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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

A company has bonds outstanding with a par value of $110,000.
The unamortized premium on these bonds is $2,585.
If the company retired these bonds at a call price of 99, the gain or loss on this retirement is:
 
$1,100 loss.
$3,685 gain.
$2,585 gain.
$1,100 gain.
$2,585 loss.
   
On January 1, a company issues bonds dated January 1 with a par value of $310,000. The bonds mature in 5 years.  The contract rate is
11%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and  the  bonds are sold for $321,964.
The journal entry to record the first interest payment using the effective interest method of amortization is:
(Rounded to the nearest dollar.)
 
Debit Interest Expense $16,098; debit Premium on Bonds Payable $952; credit Cash $17,050.
Debit Interest Payable $17,050.00; credit Cash $17,050.00.
Debit Bond Interest Expense $16,098.00; debit Discount on Bonds Payable $952.00; credit Cash $17,050.00.
Debit Bond Interest Expense 18,246.00; credit Premium on Bonds Payable $1,196.00; credit Cash $17,050.00.
Debit Bond Interest Expense $15,854.00; debit Premium on Bonds Payable $1,196.00; credit Cash $17,050.00.
 
Interest expense (321,964 x 5%) – 16,098
Bonds Payable $952 - given
Cash (310000 x 5.5 / 100) – 17,050
   
On January 1, a company issues bonds dated January 1 with a par value of $300,000. The bonds mature in 5 years.
The contract rate is 9%, and interest is paid semiannually on June 30 and December 31.
The market rate is 10% and the bonds are sold for $288,413.
The journal entry to record the first interest payment using the effective interest method of amortization is:
 
Debit Interest Payable $13,500; credit Cash $13,500.
Debit Interest Expense $14,421; credit Discount on Bonds Payable $921; credit Cash $13,500
Debit Interest Expense $12,579; debit Premium on Bonds Payable $921; credit Cash $13,500.
Debit Interest Expense $12,579; debit Discount on Bonds Payable $921; credit Cash $13,500.
Debit Interest Expense $14,421; credit Premium on Bonds Payable $921; credit Cash $13,500
   
On January 1, a company issues bonds dated January 1 with a par value of $420,000. The bonds mature in 5 years.
The contract rate is 9%, and interest is paid semiannually on June 30 and December 31.
The market rate is 10% and the bonds are sold for $403,778.
The journal entry to record the first interest payment using straight-line amortization is:
 
Debit Interest Payable $18,900.00; credit Cash $18,900.00.
Debit Interest Expense $18,900.00; credit Cash $18,900.00.
Debit Interest Expense $20,522.20; credit Discount on Bonds Payable $1,622.20; credit Cash $18,900.00.
Debit Interest Expense $17,277.80; debit Discount on Bonds Payable $1,622.20; credit Cash $18,900.00.
Debit Interest Expense $20,522.20; credit Premium on Bonds Payable $1,622.20; credit Cash $18,900.00
   
A corporation issued 8% bonds with a par value of $1,020,000, receiving a $24,000 premium.
On the interest date 5 years later, after the bond interest was paid and after 40% of the premium had been amortized,
the corporation purchased the entire issue on the open market at 99 and retired it. The gain or loss on this retirement is:
 
$24,600 gain.
$0.
$10,200 loss.
$24,600 loss.
$10,200 gain
   
The time period for classifying a liability as current is one year or the operating cycle, whichever is:

probable.
possible.
longer.
shorter.
   
Marwick Corporation issues 10%, 5-year bonds with a par value of $1,140,000 and semiannual interest payments.
On the issue date, the annual market rate for these bonds is 8%.
What is the bond's issue (selling) price, assuming the following Present Value factors:

n =			i =			Present Value of an Annuity			Present value of $1
5			10	%			3.7908		0.6209
10			5	%			7.7217		0.6139
5			8	%			3.9927		0.6806
10			4	%			8.1109		0.6756

 
$1,140,000
$929,244
$1,602,321
$1,232,505
$677,679
   
All of the following are current liabilities except:

sales taxes payable.
unearned rental revenue.
current maturities of long-term debt.
all of these answer choices are current liabilities.
   
On January 1, a company issues bonds dated January 1 with a par value of $280,000. The bonds mature in 5 years.
The contract rate is 9%, and interest is paid semiannually on June 30 and December 31.
The market rate is 8% and the bonds are sold for $291,365. The journal entry to record the issuance of the bond is:
 
Debit Cash $280,000; debit Premium on Bonds Payable $11,365; credit Bonds Payable $291,365.
Debit Cash $291,365; credit Discount on Bonds Payable $11,365; credit Bonds Payable $280,000.
Debit Cash $291,365; credit Premium on Bonds Payable $11,365; credit Bonds Payable $280,000
Debit Bonds Payable $280,000; debit Bond Interest Expense $11,365; credit Cash $291,365.
Debit Cash $291,365; credit Bonds Payable $291,365.
   
On January 1, a company issues bonds dated January 1 with a par value of $370,000. The bonds mature in 5 years.
The contract rate is 11%, and interest is paid semiannually on June 30 and December 31.
The market rate is 12% and the bonds are sold for $356,386. The journal entry to record the issuance of the bond is:
 
Debit Cash $356,386; debit Discount on Bonds Payable $13,614; credit Bonds Payable $370,000.
Debit Cash $356,386; credit Bonds Payable $356,386.
Debit Cash $370,000; credit Discount on Bonds Payable $13,614; credit Bonds Payable $356,386.
Debit Bonds Payable $370,000; debit Bond Interest Expense $13,614; credit Cash $383,614.
Debit Cash $356,386; debit Premium on Bonds Payable $13,614; credit Bonds Payable $370,000
   
On January 1, a company issues bonds dated January 1 with a par value of $610,000. The bonds mature in 3 years.
The contract rate is 8%, and interest is paid semiannually on June 30 and December 31.
The bonds are sold for $592,000. The journal entry to record the first interest payment using straight-line amortization is:
 
Debit Interest Expense $24,400; credit Cash $24,400.
Debit Interest Expense $24,400; credit Premium on Bonds Payable $3,000; credit Cash $21,400.
Debit Interest Expense $27,400; credit Discount on Bonds Payable $3,000; credit Cash $24,400.
Debit Interest Payable $24,400; credit Cash $24,400.
Debit Interest Expense $21,400; debit Discount on Bonds Payable $3,000; credit Cash $24,400
   
A company must repay the bank a single payment of $33,000 cash in 6 years for a loan it entered into.
The loan is at 7% interest compounded annually. The present value factor for 6 years at 7% is .6663.
The present value of an annuity factor for 6 years at 7% is 4.7665. The present value of the loan (rounded) is:
 
$29,301.
$6,923.
$21,988.
$157,295.
$33,000.
   
On July 1, Shady Creek Resort borrowed $320,000 cash by signing a 10-year,
8% installment note requiring equal payments each June 30 of $47,689.
What is the journal entry to record the first annual payment?
 
Debit Interest Expense $47,689; credit Cash $47,689.
Debit Interest Expense $25,600; debit Interest Payable $22,089; credit Cash $47,689.
Debit Interest Expense $25,600; credit Cash $25,600.
Debit Interest Expense $25,600; debit Notes Payable $22,089; credit Cash $47,689
Debit Cash $320,000; debit Interest Expense $47,689; credit Notes Payable $367,689
   
A company issued 5-year, 10.00% bonds with a par value of $110,000. The market rate when the bonds were issued was 9.50%.
The company received $112,315 cash for the bonds.
Using the effective interest method, the amount of recorded interest expense for the first semiannual interest period is:
 
$5,500.00.
$5,334.96.
$2,750.00.
$11,000.00.
$10,607.00
   
A company borrowed $40,800 cash from the bank and signed a 5-year note at 6% annual interest.
The present value of an annuity factor for 5 years at 6% is 4.2124. The present value of a single sum factor for 5 years at 6% is 0.7473.
The annual annuity payments equal:
 
$9,685.69.
$171,865.92.
$54,596.55.
$30,489.84.
$40,800.00.
   
On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 3 years.
The contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The market rate is 11%. 
Using the present value factors below, the issue (selling) price of the bonds is:
 
n=                           i=                            Present Value of an Annuity                         Present value of $1
3                             10.0       %                                            2.4869                 0.7513
6                             5.0          %                                            5.0757                 0.7462
3                             11.0       %                                            2.4437                 0.7312
6                             5.5          %                                            4.9955                 0.7252
 
Multiple Choice
 
$99,910.
$410,010.
$290,080.
$389,990.
$400,000.
   
A company has bonds outstanding with a par value of $100,000.
The unamortized discount on these bonds is $5,300.
The company calls these bonds at a price of $95,000 the gain or loss on retirement is:
 
$0 gain or loss.
$300 gain.
$5,000 loss.
$300 loss.
$5,000 gain.
   
A retail store did not ring up sales tax separately. If the sales tax rate is 5% and the total receipts amounted to $126,000,
what is the amount of the sales taxes owed to the taxing agency?

$126,000
$6,300
$6,000
$120,000

126,000 / 1.05 = 120,000
126,000 - 120,000 = 6,000.
   
On January 1, a company issues bonds dated January 1 with a par value of $270,000.
The bonds mature in 5 years. The contract rate is 11%, and interest is paid semiannually on June 30 and December 31.
The market rate is 10% and the bonds are sold for $280,420.
The journal entry to record the first interest payment using straight-line amortization is:
(Rounded to the nearest dollar.)
 
Debit Interest Payable $14,850; credit Cash $14,850.
Debit Bond Interest Expense $13,808; debit Discount on Bonds Payable $1,042; credit Cash $14,850.
Debit Bond Interest Expense $15,892; credit Premium on Bonds Payable $1,042; credit Cash $14,850.
Debit Bond Interest Expense $15,892; credit Discount on Bonds Payable $1,042; credit Cash $14,850.
Debit Bond Interest Expense $13,808; debit Premium on Bonds Payable $1,042; credit Cash $14,850.
   
Adonis Corporation issued 10-year, 11% bonds with a par value of $140,000. Interest is paid semiannually.
The market rate on the issue date was 10%. Adonis received $148,725 in cash proceeds.
Which of the following statements is true?
 
Adonis must pay $140,000 at maturity plus 20 interest payments of $7,700 each.
Adonis must pay $148,725 at maturity plus 20 interest payments of $7,700 each.
Adonis must pay $140,000 at maturity plus 20 interest payments of $7,000 each.
Adonis must pay $148,725 at maturity and no interest payments.
Adonis must pay $140,000 at maturity and no interest payments.
   
Janis Vick has a large consulting practice. New clients are required to pay one-half of the consulting fees up front.
The balance is paid at the conclusion of the consultation. How does Vick account for the cash received at the end of the engagement?


debit Cash and credit Service Revenue.
debit Prepaid Service Fees and Service Revenue.
debit Cash and credit Unearned Service Revenue.
No entry is required when the engagement is concluded.
   
A company borrowed cash from the bank by signing a 5-year, 8% installment note.
The present value for an annuity (series of payments) at 8% for 5 years is 3.9927.
The present value of 1 (single sum) at 8% for 5 years is .6806.
Each annual payment equals $75,000. The present value of the note is:
 
$299,452.50
$199,000.30
$217,000.25
$235,000.25
$117,500.45
 
75,000 × 3.9927 = 299,452.50
   
Charger Company's most recent balance sheet reports total assets of $27,000,000, total liabilities of $15,000,000
and total equity of $12,000,000. The debt to equity ratio for the period is (rounded to two decimals):
 
1.25
2.50
1.75
3.90
4.56
 
15,000,000 / 12,000,000 = 1.25
   
A company issues 9%, 5-year bonds with a par value of $150,000 on January 1 at a price of $156,083,
when the market rate of interest was 8%. The bonds pay interest semiannually.
The amount of each semiannual interest payment is:
 
$6,000.
$0.
$13,500.
$12,000.
$6,750.
   
On January 1 of Year 1, Congo Express Airways issued $3,100,000 of 7% bonds that pay interest semiannually on January 1 and July 1.
The bond issue price is $2,830,000 and the market rate of interest for similar bonds is 8%.
The bond premium or discount is being amortized at a rate of $9,000 every six months.
The amount of interest expense recognized by Congo Express Airways on the bond issue in Year 1 would be:
 
$248,000.
$199,000.
$217,000.
$235,000
$117,500
   
Becky Sherrick Company has total proceeds from sales of $4,515. If the proceeds include sales taxes of 5%,
the amount to be credited to Sales Revenue is

$4,000.
$4,300.
$4,289.25.
None of these answer choices are correct.

4,515 / 1.05 = 4,300
   
Adonis Corporation issued 10-year, 8% bonds with a par value of $200,000. Interest is paid semiannually.
The market rate on the issue date was 7.5%. Adonis received $206,948 in cash proceeds.
Which of the following statements is true?
 
