Premium Essay

Accounting Text and Cases 13th Ed. Hawkens

In: Business and Management

Submitted By Honza808
Words 5515
Pages 23
CHAPTER 9 SOURCES OF CAPITAL: OWNERS’ EQUITY
Changes from Eleventh Edition Updated from Eleventh Edition Approach By comparison with Chapter 8, this chapter’s equity topics are relatively straightforward. I try to downplay the differences between equity accounting for unincorporated and incorporated businesses. As a consultant to the former, I urge them to impute market salaries for their employee-owners, so that their income can be compared with the pretax earnings of incorporated firms. Cases Xytech, Inc. provides practice in accounting for various owners’ equity transactions. Innovative Engineering Company involves comparison of alternative financing arrangements for a new company. UPC, Inc., examines the calculation of earnings per share for annual periods. Maxim Integrated Products, Inc., provides a platform to discuss accounting for stock options under PAS 123R. This is a new case with this edition.

Problems
Problem 9–1 a. (1)

Debt/Equity Debt/Capitalization Ratio Ratio Including current liabilities.................................................................................................................... Rarely calculated $97,920 = 66.7% this way. $146,880

(2)

Excluding current liabilities except $79,560 $79,560 = 35.1% = 54.2% current portion of long-term debt........................................................................................................... $226,440 $146,880

(3)

Excluding all current liabilities.............................................................................................................. $73,440 $73,440 = 50.0% = 33.3% $146,880 $220,320

b. These two ratios measure the proportion of funds the company has raised from creditors as opposed to owners. They indicate how much “leverage” the firm has in its capital structure. The basic trade-off a company makes in determining the “right” ratio…...

Similar Documents

Premium Essay

Accounting Text and Cases

...Chapter 7 LONG-LIVED NONMONETARY ASSETS AND THEIR AMORTIZATION Problems Problem 7-1 With units-of-production depreciation, one finds the cost of one production unit, and then multiplies this by the units used in a year to determine the year’s depreciation: [pic] | | | | | |Units of | | | | | | | | |Production |SYD | | |Years |Units |x |$.08 |= |Depreciation |Charge | | |1 |930,000 |x |$.08 |= |$ 74,400 |$80,571 |(6/21 x $282,000) | |2 |800,000 |x | .08 |= |64,000 |67,143 |(5/21 x 282,000) | |3 |580,000 |x | .08 |= |46,400 |53,714 |(4/21 x 282,000) | |4 |500,000 |x | .08 |= |40,000 |40,286 |(3/21 x 282,000) | |5 |415,000 |x | .08 |= |33,200 |26,857 |(2/21 x 282,000) | |6 | 300,000 |x | .08 |= | 24,000 | 13,429 |(1/21 x 282,000) ......

Words: 565 - Pages: 3

Premium Essay

Accounting Case

...|Useful life |10 years | |Salvage value at the end of useful life |0 | |Annual revenues |800,000 | |Annual variable costs |300,000 | |Annual fixed costs (excluding depreciation) |100,000 | |Required rate of return (company stipulated) |12% | |Corporate tax rate |30% | The company uses a straight-line depreciation method for accounting and tax purposes. a. Will Wendy accept the project? Make a recommendation after calculating her ROI with and without the investment. Assume that investment occurs at the start of the year. [pic] [pic] Comparing it in 3rd year [pic] Though in the first year of investment, Wendy’s ROI after investment will be 34.36% based on which she should reject the project. But from the second year onwards it will start growing. If she decides to stay with the company longer, this new investment makes sense for Wendy in the long run (after 1 year) and it is not affecting her presently as well. No, Wendy will reject the project given the first year’s ROI. b. Assume that the company evaluates its......

