Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 21, Problem 4C
Operating, Investing, and Financing Activities The following is information about three different companies.
- 1. Noon Wakeup Company is a software game development company that creates titles for the Android operating system. The company recently launched its first software title. The company is expanding its operations by hiring additional developers and administrative staff. Noon Wakeup is not yet profitable, but it expects to show a profit within 2 years. Investors view the company as being on the cutting edge with its technology and have continued to invest in the company. Noon Wakeup has not yet borrowed money, but is considering doing so in the future.
- 2. Steel Grid Company is a textile company located in Waynesboro, NC. The company is experiencing its 20th year of profitability. Management is concerned by the recent economic downturn in the textile business, which has hurt sales in the 3 most recent fiscal years. Next year the company expects to just break even. For this reason, the company is not expanding and is only replacing fully
depreciated equipment in its machine intensive manufacturing business. Steel Grid- pridcs itself in paying dividends and having no debt on its balance sheet. - 3. Device Driver Company is a technology manufacturing company located in Bloomington, IN. The company has just introduced its 10th new product and is the leader in market share for its industry. The company continues to invest in new equipment and property and to expand by purchasing its competitors. The company has yet to pay dividends, but it is considering doing so in the future. The company’s largest current asset is cash, as a result of its high profit margin; because of this, the company has no need for external sources of cash.
Required:
For each company, prepare a report examining whether you think the company’s current
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Scenario:
Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice.
Requirements:
Answer the following questions for Steve.
Explain the corporate characteristic termed “no mutual agency”
Explain the corporate characteristic termed limited liability.
Explain the term outstanding stock.
Scenario:
Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice.
Requirements:
Answer the following questions for Steve.
Is it true or false that corporations muse issue common stock, but may or may not decide to issue preferred stock?
Is it true or false that all forms and classes of stock carry voting rights?
Is it true of false that stock sold for amounts in excess of par value results in a gain reported on the income statement?
Scenario:
Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice.
2. The company is desirous of comparing several financial transactions and possible outcomes to assist in guiding its decision-making process. It is assumed that the company will be formed on January 1, 2021 and registered as Osbourne Corporation. The company’s charter will authorize 1,000,000 shares of common stock and 400,000, $100 par value, 5% cumulative preferred stock. They have asked each student from your accounting course to prepare the company’s journal entries and…
Chapter 21 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 21 - What information does the statement of cash flows...Ch. 21 - Briefly describe the three types of activities a...Ch. 21 - Thompson Company sold a piece of equipment that...Ch. 21 - Give two examples of a companys (a) cash inflows...Ch. 21 - Prob. 5GICh. 21 - Prob. 6GICh. 21 - Prob. 7GICh. 21 - Prob. 8GICh. 21 - Prob. 9GICh. 21 - List the three operating cash inflows that a...
Ch. 21 - Prob. 11GICh. 21 - Prob. 12GICh. 21 - Prob. 13GICh. 21 - Dunn Company recognized a 5,000 unrealized holding...Ch. 21 - Jordan Company recognized a 5,000 unrealized...Ch. 21 - Indicate how a company computes the amount of...Ch. 21 - Prob. 17GICh. 21 - Prob. 18GICh. 21 - Prob. 19GICh. 21 - Which of the following would be considered a cash...Ch. 21 - In a statement of cash flows (indirect method),...Ch. 21 - The net cash provided by operating activities in...Ch. 21 - The retirement of long-term debt by the issuance...Ch. 21 - Prob. 5MCCh. 21 - Selected information from Brook Corporations...Ch. 21 - Prob. 7MCCh. 21 - Prob. 8MCCh. 21 - Which of the following need not be disclosed in a...Ch. 21 - The following information was taken from Oregon...Ch. 21 - Prob. 1RECh. 21 - Prob. 2RECh. 21 - Given the following information, convert Cardinal...Ch. 21 - Given the following information, convert Robin...Ch. 21 - In the current year, Harrisburg Corporation had...Ch. 21 - Tifton Co. had the following cash transactions...Ch. 21 - Tifton Co. had the following cash transactions...Ch. 21 - Trenton Corporation has the following items....Ch. 21 - Prob. 9RECh. 21 - In the current year, Harrisburg Corporation...Ch. 21 - Providence Company sold equipment for 25,000 cash....Ch. 21 - Annapolis Corporation paid 270,000 to retire bonds...Ch. 21 - Given the following information, compute Lemon...Ch. 21 - Prob. 14RECh. 21 - Prob. 1ECh. 21 - Prob. 2ECh. 21 - Visual Inspection Noble Companys accounting...Ch. 21 - Prob. 4ECh. 21 - Prob. 5ECh. 21 - Prob. 6ECh. 21 - Prob. 7ECh. 21 - Prob. 8ECh. 21 - Partially Completed Spreadsheet Hanks Company has...Ch. 21 - Spreadsheet The following 2019 information is...Ch. 21 - Spreadsheet and Statement The following 2019...Ch. 21 - Fixed Asset Transactions The following is an...Ch. 21 - Retirement of Debt Moore Company is preparing its...Ch. 21 - Interest and Income Taxes Staggs Company has...Ch. 21 - Investments On October 4, 2019, Collins Company...Ch. 21 - Statement of Cash Flows The following is a list of...Ch. 21 - Investing Activities and Depreciable Assets...Ch. 21 - Spreadsheet and Statement The following 2019...Ch. 21 - (Appendix 21.1) Operating Cash Flows The following...Ch. 21 - (Appendix 21.1) Statement of Cash Flows The...Ch. 21 - (Appendix 21.1) Visual Inspection The following...Ch. 21 - Prob. 22ECh. 21 - Classification of Cash Flows A company's statement...Ch. 21 - Prob. 2PCh. 21 - Statement of Cash Flows The following is a list of...Ch. 21 - Statement of Cash Flows The following is a list of...Ch. 21 - Partially Completed Spreadsheet The following...Ch. 21 - Spreadsheet and Statement of Cash Flows The...Ch. 21 - Prob. 7PCh. 21 - Spreadsheet from Trial Balance Heinz Companys post...Ch. 21 - Prepare Ending Balance Sheet On December 31, 2019,...Ch. 21 - Infrequent Transactions The following transactions...Ch. 21 - Prob. 11PCh. 21 - Comprehensive Angel Company has prepared its...Ch. 21 - Comprehensive The following are Farrell...Ch. 21 - (Appendix 21.1) Operating Cash Flows Refer to the...Ch. 21 - (Appendix 21.1) Statement of Cash Flows The...Ch. 21 - Comprehensive The following are Farrell...Ch. 21 - (Appendix 21.1) Comprehensive The following are...Ch. 21 - Prob. 18PCh. 21 - Financial Statement Interrelationships Prepare an...Ch. 21 - Statement of Cash Flows A friend of yours is...Ch. 21 - Prob. 3CCh. 21 - Operating, Investing, and Financing Activities The...Ch. 21 - Prob. 5CCh. 21 - Spreadsheet Method The spreadsheet method is...Ch. 21 - Prob. 7CCh. 21 - Inflows and Outflows Alfred Engineering Company is...Ch. 21 - Ethics and Cash Flows You are the accountant for...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Analyze and compare Alphabet (Google) and Microsoft Alphabet Inc. (GOOG) and Microsoft Corporation (MSFT) design and distribute consumer and enterprise software, including overlaps in search, business productivity, and mobile operating systems. Alphabets primary source of revenue is from advertising, while Microsofts is from software subscription and support fees. The following year-end data (in millions) were taken from recent balance sheets for both companies: a. Compute the working capital for each company for both years. b. Which company has the larger working capital at the end of Year 2? c. Is working capital a good measure of relative liquidity in comparing the two companies? Explain. d. Compute the current ratio for both companies. Round to one decimal place. e. Which company has the larger relative liquidity based on the current ratio? f. Based on your analysis, comment on the short-term debt-paying ability of these two companies.arrow_forwardQuestion : A new company, is being established to manufacture and sell an electronic tracking device: the Trackit. The owners are excited about the future profits that the business will generate. They have forecast that sales will grow to 2,600 Trackits per month within five months and will be at that level for the remainder of the first year.The owners will invest a total of $250,000 in cash on the first day of operations (that is the first day of July). They will also transfer non-current assets into the company.Extracts from the company’s business plan are shown below.SalesThe forecast sales for the first five months are:Month Trackits (units)July 1,000August 1,500September 2,000October 2,400November 2,600The selling price has been set at $140 per Trackit.Sales receiptsSales will be mainly through large retail outlets. The pattern for the receipt of payment is expected to be as follows:Time of payment % of sales valueImmediately 15 *One month later 25Two months later 40Three months…arrow_forwardSteve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice. 1. Answer the following questions for Steve. 2. Explain the corporate characteristic termed “no mutual agency” 3. Explain the corporate characteristic termed limited liability.arrow_forward
- . Ortel Telecom sells telecommunication products and services to a variety of small businesses. Two of Ortel’s key clients are Square and Cloudburst, both fast-growing technology start-ups located in New York City. Ortel has compiled information regarding its transactions with Square and Cloudburst for 2017, as well as its expectations regarding their interactions over the next 3 years: (in pic) Ortel’s transactions with Square and Cloudburst are in cash. Assume that they occur at year-end. Ortel is headquartered in the Cayman Islands and pays no income taxes. The owners of Ortel insist on a required rate of return of 12%. Q. Based on the net present value from cash flows over the next 3 years, is Cloudburst or Square a more valuable customer for Ortel?arrow_forward. Ortel Telecom sells telecommunication products and services to a variety of small businesses. Two of Ortel’s key clients are Square and Cloudburst, both fast-growing technology start-ups located in New York City. Ortel has compiled information regarding its transactions with Square and Cloudburst for 2017, as well as its expectations regarding their interactions over the next 3 years: (in pic) Ortel’s transactions with Square and Cloudburst are in cash. Assume that they occur at year-end. Ortel is headquartered in the Cayman Islands and pays no income taxes. The owners of Ortel insist on a required rate of return of 12%. Q. Cloudburst threatens to switch to another supplier unless Ortel gives a 10% price reduction on all sales starting in 2018. Calculate the 3-year NPV of Cloudburst after incorporating the 10% discount. Should Ortel continue to transact with Cloudburst? What other factors should it consider before making its final decision?arrow_forwardScenario: Matthew Mulatto and his brother John Mulatto plans to open a business. The major decision they face is how to organize the business. They expect to generate a massive profit during the first year. Although they have enough to start the business now as a partnership, they believe cash flow may be an issue as they grow. They believe that the corporate form of operation will be best option. They have hired you as a consultant and seek your advice. Requirements: Answer the following questions for the Mulatto brothers. How are paid-in-capital and retained earnings: Similar? Different? What are the main categories of paid-in capital? When does a company declare a cash dividend? Which characteristic of a corporation limits a stockholder's loss to the amount of his or her investment in the stock of the corporation? What does the term par value of stock mean? The owners are desirous of comparing serval financial transactions and possible outcomes to assist…arrow_forward
- Scenario: Matthew Mulatto and his brother John Mulatto plans to open a business. The major decision they face is how to organize the business. They expect to generate a massive profit during the first year. Although they have enough to start the business now as a partnership, they believe cash flow may be an issue as they grow. They believe that the corporate form of operation will be best option. They have hired you as a consultant and seek your advice. Requirements: Answer the following questions for the Mulatto brothers. How are paid-in-capital and retained earnings: Similar? Different? What are the main categories of paid-in capital? When does a company declare a cash dividend? Which characteristic of a corporation limits a stockholder's loss to the amount of his or her investment in the stock of the corporation? What does the term par value of stock mean? The owners are desirous of comparing serval financial transactions and possible outcomes to assist…arrow_forwardScenario: Matthew Mulatto and his brother John Mulatto plans to open a business. The major decision they face is how to organize the business. They expect to generate a massive profit during the first year. Although they have enough to start the business now as a partnership, they believe cash flow may be an issue as they grow. They believe that the corporate form of operation will be best option. They have hired you as a consultant and seek your advice. Requirements: Answer the following questions for the Mulatto brothers. How are paid-in-capital and retained earnings: Similar? Different? 