2. Common Products has just made its first issue of stock (A+)

Common Products has just made its first issue of stock. It raised $1.2 million by selling 150,000 shares of stock to the public. These are the only shares outstanding. The par value of each share was $3. Complete the following table:

Common shares (par value)

Additional paid-in capital

Retained earnings

Net common equity $ 1,600,000

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2. Book value of common stockholders’ equity of Dow Chemical, December 31, 2010 (figures in billions)Book value of common stockholders’ equity of Dow Chemical, December 31, 2010 (figures in billions) (A+)

Book value of common stockholders’ equity of Dow Chemical, December 31, 2010 (figures in billions).

Common shares ($1.5 par value per share) $2.934

Additional paid-in capital 2.289

Retained earnings 17.739

Treasury shares at cost (0.242)

Other (4.878)

Net common equity $17.842

Required:

a. Suppose that Dow Chemical issues 120 million shares at $25 share. Show the company’s equity after the issue.

b. Suppose that Dow subsequently repurchased 60 million shares at $45 a share. Rework part (a) to show the effect of the further change.

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2. The shareholders of the Pickwick Paper Company need to elect eight directors (A+)

The shareholders of the Pickwick Paper Company need to elect eight directors. There are 200,000 shares outstanding.

Required:

a. How many shares do you need to own to ensure that you can elect at least one director if the company has majority voting?

b. How many shares do you need to own to ensure that you can elect at least one director if the company has cumulative voting?

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If there are 8 directors to be elected and a shareholder owns 150 shares (A+)

If there are 8 directors to be elected and a shareholder owns 150 shares, calculate the maximum number of votes that he or she can cast for a favorite candidate under

Required:

a. Majority voting

b. Cumulative voting

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3. The authorized share capital of the Alfred Cake Company is 120,000 shares (A+)

The authorized share capital of the Alfred Cake Company is 120,000 shares. The equity is currently shown in the company’s books as follows:

Common stock ($2 par value) $69,000

Additional paid-in capital 19,000

Retained earnings 39,000

Common equity 127,000

Treasury stock (4,000 shares) 13,000

Net common equity $114,000

Required:

a. How many shares are issued?

b. How many are outstanding?

c. How many more shares can be issued without the approval of shareholders?

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On December 1, 2012, Liang Chemical provides services to a customer for $88,800 (A+)

On December 1, 2012, Liang Chemical provides services to a customer for $88,800. In payment for the services, the customer signs a three-year, 8% note. The face amount and all interest are due at the end of the third year.

Required:

1. Record the acceptance of the note on December 1, 2012.

2. Record the adjustment for interest revenue on December 31, 2012, 2013, and 2014.

3. Record the cash collection on December 1, 2015. (Omit the \”$\” sign in your response.)

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In an effort to boost sales in the current year, Roy’s Gym has implemented a new program (A+)

In an effort to boost sales in the current year, Roy\’s Gym has implemented a new program where members do not have to pay for their annual membership until the end of the year. The program seems to have substantially increased membership and revenues. Below are year-end amounts.

MembershipRevenues AccountsReceivable

Last year $ 112,000 $ 5,400

Current year 310,000 141,000

Arnold, the owner, realizes that many members have not paid their annual membership fees by the end of the year. However, Arnold believes that no allowance for uncollectible accounts should be reported in the current year because none of the nonpaying members\’ accounts have proven uncollectible. Arnold wants to use the direct write-off method to record bad debts, waiting until the end of next year before writing off any accounts.

Required:

1. Do you agree with Arnold\’s reasoning for not reporting any allowance for future uncollectible accounts?

2. Suppose that similar programs in the past have resulted in uncollectible accounts of approximately 80%. If Arnold uses the allowance method, what should be the balance of allowance for uncollectible accounts at the end of the current year?

3. Based on your answer in Part 2, for what amount will total assets and expenses be misstated in the current year if Arnold uses the direct write-off method? Ignore tax effects.

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Pearl E. White Orthodontist specializes in correcting misaligned teeth (A+)

Pearl E. White Orthodontist specializes in correcting misaligned teeth. During 2012, Pearl provides services on account of $584,000. Of this amount, $87,000 remains receivable at the end of the year. An aging schedule as of December 31, 2012, is provided below.

Age Group Amount Receivable Estimated Percent Uncollectible

Not yet due $25,000 15%

0-90 days past due 19,000 20%

91-180 days past due 6,000 35%

More than 180 days past due 37,000 65%

Total $87,000

Required:

1. Calculate the allowance for uncollectible accounts. (Omit the \\\”$\\\” sign in your response.)

2. Record the December 31, 2012, adjustment, assuming the balance of allowance for uncollectible accounts before adjustment is $2,300 (credit). (Omit the \\\”$\\\” sign in your response.)

3. On July 19, 2013, a customer\\\’s account balance of $5,000 is written off as uncollectible. Record the write-off

4. On September 30, 2013, the customer whose account was written off in Part 3 unexpectedly pays the full amount. Record the cash collection.

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The following events occur for The Underwood Corporation during 2012 and 2013, its first two years of operations (A+)

The following events occur for The Underwood Corporation during 2012 and 2013, its first two years of operations.

June 12, 2012 Provide services to customers on account for $36,400.

September 17, 2012 Receive $12,000 from customers on account.

December 31, 2012 Estimate that 40% of accounts receivable at the end of the year will not be received.

March 4, 2013 Provide services to customers on account for $59,000.

May 20, 2013 Receive $19,200 from customers for services provided in 2012.

July 2, 2013 Write off the remaining amounts owed from services provided in 2012.

October 19, 2013 Receive $16,300 from customers for services provided on account in 2013.

December 31, 2013 Estimate that 45% of accounts receivable at the end of the year will not be received.

Required:

1. Record transactions for each date. (Omit the \”$\” sign in your response.)

2. Post transactions to the following accounts: Cash, accounts receivable, and allowance for uncollectible accounts.

3. Calculate the net realizable value of accounts receivable at the end of 2012 and 2013.

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Outdoor Expo provides guided fishing tours (A+)

Outdoor Expo provides guided fishing tours. The company charges $200 per person but offers a 10% discount to parties of four or more. Consider the following transactions during the month of May.

May 2 Charlene books a fishing tour with Outdoor Expo for herself and four friends at the group discount price ($900 = $180 × 5). The tour is scheduled for May 7.

May 7 The fishing tour occurs. Outdoor Expo asks that payment be made within 30 days of the tour and offers a 4% discount for payment within 15 days.

May 9 Charlene is upset that no one caught a single fish and asks management for a discount. Outdoor Expo has a strict policy of no discounts related to number of fish caught.

May 15 Upon deeper investigation, management of Outdoor Expo discovers that Charlene\’s tour was led by a new guide who did not take the group to some of the better fishing spots. In concession, management offers a sales allowance of 40% of the amount due.

May 20 Charlene pays for the tour after deducting the sales allowance.

Required:

1. Record the necessary transaction(s) for Outdoor Expo on each date. (Leave no cells blank. If no entry is required, select \”No journal entry required\” in the account field and zero (0) in the amount field. Round your answers to the nearest dollar amount. Omit the \”$\” sign in your response.)

2. Calculate net sales.

3. Show how Outdoor Expo would present net sales in its income statement

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