Accounting Expert Answers & Study Resources : Page 257

134) A friend of yours, who is an accountant for a large corporation, asked you to review the financial statements he prepared for the company. In your review you noticed that some short-term investments in the shares of other companies have been reported at historical cost. When you asked your.

61) Cash paid to a municipality for property taxes would appear in the: A) investing activities section B) financing activities section C) operating activities section D) would not appear on the cash flow statement 62) Cash paid to employees for wages would appear in the: A) investing activities section B) financing activities section C) operating activities section D) would.

21) The Accounting Standards Board prefers the use of the indirect format of the cash flow statement. 22) The indirect and direct methods use different computations but produce the same amount of cash flows from operations. 23) Amortization expense is not listed on a direct-method cash flow statement since this item has.

90) Bailey Corporation accounts for its 35% investment in Carnes Corporation under the equity method of accounting. The investment was made on January 2, 2010, at a cost of $450,000. From the date of the investment until December 31, 2010, Carnes Corporation reported $100,000 of income and paid $40,000 in.

91) Quincy Industries began the year with $46,700 in accounts receivable and ended the year with $31,900 in accounts receivable. If sales for the year were $687,000, the cash collected from customers during the year amounted to: A) $701,800 B) $733,700 C) $672,200 D) $655,100 92) If the cash collections from customers amounted to $634,800,.

147) Data relating to three companies that each had sales of $850,000 during the year follow: a) Company A's accounts receivable balance increased $217,500 during the year. b) Company B had a beginning balance in accounts receivable of $328,400 and an ending balance of $142,900. c) Company C had a decrease in its.

  Table 16-1 On January 2, 2010, Logan Corporation purchased 2,000 common  shares in Downright Corporation for $55 per share. Logan intends to hold this investment for less than a year and classifies it as a Short-Term Investment. The market value of the shares at December 31, 2010, is $58 per share. 52).

141) State whether each event below should be classified as an operating activity, investing activity, financing activity, shown in a separate schedule or note of noncash investing and financing activities, or not disclosed on the cash flow statement. _______________  a) Paid for merchandise purchased on account _______________   b) Received stock dividends _______________   c).

149) On June 30, 2010, Raven Corporation purchased five-year, 6% bonds of Cannon Limited as an investment at a price of 96. Raven Corporation plans on holding these bonds for the five-year term when their maturity value will be $50,000. Raven plans to hold the bonds until maturity and amortizes.

149) You are reviewing the financial statements of three companies in the same industry. Specifically, you are interested in the transactions surrounding property, plant, and equipment (PPE) during the past year. The following information is available for the three companies. Compute the unknowns. AB Co. DC Co. PG Co. Beginning PPE, net of amortization $850,000 .

41) The cash flow statement: A) is required by generally accepted accounting principles B) is prepared at the option of management C) may be combined with the shareholders' equity section of the balance sheet D) does not have to be completed if a balance sheet is prepared 42) All of the following are cash equivalents.

139) Your best friend just lost his job because the company he was working for went bankrupt. He was complaining to you that even though the company had been profitable for three years in a row, it still went out of business. He asks you how this can happen. a) Explain.

11) When accounting for short-term investments, losses are recorded when market value increases above cost. 12) Equity investments where there is no significant influence are reported on the balance sheet at the lower of historical cost or market. 13) Stock dividends on short-term investments do not affect the total cost of the.

1) All share purchases are initially recorded at cost. 2) Short-term  investments are reported on the balance sheet at current market value or cost, whichever value is highest. 3) All short-term investments are recorded initially at cost, but are reported on the balance sheet at current market value. 4) Investment in bonds is.

140) A company purchased $17,500 of common shares in Danis Corporation on September 1, 2009 for $17,500 plus $100 in brokerage fees. This investment was properly classified as a short-term investment. At December 31, 2009, the end of the investor's fiscal year, the investment had risen in value to $18,600..

31) Goodwill is the excess of the cost to acquire another company over the sum of the fair value of its net assets. 32) Non-controlling interest is that portion of a subsidiary's shares that is owned by shareholders other than the parent company. 33) The income of a consolidated entity is the.

139) Saint Martin Inc. issued $300,000, 12%, 10-year bonds on July 1, 2008. Interest payments dates are January 2 and July 1. The issue price was $293,400. The bonds are convertible into common shares at the rate of 15 common shares for each $1,000 bond. The market price of Saint.

  Match the following. A) operating activity B) investing activity C) noncash investing and financing activities D) financing activity E) indirect method 129) Highly liquid short-term investments that can be converted to cash with little delay 130) Format of the operating activities section of the cash flow statement that lists the major categories of operating cash receipts and.

146) The following selected data for Ryder Corporation for the year ended December 31, 2010, are available to you for preparing the cash flow statement: Cost of goods sold$56,500Sales revenue$97,300 Amortization expense14,100Interest revenue4,100 Income tax expense2,300Dividend revenue3,600 Other operating expenses17,700Salary expense24,000 Loss on sale of investments1,400Interest expense5,900 Gain on sale of property,       plant, and equipment7,200 The.

11) Paying interest on money borrowed from the bank would be reported in the operating activities section of the cash flow statement. 12) Paying principal on a bank loan would be reported in the operating activities section of the cash flow statement. 13) Paying principal on a bank loan would be reported.

145) As the accountant at O'Donnell Industries, you are responsible for preparing the cash flow statement. You have decided to prepare the statement using the direct method and have gathered the following data from the accounting records: Payment of long-term debt$200,000 Collections on accounts receivable210,600 Acquisition of equipment by issuing          long-term note payable85,000 Interest.

146) Roth Corporation used the equity method to report the following transactions for the years 2009 and 2010: 2009 Feb.  2Purchased 40% of the voting common shares of Dunn Enterprises Inc. for $500,000. This is a long-term investment giving Roth Corporation significant influence over the operations of Dunn Enterprises Inc. Oct. 15Received $20,000.

41) A foreign currency transaction gain or loss occurs when the exchange rate changes between the date an order is placed and the date the merchandise is received. 42) A futures contract is a contract for foreign currencies to be received in the future. 43) There are only minor differences between GAAP.

143) On January 2, 2010, Pannabaker Corporation issued $400,000, five-year, 10% bonds when the market rate of interest was 12%. The bonds pay interest annually on December 31. Pannabaker Corporation uses the effective-interest method of amortization and has a year-end of December 31.(Note: present value tables required.) a) Prepare the journal.

108) Calder Corporation reported salary expense of $65,000 on its 2010 income statement. It reported cash payments to employees of $57,500 on the 2010 cash flow statement. The ending 2010 balance in the salary payable account was $12,000. What was the beginning 2010 balance in the salary payable account? A) $7,500 B).

146) Answer each of the following independent questions. Your responses should be brief and concise. a) What is a lease? Describe the differences between operating leases and capital leases. b)Describe the advantages of financing operations by issuing bonds. c) Explain why convertible bonds may be attractive to both investors and the corporation issuing.

21) Short-term investments and long-term investments are reported separately on the balance sheet. 22) When the equity method is used to account for a share investment, the investment account will be increased by the investor's share of the income reported by the investee. 23) An investor can own more than 20% of.

80) The equity method of accounting for a share investment should be used when the investor owns: A) between 30% and 50% of the investee's shares B) between 20% and 50% of the investee's shares C) between 25% and 50% of the investee's shares D) over 50% of the investee's shares 81) The equity method.

81) Freedom Enterprises uses the direct method in preparing its cash flow statement. Freedom sold machinery with a book value of $36,700 at a loss of $7,200. The amount to be reported on the cash flow statement under "Cash received from sale of property, plant, and equipment" is: A) $43,900 B) $29,500 C).

142) Leon Inc. needs to account for investment transactions during 2010: Jan. 15Purchased 100 Bright Corporation common shares, paying $75 per share. Leon Inc. intends to hold the investment for a short period of time and has classified the investment as a short-term investment. Jun. 30 Received a cash dividend of $1.50.

138) In early 2009, Brownlee Corporation found itself with idle cash that it decided to invest in the shares of another business. The following events transpired in 2009 and 2010: 2009 Feb.  1Brownlee Corporation purchased 1,000 shares in Green Corporation at 16.50 per share. This investment was classified as a short-term investment. Nov..

147) Eastern Corporation purchased 225,000 Western Corporation common shares on January 2, 2010, for $540,000. Western Corporation has 600,000 shares outstanding. Western Corporation earned net income of $360,000 and paid dividends of $100,000 during 2010. a) What method should be used to account for the Western Corporation investment? b) How much revenue.

153) On December 31, 2010, Parent Corporation paid $800,000 to acquire 100% of the voting common shares of Child Corporation. At that date Child Corporation had common shares of $500,000 and retained earnings of $250,000. Assume any amount paid in excess of shareholders' equity is attributable to goodwill. a) Prepare the.

  Table 16-2 Big Corporation paid $95,000 to acquire a 30% investment  in the common shares of Little Corporation on January 3, 2009. On December 31, 2009, Little Corporation's net income was $210,000 and Little Corporation paid dividends of $80,000. On December 31, 2010, Little Corporation's net income was $170,000 and Little.

141) Decide whether each of the following situations involving lease agreements should be recorded as an operating lease or as a capital lease. a)  The lease term is for 10 years, the estimated remaining life of the leased asset is 12 years. The leased asset reverts back to the lessor at.

31) If salary expense has an ending balance of $48,000 and salary payable shows an increase of $500, then the cash payment for salaries for the period was $47,500. 32) Retained earnings contains a debit of $10,000 representing dividends while the dividends payable account decreased $500. Cash paid for dividends during.

143) Rona Inc. gathered the following data from its accounting records for the year ended December 31, 2010: Amortization expense$ 15,900 Payment of income taxes 24,500 Collections of accounts receivable 167,200 Purchase of company's own common shares 40,000 Declaration of stock dividend65,000 Loss on sale of property, plant, and equipment8,400 Collection of dividend revenue13,800 Payments of salaries.

151) Using the following data, prepare the operating activities section of a cash flow statement for Richie Corporation for the year ended December 31, 2010, using the indirect method. Increase in salary payable$ 1,500 Decrease in accounts payable2,000 Increase in accounts receivable3,500 Net income95,600 Decrease in inventory5,800 Increase in prepaid expenses1,200 Amortization expense-equipment5,500 Amortization expense-buildings 7,500 Gain on sale.

100) All of the following are reasons for investing in subsidiaries, except: A) the investment creates one legal entity where two separate legal entities used to exist B) subsidiaries may enable the parent company to generate more sales C) they may enable the parent to limit its liability for risky ventures D) they may.

151) a) An investor owns 85% of the shares in another company. How should the investor account for the investment? b) How does an investor account for a long-term investment in bonds? 152) Parent Corporation paid $90,000 to acquire all the common shares of Subsidiary Inc. on December 31, 2010. At that.

  Match the following. A) controlling interest B) non-controlling interest C) equity method D) Short-term investments E) hedging F) joint venture G) the ratio of a country's imports to its exports H) amortized cost I) subsidiary company J) marketable securities K) parent company L) consolidated statements M) long-term investments 121) Financial statements of the parent company plus those of majority-owned subsidiaries as if the combination.

62) A short-term investment acquired at a cost of $65,000 in 2009 is sold in 2010 for $67,800. At December 31, 2009, the short-term investment had a market value of $66,200. In 2010, the investor should report a(n): A) Gain on Sale of Short-Term Investment of $1,600 B) Gain on Sale of.

  Table 16-4 Parson Products Inc. purchased $186,000, 10%, five-year bonds to hold until maturity. The bonds were purchased on July 1, 2010, and will mature on July 1, 2013. Interest payment dates are June 30 and December 31. Market value of the bonds on July 1, 2010 was 103. Parson.

  Table 16-6 The following are transactions in the purchase and sale of Epstein Ltd. shares by Monty Inc. January 15, 2009Purchase 1, 000 shares of Epstein at $25.00 February 10, 2009Received $1.00 dividend from Epstein December 31, 2009Epstein reported net income of $10,000. December 31, 2009Market value of Epstein shares $24.50. June 30, 2010Sold all.

1) The cash flow statement aids investors and creditors in assessing a business's ability to meet its debt obligations and pay cash dividends. 2) A company reporting net income will always show an increase in cash for the same period. 3) One purpose of the cash flow statement is to show the.

51) The purchase of office equipment for cash would appear in the: A) investing activities section B) financing activities section C) operating activities section D) operating activities section or the financing activities section 52) The cash received from the sale of office equipment for cash would appear in the: A) investing activities section B) financing activities section C).

136) In early 2009, Brownlee Corporation found itself with idle cash that it decided to invest in the shares of another business. The following events transpired in 2009 and 2010: 2009 Feb.  1Brownlee Corporation purchased 1,000 shares in Green Corporation at 16.50 per share. This investment was classified as a short-term investment. Nov..

144) When the equity method is used to account for a share investment, dividends received are recorded as a reduction to the investment account and the investor's share of income reported by the investee is treated as an increase in the investment account. Explain why this is done. 145) On January.

71) Which of the following items would be reported as an operating activity? A) purchase of land B) payment of interest C) payment of dividends D) sale of common shares 72) All of the following are considered investing activities except: A) making loans to others B) purchasing equipment C) receipt of dividends D) sale of land 73) Activities that create.

118) The beginning and ending balances of long-term debt for Rambler Corporation are $61,500 and $35,400, respectively. If cash payments of long-term debt are $35,100, how much new long-term debt was issued during the year? A) $26,100 B) $61,800 C) $9,000 D) $61,200 119) Under the indirect method, a gain resulting from the sale of.