Consider additional data for Archer-Daniels-Midland for fiscal years ending June 30, 2010 and 2011, in millions:
Fiscal Year End
(in millions) June 30, 2011 June 30, 2010
Sales $80,676 $61,682
Cost of goods sold $76,376 $57,839
Fiscal Year End
(in millions) June 30, 2011 June 30, 2010
Accounts receivable $9,816 $6,122
Inventories $12,055 $7,871
Accounts payable $11,165 $8,115
Additional Information:
From the income statement, we need sales and cost of goods sold:
(in millions) Fiscal Year End June 30, 2009
Sales $69,207
Cost of goods sold $65,118
From the balance sheet we need the balances in receivables, inventories, and accounts payables:
Fiscal Year End
(in millions) June 30, 2009 June 30, 2008
Accounts receivable $7,311 $11,483
Inventories $7,782 $10,160
Accounts payable $5,786 $6,544
In: Finance
On August 1, 2019, ABC Co. borrowed $10,000 on a one-year Note Payable with an interest rate of 12% per year.
a) What is the adjusting journal entry on November 30, 2019 to record the relevant expense for the month of November?
| Debit | Credit | Amount |
b) When the December 31, 2019 adjusting journal entry is made, a balance sheet account is impacted. Select the name of this account. Also, on January 1, 2020, after making the December 31 adjusting journal entry, what is the balance of this account?
| Account Name | Balance on January 1, 2020 |
c) As of August 1, 2020, after paying off the loan with interest, what is the total amount of interest expense the company will have recorded for 2020 and the total cash paid for interest in 2020? Do not include the $10,000 principal repayment.
| 2020 Interest Expense | 2020 Cash Paid for Interest |
d) If the company incorrectly recognized interest expense for August 2019 through July 2020 at the time cash was paid rather than when the expense was incurred, what would be the impact on the 2019 and 2020 income statements?
| 2019 Income Statement | 2020 Income Statement |
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Question 2415 pts
Note: There are 5 parts to this question (3 points each).
Capital expenditures are added to the balance sheet as assets and (usually) are expensed over time. Revenue expenditures are expensed in the period in which the cost is incurred. Select the appropriate accounting treatment under GAAP for each equipment-related expenditure below by classifying it as a capital expenditure or a revenue expenditure.
| Expenditure | Classification |
| a) Purchase price of equipment | |
| c) Cost of assembling equipment on site | |
| d) Reconditioning to extend its useful life | |
| e) Ordinary ongoing repairs and maintenance | |
| f) Monthly electricity costs for equipment |
A company purchased equipment on January 1, 2017 for $102,000. The equipment has an estimated residual value of $6,000 and an estimated useful life of 8 years. The company uses the straight-line method to depreciate the equipment and makes the relevant adjusting entry at the end of each month.
a) What is the annual depreciation for the equipment?
b) In general, what is the journal entry to record depreciation? (Ignore the amount.)
| Debit | Credit |
c) What is the value of the Accumulated Depreciation--Equipment account on January 1, 2019?
d) What is the book value of the equipment on January 1, 2019?
e) On January 1, 2019, the company sells the equipment for $85,000 cash. What is the gain or loss on the sale of the equipment?
| Gain or Loss? | Amount of Gain or Loss |
In: Accounting
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In: Accounting
An excerpt from the statement of financial position of Twilight
Limited follows:
| TWILIGHT LIMITED | |||||
| Selected Statement of Financial Position Information | |||||
| At December 31, 2020 | |||||
| Long-term debt | |||||
| Notes payable, 10% | $5,000,000 | ||||
| 4% convertible bonds payable | 2,000,000 | ||||
| 6% convertible bonds payable |
3,000,000 |
||||
| Total long-term debt |
$10,000,000 |
||||
| Shareholders' equity | |||||
| $0.68 cumulative, no par value, convertible
preferred shares (unlimited number of shares authorized, 600,000 shares issued and outstanding) |
$3,000,000 | ||||
| Common shares, no par value (8,000,000 shares
authorized, 3,000,000 shares issued and outstanding) |
25,000,000 | ||||
| Contributed surplus | 200,000 | ||||
| Retained earnings |
7,000,000 |
||||
| Total shareholders’ equity |
$35,200,000 |
||||
Notes and Assumptions
December 31, 2020
| 1. | Options were granted/written in 2019 that give the holder the right to purchase 100,000 common shares at $8 per share. The average market price of the company’s common shares during 2020 was $14 per share. The options expire in 2028 and no options were exercised in 2020. | |
| 2. | The 4% bonds were issued in 2019 at face value. The 6% bonds were issued on June 1, 2020, at face value. Each bond has a face value of $1,000 and is convertible into 100 common shares. | |
| 3. | The convertible preferred shares were issued at the beginning of 2020. Each share of preferred is convertible into one common share. | |
| 4. | The average income tax rate is 25%. | |
| 5. | The common shares were outstanding during the entire year. | |
| 6. | Preferred dividends were not declared in 2020. | |
| 7. | Net income was $2,500,000 in 2020. | |
| 8. | No bonds or preferred shares were converted during 2020. |
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| 6% Bonds | ||
| $0.68 Preferred shares | ||
| Options |
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In: Accounting
Horizon Corporation manufactures personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2019. Due primarily to increased competition and price slashing in the industry, 2020’s income statement reported a loss of $20 million. Just before the end of the 2021 fiscal year, a memo from the company’s chief financial officer (CFO) to Jim Fielding, the company controller, included the following comments:
“If we don’t do something about the large amount of unsold computers already manufactured, our auditors will require us to record a write-down. The resulting loss for 2021 will cause a violation of our debt covenants and force the company into bankruptcy. I suggest that you ship half of our inventory to J.B. Sales, Inc., in Oklahoma City. I know the company’s president, and he will accept the inventory and acknowledge the shipment as a purchase. We can record the sale in 2021 which will boost our loss to a profit. Then J.B. Sales will simply return the inventory in 2022 after the financial statements have been issued.”
