financial accounting exam 3 (knapp)

financial accounting exam 3 (knapp) - l ACCOU IN G 21 13 F...

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Unformatted text preview: l ACCOU IN G 21 13 F 1999 K NOTE: Show our work! (To have any chance of receiving credit :) 1. Liability Classification -- 8 pomts Darbre’s Donuts borrovized $60,000 on January 1, 1997 The repayment terms requrre Darbre's to repay $6,000 of the principal amount of the loan on December 31 of each year, beginning December 31, 1997, plus 12 percent interest op the unpaid principal at the beginning of each year Required: A. How much of this loan will be reported as a long—term debt m Darbre's December 31, 2001, ' balance sheet? " (90,000 ~30, 000- 6,000; m 4 points B. How much interest expense related to this debt Will be reported in Darbie’s Income statement for the year ended December 31, 2001? 30,000x./2: II. Cash Flows Related to Bonds Payable -- 8 pomts Lomax Corporation issued $100,000 of five-year, 8 percent bonds on January 1 of Year 1 Interest on the bonds is payable semiarmually on January 1 and July 1 of each year The market interest rate on the date the bonds were sold was 7 percent. Required: A. How much w1ll Lomax pay its bondholders on each interest payment date? ‘4; 000 4 points VOQOODX V2» 1! 71: B. How much w111 Lomax pay its bondholders [m the bonds' maturity date? | /00,000 ‘M ‘ (.us ‘ mi pan/«car fl“) /0‘/000 111. Accounting for Interest—Bearing NotIa Payable —— 6 pornts On December 1, 1998, Freeman Chevrolet bollght a new computer for $4,000 from Computer Vrllage In exchange, Freeman srgned a $4,000, 10 percent promrssory note wrth a ISO-day term Freeman's fiscal year comeldes wrth the calendar year Required: Prepare the appmpriate Journal entrtes in Freeman's accountlng records on the following dates December 1, December 31. 1998, and May 30 the date the note matures. [Note Each entry is worth two pomts--no partral credlt! !] at December 1: l I I | DE 1,11er are“qu I " II” I Iurcnesf intbté II I l I I I I are: m Ml I‘I.OOO| I I‘m I’°I’,1‘;’»remr'ex «’55 I am I I I Iyrermr M are I 33I I I ' CASH IV. Accounting {or Cash Dividends —— 8 paints Bratton Blood Institute has 1,000,000 shares of common stock outstanding. On January 11 of the current year, Bratton declared a cash dividend of $.20 per share, payable on March 9 to stockholders of record on February 12. Required: Match the dates listed next with the four items that follow: January 11 February 12 March 9 December 31 Dividends 200,000 Dividends Payable 200,000 Retained Earnings 200,000 Dividends 200,000 Dividends Payable 200,000 Cash 200,000 lv> {e la (2» No entry required on this date V. Book Value per Share and Eat In on Equity -- 8 points Carmen Central Corporation Opera es the Gold Bug Railroad between Alva and Sapulpa. Presented in t e following table are key financial data for Carmen Centre over a recent four~year period. Amounts are expressed in million of dollars. I XEBI_1 Iear_2 Iear_l I§QI_A Revenues $549.7 $547.4 $594.7 $593.9 Net income 65.4 95.9 88.2 133.9 Common stockholders' equity (year-end) 260.3 338.8 477.4 484.1 Common shares outstanding (year-end) 59.7 63.9 64.5 66.1 Note: At the beginning of Year 1, Carmen Central had $128 4 million of common stockholders' eqUity Required: A Compute Carmen Central's book value per share at the end of YeagB . u 7. 40 477.1 7.70 HS ' B Compute Carmen Central’s return on equ1ty for Year 4 2 7 (9° . . I ___._'.____ 412‘lr‘/W./ - ' ( mm L v 0 7 I 933.7 --2- WW): a: 21. 5’5 7. VI. Computation of Earnings Per Share -- 8l‘points : (OM- Liddell Corporation had 200,000 shares of co on stock outstandmg for the first M months of the year The company issued an additional 8:300 shares on May I, and another 30,000 shares on October 1. Liddell reported net income of $569 800 for the year ended December 31 Required: Compute Liddell's earnings per share for the year /i 200.00” 793' z: “.067 "—W— 1% 000 x {/I; .‘.’. 310.000 K 3//t. ______17o ‘°° 24am ll 367,700 . 240,337: "lg E i VII. Market Price to Book Value Ratio —— 8 p01nts 1 The following 1nformat10n is available for two companies. Fender P1pk1n CQEDQQX Company Total Assets $1,200,000 $575,000 Total Liabillties $350,000 $200,000 Number of Shares of Common Stock Outetanding* 100,000 125,000 Year-End Stock Price $17.00 $7.00 Note Neither company has preferred atpck outstandmg Required: Compute the market price to booh‘value ratlo for each company. Ewen mm I ._Z—_._0£____ Fender Company 3V 'g‘Ofloo ‘ 375,000 4 points °/s m l°°.°°° [Low | mm "m .-_?_--__ 7 ” 00 m? ’17 ,.-.?.9 2.33 i F Pipkin Company 4 points . 3 mpBV 2.00 2 3 fl # fl _ VIII. Corporate’Bond Stuff -— Suppose you purchase a corporat that has a stated interest rate is paid semiannually. Required: A. date? 'looo xi: '7‘ at 72 ‘1 \ \ \ 4 & p01nts e bond With a face value of $1,000 of 12 percent. Interest on the bond How much interest will you receive on each interest payment N60 2 points '60 Suppose that you purchased this bond when the quoted market price was 105. How much did you pay for the bond? B. C. price of 105. date of purchase? I 0) ()5:2’ I D. If you purchase this bond the market interest rate than the bond‘s stated in 7.050 2 points Suppose again that you purchase this bond at a quoted market What was this bond's "current yield" on the at a quoted market price of 96, is g: the purchase date higher or lower rest rate? Lower (Circle one) 2 points IX. Time Value Applications -~ Scenario A: Hanna Weeks Real Estate leases are located. The company wants its own and believes that $23 progect. The company presentl savings account earning 6 perq Required: If Hanna Weeks deposits the $8 many years must the company wa of $233,000. fv: WX fVF 233,000: 70.000 vaf fl/f: 1%)! R:- 7': IS”? yams Ti 18 pelnts the building in which its offices to construct an office building of ,000 will be requ1red for thlS has $80,000 that it can invest in a ent interest. 0,000 in the sav1ngs account, how it before the account has a balance /5’-/f VE/m 6 points 6% 7 (7Mch 1) Scenario B: ' m Marc Bennett owns the Nltu Bulld021ng Company (NBC). Recently, Marc dec1ded to retire. He ha$ rece1ved the following bld for hlS company: $120,000 down payment plus 15 annual payments of $13,000. The down payment would be made on the date the sales agreement 15 finalized, while the flrst annual payment would be made one year follow1ng that date. Required: Determlne the “cash value" of‘the b1d for Marc's company assuming that a n1ne percent discount gate is approprlate. 22% m 6 points I Scenario C: V ' Mindy Skinner was seriously injured while working for her employer, Cox~Wright, this matter The employer has year for the remainder of her Inc. She is presently negotiating to resolve offered to pay Mindy $75,000 per life. Mortality tables used by the insurance industry indicate that Mindy should live apprOXimately twenty more years. Mindy prefers to receive a lump sum payment. Required: What lump sum payment would be equivalent to the present value of the annuity offered to Mindy by her employer assuming that an 8 percent interest rate is apprqpriate for this scenario? ’734, 34/ 6 points x. Matching —— 18 points Bonds that may be exchanged for stock in the issuing company. ‘ Normally the only voting‘stock of a corporation. The number of shares of class of stock that has been sold or otherwise distri uted by a corporation. Permits a stockholder to maintain his or her existing ownership percentage in a company's stock when additional shares of that stock are issued. Bonds collateralized by specific assets of the company issuing the bonds. Stock that has been issued and reacquired by a corporation. The change in an entity‘s collective net income for prior years assuming a newly adopted accounting principle had been used during those years. The total number of shares of a given class of stock that a corporation is permitted to sell. A material gain or loss that is both unusual in nature and infrequent in occurrence. A correction of a material error occurring in a previous accounting period that involves a revenue or expense; the correction is made directly to the Retained Earnings account in the accounting period when the error is discovered. The number of shares of a given class of stock owned by a { company's shareholders. I Bonds backed only by the egal commitment of the issuing company to make all requi ed principal and interest payments. Mel“ (“RIB Mes l ‘3 10 Required: Match each definition or description listed With the appropriate term from the follow1ng list. < 1. ApprOpriation of Retained Earnings 2. Prior Period Adjustment 3. Cumulative Effect of a Change in Accounting Pr1nc1ple 4. Extraordinary Item 5. Authorized stock 6. Issued stock 7. Term of the bonds 8. Serial bonds ' 9. Callable bonds ‘ 10. Registered bonds 11. Bond certificate 1 12. Term bonds 13. Secured bonds 14. Convertible bonds 15. Debentures 16. Corporation 17. Articles of incorporation 18. Corporate charter 19. Initial public offering 20 Stated value L 21. Bond 22. Coupon bonds 23. Face value (or principal amount) 24. Maturity date 25. Bond indenture 26. Stated interest rate (or contract interest rate) 27. Outstanding stock 28. Treasury stock 29. Preferred stock 30. Common stock 31. Preemptive right 32. Par value 33. Discontinued Operations 34. Temporary Differences 35. Earnings per Share 36. Income from Cont1nu1ng Operations 37. Deferred Income Taxes ...
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financial accounting exam 3 (knapp) - l ACCOU IN G 21 13 F...

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