1) Hahn Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $300,000 and credit sales are $1,200,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Hahn Company make to record the bad debts expense?
Debit Bad Debt Expense $12,000, Credit – Allowance for Doubtful Accounts $12,000
2) Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $15,000. If the balance of the Allowance for Doubtful Accounts is $3,000 credit before adjustment, what is the amount of bad debts expense for that period?
Answer: B - $12,000
3) Intangible assets
Answer: B - should be reported as a separate
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C. Long-term debt, $150,000; Long-term debt due within one year, $75,000
13) A corporation issued $600,000, 10%, 5-year bonds on January 1, 2011 for 648,666, which reflects an effective-interest rate of 8%. Interest is paid semiannually on January 1 and July 1. If the corporation uses the effective-interest method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1, 2011, is
D. $25,946
14) When the effective-interest method of bond discount amortization is used
C. interest expense will not be a constant dollar amount over the life of the bond
15) If a corporation has only one class of stock, it is referred to as
D. common stock
16) Capital stock to which the charter has assigned a value per share is called
A. par value stock
17) ABC, Inc. has 1,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2011. What is the annual dividend on the preferred stock?
B. $5,000 in total
18) Manner, Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2011. There were no dividends declared in 2010. The board of directors declares and pays a $45,000 dividend in 2011. What is the amount of dividends received by the common stockholders in 2011?
D. $20,000
19) When the selling price of treasury stock is greater than its cost,
e. If we evaluated at the same effective rate, the earlier payments would give the semiannual bond the higher value.
6. Note 8 states Harnischfeger’s allowance for doubtful accounts. Compute the ratio of the allowance to gross receivables (receivables before the allowance) in 1983 and 1984. What would the allowance have been if the company maintained the ratio at the 1983 level? How much did the pre-tax income increase as a result of the changed ratio in 1984?
6. Note 8 states Harnischfeger’s allowance for doubtful accounts. Compute the ratio of the allowance to gross receivables (receivables before the allowance) in 1983 and 1984. What would the allowance have been if the company maintained the ratio at the 1983 level? How much did the pre-tax
23. Ivy has preferred stock selling for 98 percent of par that pays a 7 percent annual coupon. What would Ivy’s component cost of preferred stock ?
The ledger of Wainwright Company at the end of the current year shows Accounts Receivable $78,000; Credit Sales $810,000; and Sales Returns and Allowances $40,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date: Name: ID: Answer the following Questions: 1. Tower Inc. owns 30% of Yale Co. and applies the equity method. During the current year, Tower bought inventory costing $66,000 and then sold it to Yale for $120,000. At year-end, only $24,000 of merchandise was still being held by Yale. What amount of inter-company inventory profit must be deferred by Tower? A. $6,480 B. $3,240 C. $10,800 D. $16,200 E. $6,610 2. All of the following statements regarding the investment account using the equity method are true except A. The investment is recorded at cost B. Dividends received are reported as revenue C. Net income of investee increases the investment account D. Dividends received reduce the investment account E.
Suppose that P.V. Ltd. paid a dividend of $10 at the end of year 1 (any portion of
period a 10% stock dividend was declared and distributed. The market value was $25 a
7. (TCO D) A 15-year bond with a face value of $1,000 currently sells for $850. Which of the following statements is CORRECT? (Points : 10)
c. Should the nominal cost of Debt or the effective annual rate be used? Since the bond pays a coupon semi-annually, and earns 4.75% in six months, it is possible to determine the effective annual rate (EAR), which we have successfully calculated above. EAR = 6.6% Nevertheless, nominal rates are typically used for the cost of debt, because total costs of issuance and sale of securities decrease the net proceeds from the sale. These costs are naturally small on public debt issues.
b. The inventory write down recorded, as an expense by the company is $4.4 million. It is measured at lower of cost and net realizable value. Cost is measured by weighted average using standard cost method or
Dividend rate = 10% = 0.1 Total book value = $1,000,000; No. of preferred share = total book value / par value = 1,000,000/100 = 10,000 Price of preferred share = Dividend / Cost of preferred share = 10*0.1/0.08 = $125 Total market value of preferred share = $125 * number of pref. share = 125* 10000 = 1,250,000
Stockholders expect dividend but it is not promised (Gittman, 2004). Common stocks are hold by true owners of the business. Sometimes they are known as ‘residual owners’ as they receive whatever left after winding up of the company (Gittman, 2004; Higgins 1995). Another type of stock is known as publicly owned stock. Common stock owned by a broad group of unrelated investors or institutional investors is called as publicly owned stock. However, all common stock of a
13. Janfer Book Store purchased a new automobile that cost $10,000, made a down payment of $3,000, and signed a note payable for the balance. The entry to record this transaction is:
Bond Discount represents an additional cost of borrowing and should be recorded as bond interest expense over the life of the bond. To follow the matching principle, bond discount is allocated to expense in each period in which the bonds are outstanding. This is referred to as amortizing the discount. Amortization of the discount increases the amount of interest expense reported each period. As the discount is amortized, its balance will decline and as a consequence, the carrying value of the bonds will increase, until at maturity the carrying value of the bonds equals their face amount. The journal entries are as follow: