Foley Word Processing Service uses the straight-line method of depreciation. The
company’s fiscal year end is December 31. The following transactions and events
occurred during the first three years.
Instructions
Prepare the necessary entries. (Show computations.)
Answer:
A change in inventory methods during the year would be classified as a change in
__________________.
Answer:
Slotkin Health is considering two alternatives for the financing of some high
technology medical equipment. These two alternatives are:
1> Issue 60,000 shares of $10 par value common stock at $50 per share.
2> Issue $3,000,000, 8%, 10-year bonds at par.
It is estimated that the company will earn $900,000 before interest and taxes as a result
of acquiring the medical equipment. The company has an estimated tax rate of 40% and
has 80,000 shares of common stock outstanding prior to the new financing.
Instructions
Determine the effect on net income and earnings per share for these two methods of
financing.
Answer:
The ________________ principle states that assets should be recorded at the value
exchanged at the time the asset is acquired.
Answer:
On January 1, 2015, Hogan Enterprises issued 8%, 20-year bonds with a face amount of
$3,000,000 at 10 Interest is payable semiannually on June 30 and December 3
Instructions
Prepare the entries to record the issuance of the bonds and the first semiannual interest
payment assuming that the company uses straight-line amortization.
Answer:
Using borrowed money to increase the rate of return on common stockholders’ equity is
called “trading on the equity.”
Answer:
A sales slip, a check, and a cash register tape are examples of ________________ used
as evidence that a transaction has taken place.
Answer:
In preparing a statement of cash flows, an increase in the Common Stock and Treasury
Stock accounts during a period would be an investing activity.
Answer:
If a company has no beginning inventory and the unit cost of inventory items does not
change during the year, the value assigned to the ending inventory will be the same
under LIFO and average cost flow assumptions.
Answer: