A value chain is a set of activities and resources required to create and deliver goods and services to customers.

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Twin Towns, Inc., was authorized to issue 300,000 shares of common stock and originally issued 100,000 shares of $10 par value stock at $18 per share. Subsequently, 25,000 shares were repurchased at $20, of which 10,000 were subsequently resold at $23.

Assume the company’s retained earnings balance is $120,000.

a. Prepare the stockholders’ equity section of Twin Towns’s balance sheet, including all appropriate disclosures.

b. Briefly explain how the declaration and distribution of a 2-for-1 stock split subsequent to the above transactions would affect the stockholders’ equity section you have prepared.

Easy Money, Inc., has the following capital structure.

a. Indicate the amount that will be paid to both preferred and common stockholders assuming the preferred stock is not cumulative.

b. Indicate the amount that will be paid to both preferred and common stockholders assuming the preferred stock is cumulative.

When Resisto Systems, Inc., was formed, the company was authorized to issue 5,000 shares of $100 par value, 8 percent cumulative preferred stock, and 100,000 shares of $2 stated value common stock.

Half of the preferred stock was issued at a price of $102 per share, and 80,000 shares of the common stock were sold for $11 per share. At the end of the current year, Resisto has retained earnings of $382,000.

a. Prepare the stockholders’ equity section of the company’s balance sheet at the end of the current year.

Use the information in the ledger accounts.

Prepare a trial balance for Avenson Insurance Company dated November 30.

Transactions are first journalized and then posted to ledger accounts. In this exercise, however, your understanding of the relationship between the journal and the ledger is tested by asking you to study some ledger accounts and determine the journal entries that probably were made to produce these ledger entries. The following accounts show the first six transactions of Avenson Insurance Company.

Prepare a journal entry for each transaction. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Listed as follows are eight technical accounting terms introduced in this chapter.

Each of the following statements may (or may not) describe one of these technical terms. For each statement, indicate the term described, or answer “None” if the statement does not correctly describe any of the terms.

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        The span of time covered by an income statement.

    The sequence of accounting procedures used to record, classify, and summarize accounting information.

    The traditional accounting practice of resolving uncertainty by choosing the solution that leads to the lowest amount of income being recognized.

    An increase in owners’ equity resulting from profitable operations.

    The underlying accounting principle that determines when revenue should be recorded in the accounting records.

    The type of entry used to decrease an asset or increase 
  

The general ledger of AXM, Inc., provides the following information relating to purchases of merchandise.

The company’s cost of goods sold during the year was $2,882,000. Compute the amount of cash payments made during the year to suppliers of merchandise.

During the current year, Tachnic, Inc., made cash sales of $289,000 and credit sales of $472,000. During the year, accounts receivable decreased by $32,000.

a-1. Compute for the current year the amount of net sales reported as revenue in the income statement. a-2. Compute for the current year the amount of cash received from collecting accounts receivable. a-3. Compute for the current year the amount of cash received from customers. Assume that the credit sales amount has been collected during the current year.

An analysis of the Marketable Securities control account of Fancher Products, Inc., shows the following entries during the year.

In addition, the company’s income statement includes a $25,000 loss on sales of marketable securities. None of the company’s marketable securities is considered a cash equivalent.

Compute the amounts that should appear in the statement of cash flows as: