Read the following paragraph from a draft of a student's reflective essay. Then, answer the questions below it.
(1) No matter how hard I try, I can't seem to keep my room from being messy and cluttered. (2) In the past I've misplaced many things in my room because of the mess, but I never lost anything important. (3) Last week my disorganization almost made me lose an essay competition. (4) On the morning the essay was due, I couldn't find it anywhere among the mounds of clothing and piles of magazines and books littering my room. (5) My friends had all turned in their essays a week before the deadline. (6) I began to panic when I couldn't find the essay and begged my mom to help me look for it. (7) She couldn't hide her annoyance; she had been warning me for years that something like this would happen because of my messy habits.
The writer could add narrative details by
$F$ including dialogue between the writer and his or her mother
$G$ describing his or her room and its contents
$H$ urging others to learn from or her mistakes
$J$ describing his or her appearance

The following selected transactions were taken from the books of Dodson Company for 2016:

1. On March 1, 2016, borrowed $60,000 cash from the local bank. The note had a 6 percent interest rate and was due on September 1, 2016.

2. Cash sales for the year amounted to$240,000 plus sales tax at the rate of 7 percent.

3. Dodson provides a 90-day warranty on the merchandise sold. The warranty expense is estimated to be 2 percent of sales.

4. Paid the sales tax to the state sales tax agency on $200,000 of the sales.

5. Paid the note due on September 1 and the related interest.

6. On October 1, 2016, borrowed$50,000 cash from the local bank. The note had a 7 percent interest rate and a one-year term to maturity.

7. Paid $3,800 in warranty repairs.

8. A customer has filed a lawsuit against Dodson for$150,000 for breach of contract. The company attorney does not believe the suit has merit.

Required

Answer the following questions:

(1) What amount of cash did Dodson pay for interest during the year?

(2) What amount of interest expense is reported on Dodson's income statement for the year?

(3) What is the amount of warranty expense for the year?

Kingston Tires received the following invoice from a supplier (Fields Distribution, Inc.):

$$\begin{array}{c} \textbf{FIELDS DISTRIBUTION, INC.}\\ \textbf{7290 S. Prospect Street}\\ \textbf{Ravenna, OH 44266} \end{array}$$

$$\begin{array}{lcrr} &\textbf{Quantity}\\ \textbf{Description}&\textbf{Shipped}&\textbf{Price}&\textbf{Amount}\\ \text{D39-X4 Radials}&4&\$38.12&\$152.48\\ \text{M223 Belted-bias}&10&42.84&428.40\\ \text{Q92 Truck tires}&6&58.12&348.72\\ \hline \text{Total}&&&\$929.60\\ \textbf{Due date:}&&\textbf{Amount:}\\ \hspace{5pt}\text{October 3, 2016}&&\$920.30\\ \hspace{5pt}\text{October4 through October 23, 2016}&&\$929.60\\ \end{array}$$

Requirements

1. Journalize the transaction required by Kingston Tires on September 23, 2016. Do not round numbers to the nearest whole dollar. Assume tires are purchased on account.
2. Journalize the return on Kingston's books on September 28, 2016, of the D39-X4 Radials, which were ordered by mistake. Do not round numbers to the nearest whole dollar.
3. Journalize the payment on October 1, 2016, to Fields Distribution, Inc. Do not round numbers to the nearest whole dollar.

The ledger of Wade Corporation at December 31, 2014, after the books have been closed, contains the following stockholders’ equity accounts.

Preferred Stock (10,000 shares issued)                     $1,000,000
Common Stock (300,000 shares issued)                        1,500,000
Paid-in Capital in Excess of Par Value—Preferred Stock        200,000
Paid-in Capital in Excess of Stated Value—Common Stock      1,600,000
Retained Earnings                                           2,860,000

A review of the accounting records reveals this information:

1. Preferred stock is 8%,$100 par value, noncumulative. Since January 1, 2013, 10,000 shares have been outstanding; 20,000 shares are authorized.
2. Common stock is no-par with a stated value of $5 per share; 600,000 shares are authorized.
3. The January 1, 2014, balance in Retained Earnings was$2,380,000.
4. On October 1, 60,000 shares of common stock were sold for cash at $9 per share.
5. A cash dividend of$400,000 was declared and properly allocated to preferred and common stock on November 1. No dividends were paid to preferred stockholders in 2013.
6. Net income for the year was $880,000.
7. On December 31, 2014, the directors authorized disclosure of a$160,000 restriction of retained earnings for plant expansion. (Use Note A.)

Instructions

(a) Reproduce the Retained Earnings account (T-account) for the year

For more than 40 years, the Harnswell Sewing Machine Company has manufactured industrial sewing machines. The company specializes in automated machines called pattern tackers that sew repetitive patterns on such mass-produced products as shoes, garments, and seat belts. Aside from the sales of machines, the company sells machine parts. Because the company's products have a reputation for being superior, Harnswell is able to command a price premium for its product line.

Recently, the operations manager, Natalie York, purchased several books related to quality. After reading them, she considered the feasibility of beginning a quality program at the company. At the current time, the company has no formal quality program. Parts are 100 % inspected at the time of shipping to a customer or installation in a machine, yet Natalie has always wondered why inventory of certain parts (in particular, the halfinch cam rollers) invariably falls short before a full year lapses, even though 7,000 pieces have been produced for a demand of 5,000 pieces per year.

After a great deal of reflection and with some apprehension, Natalie has decided that she will approach John Harnswell, the owner of the company, about the possibility of beginning a program to improve quality in the company, starting with a trial project in the machine parts area. As she is walking to Mr. Harnswell's office for the meeting, she has second thoughts about whether this is such a good idea. After all, just last month, Mr. Harnswell told her, "Why do you need to go to graduate school for your master's degree in business? That is a waste of your time and will not be of any value to the Harnswell Company. All those professors are just up in their ivory towers and don't know a thing about running a business, like I do."

As she enters his office, Mr. Harnswell invites Natalie to sit down across from him. "Well, what do you have on your mind this morning?' Mr. Harnswell asks her in an inquisitive tone. She begins by starting to talk about the books that she has just completed reading and about how she has some interesting ideas for making production even better than it is now and improving profits. Before she can finish, Mr. Harnswell has started to answer: "Look, everything has been fine since I started this company in 1968 . I have built this company up from nothing to one that employs more than 100 people. Why do you want to make waves? Remember, if it ain't broke, don't fix it." With that, he ushers her from his office with the admonishment of, "What am I going to do with you if you keep coming up with these ridiculous ideas?'

What changes, if any, do you think that Natalie York might be able to institute in the company? Explain.

Peanut Company acquired 90 percent of Snoopy Company's outstanding common stock for $270,000 on January 1, 20X8, when the book value of Snoopy's net assets was equal to$300,000. Peanut uses the equity method to account for investments. Trial balance data for Peanut and Snoopy as of January 1,20X8, follow:

$$\begin{array}{lrr} & \textbf{Peanut Company} & \textbf{Snoopy Company} \\ \\ \text{Assets}\\ \\ \text{$\quad$Cash} & \$\hspace{13pt}55,000 & \$\hspace{6pt}20,000 \\ \text{$\quad$Accounts Receivable} & 50,000 & 30,000 \\ \text{$\quad$Inventory} & 100,000 & 60,000 \\ \text{$\quad$Investment in Snoopy Company} & 270,000\\ \text{$\quad$Land} & 225,000 & 100,000 \\ \text{$\quad$Buildings \& Equipment} & 700,000 & 200,000 \\ \text{$\quad$Accumulated Depreciation} & \underline{(400,000)} & \underline{(10,000)}\\ \text{Total Assets} & \underline{\underline{\$1,000,000}} & \underline{\underline{\$400,000}}\\ \\ \text{Liabilities \& Stockholders' Equity}\\ \\ \text{$\quad$Accounts Payable} & 75,000 & 25,000 \\ \text{$\quad$Bonds Payable} & 200,000 & 75,000 \\ \text{$\quad$Common Stock} & 500,000 & 200,000 \\ \text{$\quad$Retained Earnings} & \underline{225,000} & \underline{100,000}\\ \text{Total Liabilities \& Equity} & \underline{\underline{\$1,000,000}} & \underline{\underline{\$400,000}}\\ \end{array}$$

Required

Prepare the journal entry on Peanut's books for the acquisition of Snoopy on January 1, 20X8.

Several weeks ago you called Jiffy Plumbing Company to have some routine repair work done on the plumbing system in your home. The plumber came about two weeks later, at four o’clock in the afternoon, and spent two hours completing your repair work. When you received your bill from the company, it contained a $75 charge for labor—$30 for the first hour and $45 for the second.

When questioned about the difference in hourly rates, the company’s service manager explained that the higher rate for the second hour contained a charge for an “overtime premium,” because the union required that plumbers be paid time and a half for any work in excess of eight hours per day. The service manager further explained that the company was working overtime to “catch up a little” on its backlog of work orders, but still needed to maintain a “decent” profit margin on the plumbers’ time.

Required:

1. Do you agree with the company’s computation of the labor charge on your job?

2. The company pays its plumbers$20 per hour for the first eight hours worked in a day and $30 per hour for any additional time worked. Show how the cost of the plumber’s time for the day (nine hours) should be allocated between direct labor and general overhead on the company’s books.

3. Under what circumstances might the company be justified in charging an overtime premium for repair work on your home?

The books of Conchita Corporation carried the following account balances as of December 31, 2017.

$$\begin{array}{lrr} \text{Cash}&\text{\$\hspace{5pt}195,000}\\ \text{Preferred Stock (6\\\% cumulative, nonparticipating, \$50 par)}&\text{300,000}\\ \text{Common Stock (no-par value, 300,000 shares issued)}&\text{1,500,000}\\ \text{Paid-in Capital in Excess of Par—Preferred Stock}&\text{150,000}\\ \text{Treasury Stock (common 2,800 shares at cost)}&\text{33,600}\\ \text{Retained Earnings}&\text{105,000}\\ \end{array}$$

The company decided not to pay any dividends in 2017. The board of directors, at their annual meeting on December 21, 2018, declared the following: “The current year dividends shall be 6% on the preferred and $.30 per share on the common. The dividends in arrears shall be paid by issuing 1,500 shares of treasury stock.” At the date of declaration, the preferred is selling at$80 per share, and the common at $12 per share. Net income for 2018 is estimated at$77,000.

Instructions

• a. Prepare the journal entries required for the dividend declaration and payment, assuming that they occur simultaneously.
• b. Could Conchita Corporation give the preferred stockholders 2 years’ dividends and common stockholders a 30 cents per share dividend, all in cash?

The following balances were taken from the books of Alonzo Corp. on December 31, 2017.

$$\begin{array}{lrclr} \text{Interest revenue}&\$\hspace{5pt}86,000&&\text{Accumulated depreciation—equipment}&\$\hspace{5pt}40,000\\ \text{Cash}&{51,000}&&\text{Accumulated depreciation—buildings}&{28,000}\\ \text{Sales revenue}&{1,380,000}&&\text{Notes receivable}&{155,000}\\ \text{Accounts receivable}&{150,000}&&\text{Selling expenses}&{194,000}\\ \text{Prepaid insurance}&{20,000}&&\text{Accounts payable}&{170,000}\\ \text{Sales returns and allowances}&{150,000}&&\text{Bonds payable}&{100,000}\\ \text{Allowance for doubtful accounts}&{7,000}&&\text{Administrative and general expenses}&{97,000}\\ \text{Sales discounts}&{45,000}&&\text{Accrued liabilities}&{32,000}\\ \text{Land}&{100,000}&&\text{Interest expense}&{60,000}\\ \text{Equipment}&{200,000}&&\text{Notes payable}&{100,000}\\ \text{Buildings}&{140,000}&&\text{Loss from earthquake damage}&{150,000}\\ \text{Cost of goods sold}&{621,000}&&\text{Common stock}&{500,000}\\ &&&\text{Retained earnings}&{21,000}\\ \end{array}$$

Assume the total effective tax rate on all items is 34%.

Prepare a multiple-step income statement; 100,000 shares of common stock were outstanding during the year.

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program.

 Ben currently works at the money management firm of Dewey and Louis. His annual salary at the firm is $53,000 per year, and his salary is expected to increase at 3% per year until retirement. He is currently 28 years old and expects to work for 38 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26%. Ben has a savings account with enough money to cover the entire cost of his MBA program.

 The Ritter College of Business at Wilton University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is$58,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2,000 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about$87,000 per year, with a $10,000 signing bonus. The salary at this job will increase at 4% per year. Because of the higher salary, his average income tax rate will increase to 31%.

 The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated one-year program, with a tuition cost of$75,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,200. Ben thinks that he will receive an offer of$78,000 per year upon graduation, with an $8,000 signing bonus. The salary at this job will increase at 3.5% per year. His average tax rate at this level of income will be 29%.

 Both schools offer a health insurance plan that will cost$3,000 per year, payable at the beginning of the year. Ben has also found that both schools offer graduate housing. His room and board expenses will decrease by $4,000 per year at either school he attends. The appropriate discount rate is 5.5%.

QUESTION

What initial salary would Ben need to receive to make him indifferent between attending Wilton University and staying in his current position?

Supplementary Exercises A large used-book store randomly selected 1,000 of its customers and asked them to complete a survey about their satisfaction with the the merchandise in the store. The following data are from the 224 customers who returned the survey. Although the survey requested a considerable amount of information, the store was most interested in the frequency of purchases (number of books purchased in past 3 months) and the customer’s rating of the adequacy of book selection in the store. The data from the 224 surveys are given in the following table.a. Is there evidence of a significant relationship between frequency of purchases and adequacy of selection? Use $\alpha$ = .05.b. Describe the relationship between frequency of purchases and adequacy of selection (if any).

$$\begin{matrix} \text{Frequency} & \text{ } & \text{Adequacy of Selection}\\ \text{of Purchases} & \text{Poor} & \text{Average} & \text{Good} & \text{Excellent}\\ \text{1} & \text{3} & \text{4} & \text{37} & \text{44}\\ \text{2} & \text{2} & \text{6} & \text{30} & \text{28}\\ \text{3} & \text{3} & \text{8} & \text{16} & \text{19}\\ \text{4 or more} & \text{2} & \text{12} & \text{5} & \text{5}\\ \end{matrix}$$

The Walt Disney Company has four profitable business segments, described as follows:

• Media Networks: The ABC television and radio network, Disney channel, ESPN, A&E, E!, and Disney
• Parks and Resorts: Walt Disney World Resort, Disneyland, Disney Cruise Line, and other resort properties
• Studio Entertainment: Walt Disney Studios, which releases films by Pixar Animation Studios, Marvel Studios, Disney/Lucasfilm, and Touchstone Pictures
• Consumer Products: Character merchandising, Disney stores, books, and magazines Disney recently reported sector income from operations, revenue, and invested assets (in millions) as follows:

$$\begin{array}{lcrr} & \begin{array}{c} \text { Income from } \\ \text { Operations } \end{array} & \text { Revenue } & \begin{array}{c} \text { Invested } \\ \text { Assets } \end{array} \\ \hline \text { Media Networks } & \$ 7,321 & \$ 21,152 & \$ 29,887 \\ \text { Parks and Resorts } & 2,663 & 15,099 & 23,335 \\ \text { Studio Entertainment } & 1,549 & 6,988 & 15,155 \\ \text { Consumer Products } & 1,356 & 4,274 & 7,526 \end{array}$$

a. Use the DuPont formula to determine the return on investment for the four Disney sectors. Round whole percents to one decimal place and investment turnover to two decimal places.

b. How do the four sectors differ in their profit margin, investment turnover, and return on investment?

The Garvin Company is setting up a new checking account with Barngrover National Bank. Garvin plans to issue checks in the amount of $1.6 million each day and to deduct them from its own records at the close of business on the day they are written. On average, the bank will receive and clear (that is, deduct from the firm's bank balance) the checks at 5 p.m. the fourth day after they are written. For example, a check written on Monday will be cleared on Friday afternoon. The firm's agreement with the bank requires it to maintain a $1.2 million average compensating balance, which is $400,000 greater than the cash balance the firm would otherwise have on deposit. Garvin will make a $1.2 million cash deposit at the time it opens the account.

Assuming that the firm makes cash deposits at 2 p.m. each day (and the bank includes them in that day's transactions), how much must it deposit daily to maintain a sufficient balance once it reaches a steady state? (To find the answer, set up a table that shows the daily balance recorded on the company's books and the daily balance at the bank until a steady state is reached.) Indicate the required deposit on Day 1, Day 2, Day 3, Day 4, and each day thereafter, if any, assuming that the company will write checks for $1.6 million on Day 1 and each day thereafter.

On January 1, 2021, Acme Co. is considering buying a 40% ownership interest in PHC Co., a privately held enterprise, for $700,000. PHC predicts its profit will be$185,000 in 2021, projects a 10% annual increase in profits in each of the next four years, and expects to pay a steady annual dividend of $30,000 for the foreseeable future. Because PHC has on its books a patent that is undervalued by$375,000, Acme realizes that it will have an additional amortization expense of $15,000 per year over the next 10 years—the patent’s estimated remaining useful life. All of PHC’s other assets and liabilities have book values that approximate market values. Acme uses the equity method for its investment in PHC.

Required
Using an Excel spreadsheet, set the following values in cells.

• Acme’s cost of investment in PHC.
• Percentage acquired.
• First-year PHC reported income.
• Projected growth rate in income.
• PHC annual dividends.
• Annual excess patent amortization.

After, prepare the following schedules using columns for the years 2021 through 2025.

• Acme’s equity in PHC earnings with rows showing these:
• Acme’s share of PHC reported income.
• Amortization expense.
• Acme’s equity in PHC earnings.