howrk due march 15th

Please double chk work before submitting it to me thks.

Pechstein Corporation issued

 

2,

0

50 shares of $10 par value common stock upon conversion of 1,060 shares of $50 par value preferred stock. The preferred stock was originally issued at $58 per share. The common stock is trading at $27 per share at the time of conversion.
Record the conversion of the preferred stock.
(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

On January 1,

20

12 (the date of grant), Lutz Corporation issues 2,720 shares of restricted stock to its executives. The fair value of these shares is $127,500, and their par value is $10,200. The stock is forfeited if the executives do not complete 3 years of employment with the company.
Prepare the journal entry (if any) on January 1,

2012

, and on December 31, 2012, assuming the service period is 3 years.
(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Date

1/1/12

12/31/12

Rockland Corporation earned net income of $717,128 in 2012 and had 171,000 shares of common stock outstanding throughout the year. Also outstanding all year was $868,000 of 10

%

bonds, which are convertible into 17,000 shares of common. Rockland’s tax rate is 36 percent.
Compute Rockland’s 2012 diluted earnings per share. 
(Round answer to 2 decimal places, e.g. $

3.

5

5.

)

Diluted earnings per share

$

On January 1, 2012, when its $36 par value common stock was selling for $

9

0 per share, Bartz Corp. issued $10,260,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $10,875,600. The present value of the bond payments at the time of issuance was $9,003,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1,

2013

, the corporation’s $36 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2014, when the corporation’s $16 par value common stock was selling for $175 per share, holders of 20% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.

(a)

Prepare the entry to record the original issuance of the convertible debentures.
(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

(b)

Prepare the entry to record the exercise of the conversion option, using the book value method. Show supporting computations in good form.
(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

On January 1, 2012, Magilla Inc. granted stock options to officers and key employees for the purchase of 20,

40

0 shares of the company’s $15 par common stock at $22 per share. The options were exercisable within a 5-year period beginning January 1, 2014, by grantees still in the employ of the company, and expiring December 31, 201

6.

The service period for this award is 2 years. Assume that the fair value option-pricing model determines total compensation expense to be $488,000.
On April 1, 2013, 3,060 options were terminated when the employees resigned from the company. The market price of the common stock was $35 per share on this date.
On March 31, 2014, 12,240 options were exercised when the market price of the common stock was $41 per share.
Prepare journal entries to record issuance of the stock options, termination of the stock options, exercise of the stock options, and charges to compensation expense, for the years ended December 31, 2012, 2013, and 201

4.

(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

1/1/12

12/31/12

4/1/13

12/31/13

3/31/14

Derrick Company issues 4,250 shares of restricted stock to its CFO, Dane Yaping, on January 1, 201

2.

The stock has a fair value of $124,800 on this date. The service period related to this restricted stock is 4 years. Vesting occurs if Yaping stays with the company for 4 years. The par value of the stock is $4. At December 31, 2013, the fair value of the stock is $157,900.
(a) Prepare the journal entries to record the restricted stock on January 1, 2012 (the date of grant), and December 31, 2013.
(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

1/1/12

12/31/13

(b) On March 4, 2014, Yaping leaves the company. Prepare the journal entry (if any) to account for this forfeiture.
(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

The Ottey Corporation issued 10-year, $5,610,000 par, 7% callable convertible subordinated debentures on January 2, 2012. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 15:1, and in 2 years it will increase to 20:

1.

At the date of issue, the bonds were sold at 99. Bond discount is amortized on a straight-line basis. Ottey’s effective tax was 37%.

Net income

in 2012 was $7,505,000, and the company had 2,295,000 shares outstanding during the entire year.
Prepare a schedule to compute both basic and diluted earnings per share. 
(Round answers to 2 decimal places, e.g. $2.55.)

$

Diluted earnings per share

$

Basic earnings per share

The company issued to the stockholders 195,000 rights. Ten rights are needed to buy one share of stock at $33. The rights were void after 30 days. The market price of the stock at this time was $35 per share.

The company sold to the public a $253,000, 10% bond issue at 105. The company also issued with each $100 bond one detachable stock purchase warrant, which provided for the purchase of common stock at

$31

 per share. Shortly after issuance, similar bonds without warrants were selling at 96 and the warrants at $9.

All but 9,750 of the rights issued in

(1)

were exercised in 30 days.

At the end of the year, 80% of the warrants in

(2)

had been exercised, and the remaining were outstanding and in good standing.

During the current year, the company granted stock options for 10,300 shares of common stock to company executives. The company, using a fair value option-pricing model, determines that each option is worth $10. The option price is $31. The options were to expire at year-end and were considered compensation for the current year.

All but 1,030 shares related to the stock-option plan were exercised by year-end. The expiration resulted because one of the executives failed to fulfill an obligation related to the employment contract.

The stockholders’ equity section of Martino Inc. at the beginning of the current year appears below.

Common stock, $10 par value, authorized 1,181,000
   shares, 

30

8,000 shares issued and outstanding

$3,080,000

Paid-in capital in excess of par—common stock

661,000

Retained earnings

666,000

During the current year, the following transactions occurred.

1. 2. 3. 4. 5. 6.

Prepare general journal entries for the current year to record the transactions listed above.
(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

1.

2.

3.

4.

5.

6.

For options exercised:

For options lapsed:

(a)

No.

Pawnee Inc. has issued three types of debt on January 1, 2012, the start of the company’s fiscal year.

(a)

$10.

11

million, 10-year, 14.00% unsecured bonds, interest payable quarterly. Bonds were priced to yield 12%.

(b)

$25.48 million par of 10-year, zero-coupon bonds at a price to yield 12% per year.

(c)

$16.13 million, 10-year, 11.00% mortgage bonds, interest payable annually to yield 12%.

Prepare a schedule that identifies the following items for each bond: (1) maturity value, (2) number of interest periods over life of bond,

(3)

stated rate per each interest period,

(4)

effective-interest rate per each interest period,

(5)

payment amount per period, and

(6)

present value of bonds at date of issue.
(Round stated and effective rate per period to 2 decimal places, e.g. 10.00% and present value of bonds to 0 decimal places, e.g. $38,54

8.

)

$

$

$

%

%

%

%

$

$

$

$

$

$

Unsecured
Bonds

Zero-Coupon
Bonds

Mortgage
Bonds

(1)

Maturity value

(2)

Number of interest periods

(3)

Stated rate per period

%
(4)

Effective rate per period

(5)

Payment amount per period

(6)

Present value

Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In

2011

, the company expends $343,620 on a research project, but by the end of 2011 it is impossible to determine whether any benefit will be derived from it.
(a) The project is completed in 2012, and a successful patent is obtained. The R&D costs to complete the project are $125,930. The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2012 total $32,100. The patent has an expected useful life of 5 years. Record these costs in journal entry form. Also, record patent amortization (full year) in 2012.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

(To record research and development costs)

(To record legal and administrative costs)

(To record one year’s amortization expense)

(b) In 2013, the company successfully defends the patent in extended litigation at a cost of $40,240, thereby extending the patent life to December 31, 2020. What is the proper way to account for this cost? Also, record patent amortization (full year) in 2013.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

(To record legal cost of successfully defending patent)

(To record one year’s amortization)

Shown below is the liabilities and stockholders’ equity section of the balance sheet for

Ingalls Company

and

Wilder Company

. Each has assets totaling

$4,422,900

.

Current liabilities

Common stock ($20 par)

716,100

$4,422,900

Ingalls Co.

Wilder Co.

Current liabilities

$312,800

$719,800

Long-term debt, 8%

1,246,000

Common stock ($20 par)

2,987,000

2,148,000

Retained earnings (

Cash

dividends, $326,900)

716,100

Retained earnings (Cash dividends, $222,800)

 
$4,422,900

For the year, each company has earned the same income before interest and taxes.

Ingalls Co.

Wilder Co.

$1,202,000

Income before interest and taxes

$

1,202,000

Interest expense

99,680

0

1,102,320

1,202,000

Income taxes (40%)

440,928

480,800

Net income

$661,392

$721,200

At year-end, the market price of Ingalls’s stock was $101 per share, and Wilder’s was $63.50. Assume balance sheet amounts are representative for the entire year.
(a) Calculate the return on total assets?
(Round answers to 2 decimal places, e.g. 16.85%.)

%

%

Return on total assets

Wilder Company
Ingalls Company

Which company is more profitable in terms of return on total assets? 
(b) Calculate the return on stockholders’ equity?
(Round answers to 2 decimal places, e.g. 16.85%.)

Wilder Company

%

Ingalls Company

%

Return on stockholders’
equity

Which company is more profitable in terms of return on stockholders’ equity? 
(c) Calculate the Net income per share.
(Round answers to 2 decimal places, e.g. $6.85.)

Wilder Company

$

Ingalls Company

$

Net income per share

Which company has the greater net income per share of stock? Neither company issued or reacquired shares during the year. 
(d) From the point of view of net income, is it advantageous to the stockholders of Ingalls Co. to have the long-term debt outstanding?

(e) What is the book value per share for each company?
(Round answers to 2 decimal places, e.g. $6.85.)

Wilder Company

$

Ingalls Company

$

Book value per share

On January 1, 2012, Lindsey Company issued 10-year, $3,243,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 21 shares of Lindsey common stock. Lindsey’s net income in 2013 was

$26

5,000, and its tax rate was 40%. The company had 103,000 shares of common stock outstanding throughout 2012. None of the bonds were converted in 2012.
(a) Compute diluted earnings per share for 2012. 
(Round answer to 2 decimal places, e.g. $2.55.)

Diluted earnings per share

$

(b) Compute diluted earnings per share for 2012, assuming the same facts as above, except that $1,030,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 10 shares of Lindsey common stock. 
(Round answer to 2 decimal places, e.g. $2.55.)

Diluted earnings per share

$

Matthewson Company began operations on January 2, 2012. It employs 20 individuals who work 8-hour days and are paid hourly. Each employee earns 22 paid vacation days and 13 paid sick days annually. Vacation days may be taken after January 15 of the year following the year in which they are earned. Sick days may be taken as soon as they are earned; unused sick days accumulate.
Additional information is as follows.

2012

2013

0

Actual Hourly
Wage Rate

Vacation Days Used
by Each Employee

Sick Days Used
by Each Employee

2012

2013

2012

2013

$26 $31 20 9 11

Matthewson Company has chosen not to accrue paid sick leave until used, and has chosen to accrue vacation time at expected future rates of pay without discounting. The company used the following projected rates to accrue vacation time.

2012

2013

Year in Which Vacation
Time Was Earned

Projected Future Pay Rates
Used to Accrue Vacation Pay

$28

  30

(a) Prepare journal entries to record transactions related to compensated absences during 2012 and 2013.
(If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.

Account Titles and Explanation

Debit

Credit

1.

2.

3.

4.

(To record accrued vacation)

5.

(To record sick leave paid)

6.

(To record vacation time paid)

2012

(To record accrued vacation)

(To record sick leave paid)

(To record vacation time paid)

2013

(b) Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2012 and 2013.

2012

2013

$

$

Accrued liability

Answer each of the questions in the following unrelated situations.
(a) The current ratio of a company is 5:1 and its acid-test ratio is 1:1. If the inventories and prepaid items amount to $492,400, what is the amount of current liabilities?

$

Current Liabilities

(b) A company had an average inventory last year of $209,000 and its inventory turnover was 5. If sales volume and unit cost remain the same this year as last and inventory turnover is 9 this year, what will average inventory have to be during the current year?
(Round answer to 0 decimal places, e.g. 125.)

$

Average Inventory

(c) A company has current assets of $88,790 (of which $37,160 is inventory and prepaid items) and current liabilities of $37,160. What is the current ratio? What is the acid-test ratio? If the company borrows $13,870 cash from a bank on a 120-day loan, what will its current ratio be? What will the acid-test ratio be?
(Round answers to 2 decimal places, e.g. 2.50.)

 :1

 :1

 :1

Current Ratio

 :1

Acid Test Ratio

New Current Ratio

New Acid Test Ratio

(d) A company has current assets of $605,100 and current liabilities of $239,000. The board of directors declares a cash dividend of $191,200. What is the current ratio after the declaration but before payment? What is the current ratio after the payment of the dividend?
(Round answers to 2 decimal places, e.g. 2.50.)

 :1

 :1

Current ratio after the declaration but before payment

Current ratio after the payment of the dividend

Heartland Company’s budgeted sales and budgeted cost of goods sold for the coming year are $146,000,000 and $95,670,000, respectively. Short-term interest rates are expected to average 10%. If Heartland can increase inventory turnover from its present level of 9 times a year to a level of 10 times per year.
Compute its expected cost savings for the coming year.

$

Expected Cost Savings

As loan analyst for Madison Bank, you have been presented the following information.

 

 

 

 

 

 

 

Current liabilities

500,000

 

 

$1,410,000

 

$1,752,000

 

%

%

Plunkett Co.

Herring Co.

Assets

Cash

$120,000

$320,000

Receivables

220,000

302,000

Inventories

570,000

518,000

   Total current assets

910,000

1,140,000

Other assets

500,000

612,000

   Total assets

$1,410,000

$1,752,000

Liabilities and Stockholders’ Equity

$300,000

$350,000

Long-term liabilities

400,000

Capital stock and retained earnings

710,000

902,000

   Total liabilities and stockholders’ equity

Annual sales

$930,000

$1,500,000

Rate of gross profit on sales

30 40

Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. In as much as your bank has reached its quota for loans of this type, only one of these requests is to be granted.
Which of the two companies, as judged by the information given above, would you recommend as the better risk and why? Assume that the ending account balances are representative of the entire year. (Refer to Exercise 24-4.)

2012

2013

Current ratio

1.80

1.89

1.96

Acid-test (quick) ratio

1.04

0.99

0.87

Accounts receivable turnover

8.75

7.

71

6.42

Inventory turnover

4.91

4.32

3.72

Total debt to total assets

51.0

%

46.0

%

41.0

%

Long-term debt to total assets

31.0

%

27.0

%

24.0

%

Sales to fixed assets (fixed asset turnover)

1.58

1.69

1.79

Sales as a percent of 2011 sales

1.00

1.03

1.05

Gross margin percentage

36.0

%

 

35.1

%

34.6

%

Net income to sales

6.9

%

7.0

%

7.2

%

Return on total assets

7.7

%

7.7

%

7.8

%

Return on stockholders’ equity

13.6

%

 

13.1

%

12.7

%

In preparation of the report, the controller has decided first to examine the financial ratios independent of any other data to determine if the ratios themselves reveal any significant trends over the 3-year period.

Robbins Company is a wholesale distributor of professional equipment and supplies. The company’s sales have averaged about $900,000 annually for the 3-year period 2011-2013. The firm’s total assets at the end of 2013 amounted to $850,000.
The president of Robbins Company has asked the controller to prepare a report that summarizes the financial aspects of the company’s operations for the past 3 years. This report will be presented to the board of directors at their next meeting.
In addition to comparative financial statements, the controller has decided to present a number of relevant financial ratios which can assist in the identification and interpretation of trends. At the request of the controller, the accounting staff has calculated the following ratios for the 3-year period 2011–2013.

2011

The current ratio is increasing while the acid-test (quick) ratio is decreasing. Using the ratios provided, identify and explain the contributing factor(s) for this apparently divergent trend.

2012

2013

Current ratio

2.09

2.27

2.51

2.24

Quick ratio

1.15

1.12

1.19

1.22

Inventory turnover

2.40

2.18

2.02

3.50

Net sales to stockholders’ equity

2.75

2.80

2.95

2.85

Net income to stockholders’ equity

0.14

0.15

0.17

0.11

Total liabilities to stockholders’ equity

1.41

1.37

1.44

0.95

Howser is being reviewed by several entities whose interests vary, and the company’s financial ratios are a part of the data being considered. Each of the parties listed below must recommend an action based on its evaluation of Howser’s financial position.
Citizens National Bank. The bank is processing Howser’s application for a new 5-year term note. Citizens National has been Howser’s banker for several years but must reevaluate the company’s financial position for each major transaction.
Charleston Company. Charleston is a new supplier to Howser and must decide on the appropriate credit terms to extend to the company.
Shannon Financial. A brokerage firm specializing in the stock of electronics firms that are sold over-the-counter, Shannon Financial must decide if it will include Howser in a new fund being established for sale to Shannon Financial’s clients.
Working Capital Management Committee. This is a committee of Howser’s management personnel chaired by the chief operating officer. The committee is charged with the responsibility of periodically reviewing the company’s working capital position, comparing actual data against budgets, and recommending changes in strategy as needed.

Describe the analytical use of each of the six ratios presented above.

Link to Text

For each of the four entities described above, identify two financial ratios, that would be most valuable as a basis for its decision regarding Howser.

Link to Text

Discuss what the financial ratios presented in the question reveal about Howser. Support your answer by citing specific ratio levels and trends as well as the interrelationships between these ratios.

Howser Inc. is a manufacturer of electronic components and accessories with total assets of $20,000,000. Selected financial ratios for Howser and the industry averages for firms of similar size are presented below.

Howser

2013
Industry
Average

2011

Presented below are comparative balance sheets for the Gilmour Company.

GILMOUR COMPANY
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2013 AND 2012

December 31

2013

2012

Assets

Cash

$180,000

$275,000

Accounts receivable (net)

219,500

155,300

Short-term investments

269,300

149,600

Inventories

1,059,600

979,300

Prepaid expenses

24,750

24,750

Fixed assets

2,585,200

1,949,400

Accumulated depreciation

(1,000,500

)

(750,100

)

$3,337,850

 

$2,783,250

 

 

Liabilities and Stockholders’ Equity

Accounts payable

$50,020

$74,100

Accrued expenses

170,400

199,400

Bonds payable

450,500

189,600

Capital stock

2,100,000

1,769,300

Retained earnings

566,930

 

550,850

 

$3,337,850

 

$2,783,250

 

(a)

Prepare a comparative balance sheet of Gilmour Company showing the percent each item is of the total assets or total liabilities and stockholders’ equity.
(Round percentages to 2 decimal places, e.g. 2.25%. For accumulated depreciation, enter percentages using either a negative sign preceding the number e.g. -2.25% or parentheses e.g. (2.25)%.)

GILMOUR COMPANY
Comparative Balance Sheet
December 31, 2013 and 2012

December 31

Assets

2013

 

2012

Cash

$ 180,000

%

$ 275,000

%

Accounts receivable (net)

219,500

155,300

Short-term investments

269,300

149,600

Inventories

1,059,600

979,300

Prepaid expenses

24,750

24,750

Fixed assets

2,585,200

1,949,400

Accumulated depreciation

( 1,000,500

 )

 

( 750,100

 )

 

     Total

$ 3,337,850

 

%

$ 2,783,250

 

%

 

Liabilities and Stockholders’ Equity

Accounts payable

$ 50,020

%

$ 74,100

%

Accrued expenses

170,400

199,400

Bonds payable

450,500

189,600

Capital stock

2,100,000

1,769,300

Retained earnings

566,930

 

 

550,850

 

 

     Total

$ 3,337,850

 

%

$ 2,783,250

 

%

(b)

The parts of this question must be completed in order. This part will be available when you complete the part above.

On January 1, 2012, Secada Co. leased a building to Ryker Inc. The relevant information related to the lease is as follows.

1.

2.

3.

4.

5.

6.

The lease arrangement is for 10 years.

The leased building cost $3,284,500 and was purchased for cash on January 1, 2012.

The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value.

Lease payments are $207,030 per year and are made at the end of the year.

Property tax expense of $85,450 and insurance expense of $11,830 on the building were incurred by Secada in the first year. Payment on these two items was made at the end of the year.

Both the lessor and the lessee are on a calendar-year basis.

(a) Prepare the journal entries that Secada Co. should make in 2012.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

1/1/12

12/31/12

(To record receipt of lease payment.)

(To record depreciation.)

(To record insurance and property tax.)

(b) Prepare the journal entries that Ryker Inc. should make in 2012.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

(c) If Secada paid $29,500 to a real estate broker on January 1, 2012, as a fee for finding the lessee, how much should be reported as an expense for this item in 2012 by Secada Co.?

$

Expense should be reported

Below is the net income of Benchley Instrument Co., a private corporation, computed under the three inventory methods using a periodic system.

2011

2012

2013

FIFO

Average Cost

LIFO

2010

$25,637

$22,072

$19,921

30,146

24,390

20,221

29,709

27,071

24,445

34,015

30,504

26,417

(Ignore tax considerations.)
(a) Assume that in 2013 Benchley decided to change from the FIFO method to the average cost method of pricing inventories. Prepare the journal entry necessary for the change that took place during 2013, and show net income reported for 2010, 2011, 2012, and 2013.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

2013

2012

2011

Net income

$

$

$

$

2010

(b) Assume that in 2013 Benchley, which had been using the LIFO method since incorporation in 2010, changed to the FIFO method of pricing inventories. Prepare the journal entry necessary to record the change in 2013 and show net income reported for 2010, 2011, 2012, and 2013.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

2013

2012

2011

2010

Net income

$

$

$

$

Messner Co. reported $147,670 of net income for 2012. The accountant, in preparing the statement of cash flows, noted several items occurring during 2012 that might affect cash flows from operating activities. Following are the items listed below.

1.

2.

3.

4.

5.

6.

Messner purchased 140 shares of treasury stock at a cost of $19 per share. These shares were then resold at $27 per share.

Messner sold 120 shares of IBM common at $210 per share. The acquisition cost of these shares was $160 per share. This investment was shown on Messner’s December 31, 2011, balance sheet as an available-for-sale security.

Messner revised its estimate for bad debts. Before 2012, Messner’s bad debt expense was 1% of its net sales. In 2012, this percentage was increased to 2%. Net sales for 2012 were $492,600, and net accounts receivable decreased by $11,810 during 2012.

Messner issued 520 shares of its $11 par common stock for a patent. The market price of the shares on the date of the transaction was $25 per share.

Depreciation expense is $39,330.

Messner Co. holds 32% of the Sanchez Company’s common stock as a long-term investment. Sanchez Company reported $25,200 of net income for 2012.

7.

Sanchez Company paid a total of $1,900 of cash dividends to all investees in 2012.

8.

Messner declared a 10% stock dividend. One thousand shares of $11 par common stock were distributed. The market price at date of issuance was $19 per share.

Prepare a schedule that shows the net cash flows from operating activities using the indirect method. Assume no items other than those listed above affected the computation of 2012 net cash flows from operating activities.
(If an amount reduces the account balance then enter with negative sign.)

$

$

$

Messner Co.
Statement of Cash Flows (Partial)
For the Year 2012

Adjustments to reconcile net income to

Presented below are comparative balance sheets for the Gilmour Company.

GILMOUR COMPANY
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2013 AND 2012

December 31

2013

2012

Assets

Cash

$180,200

$275,700

Accounts receivable (net)

220,400

154,300

Short-term investments

270,100

149,400

Inventories

1,061,000

980,700

Prepaid expenses

24,140

24,140

Fixed assets

2,585,600

1,949,300

Accumulated depreciation

(1,000,900

)

(750,100

)

$3,340,540

 

$2,783,440

 

 

Liabilities and Stockholders’ Equity

Accounts payable

$50,700

$75,180

Accrued expenses

169,500

200,500

Bonds payable

450,100

190,600

Capital stock

2,100,000

1,770,300

Retained earnings

570,240

 

546,860

 

$3,340,540

 

$2,783,440

 

(a)

Prepare a comparative balance sheet of Gilmour Company showing the percent each item is of the total assets or total liabilities and stockholders’ equity.
(Round percentages to 2 decimal places, e.g. 2.25%. For accumulated depreciation, enter percentages using either a negative sign preceding the number e.g. -2.25% or parentheses e.g. (2.25)%.)

GILMOUR COMPANY
Comparative Balance Sheet
December 31, 2013 and 2012

December 31

Assets

2013

 

2012

Cash

$ 180,200

%

$ 275,700

%

Accounts receivable (net)

220,400

154,300

Short-term investments

270,100

149,400

Inventories

1,061,000

980,700

Prepaid expenses

24,140

24,140

Fixed assets

2,585,600

1,949,300

Accumulated depreciation

( 1,000,900

 )

 

( 750,100

 )

 

     Total

$ 3,340,540

 

%

$ 2,783,440

 

%

 

Liabilities and Stockholders’ Equity

Accounts payable

$ 50,700

%

$ 75,180

%

Accrued expenses

169,500

200,500

Bonds payable

450,100

190,600

Capital stock

2,100,000

1,770,300

Retained earnings

570,240

 

 

546,860

 

 

     Total

$ 3,340,540

 

%

$ 2,783,440

 

%

 

(b)

The parts of this question must be completed in order. This part will be available when you complete the part above.

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