ACCT 100 : Introduction to Financial Accounting
San Francisco State University (SFSU)
Financial Accounting
Jerry J. Weygandt
Ethics Case
BYP 3-6 Bluestem Company is a pesticide manufacturer. Its sales declined greatly this year due to the passage of legislation outlawing the sale of several of Bluestem’s chemical pesticides. In the coming year, Bluestem will have environmentally safe and competitive chemicals to replace these discontinued products. Sales in the next year are expected to greatly exceed any prior year’s. The decline in sales and profits appears to be a one-year aberration. But even so, the company president fears a large dip in the current year’s profits. He believes that such a dip could cause a significant drop in the market price of Bluestem’s stock and make the company a takeover target. To avoid this possibility, the company president calls in Cathi Bell, controller, to discuss this period’s year-end adjusting entries. He urges her to accrue every possible revenue and to defer as many expenses as possible. He says to Cathi, “We need the revenues this year, and next year can easily absorb expenses deferred from this year.We can’t let our stock price be hammered down!” Cathi didn’t get around to recording the adjusting entries until January 17, but she dated the entries December 31 as if they were recorded then. Cathi also made every effort to comply with the president’s request.
Instructions
(a) Who are the stakeholders in this situation?
(b) What are the ethical considerations of (1) the president’s request and (2) Cathi’s dating the adjusting entries December 31?
(c) Can Cathi accrue revenues and defer expenses and still be ethical?
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Monday, July 5, 2010
BYP 2-4 Lisa Ortega is president of Ortega Riding Academy, Inc.
ACCT 100 : Introduction to Financial Accounting
San Francisco State University (SFSU)
Financial Accounting
Jerry J. Weygandt
Decision Making Across The Organization
BYP 2-4 Lisa Ortega is president of Ortega Riding Academy, Inc. The academy’s primary sources of revenue are riding fees and lesson fees, which are paid on a cash basis. Lisa also boards horses for owners, who are billed monthly for boarding fees. In a few cases, boarders
pay in advance of expected use. For its revenue transactions, the academy maintains the following accounts: AND SO ON
Instructions
With the class divided into groups, answer the following.
(a) Identify each journal entry that is correct. For each journal entry that is incorrect, prepare the entry that should have been made by the bookkeeper.
(b) Which of the incorrect entries would prevent the trial balance from balancing?
(c) What was the correct net income for May, assuming the bookkeeper reported net income of $4,500 after posting all 50 entries?
(d) What was the correct cash balance at May 31, assuming the bookkeeper reported a balance of $12,475 after posting all 50 entries (and the only errors occurred in the items listed above)?
Click here for the SOLUTION
San Francisco State University (SFSU)
Financial Accounting
Jerry J. Weygandt
Decision Making Across The Organization
BYP 2-4 Lisa Ortega is president of Ortega Riding Academy, Inc. The academy’s primary sources of revenue are riding fees and lesson fees, which are paid on a cash basis. Lisa also boards horses for owners, who are billed monthly for boarding fees. In a few cases, boarders
pay in advance of expected use. For its revenue transactions, the academy maintains the following accounts: AND SO ON
Instructions
With the class divided into groups, answer the following.
(a) Identify each journal entry that is correct. For each journal entry that is incorrect, prepare the entry that should have been made by the bookkeeper.
(b) Which of the incorrect entries would prevent the trial balance from balancing?
(c) What was the correct net income for May, assuming the bookkeeper reported net income of $4,500 after posting all 50 entries?
(d) What was the correct cash balance at May 31, assuming the bookkeeper reported a balance of $12,475 after posting all 50 entries (and the only errors occurred in the items listed above)?
Click here for the SOLUTION
BYP 1-1 The actual financial statements of PepsiCo, as presented in the company’s 2005 Annual Report, are contained in Appendix A
ACCT 100 : Introduction to Financial Accounting
San Francisco State University (SFSU)
Financial Accounting
Jerry J. Weygandt
Financial Reporting Problem
BYP 1-1 The actual financial statements of PepsiCo, as presented in the company’s 2005 Annual Report, are contained in Appendix A (at the back of the textbook).
