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Kroger Foods, Hilton International Inc.

1A
The following information, based on the 2007 Annual Report to Shareholders of Kroger Foods (all in $ millions),

Accounts payable 1,897
Accounts receivables (net) 3,131
Accrued liabilities and taxes 4,105
Cash and cash equivalents 162
Cost of sales 17,531
Current payables to parent and affiliates 1,652
Current portion of long-term debt 540
Deferred income taxes and other liabilities 10,311
Earnings retained in the business 2,391
Goodwill and other intangible assets (net) 35,957
Income tax expense 1,565
Interest and other debt expense, net 1,437
Inventories 3,026
Long-term debt 8,134
Long-term notes payable to parent and affiliates 5,000
Marketing, general and administration expenses 11,460
Operating revenues 33,875
Other current assets 687
Other noncurrent assets 3,726
Other stockholders' equity (2,568 )
Paid-in capital for common and preferred stock 23,655
Property, plant and equipment (net) 9,109
Short-term borrowings 681

Based on the information presented above, prepare, in good form, the 2007 Income Statement for Kroger Foods.

1B
The following balance sheet information (in $ millions) comes from the Annual Report to Shareholders of Hilton International Inc. for the year ended, January 2, 2004. Certain amounts have been blackened out to test your understanding of balance sheets. In addition, you are provided with the following information from an analysis of Hilton's financial position at the same date:
Current ratio = 0.6973; Acid-test ratio = 0.5240; Debt-to-equity ratio = 1.131

Required: Compute the missing amounts (rounded to the nearest $millions) in the Hilton balance sheet.

Provide the name of the account and the dollar value next to it, such as:
Accounts and notes receivable $1
Prepaid taxes 1
Total current assets 5

ASSETS
Current assets
Cash and equivalents 229
Accounts and notes receivable ?
Prepaid taxes ?
Other 84
Total current assets ?
Property and equipment, net 2,513
Intangible assets, net ?
Investments in affiliates 1,026
Notes and other receivables, net 1,104
Other 850
Total noncurrent assets ?
Total assets ?

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable 584
Accrued payroll and benefits 412
Self-insurance 43
Other payables and accruals 731
Total current liabilities 1,770
Long-term debt ?
Other long-term liabilities 1,178
Total long-term liabilities ?
Total liabilities ?
Shareholders' equity
Class A common stock, 255.6 million shares issued 3
Additional paid-in capital 3,317
Retained earnings ?
Treasury stock and other (987)
Total shareholders' equity ?
Total liabilities and shareholders' equity 8,177

PROBLEM # 2 -there are five parts to this problem, A through E
2A
Birds Co. purchased equipment on January 1, 2003, at a cost of $650,000. The asset was estimated to have a 12-year life with a residual value of $50,000. Bird uses straight-line depreciation. In 2006, Bird revised its total estimated life to 10 years, with no residual value.

Required: Prepare journal entries to record Bird's depreciation expense for 2005 and 2006. Show computations.

2B
Wal-Mart appropriately uses the installment sales method of accounting for its installment sales. During 2006, Wal-Mart made installments sales of $300,000 and received payments of $135,000 on those sales. Wal-Mart's gross profit margin is 30%.
Required: Prepare journal entries to record the sale, collection, and recognition of gross profit.

2C
Canada Imports sold merchandise to Food-Mart, receiving a 6-month, noninterest-bearing note for $100,000. The implied discount rate on the note is 10% per annum. Canada uses a periodic inventory system.

Required:
(1) Prepare the journal entry to record the sale. (2) Compute the effective rate of interest.

2D
Michigan Dollar Store uses the gross method to record purchase discounts, and uses a perpetual inventory system. Michigan engaged in the following transactions during April:
4/12 Purchased $15,000 in merchandise subject to terms of 2/10, n30. The goods were shipped f.o.b. shipping point.
4/13 Received a billing from Blue Freight Lines for $300 for the 4/12 purchase.
4/15 Returned $1,000 of merchandise from the 4/12 purchase.
4/20 Paid balances due from 4/12 purchase.

Required:
Prepare journal entries to record the above transactions.

Attachments

Solution Preview

1A
The following information, based on the 2007 Annual Report to Shareholders of Kroger Foods (all in $ millions),

Accounts payable 1,897
Accounts receivables (net) 3,131
Accrued liabilities and taxes 4,105
Cash and cash equivalents 162
Cost of sales 17,531
Current payables to parent and affiliates 1,652
Current portion of long-term debt 540
Deferred income taxes and other liabilities 10,311
Earnings retained in the business 2,391
Goodwill and other intangible assets (net) 35,957
Income tax expense 1,565
Interest and other debt expense, net 1,437
Inventories 3,026
Long-term debt 8,134
Long-term notes payable to parent and affiliates 5,000
Marketing, general and administration expenses 11,460
Operating revenues 33,875
Other current assets 687
Other noncurrent assets 3,726
Other stockholders' equity (2,568 )
Paid-in capital for common and preferred stock 23,655
Property, plant and equipment (net) 9,109
Short-term borrowings 681

Based on the information presented above, prepare, in good form, the 2007 Income Statement for Kroger Foods.

Kroger Foods
Income Statement
For the Year Ended December 31, 2007

Operating revenues 33,875
Less: Cost of sales 17,531
Gross Margin 16,344
Less: Marketing, general and administration expenses 11,460
Earnings before interest and tax 4,884
Less: Interest and other debt expense, net 1,437
Earnings before tax 3,447
Less: Income tax expense 1,565
Net Income 1,882

1B
The following balance sheet information (in $ millions) comes from the Annual Report to Shareholders of Hilton International Inc. for the year ended, January 2, 2004. Certain amounts have been blackened out to test your understanding of balance sheets. In addition, you are provided with the following information from an analysis of Hilton's financial position at the same date:
Current ratio = 0.6973; Acid-test ratio = 0.5240; Debt-to-equity ratio = 1.131

Required: ...

Solution Summary

This solution is comprised of a detailed explanation to prepare, in good form, the 2007 Income Statement for Kroger Foods, compute the missing amounts (rounded to the nearest $millions) in the Hilton balance sheet, prepare journal entries to record Bird's depreciation expense for 2005 and 2006, journal entries to record the sale, collection, and recognition of gross profit, journal entry to record the sale, and compute the effective rate of interest, and prepare journal entries to record the above transactions.

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