Words: 1242 - Pages: 5

Premium Essay

Accounting Text and Cases

...UNIVERSITAS INDONESIA ACCOUNTING CHAPTER 5 Group 4 Muhammad Fariz Haikal 1206334291 Mutia Imro Atussoleha 1206334303 Shervani Andita P. 1206334594 Magister Management Fakultas Ekonomi Universitas Indonesia Jakarta 2013 Problem 5-4 As Of 31 Dec A/R =750.000 AFDA=37.500 Days Account Outstanding|Amount|Expected Percentage Uncollectible*|Estimated Uncollectible| 0-15 days|$450,000|0.01|$ 4,500| 16-30 days| 150,000|0.06| 9,000| 31-45 days| 75,000|0.20| 15,000| 46-60 days| 45,000|0.35| 15,750| 61-75| 15,000|0.50| 7,500| Balance for Allowance for Doubtful Accounts|$51,750| *(1-Probability of collection.) Days Account Outstanding > 75 days, has amount = $15,000, Expected Precentage Uncollectible=0% would be written off immediately and not be considered when determining the proper amount of the Allowance for Doubtful Accounts. b. Account Receivable|$735,000| Allowance for Doubtful Accounts.|$ 51,750| Net Accounts Receivable|$683,250| * Account Receivable= $750000 - $ 15.000 = $735.000 c. The year-end bad debt adjustment would decrease the year’s before-tax income by $29,250, as shown below: Estimated amount required in the Allowance for Doubtful Accounts|$51,750| Balance in the account after write-off of bad accounts but before adjustment|$22,500| Required charge to expense|$29,250| *$22500=$37500(Allowance for Doubtful Accounts ) -$15000 (Bed Debt......

Words: 799 - Pages: 4

Premium Essay

Carnival Cruise Line International Business 13th Ed

...Carnival Cruise Lines: Exploiting a Sea of Global Opportunity International business 13th ed. Summary: This case describes the history of the cruise industry and defines it, then it talks about the current state of the Cruise industry, then it goes on to discusses the business in international waters, after that it states the main points in Carnival Cruise Line operations, finally it argues the overseas environment. SWOT Analysis: Strengths: 1. Carnival cruise lines is one of three major companies that has the share of 91% of the market and it is the largest of all three. 2. That being said it is very strong financially. 3. The financial strengths of carnival cruise line generates international connections that will be very helpful in this line of business. 4. Another point resulting from the financial strengths is the ability to cover their customers geographically being based in different countries. 5. The ability to target different segments hence it has different cruises with different costs. Threats: 1. The health problem that faced them in 2006 where a virus hit the cruise caused bad publicity which causes carnival to take the infected ship out of service which caused financial losses. 2. Any health epidemics causes carnival to avoid ports of the country infected which also can cause financial losses. 3. The weather causes a major threat which normally forces the company to cancel the......

Words: 1192 - Pages: 5

Premium Essay

At&T Text Messaging Case

...AT&T TEXT MESSAGING CASE QUESTIONS 1. Describe the cost behavior in the wireless industry. What are the key cost drivers? What are the implications of this cost behavior for cost-volume-profit (CVP) relationships? The cost behavior is difficult in the wireless industry because the key components making up the costs for texting and wireless calls are the same. While there has been an increase in the number of text messages sent, almost to the point where more time is spent texting than calling, it’s hard to differentiate how the costs should be split. The key cost driver’s include several factors ranging from the fixed costs of infrastructure (purchasing servers, cell towers, etc), services (billing, accounting, maintenance, etc), and variable costs (storage on servers). The implications of the CVP is that it is difficult to determine what portion of the fixed/variable costs are associated with texting vs. other cell phone operations that use all of the same cost drivers. 2. What kinds of margins does text messaging produce? It’s difficult to say exactly what type of margins texting produces, but I think that the best way to determine it would be to allocate a weighted-average contribution margin to determine the approximate number. The fixed costs such as servers should have a 90/10 allocation because text messages take up little bandwidth, but all other costs should be allocated 50/50 because the total income from the two operations seems to be about......

Words: 462 - Pages: 2

Premium Essay

An Accounting Case

...SHEPPARD’S Accounting game 1: Deyonne’s assets: 1. 400 sheep 2. 20 acres of land 3. A one-room cabin 4. A plow 5. Two carts 6. An ox Deyonne’s liabilities and deduction of assets: 1. 35 sheep 2. 3 sheep Due to the information, 20 acres of land equal 80 sheep according to the exchange rate of last year, a one-room cabin equal 3 acres of land and equal 12 sheep finally, a plow equals 2 goat and equal 2/3 sheep according to last year’s exchange rate and 2 carts which were traded with a poor acre of land equals 8 sheep plus 400 sheep. So Deyonne’s total assets are 500(2/3) sheep. Deyonne’s liabilities and assets deduction are 35 sheep plus 3 sheep, which will come to 38 sheep, therefore, his total net assets are 462(2/3) sheep. Batonne’s assets: 1. 360 sheep 2. 30 acres of land (which were trade with 35 sheep 10 years ago) 3. 10 acres of land (which were trade current year) 4. 10 goats ( 3 goat equals 1 sheep according to last year’s price) 5. An ox ( equals 3 sheep) 6. A two-room cabin (worth 3 acres of land) Explanations: 1. Although Batonne obtained 20 acres of land 10 years ago with 35 sheep, the worth of land increased to 4 sheep per acre of land. So all the land should be converted to sheep according to this later price. 2. There is no exchange price for the poor land, so it is assumed that the price for poor land is also 4 sheep per acre of land. 3. Because......

