Description Instructions Complete the following Week 3 Assignme.docx

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
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Question 1
During the month of March, Olinger Company’s employees
earned wages of $64,000. Withholdings related to these wages
were $4,896 for Social Security (FICA), $7,500 for federal
income tax, $3,100 for state income tax, and $400 for union
dues. The company incurred no cost related to these earnings
for federal unemployment tax but incurred $700 for state
unemployment tax.
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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.)
Date
Account Titles and Explanation
Debit
Credit
Mar. 31

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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.)
Date
Debit
Credit
Mar. 31
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Question 2
On August 1, 2014, Ortega Corporation issued
$600,000, 7%, 10-year bonds at face value. Interest is payable

annually on August 1. Ortega’s year-end is December 31.
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Prepare journal entries to record the issuance of the bonds.
Date
Debit
Credit
Aug. 1
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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.)
Date
Debit
Credit
Dec. 31
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Prepare journal entries to record the payment of interest on
August 1, 2015. (Credit account titles are automatically
Date
Debit
Credit
Aug. 1
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Question 3
Romine Company issued $350,000 of 8%, 20-year bonds on
January 1, 2014, at face value. Interest is payable annually on
January 1.
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Prepare the journal entries to record the issuance of the bonds.
Date
Debit
Credit
Jan. 1, 2014
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Prepare the journal entries to record the accrual of interest on
December 31, 2014. (Credit account titles are automatically

Date
Debit
Credit
Dec. 31, 2014
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Prepare the journal entries to record the payment of interest on
January 1, 2015. (Credit account titles are automatically
Date
Debit
Credit
Jan. 1, 2015

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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.)
Date
Debit
Credit
Jan. 1, 2034

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Question 4

Cole Corporation issued $400,000, 7%, 20-year bonds on
January 1, 2014, for $360,727. 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.
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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.)
Interest
Periods
Interest to
Be Paid
Interest Expense
to Be Recorded
Discount
Amortization

Unamortized
Discount
Bond
Carrying Value
Issue date
$
$
$
$
$
1
2

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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.)
Date
Debit
Credit
Jan. 1, 2014

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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
manually.)
Date
Debit
Credit
Dec. 31, 2014

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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
Date
Debit
Credit
Jan. 1, 2015
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Question 5
Nance Co. receives $280,000 when it issues a $280,000, 6%,
mortgage note payable to finance the construction of a building
at December 31, 2014. The terms provide for semiannual
installment payments of $14,285 on June 30 and December 31.

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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.)
Semiannual
Interest
Period
Cash
Payment
Interest
Expense
Reduction
of Principal
Principal
Balance
Issue date
$

$
$
$
6/30/15
12/31/15
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Prepare the journal entries to record the mortgage loan. (Round
answers to 0 decimal places, e.g. 125. Credit account titles are
manually.)
Date
Debit
Credit
Dec. 31, 2014
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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
Date
Debit
Credit
First Installment Payment
June 30, 2015
Second Installment Payment
Dec. 31, 2015
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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 outstanding
57,892
58,685
59,425
(The accompanying notes are an integral part of these
statements.)
Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in
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
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:

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—36,479 and 36,057 respectively, issued

25,333
25,040
Class B common stock, $.69-4/9 par value—40,000 shares
14,601
14,212
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
Cash Flows (in thousands)
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
)

2,022
1,429
1,384
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
statements.)
Answer the following questions.
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What were Tootsie Roll’s total current liabilities at December
31, 2011? (Enter amount in thousands.)

Current liabilities as at December 31, 2011
$
What was the increase/decrease in Tootsie Roll’s total current
liabilities from the prior year? (Enter amount in thousands.)
Change in current liabilities
$
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How much were the accounts payable at December 31, 2011?
(Enter amount in thousands.)
Accounts payable
$
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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
Net Sales
$6,080,788
$5,671,009
$5,298,668
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) charges, net
(886
)
83,433
82,875
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

333,883
299,065
235,137
Net Income
$628,962
$509,799
$435,994
Net Income Per Share—Basic—Class B Common Stock
$2.58
$2.08
$1.77
Net Income Per Share—Diluted—Class B Common Stock
$2.56
$2.07

$1.77
Net Income Per Share—Basic—Common Stock
$2.85
$2.29
$1.97
Net Income Per Share—Diluted—Common Stock
$2.74
$2.21
$1.90
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:
$693,686
$884,642
Accounts receivable—trade

399,499
390,061
Inventories
648,953
533,622
136,861
55,760
Prepaid expenses and other
167,559
141,132

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
Total assets
$4,412,199
$4,272,732
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
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
299,195,325 in 2010
299,269
299,195
Class B Common Stock, shares issued: 60,632,042 in 2011
and 60,706,419 in 2010
60,632
60,706

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
2011 and 132,871,512 in 2010
(4,258,962
)
(4,052,101
)
(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
Total liabilities and stockholders’equity
$4,412,199
$4,272,732

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 $15,127,
$17,413 and $19,223, respectively
28,341
32,055
34,927
Excess tax benefits from stock-based compensation
(13,997
)
(1,385
)
(4,455
)

33,611
(18,654
)
(40,578
)
Gain on sale of trademark licensing rights, net of tax of $5,962
(11,072
)
—
—
Business realignment and impairment charges, net of tax of
$18,333, $20,635 and $38,308, respectively
30,838
77,935
60,823

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
1,065,749
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 subsidiaries

—
10,199
7,322
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
Cash and Cash Equivalents as of December 31
$693,686
$884,642
$253,605

Interest Paid
$97,892
$97,932
$91,623
Income Taxes Paid
292,315
350,948
252,230
Earnings, Comprehensive Earnings and Retained Earnings (in
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
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 outstanding
57,892
58,685

59,425
statements.)
Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in
Assets
December 31,
2011
2010
CURRENT ASSETS:

$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
578
689
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

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
58,355
58,505
NONCURRENT LIABILITES:
43,521
47,865

26,108
20,689
Industrial development bonds
7,500
7,500
Liability for uncertain tax positions
8,345
9,835
48,092

46,157
Total noncurrent liabilities
133,566
132,046
SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value—120,000 shares
25,333
25,040
Class B common stock, $.69-4/9 par value—40,000 shares

14,601
14,212
Capital in excess of par value
533,677
505,495
Retained earnings, per accompanying statement
114,269
135,866
(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
Cash Flows (in thousands)

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
)
2,022
1,429

1,384
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
statements.)
NOTE 6—OTHER INCOME (EXPENSE), NET:
Other income (expense), net is comprised of the following:
2011
2010
2009
Interest and dividend income
$1,087
$879
$1,439
Gains (losses) on trading securities relating to deferred
compensation plans
29
3,364
4,524
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
$2,946
$8,358
$2,100
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.
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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
Current ratio
: 1
:1
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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
Debt to assets
%
%
Times interest earned
times
times

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Bottom of Form
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.
Machine
Acquired
Cost
Salvage
Value
Useful Life
(in years)
Depreciation
Method
1
Jan. 1, 2012
$96,000
$12,000
8
Straight-line
2
July 1, 2013
85,000

10,000
5
Declining-balance
3
Nov. 1, 2013
66,000
6,000
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 30,000. Actual hours of use in
the first 3 years were: 2013, 800; 2014, 4,500; and 2015, 6,000.
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Compute the amount of accumulated depreciation on each
machine at December 31, 2015.
MACHINE 1
MACHINE 2
MACHINE 3
Accumulated Depreciation at December 31
$
$
$
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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
Depreciation Expense
$
$
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Question 9
Wempe Co. sold $3,000,000, 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.
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Prepare the journal entries to record the issuance of the bonds
assuming they sold at: (1) 103 and (2) 98. (Credit account titles
are automatically indented when amount is entered. Do not
indent manually.)
No.
Date
Debit

Credit
1.
1/1/14
2.
1/1/14
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Prepare amortization tables for issuance of the bonds sold
at 103 for the first three interest payments.
Annual
Interest
Periods
Interest to
Be Paid
Interest Expense
to Be Recorded
Premium
Amortization
Unamortized
Premium
Bond
Carrying Value
Issue date
$
$

Prepare amortization tables for issuance of the bonds sold
at 98 for the first three interest payments.
Annual
Interest
Periods
Interest to
Be Paid
Interest Expense
to Be Recorded
Premium
Amortization
Unamortized
Premium
Bond
Carrying Value
Issue date
$
$
$
$
$
1

2
3
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Prepare the journal entries to record interest expense for 2014
under both of the bond issuances assuming they sold at:
(1) 103 and (2) 98. (Credit account titles are automatically
No.
Date
Debit
Credit
1.
12/31/14
2.
12/31/14

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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 98 at December 31, 2014.
WEMPE Co.
December 31, 2014
$

:
$
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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 $150,000 at an
annual interest rate of 7%. The loan is repayable over 5 years in
annual installments of $36,584, 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.
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Prepare an amortization schedule for the 5 years, 2013–2018.
(Round answers to 0 decimal places, e.g. 125.)
Period
Cash

Payment
Interest
Expense
Principal
Reduction
Balance
July 1, 2013
$
$
$
$
June 30, 2014
June 30, 2015

June 30, 2016
June 30, 2017
June 30, 2018
*
* Amount may be off due to rounding.

