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Michigan State University - PHY - 183

Michigan State University - PHY - 183

Michigan State University - PHY - 183

Michigan State University - PHY - 183

Washington State - FIN 325 - 325

Solutions ManualFundamentals of Corporate Finance 9th editionRoss, Westerfield, and JordanUpdated 12-20-2008CHAPTER 1INTRODUCTION TO CORPORATEFINANCEAnswers to Concepts Review and Critical Thinking Questions1.Capital budgeting (deciding whether t

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionCHAPTER REVIEW1.Chapter 13 explains the basic principles regarding accounting and reporting for currentliabilities, asset retirement obligations, and contingent l

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionBank Indebtedness and Credit Facilities7.The cash position of a company is closely related to its bank indebtedness for currentoperating purposes and its associat

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Kieso, Weygandt, Warfield, Young, Wiecek11.Intermediate Accounting, Eighth Canadian EditionThe currently maturing portion of long-term debts may be classified as a current liability.When a portion of long-term debt is so classified, it is assumed that

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Kieso, Weygandt, Warfield, Young, Wiecek16.Intermediate Accounting, Eighth Canadian EditionA company sometimes receives cash in advance of the performance of services or issuanceof merchandise. Such transactions result in a credit to a deferred or une

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Kieso, Weygandt, Warfield, Young, Wiecekb.c.21.Intermediate Accounting, Eighth Canadian EditionCompensated absences.Bonuses.The following illustrates the concept of accrued liabilities related to payroll deductions.Assume a weekly payroll of $10,0

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Editionwhen the concept of income taxes is added to the formula, calculation of the bonusrequires solving simultaneous equations.Estimated LiabilitiesWarranties26.A wa

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionAsset Retirement Obligations29.In industries such as mining or oil drilling, the construction and operation of long-livedassets often involves obligations at the

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Kieso, Weygandt, Warfield, Young, Wieceka.b.Intermediate Accounting, Eighth Canadian EditionInformation available prior to the issuance of the financial statements indicates thatit is likely that a future event will confirm that an asset has been imp

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Edition42.Contingent liabilities are disclosed if:it is likely that a future event will confirm the existence of a loss but the loss cannot bereasonably estimated.a los

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Edition1.Bank Indebtedness and Credit Facilities: a line-of-credit or revolving debtarrangement. The company draws on the fund as soon as needed when the previousamount

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Kieso, Weygandt, Warfield, Young, Wiecek8.Intermediate Accounting, Eighth Canadian EditionCollections for Third Parties:a.b.9.Sales taxesIncome tax and other payroll deductions, such as Canada Pension Planpremium, employment insurance, and union

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Kieso, Weygandt, Warfield, Young, WiecekE.Intermediate Accounting, Eighth Canadian EditionAsset Retirement Obligation1.2.Measurement: An ARO is initially measured at its fair value, which is defined asthe amount that the company would be required t

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Kieso, Weygandt, Warfield, Young, Wiecek3.Intermediate Accounting, Eighth Canadian EditionLitigations, Claims, and Assessments. The following factors should beconsidered:a. The period in which the underlying cause for action occurred.b. The degree o

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionG.AnalysisRatios used to measure the liquidity of a company to determine its ability to meet itscurrent financing and operating obligations include:a. Current ra

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionILLUSTRATION 13-1ACCOUNTING TREATMENT OF LOSS CONTINGENCIESNotAccruedLoss Related to:1. Risk of loss or damage of enterprise property by fire, explosion,or oth

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionCHAPTER 14LONG-TERM FINANCIAL LIABILITIESCHAPTER TOPICS CROSS REFERENCED WITH CICA HANDBOOKLong-Term DebtSection 3210Financial Instrumentsrecognition and measur

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionCHAPTER REVIEW1.Chapter 14 presents a discussion of the issues related to long-term liabilities. Long-termdebt consists of probable future sacrifices of economic

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Editiond.Serial Bonds. Issues that mature in periodic instalments.e.Mortgage Bonds. Secured bonds having a claim on real estate.f.Junk Bonds. Term used to describe bon

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Edition7.Bonds are issued with a stated rate of interest expressed as a percentage of the face valueof the bonds. When bonds are sold for more than face value (at a premi

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Editionover the entire life of the bonds. The entry to amortize the bond discount at the end of2004 would be:Bond Interest ExpenseBonds Payable400400The entry to amor

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionAmortization. This schedule provides the information necessary for each semi-annualentry for interest and discount or premium amortization. The spreadsheet software

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Editiondifferent from the current cash price of the consideration or the current market value of thedebt. In these circumstances, the present value of the debt instrument

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Kieso, Weygandt, Warfield, Young, Wiecek26.Intermediate Accounting, Eighth Canadian EditionThe following terms are important to an understanding of the accounting for earlyextinguishment of debt securities.a.Extinguishment of Debt/Derecognition. Whe

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Kieso, Weygandt, Warfield, Young, Wiecek30.Intermediate Accounting, Eighth Canadian EditionAnother way companies keep debt off the balance sheet is by leasing assets instead ofbuying them with debt.Presentations and Disclosure31.Long-term debt that

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Editionotherwise consider. Such restructuring could be through settlement of the debt at less thanits carrying amount or continuation of the debt with a modification of te

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionTEACHING TIPIllustration 14-1 can be used to demonstrate how bond prices are affected by the statedrate of interest. A numerical example is given that calculates t

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionTEACHING TIPIllustration 14-3 provides a review problem of accounting for bonds. The numericalexample requires calculating bond discount, recording issuance of bon

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Kieso, Weygandt, Warfield, Young, WiecekD.Intermediate Accounting, Eighth Canadian EditionExtinguishment of Debt/Derecognition1.Reacquisition of debt before maturitya.The difference between the net carrying amount and the reacquisition price(the a

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Kieso, Weygandt, Warfield, Young, Wiecek2.G.Intermediate Accounting, Eighth Canadian EditionFuture payments for sinking fund requirements and maturity amounts of long-termdebt during each of the next five years should be disclosed.Troubled Debt Rest

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionILLUSTRATION 14-1INTEREST RATES AND BOND PRICESMarket InterestRateBondStatedInterestRate12%Bonds SoldAt(1)10%Premium(2)12%Face Value(3)15%Discount

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionILLUSTRATION 14-2BOND AMORTIZATION METHODSComputation of AmortizationStraight-Line MethodBond Discountor PremiumNumber ofInterestPeriodsInterest Payable+ Di

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionILLUSTRATION 14-3BONDS PAYABLEREVIEW PROBLEMThree-year bond with an 8% coupon rate sold to yield 10% on January 1, 2005. Interest payableannually. Callable at 105

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionILLUSTRATION 14-3 (continued)5.Entries, if bonds recalled on 12/31/06. Expenses of recall: $2,000Cash paid = (1.05 x $100,000) + $2,000 = $107,000Net carrying am

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionSHAREHOLDERS' EQUITYCHAPTER 15CHAPTER TOPICS CROSS-REFERENCED WITH CICA HANDBOOKShare CapitalSection 3240Share Capital: Treasury Shares (Acquisition of Shares)

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Edition13.Compare current Canadian and international GAAP and understand which directioninternational GAAP is headed.14.Explain the accounting for par value shares (App

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionCHAPTER REVIEW1.Chapter 15 focuses on the shareholders' equity section of the corporate form of businessorganization. Shareholders' equity represents the amount t

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Editiondocuments are appropriately completed. Once the certificate of incorporation isissued, the corporation is recognized as a separate legal entity bound by the laws of

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Edition10.Profits of a corporation distributed to shareholders are referred to as dividends. In general,dividends can only be paid if the company's capital will be mainta

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Edition17.Where an entity advances money to its employees or officers for the purpose of purchasingshares of company stock, it is common practice to deduct the remaining

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Edition22.While the unencumbered credit balance in retained earnings is normally considered toprovide the basis for dividend distributions, very few companies pay dividen

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Editiondistribution. When a property dividend is declared, fair market value should be recognizedin the accounts with the appropriate gain or loss recorded. The fair marke

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Editionto share capital. When the stock dividend is "paid," the appropriate share capital account iscredited, and the common stock dividend distributable account is debite

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Editiona.b.Participating. Preferred shares that are participating share proportionately with thecommon shareholders in any profit distribution beyond a prescribed amount

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Kieso, Weygandt, Warfield, Young, Wiecekd.e.f.g.39.Intermediate Accounting, Eighth Canadian EditionFinancial reorganizations (Appendix 15B)Stock rights and warrants (Chapter 16)Issue of convertible debt (Chapter 16)Share subscriptions forfeited

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Editionc.Price earnings ratio: The analyst, in discussing the investment possibility of agiven enterprise, mostly uses this ratio. It is calculated as follows: market pri

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Editiontreasury shares are reissued for less than acquisition cost, the difference should be debitedto any contributed capital from previous treasury share, or repurchase

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionLECTURE OUTLINEThe material in this chapter is relatively straightforward and can be covered in one or two classsessions.A.Nature of Shareholders' Equity1.The

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Kieso, Weygandt, Warfield, Young, Wiecek5.Intermediate Accounting, Eighth Canadian EditionShare Capital or Capital Stock System. Each share represents an ownership rightwith the following privileges:a.To share proportionately in profits and losses.

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Edition4.Callable at the option of the corporation5.Retractable at the option of the shareholder6.Nonvoting7.Cumulative8.ParticipatingPreferred shares sometimes h

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian Edition1.2.E.Such reacquired shares may be retired (cancelled) or, where permitted, held astreasury shares. With rare exceptions, the CBCA does not allow a corporation

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Kieso, Weygandt, Warfield, Young, WiecekG.Intermediate Accounting, Eighth Canadian EditionTreasury SharesTreasury shares are not an asset. A corporation cannot own a part of itself.1.In Canada, the CICA Handbook recommends that treasury shares, if t

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionILLUSTRATION 15-1COMPONENTS OF SHAREHOLDERS' EQUITYPreferred SharesCommon SharesShareholders'EquityUnappropriatedRetained EarningsAppropriatedAccumulated Ot

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionILLUSTRATION 15-2ACCOUNTING FOR TREASURY SHARE TRANSACTIONSHTM Limited has the following shareholders' equity at September 30, 2004:Common shares, no par value, 1

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionILLUSTRATION 15-2SOLUTION:(a)October 12Treasury SharesCash100,000100,000October 29Cash30,900Contributed Surplus (T/S Transactions)Treasury Shares (3,000 x

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Kieso, Weygandt, Warfield, Young, WiecekIntermediate Accounting, Eighth Canadian EditionCHAPTER 16COMPLEX FINANCIAL INSTRUMENTSCHAPTER TOPICS CROSS-REFERENCED WITH CICA HANDBOOKFinancial Instrumentsrecognition and measurementSection 3855Financial I