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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
 

Exercise 10-5

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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
Account Titles and Explanation
Debit
Credit
Mar. 31
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Exercise 10-8

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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. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
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
Account Titles and Explanation
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 indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
Aug. 1
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Exercise 10-13

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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. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
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 indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
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 indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
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
Account Titles and Explanation
Debit
Credit
Jan. 1, 2034
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Exercise 10-22

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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 $[removed] $[removed] $[removed] $[removed] $[removed]
1 [removed] [removed] [removed] [removed] [removed]
2 [removed] [removed] [removed] [removed] [removed]

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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
Account Titles and Explanation
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 automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
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 entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
Jan. 1, 2015
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Exercise 10-24

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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 $[removed] $[removed] $[removed] $[removed]
6/30/15 [removed] [removed] [removed] [removed]
12/31/15 [removed] [removed] [removed] [removed]

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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 automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
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 entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
 
First Installment Payment
June 30, 2015
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Second Installment Payment
Dec. 31, 2015
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Broadening Your Perspective 10-1

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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.) 

 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—36,479 and 36,057 respectively, issued 25,333  25,040  
  Class B common stock, $.69-4/9 par value—40,000 shares authorized—21,025 and 20,466 respectively, issued 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  

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.

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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 $[removed]

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

Change in current liabilities $[removed]

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

Accounts payable $[removed]

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Broadening Your Perspective 10-2

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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 
   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 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:       
   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  
     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  
     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 299,195,325 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) 
     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  
       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) 
  Deferred income taxes 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  

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.) 

 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—36,479 and 36,057 respectively, issued 25,333  25,040  
  Class B common stock, $.69-4/9 par value—40,000 shares authorized—21,025 and 20,466 respectively, issued 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  

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 
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 [removed]: 1 [removed]: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 [removed]% [removed]% 
Times interest earned [removed]times [removed]times 

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Problem 9-7A

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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 
$[removed]
 
$[removed]
 
$[removed]

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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 
$[removed]
 
$[removed]

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Problem 10-9A

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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
Account Titles and Explanation
Debit
Credit
1. 1/1/14
[removed]
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2. 1/1/14
[removed]
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[removed]
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[removed]
[removed]
[removed]

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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 $[removed] $[removed] $[removed] $[removed] $[removed]
1 [removed] [removed] [removed] [removed] [removed]
2 [removed] [removed] [removed] [removed] [removed]
3 [removed] [removed] [removed] [removed] [removed]

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 $[removed] $[removed] $[removed] $[removed] $[removed]
1 [removed] [removed] [removed] [removed] [removed]
2 [removed] [removed] [removed] [removed] [removed]
3 [removed] [removed] [removed] [removed] [removed]

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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 indented when amount is entered. Do not indent manually.)

No.
Date
Account Titles and Explanation
Debit
Credit
1. 12/31/14
[removed]
[removed]
[removed]
  
[removed]
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[removed]
  
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2. 12/31/14
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[removed]
[removed]

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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

[removed]
      
[removed]
  
$[removed]
   
[removed][removed]
  
[removed]
 
$[removed]
 

Show the long-term liabilities balance sheet presentation for issuance of the bonds sold at 98 at December 31, 2014.

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

[removed]
      
[removed]
  
$[removed]
   
[removed][removed]
  
[removed]
 
$[removed]
 

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Problem 10-13A

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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 $[removed] $[removed] $[removed] $[removed] 
June 30, 2014 [removed] [removed] [removed] [removed] 
June 30, 2015 [removed] [removed] [removed] [removed] 
June 30, 2016 [removed] [removed] [removed] [removed] 
June 30, 2017 [removed] [removed] [removed] [removed] 
June 30, 2018 [removed] [removed] [removed] [removed]*

* 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 automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
July 1/13
[removed]
[removed]
[removed]
 
[removed]
[removed]
[removed]
June 30/14
[removed]
[removed]
[removed]
 
[removed]
[removed]
[removed]
 
[removed]
[removed]
[removed]
June 30/15
[removed]
[removed]
[removed]
 
[removed]
[removed]
[removed]
 
[removed]
[removed]
[removed]

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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
Balance Sheet (Partial)
June 30, 2015

[removed]
   
[removed]
  
$[removed]
[removed]
   
[removed]
  
$[removed]

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IFRS 10-4

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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
Account Titles and Explanation
Debit
Credit
Jan. 1
[removed]
[removed]
[removed]
 
[removed]
[removed]
[removed]

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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
Account Titles and Explanation
Debit
Credit
Jan. 1
[removed]
[removed]
[removed]
 
[removed]
[removed]
[removed]

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