Question 1 - Computing Issue Prices of Bonds for Three Cases
James Corporation is planning to issue $502,000 worth of bonds that mature in 6 years and pay 7 percent interest each June 30 and December 31. All of the bonds will be sold on January 1, 2011. (Use Table 5, Table 6)
Required: Compute the issue (sale) price on January 1, 2011, for each of the following independent cases:
Case A: Market (yield) rate, 5 percent.
Case B: Market (yield) rate, 7 percent.
Case C: Market (yield) rate, 9 percent.
Question 2 - Recording Transactions Affecting Stockholders' Equity
King Corporation began operations in January 2011. The charter authorized the following capital stock:
Preferred stock: 10 percent, $13 par, authorized 41,800 shares
Common stock: $8 par, authorized 87,000 shares
During 2011, the following transactions occurred in the order given:
a. Issued 22,200 shares of common stock to each of the three organizers and collected $12 cash per share from each of them.
b. Sold 8,500 shares of the preferred stock at $23 per share.
c. Sold 1,800 shares of the preferred stock at $23 and 3,400 shares of common stock at $13 per share.
Required: Give the journal entries indicated for each of the above transactions.
Question 3 - Recording Treasury Stock Transactions and Analyzing Their Impact
During 2011 the following selected transactions affecting stockholders' equity occurred for TARP Corporation:
a. Feb. 1 Purchased in the open market 210 shares of the company's own common stock at $24 cash per share.
b. Jul. 15 Sold 80 of the shares purchased on February 1 for $25 cash per share.
c. Sept. 1 Sold 50 more of the shares purchased on February 1 for $23 cash per share.
Required: Give the indicated journal entries for each of the transactions.
Question 4 - Preparing the Stockholders' Equity Section of the Balance Sheet
Witt Corporation received its charter during January 2011. The charter authorized the following capital stock:
Preferred stock: 10 percent, par $12, authorized 21,400 shares
Common stock: par $10, authorized 50,800 shares.
During 2011, the following transactions occurred in the order given:
a. Issued a total of 38,100 shares of the common stock to the four organizers at $14 per share.
b. Sold 6,900 shares of the preferred stock at $18 per share.
c. Sold 3,000 shares of the common stock at $17 per share and 1,100 shares of the preferred stock at $28.
d. Net income for the year was $69,000.
Required: Prepare the Stockholders' Equity section of the balance sheet at December 31, 2011.
Question 5 - Comparing Stock Dividends and Splits
On July 1, 2011, Davidson Corporation had the following capital structure:
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Common stock (par $4)
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$630,000
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Capital in excess of par
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1,050,000
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Retained earnings
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750,000
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Treasury stock
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0
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Required: Complete the following comparative tabulation based on two independent cases:
Case 1: The board of directors declared and issued a 50 percent stock dividend when the stock was selling at $6 per share.
Case 2: The board of directors voted a 6-to-5 stock split (i.e., a 20 percent increase in the number of shares). The market price prior to the split was $6 per share.
Question 6 - Preparing a Statement of Cash Flows with Gain on Sale of Equipment (Indirect Method)
XS Supply Company is developing its annual financial statements at December 31, 2011. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:
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2011
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2010
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Balance sheet at December 31
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|
|
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Cash
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$35,200
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$28,800
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Accounts receivable
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37,400
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30,000
|
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Merchandise inventory
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43,000
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39,000
|
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Property and equipment
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123,500
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101,400
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Less: Accumulated depreciation
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(32,100)
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(26,100)
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| |
$207,000
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$173,100
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Accounts payable
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$38,200
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$29,600
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Wages payable
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2,300
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2,800
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Note payable, long-term
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45,900
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51,000
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Contributed capital
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91,400
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73,800
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Retained earnings
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29,200
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15,900
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| |
$207,000
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$173,100
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Income statement for 2011
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|
|
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Sales
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$129,000
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|
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Gain on sale of equipment
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3,000
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|
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Cost of goods sold
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79,000
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|
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Other expenses
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39,700
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|
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Net income
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$13,300
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Additional Data:
a. Bought equipment for cash, $34,100. Sold equipment with original cost of $12,000, accumulated depreciation of $11,000, for $4,000 cash.
b. Paid $5,100 on the long-term note payable.
c. Issued new shares of stock for $17,600 cash.
d. No dividends were declared or paid.
e. Other expenses included depreciation, $17,000; wages, $14,200; taxes, $6,400; and other, $2,100.
f. Accounts payable includes only inventory purchases made on credit. Because there are no liability accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.
Required: Prepare the statement of cash flows for the year ended December 31, 2011, using the indirect method.
Question 7 - Computing Liquidity Ratios
Cintas designs, manufactures, and implements corporate identity uniform programs that it rents or sells to customers throughout the United States and Canada. The company's stock is traded on the NASDAQ and has provided investors with significant returns over the past few years. Selected information from the company's balance sheet follows. For 2007, the company reported sales revenue of $3,707,300 and cost of goods sold of $1,516,015. All amounts in thousands of dollars.
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CINTAS
Balance Sheet
(amounts in thousands)
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|
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2007
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2006
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Cash
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$35,377
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$38,918
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Marketable securities
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120,059
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202,551
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Accounts receivable, net
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408,884
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389,917
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Inventories
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231,755
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198,006
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Prepaid expense
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15,800
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11,180
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Accounts payable
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64,635
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71,635
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Accrued taxes
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70,777
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95,367
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Accrued liabilities
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263,514
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239,072
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Long-term debt due within one year
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4,141
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26,671
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Required: Compute the current ratio, inventory turnover ratio, and accounts receivable turnover ratio (assuming that 60 percent of sales were on credit).
Question 8 - Analyzing Comparative Financial Statement Using Percentages
[The following information applies to the questions displayed below.]
The comparative financial statements prepared at December 31, 2012, for Prince Company showed the following summarized data:
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2012
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2011
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Income Statement
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|
|
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Sales revenue
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$191,600
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$167,600
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|
Cost of goods sold
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112,900
|
100,900
|
|
Gross profit
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78,700
|
66,700
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|
Operating expenses and interest expense
|
56,500
|
53,500
|
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Pretax income
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22,200
|
13,200
|
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Income tax
|
6,660
|
3,960
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|
Net income
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$15,540
|
$9,240
|
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Balance Sheet
|
|
|
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Cash
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$5,800
|
$5,100
|
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Accounts receivable (net)
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15,800
|
17,800
|
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Inventory
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40,300
|
32,000
|
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Operational assets (net)
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46,100
|
37,200
|
|
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$108,000
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$92,100
|
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Current liabilities (no interest)
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$15,000
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$16,000
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Long-term liabilities (9% interest)
|
43,500
|
43,500
|
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Common stock (par $5)
|
28,400
|
28,400
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Retained earnings
|
21,100
|
4,200
|
|
|
$108,000
|
$92,100
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Required:
1. Complete the following columns for each item in the preceding comparative financial statements.
2. By what amount did working capital change?