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    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2

The following income statement and information about changes in noncash current assets
and current liabilities are reported.
 

SONAD COMPANY Income Statement For Year Ended December 31, 2017
Sales				$	2,323,000
Cost of goods sold					1,138,270
Gross profit					1,184,730
Operating expenses
Salaries expense	$	318,251
Depreciation expense		55,752
Rent expense		62,721
Amortization expenses–Patents		6,969
Utilities expense		25,553			469,246
					715,484
Gain on sale of equipment					9,292
Net income				$	724,776

 
Changes in current asset and current liability accounts for the year that relate to operations follow.
 

Accounts receivable	$	22,300		increase		Accounts payable	$	10,025		decrease
Inventory		34,575		increase		Salaries payable		1,250		decrease

 
Prepare only the cash flows from operating activities section of the statement of cash flows using the indirect method.
(Amounts to be deducted should be indicated with a minus sign.)

 
Equipment with a book value of $79,000 and an original cost of $168,000 was sold at a loss of $32,000.
Paid $106,000 cash for a new truck.
Sold land costing $315,000 for $405,000 cash, yielding a gain of $90,000.
Long-term investments in stock were sold for $94,200 cash, yielding a gain of $16,250.
Use the above information to determine this company’s cash flows from investing activities. 
(Amounts to be deducted should be indicated with a minus sign.)
 

 
Net income was $479,000.
Issued common stock for $72,000 cash.
Paid cash dividend of $13,000.
Paid $120,000 cash to settle a note payable at its $120,000 maturity value.
Paid $119,000 cash to acquire its treasury stock.
Purchased equipment for $85,000 cash.
Use the above information to determine this company’s cash flows from financing activities. 
(Amounts to be deducted should be indicated with a minus sign.)

 
The following financial statements and additional information are reported.
 

IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016
	2017				2016
Assets
Cash	$	96,700			$	62,000
Accounts receivable, net		92,000				69,000
Inventory		81,800				113,500
Prepaid expenses		6,200				9,000
Total current assets		276,700				253,500
Equipment		142,000				133,000
Accum. depreciation—Equipment		(36,000	)			(18,000	)
Total assets	$	382,700			$	368,500
Liabilities and Equity
Accounts payable	$	43,000			$	57,000
Wages payable		7,800				18,600
Income taxes payable		5,200				7,400
Total current liabilities		56,000				83,000
Notes payable (long term)		48,000				78,000
Total liabilities		104,000				161,000
Equity
Common stock, $5 par value		256,000				178,000
Retained earnings		22,700				29,500
Total liabilities and equity	$	382,700			$	368,500

 

IKIBAN INC. Income Statement For Year Ended June 30, 2017
Sales				$	768,000
Cost of goods sold					429,000
Gross profit					339,000
Operating expenses
Depreciation expense	$	76,600
Other expenses		85,000
Total operating expenses					161,600
					177,400
Other gains (losses)
Gain on sale of equipment					3,800
Income before taxes					181,200
Income taxes expense					45,690
Net income				$	135,510

 
Additional Information
 
A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash.
The only changes affecting retained earnings are net income and cash dividends paid.
New equipment is acquired for $75,600 cash.
Received cash for the sale of equipment that had cost $66,600, yielding a $3,800 gain.
Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
 
All purchases and sales of inventory are on credit.
 
(1) Prepare a statement of cash flows for the year ended June 30, 2017, using the indirect method.
(Amounts to be deducted should be indicated with a minus sign.)
 

   
The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the:
 
Operating activities.
Financing activities.
Investing activities.
Schedule of noncash financing and investing activities.
Reconciliation of cash balance.
   
The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:
 
Operating activities.
Financing activities.
Investing activities.
Schedule of noncash investing or financing activity.
Reconciliation of cash balance.
   
In preparing Marjorie Company’s statement of cash flows for the most recent year, the following information is available:
 

Purchase of equipment	$	260,000
Proceeds from the sale of equipment		87,000
Purchase of land		91,000

 
$438,000 of net cash used.
$438,000 of net cash provided.
$264,000 of net cash used.
$351,000 of net cash used.
$264,000 of net cash provided.
  Use the following information to calculate cash received from dividends:

Dividends revenue	$	29,800
Dividends receivable, January 1		2,600
Dividends receivable, December 31		3,400

 
$26,400
$29,000
$29,800
$30,600
$32,400
  The statement of cash flows helps analysts evaluate all but which of the following?
 
