The board of directors of Moore Corporation is considering two plans for financing the
purchase of new plant equipment. Plan #1 would require the issuance of $5,000,000,
6%, 20-year bonds at face value. Plan #2 would require the issuance of 100,000 shares
of $5 par value common stock which is selling for $40 per share on the open market.
Moore Corporation currently has 100,000 shares of common stock outstanding and the
income tax rate is expected to be 35%. Assume that income before interest and income
taxes is expected to be $500,000 if the new factory equipment is purchased.
Instructions
Prepare a schedule which shows the expected net income after taxes and the earnings
per share on common stock under each of the plans that the board of directors is
considering.
Answer:
Identify which of the following accounts would appear in a post-closing trial balance.
Answer:
The revenue recognition principle dictates that revenue be recognized in the accounting
period in which cash is received.
Answer:
The current sections of Remington Inc.’s balance sheets at December 31, 2014 and
2015, are presented here. Remington’s net income for 2015 was $173,000. The income
statement included depreciation expense, $20,000, amortization expense, $10,000, and
a gain on sale of equipment, $7,000. The equipment was sold for $47,000. Remington
also issued bonds for $60,000.
Instructions
Prepare the net cash provided by operating activities section of the company’s statement
of cash flows for the year ended December 31, 2015, using the indirect method.
Answer:
Selected worksheet data for Patinkin Company are presented below.
Instructions
[a] Fill in the missing amounts.
[b] Prepare the adjusting entries that were made.
Answer:
Pickett Company typically sells subscriptions on an annual basis, and publishes six
times a year. The magazine sells 90,000 subscriptions in January at $15 each. What
entry is made in January to record the sale of the subscriptions?
Answer:
Gross profit is a measure of the overall profitability of a company.
Answer:
The accounts in the ledger of Ace Delivery Service contain ithe following balances on
July 31, 2015.
Instructions
Prepare a trial balance with the accounts arranged as illustrated in the chapter and fill in
the missing amounts for Cash and Salaries and Wages Expense. Assume net income for
the period is $3,500.
Answer:
If a company maintains special journals, sales of merchandise on credit should be
recorded in a _______________ whereas sales of merchandise for cash should be
recorded in the _______________.
Answer: