ACC 291 Week 3 Assignment Question

ACC 291 week 3 Assignment Question

Description / Instructions: Complete the following Week 3 Assignment in WileyPLUS: * Problem 9-7A * Exercise 10-5 * Exercise 10-8 * Exercise 10-13 * Exercise 10-22 * Exercise 10-24 * BYP 10-1 * BYP 10-2 * Problem 10-9A * Problem 10-13A * IFRS 10-4 Question 1

During the month of March, Olinger Company’s employees earned wages of $70,700. Withholdings related to these wages were $5,409 for Social Security (FICA), $8,285 for federal income tax, $3,425 for state income tax, and $442 for union dues. The company incurred no cost related to these earnings for federal unemployment tax but incurred $773 for state unemployment tax.

Prepare the necessary March 31 journal entry to record salaries and wages expense and salaries and wages payable. Assume that wages earned during March will be paid during April. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

D a Account Titles and Explanation Debit Credit t e M a r . 3 1

Prepare the entry to record the company’s payroll tax expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

D a Account Titles and Explanation Debit Credit t e M a r . 3 1

Question 2

On August 1, 2014, Ortega Corporation issued $693,600, 7%, 10-year bonds at face value. Interest is payable annually on August 1. Ortega’s year-end is December 31.

Prepare journal entries to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

D a Account Titles and Explanation Debit Credit t e A u g . 1

Prepare journal entries to record the accrual of interest on December 31, 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

D a Account Titles and Explanation Debit Credit t e D e c . 3 1

Prepare journal entries to record the payment of interest on August 1, 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

D a Account Titles and Explanation Debit Credit t e A u g . 1 Question 3

Romine Company issued $560,000 of 9%, 15-year bonds on January 1, 2014, at face value. Interest is payable annually on January 1.

Prepare the journal entries to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

D a Account Titles and Explanation Debit Credit t e J a n . 1 , 2 0 1 4

Prepare the journal entries to record the accrual of interest on December 31, 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

D a Account Titles and Explanation Debit Credit t e D e c . 3 1 , 2 0 1 4 Prepare the journal entries to record the payment of interest on January 1, 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the journal entries to record the redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

D a Account Titles and Explanation Debit Credit t e J a n . 1 , 2 0 3 4 Question 4

Cole Corporation issued $428,000, 6%, 20-year bonds on January 1, 2014, for $343,956. This price resulted in an effective-interest rate of 8% on the bonds. Interest is payable annually on January 1. Cole uses the effective-interest method to amortize bond premium or discount.

Prepare the schedule using effective-interest method to amortize bond premium or discount of Cole Corporation. (Round answers to 0 decimal places, e.g. 125.)

I n t e r e s Interest to Interest Expense Discount Unamortized Bond t Be Paid to Be Recorded Amortization Discount Carrying Value P e r i o d s I s s u e $ $ $ $ $ d a t e 1 2 Prepare the journal entries to record the issuance of the bonds. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the journal entries to record the accrual of interest and the discount amortization on December 31, 2014. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

D at Account Titles and Explanation Debit Credit e D e c. 3 1, 2 0 1 4 Prepare the journal entries to record the payment of interest on January 1, 2015. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Question 5

Nance Co. receives $375,900 when it issues a $375,900, 6%, mortgage note payable to finance the construction of a building at December 31, 2014. The terms provide for semiannual installment payments of $19,178 on June 30 and December 31.

Prepare the schedule using effective-interest method to amortize bond premium or discount of Nance Co. (Round answers to 0 decimal places, e.g. 125.)

S Cash Interest Reduction Principal e Payment Expense of Principal Balance m ia n n u al In te re st P er io d Is su e $ $ $ $ da te 6/ 30 /1 5 12 /3 1/ 15

Prepare the journal entries to record the mortgage loan. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

D a Account Titles and Explanation Debit Credit t e D e c . 3 1 , 2 0 1 4 Prepare the journal entries to record the first two installment payments. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

D a Account Titles and Explanation Debit Credit t e First Installment Payment J u n e 3 0 , 2 0 1 5

Second Installment Payment D e c . 3 1 , 2 0 1 5 Question 6

The financial statements of Tootsie Roll are presented below.

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF Earnings, Comprehensive Earnings and Retained Earnings (in thousands except per share data) For the year ended December 31, 2011 2010 2009 Net product sales $528,369 $517,149 $495,592 Rental and royalty revenue 4,136 4,299 3,739 Total revenue 532,505 521,448 499,331 Product cost of goods sold 365,225 349,334 319,775 Rental and royalty cost 1,038 1,088 852 Total costs 366,263 350,422 320,627 Product gross margin 163,144 167,815 175,817 Rental and royalty gross margin 3,098 3,211 2,887 Total gross margin 166,242 171,026 178,704 Selling, marketing and administrative expenses 108,276 106,316 103,755 Impairment charges — — 14,000 Earnings from operations 57,966 64,710 60,949 Other income (expense), net 2,946 8,358 2,100 Earnings before income taxes 60,912 73,068 63,049 Provision for income taxes 16,974 20,005 9,892 Net earnings $43,938 $53,063 $53,157

Net earnings $43,938 $53,063 $53,157 Other comprehensive earnings (loss) (8,740) 1,183 2,845 Comprehensive earnings $35,198 $54,246 $56,002

Retained earnings at beginning of year. $135,866 $147,687 $144,949 Net earnings 43,938 53,063 53,157 Cash dividends (18,360) (18,078) (17,790) Stock dividends (47,175) (46,806) (32,629) Retained earnings at end of year $114,269 $135,866 $147,687

Earnings per share $0.76 $0.90 $0.89

Average Common and Class B Common shares 57,892 58,685 59,425 outstanding (The accompanying notes are an integral part of these statements.)

CONSOLIDATED STATEMENTS OF Financial Position TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data) Assets December 31, 2011 2010 CURRENT ASSETS: $115,97 Cash and cash equivalents $78,612 6 Investments 10,895 7,996 Accounts receivable trade, less allowances of $1,731 and $1,531 41,895 37,394 Other receivables 3,391 9,961 Inventories: Finished goods and work-in-process 42,676 35,416 Raw materials and supplies 29,084 21,236 Prepaid expenses 5,070 6,499 Deferred income taxes 578 689 Total current assets 212,201 235,167 PROPERTY, PLANT AND EQUIPMENT, at cost: Land 21,939 21,696 Buildings 107,567 102,934 Machinery and equipment 322,993 307,178 Construction in progress 2,598 9,243 455,097 440,974 Less—Accumulated depreciation 242,935 225,482 Net property, plant and equipment 212,162 215,492 OTHER ASSETS: Goodwill 73,237 73,237 Trademarks 175,024 175,024 Investments 96,161 64,461 Split dollar officer life insurance 74,209 74,441 Prepaid expenses 3,212 6,680 Equity method investment 3,935 4,254 Deferred income taxes 7,715 9,203 Total other assets 433,493 407,300 $857,85 $857,95 Total assets 6 9 Liabilities and Shareholders’ Equity December 31, 2011 2010 CURRENT LIABILITIES: Accounts payable $10,683 $9,791 Dividends payable 4,603 4,529 Accrued liabilities 43,069 44,185 Total current liabilities 58,355 58,505 NONCURRENT LIABILITES: Deferred income taxes 43,521 47,865 Postretirement health care and life insurance benefits 26,108 20,689 Industrial development bonds 7,500 7,500 Liability for uncertain tax positions 8,345 9,835 Deferred compensation and other liabilities 48,092 46,157 Total noncurrent liabilities 133,566 132,046 SHAREHOLDERS’ EQUITY: Common stock, $.69-4/9 par value—120,000 shares authorized— 25,333 25,040 36,479 and 36,057 respectively, issued Class B common stock, $.69-4/9 par value—40,000 shares 14,601 14,212 authorized—21,025 and 20,466 respectively, issued Capital in excess of par value 533,677 505,495 Retained earnings, per accompanying statement 114,269 135,866 Accumulated other comprehensive loss (19,953) (11,213) Treasury stock (at cost)—71 shares and 69 shares, respectively (1,992) (1,992) Total shareholders’ equity 665,935 667,408 $857,85 $857,95 Total liabilities and shareholders’ equity 6 9

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF Cash Flows (in thousands) For the year ended December 31, 2011 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $43,938 $53,063 $53,157 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 19,229 18,279 17,862 Impairment charges — — 14,000 Impairment of equity method investment — — 4,400 Loss from equity method investment 194 342 233 Amortization of marketable security premiums 1,267 522 320 Changes in operating assets and liabilities: Accounts receivable (5,448) 717 (5,899) Other receivables 3,963 (2,373) (2,088) Inventories (15,631) (1,447) 455 Prepaid expenses and other assets 5,106 4,936 5,203 Accounts payable and accrued liabilities 84 2,180 (2,755) Income taxes payable and deferred (5,772) 2,322 (12,543) Postretirement health care and life insurance benefits 2,022 1,429 1,384 Deferred compensation and other liabilities 2,146 2,525 2,960 Others (708) 310 305 Net cash provided by operating activities 50,390 82,805 76,994 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (16,351) (12,813) (20,831) Net purchase of trading securities (3,234) (2,902) (1,713) Purchase of available for sale securities (39,252) (9,301) (11,331) Sale and maturity of available for sale securities 7,680 8,208 17,511 Net cash used in investing activities (51,157) (16,808) (16,364) CASH FLOWS FROM FINANCING ACTIVITIES: Shares repurchased and retired (18,190) (22,881) (20,723) Dividends paid in cash (18,407) (18,130) (17,825) Net cash used in financing activities (36,597) (41,011) (38,548) Increase (decrease) in cash and cash equivalents (37,364) 24,986 22,082 Cash and cash equivalents at beginning of year 115,976 90,990 68,908 Cash and cash equivalents at end of year $78,612 $115,976 $90,990 Supplemental cash flow information Income taxes paid $16,906 $20,586 $22,364 Interest paid $38 $49 $182 Stock dividend issued $47,053 $46,683 $32,538 (The accompanying notes are an integral part of these statements.)

Answer the following questions.

What were Tootsie Roll’s total current liabilities at December 31, 2011? (Enter amount in thousands.)

Curren $ t liabiliti es as at Decem ber 31, 2011

What was the increase/decrease in Tootsie Roll’s total current liabilities from the prior year? (Enter amount in thousands.)

Chang e in curren t $ liabiliti es

How much were the accounts payable at December 31, 2011? (Enter amount in thousands.)

Accou nts payabl $ e Question 7

The financial statements of The Hershey Company and Tootsie Roll are presented below.

THE HERSHEY COMPANY CONSOLIDATED STATEMENTS OF INCOME For the years ended December 31, 2011 2010 2009 In thousands of dollars except per share amounts $6,080,78 $5,298,66 Net Sales $5,671,009 8 8 Costs and Expenses: Cost of sales 3,548,896 3,255,801 3,245,531 Selling, marketing and administrative 1,477,750 1,426,477 1,208,672 Business realignment and impairment (credits) (886) 83,433 82,875 charges, net Total costs and expenses 5,025,760 4,765,711 4,537,078 Income before Interest and Income Taxes 1,055,028 905,298 761,590 Interest expense, net 92,183 96,434 90,459 Income before Income Taxes 962,845 808,864 671,131 Provision for income taxes 333,883 299,065 235,137 Net Income $628,962 $509,799 $435,994 Net Income Per Share—Basic—Class B $2.58 $2.08 $1.77 Common Stock Net Income Per Share—Diluted—Class B $2.56 $2.07 $1.77 Common Stock Net Income Per Share—Basic—Common Stock $2.85 $2.29 $1.97 Net Income Per Share—Diluted—Common $2.74 $2.21 $1.90 Stock Cash Dividends Paid Per Share: Common Stock $1.3800 $1.2800 $1.1900 Class B Common Stock 1.2500 1.1600 1.0712 The notes to consolidated financial statements are an integral part of these statements and are included in the Hershey's 2011 Annual Report, available at www.thehersheycompany.com.

THE HERSHEY COMPANY CONSOLIDATED BALANCE SHEETS December 31, 2011 2010 In thousands of dollars ASSETS Current Assets: Cash and cash equivalents $693,686 $884,642 Accounts receivable—trade 399,499 390,061 Inventories 648,953 533,622 Deferred income taxes 136,861 55,760 Prepaid expenses and other 167,559 141,132 Total current assets 2,046,558 2,005,217 Property, Plant and Equipment, Net 1,559,717 1,437,702 Goodwill 516,745 524,134 Other Intangibles 111,913 123,080 Deferred Income Taxes 38,544 21,387 Other Assets 138,722 161,212 $4,412,19 Total assets $4,272,732 9 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $420,017 $410,655 Accrued liabilities 612,186 593,308 Accrued income taxes 1,899 9,402 Short-term debt 42,080 24,088 Current portion of long-term debt 97,593 261,392 Total current liabilities 1,173,775 1,298,845 Long-term Debt 1,748,500 1,541,825 Other Long-term Liabilities 617,276 494,461 Total liabilities 3,539,551 3,335,131 Commitments and Contingencies — — Stockholders’ Equity: The Hershey Company Stockholders’ Equity Preferred Stock, shares issued: none in 2011 and 2010 — — Common Stock, shares issued: 299,269,702 in 2011 and 299,269 299,195 299,195,325 in 2010 Class B Common Stock, shares issued: 60,632,042 in 2011 60,632 60,706 and 60,706,419 in 2010 Additional paid-in capital 490,817 434,865 Retained earnings 4,699,597 4,374,718 Treasury—Common Stock shares, at cost: 134,695,826 in (4,258,962) (4,052,101) 2011 and 132,871,512 in 2010 Accumulated other comprehensive loss (442,331) (215,067) The Hershey Company stockholders’ equity 849,022 902,316 Noncontrolling interests in subsidiaries 23,626 35,285 Total stockholders’ equity 872,648 937,601 $4,412,19 Total liabilities and stockholders’equity $4,272,732 9

THE HERSHEY COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2011 2010 2009 In thousands of dollars Cash Flows Provided from (Used by) Operating Activities Net income $628,962 $509,799 $435,994 Adjustments to reconcile net income to net cash provided from operations: Depreciation and amortization 215,763 197,116 182,411 Stock-based compensation expense, net of tax of 28,341 32,055 34,927 $15,127, $17,413 and $19,223, respectively Excess tax benefits from stock-based compensation (13,997) (1,385) (4,455) Deferred income taxes 33,611 (18,654) (40,578) Gain on sale of trademark licensing rights, net of tax (11,072) — — of $5,962 Business realignment and impairment charges, net of 30,838 77,935 60,823 tax of $18,333, $20,635 and $38,308, respectively Contributions to pension plans (8,861) (6,073) (54,457) Changes in assets and liabilities, net of effects from business acquisitions and divestitures: Accounts receivable—trade (9,438) 20,329 46,584 Inventories (115,331) (13,910) 74,000 Accounts payable 7,860 90,434 37,228 Other assets and liabilities (205,809) 13,777 293,272 Net Cash Provided from Operating Activities 580,867 901,423 1,065,74 9 Cash Flows Provided from (Used by) Investing Activities Capital additions (323,961) (179,538) (126,324) Capitalized software additions (23,606) (21,949) (19,146) Proceeds from sales of property, plant and equipment 312 2,201 10,364 Proceeds from sales of trademark licensing rights 20,000 — — Business acquisitions (5,750) — (15,220) Net Cash (Used by) Investing Activities (333,005) (199,286) (150,326) Cash Flows Provided from (Used by) Financing Activities Net change in short-term borrowings 10,834 1,156 (458,047) Long-term borrowings 249,126 348,208 — Repayment of long-term debt (256,189) (71,548) (8,252) Proceeds from lease financing agreement 47,601 — — Cash dividends paid (304,083) (283,434) (263,403) Exercise of stock options 184,411 92,033 28,318 Excess tax benefits from stock-based compensation 13,997 1,385 4,455 Contributions from noncontrolling interests in — 10,199 7,322 subsidiaries Repurchase of Common Stock (384,515) (169,099) (9,314) Net Cash (Used by) Financing Activities (438,818) (71,100) (698,921) (Decrease) Increase in Cash and Cash Equivalents (190,956) 631,037 216,502 Cash and Cash Equivalents as of January 1 884,642 253,605 37,103 $693,68 Cash and Cash Equivalents as of December 31 $884,642 $253,605 6 Interest Paid $97,892 $97,932 $91,623 Income Taxes Paid 292,315 350,948 252,230

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF Earnings, Comprehensive Earnings and Retained Earnings (in thousands except per share data) For the year ended December 31, 2011 2010 2009 Net product sales $528,369 $517,149 $495,592 Rental and royalty revenue 4,136 4,299 3,739 Total revenue 532,505 521,448 499,331 Product cost of goods sold 365,225 349,334 319,775 Rental and royalty cost 1,038 1,088 852 Total costs 366,263 350,422 320,627 Product gross margin 163,144 167,815 175,817 Rental and royalty gross margin 3,098 3,211 2,887 Total gross margin 166,242 171,026 178,704 Selling, marketing and administrative expenses 108,276 106,316 103,755 Impairment charges — — 14,000 Earnings from operations 57,966 64,710 60,949 Other income (expense), net 2,946 8,358 2,100 Earnings before income taxes 60,912 73,068 63,049 Provision for income taxes 16,974 20,005 9,892 Net earnings $43,938 $53,063 $53,157

Net earnings $43,938 $53,063 $53,157 Other comprehensive earnings (loss) (8,740) 1,183 2,845 Comprehensive earnings $35,198 $54,246 $56,002 Retained earnings at beginning of year. $135,866 $147,687 $144,949 Net earnings 43,938 53,063 53,157 Cash dividends (18,360) (18,078) (17,790) Stock dividends (47,175) (46,806) (32,629) Retained earnings at end of year $114,269 $135,866 $147,687

Earnings per share $0.76 $0.90 $0.89

Average Common and Class B Common shares 57,892 58,685 59,425 outstanding (The accompanying notes are an integral part of these statements.)

CONSOLIDATED STATEMENTS OF Financial Position TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data) Assets December 31, 2011 2010 CURRENT ASSETS: Cash and cash equivalents $78,612 $115,976 Investments 10,895 7,996 Accounts receivable trade, less allowances of $1,731 and $1,531 41,895 37,394 Other receivables 3,391 9,961 Inventories: Finished goods and work-in-process 42,676 35,416 Raw materials and supplies 29,084 21,236 Prepaid expenses 5,070 6,499 Deferred income taxes 578 689 Total current assets 212,201 235,167 PROPERTY, PLANT AND EQUIPMENT, at cost: Land 21,939 21,696 Buildings 107,567 102,934 Machinery and equipment 322,993 307,178 Construction in progress 2,598 9,243 455,097 440,974 Less—Accumulated depreciation 242,935 225,482 Net property, plant and equipment 212,162 215,492 OTHER ASSETS: Goodwill 73,237 73,237 Trademarks 175,024 175,024 Investments 96,161 64,461 Split dollar officer life insurance 74,209 74,441 Prepaid expenses 3,212 6,680 Equity method investment 3,935 4,254 Deferred income taxes 7,715 9,203 Total other assets 433,493 407,300 Total assets $857,856 $857,959 Liabilities and Shareholders’ Equity December 31, 2011 2010 CURRENT LIABILITIES: Accounts payable $10,683 $9,791 Dividends payable 4,603 4,529 Accrued liabilities 43,069 44,185 Total current liabilities 58,355 58,505 NONCURRENT LIABILITES: Deferred income taxes 43,521 47,865 Postretirement health care and life insurance benefits 26,108 20,689 Industrial development bonds 7,500 7,500 Liability for uncertain tax positions 8,345 9,835 Deferred compensation and other liabilities 48,092 46,157 Total noncurrent liabilities 133,566 132,046 SHAREHOLDERS’ EQUITY: Common stock, $.69-4/9 par value—120,000 shares authorized— 25,333 25,040 36,479 and 36,057 respectively, issued Class B common stock, $.69-4/9 par value—40,000 shares 14,601 14,212 authorized—21,025 and 20,466 respectively, issued Capital in excess of par value 533,677 505,495 Retained earnings, per accompanying statement 114,269 135,866 Accumulated other comprehensive loss (19,953) (11,213) Treasury stock (at cost)—71 shares and 69 shares, respectively (1,992) (1,992) Total shareholders’ equity 665,935 667,408 Total liabilities and shareholders’ equity $857,856 $857,959

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF Cash Flows (in thousands) For the year ended December 31, 2011 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $43,938 $53,063 $53,157 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 19,229 18,279 17,862 Impairment charges — — 14,000 Impairment of equity method investment — — 4,400 Loss from equity method investment 194 342 233 Amortization of marketable security premiums 1,267 522 320 Changes in operating assets and liabilities: Accounts receivable (5,448) 717 (5,899) Other receivables 3,963 (2,373) (2,088) Inventories (15,631) (1,447) 455 Prepaid expenses and other assets 5,106 4,936 5,203 Accounts payable and accrued liabilities 84 2,180 (2,755) Income taxes payable and deferred (5,772) 2,322 (12,543) Postretirement health care and life insurance benefits 2,022 1,429 1,384 Deferred compensation and other liabilities 2,146 2,525 2,960 Others (708) 310 305 Net cash provided by operating activities 50,390 82,805 76,994 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (16,351) (12,813) (20,831) Net purchase of trading securities (3,234) (2,902) (1,713) Purchase of available for sale securities (39,252) (9,301) (11,331) Sale and maturity of available for sale securities 7,680 8,208 17,511 Net cash used in investing activities (51,157) (16,808) (16,364) CASH FLOWS FROM FINANCING ACTIVITIES: Shares repurchased and retired (18,190) (22,881) (20,723) Dividends paid in cash (18,407) (18,130) (17,825) Net cash used in financing activities (36,597) (41,011) (38,548) Increase (decrease) in cash and cash equivalents (37,364) 24,986 22,082 Cash and cash equivalents at beginning of year 115,976 90,990 68,908 Cash and cash equivalents at end of year $78,612 $115,976 $90,990 Supplemental cash flow information Income taxes paid $16,906 $20,586 $22,364 Interest paid $38 $49 $182 Stock dividend issued $47,053 $46,683 $32,538 (The accompanying notes are an integral part of these statements.)

NOTE 6—OTHER INCOME (EXPENSE), NET: Other income (expense), net is comprised of the following:

2011 2010 2009 $1,08 Interest and dividend income $879 $1,439 7 Gains (losses) on trading securities relating to deferred 29 3,364 4,524 compensation plans Interest expense (121) (142) (243) Impairment of equity method investment. _ _ (4,400) Equity method investment loss (194) (342) (233) Foreign exchange gains (losses) 2,098 4,090 951 Capital gains (losses) (277) (28) (38) Miscellaneous, net 274 537 100 $2,94 $8,35 $2,100 6 8

As of December 31, 2009, management determined that the carrying value of an equity method investment was impaired as a result of accumulated losses from operations and review of future expectations. The Company recorded a pre-tax impairment charge of $4,400 resulting in an adjusted carrying value of $4,961 as of December 31, 2009. The fair value was primarily assessed using the present value of estimated future cash flows.

Based on the information contained in these financial statements, compute the current ratio for 2011 for each company. (Round answers to 2 decimal places, e.g. 15.25.)

Hershey Tootsie Roll Cu rr : en : t 1 1 rat io

Based on the information contained in these financial statements, compute the following 2011 ratios for each company. (Round answers to 1 decimal places, e.g. 15.2% or 15.2 times.) (1 Debt to assets. ) (2 Times interest earned. (Hershey’s total interest expense for 2011 was $94,780,000. See ) Tootsie Roll’s Note 6 for its interest expense.)

Hershey Tootsie Roll De bt to % % as se ts Ti m es int ti ti er m m es e e t s s ea rn ed

Question 8

In recent years, Farr Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below.

Salvage Useful Life Depreciation Machine Acquired Cost Value (in years) Method 1 Jan. 1, 2012 $127,000 $26,000 10 Straight-line 2 July 1, 2013 88,000 10,400 5 Declining-balance 3 Nov. 1, 2013 93,500 7,700 6 Units-of-activity

For the declining-balance method, Farr Company uses the double-declining rate. For the units- of-activity method, total machine hours are expected to be 33,000. Actual hours of use in the first 3 years were: 2013, 770; 2014, 4,000; and 2015, 5,490. Compute the amount of accumulated depreciation on each machine at December 31, 2015.

