# Accounting Problems 30-34

Question # 00004870 Posted By: expert-mustang Updated on: 12/07/2013 12:52 PM Due on: 12/07/2013
Subject Accounting Topic Accounting Tutorials:
Question
30. The balance sheets at the end of each of the first two years of operations indicate the following:

2007 2006
Total current assets \$250,000 \$225,000
Total investments 50,000 25,000
Total fixed assets 450,000 300,000
Total current liabilities 100,000 37,500
Total long-term liabilities 200,000 112,500
Preferred 9% stock, \$100 par 50,000 50,000
Common stock, \$10 par 250,000 250,000
Paid-in capital in excess of par-
common stock 25,000 25,000
Retained earnings 125,000 125,000

If net income is \$50,000 and interest expense is \$20,000 for 2007, what are the earnings per share on common stock for 2007?
a. \$1.82
b. \$2.00
c. \$2.80
d. \$1.20

Problems:

31. On August 1, Clayton Co. issued \$1,300,000 of 20-year, 9% bonds, dated August 1, for \$1,225,000. Interest is payable semiannually on February 1 and August 1. Present the entries to record the following transactions for the current year (7 points):

(a) Issuance of the bonds.
(b) Accrual of interest and amortization of bond discount for the year, on December 31, using the straight-line method.

32. Excel Products Inc. pays its employees semimonthly. The summary of the payroll for December 31 indicated the following (10 points):

Salary expense \$120,000
Federal income tax withheld 20,000

Of the payroll, \$40,000 is subject to social security tax of 6%; \$120,000 is subject to Medicare tax of 1.5%; \$10,000 is subject to state unemployment tax of 4.3% and federal unemployment tax of 0.8%. Present the journal entries for payroll tax expense if the employees are paid (a) December 31 of the current year, (b) January 2 of the following year.

33. State the section(s) of the statement of cash flows prepared by the indirect method (operating activities, investing activities, financing activities, or not reported) and the amount that would be reported for each of the following transactions (9 points):

(a) Received \$145,000 from the sale of land costing \$70,000.
(b) Purchased investments for \$50,000.
(c) Declared \$35,000 cash dividends on stock. \$5,000 dividends were payable at the beginning of the year, and \$6,000 were payable at the end of the year.
(d) Acquired equipment for \$32,000 cash.
(e) Declared and issued 100 shares of \$20 par common stock as a stock dividend, when the market price of the stock was \$32 a share.
(f) Recognized by an adjusting entry depreciation for the year, \$48,000.
(g) Issued 85,000 shares of \$10 par common stock for \$25 a share, receiving cash.
(h) Issued \$500,000 of 20-year, 10% bonds payable at 99.
(i) Borrowed \$43,000 from Regional Bank, issuing a 5-year, 8% note for that amount.

34. The following information has been condensed from the December 31 balance sheets of Hanson Co. (5 points):

2010 2009
Assets:
Current assets \$ 825,500 \$ 674,300
Fixed assets (net) 1,473,600 1,275,300
Total assets \$2,299,100 \$1,949,600

Liabilities:
Current liabilities \$ 313,500 \$ 309,600
Long-term liabilities 703,000 545,000
Total liabilities \$1,016,500 \$ 854,600
Stockholders' equity \$1,282,600 \$1,095,000
Total liabilities and
stockholders' equity \$2,299,100 \$1,949,600

(a) Determine the ratio of fixed assets to long-term liabilities for 2010 and 2009.
(b) Determine the ratio of liabilities to stockholders' equity for 2010 and 2009.
(c) Comment on the year-to-year changes for both ratios.
Tutorials for this Question
1. ## Solution: Solution for Accounting Problems 30-34

Tutorial # 00004664 Posted By: expert-mustang Posted on: 12/07/2013 12:53 PM
Puchased By: 2
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1225,000 Discount on Issue of Bonds……….Dr. 75,000 Bonds Payable ……………………………Cr. 1300,000 (b) ...
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