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ACCT 221 7380 Principles of Accounting 2:

221 Exam 1 Ch 14-18

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Question 1:

1. Oriole Corporation has 10,000 shares of 9%, \$100 par value, cumulative preferred stock outstanding at December 31, 2022. No dividends were declared in 2020 or 2021. If M. Oriole wants to pay \$440,000 of dividends in 2022, what amount of dividends will common stockholders receive?

Amount of dividend \$

QUESTION 2.

For the year ending December 31, 2022, Lily Inc. reports net income \$132,000 and cash dividends \$81,000.

Determine the balance in retained earnings at December 31, assuming the balance in retained earnings on January 1, 2022, was \$216,000.

Balance in retained earnings \$

QUESTION 3:

On January 1, 2022, Oriole Corporation had \$1,480,000 of common stock outstanding that was issued at par. It also had retained earnings of \$742,000. The company issued 40,000 shares of common stock at par on July 1 and earned net income of \$400,000 for the year.

Journalize the declaration of a 16% stock dividend on December 10, 2022, for the following independent assumptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter O for the amounts.)

1. Par value is \$10, and market price is \$18.

b.

Par value is \$5, and market price is \$21.

Format Needed:

No. Account Titles and Explanation                 Dr               Cr

a.

b.

Question 4:

On January 1, 2022, Coronado Corporation purchased 4,600 shares of treasury stock. Other information regarding Coronado Corporation is provided as follows.

2021                                      2022

Net income

Dividends on preferred stock

Dividends on common stock

\$92,000 \$101,200

\$27,600 \$27,600

\$18,400 \$23,000

Weighted-average number of common shares outstanding

44,000

39,400

Common stockholders’ equity beginning of year

Common stockholders’ equity end of year

\$552,000 \$690,000

\$690,000 \$763,600

(a) Compute earnings per share for each year. (Round answer to 2 decimal places, e.g. 10.50.)

2021

Earnings per share

\$

2022

\$

QUESTION  5:

Presented below are long-term liability items for Oriole Company at December 31, 2022.

Bonds payable, due 2024

\$650,000

Lease liability

60,000

Notes payable, due 2027

70,000

Discount on bonds payable

42,250

Prepare the long-term liabilities section of the balance sheet for Oriole Company. (Enter account name only and do not provide descriptive information.)

Oriole Company

Balance Sheet (Partial)

Put Correct Date here:

Question 6:

Crane Corporation issues \$420,000 of bonds for \$428,400.

(a)

Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation                      Dr                 Cr

Parts b, c and d available

Question 7:

Sandhill Company issued \$526,000 of 8%, 10-year bonds on January 1, 2022, at face value. Interest is payable annually on January 1, 2023.

(a)

Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Jan. 1,

2022

Debit

Credit

Question  8:

Cullumber Company issued \$730,000, 9%, 10-year bonds on December 31, 2021, for \$660,000. Interest is payable annually on December 31. Cullumber Company uses the straight-line method to amortize bond premium or discount.

(a)

Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date Account Titles and Explanation

Dec. 31.

2021

Debit

Credit

QUESTION 9

Suppose the 2022 adidas financial statements contain the following selected data (in millions).

Current assets

\$5,700

Cash

\$900

Total assets

10,100

Interest expense

290

Current liabilities

4,100

Income taxes

240

Total liabilities

6,262

Net income

370

Compute the following values.

(a) Debt to assets ratio. (Round to O decimal places, e.g. 60.)

(b) Times interest earned. (Round to 2 decimal places, e.g. 6.25.)

%

times

Question 10:

On January 1, 2022, Sandhill Inc. entered into an agreement to lease 20 computers from Drummond Electronics. The terms of the lease agreement require three annual rental payments of \$41,000 (including 10% interest) beginning December 31, 2022. The present value of the three rental payments is \$101,959. Sandhill considers this a finance lease.

Prepare the journal entry to record the lease agreement on the books of Sandhill Inc. on January 1, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date Account Titles and Explanation

Jan. 1

Debit

Credit

Question 11:

Sandhill Company owns 30% of Lauer Company. For the current year, Lauer reports net income of \$250,000 and declares and pays a \$50,000 cash dividend.

Record Sandhill’s equity in Lauer’s net income and the receipt of dividends from Lauer. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter O for the amounts.)

Date Account Titles and Explanation

Debit

Credit

Dec. 31

Dec. 31

(To record equity in Lauer’s net income)

QUESTION 12:

In its first year of operations, Oriole Corporation purchased available-for-sale debt securities costing \$67,500 as a long-term investment. At December 31, 2022, the fair value of the securities is \$62,750.

Prepare the adjusting entry to record the securities at fair value. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter O for the amounts.)

Date Account Titles and Explanation

Dec. 31

Debit

Credit

Question 13:

At December 31, 2022, the trading debt securities for Crane, Inc. are as follows.

Security

Cost

Fair Value

A

\$17,500

\$15,800

B

12,200

14,200

| 1

с

22,500

19,400

\$52,200

\$49,400

(a)

Prepare the adjusting entry at December 31, 2022, to report the securities at fair value. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter O for the amounts.)

Date

Dec. 31

Account Titles and Explanation

Debit

Credit

Question 14:

The following T-account is a summary of the Cash account of Bramble Company.

Cash (Summary Form)

Balance, Jan. 1

8,600

Receipts from customers

365,800

Payments for goods

201,500

Dividends on stock investments

Proceeds from sale of equipment Proceeds from issuance of

5,600 36,200

Payments for operating expenses 140,400

Interest paid

10,200

Taxes paid

8,400

bonds payable

500,100 Dividends paid

59,800

Balance, Dec. 31

496,000

What amount of net cash provided (used) by financing activities should be reported in the statement of cash flows? (Show amount that decrease cash flow with either a-sign e.g.-15,000 or in parenthesis e.g. (15,000).)

Net cash

by financing activities \$

Question 15:

Vaughn, Inc. reported net income of \$2.45 million in 2022. Depreciation for the year was \$156,800, accounts receivable decreased \$343,000, and accounts payable decreased \$274,400.

Compute net cash provided by operating activities using the indirect method. (Show amounts that decrease cash flow with either a-sign e.g.-15,000 or in parenthesis e.g. (15,000).)

Vaughn, Inc.

Statement of Cash Flows-Indirect Approach

Adjustments to reconcile net income to

\$

40

Question 16:

Suppose that during 2022, Cypress Semiconductor Corporation reported net cash provided by operating activities of \$80,649,000, cash used in investing of \$40,662,000, and cash used in financing of \$7,542,000. In addition, cash spent for plant assets during the period was \$27,769,000. No dividends were paid.

Calculate free cash flow. (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Free cash flow

\$

Question 17:

Cullumber Company’s investments in equity securities at December 31 show total cost of \$202,000 and total fair value of \$208,500. Cullumber has less than a 20% ownership interest in the equity securities. Prepare the adjusting entry. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter O for the amounts.)

Account Titles and Explanation

Debit

Credit

Question18:

Here are comparative balance sheets for Sheridan Company. Prepare a statement of cash flows-indirect method.

SHERIDAN COMPANY

Comparative Balance Sheets

December 31

Assets

2020

2019

Cash

\$73,000

\$22,000

Accounts receivable

88,000

75,000

Inventory

173,000

188,000

Land

71,000 100,000

Equipment

264,000

198,000

Accumulated depreciation – equipment

(65,000) (32,000)

Total

\$604,000

\$551,000

Liabilities and Stockholders’ Equity

Accounts payable

\$36,000

\$47,000

Bonds payable

149,000

212,000

Common stock (\$1 par)

212,000 176,000

Retained earnings

207,000

116,000

Total

\$604,000

\$551,000

1.

Net income for 2020 was \$97,000.

2.

Cash dividends of \$6,000 were declared and paid.

3.

Bonds payable amounting to \$63,000 were redeemed for cash \$63,000.

4.

Common stock was issued for \$36,000 cash.

5.

Equipment that cost \$50,000 and had a book value of \$27,000 was sold for \$35,000 during 2020; land was sold at cost.

(a)

Prepare a statement of cash flows for 2020 using the indirect method. (Show amounts that decrease cash flow with either a -sign e.g. -15,000 or in parenthesis e.g. (15,000).)

SHERIDAN COMPANY Statement of Cash Flows

Adjustments to reconcile net income to

>

\$

Question 19:

The net income for Sheffield Co. for 2022 was \$276,200. For 2022, depreciation on plant assets was \$72,400, and the company incurred a loss on disposal of plant assets of \$30,800.

Compute net cash provided by operating activities under the indirect method, assuming there were no other changes in the company’s accounts. (Show amounts that decrease cash flow with either a-sign eg.-15,000 or in parenthesis e.g. (15,000).)

Sheffield Co.

Statement of Cash Flows-Indirect Method

Adjustments to reconcile net income to

Question 20:

Suppose these selected condensed data are taken from recent balance sheets of Bob Evans Farms (in thousands).

2022

2021

Cash

\$13,116

\$7,878

Accounts receivable (net)

21,673

20,721

Inventory

28,681

29,935

Other current assets

13,690

11,360

Total current assets

\$77,160

\$69,894

Total current liabilities

\$257,200

\$317,700

(a1) Compute the current ratio for each year. (Round answers to 2 decimal places, e.g. 0.15.)

Current ratio

2022

:1

2021

:1

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