MACHINE 1 MACHINE 2 MACHINE 3 Acc um ula ted De pre cia tio $ $ $ n at De ce mb er 31

If machine 2 was purchased on April 1 instead of July 1, what would be the depreciation expense for this machine in 2013? In 2014?

2013 2014 Depr eciat ion $ $ Expe nse Question 9

Wempe Co. sold $3,461,000, 8%, 10-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. The company uses straight-line amortization on bond premiums and discounts. Financial statements are prepared annually.

Prepare the journal entries to record the issuance of the bonds assuming they sold at: (1) 103 and (2) 97. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

D N a Account Titles and o Debit Credit t Explanation . e 1 / 1 1 . / 1 4

1 / 2 1 . / 1 4

Prepare amortization tables for issuance of the bonds sold at 103 for the first three interest payments. A n n u a l I n t e Interest to Interest Expense Premium Unamortized Bond r Be Paid to Be Recorded Amortization Premium Carrying Value e s t P e r i o d s I s s u e $ $ $ $ $ d a t e 1 2 3

Prepare amortization tables for issuance of the bonds sold at 97 for the first three interest payments.

A Interest to Interest Expense Premium Unamortized Bond n Be Paid to Be Recorded Amortization Premium Carrying Value n u a l I n t e r e s t P e r i o d s I s s u e $ $ $ $ $ d a t e 1 2 3

Prepare the journal entries to record interest expense for 2014 under both of the bond issuances assuming they sold at: (1) 103 and (2) 97. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

N D Account Titles and o at Debit Credit Explanation . e 1 2/ 1 3 . 1/ 1 4

1 2/ 2 3 . 1/ 1 4

Show the long-term liabilities balance sheet presentation for issuance of the bonds sold at 103 at December 31, 2014.

WEMPE Co. Balance Sheet (Partial) December 31, 2014

Show the long-term liabilities balance sheet presentation for issuance of the bonds sold at 97 at December 31, 2014.

WEMPE Co. Balance Sheet (Partial) December 31, 2014

Question 10

Grace Herron has just approached a venture capitalist for financing for her new business venture, the development of a local ski hill. On July 1, 2013, Grace was loaned $189,000 at an annual interest rate of 7%. The loan is repayable over 5 years in annual installments of $46,095, principal and interest, due each June 30. The first payment is due June 30, 2014. Grace uses the effective-interest method for amortizing debt. Her ski hill company’s year-end will be June 30.

Prepare an amortization schedule for the 5 years, 2013–2018. (Round answers to 0 decimal places, e.g. 125.)

P e r Cash Interest Principal Balance i Payment Expense Reduction o d J u l y 1 , $ $ $ $ 2 0 1 3 J u n e 3 0 , 2 0 1 4 J u n e 3 0 , 2 0 1 5 J u n e 3 0 , 2 0 1 6 J u n e 3 0 , 2 0 1 7 J * u n e 3 0 , 2 0 1 8

* Amount may be off due to rounding.

Prepare all journal entries for Grace Herron for the first 2 fiscal years ended June 30, 2014, and June 30, 2015.(Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

D a Account Titles and Explanation Debit Credit t e J u l y 1 / 1 3

J u n e 3 0 / 1 4

J u n e 3 0 / 1 5 Show the balance sheet presentation of the note payable as of June 30, 2015. (Hint: Be sure to distinguish between the current and long-term portions of the note.) (Round answers to 0 decimal places, e.g. 125.)

GRACE HERRON Balance Sheet (Partial) June 30, 2015

Question 11

Ratzlaff Company issues €2 million, 10-year, 8% bonds at 97, with interest payable on July 1 and January 1.

Prepare the journal entry to record the sale of these bonds on January 1, 2014. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

D a Account Titles and Explanation Debit Credit t e J a n . 1

Assuming instead that the above bonds sold for 104, prepare the journal entry to record the sale of these bonds on January 1, 2014. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

D a Account Titles and Explanation Debit Credit t e J a n . 1