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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
manually.)
Date
Debit
Credit
July 1/13
June 30/14

June 30/15
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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
June 30, 2015
$
$
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Question 11
Ratzlaff Company issues €2 million, 10-year, 8% bonds at 97,
with interest payable on July 1 and January 1.
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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.)
Date
Debit
Credit
Jan. 1
Warning
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Cancel
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.)

Date
Debit
Credit
Jan. 1
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MBA572
Financial Planning and Insurance
Assignment 11
Required Readings:
Book 1 (R. Frasca): Chapters 15-16.
Book 2 (Gitman): Chapters 14-16.
Knowledge Points:
1. Life insurance and retirement planning.
(a) There are mainly two categories of life insurance: term life
insurance that provides only death
protection, and cash value life insurance that provides both
death protection and cash value
buildup. Cash value insurance therefore carries the savings
feature and the return is relatively
safe and better than some investments. But the Consumers
Union has suggested that it is better
off buying a term life and invest the difference of premiums.
(b) The sufficient life insurance coverage is determined by the
continuing survivors’ expenses, sur-
vivors’ income, and the length of time needed for adjustment
(annuity factor). The following is
an example.
Survivors’ monthly expenses 3,500
Survivors’ monthly income 2,800
Gap per month 700
× 12
Gap per year 8,400

× Annuity factor 10
Life insurance needs 84,000
2. Retirement pension (annuity) distribution.
(a) There are two types of employer-sponsored retirement
pension plans: defined benefit plans and
defined contribution plans. With the defined benefit plan, the
employer guarantees the employee
a specified retirement benefit, so the employee knows exactly
what he will have at retirement.
The investment risk is entirely borne by the employer. Since the
last recession, many govern-
ments and businesses have switched to the defined contribution
plans that only require employers
to contribute a specified amount to their employees’ retirement
accounts. The investment risk
therefore is shifted to the employee.
(b) Expected pension balance at retirement depends on the size
of periodical contributions, the length
of time till retirement, and the investment strategy (which
determines the expected rate of return).
For instance, if a person contributes $6,000 a year ($500 a
month) to his/her retirement pension
and the employer matches the contribution, has 30 years till
retirement, and expects 6% annual
return, then the expected pension balance at retirement is:
12,000 PMT
30 N
0 PV
6 I/YR

CPT FV
Balance = $948,698.24
1
(c) Realistically, unless the total balance of a pension is
disbursed to the employee at retirement,
the remaining balance will continue to generate investment
returns. But because the retiree
now lives partly on the pension distribution, the investment
normally will be switched to a safer
strategy (i.e., switching from investing in stocks to holding
high-quality bonds). Since a safer
investment is expected to generate a smaller return, in a
simplified case, we can obtain the annual
distribution from a pension plan by dividing the balance at
retirement by the number of years
of distribution. In the above case, if the fund is disbursed to the
retiree over a 20-year span,
the annual disbursement will be $474,349.12
20
= $23, 717.46 without factoring in the after-retirement
investment income.
Case Study 1 (Life Insurance):
John (age 40), Jane (35) and Jimmy (10) are a family of three.
One day, John talked to a CFP and wanted
to find out how much life insurance is adequate to provide a
financial safety net to the family for the next

10 years should a dramatic event happen to John. Here are the
needs and considerations:
• The family currently finances its home, with monthly
mortgage payment of $1,500 for the next 20
years.
• Regular expenses such as food, fuel and auto-related are about
$1,500 a month.
• Jimmy’s education cost is estimated to be $1,000 a month on
average for the next 10 years.
• The only survivors’ source of income comes from Jane’s job,
which pays $50,000 annual salary or $3,200
per-month take-home pay.
• The annuity factor is given at 10.
Questions:
1. Use Figure 15.2 of Book 1 as a reference. How much term
life insurance is adequate to cover the
expenses for the survivors?
(a) $50,000
(b) $96,000
(c) $190,000
(d) $150,000
2. If the premium is $5 per $100,000 coverage per month, what
is the monthly cost of the term life
insurance for John?

