Chapter 18

33. Short-term creditors are usually most interested in evaluating a. solvency. b. marketability. c. liquidity. d. profitability.

34. A stockholder is interested in the ability of a firm to a. pay consistent dividends. b. appreciate in share price. c. survive over a long-period. d. all of these.

35. Assume the following sales data for a company: 2013 $1,000,000 2012 900,000 2011 750,000 2010 600,000

If 2010 is the base year, what is the percentage increase in sales from 2010 to 2012? a. 100% b. 150% c. 50% d. 66.7%

36. Walker Clothing Store had a balance in the Accounts Receivable account of $780,000 at the beginning of the year and a balance of $820,000 at the end of the year. Net credit sales during the year amounted to $8,000,000. The average collection period of the receivables in terms of days was a. 30 days. b. 365 days. c. 10 days. d. 37 days.

37. Parr Hardware Store had net credit sales of $5,200,000 and cost of goods sold of $4,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The receivables turnover was a. 7.4 times. b. 8.7 times. c. 6.2 times. d. 8 times.

Due Date: Sunday, April 7 @ 11 p.m. ET submit via WebTycho Assignment Folder


Use the following information for questions 38–40.

Waters Department Store had net credit sales of $12,000,000 and cost of goods sold of $9,000,000 for the year. The average inventory for the year amounted to $2,000,000.

38. Inventory turnover for the year is a. 6 times. b. 10.5 times. c. 4.5 times. d. 3 times.

39. The average number of days in inventory during the year (assuming 365 days in a year) was a. 122 days. b. 81 days. c. 61 days. d. 35 days.

40. Holt Company reported the following on its income statement: Income before income taxes $420,000 Income tax expense 120,000 Net income $300,000

An analysis of the income statement revealed that interest expense was $50,000. Holt Company’s times interest earned was a. 9.4 times. b. 8.4 times. c. 7 times. d. 6 times.

Due Date: Sunday, April 7 @ 11 p.m. ET submit via WebTycho Assignment Folder


ACCT 221 Midterm Problems

1. Albert Corporation is authorized to issue 1,500,000 shares of $4 par value common stock. During 2013, its first year of operation, the company has the following stock transactions. Jan. 15 Issued 500,000 shares of stock at $11 per share. Jan. 30 The company’s attorney accepted 3,500 shares of common stock as payment for legal

services rendered in helping the company incorporate. The legal services are estimated to have a value of $28,000.

July 2 Issued 100,000 shares of stock for land. The land had an asking price of $2,000,000. The stock is currently selling on a national exchange at $14 per share.

Instructions Journalize the transactions for Albert Corporation.

2. Vero Corporation has the following stockholders’ equity accounts on January 1, 2013:

The company uses the cost method to account for treasury stock transactions. During 2013, the following treasury stock transactions occurred:

March 1 Purchased 12,000 shares at $18 per share. July 1 Sold 3,500 shares at $21 per share. Sept 1 Sold 3,100 shares at $14 per share.

Instructions Journalize the treasury stock transactions for 2013.

Due Date: Sunday, April 7 @ 11 p.m. ET submit via WebTycho Assignment Folder


Common Stock, $10 par value $1,500,000

Paid-in Capital in Excess of Par 200,000

Retained Earnings 500,000

Total Stockholders’ Equity $2,200,000

3. Domino Corporation was organized on January 1, 2011. During its first year, the corporation issued 20,000 shares of $5 par value preferred stock and 200,000 shares of $1 par value common stock. At December 31, the company declared the following cash dividends:

Year Dividend

2011 5,000

2012 15,000

2013 35,000

Instructions (a) Show the allocation of dividends to each class of stock, assuming the preferred stock dividend

is 8% and cumulative.

(b) Journalize the declaration of the cash dividend at December 31, 2013.

4. On January 1, 2013, Alsace Corporation had $3,000,000 of $5 par value common stock outstanding that was issued at par and retained earnings of $2,000,000. The company issued 250,000 shares of common stock at $14 per share on July 1. On December 15, the board of directors declared a 15% stock dividend to stockholders of record on December 31, 2013, payable on January 15, 2014. The market value of Alsace Corporation stock was $18 per share on December 15 and $20 per share on December 31. Net income for 2013 was $550,000.

Instructions Journalize the issuance of stock on July 1, the declaration of the stock dividend on December 15, 2013, and the issuance of the stock dividend on January 15, 2014.

5. Prepare the journal entries for the following two independent situations:

(a) On January 1, 2013, Hathaway Corporation issued $300,000, 11%, 10-year bonds for $291,780. The bonds were sold to yield an effective-interest rate of 12%. Prepare the journal entry that Hathaway Corporation would make on January 1.

(b) Monaghan, Inc. redeemed $500,000 of its bonds at 96 on June 30, 2013, and immediately retired them. The carrying value of the bonds on the retirement date was $493,500. The bonds pay semiannual interest and the interest payment due on June 30, 2013 has been made and recorded. Prepare the journal entry to record the retirement of these bonds.

Due Date: Sunday, April 7 @ 11 p.m. ET submit via WebTycho Assignment Folder


6. On December 31, 2012, Rhadik, Inc. owned the following securities, held as a short-term investment (trading securities). The securities are not held for influence or control of the investee.

On December 31, 2012, the total fair value of the securities was equal to its cost. In 2013, the following transactions occurred: July 1 Received $2.25 per share cash dividend on BOD Co. common stock. Aug 1 Received $0.90 per share cash dividend on Carter Co. common stock. Sept 1 Sold 1,500 shares of BOD Co. common stock for cash at $7.50 per share, less brokerage

fees of $500. Oct 1 Sold 1,200 shares of Carter Co. common stock for cash at $28 per share, less brokerage

fees of $900.

At year end on December 31, 2013, the market values per share were:

Instructions (a) Prepare the journal entries to record the 2013 stock transactions. (b) On December 31, 2013, prepare any adjusting entry that might be necessary relative to the


7. Information pertaining to long-term investments in stock in 2013 by Tater Corporation follows:

Obtained significant influence over Tot Company by buying 30% of its 180,000 outstanding shares of common stock at a total cost of $28 per share on January 1, 2013. On June 15, Tot Company declared and paid a cash dividend of $1.80 per share. On December 31, Tot’s reported net income was $520,000.

Instructions Prepare journal entries for January 1, June 15, and December 31 for Tater Corporation.

Due Date: Sunday, April 7 @ 11 p.m. ET submit via WebTycho Assignment Folder


Stock # of

Shares Cost

Carter Common Stock 3,200 76,800

BOD Common Stock 6,400 51,840

Williams Common Stock 2,700 34,290


Carter Common Stock $27.00

BOD Common Stock $5.00

Williams Common Stock $15.00

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