Instructions
Refer to PepsiCo’s financial statements and answer the following questions.
(a) What were PepsiCo’s total assets at December 31, 2005? At December 25, 2004?
(b)How much cash (and cash equivalents) did PepsiCo have on December 31, 2005?
(c) What amount of accounts payable did PepsiCo report on December 31, 2005? On December 25, 2004?
(d) What were PepsiCo’s net sales in 2003? In 2004? In 2005?
(e) What is the amount of the change in PepsiCo’s net income from 2004 to 2005?
Click here for the SOLUTION
San Francisco State University (SFSU)
Financial Accounting
Jerry J. Weygandt
Financial Reporting Problem
BYP 1-1 The actual financial statements of PepsiCo, as presented in the company’s 2005 Annual Report, are contained in Appendix A (at the back of the textbook).
Instructions
Refer to PepsiCo’s financial statements and answer the following questions.
(a) What were PepsiCo’s total assets at December 31, 2005? At December 25, 2004?
(b)How much cash (and cash equivalents) did PepsiCo have on December 31, 2005?
(c) What amount of accounts payable did PepsiCo report on December 31, 2005? On December 25, 2004?
(d) What were PepsiCo’s net sales in 2003? In 2004? In 2005?
(e) What is the amount of the change in PepsiCo’s net income from 2004 to 2005?
Click here for the SOLUTION
Sunday, July 4, 2010
21. The Rogers Corporation has a gross profit of $880,000 and $360,000 in depreciation expense.
FIN 200
Axia College of University of Phoenix (UoP)
Foundations of Financial Management
Block Hirt Danielsen
Introduction to Finance: Harvesting the Money Tree
Fin 200 Week One (Week 1) Solution
Assignment: Cash Flow Preparation
Chapter 2
21. The Rogers Corporation has a gross profit of $880,000 and $360,000 in depreciation expense. The Evans Corporation also has $880,000 in gross profit, with $60,000 in depreciation expense. Selling and administrative expense is $120,000 for each company .
Given that the tax rate is 40 percent, compute the cash flow for both companies. Explain the difference in cash flow between the two firms.
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Axia College of University of Phoenix (UoP)
Foundations of Financial Management
Block Hirt Danielsen
Introduction to Finance: Harvesting the Money Tree
Fin 200 Week One (Week 1) Solution
Assignment: Cash Flow Preparation
Chapter 2
21. The Rogers Corporation has a gross profit of $880,000 and $360,000 in depreciation expense. The Evans Corporation also has $880,000 in gross profit, with $60,000 in depreciation expense. Selling and administrative expense is $120,000 for each company .
Given that the tax rate is 40 percent, compute the cash flow for both companies. Explain the difference in cash flow between the two firms.
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20. Nova Electrics anticipated cash flow from operating activities of $6 million in 2008. It will need to spend $1.2 million on capital investments
FIN 200
Axia College of University of Phoenix (UoP)
Foundations of Financial Management
Block Hirt Danielsen
Introduction to Finance: Harvesting the Money Tree
Fin 200 Week One (Week 1) Solution
Assignment: Cash Flow Preparation
Chapter 2
20. Nova Electrics anticipated cash flow from operating activities of $6 million in 2008. It will need to spend $1.2 million on capital investments in order to remain competitive within the industry. Common stock dividends are projected at $.4 million and preferred stock dividends at $.55 million.
a. What is the firm’s projected free cash flow for the year 2008?
b. What does the concept of free cash flow represent?
Click here for the SOLUTION
Axia College of University of Phoenix (UoP)
Foundations of Financial Management
Block Hirt Danielsen
Introduction to Finance: Harvesting the Money Tree
Fin 200 Week One (Week 1) Solution
Assignment: Cash Flow Preparation
Chapter 2
20. Nova Electrics anticipated cash flow from operating activities of $6 million in 2008. It will need to spend $1.2 million on capital investments in order to remain competitive within the industry. Common stock dividends are projected at $.4 million and preferred stock dividends at $.55 million.
a. What is the firm’s projected free cash flow for the year 2008?
b. What does the concept of free cash flow represent?
