Intermediate accounting questions

$39.00

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Accounting

17-9 U.S.M’s actuary determined that 2013 service cost is $60,000. Both the expected and actual rate of return on plan assets is 9%. The interest (discount) rate is 5%. U.S.M contributed $120,000 to the pension fund at the end of 2013, and retirees were paid $44,000 from plan assets.

Determine the following amounts at the end of 2013:

1) Pension Expense

2) Projected benefit obligation

3) Plan assets

4) Net pension asset or net pension liability

5) Prepare journal entries to record the pension expense, funding of plan assets, and retiree benefit payments.

Is USM’s pension plan underfunded or overfunded? Explain.

17-14The funded status of Hilton Paneling Inc.’s defined benefit pension plan and the balances in prior service cost and the net gain- pensions, are given below.

($ in 000’s)

2013 Beg Balances 2013 Ending Balances

Projected benefit obligation $2,300 $2,501

Plan assets 2,400 2,591

Funded Status 100 90

Prior service cost – AOCI 325 300

Net Gain – AOCI 330 300

Retirees were paid $270,000 and the employee contribution to the pension fund was $245,000 at the end of 2013. The expected rate of return on plan assets was 10%, and the actuary’s discount rate is 7%. There were no changes in actuarial estimates and assumptions regarding the PBO.

Determine the following amounts:

1 Actual return on plan assets

2Loss or Gain on plan assets

3Service cost

4Pension expense

Briefly explain how Hilton would have accounted for changes to actuarial estimates and assumptions regarding its PBO, if any changes in estimates and/or assumptions had been made.

CMA Questions 1 and 2

Briefly explain choices.

1) The projected benefit obligations (PBO) is best described as the

a) Present value of benefits accrued to date based on future salary levels

b) Present value of benefits accrued to date based on current salary levels

c) Increase in retroactive benefits at the date of the amendment of the plan

d) Amount of the adjustment necessary to reflect the difference between actual and estimated actuarial returns

2) On November 30, the Board of Directors of Baldwin Corp amended its pension plan giving retroactive benefits to its employees. The information below is provided at November 30.

Accumulated benefit obligation (ABO) $825,000

Projected benefit obligation (PBO) 900,000

Plan assets (fair value) 307,000

Market related asset value 301,150

Prior service cost 190,000

Average remaining service life of employees 10 years

Useful life of pension goodwill 20 years

Using the straight line method of amortization, the amount of prior service cost charged to expense during the year ended November 30 is:

a) $9,500

b) $19,000

c) $30,250

d) $190,000

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intermediate accounting questions

$21.00

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Foto Company manufactures and sells a product called JYMP. Results from last year from the sale
of JYMP appear below:
Sales revenue (8,000 JYMPs @ $120 each) ………….. $960,000
Variable costs ………………………………… 640,000
Contribution margin ……………………………. 320,000
Fixed costs:
Salaries of line supervisors ……………………. 100,000
Advertising expense ……………………………. 160,000
Allocated general overhead ……………………… 132,000
Net loss ……………………………………… <72,000>
Foto Company is considering eliminating the JYMP product line. The company has determined that
if the JYMP product line is discontinued, the contribution margin of its other products will
increase by $120,000.
Calculate the increase in company profits if the JYMP product line is discontinued.
Q2)
Orr Company makes and sells a single product called a Bik. It takes three yards of Material A to
make one Bik. Budgeted production of Biks for the next three months is as follows:
Budgted Biks to be Produced
February 15,000 units
March 18,500 units
April 12,700 units
The company wants to maintain monthly ending inventories of Material A equal to 25% of the next
month’s production needs. The cost of material A is $1.20 per yard. The company is in the process
of preparing a direct materials purchases budget.
Calculate the total cost of material A budgeted to be purchased in March.
Q3)
Apnea Video Rental Store is considering the purchase of an almost new minivan to deliver and
pick up video tapes from customers. The minivan will cost $95,000 and is expected to last 10
years. However, the minivan’s engine will need to be overhauled at a cost of $5,000 at the
end of year 3. In addition, purchasing this minivan would require an immediate investment of
$15,000 in working capital which would be released for investment elsewhere at the end of the
10 years. The minivan is expected to have a $10,000 salvage value at the end of 10 years. This
delivery service is expected to generate net cash inflows of $20,000 per year in each of the
10 years. Apnea’s cost of capital is 9%.

Calculate the net present value (NPV) of this investment opportunity. Do not use decimals in
your answer.

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intermediate accounting questions

$26.00

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roblem 1-5 (LO 4, 7) Revaluation of assets. Jansen Company is a corporation that was
organized on July 1, 20X1. The June 30, 20X6 balance sheet for Jansen is as follows:
Assets
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 400,500
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,250,000
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . (300,000) 950,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000
Prepaid insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,000
Machinery and equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . 1,473,500
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,500,000
Liabilities and Equity
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,475,000
Common stock, $10 par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,825,000
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,500,000
(continued)
Business Combinations 59
Machinery was purchased in fiscal years 20X2, 20X4, and 20X5 for $500,000, $850,000, and
$660,000, respectively. The straight-line method of depreciation and a 10-year estimated life with
no salvage value have been used for all machinery, with a half-year of depreciation taken in the
year of acquisition. The experience of other companies over the last several years indicates that the
machinery can be sold at 125% of its book value.
An analysis of the accounts receivable indicates that the allowance for doubtful accounts should
be increased to $337,500. An independent appraisal made in June 20X1 valued the land at $70,000.
Using the lower-of-cost-or-market rule, inventory is to be restated at $1,200,000.
To be exchanged are 16,000 shares of Clark Corporation for 120,000 Jansen shares. During
June 20X6, the fair value of a share of Clark Corporation was $265. The stockholders’ equity account
balances of Clark Corporation as of June 30, 20X6, were as follows:
Common stock, $10 par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,000,000
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,496,400
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,076,400
Direct acquisition costs are $12,000.
Assuming the books of Clark Corporation are to be retained, prepare the necessary journal entry
(or entries) to effect the business combination on July 1, 20X6, as a purchase. Use zone analysis
to support the purchase entries.

Problem 1-6 (LO 7) Cash purchase, several of each priority, with goodwill. Tweedy
Corporation is contemplating the purchase of the net assets of Sylvester Corporation in anticipation
of expanding its operations. The balance sheet of Sylvester Corporation on December 31,
20X1, is as follows:
1-60 Part 1 COMBINED CORPORATE ENTITIES AND CONSOLIDATIONS
Required _ _ _ _ _
Sylvester Corporation
Balance Sheet
December 31, 20X1
Current assets: Current liabilities:
Notes receivable . . . . . . . . . . . . $ 24,000 Accounts payable . . . . . . . . . . . $ 45,000
Accounts receivable . . . . . . . . . . 56,000 Payroll and benefit-related
Inventory . . . . . . . . . . . . . . . . . 31,000 liabilities . . . . . . . . . . . . . . . 12,500
Other current assets . . . . . . . . . . 18,000 Debt maturing in one year . . . . . 10,000
Total current assets . . . . . . . . . $129,000 Total current liabilities . . . . . . . $ 67,500
Investments . . . . . . . . . . . . . . . 65,000
Fixed assets: Other liabilities:
Land . . . . . . . . . . . . . . . . . . . $ 32,000 Long-term debt . . . . . . . . . . . . . $248,000
Building . . . . . . . . . . . . . . . . . 245,000 Payroll and benefit-related
Equipment . . . . . . . . . . . . . . . . 387,000 liabilities . . . . . . . . . . . . . . . 156,000
Total fixed assets . . . . . . . . . . 664,000 Total other liabilities . . . . . . . . 404,000
Intangibles: Stockholders’ equity:
Goodwill . . . . . . . . . . . . . . . . . $ 45,000 Common stock . . . . . . . . . . . . . $100,000
Patents . . . . . . . . . . . . . . . . . . 23,000 Paid-in capital in excess of par . . 250,000
Trade names . . . . . . . . . . . . . . 10,000 Retained earnings . . . . . . . . . . . 114,500
Total intangibles . . . . . . . . . . . 78,000 Total equity . . . . . . . . . . . . . 464,500
Total assets . . . . . . . . . . . . . . . $936,000 Total liabilities and equity . . . . . . $936,000
60 Business Combinations
An appraiser for Tweedy determined the fair values of the assets and liabilities to be as follows:
Assets Liabilities
Notes receivable . . . . . . . . . . . . $ 24,000 Accounts payable . . . . . . . . . . . $ 45,000
Accounts receivable . . . . . . . . . . 56,000 Payroll and benefit-related
Inventory . . . . . . . . . . . . . . . . . 30,000 liabilities . . . . . . . . . . . . . . . . 12,500
Other current assets . . . . . . . . . . 15,000 Debt maturing in one year . . . . . . 10,000
Investments . . . . . . . . . . . . . . . 63,000
Land . . . . . . . . . . . . . . . . . . . 55,000 Long-term debt . . . . . . . . . . . . . . 248,000
Building . . . . . . . . . . . . . . . . . 275,000 Payroll and benefit-related
Equipment . . . . . . . . . . . . . . . . 426,000 liabilities—long-term . . . . . . . . . 156,000
Goodwill . . . . . . . . . . . . . . . . . —
Patents . . . . . . . . . . . . . . . . . . 20,000
Trade names . . . . . . . . . . . . . . 15,000
The agreed-upon purchase price was $580,000 in cash. Direct acquisition costs paid in cash totaled
$20,000.
Using the above information, do zone analysis, and prepare the entry on the books of Tweedy
Corporation to purchase the net assets of Sylvester Corporation on December 31, 20X1.

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intermediate accounting questions

$29.00

Description

1.The director of cost management for Odessa
Company uses a statistical control chart to help management determine when to
investigate variances. The critical value is 1 standard deviation. The
company incurred the following direct-labor efficiency variances during the
first six months of the current year.

January

$

500

F

February

1,600

U

March

1,400

U

April

1,800

U

May

2,100

U

June

2,400

U


The standard direct-labor cost
during each of these months was $38,000. The controller has estimated that
the firm’s monthly direct-labor variances have a standard deviation of
$1,900.

Required:

a.

Determine the cutoff value for investigation if the
controller’s rule of thumb is to investigate all variances equal to or
greater than 6 percent of standard cost.

b.

Based on the cutoff value, which of the month(s) will have
their direct-labor efficiency variance investigated?(Select all that
apply.)

January
variance

February
variance

March
variance

April
variance

May
variance

June
variance

2.The following data pertain to Colgate
Palmolive’s liquid filling line during the first 10 months of a particular
year. The standard ratio of direct-labor hours to machine hours is 4:1. The
standard direct-labor rate is $15.98.

Colgate Palmolive: Direct-Labor Efficiency Variance Data*


Units
Produced

Machine
Hours

Standard
Direct-Labor
Hours

Actual
Direct-Labor
Hours

Direct-Labor
Efficiency
Variance

January

50,658

174.5

698.00

392.00

$

4,890

February

32,123

109.3

437.20

232.00

3,279

March

186,079

570.0

2,280.00

1,104.00

18,792

April

214,074

726.4

2,905.60

1,522.75

22,098

May

49,290

169.0

676.00

382.00

4,698

June

83,066

250.0

1,000.00

572.50

6,831

July

36,568

113.0

452.00

301.00

2,413

August

33,843

105.0

420.00

356.50

1,015

September

32,010

105.0

420.00

354.50

1,047

October

28,641

81.0

324.00

194.00

2,077


*Source of data: Alan S. Levitan and Sidney J. Baxendale,
“Analyzing the Labor Efficiency Variance to Signal Process Engineering
Problems,” Journal of Cost Management6, no. 2 (Summer 1992), p.
70.

Required:

1-a.

Which of the following amounts did Colgate Palmolive use in
calculating its standard direct labor hours for the month of January?(Select all that apply.)

Units produced

Machine
hours

Actual
direct-labor hours

Standard
ratio of direct-labor hours to machine hours

1-b.

Which of the following amounts did Colgate Palmolive use in
calculating its direct-labor efficiency variance for the month of January?
(Select all that apply.)

Units produced

Standard
direct-labor hours

Actual
direct-labor hours

Standard
direct-labor rate

2.

Calculate the following amounts.

a.

The standard direct-labor cost for each of the 10 months.(Round intermediate
calculation to 2 decimal places and final answers to nearest whole dollar
amount.)

Standard Direct-Labor Cost

January

February

March

April

May

June

July

August

September

October

b.

For each month, (expression error) percent of the standard
direct-labor cost.(Round your final answers to the nearest whole dollar amount.)

intermediate accounting questions

$16.00

Description

1. (1 point)
On January 1, 2014, Monopoly Corporation purchased a debt security as a held-to-maturity investment. Monopoly paid $358,859 for the 3-year bonds which had a face value of $350,000, a stated rate of 10% and pay interest annually. The bonds were sold to yield 9%, and the investment had a fair value of $354,718 at December 31, 2014.

With respect to this portfolio, what dollar amount will be reported on Monopoly’s December 31, 2014, balance sheet?
Investment in Bonds $___________________

2. (1 point)
Twister Corp owns a stock portfolio with the following 12/31/13 values:

Cost Fair Value
December 31, 2013: $388,000 $371,000

During 2014, Twister sold stocks from its portfolio. Those stocks had a cost basis of $168,000 and were sold for $172,000. Additionally, stocks were purchased for $200,000 as a passive investment. Dividends received during the year totaled $18,000. The investment portfolio had a fair value of $409,000 at December 31, 2014. “Preliminary income” (i.e., income before consideration of these investments) for the year ended December 31, 2014, totaled $100,000.

Part A) Assume the portfolio consists of only trading securities. With respect to this portfolio:

What dollar amount will be reported on Twister’s December 31, 2014, balance sheet?

Investment in Stocks $___________________

What dollar amount would Twister report as net income for the year ended December 31, 2014?

Net Income $___________________

Part B) Instead, assume that the portfolio consist of only available for sale securities, and that Twister reported the following Stockholders’ Equity on its December 31, 2013, balance sheet:

Common Stock $3,925,000
Paid-in-Capital 9,855,000
Accumulated Other Comprehensive Income 390,750
Retained Earnings 7,061,340

With respect to this available for sale portfolio, what dollar amounts will be reported on Twister’s December 31, 2014, balance sheet?
Investment in Stocks $___________________

Accumulated Other Comprehensive Income $___________________

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intermediate accounting questions

$14.00

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E10-6 Adjusting variable cost income to absorption net income:

the fixed overhead budgeted for MacBeth Co. at an expected capacity of 500,000 units is 1,500,000. variable costing is used internally, and the net income is adjusted to an absorption costing net income at year-end.

Data collected over the last three years show the following:

Units produced: 502,000 (first year), 498,000 (second year), 496,000 (third year)

Units sold: 496,000 (first year), 503,000 (second year), 496,000 (third year)

net income (variable cost): $500,000 (first year), $521,000 (second year), $497,000 (third year)

Determine the adjustment each year to convert the variable costing income to absorption costing net income. Compute the absorption costing net income for each year.

P10-8

Break-even analysis:

the production of a new product required Venetian Manufacturing Co. to lease additional plant facilities.

Based on studies, the following data have been made available: Estimated annual sales- 24,000 units:

Estimated costs: materials $96,000 at $4 per unit

direct labor $14,400 at $0.60 per unit

factory overhead 24,000 at $1.00 per unit

administrative expense 28,800 at $1.20 per unit

total $163,200 at $6.80 per unit

selling expenses are expected to be 5% of sales, and net income is to amount to $2.00 per unit.

1. calculate the selling price per unit (hint: let “x” equal the selling price and express selling expense as a percentage of “x”)

2. prepare an absorption costing income statement for the year ended December 31, 2013

3. calculate the break-even point expressed in dollars and in units, assuming that administrative expense and factory overhead are all fixed but other costs are fully variable.

P10-11

Calculating break-even point, contribution margin ration, and margin of safety ratio:

leprechaun enterprises inc., is considering building a manufacturing plant in county cork. predicting sales of 100,000 units, leprechaun estimates the following expenses:

materials: $19,000 (total annual expenses), 10% (percent of total annual expenses that are fixed)

labor: $26,000 (total annual expenses), 20% (percent of total annual expenses that are fixed)

overhead: $40,000 (total annual expenses), 40% (percent of total annual expenses that are fixed)

marketing and administration: $14,000 (total annual expenses, 60% (percent of total annual expenses that are fixed)

total: $99,000

an irish firm that specializes in marketing will be engaged to sell the manufactured product and will receive a commission of 10% of the sales price. none of the u.s. home office expense will be allocated to the irish facility.

1. if the unit sales price is $2, how many units must be sold to break even? (hint: first compute the variable cost per unit)

2. calculate the margin of safety ratio

3. calculate the contribution margin ratio

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intermediate accounting questions

$21.00

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Salem Corp. contracted for a specialized production machine from Quindo Industries, a tool company. The contract specified a price equal to “115 percent of production cost.” A sales executive at the Quindo told Salem’s management that the approximate price of the machine would be $1,725,000 based on the following estimates:
Direct material cost $500,000
Direct labor cost 400,000
Manufacturing overhead ( applied based on machine time) 600,000
Markup 225,000
Estimated price to $1,725,000

Two months later, Quindo Industries delivered the completed machinery, configured and manufactured as per the contract. However, the accompanying invoice caught Salem’s executives by surprise. The invoice provided the following:

Direct material cost $658,000 Direct labor cost 625,000
Manufacturing overhead (applied based on machine time) 640,000
Markup 288,450 Estimated price to Salem $2,211,450
Upon receiving the invoice, Salem executives requested an audit of the direct material charges because they were more than 30 percent higher than the original estimate. Quindo Industries granted the request and Salem hired your firm to conduct the audit.

a. Describe the strategy you used to validate the $658,000 charge for direct material and discuss the specific documents that you requested from the tool company as part of the audit.
b. Describe your strategy for validating the $625,000 charge for direct labor and discuss specific documents you will request from Quindo Industries as part of the audit.
c. How might Quindo Industries have manipulated the predetermined overhead rate?
d. Even if all the charges are validated, do you perceive the tool company’s behavior in this case as ethical? Explain.
e. What suggestions would you give to Salem for the next time they are looking to contract for such an expensive specialized product.

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intermediate accounting questions

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1. Seventh Heaven takes tourists on helicopter tours of Hawaii. Each tourist buys a $150 ticket; the variable costs average $60 per person. Seventh Heaven has annual fixed costs of $702,000.

a. How many tours must the company conduct in a month to break even?
b. What is the amount of monthly sales (in $dollars) to break-even ?
b. Compute the sales revenue needed to produce a target net profit of $36,000 per month.

2. Altered State University (ASU) is preparing its master budget for the upcoming academic year. Currently, 12,000 students are enrolled on campus; however, the admissions office is forecasting a 5% growth in the student body next year despite a tuition hike to $80 per credit hour. The following additional information has been gathered from an examination of university records and conversations with university officials:
• The average class has 30 students, and the typical student takes 15 credit hours each semester.
• Each class is three credit hours.
• Each faculty member teaches five classes during the academic year.

a. What is the budgeted tuition revenue for the upcoming academic year ?

b. How many faculty members will be needed to teach classes in the upcoming year ?

