50. How is the issuance of stock accounted for?

1. When issuing common stock at par value, the journal entry would be to debit __________ and credit __________________.   
   
   

50. How is treasury stock accounted for?

1. What is treasury stock?
   
2. Why might a company later reacquire some of its own stock as treasury stock?
   
3. ABC company recently repurchased some of its own stock as treasury stock for $1,000. The company is now selling the treasury stock for $1,100. The journal entry would be:

50. How are dividends and stock splits accounted for?

1. Journalize for the 1) declaration of cash dividend of $1,000 and 2) payment of cash dividend:
   

2. Why might some companies issue stock dividends instead of cash dividends?
   
   
3. ABC Company currently has 100,000 shares of common stock with a par value of $2 before a 2-for-1 split. What is the number of shares and par value after the split?

50. How is the complete corporate income statement prepared?

1. What may appear on a corporation’s income statement that generally does not appear for smaller business?

50. How is equity reported for a corporation?

1. What is included on the statement of retained earnings?

2. The statement of stockholder’s equity reports the changes in all ___________ accounts.

50. How do we use stockholders’ equity ratios to evaluate business performance?
    1. Use the following information for ABC Company to calculate the EPS, price/earnings ratio, and return on common stockholders’ equity:

               Net Income = $10,000
               Preferred Dividends = $2,000
               Average Common Stockholders’ Equity = $300,000
               Number of Common Shares Outstanding = 20,000 shares

1. What is earnings per share?

2. What is price/earnings ratio assuming the market price is $2 per share?

3. What is rate of return on common stockholders’ equity (take percentage to 2 decimal places)?

Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the company’s products. The company now is planning raw materials needs for the third quarter, the quarter in which peak sales of Supermix occur. To keep production and sales moving smoothly, the company has the following inventory requirements:

1. The finished goods inventory on hand at the end of each month must equal 3,000 units of Supermix plus 25% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 16,250 units.

2. The raw materials inventory on hand at the end of each month must equal one-half of the following month’s production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 81,375 cc of solvent H300.

3. The company maintains no work in process inventories.

A monthly sales budget for Supermix for the third and fourth quarters of the year follows.

Required:

1. Prepare a production budget for Supermix for the months July, August, September, and October.

3. Prepare a direct materials budget showing the quantity of solvent H300 to be purchased for July, August, and September, and for the quarter in total.

Forecast Sales Volume and Sales Budget

For 20Y8, Raphael Frame Company prepared the sales budget that follows.

At the end of December 20Y8, the following unit sales data were reported for the year:

For the year ending December 31, 20Y9, unit sales are expected to follow the patterns established during the year ending December 31, 20Y8. The unit selling price for the 8" × 10" frame is expected to increase to $34 and the unit selling price for the 12" × 16" frame is expected to increase to $45, effective January 1, 20Y9.

Required:

1. Compute the increase or decrease of actual unit sales for the year ended December 31, 20Y8, over budget. Use the minus sign to indicate a decrease in amount and percent. Round percents to the nearest whole percent.

2. Assuming that the increase or decrease in actual sales to budget indicated in part (1) is to continue in 20Y9, compute the unit sales volume to be used for preparing the sales budget for the year ending December 31, 20Y9. Use the minus sign to indicate a decrease in percent. Round budgeted units to the nearest whole unit.

3.  Prepare a sales budget for the year ending December 31, 20Y9.

Vibrant Company had $1,020,000 of sales in each of three consecutive years 2016–2018, and it purchased merchandise costing $560,000 in each of those years. It also maintained a $320,000 physical inventory from the beginning to the end of that three-year period. In accounting for inventory, it made an error at the end of year 2016 that caused its year-end 2016 inventory to appear on its statements as $300,000 rather than the correct $320,000.

Required:
1. Determine the correct amount of the company’s gross profit in each of the years 2016–2018.
2. Prepare comparative income statements to show the effect of this error on the company's cost of goods sold and gross profit for each of the years 2016−2018.
  

Shannon O’Bryan operates a service business called Edgecliff Photography. Edgecliff Photography uses the accounts shown in the following accounting equation. Transaction 1 is given as an example. For each transaction, complete the following: (a) Analyze the transaction to determine which accounts in the accounting equation are affected. (b) In the appropriate columns, enter a plus sign (+) if the account increases or a minus sign (–) if the account decreases, and then enter the amount. (c) For transactions that change owner’s equity, enter a description (revenue, expense, investment, or withdrawal) of the transaction to the right of the amount. (d) Calculate and enter a new balance for each account in the accounting equation. (e) Before going on to the next transaction, determine that the accounting equation is still in balance.

Comprehensive Accounting Cycle Review 11-2 (Part Level Submission)

Karen Noonan opened Metlock Inc. on February 1, 2017. During February, the following transactions were completed:

a.) Journalize the February transactions.

b.) Post to Ledger Accounts

c.) Prepare Trial Balance

Hemming Co. reported the following current-year purchases and sales for its only product. Date Activities Units Acquired at Cost Units Sold at Retail Jan. 1 Beginning inventory 260 units @ $12.40 = $ 3,224 Jan. 10 Sales 215 units @ $42.40 Mar. 14 Purchase 420 units @ $17.40 = 7,308 Mar. 15 Sales 380 units @ $42.40 July 30 Purchase 460 units @ $22.40 = 10,304 Oct. 5 Sales 425 units @ $42.40 Oct. 26 Purchase 160 units @ $27.40 = 4,384 Totals 1,300 units $ 25,220 1,020 units Required: Hemming uses a perpetual inventory system.

1. Determine the costs assigned to ending inventory and to cost of goods sold using FIFO.

2. Determine the costs assigned to ending inventory and to cost of goods sold using LIFO.

3. Compute the gross margin for FIFO method and LIFO method.

Periodic Inventory by Three Methods

Pappa's Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, purchases invoices during the year, and the inventory count at December 31 are summarized as follows:

Required:

1. Determine the cost of the inventory on December 31 by the first-in, first-out method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. If units are in inventory at two different costs, enter the units PURCHASED MOST RECENTLY first.

2. Determine the cost of the inventory on December 31 by the last-in, first-out method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. If units are in inventory at two different costs, enter the OLDEST units first.

3. Determine the cost of the inventory on December 31 by the weighted average cost method.

4.   would be preferred for income tax purposes in periods of declining prices.

Aging of Receivables; Estimating Allowance for Doubtful Accounts

Wig Creations Company supplies wigs and hair care products to beauty salons throughout Texas and the Southwest. The accounts receivable clerk for Wig Creations prepared the following partially completed aging of receivables schedule as of the end of business on December 31, 20Y1:

The following accounts were unintentionally omitted from the aging schedule:

Wig Creations has a past history of uncollectible accounts by age category, as follows:

Required:

1. Determine the number of days past due for each of the preceding accounts. If an account is not past due, enter a zero.

Feedback

Count the number of days after the due date up to December 31. Do not include the due date in your count. Remember that not all months have an equal number of days.

Add the accounts into the aging schedule based on their number of days past due.

Apply the respective uncollectible percentage to the total receivables in each days past due group and the not past due group.

The amount of bad debt expense is affected by the balance in the allowance account.

Consider the effects of a contra asset not being recorded in terms of the balance sheet equation.

Consider the effects of an expense not being reported in terms of the income equation.

2. Complete the aging of receivables schedule by adding the omitted accounts to the bottom of the schedule and updating the totals. If an amount box does not require an entry, leave it blank.

Feedback

Count the number of days after the due date up to December 31. Do not include the due date in your count. Remember that not all months have an equal number of days.

Add the accounts into the aging schedule based on their number of days past due.

Apply the respective uncollectible percentage to the total receivables in each days past due group and the not past due group.

The amount of bad debt expense is affected by the balance in the allowance account.

Consider the effects of a contra asset not being recorded in terms of the balance sheet equation.

Consider the effects of an expense not being reported in terms of the income equation.

3. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule.
$fill in the blank b3e2effda050076_1

Feedback

Count the number of days after the due date up to December 31. Do not include the due date in your count. Remember that not all months have an equal number of days.

Add the accounts into the aging schedule based on their number of days past due.

Apply the respective uncollectible percentage to the total receivables in each days past due group and the not past due group.

The amount of bad debt expense is affected by the balance in the allowance account.

Consider the effects of a contra asset not being recorded in terms of the balance sheet equation.

Consider the effects of an expense not being reported in terms of the income equation.

4. Assume that the allowance for doubtful accounts for Wig Creations has a credit balance of $1,810 before adjustment on December 31, 20Y1. Journalize the adjustment for uncollectible accounts. If an amount box does not require an entry, leave it blank.

Feedback

Count the number of days after the due date up to December 31. Do not include the due date in your count. Remember that not all months have an equal number of days.

Add the accounts into the aging schedule based on their number of days past due.

Apply the respective uncollectible percentage to the total receivables in each days past due group and the not past due group.

The amount of bad debt expense is affected by the balance in the allowance account.

Consider the effects of a contra asset not being recorded in terms of the balance sheet equation.

Consider the effects of an expense not being reported in terms of the income equation.

5. Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement?

On the balance sheet, assets would be overstated  by $69,631  because the allowance for doubtful accounts would be understated  by $69,631 . In addition, the owner’s capital account would be overstated  by $69,631  because bad debt expense would be understated  and net income overstated  by $69,631  on the income statement.

3 The Aledo Company, which has only been in business since 2017, decided to change from the Average Cost to the FIFO inventory cost flow assumption for financial reporting purposes. The following data are available in regard to its pretax operating income and cost of goods sold:

                        Average Cost             

                        Net Income                  FIFO Income

Year                As Reported                Net Income

2017                $40,000                        $48,000

2018                46,000                        56,000

2019                  50,000                        62,000

Required

1. Ignoring tax effects. Compute the cumulative effect of the change of accounting principle at the beginning of 2019 and record the journal entry to reflect the change.

2. What net income would be reported in the financial statements presented for the years prior to 2019 after the accounting change?

In your own words write and discuses the components of the accounting equation and its importance? and

in which financial statement, we can apply the accounting equation components?

Discuss the structure of financial statements and how they interact with each other. Why is a cash flow statement considered an accurate indicator to evaluate a company? Locate financial statements for a company of your choice, and review the cash flow statement. What insights does it provides about the company’s performance, in relation to other its other financial statements?

o   Examine the five (5) steps to managing accounts receivable. Speculate on the step that is most vulnerable to fraud. Suggest at least two (2) actions that a company can take in order to protect this step from fraud.

o   Imagine that your company has tasked you with developing a plan for factoring accounts receivables. Create one (1) scenario that demonstrates the key benefits and / or detriments to your company from factoring accounts receivable.

Gallerani Corporation has received a request for a special order of 5,400 units of product A90 for $28.40 each. Product A90's unit product cost is $27.85, determined as follows:

Assume that direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product A90 that would increase the variable costs by $4.70 per unit and that would require an investment of $14,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be:

Multiple Choice

• $(36,410)

• $8,140

• $2,970

• $(98,550)

Bruce Corporation makes four products in a single facility. These products have the following unit product costs:

Additional data concerning these products are listed below.

The grinding machines are potentially the constraint in the production facility. A total of 53,100 minutes are available per month on these machines.

Direct labor is a variable cost in this company.

How many minutes of grinding machine time would be required to satisfy demand for all four products?

Multiple Choice

• 42,000

• 53,100

• 31,120

• 8,980

Bruce Corporation makes four products in a single facility. These products have the following unit product costs:

Additional data concerning these products are listed below.

The grinding machines are potentially the constraint in the production facility. A total of 10,500 minutes are available per month on these machines.

Direct labor is a variable cost in this company.

Which product makes the MOST profitable use of the grinding machines? (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

• Product B

• Product A

• Product C

• Product D

Bruce Corporation makes four products in a single facility. These products have the following unit product costs:

Additional data concerning these products are listed below.

The grinding machines are potentially the constraint in the production facility. A total of 89,600 minutes are available per month on these machines.

Direct labor is a variable cost in this company.

Up to how much should the company be willing to pay for one additional minute of grinding machine time if the company has made the best use of the existing grinding machine capacity? (Round your intermediate calculations to 2 decimal places.) 1_04_2014_QC_58425, 11_17_2014_QC_58425,Garrison 16e Rechecks 2017-09-13

Multiple Choice

• $10.32

• $3.20

• $6.40

• $8.85