Ability of the company to generate profit.
Source of cash used for plant expansion.
Differences between net income and net operating cash flow.
Source of cash used to finance investing activities.
Source of cash used for debt repayments. The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is:
 
Cash
Cash received from customers.
Increase (decrease) in accounts receivable.
Net income (loss).
Adjustments to net income.
  A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash.
The amount that should be reported in the operating activities section reported under the direct method is:
 
$50,000
$5,000
$45,000
Zero. This is an investing activity.
Zero. This is a financing activity
  When using the indirect method to calculate and report the net cash provided or used by operating activities,
net income is adjusted for all but which of the following?
 
Gains and losses from nonoperating items.
Revenues and expenses that did not provide or use cash.
Changes in noncurrent assets and noncurrent liabilities.
Changes in current liabilities related to operating activities.
Depreciation and amortization expense. A company had net cash flows from operations of $341,000, net income of $286,000 and average total assets of $1,850,000.
The cash flow on total assets ratio equals:
 
83.9
542.5
15.5
18.4
646.9 In preparing a company’s statement of cash flows for the most recent year using the indirect method,
the following information is available:

Net income for the year was	$	52,000
Accounts payable increased by		18,000
Accounts receivable decreased by		25,000
Inventories increased by		5,000
Depreciation expense was		30,000

Net cash provided by operating activities was:
 
$120,000
$60,000
$70,000
$80,000
$130,000
 

The two basic sources of stockholders' equity are __________.

Paid-In Capital and common stock
Retained Earnings and treasury stock
Retained Earnings and common stock
Paid-In Capital and Retained Earnings
   
Beta Electronics has 10,000 shares of $3 par common stock outstanding, which were issued at $5 per share.
The balance in retained earnings is $40,000. What is total stockholders' equity?
 
$90,000
 
5 x 10,000 = 50,000
50,000 + 40,000 = 90,000.
   
On March 1st, Jones Corporation purchased 1,000 shares of previously issued common stock, paying $2 per share.
What is the journal entry to record the purchase?
 
Debit Treasury Stock                      2,000
Credit Cash                                                         2,000
   
Which of the following is NOT one of the four basic rights of common stockholders?

Stockholders receive additional shares of stock when cash dividends are paid.
Stockholders receive their proportionate share of any assets remaining after debts are paid.
Stockholders have preemptive right to maintain their proportionate ownership in the corporation.
Stockholders' receive proportionate part of any dividend that is declared and paid.
   
Beta Electronics issued 100,000 shares of $2 par common stock at $2.50 per share.
What is the journal entry to record this transaction?
 
Debit     Cash 250,000
Credit    Common Stock 200,000
Credit    Paid-In Capital in Excess of Par Common 50,000
   
Beta Electronics issued 100,000 shares of $2 par common stock at $2 per share.
What is the journal entry to record this transaction?
 
Cash 200,000 (debit)
Common Stock 200,000 (credit)
   
Which is a unique characteristic of a corporation?

A corporation pays taxes only on dividends.
Stockholders of a corporation are liable for the corporation's debt.
A corporation is a separate legal entity.
A corporation has mutual agency.
A corporation is a separate legal entity.
   
Stock that is held by the stockholders outside the corporation is called __________.
 
outstanding stock
   
Jones Corporation purchases land with a market value of $200,000 in exchange for 180,000 shares of its $1 par common stock.
The journal entry to record this transaction is:
 
Land 200,000 (debit)
Common Stock 180,000 (credit)
Paid-In Capital in Excess of Par - Common 20,000 (credit)

200,000 – 180,000 = 20,000
   
Lu Company the following information on the financial statements:

Net Income                                                                                         $60,000
Preferred Dividends                                                                        $5,000
Average Common Stockholder's Equity                                   $180,000
Average number of Common Shares Outstanding              $200,000
Market Price                                                                                      $2 per share

What is the earnings per share (to the nearest penny)?
 
0.28

60,000 - 5,000 / 200,000 = 0.28
   
Assume Jones Company has 2,000 outstanding shares of 2%, $2 par value preferred stock and has declared the cash dividend as a payable.
What is the amount of total dividends owed to preferred stockholders?
 
$80
 
2,000 x 2 x .02 = 80
   
Beta Electronics issued 10,000 shares of $1 stated value common stock at $3 per share.
What is the journal entry to record this transaction?
 