(a) $5
(b) $10
(c) $15
(d) $20
Case Study 2 (Retirement Planning):
Patti is a 37-year old sales representative who started her
employment at company J last year. She needs a
CFP to draft a retirement plan for her. The following list has the
details:
• Patti earns pretax income of $100,000 this year. For
simplicity, assume that her income does not grow
and the tax rate is 25%.
2
• Her current annual cost of living is $40,000, which is expected
to increase by 4% annually. She plans
to retire at the age of 67, and the cost of living after then will
be roughly 80% of the pre-retirement
cost of living. The applicable tax rate after retirement is 20%.
• In the past year, she paid $6,250 of Social Security Tax, and it
is estimated that the Social Security
benefits at the time of retirement will be $4,500 per month.
• She has an employer-sponsored 401(K) retirement account, to
which she contributes 5% of pretax

income and the employer matches 5%. Based on the historical
performance, the average return is 10%
a year. Assume that the account no longer grows once she starts
withdrawing funds at age 67. The
accumulated dollars will be distributed evenly to her for 20
years.
Questions:
3. Considering all factors such as inflation and life style. What
will be Patti’s cost of living at age 67
when she plans to retire?
(a) $103,788.72
(b) $129,735.90
(c) $155,478.58
(d) $80,637.96
4. What will be the annual retirement income from Social
Security Benefits and 401(K)? Will the two
sources be enough to cover the cost of living after 67?
(a) From Social Security: $54,000; from 401 (K): 52,143;
sufficient to cover.
(b) From Social Security: $54,000; from 401 (K): 82,247;
sufficient to cover.
(c) From Social Security: $54,000; from 401 (K): 82,247;
insufficient to cover.
(d) From Social Security: $58,000; from 401 (K): 52,143;
insufficient to cover.

5. She also considers making a one-time contribution of $5,000
pretax money to either a traditional IRA
or a Roth IRA. Which option is more beneficial? Why (show
after tax results at age of 67)?
(a) Contributions to a traditional IRA are tax-exempt, so it is
better.
(b) Withdrawals from a Roth IRA are tax-exempt, so it is better.
(c) Because the current tax rate is greater than that after
retirement, so a traditional IRA is better
than a Roth IRA for Patti.
(d) Because the current tax rate is greater than that after
retirement, so a Roth IRA is better than
a traditional IRA for Patti.
3
MBA572
Assignment 10
Required Readings:
Book 1 (R. Frasca): Chapter 13.
Book 2 (Gitman): Chapters 13.
Knowledge Points:

1. Auto insurance, homeowner’s insurance and medical
insurance.
Case Study:
John Conner is a 33-year old man working as a computer
engineer. He bought his single house 8 years ago
in 2004 for $150,000 and has been living in it since. The house
value was once at its height of $400,000 but is
now $300,000 after crumbling down for the last two years. The
current construction cost for a similar house
is $200,000.
Throughout the years, Conner has been adding things such as
appliances, computers, furnitures, antique
arts to the house. The values are $2,000 for all appliances,
$2,000 for computers and softwares, $3,000 for
furnitures, and $10,000 for antique arts.
Conner drives a 2010 Pontiac GXP with a price tag at $29,800.
His policy details are as follows:
TYPE LIMIT DEDUCTIBLE
BODILY INJURY LIABILITY EA. PERSON/EA.
OCCURRENCE $50,000/$100,000
PROPERTY DAMAGE LIABILITY $25,000
COLLISION $300,000 $1,000 DED
UNINSURED MOTORISTS BODILY INJURY
$50,000/$100,000
PROPERTY DAMAGE $25,000
COMPREHENSIVE $100,000 $1,000 DED
Conner has a comprehensive homeowner’s insurance policy

covering risks of hazards, crimes and liability.
Details are in the following table. The policy also has
deductibles that help bring down Conner’s homeowner’s
insurance premium from $489 to $465.
TYPE LIMIT DEDUCTIBLE
STRUCTURE $250,000 $1,000
PERSONAL PROPERTY PROTECTION $25,000 $1,000
LIABILITY PROTECTION $50,000/$10,000
GUEST MEDICAL PROTECTION 5,000 PER PERSON
Last week, Conner invited friends over to his house for party.
At midnight, a lightening set the house on
fire and destroyed the entire house. He and a friend also had
minor injury and were rushed to hospital for
emergency care and physical examination. The hospital bills
were $4,000 for him and $3,000 for his friend.
He had to move to his parent’s house temporarily. Although he
knew the insurance would cover much
of the damages, he was still very uneasy about it and kept
thinking about it. Yesterday, he was scheduled
to meet an insurance agent from his homeowner’s insurance
company, but he had a car accident on his way.
It was not his fault though. The other car missed a red light at
an intersection and struck his car on the
passenger’s side. Conner exchanged the driver’s insurance card
and found that they had the same insurance
coverages and deductibles.
The car was towed to a mechanic shop and it needed
replacements of the frond door on the passenger’s
side, a tire and the front bumper. The tow fee was $75, and the
body work was $3,725. The other’s car also

1
was towed for repair, and the costs were: tow fee $75, and the
body work is $1,725. Last night, Conner felt
a strong headache caused by the car accident and went to
hospital for treatment. He stayed in the hospital
over night and the doctor prescribed some medicine after that.
The bill was $5,250 for the stay and body
check and $50 for the medicine.
Conner is in a No-fault-insurance state.
Questions
1. How much will Conner’s homeowner insurance cover the
damage to the house based on the building
structure replacement cost method?
(a) $200,000
(b) $250,000
(c) $199,000
(d) $300,000
2. How much will the homeowner insurance cover Conner and
his friend?
(a) Conner only, $4,000
(b) Conner’s friend only, $3,000

(c) both Conner and his friend, $7,000
(d) Up to maximum coverage, $5,000
3. Which insurance will pay Conner for cost of the car accident
initially?
(a) Conner’s insurance
(b) The other driver’s insurance
4. How much will insurance cover Conner for cost of the car
accident, both car damages and hospital
costs?
(a) Initially, Conner’s insurance will pay for the costs less
deductibles.
(b) Conner’s insurance will pay for the full costs.
5. Whose insurance company (companies) will eventually pay
for the accident? How much in total for
both cars and hospital bills?
(a) Eventually, the other driver’s insurance will cover Conner
for car damage and hospital care in full,
$9,100.
(b) Eventually, the other driver’s insurance will pay for the full
cost less deductibles of car damage
and hospital care for Conner and the driver, $8,900.
(c) Eventually, the other driver’s insurance will cover the full
costs for Conner and total less de-
ductibles for the driver, $9,900.

(d) Eventually, the other driver’s insurance will cover the full
costs for Conner and the driver, $10,900.
2
MBA572
Assignment 9
Required Readings:
Book 1 (R. Frasca): Chapter 12.
Book 2 (Gitman): Chapters 12.
Knowledge Points:
1. A mutual fund company is an investment company that helps
pool funds from its clients (i.e., mutual
fund shareholders) to invest in financial assets. The company
sets up different funds with distinctive
objectives to suit different investment needs. When a person
buy shares of a mutual fund, the person
becomes a fund investor and owns a proportionate interest in
the invested assets. Two major reasons
why people are interested in mutual funds are that, first, mutual
funds are a convenient and relatively
inexpensive means of achieving sufficient diversification of
investments, and second, mutual funds are
managed by professionals so it is a way to access investment
expertise.
2. The value of a mutual fund (that is, Net Asset Value, NAV)

solely depends on the net value of the
fund’s invested assets. There can be transaction costs associated
with the purchase and sale of mutual
fund shares, such as the so-called loads and management fees.
When a client has to pay an up-front
cost at the time of buying shares of a mutual fund, it is called a
front-end load. When the cost is
incurred at the time of selling the mutual fund, it is called a
rear-end load.
3. Some mutual funds have a fixed number of shares, so called
closed-end funds. You can only get shares
of this type of mutual funds when an existing holder is willing
to sell his/her shares to you. On the
other hand, there are mutual funds that stand ready to take more
money and issue new shares at their
NAV. These are open-end funds. Many retirement pension funds
fall into this category.
4. Like stocks, mutual funds also pay dividends, either in cash
or shares.
5. The Individual Retirement Account (IRA) provides unique
tax benefits to individuals. Specifically,
the contribution to a traditional IRA is tax exempt, so you don’t
pay income tax on the amount you
contribute to your IRA. On the other hand, a Roth-IRA exempts
the tax on the income you grow in
the account. Which of the two is better depends on the tax rates
between now and retirement. The
limit of contribution of both types are subject to phase-out as
income increases.
6. If an investor is looking beyond financial assets, he/she can
consider a real estate investment trust
(REIT) that is a closed-end investment company who must

derive at least 70% of its income from real
estate and distributes no less than 90% of its income as cash
dividend.
Case Study:
Lorrie is 42 years old and she recently studied the Vanguard
Target Retirement 2035 Fund. The following is
the description of the fund and fee structure:
Vanguard Target Retirement Funds offer a diversified portfolio
within a single fund that
adjusts its underlying asset mix over time. The funds provide
broad diversification while
incrementally decreasing exposure to equities and increasing
exposure to bonds as each
funds target retirement date approaches. The funds continue to
adjust for approximately
seven years after that date until their allocations match that of
the Target Retirement
Income Fund. Investors in the funds should be able to tolerate
the risks that come from
the volatility of the stock and bond markets. The 2035 fund
invests in four Vanguard
index funds, holding approximately 85% of assets in equities
and 15% in bonds. You may
wish to consider this fund if you’re planning to retire between
2033 and 2037.a

ahttps://personal.vanguard.com/us/funds/vanguard
1
Vanguard Target Retirement 2035 Fund (VTTHX)
Fees and minimums
12b-1 fee None
Account service fee Yes
Purchase fee None
Redemption fee None
Minimum investment $1,000.00
But at the end, Lorrie plans to invest $6,000 in one of two
mutual funds: Sun Income Fund or Moon
Growth Fund. Sun pays out cash dividends and Moon pays out
stock dividends. The following table has
the details of both funds. Suppose Lorrie has $6,000 to invest in
one of the two funds on August 10, 2013,
and will immediately reinvest all dividends in the same stock.
Use the information to answer the following
questions.
Sun Moon
NAV/Share Price:
August 10, 2013 $15.00 $12.00
August 10, 2014 $13.50 $13.00
August 10, 2015 $16.50 $14.00
Distributions per share:
August 10, 2013 $3.00 10%
August 10, 2014 $3.00 10%

1. Which of the following description of the Vanguard Target
Retirement 2035 Fund is correct?
(a) There is no purchase fees, so it has no front-end load.
(b) There is no redemption fees, so it has no rear-end load.
(c) It has a target composition of 85% equity and 15% bonds, so
it is an actively managed fund.
(d) It is readily available for purchase, so it is an open-end
fund.
(e) All of the above are correct observations of the fund.
2. How many shares can she invest in Sun or Moon,
respectively?
(a) 400 shares; 400 shares
(b) 500 shares; 400 shares
(c) 400 shares; 500 shares
(d) 500 shares; 500 shares
3. How much cash dividend will she receive from Sun on
August 10, 2014?
(a) $1,000
(b) $1,200
(c) $1,400

(d) $1,600
4. How many shares does she have in total after reinvesting the
cash dividend on August 10, 2014?
(a) 400 shares
(b) 450 shares
(c) 489 shares
2
(d) 578 shares
5. On August 10, 2015, she receives another cash dividend. How
many share in total does she have now?
(a) 400 shares
(b) 450 shares
(c) 489 shares
(d) 578 shares
6. What is the total value of her investment in Sun close to on
August 10, 2015?
(a) $4,533.33
(b) $6,533.33
(c) $7,533.33

(d) $9,533.33
7. How many stock dividends would she receive from Moon on
August 10, 2014?
(a) 50 shares
(b) 60 shares
(c) 70 shares
(d) 80 shares
8. On August 10, 2015, she receives another stock dividend
distribution. How many shares in total does
she have now?
(a) 600 shares
(b) 605 shares
(c) 500 shares
(d) 705 shares
9. What is the total value of her investment in Moon close to on
August 10, 2015?
(a) $6,000
(b) $5,478
(c) $9,541
(d) $8,470

10. If the total value of each option on August 10, 2015 is the
determinant factor for her decision. Which
fund should she pick?
(a) Sun
(b) Moon
11. However, suppose only cash dividends are subject to income
tax and stock dividends are not subject
to tax until capital gains are realized, and Lorrie is in a 30% tax
bracket. Which fund would you
recommend to Lorrie now?
(a) The after tax account balance is $8,597.33 for Sun, which is
higher than Moon
(b) Moon
3

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