This period, Amadeus Co. purchased its only available-for-sale investment in the notes of Bach Co. for $83,000. The period-end fair value of these notes is$84,500. Amadeus records a

• a. Credit to Unrealized Gain—Equity for $1,500.
• b. Debit to Unrealized Loss—Equity for$1,500.
• c. Debit to Investment Revenue for $1,500.
• d. Credit to Fair Value Adjustment—Available-for-Sale for$3,500.
• e. Credit to Cash for $1,500.

The following information was taken from Einar Company’s balance sheet:

$$\begin{array}{llr} \text{Fixed assets (net)}&\text{\$1,800,000}\\ \text{Long-term liabilities}&\text{600,000}\\ \text{Total liabilities}&\text{900,000}\\ \text{Total stockholders’ equity}&\text{750,000}\\ \end{array}$$

Determine the company’s (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to stockholders’ equity.

The following data were taken from Mesa Company’s balance sheet:

Particulars	Dec. 31, 2014	Dec. 31, 2013
Total liabilities	$  547,800	$  518,000
Total owner's equity	415,000	370,000

a. Compute the ratio of liabilities to owner’s equity. b. Has the creditor’s risk increased or decreased from December 31, 2013, to December 31, 2014?

The stockholders' equity section of TVX Company on February 4 follows.

$$\begin{array}{lrr} \text{Common stock-\$10 par value, 150,000 shares authorized, 60,000 shares issued and outstanding}&\text{\$\hspace{10pt}600,000}\\ \text{Paid-in capital in excess of par value, common stock}&\text{425,000}\\ \text{Retained earnings}&\underline{\text{\hspace{15pt}550,000}}\\ \text{Total stockholders' equity}&\underline{\underline{\$\text{\hspace{2pt}1,575,000}}}\\ \end{array}$$

On February 5, the directors declare a 20% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock's market value is $40 per share on February 5 before the stock dividend.

1. Prepare entries to record both the dividend declaration and its distribution.
2. Prepare the stockholders' equity section after the stock dividend is distributed. (Assume no other changes to equity.)

Identify the following investment as an investment in either debt (D) securities or equity (E) securities.

______U.S. Treasury bonds

Assume the following relationships for the Caulder Corp.: $$ \begin{matrix} \text{Sales/Total assets} & \text{1.3 }{\times}\\ \text{Return on assets (ROA)} & \text{4.0\\%}\\ \text{Return on equity (ROE)} & \text{8.0\\%}\\ \end{matrix} $$ Calculate Caulder’s profit margin and debt-to-capital ratio assuming the firm uses only debt and common equity, so total assets equal total invested capital.

The McGee Corporation finds it is necessary to determine its marginal cost of capital. McGee's current capital structure calls for 40 percent debt, 30 percent preferred stock, and 30 percent common equity. Initially, common equity will be in the form of retained earnings $\left(K_e\right)$ and then new common stock $\left(K_n\right)$. The costs of the various sources of financing are as follows: debt, $9.6$ percent; preferred stock, $9.0$ percent; retained earnings, $10.0$ percent; and new common stock, $11.4$ percent. What is the initial weighted average cost of capital? (Include debt, preferred stock, and common equity in the form of retained earnings, $K_e$.)

For the fiscal year, sales were $191,350,000 and the cost of merchandise sold was$114,800,000.

a. What was the amount of gross profit?
b. If total operating expenses were $18,250,000, could you determine net income?
c. Is Customer Refunds Payable an asset, liability, or owner’s equity account, and what is its normal balance?
d. Is Estimated Returns Inventory an asset, liability, or owner’s equity account, and what is its normal balance?

Company A and Company B both start 2012 with $1 million of shareholders’ equity and 100,000 shares of common stock outstanding. During 2012, both companies earn net income of$100,000, a return of 10% on common shareholders’ equity at the beginning of 2012. Company A declares and pays $100,000 of dividends to common shareholders at the end of 2012, whereas Company B retains all its earnings and declares no dividends. During 2013, both companies earn net income equal to 10% of shareholders’ equity at the beginning of 2013.

b. Compute the rate of growth in earnings per share for Company A and Company B, comparing earnings per share in 2013 with earnings per share in 2012.

Assume the definition of class bagType as given in previous Exercise. Answer the following questions: a. Write the definition of the member function set so that private members are set according to the parameters. b. Write the definition of the member function print that prints the values of the data members. c. Write the definition of the default constructor of the class bagType so that the private member variables are initialized to "", 0.0, 0.0, 0.0, 0.0, respectively. d. Write a C++ statement that prints the value of the object newBag. e. Write a C++ statement that declares the object tempBag of type bagType, and initializes the member variables of tempBag to "backPack", 15, 8, 20, and 49.99, respectively.

The following data were taken from Alvarado Company’s balance sheet:

Particulars	Dec. 31, 2014	Dec. 31, 2013
Total liabilities	$  4,085,000	$  2,880,000
Total owner's equity	4,300,000	3,600,000

a. Compute the ratio of liabilities to owner’s equity. b. Has the creditor’s risk increased or decreased from December 31, 2013, to December 31, 2014?

The following information was taken from Sigmund Company's balance sheet:

$$\begin{array}{lr}\text { Fixed assets (net) } & \$ 1,050,000 \\ \text { Long-term liabilities } & 750,000 \\ \text { Total liabilities } & 850,000 \\ \text { Total stockholders' equity } & 500,000\end{array}$$

Determine the company's (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to stockholders' equity. Round to one decimal place.

Palencia Paints Corporation has a target capital structure of 35% debt and 65% common equity, with no preferred stock. Its before-tax cost of debt is 8%, and its marginal tax rate is 40%. The current stock price is $\mathrm{P}_{0}=\$ 22.00$. The last dividend was $\mathrm{D}_{0}=\$ 2.25$, and it is expected to grow at a 5% constant rate. What is its cost of common equity and its WACC?

Company A and Company B both start 2012 with $1 million of shareholders’ equity and 100,000 shares of common stock outstanding. During 2012, both companies earn net income of$100,000, a return of 10% on common shareholders’ equity at the beginning of 2012. Company A declares and pays $100,000 of dividends to common shareholders at the end of 2012, whereas Company B retains all its earnings and declares no dividends. During 2013, both companies earn net income equal to 10% of shareholders’ equity at the beginning of 2013.

c. Using the rate of growth in earnings per share as the criterion, which company’s management appears to be doing a better job for its shareholders? Comment on this result.