Cash 30,000 (debit)
Common Stock 10,000 (credit)
Paid-In Capital in Excess of Stated - Common 20,000 (credit)
   
Which characteristic of a corporation is an advantage?
Transfer of corporation ownership is easy.
 
The maximum number of shares of stock the corporation can issue is called __________.
authorized stock
 
Assume Warren Company has 4,000 outstanding shares of 2%, $3 par value preferred stock and has declared the cash dividend as a payable.
What is the amount of total dividends owed to preferred stockholders?
 
$240

2% x 3 = 0.06
4,000 x 0.06 = 240
   
Basic Manufacturing issued 200,000 shares of $4 par common stock at $4.50 per share.
What is the journal entry to record this transaction?
 
Cash 900,000 (debit)
Common Stock 800,000 (credit)
Paid-In Capital in Excess of Par - Common 100,000 (credit)


200,000 x 4.50 = 900,000
900,000 – 100,000 = 800,000
   
Weaver Electronics issued 20,000 shares of $2 stated value common stock at $3 per share.
What is the journal entry to record this transaction?
 
Cash 60,000 (debit)
Common Stock 40,000 (credit)
Paid-In Capital in Excess of Stated - Common 20,000 (credit)

20,000 x 3 = 60,000
20,000 x 2 = 40,000
40,000 – 20,000 = 20,000
   
Beta Electronics issued 100,000 shares of no-par common stock at $2.50 per share.
What is the journal entry to record this transaction?
 
Cash 250,000 (debit)
Common Stock 250,000 (credit)
   
What are the two sections of the Stockholders' Equity section?
 
Paid-In Capital
Retained Earnings
   
What is Paid-In Capital?
 
contributions by stockholders
   
What is Retained Earnings?
 
all prior period earnings less dividends paid
   
What are the 2 classes of capital stock?
 
common stock
preferred stock
   
Cash dividends result in a decrease in _________  and ____________________.
 
Retained Earnings
total stockholders' equity
   
Stock dividends result in a decrease in ______________  __________________ and an increase in _________________ What remains the same?
 
Retained earnings
Paid-in capital
stockholders' equity
   
Suppose a stock had an initial price of $62 per share, paid a dividend of $1.10 per share during the year, and had an ending share price of $74.
 
21.13%
 
74 - 62 + 1.10) / 62
.2113 or 21.13%
   
You bought one of Great White Shark Repellant Co.'s 8 percent coupon bonds one year ago for $1,059. These bonds make annual payments and
mature 10 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 7 percent.
The bonds have a par value of $1,000. If the inflation rate was 4.8 percent over the past year, what was your total real return on investment?
 
3.64%
   
A stock had returns of 5 percent, 14 percent, 11 percent, −8 percent, and 6 percent over the past five years. What is the standard deviation of these returns?
 
8.44%
   
Suppose a stock had an initial price of $84 per share, paid a dividend of $1.50 per share during the year, and had an ending share price of $73.
Compute the percentage total return, dividend yield, and capital gains yield.
 
Total Return                       -11.31%
Dividend                              1.79%
Capital Gain                       -13.10%
 
 
73 - 84 + 1.50) / 84 = −0.1131, or −11.31%
1.50 / 84 = 0.0179, or 1.79%
73 – 84 / 84 = −0.1310, or −13.10%
   
The common stock of Air Express had annual returns of 11.7 percent, 8.8 percent, 16.7 percent, and −7.9 percent over the last four years,
respectively. What is the standard deviation of these returns?
 
10.66%
   
One year ago, you purchased 100 shares of Best Wings stock at a price of $38.19 a share.
The company pays an annual dividend of $.46 per share.
Today, you sold for the shares for $37.92 a share. What is your total percentage return on this investment?
 
0.50%
   
A stock has had returns of 12 percent, 30 percent, 17 percent, −18 percent, 30 percent, and −7 percent over the last six years.
What are the arithmetic and geometric average returns for the stock?
 
Arithmetic average return 10.67%
Geometric average return 9.13%
 
 
12 + .30 + .17 - .18 + .30 - .07 / 6 = .1067, or 10.67%
 [(1 + .12)(1 + .30)(1 + .17)(1 - .18)(1 + .30)(1 - .07)](1/6) – 1 = .0913, or 9.13%

    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2