2. What are the main categories of paid-in capital? 3. When does a company declare a cash dividend? 4. Which characteristic of a corporation limits a stockholder's loss to the amount of his or her investment in the stock of the corporation? 5. What does the term par value of stock mean?arrow_forwardSmartlink Computer Services Co. specializes in customized software development for the broadcast and telecommunications industries. The company was started by three people to develop software primarily for a national network to be used in broadcasting national election results. After sustained and manageable growth for many years, the company has grown very fast over the last three years, doubling in size. This growth has placed the company in a challenging financial position. Within thirty days, Smartlink will need to renew its P300,000 loan with Philippine National Bank. This loan is classified as a current liability on Smartlink’s balance sheet. Steve Heart, president of Smartlink, is concerned about renewing the loan. The bank has requested Smartlink's most recent financial statements which appear below, including balance sheets for this year and last year. The bank has also requested four ratios relating to operating performance and liquidity. Required: Discuss (at least 4)…arrow_forward
- Smartlink Computer Services Co. specializes in customized software development for the broadcast and telecommunications industries. The company was started by three people to develop software primarily for a national network to be used in broadcasting national election results. After sustained and manageable growth for many years, the company has grown very fast over the last three years, doubling in size. This growth has placed the company in a challenging financial position. Within thirty days, Smartlink will need to renew its P300,000 loan with Philippine National Bank. This loan is classified as a current liability on Smartlink’s balance sheet. Steve Heart, president of Smartlink, is concerned about renewing the loan. The bank has requested Smartlink's most recent financial statements which appear below, including balance sheets for this year and last year. The bank has also requested four ratios relating to operating performance and liquidity. Required: Give your analysis based on…arrow_forwardSmartlink Computer Services Co. specializes in customized software development for the broadcast and telecommunications industries. The company was started by three people to develop software primarily for a national network to be used in broadcasting national election results. After sustained and manageable growth for many years, the company has grown very fast over the last three years, doubling in size. This growth has placed the company in a challenging financial position. Within thirty days, Smartlink will need to renew its P300,000 loan with Philippine National Bank. This loan is classified as a current liability on Smartlink’s balance sheet. Steve Heart, president of Smartlink, is concerned about renewing the loan. The bank has requested Smartlink's most recent financial statements which appear below, including balance sheets for this year and last year. The bank has also requested four ratios relating to operating performance and liquidity. Required: Explain why the Philippine…arrow_forwardScenario: Matthew Mulatto and his brother John Mulatto plans to open a business. The major decision they face is how to organize the business. They expect to generate a massive profit during the first year. Although they have enough to start the business now as a partnership, they believe cash flow may be an issue as they grow. They believe that the corporate form of operation will be best option. They have hired you as a consultant and seek your advice. Requirements: Answer the following questions for the Mulatto brothers. a) How are paid-in-capital and retained earnings: Similar? Different? b) What are the main categories of paid-in capital? c) When does a company declare a cash dividend? d) Which characteristic of a corporation limits a stockholder's loss to the amount of his or her investment in the stock of the corporation? e) What does the term par value of stock mean?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
How To Analyze an Income Statement; Author: Daniel Pronk;https://www.youtube.com/watch?v=uVHGgSXtQmE;License: Standard Youtube License