SURVEY OF ACCOUNTING(LL)>CUSTOM PKG.<
5th Edition
ISBN: 9781264010653
Author: Edmonds
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Textbook Question
Chapter 3, Problem 18E
Using common size statements and ratios to make comparisons
At the end of 2018 the following information is available for Billings and Phoneix companies:
Required
a. Prepare common size income statements for each company.
b. One company is a high-end retailer, and the other operates a discount store. Which is the discounter? Support your selection by referring to the common size statements.
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On May 31, 2026, Oriole Company paid $3,290,000 to acquire all of the common stock of Pharoah Corporation, which became a
division of Oriole. Pharoah reported the following balance sheet at the time of the acquisition:
Current assets
$846,000
Current liabilities
$564,000
Noncurrent assets
2,538,000
Long-term liabilities
470,000
Stockholder's equity
2,350,000
Total assets
$3,384,000
Total liabilities and stockholder's equity
$3,384,000
It was determined at the date of the purchase that the fair value of the identifiable net assets of Pharoah was $2,914,000. At
December 31, 2026, Pharoah reports the following balance sheet information:
Current assets
$752,000
Noncurrent assets (including goodwill recognized in purchase)
2,256,000
Current liabilities
(658,000)
Long-term liabilities
(470,000)
Net assets
$1,880,000
It is determined that the fair value of the Pharoah division is $2,068,000.
On May 31, 2026, Oriole Company paid $3,290,000 to acquire all of the common stock of Pharoah Corporation, which became a
division of Oriole. Pharoah reported the following balance sheet at the time of the acquisition:
Current assets
$846,000
Current liabilities
$564,000
Noncurrent assets
2,538,000
Long-term liabilities
470,000
Stockholder's equity
2,350,000
Total assets
$3,384,000
Total liabilities and stockholder's equity
$3,384,000
It was determined at the date of the purchase that the fair value of the identifiable net assets of Pharoah was $2,914,000. At
December 31, 2026, Pharoah reports the following balance sheet information:
Current assets
$752,000
Noncurrent assets (including goodwill recognized in purchase)
2,256,000
Current liabilities
(658,000)
Long-term liabilities
(470,000)
Net assets
$1,880,000
It is determined that the fair value of the Pharoah division is $2,068,000.
The following transactions involving intangible assets of Oriole Corporation occurred on or near December 31, 2025.
1.) Oriole paid Grand Company $520,000 for the exclusive right to market a particular product, using the Grand name and logo in promotional material. The franchise runs for as long as Oriole is in business.
2.) Oriole spent $654,000 developing a new manufacturing process. It has applied for a patent, and it believes that its application will be successful.
3.) In January 2026, Oriole's application for a patent (#2 above) was granted. Legal and registration costs incurred were $247,800. The patent runs for 20 years. The manufacturing process will be useful to Oriole for 10 years.
4.) Oriole incurred $168,000 in successfully defending one of its patents in an infringement suit. The patent expires during December 2029.
5.) Oriole incurred $446,400 in an unsuccessful patent defense. As a result of the adverse verdict, the patent, with a remaining unamortized cost of…
Chapter 3 Solutions
SURVEY OF ACCOUNTING(LL)>CUSTOM PKG.<
Ch. 3 - 1. Define merchandise inventory. What types of...Ch. 3 - 2. What is the difference between a product cost...Ch. 3 - 3. How is the cost of goods available for sale...Ch. 3 - 4. What portion of cost of goods available for...Ch. 3 - 5. When are period costs expensed? When are...Ch. 3 - 6. If PetCo had net sales of 600,000, goods...Ch. 3 - Prob. 7QCh. 3 - 8. What are the effects of the following types of...Ch. 3 - 9. Northern Merchandising Company sold inventory...Ch. 3 - 10. If goods are shipped FOB shipping point, which...
Ch. 3 - 11. Define transportation-in. Is it a product or a...Ch. 3 - Prob. 12QCh. 3 - Prob. 13QCh. 3 - 14. Dyer Department Store purchased goods with the...Ch. 3 - 15. Eastern Discount Stores incurred a 5,000 cash...Ch. 3 - 16. What is the purpose of giving credit terms to...Ch. 3 - Prob. 17QCh. 3 - 18. Ball Co. purchased inventory with a list price...Ch. 3 - 22. Explain the difference between purchase...Ch. 3 - Prob. 20QCh. 3 - Prob. 21QCh. 3 - 25. What is the advantage of using common size...Ch. 3 - 27. What is the purpose of preparing a schedule of...Ch. 3 - 28. Explain how the periodic inventory system...Ch. 3 - Prob. 25QCh. 3 - Exercise 3-1 Determining the cost of financing...Ch. 3 - Exercise 3-2 Comparing a merchandising company...Ch. 3 - Exercise 3-3 Effect of inventory transactions on...Ch. 3 - Exercise 3-4 Effect of inventory transactions on...Ch. 3 - Exercise 3-5 Recording inventory transactions in a...Ch. 3 - Exercise 4-6A Understanding the freight terms FOB...Ch. 3 - Exercise 3-7 Effect of purchase returns and...Ch. 3 - Exercise 3-8 Accounting for product costs:...Ch. 3 - Effect of product cost and period cost: Horizontal...Ch. 3 - Cash Discounts and Purchase Returns On April 6,...Ch. 3 - Exercise 4-9A Determining the effect of inventory...Ch. 3 - Inventory financing costs Bill Norman comes to you...Ch. 3 - Effect of shrinkage: Perpetual system Ho Designs...Ch. 3 - Comparing gross margin and gain on sale of land...Ch. 3 - Single-step and multistep income statements The...Ch. 3 - Prob. 16ECh. 3 - Effect of cash discounts on financial statements:...Ch. 3 - Using common size statements and ratios to make...Ch. 3 - Prob. 19ECh. 3 - Determining cost of goods sold: Periodic system...Ch. 3 - Identifying product and period costs Required...Ch. 3 - Problem 4-23A Identifying freight costs Required...Ch. 3 - Effect of purchase returns and allowances and...Ch. 3 - Preparing a schedule of cost of goods sold and...Ch. 3 - Prob. 25PCh. 3 - Comprehensive cycle problem: Perpetual system At...Ch. 3 - Prob. 27PCh. 3 - Comprehensive cycle problem: Periodic system...Ch. 3 - Prob. 1ATCCh. 3 - ATC 3-2 Group Exercise Multistep income statement...Ch. 3 - Prob. 3ATCCh. 3 - Prob. 4ATC
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- Reffering to fair value of an asset, division, or organization, What exactly is fair value and how is it assessed?arrow_forwardThe following transactions involving intangible assets of Oriole Corporation occurred on or near December 31, 2025. 1.) Oriole paid Grand Company $520,000 for the exclusive right to market a particular product, using the Grand name and logo in promotional material. The franchise runs for as long as Oriole is in business. 2.) Oriole spent $654,000 developing a new manufacturing process. It has applied for a patent, and it believes that its application will be successful. 3.) In January 2026, Oriole's application for a patent (#2 above) was granted. Legal and registration costs incurred were $247,800. The patent runs for 20 years. The manufacturing process will be useful to Oriole for 10 years. 4.) Oriole incurred $168,000 in successfully defending one of its patents in an infringement suit. The patent expires during December 2029. Oriole incurred 5.) $446,400 in an unsuccessful patent defense. As a result of the adverse verdict, the patent, with a remaining unamortized cost of…arrow_forwardNonearrow_forward
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