Click here for the SOLUTION
Complete Problems 20, 21 in Chapter 2 of Foundations of Financial Management
FIN 200
Axia College of University of Phoenix (UoP)
Foundations of Financial Management
Block Hirt Danielsen
Introduction to Finance: Harvesting the Money Tree
Fin 200 Week One (Week 1) Solution
Assignment: Cash Flow Preparation
* Resource: Ch. 2 of Foundations of Financial Management
* Due Date: Day 7 [post to the Individual forum]
* Complete Problems 20, 21 in Chapter 2 of Foundations of Financial Management.
Click here for the SOLUTION
Axia College of University of Phoenix (UoP)
Foundations of Financial Management
Block Hirt Danielsen
Introduction to Finance: Harvesting the Money Tree
Fin 200 Week One (Week 1) Solution
Assignment: Cash Flow Preparation
* Resource: Ch. 2 of Foundations of Financial Management
* Due Date: Day 7 [post to the Individual forum]
* Complete Problems 20, 21 in Chapter 2 of Foundations of Financial Management.
Click here for the SOLUTION
Saturday, July 3, 2010
25. Carter Paint Company has plants in nine midwestern states. Sales for last year were $100 million, and the balance sheet at year-end is similar
FIN 200
Axia College of University of Phoenix (UoP)
Foundations of Financial Management
Block Hirt Danielsen
Introduction to Finance: Harvesting the Money Tree
Fin 200 Week 3 Solution
Assignment: Pro Forma Statements
Chapter 4
25. Carter Paint Company has plants in nine midwestern states. Sales for last year were $100 million, and the balance sheet at year-end is similar in percentage of sales to that of previous years (and this will continue in the future). All assets (including fixed assets) and current liabilities will vary directly with sales.
BALANCE SHEET
(in $ millions)
Assets Liabilities and Stockholders’ Equity
Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 5 Accounts payable . . . . . . . . . . . . . . $15
Accounts receivable. . . . . . . . . . . . . 15 Accrued wages . . . . . . . . . . . . . . . . 6
Inventory . . . . . . . . . . . . . . . . . . . . . 30 Accrued taxes . . . . . . . . . . . . . . . . . 4
Current assets . . . . . . . . . . . . . . . 50 Current liabilities . . . . . . . . . . . . . 25
Fixed assets . . . . . . . . . . . . . . . . . . 40 Notes payable . . . . . . . . . . . . . . . . . 30
Common stock . . . . . . . . . . . . . . . . . 15
Retained earnings . . . . . . . . . . . . . . 20
Total assets . . . . . . . . . . . . . . . . . . . $90 Total liabilities and
stockholders’ equity . . . . . . . . . . . $90
Carter Paint has an aftertax profit margin of 5 percent and a dividend payout ratio of 30 percent.
If sales grow by 10 percent next year, determine how many dollars of new funds are needed to finance the expansion. (Assume Carter Paint is already using assets at full capacity and that plant must be added.)
Click here for the SOLUTION
Axia College of University of Phoenix (UoP)
Foundations of Financial Management
Block Hirt Danielsen
Introduction to Finance: Harvesting the Money Tree
Fin 200 Week 3 Solution
Assignment: Pro Forma Statements
Chapter 4
25. Carter Paint Company has plants in nine midwestern states. Sales for last year were $100 million, and the balance sheet at year-end is similar in percentage of sales to that of previous years (and this will continue in the future). All assets (including fixed assets) and current liabilities will vary directly with sales.
BALANCE SHEET
(in $ millions)
Assets Liabilities and Stockholders’ Equity
Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 5 Accounts payable . . . . . . . . . . . . . . $15
Accounts receivable. . . . . . . . . . . . . 15 Accrued wages . . . . . . . . . . . . . . . . 6
Inventory . . . . . . . . . . . . . . . . . . . . . 30 Accrued taxes . . . . . . . . . . . . . . . . . 4
Current assets . . . . . . . . . . . . . . . 50 Current liabilities . . . . . . . . . . . . . 25
Fixed assets . . . . . . . . . . . . . . . . . . 40 Notes payable . . . . . . . . . . . . . . . . . 30
Common stock . . . . . . . . . . . . . . . . . 15
Retained earnings . . . . . . . . . . . . . . 20
Total assets . . . . . . . . . . . . . . . . . . . $90 Total liabilities and
stockholders’ equity . . . . . . . . . . . $90
Carter Paint has an aftertax profit margin of 5 percent and a dividend payout ratio of 30 percent.
