devry acct312 week4,5,6 and 7 homework assignment

Week Four – Homework Exercises E19-2, E19-5, E19-10, and
E19-17
E19-2 On January 1,
2013, VKI Corporation awarded 12 million of its $1 par common shares to key
personnel, subject to forfeiture if employment is terminated within three
years. On the grant date, the shares have a market price of $2.50 per share.
Required: 1.
Determine the total compensation cost pertaining to the restricted shares.
2.
Prepare the appropriate journal entry to record the award of restricted shares
on January 1, 2013.
3.
Prepare the appropriate journal entry to record compensation expense on
December 31, 2013.
4.
Prepare the appropriate journal entry to record compensation expense on
December 31, 2014.
5.
Prepare the appropriate journal entry to record compensation expense on
December 31, 2015.
6.
Prepare the appropriate journal entry to record the lifting of restrictions on
the shares at December 31, 2015.
E19-5 American Optical
Corporation provides a variety of share-based compensation plans to its
employees. Under its executive stock option plan, the company granted options
on January 1, 2013, that permit executives to acquire 4 million of the
company’s $1 par common shares within the next five years, but not before
December 31, 2014 (the vesting date). The exercise price is the market price of
the shares on the date of grant, $14 per share. The fair value of the 4 million
options, estimated by an appropriate option pricing model, is $3 per option. No
forfeitures are anticipated. Ignore taxes.
Required: 1.
Determine the total compensation cost pertaining to the options.
2.
Prepare the appropriate journal entry to record the award of options on January
1, 2013.
3.
Prepare the appropriate journal entry to record compensation expense on
December 31, 2013.
4.
Prepare the appropriate journal entry to record compensation expense on
December 31, 2014.
E19-10 For the year
ended December 31, 2013, Norstar Industries reported net income of $655,000. At
January 1, 2013, the company had 900,000 common shares outstanding. The
following changes in the number of shares occurred during 2013:
30-Apr Sold 60,000
shares in a public offering.
24-May Declared and
distributed a 5% stock dividend.
1-Jun Issued 72,000
shares as part of the consideration for the purchase of assets from a subsidiary
Required: Compute
Norstar’s earnings per share for the year ended December 31, 2013.
E19-17 “(Note:
This is a variation of E 19–15 modified to include convertible bonds).
On December 31, 2012, Berclair Inc. had 200 million shares
of common stock and 3 million shares of 9%, $100 par value cumulative preferred
stock issued and outstanding. On March 1, 2013, Berclair purchased 24 million
shares of its common stock as treasury stock. Berclair issued a 5% common stock
dividend on July 1, 2013. Four million treasury shares were sold on October 1.
Net income for the year ended December 31, 2013, was $150 million. The income
tax rate is 40%.
Also outstanding at December 31 were incentive stock options
granted to key executives on September 13, 2008. The options are exercisable as
of September 13, 2012, for 30 million common shares at an exercise price of $56
per share. During 2013, the market price of the common shares averaged $70 per
share.
$62.5 million of 8% bonds, convertible into 6 million common
shares, were issued at face value in 2009.”
Required: Compute
Berclair’s basic and diluted earnings per share for the year ended December 31,
2013.Week Five – Homework Exercises E20-1, E20-10, E20-17, and
E20-24
E20-1 “During
2011 (its first year of operations) and 2012, Batali Foods used the FIFO
inventory costing method for both financial reporting and tax purposes. At the
beginning of 2013, Batali decided to change to the average method for both
financial reporting and tax purposes.
Income components before income tax for 2013, 2012, and 2011
were as follows ($ in millions):”
2013 2012 2011
Revenues $420
$390 $380
Cost of goods sold (FIFO) (46) (40) (38)
Cost of goods sold (average) (62) (56) (52)
Operating expenses (254) (250) (242)
Dividends of $20 million were paid each year. Batali’s
fiscal year ends December 31.
Required: 1.
Prepare the journal entry at the beginning of 2013 to record the change in
accounting principle. (Ignore income taxes.)
2.
Prepare the 2013–2012 comparative income statements.
3.
Determine the balance in retained earnings at January 1, 2012, as Batali
reported previously using the FIFO method.
4.
Determine the adjustment to the January 1, 2012, balance in retained earnings
that Batali would include in the 2013–2012 comparative statements of retained
earnings or retained earnings column of the statements of shareholders’ equity
to revise it to the amount it would have been if Batali had used the average
method.
E20-10 For financial
reporting, Clinton Poultry Farms has used the declining-balance method of
depreciation for conveyor equipment acquired at the beginning of 2010 for
$2,560,000. Its useful life was estimated to be six years with a $160,000
residual value. At the beginning of 2013, Clinton decides to change to the
straight-line method. The effect of this change on depreciation for each year
is as follows ($ in 000s):
Year Straight-Line Declining Balance Difference
2010 $400 $852 $453

2011 400 569 169
2012 400 379 -21
$1,200 $1,801 $601

Required: 1.
Briefly describe the way Clinton should report this accounting change in the
2012–2013 comparative financial statements.
2.
Prepare any 2013 journal entry related to the change.
E20-17 Wardell
Company purchased a mini computer on January 1, 2011, at a cost of $40,000. The
computer has been depreciated using the straight-line method over an estimated
five-year useful life with an estimated residual value of $4,000. On January 1,
2013, the estimate of useful life was changed to a total of 10 years, and the
estimate of residual value was changed to $900.
Required: 1.
Prepare the appropriate adjusting entry for depreciation in 2013 to reflect the
revised estimate.
2.
Repeat requirement 1 assuming that the company uses the
sum-of-the-years’-digits method instead of the straight-line method.
E20-24

For each of the following inventory errors occurring in 2013,
determine the effect of the error on 2013’s cost of goods sold, net income,
and retained earnings. Assume that the error is not discovered until 2014 and
that a periodic inventory system is used. Ignore income taxes.

Week Six – Homework Exercises E21-14, E21-21and P21-4
E21-14 In preparation
for developing its statement of cash flows for the year ended December 31,
2013, Millennium Solutions, Inc., collected the following information ($ in
millions):
Payment for the early extingushments of
long-term notes
(book value: $50 million)
$54
Sales of common shares 176
Retirement of common shares 122
Loss on sale of equipment 2
Proceeds from safe of equipment 8
Issuance of short-term note payable for cash 10
Acquisition of building for cash 7
Purchase of marketable securities (not a cash equivalent) 5
Purchase of marketable securities (considered a cash
equivalent) 1
Cash payment for 3-year insurance policy 3
Collection of note receivable with interest (principal
amount, $11) 13
Declaration of cash dividends 33
Distribution of cash dividends declared in 2012 30
Required: 1. In Millennium’s statement of cash flows,
what were net cash inflows (or outflows) from investing activities for 2013?
2. In Millennium’s statement of cash flows,
what were net cash inflows (or outflows) from financing activities for 2013?
E21-21 The income
statement and a schedule reconciling cash flows from operating activities to
net income are provided below ($ in 000s) for Peach Computers.
PEACH COMPUTERS Reconciliation
of Net Income
Income Statement To
Net Cash Flows from Operating Activites
For the Year Ended December 31, 2013
Sales $305
Net income $22

Cost of goods sold (185) Adjustments for Noncash
Effects
Gross margin 120 Depreciation expense 11
Salaries expense $41
Loss
on sale of land 5
Insurance expense 19 Changes
in operating assets and liabilities:
Depreciation expense 11 Decrease in accounts receivable 6
Loss on sale of land 5 76 Increase in inventory (13)
Income before tax 44 Decrease in accounts payable (8)
Income tax expense (22) Increase in salaries payable 5
Net income $22
Decrease in prepaid insurance 9
Increase in income tax payable 20
Net cash flows from operating activities $57

Required: 1.
Calculate each of the following amounts for Peach Computers:
a. Cash received from customers during
the reporting period.
b. Cash paid to suppliers of goods during
the reporting period.
c. Cash paid to employees during the
reporting period.
d. Cash paid for insurance during the
reporting period.
e. Cash paid for income taxes during the
reporting period.
2.
Prepare the cash flows from operating activities section of the statement of
cash flows (direct method).
P21-4 The
comparative balance sheets for 2013 and 2012 and the statement of income for
2013 are given below for Dux Company. Additional information from Dux’s
accounting records is provided also.
DUX COMPANY
Comparative Balance Sheets
December 31, 2013 and 2012
($ in 000s)
2013 2012
Assets
Cash $33
$20
Accounts receivable 44 47
Dividends receivable 3 2
Inventory 55 50
Long-term investment 15 10
Land 70 40
Buildings and equipment 225 250
Less:
Accumulated depreciation (25) (50)
$420
$369
Liabilities
Accounts payable $13
$20
Salaries payable 2 5
Interest payable 4 2
Income tax payable 7 8
Notes payable 30 0
Bonds payable 95 70
Less: Discount
on bonds (2) (3)
Shareholders’ Equity
Common stock 210 200
Paid-in capital—excess of par 24 20
Retained earnings 45 47
Less: Treasury
stock (8) 0
$420
$369
Revenues
Sales revenue $200

Dividend revenue 3 $203
Expenses
Cost of goods
sold 120
Salaries expense 25
Depreciation
expense 5
Interest expense 8
Loss on sale of
building 3
Income tax
expense 17 178
Net income $25

Additional information from the accounting records:
a. A building that originally cost $40,000, and which was
three-fourths depreciated, was sold for $7,000.
b. The common stock of Byrd Corporation was purchased for
$5,000 as a long-term investment.
c. Property was acquired by issuing a 13%, seven-year,
$30,000 note payable to the seller.
d. New equipment was purchased for $15,000 cash.
e. On January 1, 2013, bonds were sold at their $25,000 face
value.
f. On January 19, Dux issued a 5% stock dividend (1,000
shares). The market price of the $10 par value common stock was $14 per share
at that time.
g. Cash dividends of $13,000 were paid to shareholders.
h. On November 12, 500 shares of common stock were
repurchased as treasury stock at a cost of $8,000.
Required: Prepare
the statement of cash flows of Dux Company for the year ended December 31,
2013. Present cash flows from operating activities by the direct method. (You
may omit the schedule to reconcile nWeek Seven – Homework Exercises P21-5 and P21-6
P21-5 Comparative
balance sheets for 2013 and 2012 and a statement of income for 2013 are given
below for Metagrobolize Industries. Additional information from the accounting
records of Metagrobolize also is provided.
METAGROBOLIZE INDUSTRIES
Comparative Balance Sheets
December 31, 2013 and 2012
($ in 000s)
2013 2012
Assets
Cash $600
$375
Accounts receivable 600 450
Inventory 900 525
Land 675 600
Building 900 900
Less:
Accumulated depreciation (300) (270)
Equipment 2,850 2,250
Less:
Accumulated depreciation (525) (480)
Patent 1,200 1,500
$6,900
$5,850
Liabilities
Accounts payable $750
$450
Accrued expenses payable 300 225
Lease liability–land 150 0
Shareholders’ Equity
Common stock 3,150 3000
Paid-in capital—excess of par 750 675
Retained earnings 1,800 1,500
Revenues
Sales revenue $2,645

Gain on sale of
land 90 $2,735
Expenses
Cost of goods
sold $600

Depreciation
expense–building 30
Depreciation
expense–equipment 315
Loss on sale of
equipment 15
Amortization of
patent 300
Operating
expenses 500 1,760
Net income $975

Additional information from the accounting records:
a. During 2013, equipment with a cost of $300,000 (90%
depreciated) was sold.
b. The statement of shareholders’ equity reveals reductions
of $225,000 and $450,000 for stock dividends and cash dividends, respectively.
Required: Prepare
the statement of cash flows of Metagrobolize for the year ended December 31,
2013. Present cash flows from operating activities by the direct method. (You
may omit the schedule to reconcile net income to cash flows from operating
activities.)
P21-6 The income
statement and a schedule reconciling cash flows from operating activities to
net income are provided below ($ in millions) for Mike Roe Computers.
PEACH COMPUTERS Reconciliation
of Net Income
Income Statement To
Net Cash Flows from Operating Activites
For the Year Ended December 31, 2013
Sales $150
Net income $13

Cost of goods sold (90) Adjustments for noncash
effects:
Gross margin 60 Decrease in accounts
receivable 5
Salaries expense $20
Gain
on sales of equipment (12)
Insurance expense 12 Increase
in inventory (6)
Depreciation expense 5 Increase
in accounts payable 9
Interest expense 6 (43) Increase in salaries payable 3
Gain and losses: Depreciation
expense 5
Gain on sale of
equipment 12 Decrease in bond
discount 3
Loss on sale of
land (3) Decrease in prepaid
insurance 2
Income before tax 26 Loss on sale of land 3
Income tax
expense (13) Increase in income tax
payable 6
Net income $13

Net cash flows from operating activities $31

Required: 1.
Calculate each of the following amounts for Mike Roe Computers:
a. Cash received from customers
during the reporting period.
b. Cash paid to suppliers of goods
during the reporting period.
c. Cash paid to employees during the
reporting period.
d. Cash paid for interest during the
reporting period.
e. Cash
paid for insurance during the reporting period.
f. Cash
paid for income taxes during the reporting period.
2.
Prepare the cash flows from operating activities section of the statement of
cash flows (direct method).