the following: Sales 4,400,000 Average total assets (excluding long-term investments) 2,000,000 Determine the asset turnover ratio. (Round percentages to one decimal place.)14.9BE Common stockholders' profitability analysis A company reports the following: Net income 1,000,000 Preferred dividends 50,000 Average stockholders' equity 6,250,000 Average common stockholders' equity 3,800,000 Determine (A) the return on stockholders equity and (B) the return on common stockholders' equity. (Round percentages to one decimal place.)Earnings per share and price-earnings ratio A company reports the following: Net income 410,000 Preferred dividends 60,000 Shares of common stock outstanding 50,000 Market price per share of common stock 84 A. Determine the company's earnings per share on common stock. B. Determine the company's price-earnings ratio. (Round to one decimal place.)Vertical analysis of income statement Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows: Current Year Previous Year Sales 4,000,000 3,600,000 Cost of goods sold 2,280,000 1,872,000 Selling expenses 600,000 648,000 Administrative expenses 520,000 360,000 Income tax expense 240,000 216,000 A. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. (Round to the nearest whole percentage.) B. Comment on the significant changes disclosed by the comparative income statement.14.2EX Common-sized income statement Revenue and expense data for the current calendar year for Tannenhill Company and for the electronics industry are as follows. Tannenhills data are expressed in dollars. The electronics industry averages are expressed in percentages. Tannenhill Company Electronics Industry Average Sales 4,000,000 100.0% Cost of goods sold 2,120,000 60.0 Gross profit 1,880,000 400% Selling expenses 1,080,000 24.0% Administrative expenses 640,000 14.0 Total operating expenses 1,720,000 38.0% Operating income 160,000 2.0% Other income 120,000 3.0 280,000 5.0% Other expense 80,000 2.0 Income before income tax 200,000 3.0% Income tax expense 80,000 2.0 Net income 120,000 1.0% A. Prepare a common-sized income statement comparing the results of operations for Tannenhill Company with the industry average. (Round to the nearest whole percentage.) B. As far as the data permit, comment on significant relationships revealed by the comparisons.Vertical analysis of balance sheet Balance shed data for Alvarez Company on December 31. the end of two recent fiscal years, follow: Current Year Previous Year Current assets 2,500,000 1,840,000 Property, plant, and equipment 5,600,000 6,072,000 Intangible assets 1,900,000 1,288,000 Current liabilities 2,000,000 1,380,000 Long-term liabilities 3,400,000 3,680,000 Common stock 920,000 920,000 Retained earnings 3,680,000 3,220,000 Prepare a comparative balance sheet for both years, stating each asset as a percent of total assets and each liability and stockholders' equity item as a percent of the total liabilities and stockholders' equity. (Round percentages to one decimal place.)Horizontal analysis of the income statement Income statement data for Winthrop Company for two recent years ended December 31 are as follows: Current Year Previous Year Sales 2,280,000 2,000,000 Cost of goods sold 1,960,000 1,750,000 Gross profit 320,000 250,000 Selling expenses 156,500 125,000 Administrative expenses 122,000 100,000 Total operating expenses 278,500 225,000 Income before income tax 41,500 25,000 Income tax expense 16,600 10,000 Net income 24,900 15,00 A. Prepare a comparative income statement with horizontal analysis, indicating the increase B. (decrease) for the current year when compared with the previous year. (Round percentages to one decimal place.) C. What conclusions can be drawn from the horizontal analysis?Current position analysis The following data were taken from the balance sheet of Nilo Company at the end of two recent fiscal years: Current Year Previous Year Current assets: Cash 414,000 320,000 Marketable securities 496,800 336,000 Accounts and notes receivable (net) 619,200 464,000 Inventories 351,900 272,000 Prepaid expenses 188,100 208,000 Total current assets 2,070,000 1,600,000 Current liabilities: Accounts and notes payable (short-term) 675,000 600,000 Accrued liabilities 225,000 200,000 Total current liabilities 900,000 800,000 A. Determine for each year (1) the working capital, (2) the current ratio, and (3) the quick ratio. (Round ratios to one decimal place.) B. What conclusions can be drawn from these data as to the company's ability to meet its currently maturing debts?14.7EX Current position analysis The bond indenture for the 10-year, 9% debenture bonds issued January 2, 20Y5, required working capital of 100,000, a current ratio of 1.5, and a quick ratio of 1.0 at the end of each calendar year until the bonds mature. At December 31, 20Y6, the three measures were computed as follows: A. List the errori in the determination of the three measures of current position analysis. B. Is the company satisfying the terms of the bond indenture?Accounts receivable analysis The following data arc taken from the financial .statements of Sigmon Inc. Terms of all sales are 2/10, n/45. 20Y3 20Y2 20Y1 Accounts receivable, end of year 725,000 650,000 600,000 Sales on account 5,637,500 4,687,500 A. For 20Y2 and 20Y3, determine (1) the accounts receivable turnover and (2) the number of days' sales in receivables. (Round to the nearest dollar and one decimal place) B. What conclusions can be drawn from these data concerning accounts receivable and credit policies?Accounts receivable analysis Xavier Stores Company anti Lestrade Stores Inc. are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (in millions): Xavier Lestrade Sales 8,500,000 4,585,000 Credit card receivablesbeginning 820,000 600,000 Credit card receivablesending 880,000 710,000 A. Determine the (1) accounts receivable turnover and (2) the number of days sales in receivables for both companies. (Round to one decimal place.) B. Compare the two companies with regard to their credit card policies.Inventory analysis The following data were extracted from the income statement of Keever Inc.: Current Year Previous Year Sales 18,500,000 20,000,000 Beginning inventories 940,000 860,000 Cost of goods sold 9,270,000 10,800,000 Ending inventories 1,120,000 940,000 A. Determine for each year (1) the inventory turnover and (2) the number of days' sales in inventory. (Round to the nearest dollar and one decimal place.) B. What conclusions can be drawn from these data concerning the inventories?Inventory analysis QT, Inc. and Elppa Computers, Inc. compete with each other in the personal computer market. QT assembles computers to customer orders, building and delivering a computer within four days of a customer entering an order online. Elppa, on the other hand, builds computers for inventory prior to receiving an order. These computers are sold from inventory once an order is received. Selected financial information for both companies from recent financial statements follows (in millions): QT Elppa Sales 56,940 120,357 Cost of goods sold 44,754 92,385 Inventory, beginning of period 1,382 6,317 Inventory, end of period 1,404 7,490 A. Determine for both companies (1) the inventory' turnover and (2) the number of days' sales in inventory. (Round to one decimal place.) B. Interpret the inventory ratios in the context of both companies' operating strategies.Ratio of liabilities to stockholders' equity and number of times interest earned The following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years: Current Year Previous Year Accounts payable 924,000 800,000 Current maturities of serial bonds payable 200,000 200,000 Serial bonds payable. 10% 1,000,000 1,200,000 Common stock. 10 par value 250,000 250,000 Paid-in capital in excess of par 1,250,000 1,250,000 Retained earnings 860,000 500,000 A. Determine the ratio of liabilities to .stockholders' equity at the end of each year. (Round to one decimal place.) B. Determine the times interest earned ratio for both years. (Round to one decimal place.) C. What conclusions can be drawn from these data as to the company's ability to meet its currently maturing debts?14.14EX Ratio of liabilities to stockholders' equity and ratio of fixed assets to long-term liabilities Recent balance sheet information for two companies in the food industry, Mondelez International, Inc. and The Hershey Company, is as follows (in thousands): Mondelez Hershey Net property, plant, and equipment 10,010,000 1,674,071 Current liabilities 14,373,000 1,471,110 Long-term debt 15,574,000 1,530,967 Other long-term liabilities 12,816,000 716,013 Stockholders equity 32,215,000 1,036,749 A. Determine the ratio of liabilities to stockholders equity for both companies. (Round to one decimal place.) B. Determine the ratio of fixed assets to long-term liabilities for both companies. (Round to one decimal place.) C. Interpret the ratio differences between the two companies.14.16EX Profitability ratios The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 20Y7, 20Y6, and 20Y5: 20Y7 20Y6 20Y5 Total assets 4,800,000 4,400,000 4,000,000 Notes payable (8% interest) 2,250,000 2,250,000 2,250,000 Common stock 250,000 250,000 250,000 Preferred 4% stock, 100 par (no change during year) 500,000 500,000 500,000 Retained earnings 1,574,000 1,222,000 750,000 The 20Y7 net income was 372,000, and the 20Y6 net income was 492,000. No dividends on common stock were declared between 20Y5 and 20Y7. Preferred dividends were declared and paid in full in 20Y6 and 20Y7. A. Determine the return on total assets, the rate earned on stockholders' equity, and the return on common stockholders' equity for the years 20Y6 and 20Y7. (Round percentages to one decimal place.) B. What conclusions can be drawn from these data as to the company's profitability?Profitability ratios Ralph Lauren Corporation sells apparel through company-owned retail stores. Recent financial information for Ralph Lauren follows (in thousands): Fiscal Year 3 Final Year 2 Net income 567,600 479,500 Interest expense 18,300 22,200 Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 Total assets (at end of fiscal year) 4,981,100 4,648,900 4,356,500 Total stockholders' equity {at end of fiscal year) 3,304,700 3,116,600 2,735,100 Assume the apparel industry average return on total assets is 8.0%, and the average rate earned on stockholders' equity is 10.0% for the year ended April 2, Year 3. A. Determine the return on total assets for Ralph Lauren for fiscal Years 2 and 3. (Round percentages to one decimal place.) B. Determine the return on stockholders equity for Ralph Lauren for fiscal Years 2 and 3. (Round percentages to one decimal place.) C. Evaluate the two-year trend for the profitability ratios determined in (A) and (B). D. Evaluate Ralph Lauren s profit performance relative to the industry.Six measures of solvency or profitability The following data were taken from the financial .statements of Gates Inc. for the current fiscal year. Assuming that long-term investments totaled 3,000,000 throughout the year and that total assets were 7,000,000 at the beginning of the current fiscal year, determine the following: (A) ratio of fixed assets to long-term liabilities, (B) ratio of liabilities to stockholders' equity, (C) asset turnover, (D) return on total assets, (E) return on stockholders" equity, and (F) return on common stockholders' equity. (Round ratios and percentages to one decimal place as appropriate.)Five measures of solvency or profitability The balance sheet for Garcon Inc. at the end of the current fiscal year indicated the following: Bonds payable, 8% 5,000,000 Preferred 4 stock, 50 par 2,500,000 Common stock, 10 par 5,000,000 Income before income tax was 3,000,000, and income taxes were 51,200,000 for the current year. Cash dividends paid on common stock during the current year totaled 1,200,000. The common stock was selling for 32 per share at the end of the year. Determine each of the following: (A) times interest earned ratio (B) earnings per share on common stock, (C) price-earnings ratio, (D) dividends per share of common stock, and (E) dividend yield. (Round ratios and percentages to one decimal place, except for per-share amounts.)Earnings per share, price-earnings ratio, dividend yield The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year. Common stock, 20 par (no change during the year) 10,000,000 Preferred 4 stock, 40 par (no change during the year) 2,500,000 The net income was 1,750,000 and the declared dividends on the common stock were 1,125,000 for the current year. The market price of the common stock is 45 per share. For the common stock, determine (A) the earnings per share, (B) the price-earnings ratio, (C) the dividends per share, and (D) the dividend yield. (Round ratios and percentages to one decimal place, except for per-share amounts.)14.22EX Earnings per share, discontinued operations The nel income reported on the income statement of Cutler Co. was 4,000,000. There were 500,000 shares of 10 par common stock and 100,000 shares of 2 preferred stock outstanding throughout the current year. The income statement included a gain on discontinued operations of 400,000 after applicable income tax. Determine the per-share figures for common stock for (A) income before discontinued operations and (B) net income.14.24EX Unusual items Explain whether Colston Company correctly reported the following items in the financial statements: A. In a recent year, the company discovered a clerical error in the prior year's accounting records. As a result, the reported net income few the previous year was overstated by 45,000. The company corrected this error by restating the prior-year financial statements. B. In a recent year, the company voluntarily changed its method of accounting for long-term construction contracts from the percentage of completion method to the completed contract method. Both methods are acceptable under generally acceptable accounting principles. The cumulative effect of this change was reported as a separate component of income in the current period income statement.Comprehensive Income Anson Industries, Inc. reported the following information on its 20Y1 income statement: Sales 4,000,000 Cost of good s sold 2,300,000 Operating expenses 1,000,000 Income tax expense 280,000 Other comprehensive income 450,000 Prepare the following for Anson Industries, Inc.: A. Income statement, including comprehensive income. B. Income statement and a separate statement of comprehensive income.Horizontal analysis of income statement For 20V2, McDade Company reported a decline in net income. At the end of the year, T. Burrows, the president, is presented with the following condensed comparative income statement: McDade Company Comparative Income Statement For the Years Ended December 31,20Y2 and 20Y1 20Y2 20Y1 Sales 16,800,000 15,000,000 Cost of goods sold 11,500,000 10,000,000 Gross profit 5,300,000 5,000,000 Selling expenses 1,770,000 1,500,000 Administrative expenses 1,220,000 1,000,000 Total operating expenses 2,990,000 2,500,000 Income from operations 2,310,000 2,500,000 Other income 256,950 225,000 Income before income tax 2,556,950 2,725,000 Income tax expense 1,413,000 1,500,000 Net income 1,153,950 1,225,000 Instructions 1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 20Y1 as the base year. (Round percentages to one decimal place.) 2. To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1).14.2APR 14.3APR Measures of liquidity, solvency, and profitability The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was 82.60 on December 31, 20Y2. Marshall Inc. Comparative Retained Earnings Statement For the Years Ended December 31,20Y2 and 20Y1 20Y2 20Y1 Retained earnings, January 1 3,704,000 3,264,000 Net income 600,000 550,000 Total 4,304,000 3,814,000 Dividends: On preferred stock 10,000 10,000 On common stock 100,000 100,000 Total dividends 110,000 110,000 Retained earnings, December 31 4,194,000 3,704,000 Sales 10,850,000 10,000,000 Cost of goods sold 6,000,000 5,450,000 Gross profit 4,850,000 4,550,000 Selling expenses 2,170,000 2,000,000 Administrative expenses 1,627,500 1,500,000 Total operating expenses 3,797,500 3,500,000 Income from operations 1,052,500 1,050,000 Other income 99,500 20,000 1,152,000 1,070,000 Other expense (interest) 132,000 120,000 Income before income tax 1,020,000 950,000 Income tax expense 420,000 400,000 Net income 600,000 550,000 Marshall Inc. Comparative Balance Sheet December 31,20Y2 and 20Y1 20Y2 20Y1 Assets Current assets: Cash 1,050,000 950,000 Marketable securities 301,000 420,000 Accounts receivable (net) 585,000 500,000 Inventories 420,000 380,000 Prepaid expenses 108,000 20,000 Total current assets 2,464,000 2,270,000 Long-term investments 800,000 800,000 Property, plant, and equipment (net) 5,760,000 5,184,000 Total assets 9,024,000 8,254,000 Liabilities Current liabilities 880,000 800,000 Long-term liabilities: Mortgage note payable. 6% 200,000 0 Bonds payable. 4%, 3,000,000 3,000,000 Total long term liabilities 3,200,000 3,000,000 Total liabilities 4,080,000 3,800,000 Stockholders' Equity Preferred 4% stock, 5 par 250,000 250,000 Common stock. 5 par 500,000 500,000 Retained earnings 4,194,000 3,704,000 Total stockholders' equity 4,944,000 4,454,000 Total liabilities and stockholders' equity 9,024,000 8,254,000 Instructions Determine the following measures for 20Y2 (round to one decimal place, including percentages, except for per-share amounts): 1. Working capital 2. Current ratio 3. Quick ratio 4. Accounts receivable turnover 5. Number of days' sales in receivables 6. Inventory turnover 7. Number of days' sales in inventory 8. Ratio of fixed assets to long-term liabilities 9. Ratio of liabilities to stockholders' equity 10. Times interest earned 11. Asset turnover 12. Return on total assets 13. Return on stockholders' equity 14. Return on common stockholders' equity 15. Earnings per share on common stock 16. Price-earnings ratio 17. Dividends per share of common stock 18. Dividend yield Solvency and profitability trend analysis Addai Company has provided the following comparative information: You have been asked to evaluate the historical performance of the company over the la.st five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 20Y4-20Y8 Return on total assets 28% Return on stockholders' equity 18% Times interest earned 2.7 Ratio of liabilities to stockholders' equity 0.4 Instructions 1. Prepare four line graphs with the ratio on the vertical axis and the years on the horizontal axis for the following four ratios (round to one decimal place): A. Return on total assets B. Return on stockholders' equity C. Times interest earned D. Ratio of liabilities to stockholders' equity Display both the company ratio and the industry benchmark on each graph. That is, each graph should have two lines. 2. Prepare an analysis of the graphs in (1).Horizontal analysis of income statement For 20Y2, Macklin Inc. reported a significant increase in net income. At the end of the year, John Mayer, the president, is presented with the following condensed comparative income statement: McDade Company Comparative Income Statement For the Years Ended December 31,20Y2 and 20Y1 20Y2 20Y1 Sales 910,000 700,000 Cost of goods sold 441,000 350,000 Gross profit 469,000 350,000 Selling expenses 139,150 115,000 Administrative expenses 99,450 85,000 Total operating expenses 238,600 200,000 Income from operations 230,400 150,000 Other income 65,000 50,000 Income before income tax 295,400 200,000 Income tax expense 65,000 50,000 Net income 230,400 150,000 Instructions 1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 20Y1 as the base year. (Round percentages to one decimal place.) 2. To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1).14.2BPR Effect of transactions on current position analysis Data pertaining to the current position of Lucroy Industries Inc. follows: Cash 800,000 Marketable securities 550,000 Accounts and notes receivable (net) 850,000 Inventories 700,000 Prepaid expenses 300,000 Accounts payable 1,200,000 Notes payable (short-term) 700,000 Accrued expenses 100,000 Instructions 1. Compute (A) the working capital, (B) the current ratio, and (C) the quick ratio. (Round to one decimal place.) 2. List the following captions on a sheet of paper: Transaction Working Capital Current Ratio Quick Ratio Compute the working capital, the current ratio, and the quick ratio after each of the following transactions, and record the results in the appropriate columns. Consider each transaction separately and assume that only that transaction affects the data given. (Round to one decimal place.) A. Sold marketable securities at no gain or loss, 500,000. B. Paid accounts payable, 287,500. C. Purchased goods on account, 400,000. D. Paid notes payable, 125,000. E. Declared a cash dividend, 325,000. F. Declared a common stock dividend on common stock. 150,000. G. Borrowed cash from bank on a long term note. 1,000,000. H. Received cash on account, 75,000. I. Issued additional shares of stock for cash, 2,000,000. J. Paid cash for prepaid expenses, 200,000.Measures of liquidity, solvency and profitability The comparative financial .statements of Stargel Inc. are as follows. The market price of Stargel common stock was 119.70 on December 31, 20Y2. Stargel Inc. Comparative Retained Earnings Statement For the Years Ended December 31,20Y2 and 20Y1 20Y2 20Y1 Retained earnings, January 1 5,375,000 4,545,000 Net income 900,000 925,000 Total 6,275,000 5,470,000 Dividends: On preferred stock 45,000 45,000 On common stock 50,000 50,000 Total dividends 95,000 95,000 Retained earnings, December 31 6,180,000 5,375,000 Sales 10,000,000 9,400,000 Cost of goods sold 5,350,000 4,950,000 Gross profit 4,650,000 54,450,000 Selling expenses 2,000,000 1,880,000 Administrative expenses 1,500,000 1,410,000 Total operating expenses 3,500,000 3,290,000 Income from operations 1,150,000 1,160,000 Other income 150,000 140,000 1,300,000 1,300,000 Other expense (interest) 170,000 150,000 Income before income tax 1,130,000 1,150,000 Income tax expense 230,000 225,000 Net income 900,000 925,000 Stargel Inc Comparative Balance Sheet December 31,20Y2 and 20Y1 20Y2 20Y1 Assets Current assets: 500,000 400,000 Marketable securities 1,010,000 1,000,000 Accounts receivable (net) 740,000 510,000 Inventories 1,190,000 950,000 Prepaid expenses 250,000 229,000 Total current assets 3,690,000 3,089,000 Long term investments 2,350,000 2,300,000 Property, plant, and equipment (net) 3,740,000 3,366,000 Total assets 9,780,000 8,755,000 Liabilities Current liabilities 900,000 880,000 Long term liabilities: Mortgage note payable. 10% 200,000 0 Bonds payable, 10% 1,500,000 1,500,000 Total long-term liabilities 1,700,000 1,500,000 Total liabilities 2,600,000 2,380,000 Stockholders' Equity Preferred 0.90 stock. 10 par 500,000 500,000 Common stock. 5 par 500,000 500,000 Retained earnings 6,180,000 5,375,000 Total stockholders' equity 7,180,000 6,375,000 Total liabilities and stockholders' equity 9,780,000 58,755,000 Instructions Determine the following measures for 20Y2 (round to one decimal place including percentages, except for per-share amounts): 1. Working capital 2. Current ratio 5. Quick ratio 4. Accounts receivable turnover 5. Number of days- sales in receivables 6. Inventory turnover 7. Number of days' sales in inventor) 8. Ratio of fixed assets to long-term liabilities 9. Ratio of liabilities to stockholders' equity 10. Times interest earned 11. Asset turnover 12. Return on total assets 13. Return on stockholders equity 14. Return on common stockholders' equity 15. Earnings per share on common stock 16. Price-earnings ratio 17. Dividends per share of common stock 18. Dividend yield Solvency and profitability trend analysis Crosby Company has provided the following comparative information: You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 20Y4-20Y8 Return on total assets 19% Return on stockholders' equity 26% Times interest earned 3.4 Ratio of liabilities to stockholders' equity 1.4 Instructions 1. Prepare four line graphs with the ratio on the vertical axis and the years on the horizontal axis for the following four ratios (round ratios and percentages to one decimal place): A. Return on total assets B. Return on stockholders' equity C. Times interest earned D. Ratio of liabilities to stockholders' equity Display both the company ratio and the industry benchmark on each graph. That is, each graph should have two lines. 2. Prepare an analysis of the graphs in (1).Financial Statement Analysis The financial statements for Nike, Inc., are presented in Appendix 1 at the end of the text. The following additional information is available (in thousands): Accounts receivable at May 31, 2013 3,117 Inventories at May 31, 2013 3,484 Total assets at May 31, 2013 17,545 Stockholders' equity at May 31, 2013 11,081 Instructions 1. Determine the following measures for the fiscal years ended May 31, 2015, and May 31, 2014. (Round ratios and percentages to one decimal place.) A. Working capital B. Current ratio C. Quick ratio D. Accounts receivable turnover E. Number of days' sales in receivables F. Inventory turnover G. Number of days' sales in inventory H. Ratio of liabilities to stockholders' equity I. Asset turnover J. Return on total assets, assuming interest expense is 28 million for the year ending May 31, 2015, and 24 million for the year ending May 31, 2014 K. Return on common stockholders equity L. Priceearnings ratio, assuming that the market price was 101,67 per share on May 29, 2015, and 76.91 per share on May 30, 2014 M. Percentage relationship of net income to sales 2. What conclusions can be drawn from these analyses?14.1ADM Deere: Profitability analysis Deere Company manufactures and distributes farm and construction machinery that it sells around the world. In addition to its manufacturing operations, Deere's credit division loans money to customers to finance the purchase of their farm and construction equipment. The following information is available for three recent years (in millions except per-share amounts): 1. Calculate the following ratios for each year (round ratios and percentages to one decimal place, except for per-share amounts): A. Return on total assets B. Return on stockholders equity C. Earnings per share D. Dividend yield E. Price-earnings ratio 2. Based on these data, evaluate Deere s profitability.Marriott and Hyatt: Solvency and profitability analysis Marriott International, Inc., and Hyatt Hotels Corporation arc two major owners and managers of lodging and resort properties in the United States. Abstracted income statement information for the two companies is as follows for a recent year (in millions): Marriott Hyatt Operating profit before other expenses and interest 677 39 Other income (expenses) 54 118 Interest expense (180) (54) Income before income taxes 551 103 Income tax expense 93 37 Net income 458 66 Balances sheet information is as follows: Marriott Hyatt Total liabilities 7,398 2,125 Total stockholders' equity 1,585 5,118 Total liabilities and stockholders' equity 8,983 7,243 The average liabilities, average stockholders' equity, and average total assets are as follows: Marriott Hyatt Average total liabilities 7,095 2,132 Average total stockholders' equity 1,364 5,067 Average total assets 8,458 7,199 1. Determine the following ratios for both companies (round ratios and percentages to one decimal place): A. Return on total assets B. Return on stockholders equity C. Times interest earned D. Ratio of total liabilities to stockholders' equity 2. Based on the information in (1), analyze and compare the two companies' solvency and profitability.14.1TIF 14.3TIF 1DQ 2DQ 3DQ 4DQ 5DQ 6DQ 7DQ 8DQ 9DQ 1IFRSA 2IFRSA 3IFRSA 1DQ 2DQ 3DQ 4DQ 5DQ How is property, plant, and equipment measured on the balance sheet under IFRS? How does this differ from the way property, plant, and equipment is measured on the balance sheet under U.S. GAAP?What inventory costing methods are allowed under IFRS? How does this differ from the treatment under U.S. GAAP?D.1EX Entries for investment in bonds, interest, and sale of bonds Parilo Company acquired 170,000 of Makofske Co., 5% bonds on May 1. 20Y5, at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, 20Y5, Parilo sold 50,000 of the bonds for 96. Journalize the entries to record the following: A. The initial acquisition of the bends on May 1. B. The semiannual interest received on November 1. C. The sale of the bonds on November 1. D. The accrual of 1,000 interest on December 31, 20YS.D.3EX D.4EX D.5EX D.6EX D.7EX D.8EX D.9EX Fair value journal entries, trading investments Jets Bancorp Inc. purchased a portfolio of trading securities during 20Y3.The cost and fair value of this portfolio on December 31, 20Y3, was as follows: Name Number of Shares Total Cost Total Fair Value Dolphins Inc. 1,400 28,000 30,800 Marino Company 1,200 30,000 27,600 Namath Company 800 28,000 26,400 Total 86,000 84,800 Journalize the entry to record the adjustment of the trading security portfolio to fair value on December 31, 20Y3.Valuing available-for-sale securities at fair value On January 1. 20Y5. Valuation Allowance for Available-for-Sale Investments had a zero balance. On December 31, 20Y5, the cost of the available-for-sale was 24,260, and the fair value was 26,350. Journalize the adjusting entry to record the unrealized gain or loss on available-for-sale investments on December 31. 20Y5.D.12EX D.13EX Balance sheet presentation of available-for-sale investments During 20Y8, its first year of operations, Galileo Company purchased two available-for-sale investments as follows: Security Shares Purchased Cost Hawking Inc 900 44,000 Pavlov Co. 1,780 38,000 Assume that as of December 51, 20Y8, the Hawking Inc. stock had a market value of 50 pc-r share, and the Pavlov Co. stock had a market value of 24 per share. Galileo Company had net income of 300,000 and paid no dividends for the year ended December 31, 20Y8. All of the available-for-sale investments are classified as current assets. A. Prepare the current assets section of the balance sheet presentation for the available- for-sale investments. B. Prepare the stockholders' equity section of the balance sheet to reflect the earnings and unrealized gain (loss) for the available-for-sale investments.

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