I-03.05 Problem

I-03.05 Problem - I-03.05 Fenco Corporation's stock price...

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I-03.05 Fenco Corporation's stock price recently collapsed on news that its chief financial officer resigned. It seems the company had deliberately failed to follow generally accepted principles in an attempt to support a 30% income growth rate. The company announced that it would be restating the 20X7 results. Information about Fenco's financial condition and stock price follow: Reported Annual Net Income Reported Assets Reported Liabilities Reported Stockholders' Equity Stock Price Per Share Dec. 31, 20X4 2,500,000 $ 7,600,000 $ 3,800,000 $ 3,800,000 $ 20.20 $ Dec. 31, 20X5 3,275,000 9,804,000 2,729,000 7,075,000 35.00 Dec. 31, 20X6 4,323,000 13,627,560 2,229,560 11,398,000 60.75 Dec. 31, 20X7 5,576,670 18,942,308 1,967,638 16,974,670 98.90 Jan. 31, 20X8 n/a n/a n/a n/a 11.50 The following information is necessary to correct 20X7's data. As of December 31, 20X7, Fenco's CFO withheld adjusting entries for accruals relating to wages, utilities, and similar items. The total of such items amounted to $855,000. During the year, Fenco presold certain services to its clients.
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This note was uploaded on 02/29/2012 for the course ACCOUNTING 101 taught by Professor Hudack during the Spring '11 term at FIU.

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