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Problem 1 (16 Points) Jets Company had a $700 credit balance in Allowance for Doubtful Accounts at December 31, 2015, before the current year's provision for uncollectible accounts. An aging of the accounts receivable revealed the following: Estimated Percentage Uncollectible Current Accounts $120,000 1% 1–30 days past due 20,000 3% 31–60 days past due 10,000 6% 61–90 days past due 10,000 12% Over 90 days past due 8,000 30% Total Accounts Receivable $168,000 Instructions A) 1. Determine the appropriate allowance for uncollectible accounts. 2. How will Jets report its accounts receivable on the balance sheet? 3. How much is reported as the Bad debt Expense? B) Assume the same facts as above except that the Allowance for Doubtful Accounts account had a $300 debit balance before the current year's provision for uncollectible accounts. 1. What will be the reported balance for the allowance for uncollectible accounts? 2. How will Jets report its accounts receivable on the balance sheet? 3. How much is reported as the Bad Debt Expense? Problem 2 (10 Points) Rangers Inc.’s statement of stockholders’ equity on December 31, 2013 is as follows: 5% cumulative preferred stock, $50 par,10,000 shares authorized; 6,000 shares issued and outstanding $300,000 Common stock, $1 par, 500,000 share authorized; 385,000 shares issued and outstanding 385,000 Paid-in capital in excess of par - Preferred stock 25,000 Paid-in capital in excess of par - Common stock 2,045,000 Retained earnings 220,000 Total stockholders’ equity $2,975,000 The following transactions occurred during 2014: Feb 3 Issued 2,500 shares of preferred stock for $50 per share. Apr 25 Issued 50,000 shares of common stock for $10 per share. Jun 15 Repurchased 15,000 shares of common stock at $7 per share. Oct 24 Sold 7,500 shares of treasury stock bought on June 15 for $16 per share. Journalize all the above transactions. Problem 3 (16 Points) At the start of 2010, Denver Corporation has 15,000 outstanding shares of preferred stock, each with a $40 par value and a cumulative 7% annual dividend. The company also has 28,000 shares of common stock outstanding with par value of $25 per share. 2010 $0 2011 $ 33,000 2012 $119,000 2013 $ 82,000 2014 $ 63,000 Calculate the dividends paid to each category of stockholders, in total and per share. Problem 4 (8 Points) Mets reported the following earnings per share information in its 2011 annual report. The company has only one class of stock outstanding. ($ in millions) Net income $18,000 Dividends paid to common shareholders $1,061 Dividends paid to preferred shareholders $3,000 Weighted average common shares outstanding 6,000 Weighted average dilutive shares from employee stock plans 1,500 Compute basic and diluted earnings per share (show your work). Problem 5 (10 Points) The following items were shown on the balance sheet of Eagles Corporation on December 31, 2015: Stockholders’ equity Paid-in capital Capital stock Common stock, $10 par value, 400,000 shares authorized; ______ shares issued and ______ outstanding ......... $1,850,000 Additional paid-in capital In excess of par............................................................................. 165,000 Total paid-in capital.................................................................. 2,015,000 Retained earnings.................................................................................... 750,000 Total paid-in capital and retained earnings.................................... 2,765,000 Less: Treasury stock (18,000 shares)...................................................... (270,000) Total stockholders’ equity.............................................................. $2,495,000 Instructions Complete the following statements and show your computations. (a) The number of shares of common stock issued was _______________. (b) The number of shares of common stock outstanding was ____________. (c) The sales price of the common stock when issued was $____________. (d) The cost per share of the treasury stock was $_______________. (e) The average issue price of the common stock was $______________. Problem 6 (20 Points) Shanon Company uses the periodic inventory method and had the following inventory information available: Units Unit Cost Total Cost 1/1 Beginning Inventory 100 $4 $ 400 1/20 Purchase 400 $6 2,400 7/25 Purchase 200 $7 1,400 10/20 Purchase 300 $8 2,400 1,000 $6,600 A physical count of inventory on December 31 revealed that there were 400 units on hand. Instructions Answer the following independent questions and show computations supporting your answers. 1. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is $__________. 2. Assume that the company uses the Average-Cost method. The value of the ending inventory on December 31 is $__________. 3. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is $__________. 4. Assume that the company uses the FIFO method. The value os the cost of goods sold at December 31 is $ ___________. 5. Which method reports the lowest amount of cost of goods sold on the income statement? 6. Which method reports the lowest amount of net income on the income statement? Problem 7 (20 Points) These financial statement items are for Rutgers Company at year-end, July 31, 2015. Salaries and wages payable $ 2,980 Notes payable (long-term)$ 3,000 Salaries and wages expense 45,700 Cash 5,200 Utilities expense 21,100 Accounts receivable 9,780 Equipment 38,000 Accumulated depreciation 6,000 Accounts payable 4,100 Dividends 4,000 Service revenue 57,200 Depreciation expense 4,000 Rent revenue 6,500 Retained earnings 28,000 Common stock 20,000 (Aug. 1, 2014) Instructions (a) Prepare an income statement and a retained earnings statement for the year. Stockholders not make any new investments during the year. (b) Prepare a classified balance sheet at July 31. Problem 8 (12 Points) Below are several financial statement items for fiscal year 2013 for two grocery chains, Whole Foods Market, an upscale organic grocer, and The Kroger Co. a mainstream grocer. ($ millions) a. Calculate each company’s return on assets (ROA) and return on equity (ROE). Comment on any differences you observe. b. Disaggregate the ROA for each company into profit margin (PM) and asset turnover (AT). Explain why Whole Foods has a higher ROA, is it because of PM or AT or both? Whole Foods Market The Kroger Co. Net income $551 $1,508 Sales 12,917 96,751 Average assets 5,416 24,064 Average stockholders’ equity 3,840 4,090 Problem 9 (10 Points) The fiscal 2013 balance sheet for Saints Co. reports the following data (in millions). What is the company’s current ratio? Show your work. Cash and cash equivalents Accounts receivable Merchandise inventories Current assets Current liabilities $290 $188 $414 $1,980 $1,088 Selected balance sheet data follow for Giants Company for the year ended December 31, 2013 (in millions). What is the company’s liabilities-to-equity ratio? Show your work. Total operating liabilities Total nonoperating liabilities Total current liabilities Total liabilities Total liabilities and shareholders’ equity $8,847 $6,235 $5,025 $15,082 $17,527 Problem 10 (12 Points) Identify the financial statements in which you would find each of the items listed below. Some items may appear on more than one statement. Indicate all financial statements that apply to each item. The possible choices are: B : Balance sheet SE : Statement of Stockholders’ Equity I : Income Statement CF : Statement of Cash Flows Financial Statement Item Financial Statement a. Land b. Copyrights c. Dividends d. Proceeds of sale of investments e. Repayments of bank loan f. Treasury stock Problem 11 (8 Points) For each of the following financial statement items, indicate the correct balance sheet classification, from the list below. You may use each balance sheet classification item only once. Balance sheet classification a. Current asset b. Intangible asset c. Current liability d. Long term liability e. Equity f. None of the above Financial statement item Balance sheet classification Interest payable Treasury stock Insurance expense Goodwill Note payable, due in 2015 Prepaid insurance expense Problem 12 (4 Points) Match the following principles of financial accounting to their definitions: a. Financial statements are linked within and across time 1) Revenue recognition principle b. Revenue and expenses are recognized when a cash transaction is completed 2) Articulation of financial statements c. Revenue is recognized when earned 3) Cash basis accounting d. Recognizes revenue when earned and expenses when incurred, even if no cash is received or paid 4) Accrual accounting Problem 13 (4 Points) Match the item on the left to a numbered item on the right to complete each sentence. A) Resources that a company owns or controls are called _________________. 1. liabilities B) The difference between a company’s assets and its equity is equal to _______________. 2. return on assets C) Net income divided by average assets is known as ____________. 3. assets D) Sales, cost of goods sold and all other expenses are necessary to calculate a company’s ______________. 4. income statement 5. net income Problem 14 (4 points) Match the item on the left to a numbered item on the right to complete each sentence. A) Companies report assets, liabilities, and equity on the _________________. 1. income statement B) Sales, cost of goods sold, and net income are found on the _______________. 2. balance sheet C) Changes in contributed capital during the period are explained on the ____________. 3. statement of cash flows D) The _______________ reports cash from financing activities. 4. statement of shareholders’ equity Problem 15 (18 Points) Raiders Industries acquired common stock of Chargers, Inc. as an investment. Consider the following transactions. 2014: • Purchase 4,000 (15%) of the common shares of Chargers, Inc. for $17 cash per share plus a $1,450 brokerage commission • Chargers reports net income of $98,500. • Raiders receive a cash dividend of $1.90 per share from Chargers, Inc. • Year-end market price of Chargers’ stock is $18.00 per share 2015: • Sell all 4,000 shares for $16.50 per share. Complete the table below to show what Raiders Industries would report on its balance sheet in 2014 and on its income statement in 2014 and 2015 if the investment is classified as trading, available-for-sale or as an equity method investment. Show your supporting calculations. 2014 Balance Sheet 2014 Income Statement 2015 Income Statement Trading securities Available-forsale securities Equity method investment Problem 16 (8 points) Jets Company issues $500,000 of 12% bonds that pay interest semiannually and mature in 10 years. Compute the bonds’ issue price assuming that the bonds’ market interest rate is: a. 10% per year compounded semiannually b. 14% per year compounded semiannually

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