Words: 599 - Pages: 3

Premium Essay

Accounting Case

...Case 12-02 To Recognize or Not to Recognize, That Is the Question Shakespeare Inc. (“Shakespeare” or the “Company”) is a privately held book printing and publishing company with a December 31 year-end. The summary balance sheet as of December 31, 2010, included: Current assets Noncurrent assets Total assets Current liabilities Noncurrent liabilities Total liabilities Total shareholder equity $ 6,500,000 28,250,000 $34,750,000 $ 4,500,000 13,750,000 $18,250,000 $16,500,000 The summary results of operations for the year ended December 31, 2010, included revenue of $10.7 million and net income of $1.2 million. Shakespeare is planning to issue its financial statements on March 20, 2011. On March 18, 2011, Shakespeare’s management will evaluate new information about one of its accruals and two subsequent events to determine if this information or events represent items that should be recognized or disclosed in the December 31, 2010, financial statements. Medical Benefits Payable For the past several years, Shakespeare has self-insured medical benefits (health and dental) for its employees. The Company records the costs of medical care in the period in which covered events occur and includes its best estimate of the costs that have been incurred but not yet reported (IBNR) in its estimate of the medical benefits payable. Shakespeare looks to the FASB Accounting Standards Codification, which defines IBNR as “losses incurred by the insured entity that have not yet been reported to...

Words: 967 - Pages: 4

Premium Essay

Accounting Case

...Seligram, Inc.: Electronic Testing Operations 1. What caused the existing system at ETO to fail? 2. Calculate the reported cost of the five components listed in Exhibit 6 using: a. The existing system. b. The system proposed by the accounting manager. c. The system proposed by the consultant. 3. Which system is preferable? Why? 4. Would you recommend any changes to the system you prefer? Why? 5. Would you treat the new machine as a separate cost center or as a part of the main test room? Bridgeton Industries: Automotive Component & Fabrication Plant 1. The official overhead allocation rate used in the 1987 model year strategy study at the Automotive Component and Fabrication Plant (ACF) was 435% of direct labor cost. Calculate the overhead allocation rate using the 1987 model year budget. Why do you get different numbers? 2. Calculate the overhead allocation rate for each of the model years 1988 through 1990. Are the changes since 1987 in overhead allocation rates significant? Why have these changes occurred? 3. Consider two products in the same product line: Product 1 Product 2 Expected Selling Price $62 $54 Standard Material Cost 16 27 Standard Labor Cost 6 3 Calculate the expected gross margins as a percentage of selling price on each product based on the 1988 and 1990 model year budgets, assuming selling price remains constant and material/labor costs do......

Words: 1915 - Pages: 8

Free Essay

Accounting Case

...Memo: To: Edward Sloane, Senior Audit Partner From: David Mynarski, CGA Date: January 15, 20X5 Re: Analysis of Issues for Vehicles for Hope Ltd. (VHL) Audit I have identified issues pertaining to the 2014 audit of VHL, based on the information provided in my meeting with VHL’s Accountant today. I have provided an analysis and recommendations for each of these issues. Financial Accounting Issues Under the Deferral method of accounting that VHL adheres to, the land, building and equipment donation by the Board member would be recorded as revenue and matched to expenses in the year the related costs of maintaining / operating these items are incurred. However, since VHL follows Part III of the CICA Handbook – Accounting and under Part III, an entity has a choice between recording restricted contributions under the Deferral or the Restricted Fund method. I recommend VHL choose the Restricted Fund method of accounting. This would allow VHL to separate their contributions into specific funds, based on what the funds are used for, eliminating the need to defer recognition of the donation revenue. Under the Restricted Fund method, the donated land, building and equipment would be recorded in the capital asset fund in the 2014 year, and the donation for automotive toolkits would be recorded in the restricted fund in 2014, since it is to be used for a specific purpose. Any other non-restricted, non-capital funds donated to VHL would be recorded in the Current...

Words: 1221 - Pages: 5

Premium Essay

Accounting Case

...ACCT 4400 Case Set 1 Case Set 1 covers Ethics and Professionalism in Auditing, and consists of the following cases: Case 1-1: Accounting Scandal Case 1-2: Audit Dilemma Case 1-3: Independence Case 1-1: Accounting Scandal This case focuses on the Diamond Foods accounting scandal. To complete this assignment, you should first conduct research using the Internet to better understand Diamond Foods and its fraud. Second, answer the following questions. Questions: 1. What was the motivation for the Diamond Foods scandal? Be specific, simply stating “greed” is insufficient. 2. (a) In general, what is a conflict of interest? (b) What role did the board of directors at Diamond Foods play in creating conflicts of interest at the company? (c) How should an auditor have responded to the conflicts of interest at Diamond Foods? 3. (a) What are momentum payments? (b) What was the role of momentum payments in the Diamond Foods scandal? 4. How did Diamond Foods fund its aggressive growth strategy of multiple acquisitions during a short period of time? Case 1-2: Audit Dilemma Assume that you have just started as a staff auditor at a large accounting firm. For your first audit, you are assigned to E&K books, a public company. Your firm has been auditing this client for several years, and has always given E&K clean opinions. A senior, Ella, will lead fieldwork on the E&K audit. You are glad to be working with Ella......

Words: 923 - Pages: 4

Premium Essay

Accounting Case

...Acquisition of Legal Subsidiary in Bankruptcy Parent Co. (Parent) is a nonpublic company with two wholly owned subsidiaries, Poor Son Co. (Poor Son), a nonpublic company, and Rich Grandson Co. (Rich Grandson), a public entity registered with the SEC. Rich Grandson was transferred to Parent by Poor Son in 2006. Parent, Poor Son, and Rich Grandson each prepare stand-alone financial statements in accordance with U.S. GAAP. This case addresses the accounting by Parent and Poor Son and does not address any accounting associated with Rich Grandson. Bankruptcy In January 2007, Poor Son filed a voluntary petition for reorganization under Chapter 11 of the U.S. bankruptcy code because of its inability to meet obligations as they became due. Specifically, Poor Son incurred significant levels of bank debt in prior years, and because of deteriorating business conditions, was no longer able to support that level of debt. Parent concluded that as a result of the bankruptcy, it lost control of Poor Son and deconsolidated Poor Son from its financial statements. Parent cited the following to support a loss of control: • The bankruptcy court imposed a corporate governance stipulation under which Parent lost its ability to unilaterally remove and replace three out of the five members comprising Poor Son’s board of directors. • In 2008, Poor Son filed an action against Parent seeking to void the transfer of Rich Grandson as a fraudulent transfer, and seeking the return of its interest......

Words: 631 - Pages: 3

Free Essay

Accounting Case

...instead of weekend one), just because he ignored the difference time between India time and US time. on the other hand, Devilal didn’t contact Nick at his home just because of avoiding personal conflicts. Also I think that the Dubai Team has to take some responsibility, because they caused the queue which was sent to the wrong place. 2 What role did diversity play on this team? Generallyspeaking in this case, diversity caused a negative (or disadvantage) role. Instead the diversity caused innovation and productivity. Diversity here in this case caused conflicts and unfair feelings. Such as the conflicts between Mumbai team and Dubai team, the conflicts between Paris team and the US team and so on. What should James do in the short and long-term? Short run: James should make sure that there always someone standby 24 hours no mater the day time or the night to get the info updated in time. And also he should build a channel that all the top managers have the proper ways to get the info if there is something emergency happen. Long run: The most important thing here in the case is that James should build a fair and trust work environment to make employees working in a respectable way. And also James should try to communicate with the employees frequently not matter the region and the country....

Words: 282 - Pages: 2

Premium Essay

Text Book Answers Accounting 100

...Toronto, Ontario M1K 5G4. Or you can visit our Internet site at www.nelson.com. ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon may be reproduced or used in any form or by any means—graphic, electronic, or mechanical, including photocopying, recording, taping, web distribution or information storage and retrieval systems—without the written permission of the publisher. We wish to extend our gratitude to Ross Meacher for his immaculate attention to detail in the technical editing of this solutions manual. Table of Contents PART I PLANNING FOR THE TRIP Accounting Communication – An Introduction......................... 1 Financial Statements and the Annual Report .......................... 22 CHAPTER 1 CHAPTER 2 PART II GETTING BASIC TRAINING Processing Accounting Information ......................................... 40 Accrual Accounting, Adjusting Entries, and Accounting Cycle ...................................................................................... 74 CHAPTER 3 CHAPTER 4 PART III TOURING THE INCOME STATEMENT CHAPTER 5 CHAPTER 6 PART IV Income Measurement and the Income Statement................... 115 Inventories and Cost of Goods Sold........................................ 130 TOURING THE BALANCE SHEET Liquid Assets and Internal Control........................................... 154 Capital Assets: Property, Plant, and Equipment, Natural Resources, and Intangibles......

Words: 43800 - Pages: 176

Premium Essay

Solution of Intermadiate Accounting Chap 14 , 13th Edition

... 15 9 3, 4, 5 1, 3, 5 *7. 20, 21, 22, 23, 24, 25, 26 13, 14, 15 *This material is discussed in the Appendix to the Chapter. Copyright © 2010 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 13/e, Solutions Manual (For Instructor Use Only) 14-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives 1. 2. Describe the formal procedures associated with issuing long-term debt. Identify various types of bond issues. 1, 2 Brief Exercises Exercises Problems 3. Describe the accounting valuation for bonds at date of issuance. Apply the methods of bond discount and premium amortization. Describe the accounting for the extinguishment of debt. Explain the accounting for long-term notes payable. Explain the reporting of off-balance sheet financing arrangements. Indicate how to present and analyze long-term debt. Describe the accounting for debt restructuring. 1, 2, 3, 4, 5, 6, 7, 8 2, 3, 4, 5, 6, 7, 8, 10 11 12, 13, 14, 15 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15 3, 4, 5, 6, 7, 8, 9, 10, 12, 13, 14, 15 12, 13, 14, 15 16, 17, 18 1, 2, 3, 4, 5, 6, 7, 10 1, 2, 3, 4, 5, 6, 7, 10, 11 2, 4, 5, 6, 7, 10 8, 9 4. 5. 6. 7. 8. *9. 9 19 20, 21, 22, 23, 24, 25, 26 4, 10 12, 13, 14 14-2 Copyright © 2010 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 13/e, Solutions Manual (For Instructor Use Only) ASSIGNMENT CHARACTERISTICS TABLE Item E14-1 E14-2 E14-3 E14-4 E14-5 E14-6 E14-7 E14-8 E14-9 E14-10 E14-11 E14-12 E14-13 E14-14 E14-15 E14-16...

Words: 22251 - Pages: 90

Premium Essay

Intermediate Accounting 14th Ed. Ch 19 Answers

...CHAPTER 19 Accounting for Income Taxes ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics 1. Reconcile pretax financial income with taxable income. 2. Identify temporary and permanent differences. 3. Determine deferred income taxes and related items— single tax rate. 4. Classification of deferred taxes. 5. Determine deferred income taxes and related items— multiple tax rates, expected future income. 6. Determine deferred taxes, multiple rates, expected future losses. 7. Carryback and carryforward of NOL. 8. Change in enacted future tax rate. 9. Tracking temporary differences through reversal. 10. Income statement presentation. 9 8 16, 17, 18, 14, 21, 22 Questions 1, 13 3, 4, 5 6, 7, 13 2, 3, 4, 5, 6, 7, 9 15 10 Brief Exercises Exercises 1 1, 2, 4, 7, 12, 18, 20, 21 4, 5, 6, 7 Concepts Problems for Analysis 1, 2, 3, 8 2, 3, 4 3, 4, 5 2 1, 3, 4, 5, 7, 8, 3, 4, 8, 9 12, 14, 15, 19, 21, 23, 25 7, 11, 16, 18, 19, 20, 21, 22 2, 13, 16, 17, 18, 20, 22 3, 6 1, 2, 6, 7 10, 11, 12 2, 3, 5 1, 6, 7 10 12, 13, 14 11 9, 10, 23, 24, 25 16 8, 17 5 2, 7 2, 7 5, 6 1, 2, 3, 4, 5, 7, 1, 2, 3, 5, 10, 12, 16, 19, 7, 8, 9 23, 24, 25 7 1, 2, 7 11. Conceptual issues—tax allocation. 1, 2, 8, 19, 21, 22 7 12. Valuation allowance—deferred 8, 19 tax asset. 13. Disclosure and other issues. 15 7, 14, 15, 23, 24, 25 Copyright © 2010 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 13/e, Solutions Manual (For Instructor Use Only) 19-1 ASSIGNMENT......

Words: 22820 - Pages: 92