In December 2016, the plaintiff made a demand for the 2 percent stock, but the defendant refused, contending that the 2 percent agreement was meant only to secure his payment of the additional $25,000. The plaintiff sued for breach of the 2 percent agreement. Prior to trial, the defendant discovered additional business records documenting that he had, before entering into the second agreement, actually overpaid the plaintiff for the purchase of the stock. The defendant asserts the plaintiff could not enforce the second agreement as an accord and satisfaction because
1. The appeals court affirmed that the principal was liable for damages incurred by fraud of one of its agents. Since there was no evidence that Wardley participated in Gritton’s fraud, why should it be liable?
2. Suppose Gritton had told Wardley he wanted to buy the property he had listed. What should Wardley have done?
You have been asked by the shareholders to prepare a report evaluating certain aspects of Magundy’s performance during 2017. Your report should consider the following:
a. What should Magundy’s bad debt expense for 2017 be? In previous years, Magundy calculated its bad debt expense based on 2 percent of credit sales during the year.
Explain your answer.
b. How would you expect Magundy’s accounts receivable turnover ratio to change from 2016 to 2017? Explain.
c. How would the new credit strategy affect Magundy’s liquidity?
d. Do you think the new president’s credit strategy is a good one? What are the risks and benefits of the new strategy?
1. Mittelstaedt Inc., buys 60 percent of the outstanding stock of Sherry, Inc. Sherry owns a piece of land that cost $212,000 but had a fair value of $549,000 at the acquisition date. What value should be attributed to this land in a consolidated balance sheet at the date of takeover?
1. Assume all accounts have a normal balance.
2. 75% of the balance in the Advance Sales account is for garments to be made and delivered by
Goodfish during 2015; the remaining 25% is from sales earned during 2014.
3. Goodfish Lake Sewing and Garment Company warranties its garments against defects and estimates its warranty liability to be 2.5% of adjusted net sales.
4. The 3.5%, 5-year note payable was issued on October 1, 2014; interest is payable annually each September 30.
5. A partial amortization schedule for the mortgage follows:
a. What APR must the store report to its customers? What is the EAR that the customers are actually paying?
Hastings is to acquire all the assets, except cash, of F-Squared. The assets of F-Squared are all recorded at fair value except: Fair value
Inventory…………… $ 39,000
Freehold land…………. 130,000
In exchange, Hastings is to provide sufï¬cient extra cash to allow F-Squared to repay all of its outstanding debts and its liquidation costs of $2,400, plus two fully paid shares in Hastings for every three shares held in F-Squared. The fair value of a share in Hastings is $3.20. An investigation by the liquidator of F-Squared reveals that at December 31, 2012, the following debts were outstanding but had not been recorded:
Accounts payable…………… $1,600
Mortgage interest …………… 4,000
The bonds issued by F-Squared are to be redeemed at a 5% premium. Costs of issuing the shares were $1,200.
(a) Prepare the acquisition analysis and journal entries to record the business combination in the records of Hastings.
(b) Prepare the statement of ï¬nancial position of Hastings immediately after the acquisition.
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