2. Specify the options: If Jim does not record the sales transaction requested by the CFO, what is the effect on total assets and income before taxes of the inventory write-down?
3. Identify the impact: Are investors and creditors potentially harmed by the CFO’s suggestion?
4. Make a decision: Should Jim follow the CFO’s suggestion?
In: Finance
In: Accounting
Kurz Manufacturing is currently an all-equity firm with 17 million shares outstanding and a stock price of $ 14.00 per share. Although investors currently expect Kurz to remain an all-equity firm, Kurz plans to announce that it will borrow $ 55 million and use the funds to repurchase shares. Kurz will pay interest only on this debt, and it has no further plans to increase or decrease the amount of debt. Kurz is subject to a 35 % corporate tax rate.
a. What is the market value of Kurz's existing assets before the announcement?
b. What is the market value of Kurz's assets (including any tax shields) just after the debt is issued, but before the shares are repurchased?
c. What is Kurz's share price just before the share repurchase? How many shares will Kurz repurchase?
d. What are Kurz's market value balance sheet, and share price after the share repurchase?
a. What is the market value of Kurz's existing assets before the announcement?
The market value of Kurz's existing assets before the announcement is $________ million. (Round to one decimal place.)
b. What is the market value of Kurz's assets (including any tax shields) just after the debt is issued, but before the shares are repurchased?
The market value of Kurz's assets (including any tax shields) just after the debt is issued, but before the shares are repurchased is
$_________ million. (Round to one decimal place.)
c. What is Kurz's share price just before the share repurchase? How many shares will Kurz repurchase?
Kurz's share price just before the share repurchase is $________ (Round to the nearest cent.) The number of shares that Kurz will repurchase is _______ million. (Round to two decimal places.)
d. What are Kurz's market value balance sheet, and share price after the share repurchase?
The market value of assets is $________ million. (Round to one decimal place.)
The debt is $_________ million. (Round to the nearest integer.)
The market value of equity is $_______ million. (Round to one decimal place.)
Share price after repurchase is $_______ (Round to two decimal places).
In: Finance
On January 1, 2018, David Corp. grants options that permit key executives to acquire 32 million of the company's $1 par common shares within the next 8 years, but not before December 31, 2021 (the vesting date). The exercise price is $27 per share. The fair value of the options, estimated by an appropriate option-pricing model, is $7 per option.
David Corp.'s policy is to estimate option forfeitures. Originally, a forfeiture rate of 3% was expected. During 2020, the third year, David Corp. revised its estimate of forfeitures from 3% to 7%.
What are the journal entry for 2018, 2019, 2020 and 2021 to record compensation expense, considering expected forfeitures.
In: Accounting
Under its executive stock option plan, Q Corporation granted options on January 1, 2018, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures were anticipated; however, unexpected turnover during 2019 caused the forfeiture of 5% of the stock options. Ignoring taxes, what is the effect on earnings in 2020? Multiple Choice $18.5 million. $18 million. $19 million. $20 million.
In: Accounting
IDEO is a global award-winning design firm. Every year teams of people including psychologists, mechanical engineers, biologists, and industrial designers work on projects ranging from Apple's first computer mouse to heart defibrillators to the Neat Squeeze toothpaste tube.
IDEO's corporate philosophy is that teamwork improves innovation and creativity. Group brainstorming is used to spark a lot of new ideas at once. Project teams share and improve ideas by leveraging members' skills and solving problems together. The company believes that the diversity of interdisciplinary teams allows higher quality, faster innovation.
Regardless of the project, IDEO teams use the same process. First they identify similar products and experiences, then they observe people using them. The teams then visualize, evaluate, refine, and implement innovative solutions to their clients' problems drawing from their research and observations. IDEO team members lack status or formal titles, and every team member is given equal respect.
How does teamwork influence innovation at IDEO?
How does diversity influence the effectiveness of teamwork at IDEO?
What characteristics would you look for in staffing a project team at IDEO?
In: Operations Management