Chapter 22: 9DQ (page 986)
Question: Explain the concept of accrued interest on bonds at the end of an accounting period.
Answer
Accrued Interest refers to the interest earned on the bonds by the bondholders at the end of the accounting period, but the amount will be paid at the time of coupon payment.
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What three factors would influence your evaluation as to whether a company’s current ratio is good or bad?
A company purchases a 10,020-square-foot commercial building for \(325,000 and spends an additional \)50,000 to divide the space into two separate rental units and prepare it for rent. Unit A, which has the desirable location on the corner and contains 3,340 square feet, will be rented for \(1.00 per square foot. Unit B contains 6,680 square feet and will be rented for \)0.75 per square foot. How much of the joint cost should be assigned to Unit B using the value basis of allocation?
At December 31, 2017, Hawke Company reports the following results for its calendar year.
Cash sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(1,905,000
Credit sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,682,000
In addition, its unadjusted trial balance includes the following items.
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . \)1,270,100 debit
Allowance for doubtful accounts . . . . . . . . . . . . . 16,580 debit
1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.
a. Bad debts are estimated to be 1.5% of credit sales.
b. Bad debts are estimated to be 1% of total sales.
c. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1a
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1c.
Compute the times interest earned for Park Company, which reports income before interest expense and income tacxes of \(1,885,000 and interest expense of \)145,000. Interpret its times interest earned (assume that its competitors average a times interest earned of 4.0).
Compute return on investment for each of the divisions below (each is an investment center). Comment on the relative performance of each investment center.
Investment center | Net income | Average assets | Return on investment |
Cameras and camcorders | \(4,500,000 | \)20,000,000 | % |
Phones and Communications | \(1,500,000 | \)12,500,000 | % |
Computers and accessories | 800,000 | 10,000,000 | % |
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