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

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	Account Titles and Explanation	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. (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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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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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	$	$	$	$	$

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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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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 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


	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.)

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

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
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			: 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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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
	Jan. 1, 2012	$96,000	$12,000		Straight-line
	July 1, 2013	85,000	10,000		Declining-balance
	Nov. 1, 2013	66,000	6,000		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	Account Titles and Explanation	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	$	$	$	$	$

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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


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.

Show the long-term liabilities balance sheet presentation for issuance of the bonds sold at 98 at 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 automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	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 Balance Sheet (Partial) 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	Account Titles and Explanation	Debit	Credit
Jan. 1

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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

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