1) Stocks and Bonds
Intel Inc. is the pioneer in the manufacture of microprocessor for computers. The companys fiscal year runs from April 1 to March 31. On 4/1/2013, Intel Issued $5,000,000 of 11% Bonds due in 10 years. The interest is payable annually on April 1. The market rate of interest on that date for bonds of similar risk is 10%
1. Prepare the journal entry for the issuance of the bonds and on the first interest payment date.
2. Use spreadsheet to prepare an amortization schedule for the bonds.
Exercise 2
Presented below is the stockholders equity section of Delta Inc.
All amounts are in million except for number of shares and par value
Stockholders’ Equity (Deficit)
Current
Year
Prior
Year
Preferred stock-20,000,000 shares authorized; none issued
$ -0-
$ -0-
Common stock-$1 par value; 750,000,000 shares authorized; 182,350,259 shares issued
182
182
Additional paid-in capital
2,521
2,605
Treasury shares at cost: current year-21,194,312; prior year-22,768,027
(1,308)
(1,405)
Accumulated other comprehensive loss
(664)
(785)
Accumulated deficit
(1,312)
(551)
$ (581)
$ 46
1. Explain why the common stock is classified as part of the stockholder’s equity.
2. Explain why treasury stock is not classified as an asset.
3. Explain what is meant by “Accumulated other comprehensive loss.”
4. Why is the accumulated deficit larger in the current year than in the prior year?
5. Compute book value per share for Delta for the current year.
Provide reference in APA format if available.
Financial Investments
· As auditor for Banquo & Associates, you have been assigned to check Duncan Corporations computation of earnings per share for the current year. The controller, Mac Beth, has supplied you with the following computations.
Net income
$3,374,960
Common shares issued and outstanding:
Beginning of year
1,285,000
End of year
1,200,000
Average
1,242,500
Earnings per share:
$3,374,960
= $2.72 per share
1,242,500
· You have developed the following additional information.
1. There are no other equity securities in addition to the common shares.
2. There are no options or warrants outstanding to purchase common shares.
3. There are no convertible debt securities.
4. Activity in common shares during the year was as follows.
Outstanding, Jan. 1
1,285,000
Treasury shares acquired, Oct. 1
1,035,000
Shares reissued, Dec. 1
1,165,000
Outstanding, Dec. 31
1,200,000
· Required:
1. On the basis of the information above, do you agree with the controllers computation of earnings per share for the year? If you disagree, prepare a revised computation of earnings per share
2. Assume the same facts as those presented above, except that options had been issued to purchase 140,000 shares of common stock at $10 per share. These options were outstanding at the beginning of the year, and none had been exercised or canceled during the year. The average market price of the common shares during the year was $25, and the ending market price was $35. What earnings per share amounts will be reported?
·
1) Income Tax Calculations
Johnny Bravo Company began operations in 2012 and has provided the following information.
1. Pretax financial income for 2012 is $100,000.
2. The tax rate enacted for 2012 and future years is 40%.
3. Differences between the 2012 income statement and tax return are listed below.
(a) Warranty expense accrued for financial reporting purposes amounts to $5,000. Warranty deductions
per the tax return amount to $2,000.
(b) Gross profit on construction contracts using the percentage-of-completion method for book purposes
amounts to $92,000. Gross profit on construction contracts for tax purposes amounts to $62,000.
(c) Depreciation of property, plant, and equipment for financial reporting purposes amounts to $60,000.
Depreciation of these assets amounts to $80,000 for the tax return.
(d) A $3,500 fine paid for violation of pollution laws was deducted in computing pretax financial income.
(e) Interest revenue earned on an investment in tax-exempt municipal bonds amounts to $1,400.
4. Taxable income is expected for the next few years.
a. Prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable for 2012.
b. Draft the income tax expense section of the income statement, beginning with Income before income taxes
1) Financial Statements
The financial statements of Procter & Gamble Company available . Refer to P&Gs financial statements and the accompanying notes to answer the following questions:
1. Using the notes to the consolidated financial statements, determine P&Gs revenue recognition policies. Discuss the impact of trade promotions on P&Gs financial statements.
2. Give two examples of where historical cost information is reported in P&Gs financial statements and related notes. Give two examples of the use of fair value information reported in either the financial statements or related notes.
3. How can we determine that the accounting principles used by P&G are prepared on a basis consistent with those of last year?
4. What is P&Gs accounting policy related to advertising? What accounting principle does P&G follow regarding accounting for advertising? Where are advertising expenses reported in the financial statements?
Provide reference if any in APA format.
2) Trial Balance
Listed below are the transactions for Hunter Marketing. Inc. for the month of July:
July 1 Hunter begins his marketing company and invests $50,000 cash.
July 5 Purchases computers and office equipment on account from OfficeMax for $10,250.
July 6 Pays rent for office space $800 for the month.
July 6 Employs a secretary, Mary Jones.
July 8 Purchases office supplies for cash $960.
July 9 Receives $2,430 from customer for services performed.
July 11 Pays miscellaneous office expenses $375.
July 13 Bills customers $4,900 for serviced performed.
July 15 Pays Office Max $3,500 on account.
July 18 Withdraws $2,000 from business for personal use.
July 20 Receives $1,900 from customers on account.
July 23 Bills customers $6,320 for services performed.
July 30 Pays the following expenses in cash: office salaries $2,300 and utilities $400.
a. Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies on Hand, Office Equipment, Accumulated Depreciation, Accounts Payable, Hunter-Capital, Service Revenue, Rent Expense, Miscellaneous Office Expense, Office Salaries Expense, Supplies Expense, Utilities Expense, Depreciation Expense and Income Summary.
b. Prepare an unadjusted trial balance.
c. Record depreciation using a 5-year life on the office equipment, the straight-line method, and no salvage value. Round to whole numbers. Also, record an adjustment for office supplies used in the amount of $510.
d. Prepare an adjusted trial balance.
e. Prepare an income statement, a statement of retained earnings, and an unclassified balance sheet.
f. Close the ledger.
g. Prepare a post-closing trial balance.
3) Balance Sheet
Lander Inc. had the following balance sheet at December 31, 2008:
LANDER, INC.
Balance Sheet
December 31, 2008
Cash
$45,300
Accounts payable
$33,800
Accounts receivable
$18,900
Bonds payable
$35,000
Investments
$25,000
Common stock
$190,000
Plant assets (net)
$78,000
Retained earnings
$18,400
Land
$110,000
Total Assets
$277,200
Total Liabilities & Equity
$277,200
During 2009 the following occurred.
a. Lander liquidated its available-for-sale investment portfolio at a loss of $6,500.
b. A tract of land was purchased for $31,000.
c. An additional $20,000 in common stock was issued at par.
d. Dividends totaling $5,000 were declared and paid to stockholders.
e. Net income for 2009 was $29,000, including $7,000 in depreciation expense.
f. Land was purchased through the issuance of $25,000 in additional bonds.
g. At December 31, 009, Cash was $72,650, Accounts Receivable was $35,250, and Accounts Payable was $32,500.
i. Prepare a statement of cash flows for the year 2009 for Lander.
ii. Prepare the balance sheet as it would appear at December 31, 2009.