$12,000
$15,500
$0
$4,200
$8,000
 
200,000 × 8% × ½ = 8,000
   
A company must repay the bank a single payment of $20,000 cash in 3 years for a loan it entered into.
The loan is at 8% interest compounded annually. The present value of 1 (single sum) at 8% for 3 years is 0.7938.
The present value of an annuity (series of payments) at 8% for 3 years is 2.5771. The present value of the loan (rounded) is:
 
$16,000
$14,500
$0
$4,600
$15,876
 
20,000 × 0.7938 = 15,876
   
RS Company borrowed $70,000 on December 1 on a 6-month, 12% note. At December 31:

neither the notes payable nor the interest payable is a current liability.
the notes payable is a current liability, but the interest payable is not.
the interest payable is a current liability but the notes payable is not.
both the notes payable and interest payable are current liabilities.
   
On January 1, Year 1, Stratton Company borrowed $240,000 on a 10-year, 10% installment note payable.
The terms of the note require Stratton to pay 10 equal payments of $39,059 each December 31 for 10 years.
The required general journal entry to record the payment on the note on December 31, Year 2 is:
 
Debit Interest Expense $15,974; debit Notes Payable $13,632; credit Cash $29,606.
Debit Interest Expense $17,100; debit Notes Payable $12,506; credit Cash $29,606.
Debit Notes Payable $17,100; debit Interest Expense $12,506; credit Cash $29,606.
Debit Interest Expense $22494; Debit Notes Payable $16565; Credit Cash $39059
Debit Notes Payable $29,606; credit Cash $29,606
   
The amount of sales tax collected by a retailer is recorded in the:

Sales Tax Revenue account.
Sales Revenue account.
Sales Tax Expense account.
Sales Taxes Payable account.
   
Sensible Insurance Company collected a premium of $18,000 for a 1-year insurance policy on April 1.
What amount should Sensible report as a current liability for Unearned Service Revenue at December 31?

$4,500
$18,000
$13,500
$0
$4,500


18,000 / 12 = 1,500
1,500 X 3 = 4,500
   
The following information is for Sunny Day Real Estate:
 
Sunny Day Real Estate
Balance Sheet
December 31, 2015
Cash                                                      $             25,000
Accounts Payable                             $             60,000
Prepaid Insurance                                            30,000
Salaries and Wages Payable                          15,000
Accounts Receivable                                        50,000
Mortgage Payable                                            85,000
Inventory                                                            70,000
Total Liabilities                                                   160,000
Land Held for Investment                             85,000
Land                                                                      120,000
Buildings                                                              $100,000
Common Stock                                                  $120,000
Less Accumulated
Retained Earnings                                            250,000                               370,000
Depreciation                                                       (20,000)                              80,000
Trademark                                                           70,000
Total Assets                                                        $530,000
Total Liabilities/Stockholders' Equity         $530,000
The total dollar amount of assets to be classified as property, plant, and equipment is
 
$200,000.
 
120,000 + 80,000 = 200,000
   
Zen Arcade paid the weekly payroll on January 2 by debiting Salaries and Wages Expense for $47,000.
The accountant preparing the payroll entry overlooked the fact that Salaries and Wages Expense of
$27,000 had been accrued at year end on December 31. The correcting entry is
 
Salaries and Wages Payable 27,000
Salaries and Wages Expense 27,000
 
These are selected account balances on December 31, 2015.
 
Land (location of the office building)                        $100,000
Land (held for future use)                                             150,000
Office Building                                                                   700,000
Inventory                                                                            200,000
Equipment                                                                          450,000
Office Furniture                                                                 150,000
Accumulated Depreciation                                            425,000
 
What is the total amount of property, plant, and equipment that will appear on the balance sheet?
 
$975,000
 
100,000 + 700,000 + 450,000 + 150,000 - 425,000 = 975,000
   
The following items are taken from the financial statements of the
Postal Service for the year ending December 31, 2015:
 
Accounts payable                                                             $ 18,000
Accounts receivable                                                        11,000
Accumulated depreciation - equipment                  8,000
Advertising expense                                                        21,000
Cash                                                                                      15,000
Common stock                                                                  42,000
Dividends                                                                            14,000
Depreciation expense                                                     12,000
Insurance expense                                                           3,000
Note payable, due 6/30/16                                          70,000
Prepaid insurance (12-month policy)                       6,000
Rent expense 17,000
Retained earnings (1/1/15)                                          60,000
Salaries and wages expense                                         32,000
Service revenue                                                                133,000
Supplies                                                                               4,000
Supplies expense                                                              6,000
Equipment                                                                          210,000
 
What are total current assets at December 31, 2015?
 