If sales grow by 10 percent next year, determine how many dollars of new funds are needed to finance the expansion. (Assume Carter Paint is already using assets at full capacity and that plant must be added.)
Click here for the SOLUTION
16. J. Lo’s Clothiers has forecast credit sales for the fourth quarter of the year as
FIN 200
Axia College of University of Phoenix (UoP)
Foundations of Financial Management
Block Hirt Danielsen
Introduction to Finance: Harvesting the Money Tree
Fin 200 Week 3 Solution
Assignment: Pro Forma Statements
Chapter 4
16. J. Lo’s Clothiers has forecast credit sales for the fourth quarter of the year as:
September (actual) . . . . . . . . . . . . . $70,000
Fourth Quarter
October . . . . . . . . . . . . . . . . . . . . . . $60,000
November . . . . . . . . . . . . . . . . . . . . 55,000
December . . . . . . . . . . . . . . . . . . . . 80,000
Experience has shown that 30 percent of sales are collected in the month of sale, 60 percent in the following month, and 10 percent are never collected. Prepare a schedule of cash receipts for J. Lo’s Clothiers covering the fourth quarter (October through December).
Click here for the SOLUTION
Axia College of University of Phoenix (UoP)
Foundations of Financial Management
Block Hirt Danielsen
Introduction to Finance: Harvesting the Money Tree
Fin 200 Week 3 Solution
Assignment: Pro Forma Statements
Chapter 4
16. J. Lo’s Clothiers has forecast credit sales for the fourth quarter of the year as:
September (actual) . . . . . . . . . . . . . $70,000
Fourth Quarter
October . . . . . . . . . . . . . . . . . . . . . . $60,000
November . . . . . . . . . . . . . . . . . . . . 55,000
December . . . . . . . . . . . . . . . . . . . . 80,000
Experience has shown that 30 percent of sales are collected in the month of sale, 60 percent in the following month, and 10 percent are never collected. Prepare a schedule of cash receipts for J. Lo’s Clothiers covering the fourth quarter (October through December).
Click here for the SOLUTION
Assignment: Pro Forma Statements Fin 200 Week Three Solution
FIN 200
Axia College of University of Phoenix (UoP)
Foundations of Financial Management
Block Hirt Danielsen
Introduction to Finance: Harvesting the Money Tree
Fin 200 Week 3 Solution
Assignment: Pro Forma Statements
16. J. Lo’s Clothiers has forecast credit sales for the fourth quarter of the year as:
September (actual) . . . . . . . . . . . . . $70,000
Fourth Quarter
October . . . . . . . . . . . . . . . . . . . . . . $60,000
November . . . . . . . . . . . . . . . . . . . . 55,000
December . . . . . . . . . . . . . . . . . . . . 80,000
Experience has shown that 30 percent of sales are collected in the month of sale, 60 percent in the following month, and 10 percent are never collected.
Prepare a schedule of cash receipts for J. Lo’s Clothiers covering the fourth quarter (October through December).
25. Carter Paint Company has plants in nine midwestern states. Sales for last year were $100 million, and the balance sheet at year-end is similar in percentage of sales to that of previous years (and this will continue in the future). All assets (including fixed assets) and current liabilities will vary directly with sales.
BALANCE SHEET
(in $ millions)
Assets Liabilities and Stockholders’ Equity
Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 5 Accounts payable . . . . . . . . . . . . . . $15
Accounts receivable. . . . . . . . . . . . . 15 Accrued wages . . . . . . . . . . . . . . . . 6
Inventory . . . . . . . . . . . . . . . . . . . . . 30 Accrued taxes . . . . . . . . . . . . . . . . . 4
Current assets . . . . . . . . . . . . . . . 50 Current liabilities . . . . . . . . . . . . . 25
Fixed assets . . . . . . . . . . . . . . . . . . 40 Notes payable . . . . . . . . . . . . . . . . . 30
Common stock . . . . . . . . . . . . . . . . . 15
Retained earnings . . . . . . . . . . . . . . 20
Total assets . . . . . . . . . . . . . . . . . . . $90 Total liabilities and
stockholders’ equity . . . . . . . . . . . $90
Carter Paint has an aftertax profit margin of 5 percent and a dividend payout ratio of 30 percent. If sales grow by 10 percent next year, determine how many dollars of new funds are needed to finance the expansion. (Assume Carter Paint is already using assets at full capacity and that plant must be added.)
Axia College of University of Phoenix (UoP)
Foundations of Financial Management
Block Hirt Danielsen
Introduction to Finance: Harvesting the Money Tree
Fin 200 Week 3 Solution
Assignment: Pro Forma Statements
- Resource: Ch. 4 of Foundations of Financial Management
- Due Date: Day 7 [post to the Individual forum]
- Complete Problems 16 and 25
- Post the assignment as an attachment.
16. J. Lo’s Clothiers has forecast credit sales for the fourth quarter of the year as:
September (actual) . . . . . . . . . . . . . $70,000
Fourth Quarter
October . . . . . . . . . . . . . . . . . . . . . . $60,000
November . . . . . . . . . . . . . . . . . . . . 55,000
December . . . . . . . . . . . . . . . . . . . . 80,000
Experience has shown that 30 percent of sales are collected in the month of sale, 60 percent in the following month, and 10 percent are never collected.
Prepare a schedule of cash receipts for J. Lo’s Clothiers covering the fourth quarter (October through December).
25. Carter Paint Company has plants in nine midwestern states. Sales for last year were $100 million, and the balance sheet at year-end is similar in percentage of sales to that of previous years (and this will continue in the future). All assets (including fixed assets) and current liabilities will vary directly with sales.
BALANCE SHEET
(in $ millions)
Assets Liabilities and Stockholders’ Equity
Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 5 Accounts payable . . . . . . . . . . . . . . $15
Accounts receivable. . . . . . . . . . . . . 15 Accrued wages . . . . . . . . . . . . . . . . 6
Inventory . . . . . . . . . . . . . . . . . . . . . 30 Accrued taxes . . . . . . . . . . . . . . . . . 4
Current assets . . . . . . . . . . . . . . . 50 Current liabilities . . . . . . . . . . . . . 25
Fixed assets . . . . . . . . . . . . . . . . . . 40 Notes payable . . . . . . . . . . . . . . . . . 30
Common stock . . . . . . . . . . . . . . . . . 15
Retained earnings . . . . . . . . . . . . . . 20
Total assets . . . . . . . . . . . . . . . . . . . $90 Total liabilities and
stockholders’ equity . . . . . . . . . . . $90
Carter Paint has an aftertax profit margin of 5 percent and a dividend payout ratio of 30 percent. If sales grow by 10 percent next year, determine how many dollars of new funds are needed to finance the expansion. (Assume Carter Paint is already using assets at full capacity and that plant must be added.)
Problem 9.4A (P9.4A) During the current year, Ramirez Developers disposed of plant assets in the following transactions
Financial and Managerial Accounting: The Basis for Business Decisions 13th ed
Williams, Haka, and Bettner
Financial Accounting
Managerial Accounting
Williams, Haka, and Bettner
Chapter 9
Problem 9.4A (P9.4A) During the current year, Ramirez Developers disposed of plant assets in the following transactions:
Disposal of Plant Assets
Feb. 10 Office equipment costing $26,000 was given to a scrap dealer at no charge. At the date of disposal, accumulated depreciation on the office equipment amounted to $25,800.
Apr. 1 Ramirez sold land and a building to Claypool Associates for $900,000, receiving $100,000 cash and a 5-year, 9 percent note receivable for the remaining balance. Ramirez's records showed the following amounts: Land, $50,000; Building, $550,000; Accumulated Depreciation: Building (at the date of disposal), $250,000.
Aug. 15 Ramirez traded in an old truck for a new one. The old truck had cost $26,000, and its accumulated depreciation amounted to $18,000. The list price of the new truck was $39,000, but Ramirez received a $10,000 trade-in allowance for the old truck and paid only $29,000 in cash. Ramirez includes trucks in its Vehicles account.
Oct. 1 Ramirez traded in its old computer system as part of the purchase of a new system. The old system had cost $15,000, and its accumulated depreciation amounted to $11,000. The new computer's list price was $8,000. Ramirez accepted a trade-in allowance of $500 for the old computer system, paying $1,500 down in cash, and issuing a l -year, 8 percent note payable for the $6,000 balance owed.
Instructions
a. Prepare journal entries to record each of the disposal transactions. Assume that depreciation expense on each asset has been recorded up to the date of disposal. Thus, you need not update the accumulated depreciation figures stated in the problem.
AND SO ON
Click here for the SOLUTION
Williams, Haka, and Bettner
Financial Accounting
Managerial Accounting
Williams, Haka, and Bettner
Chapter 9
Problem 9.4A (P9.4A) During the current year, Ramirez Developers disposed of plant assets in the following transactions:
Disposal of Plant Assets
Feb. 10 Office equipment costing $26,000 was given to a scrap dealer at no charge. At the date of disposal, accumulated depreciation on the office equipment amounted to $25,800.
Apr. 1 Ramirez sold land and a building to Claypool Associates for $900,000, receiving $100,000 cash and a 5-year, 9 percent note receivable for the remaining balance. Ramirez's records showed the following amounts: Land, $50,000; Building, $550,000; Accumulated Depreciation: Building (at the date of disposal), $250,000.
Aug. 15 Ramirez traded in an old truck for a new one. The old truck had cost $26,000, and its accumulated depreciation amounted to $18,000. The list price of the new truck was $39,000, but Ramirez received a $10,000 trade-in allowance for the old truck and paid only $29,000 in cash. Ramirez includes trucks in its Vehicles account.
Oct. 1 Ramirez traded in its old computer system as part of the purchase of a new system. The old system had cost $15,000, and its accumulated depreciation amounted to $11,000. The new computer's list price was $8,000. Ramirez accepted a trade-in allowance of $500 for the old computer system, paying $1,500 down in cash, and issuing a l -year, 8 percent note payable for the $6,000 balance owed.
Instructions
a. Prepare journal entries to record each of the disposal transactions. Assume that depreciation expense on each asset has been recorded up to the date of disposal. Thus, you need not update the accumulated depreciation figures stated in the problem.
AND SO ON
Click here for the SOLUTION
Problem 9.3A (P9.3A) Smart Hardware purchased new shelving for its store on April 1, 2005
Financial and Managerial Accounting: The Basis for Business Decisions 13th ed
Williams, Haka, and Bettner
Financial Accounting
Managerial Accounting
Williams, Haka, and Bettner
Chapter 9
Problem 9.3A (P9.3A) Smart Hardware purchased new shelving for its store on April 1, 2005. The shelving is expected to have a 20-year life and no residual value. The following expenditures were associated with the purchase:
Cost of the shelving $12,000
Freight charges 520
Sales taxes 780
Installation of shelving 2,700
Cost to repair shelf damaged during installation 400
Instructions
a. Compute depreciation expense for the years 2005 through 200S under each depreciation method listed below:
1. Straight-line, with fractional years rounded to the nearest whole month.
2. 200 percent declining-balance, using the half-year convention.
3. 150 percent declining-balance, using the half-year convention.
AND SO ON
Click here for the SOLUTION
Williams, Haka, and Bettner
Financial Accounting
Managerial Accounting
Williams, Haka, and Bettner
Chapter 9
Problem 9.3A (P9.3A) Smart Hardware purchased new shelving for its store on April 1, 2005. The shelving is expected to have a 20-year life and no residual value. The following expenditures were associated with the purchase:
Cost of the shelving $12,000
Freight charges 520
Sales taxes 780
Installation of shelving 2,700
Cost to repair shelf damaged during installation 400
Instructions
a. Compute depreciation expense for the years 2005 through 200S under each depreciation method listed below:
1. Straight-line, with fractional years rounded to the nearest whole month.
2. 200 percent declining-balance, using the half-year convention.
3. 150 percent declining-balance, using the half-year convention.
AND SO ON
Click here for the SOLUTION
Mary and Jack Gray, local golf stars, opened the Chip-Shot Driving Range Company on March 1, 2008. They invested $25,000 cash and received common
ACCT 100 : Introduction to Financial Accounting
San Francisco State University (SFSU)
Financial Accounting
Jerry J. Weygandt
Decision Making Across The Organization
BYP 1-4 Mary and Jack Gray, local golf stars, opened the Chip-Shot Driving Range Company on March 1, 2008. They invested $25,000 cash and received common stock in exchange for their investment. A caddy shack was constructed for cash at a cost of $8,000 and $800 was spent on golf balls and golf clubs. The Grays leased five acres of land at a cost of $1,000 per month and paid the first month’s rent. During the first month, advertising costs totaled $750, of which $150 was unpaid at March 31, and $400 was paid to members of the high school golf team for retrieving golf balls. All revenues from customers were deposited in the company’s bank account. On March 15, Mary and Jack received a dividend of $1,000. A $100 utility bill was received on March 31 but was not paid. On March 31, the balance in the company’s bank account was $18,900.
Mary and Jack thought they had a pretty good first month of operations. But, their estimates of profitability ranged from a loss of $6,100 to net income of $2,450.
Instructions
(a) How could the Grays have concluded that the business operated at a loss of $6,100? Was this a valid basis on which to determine net income?
(b) How could the Grays have concluded that the business operated a t a net income of $2,450? (Hint: Prepare a balance sheet at March 31.) Was the valid basis on which to determine net income?
(c) Without preparing an income statement, determine the actual net income for March.
(d) What was the revenue earned in March?
Click here for the SOLUTION
San Francisco State University (SFSU)
Financial Accounting
Jerry J. Weygandt
Decision Making Across The Organization
BYP 1-4 Mary and Jack Gray, local golf stars, opened the Chip-Shot Driving Range Company on March 1, 2008. They invested $25,000 cash and received common stock in exchange for their investment. A caddy shack was constructed for cash at a cost of $8,000 and $800 was spent on golf balls and golf clubs. The Grays leased five acres of land at a cost of $1,000 per month and paid the first month’s rent. During the first month, advertising costs totaled $750, of which $150 was unpaid at March 31, and $400 was paid to members of the high school golf team for retrieving golf balls. All revenues from customers were deposited in the company’s bank account. On March 15, Mary and Jack received a dividend of $1,000. A $100 utility bill was received on March 31 but was not paid. On March 31, the balance in the company’s bank account was $18,900.
Mary and Jack thought they had a pretty good first month of operations. But, their estimates of profitability ranged from a loss of $6,100 to net income of $2,450.
Instructions
(a) How could the Grays have concluded that the business operated at a loss of $6,100? Was this a valid basis on which to determine net income?
(b) How could the Grays have concluded that the business operated a t a net income of $2,450? (Hint: Prepare a balance sheet at March 31.) Was the valid basis on which to determine net income?
(c) Without preparing an income statement, determine the actual net income for March.
(d) What was the revenue earned in March?
Click here for the SOLUTION
BYP 1-4 Mary and Jack Gray, local golf stars, opened the Chip-Shot Driving Range Company on March 1, 2008
ACCT 100 : Introduction to Financial Accounting
San Francisco State University (SFSU)
Financial Accounting
Jerry J. Weygandt
Decision Making Across The Organization
BYP 1-4 Mary and Jack Gray, local golf stars, opened the Chip-Shot Driving Range Company on March 1, 2008. They invested $25,000 cash and received common stock in exchange for their investment. A caddy shack was constructed for cash at a cost of $8,000 and $800 was spent on golf balls and golf clubs. The Grays leased five acres of land at a cost of $1,000 per month and paid the first month’s rent. During the first month, advertising costs totaled $750, of which $150 was unpaid at March 31, and $400 was paid to members of the high school golf team for retrieving golf balls. All revenues from customers were deposited in the company’s bank account. On March 15, Mary and Jack received a dividend of $1,000. A $100 utility bill was received on March 31 but was not paid. On March 31, the balance in the company’s bank account was $18,900.
Mary and Jack thought they had a pretty good first month of operations. But, their estimates of profitability ranged from a loss of $6,100 to net income of $2,450.
Instructions
(a) How could the Grays have concluded that the business operated at a loss of $6,100? Was this a valid basis on which to determine net income?
(b) How could the Grays have concluded that the business operated a t a net income of $2,450? (Hint: Prepare a balance sheet at March 31.) Was the valid basis on which to determine net income?
(c) Without preparing an income statement, determine the actual net income for March.
(d) What was the revenue earned in March?
Click here for the SOLUTION
San Francisco State University (SFSU)
Financial Accounting
Jerry J. Weygandt
Decision Making Across The Organization
BYP 1-4 Mary and Jack Gray, local golf stars, opened the Chip-Shot Driving Range Company on March 1, 2008. They invested $25,000 cash and received common stock in exchange for their investment. A caddy shack was constructed for cash at a cost of $8,000 and $800 was spent on golf balls and golf clubs. The Grays leased five acres of land at a cost of $1,000 per month and paid the first month’s rent. During the first month, advertising costs totaled $750, of which $150 was unpaid at March 31, and $400 was paid to members of the high school golf team for retrieving golf balls. All revenues from customers were deposited in the company’s bank account. On March 15, Mary and Jack received a dividend of $1,000. A $100 utility bill was received on March 31 but was not paid. On March 31, the balance in the company’s bank account was $18,900.
Mary and Jack thought they had a pretty good first month of operations. But, their estimates of profitability ranged from a loss of $6,100 to net income of $2,450.
Instructions
(a) How could the Grays have concluded that the business operated at a loss of $6,100? Was this a valid basis on which to determine net income?
(b) How could the Grays have concluded that the business operated a t a net income of $2,450? (Hint: Prepare a balance sheet at March 31.) Was the valid basis on which to determine net income?
(c) Without preparing an income statement, determine the actual net income for March.
(d) What was the revenue earned in March?
Click here for the SOLUTION
You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive $20,000 at the end of each year for the 30 years
Finance 419 (FIN 419)
Business Finance
Principles of Managerial Finance
Brief Fourth 4th Edition
Lawrence J. Gitman
Prepare responses to the following problems from the text:
Chapter 4
P4-23. LG 3: Funding Your Retirement
You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive $20,000 at the end of each year for the 30 years between retirement and death (a psychic told you that you will die exactly 30 years after you retire). You know you will be able to earn 11% per year during the 30-year retirement period.
a) How large a fund will you need when you retire in 20 years to provide the 30-year, $20,000 retirement annuity?
b) How much will you need today as a single amount to provide the fund calculated in part (a) if you earn only 9% per year during the 20 years preceding retirement?
c) What effect would an increase in the rate you can earn both during and prior to retirement have on the values found in part (a) and (b)?
Click here for the SOLUTION
Business Finance
Principles of Managerial Finance
Brief Fourth 4th Edition
Lawrence J. Gitman
Prepare responses to the following problems from the text:
Chapter 4
P4-23. LG 3: Funding Your Retirement
You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive $20,000 at the end of each year for the 30 years between retirement and death (a psychic told you that you will die exactly 30 years after you retire). You know you will be able to earn 11% per year during the 30-year retirement period.
a) How large a fund will you need when you retire in 20 years to provide the 30-year, $20,000 retirement annuity?
b) How much will you need today as a single amount to provide the fund calculated in part (a) if you earn only 9% per year during the 20 years preceding retirement?
c) What effect would an increase in the rate you can earn both during and prior to retirement have on the values found in part (a) and (b)?
Click here for the SOLUTION
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