3. Sammy Corp manufactures helmets. Sammy uses a standard costing system with the following standards:

STANDARD Quantity Price
Direct Materials 1000 pounds $12 per lb.
Direct Labor 2500 hours $20 per hour
Variable OH ——- $30 per DLH

a. The actual amount of direct materials purchased and used last period was 900 pounds. The average price paid was $15.00 per pound. What is the overall Direct Material Variance ? Show your diagram here if you decide to use one.

b. What is the Direct Materials Price Variance ?

c. What is the Direct Materials Quantity Variance ?

d. The actual direct labor costs last period were $25.00 per hour. Sammy assumed that by paying the workers more than the standard, the workers’ higher efficiency would make up for the higher costs. Last period the Direct Labor Efficiency Variance was $14,000 (F). How many direct labor hours were actually used last period ? Show your diagram here if you use one

e. What is the Direct Labor Wage Variance ?

f. What is the overall Direct Labor Variance ?

g. What was the budgeted amount of Variable Overhead ?

h. The actual variable overhead costs were $70,000. What was the VARIABLE OVERHEAD SPENDING VARIANCE ? Make sure to clearly indicate your answer !!

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intermediate accounting questions

$28.00

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P9-28A
(p.517) :Capitalized asset cost and first year depreciaton, and identifying
depreciation results that meet management objectives

On January 9, 2010, Swifty Delivery Service
purchased a truck at cost of $67,000. Before placing the truck in service,
Swifty spent $2,200 painting it, $500 replacing tires, and $5,000 overhauling
the engine. The truck should remain in service for 6 years and have a residual
value of $14,700. The truck’s annual mileage is expected to be 15,000 miles in
each of the first 4 years and 10,000 miles in each of the next 2 years–80,000
miles in total. In deciding, which depreciation method to use, Jerry Speers, the
general manager, requests a depreciation schedule for each of the depreciation
methods (straight line, units of production, and double declining balance).

Requirements

1. Prepare a depreciation schedule for each
depreciation method, showing asset cost, depreciation expense, accumulated
depreciation , and asset book value.

2. Swifty prepares financial statements using the
depreciation method that reports the hightest net income in the early years of
asset use. For income tax purposes, the company uses the depreciation method
that minimizes income taxes in the early years. Consider the first year that
Swifty uses the truck. Identify the depreciation methods that meet the general
managers objectives, assuming the income tax authorities permit the use of any
of the methods.

P10A-9B: p.586 -Calculating present value

Calculating present value
Axel needs new manufacturing equipment. Two companies can provide similar equipment but under different payment plans:

Plan A: MRE offers to let Axel pay $35,000 each year for five years. The payments include interest at 12% per year.

Plan B: Westernhome will let Axel make a single payment of $42,000 at the end of five years. This payment includes both principal and interest at 12%.

Requirements:
1. Calculate the present value of Plan A.
2. Calculate the present value of Plan B.
3. Axel will purchase the equipment that costs the least, as measured by present value. Which equipment should Axel select? Why?

Additional Requirements

P11-29A p. 631: Analyzing the
stockeholders equity section of the balance sheet

The balance sheet of Ballcraft, Inc.,
reported the following:

Preferred stock, $6 par, 6%
5,000 shares authorized and issued
………………………………. $30,000
Common stock, $4.00 par value, 45,000 shares
authorized;
10,000 shares issued
………………………………….. $40,000
Additional paid-in-capital-common
…………………… $219,000

Total paid-in-capital
………………………………………….. $289,000

Retained earnings …………………………………………….
$90,000

Total stockholder’s equity
………………………………….. $379,000

Preferred dividends are in arrears for two years,
including the current year. On the balance sheet date, the market value of the
Ballcraft common stock was $31 per share.

Requirements:
1. Is the preferred stock cumulative or
noncumulative? How can you tell?
2. What is the total paid-in-capital of the
company?
3. What was the total market value of the common
stock?
4. Compute the book value per share of the common
stock.

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