$36,000
 
$11,000 + $15,000 + $6,000 + $4,000 = $36,000
   
Charger Company's most recent balance sheet reports total assets of $31,347,000,
total liabilities of $18,447,000 and total equity of $12,900,000.
The debt-to-equity ratio for the period is (rounded to two decimals)
 
1.43
   
Maggie Sharrer Company borrows $88,500 on September 1, 2014, from Sandwich State Bank by signing an $88,500, 12%, one-year note.
What is the accrued interest at December 31, 2014?

$4,425
$10,620
$2,655
$3,540
 
88,500 x 12% x (4/12) = 3,540
   
Morgan Company issues 10%, 20-year bonds with a par value of $690,000 that pay interest semiannually.
The amount paid to the bondholders for each semiannual interest payment is.
 
$34,500
   
A company issued 8%, 15-year bonds with a par value of $450,000 that pay interest semiannually.
The market rate on the date of issuance was 8%.
The journal entry to record each semiannual interest payment is
 
Debit Bond Interest Expense $18,000
Credit Cash $18,000
   
On January 1, Parson Freight Company issues 8.5%, 10-year bonds with a par value of $3,300,000.
The bonds pay interest semiannually. The market rate of interest is 9.5% and the bond selling price was $3,075,762.
The bond issuance should be recorded as:
 
Debit Cash                                                          $3,075,762
Debit Discount on Bonds Payable             $224,238
Credit Bonds Payable                                     $3,300,000
   
On January 1 of Year 1, Congo Express Airways issued $3,250,000 of 5% bonds that pay interest semiannually on January 1 and July 1.
The bond issue price is $2,930,000 and the market rate of interest for similar bonds is 6%. The bond premium or discount is being
amortized at a rate of $10,667 every six months. After accruing interest at year end, the company's December 31, Year 1
balance sheet should reflect total liabilities associated with the bond issue in the amount of
 
$3,032,584
   
On January 1 of Year 1, Congo Express Airways issued $2,500,000 of 5% bonds that pay interest semiannually on January 1 and July 1.
The bond issue price is $2,260,000 and the market rate of interest for similar bonds is 6%.
The bond premium or discount is being amortized at a rate of $8,000 every six months.
The amount of interest expense recognized by Congo Express Airways on the bond issue in Year 1 would be:
 
$141,000
   
 
On January 1 of Year 1, Congo Express Airways issued $4,800,000 of 7%, bonds that pay interest semiannually on January 1 and July 1.
The bond issue price is $4,404,000 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being
amortized using the straight-line method at a rate of $11,000 every 6 months. The life of these bonds is:
 
18 years
 
22,000 ($11,000 × 2) = 4,800,000
4,800,000 − 4,404,000 = 396,000
396,000 / 22,000 = 18
   
On January 1, a company issued and sold a $395,000, 8%, 10-year bond payable, and received proceeds of $390,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is
 
Debit Bond Interest Expense                      $16,050
Credit Cash                                                         $15,800
Credit Discount on Bonds Payable            $250
 
395,000 × .08 × 1/2 = 15,800
395,000 − 390,000) / 20 = 250
15,800 + 250 = 16,050
   
 
On January 1, a company issued and sold a $480,000, 5%, 10-year bond payable, and received proceeds of $473,000.
Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount.
The carrying value of the bonds immediately after the first interest payment is
 
$473,350
 
480,000 - 473,000) / (2 x 10) = 350
480,000 - (7,000 − 350) = 473,350
   
On January 1, Year 1, Stratton Company borrowed $260,000 on a 10-year, 10% installment note payable.
The terms of the note require Stratton to pay 10 equal payments of $42,314 each December 31 for 10 years.
The required general journal entry to record the payment on the note on December 31, Year 2 is
 
Debit Interest Expense                  $24,369
Debit Notes Payable                       $17,945
Credit Cash                                         $42,314
 
260,000 × 10% = 26,000
42,314 − 26,000 = 16,314
260,000 −$16,314) × 10% = 24,369
42,314 − 24,369 = 17,945
Credit Cash = given
   
Fargo Company's outstanding stock consists of 500 shares of noncumulative 4% preferred stock with a $10 par value and
3,100 shares of common stock with a $1 par value. During the first three years of operation,
the corporation declared and paid the following total cash dividends.

Dividends Declared & Paid
year 1                    $21,000
year 2                    $4,000
year 3                    $30,000

The amount of dividends paid to preferred and common shareholders in year 1 is:
 
$200 preferred
 
500 x .04 x $1 = $200
   
A company had net cash flows from operations of $144,000, cash flows from financing of $378,000,
total cash flows of $572,000, and average total assets of $3,940,000. The cash flow on total assets ratio equals
 
3.7%
 
cash flow on total assets = cash flow from operations / avg. total assets
   
A company had average total assets of $3,460,000, total cash flows of $2,400,000, cash flows from operations of $475,000, and cash flows from financing of $1,290,000. The cash flow on total assets ratio equals
13.73% (cash flow on total assets = cash flow from operations/ avg. total assets)
   
A company's income statement showed the following: net income, $127,000; depreciation expense, $36,500; and gain on sale of plant assets, $10,500. An examination of the company's current assets and current liabilities showed the following changes accounts receivable decreased $10,700; merchandise inventory increased $24,500; prepaid expenses increased $7,500; accounts payable increased $4,700. Calculate the net cash provided or used by operating activities
$136,400 (net cash provided by operating activities = net income + depreciation expense - gain on sale of plant assets + decrease in AR - increase in merchandise inventory - increase in prepaid expenses + increase in AP)
   
A company's income statement showed the following: net income, $128,000 and depreciation expense, $31,200.
An examination of the company's current assets and current liabilities showed the following changes:
 
Accounts receivable decreased                   $9,800
Merchandise inventory increased              $18,800
Accounts payable increased                         $3,800
 
Calculate the net cash provided or used by operating activities.
 
$154,000
   
Use the following information and the indirect method to calculate the net cash provided or used by operating activities:

Net income                                                         $87,200
Depreciation expense                                     13,900
Gain on sale of land                                         6,400
Increase in merchandise inventory            3,950
Increase in accounts payable                       8,050
 
$98,800
 
87,200 + 13,900 - 6,400 - 3,950 + 8,050 = 98,800
   
In preparing a company's statement of cash flows using the indirect method, the following information is available:

Net income                                                         $53,500
Accounts payable decreased by                  19,500
Accounts receivable increased by              26,500
Inventories increased by                                6,500
Cash dividends paid                                         14,300
Depreciation expense                                     21,500

Net cash provided by operating activities was:
 
$22,500
 

Net income                                                         $60,000
Accounts payable increased by                   26,000
Accounts receivable decreased by             41,000
Inventories decreased by                              13,000
Cash dividends paid                                         22,000
Depreciation expense                                     36,000

Net cash provided by operating activities was:
 
$176,000
   
In preparing a company's statement of cash flows using the indirect method, the following information is available:

Net income                                                         $76,000
Accounts payable increased by                   20,400
Accounts receivable decreased by             27,400
Inventories increased by                                9,800
Depreciation expense                                     37,200

Net cash provided by operating activities was
 
$151,200
 
Net income                                                         $62,000
Accounts payable decreased by                  23,000
Accounts receivable increased by              30,000
Inventories increased by                                10,000
Depreciation expense                                     40,000

Net cash provided by operating activities was
 
$39,000
   
A machine with a cost of $145,000 and accumulated depreciation of $100,000 is sold for $57,500 cash.
The amount that should be reported as a source of cash under cash flows from investing activities is
 
$57,500
   
A machine with a cost of $146,000 and accumulated depreciation of $93,000 is sold for $66,000 cash.
The amount that should be reported in the operating activities section reported under the direct method is
 
$0
   
A machine with a cost of $140,000, accumulated depreciation of $90,000, and current year depreciation expense of $19,500
is sold for $44,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is
 
$44,000
   
A machine with a cost of $174,000 and accumulated depreciation of $107,000 is sold for $57,600 cash. The total amount related to this machine that should be reported in the operating section of the statement of cash flows under the indirect method is
 
$9,400
 
174,000 - 107,000 - 57,600 = 9,400
   
Use the following information to calculate cash received from dividends:

Dividends revenue                                           $             37,800
Dividends receivable, January 1                                  4,200
Dividends receivable, December                                31 6,600
 
$35,400
 
37,800 + 4,200 - 6,600 = 34,400
   
Use the following information to calculate cash received from dividends:

Dividends revenue                                           $             74,500
Dividends receivable, January 1                                  6,900
Dividends receivable, December 31                          5,300
 
$76,100
 
74,500 + 6,900 - 5,300 = 76,100
   
Analysis reveals that a company had a net increase in cash of $22,200 for the current year.  Net cash provided by
operating activities was $20,000; net cash used in investing activities was $11,000 and net cash provided by financing
activities was $13,200. If the year-end cash balance is $27,000, the beginning cash balance was
 
$4,800
 
27,000 - 13,200 + 11,000 - 20,000 = 4,800
   
Stormer Company reports the following amounts on its statement of cash flow: Net cash provided by operating activities
was $39,500; net cash used in investing activities was $14,600 and net cash used in financing activities was $18,900.
If the beginning cash balance is $7,300, what is the ending cash balance?
 
$13,300
 
39,500 - 14,600 - 18,900 + 7,300
   
Bagrov Corporation had a net decrease in cash of $17,500 for the current year.
Net cash used in investing activities was $59,500 and net cash used in financing activities was $45,500.
What amount of cash was provided (used) in operating activities?
 
$87,500
 
59,500 + 45,500 - 17,500 = 87,500
   
The accountant for Crusoe Company is preparing the company's statement of cash flows for the fiscal year just ended.
The following information is available:

Retained earnings balance at the beginning of the year                    $130,000
Cash dividends declared for the year                                                        50,000
Proceeds from the sale of equipment                                                      85,000
Gain on the sale of equipment                                                                    7,800
Cash dividends payable at the beginning of the year                          22,000
Cash dividends payable at the end of the year                                      24,800
Net income for the year                                                                                 96,000

What is the ending balance for retained earnings?
 
$176,000
 
ending balance = beginning balance + net income for the year - cash dividends declared
   
The accountant for Walter Company is preparing the company's statement of cash flows for the fiscal year just ended.
The following information is available:

Retained earnings balance at the beginning of the year    $135,000
Cash dividends declared for the year                                        55,000
Proceeds from the sale of equipment                                      90,000
Gain on the sale of equipment                                                    8,800
Cash dividends payable at the beginning of the year          27,000
Cash dividends payable at the end of the year                      30,800
Net income for the year                                                                 101,000

The amount of cash dividends paid during the year would be
 
$51,200
 
cash dividend paid during the year = cash dividend declared during the year + cash dividend payable, beginning - cash dividend payable, end
   
A company issues 8% bonds with a par value of $40,000 at par on January 1.
The market rate on the date of issuance was 7%. The bonds pay interest semiannually on January 1 and July 1.
The cash paid on July 1 to the bond holder(s) is:
 
$1,600
 
40,000 × .08 × 1/2 year = 1,600
   
The accountant for TI Company is preparing the company's statement of cash flows for the fiscal year just ended.
The following information is available:

Retained earnings balance at the beginning of the year    $176,000
Cash dividends declared for the year                                        56,000
Net income for the year                                                                 104,500

What is the ending balance for retained earnings?
 
$224,500
 
176,000 - 56,000 + 104,500
   
Chang Industries has bonds outstanding with a par value of $200,000 and a carrying value of $203,000.
If the company calls these bonds at a price of $201,000, the gain or loss on retirement is:
 
Carrying value of bonds                $             203,000
Retirement price                                              201,000
Gain on retirement                         $             2,000
   
The effective interest amortization method:
 
Allocates bond interest expense over the bond's life using a constant interest rate.
   
A bond sells at a discount when the:
 
Contract rate is below the market rate.
   
On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal
payments each June 30 of $37,258. What is the appropriate journal entry to record the issuance of the note?
 
Debit Cash                                          $250,000
Credit Notes Payable                      $250,000.
   
A company issues 9%, 5-year bonds with a par value of $100,000 on January 1 at a price of $106,160,
when the market rate of interest was 8%. The bonds pay interest semiannually.
The amount of each semiannual interest payment is:
 
$4,500
 
100,000 × .09 × 6/12 year = 4,500
   
On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments
each June 30 of $37,258. What amount of interest expense will be included in the first annual payment?
 
$20,000 interest
 
250,000 × 8% = 20,000
   
A company purchased equipment and signed a 7-year installment loan at 9% annual interest.
The annual payments equal $9,000. The present value for an annuity (series of payments)
at 9% for 7 years is 5.0330. The present value of 1 (single sum) for 7 years at 9% is 0.5470.
The present value of the loan is:
 
$45,297
 
9,000 × 5.0330 = 45,297
   
In preparing a company's statement of cash flows for the most recent year, the following information is available:

Loss on the sale of equipment                                    $15,800
Purchase of equipment                                                  163,000
Proceeds from the sale of equipment                      144,000
Repayment of outstanding bonds                              96,000
Purchase of treasury stock                                            71,000
Issuance of common stock                                            105,000
Purchase of land                                                               133,000
Increase in accounts receivable during the year   52,000
Decrease in accounts payable during the year      84,000
Payment of cash dividends                                           44,000

Net cash flows from investing activities for the year were
 
$152,000
   
Salah's net income for the year ended December 31, Year 2 was $200,000.
Information from Salah's comparative balance sheets is given below.
Compute the cash paid for dividends during Year 2.


At December 31                                Year 2                                    Year 1
Common Stock, $5 par value       $515,000                             $463,500
Paid-in capital in excess of par     963,000                               866,500
Retained earnings                            703,000                               595,500
 
$92,500
 
595,500 + 200,000 − 703,000 = 92,500
   
Alfredo Inc. reports net income of $239,000 for the year ended December 31. It also reports $91,600 depreciation expense
and a $5,450 gain on the sale of equipment. Its comparative balance sheet reveals a $37,300 decrease in accounts receivable,
a $16,650 increase in accounts payable, and a $13,100 decrease in wages payable.
Calculate the cash provided (used) in operating activities using the indirect method.
 
$366,000
 
239,000 + 91,600 + 37,300 + 16,650 − 13,100 − 5,450 = 366,000
   
Alvarez Company is preparing the company's statement of cash flows for the fiscal year just ended.
The following information is available:

Retained earnings balance at the beginning of the year                    $323,000
Cash dividends declared for the year                                                        72,500
Proceeds from the sale of equipment                                                      124,600
Gain on the sale of equipment                                                                    7,200
Cash dividends payable at the beginning of the year                          31,900
Cash dividends payable at the end of the year                                      39,000
Net income for the year                                                                                 159,500

The ending balance in retained earnings is
 
410,000
 
323,000 + 159,500 − 72,500 = 410,000
   
Barclays Company is preparing the company's statement of cash flows for the fiscal year just ended.
The following information is available:

Retained earnings balance at the beginning of the year    $323,000
Cash dividends declared for the year                                    72,500
Proceeds from the sale of equipment                                    124,600
Gain on the sale of equipment                                                7,200
Cash dividends payable at the beginning of the year          31,900
Cash dividends payable at the end of the year                     39,000
Net income for the year                                                             159,500

The amount of cash paid for dividends was:
 
$65,400
 
72,500 + 31,900 − 39,000 = 65,400)
   
Mayweather reports net income of $315,000 for the year ended December 31. It also reports $98,900 depreciation expense
and a $10,600 loss on the sale of equipment. Its comparative balance sheet reveals a $42,600 increase in accounts receivable,
a $10,800 decrease in prepaid expenses, a $16,200 increase in accounts payable, a $13,300 decrease in wages payable, a
$79,400 increase in equipment, and a $106,000 decrease in notes payable.
Calculate the net increase in cash for the year.
 
$210,200
 
315,000 + 98,900 + 10,600 + 10,800 + 16,200 − 42,600 − 13,300 = 395,600
395,600 − 79,400 − 106,000 = 210,200
   
A current liability is a debt that the company reasonably expects to pay from existing current assets
 
False
   
What do debts that do not match the criteria of a current liability (discussed before this) classified as?
 
Long-term liabilities
   
Notes payable due for payment within one year of the balance sheet date are usually classified as current liabilities.
 
True
   
Companies frequently issue ______ ________ to meet short-term financing needs.
 
notes payable
   
If a company declares bankruptcy, a specific, ____________ to creditors exists. Therefore, the ______
and _____ are of critical importance.
 
predetermined order of payment
amount
type of liabilities
   
Companies record obligations in the form of written notes as _________  _________.
 
Notes payable
   
When a company issues an interest-bearing note, the amount of assets it receives upon issuance of the note generally equals:
 
The note's face value
   
Interest ________ over the life of a note, and the company must periodically record that _________.
 
accrues; accrual

    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