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APPENDIX G LEARNING OBJECTIVES 1. DISTINGUISH BETWEEN SIMPLE AND COMPOUND INTEREST. 2. SOLVE FOR FUTURE VALUE OF A SINGLE AMOUNT. 3. SOLVE FOR FUTURE VALUE OF AN ANNUITY. 4. IDENTIFY THE VARIABLES FUNDAMENTAL TO SOL- VING PRESENT VALUE PROBLEMS. 5. […]

G. Computing the Present Value of a Long-Term Note or Bond 1. The present value (or market price) of a long-term note or bond is a function of the: a. payment amounts. b. length of time until the amounts are […]

APPENDIX G Time Value of Money SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE G-1 (a) Interest = p X i X n I = $9,000 X .05 X 12 years I = $5,400 Accumulated amount = $9,000 + $5,400 = $14,400 […]

BRIEF EXERCISE G-18 i = 5% ? $48,850 $48,850 $48,850 $48,850 $48,850 $48,850 0 1 2 3 4 9 10 Discount rate from Table 4 is 7.72173. Present value of 10 payments of $48,850 each discounted at 5% is therefore […]

APPENDIX H Payroll Accounting LEARNING OBJECTIVES PERIOD. 2. DESCRIBE AND RECORD EMPLOYER PAYROLL TAXES. 3. DISCUSS THE OBJECTIVES OF INTERNAL CONTROL FOR PAYROLL. 1. COMPUTE AND RECORD THE PAYROLL FOR A PAY APPENDIX H REVIEW Accounting for Payroll 1. (L.O. […]

APPENDIX H Payroll Accounting ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Exercises A Problems B Problems 1. Compute and record the payroll for a pay period. 1, 2, 3, 5, 6, 7, 8 1, 2 1, 2, 3, 4 […]

PROBLEM H-2A (a) Jan. 10 Union Dues Payable …………………. 250.00 Cash …………………………………. 250.00 12 FICA Taxes Payable ………………….. 662.20 Federal Income Taxes Payable ….. 1,254.60 Cash …………………………………. 1,916.80 15 U.S. Savings Bonds Payable ……… 350.00 Cash …………………………………. 350.00 17 State […]

H-20 Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) PROBLEM H-4B (a) Weaknesses (b) Recommended Procedures 1.  Department managers have too much authority in hiring.  The human resources […]

APPENDIX I Subsidiary Ledgers and Special Journals LEARNING OBJECTIVES 1. DESCRIBE THE NATURE AND PURPOSE OF A SUBSID- IARY LEDGER. 2. EXPLAIN HOW COMPANIES USE SPECIAL JOURNALS IN JOURNALIZING. 3. INDICATE HOW COMPANIES POST A MULTI-COLUMN JOURNAL. Copyright © 2014 […]

APPENDIX I Subsidiary Ledgers and Special Journals ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Describe the nature and purpose of a subsidiary ledger. 1, 2, 5, 7,12 1, 2 1 1, […]

BYP I-1 (Continued) (d) BRYANT CO. Income Statement For the Month Ended January 31, 2014 Sales revenues Sales ……………………………………….. $75,300 Less: Sales discounts………………. $ 90 Sales returns and allowances ……………………… 400 490 Net sales revenue ……………………… 74,810 Cost of goods […]

EXERCISE I-6 (a) & (b) NORREN COMPANY Sales Journal S1 Date Account Debited Invoice No. Ref. Accounts Receivable Dr. Sales Revenue Cr. Cost of Goods Sold Dr. Inventory Cr. 2015 Sept. 2 21 J. Yancey K. Pricer 101 102 780 […]

PROBLEM I-3A (Continued) General Journal G1 Date Accounts and Explanations Ref. Debit Credit July 8 Accounts Payable—Langer Company ……………………………….. Inventory ……………………………. 201/ 120/ 300 300 22 Sales Returns and Allowances Accounts Receivable— Dayley Company …………….. 412/  112/ 65 65 […]

PROBLEM I-5A (Continued) (c) Accounts Receivable Subsidiary Ledger Edwards Co. Date Explanation Ref. Debit Credit Balance July 6 20 S1 CR1 6,600 6,600 6,600 0 M. Putzi Date Explanation Ref. Debit Credit Balance July 21 S1 5,000 5,000 L. Nunez […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) I-41 PROBLEM I-6A (Continued) P. Weng Date Explanation Ref. Debit Credit Balance Jan. 5 27 P1 CP1 950 2,800 2,800 1,850 (d) […]

PROBLEM I-3B (Continued) Santo Supply Date Explanation Ref. Debit Credit Balance May 15 17 28 P1 G1 P1 100 900 500 900 800 1,300 Patek Company Date Explanation Ref. Debit Credit Balance May 8 16 P1 P1 8,000 7,200 8,000 […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) I-61 PROBLEM I-5B (Continued) (h) VERMAN CO. Adjusted Trial Balance February 28, 2015 Debit Credit Cash …………………………………………………………… Accounts Receivable …………………………………… Inventory ……………………………………………………. […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) I-71 COMPREHENSIVE PROBLEM (Continued) W. Rayms Date Explanation Ref. Debit Credit Balance Jan. 3 13 22 S1 CR1 S1 3,600 3,700 3,600 […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) I-81 BYP I-1 (Continued) Notes Receivable No. 115 Date Explanation Ref. Debit Credit Balance Jan. 1 Balance  39,000 Inventory No. 120 […]

APPENDIX J Other Significant Liabilities LEARNING OBJECTIVES 1. DESCRIBE THE ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR CONTINGENT LIABILITIES. 2. CONTRAST THE ACCOUNTING FOR OPERATING AND CAPITAL LEASES. 3. IDENTIFY ADDITIONAL FRINGE BENEFITS ASSOCI– ATED WITH EMPLOYEE COMPENSATION. Copyright © 2014 John […]

APPENDIX J Other Significant Liabilities ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Describe the accounting and disclosure requirements for contingent liabilities. 1, 2 1 1, 2 1A 1B 2. Contrast the […]

PROBLEM J-2A (a) Carson Enterprises should record the Logan Co. lease as a capital lease because the lease term is greater than 75% of the estimated economic life of the second property. Both the Porter Inc. and Schell Inc. leases […]

CHAPTER 1 ACCOUNTING IN ACTION LEARNING OBJECTIVES 1. EXPLAIN WHAT ACCOUNTING IS. 2. IDENTIFY THE USERS AND USES OF ACCOUNTING. 3. UNDERSTAND WHY ETHICS IS A FUNDAMENTAL BUSI- NESS CONCEPT. 4. EXPLAIN GENERALLY ACCEPTED ACCOUNTING PRIN– CIPLES. 5. EXPLAIN THE […]

F. The Basic Accounting Equation. 1. Assets = Liabilities + Owner’s Equity. 2. Equality of the equation must be preserved. 3. The expanded accounting equation is: Assets = Liabilities + Owner’s Capital – Owner’s Drawings + Revenues – Expenses. G. […]

CHAPTER 1 Accounting in Action ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Explain what accounting is. 1, 2, 5 1 1 2. Identify the users and uses of accounting. 3, 4 […]

BRIEF EXERCISE 1-10 ELLERBY COMPANY Balance Sheet December 31, 2015 Assets Cash ………………………………………………………………………………….. $ 44,000 Accounts receivable …………………………………………………………… 72,500 Total assets …………………………………………………………………. $116,500 Liabilities and Stockholders’ Equity Liabilities Accounts payable ………………………………………………………… $ 85,000 Stockholders’ equity Common stock …………………………………………………………….. 31,500 Total […]

EXERCISE 1-13 MADISON COMPANY Balance Sheet December 31, 2015 Assets Cash ……………………………………………………………………… $14,000 Accounts receivable ………………………………………………. 8,500 Supplies ………………………………………………………………… 3,000 Equipment……………………………………………………………… 48,000 Total assets …………………………………………………….. $73,500 Liabilities and Stockholders’ Equity Liabilities Accounts payable ……………………………………………. $15,000 Stockholders’ equity Common stock ………………………………………………… […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 1-31 (a) TERCEK DELIVERIES Assets Liabilities Stockholders’ Equity Date Cash + Accounts Receivable + Supplies + Equipment = Notes Payable + Accounts […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 1-41 (a) RODD CONSULTING Assets Liabilities Stockholders’ Equity Date Cash + Accounts Receivable + Supplies + Equipment = Notes Payable + Accounts […]

BYP 1-6 COMMUNICATION ACTIVITY To: Ashley Hirano From: Student I have received the balance sheet of New York Company as of December 31, 2015. A number of items in this balance sheet are not properly reported. They are: 1. The […]

CHAPTER 10 LIABILITIES LEARNING OBJECTIVES 1. EXPLAIN A CURRENT LIABILITY, AND IDENTIFY THE MAJOR TYPES OF CURRENT LIABILITIES. 2. DESCRIBE THE ACCOUNTING FOR NOTES PAYABLE. 3. EXPLAIN THE ACCOUNTING FOR OTHER CURRENT LIABILITIES. 4. EXPLAIN WHY BONDS ARE ISSUED, AND […]

2. Issuing procedures. a. In authorizing the bond issue, the board of directors must stipulate the number of bonds to be authorized, total face value, and con– tractual interest rate. b. The terms of the bond issue are set forth […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Instructor’s Manual (For Instructor Use Only) 10–17 2. Bond interest expense is computed by adding (subtracting) the bond discount (premium) amortization per period to (from) the interest to […]

CHAPTER 10 Liabilities ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems * 1. Explain a current liability, and identify the major types of current liabilities. 1 1 1A 1B * 2. Describe the […]

SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 10-1 (a) A note payable due in two years is a long-term liability, not a current liability. (b) $30,000 of the mortgage payable is a current maturity of long–term debt. This amount should be […]

EXERCISE 10-4 (a) Nov. 30 Cash …………………………………………………. 300,000 Unearned Subscription Revenue (15,000 X $20) ………………………….. 300,000 (b) Dec. 31 Unearned Subscription Revenue ………… 25,000 Subscription Revenue ($300,000 X 1/12) ……………………… 25,000 (c) Mar. 31 Unearned Subscription Revenue …………. 75,000 Subscription […]

*EXERCISE 10-20 (a) Jan. 1 Cash ($600,000 X 103%) …………………… 618,000 Premium on Bonds Payable ………. 18,000 Bonds Payable …………………………. 600,000 (b) July 1 Interest Expense ……………………………… 26,550 Premium on Bonds Payable ($18,000 X 1/40) …………………………. 450 Cash ($600,000 X […]

*PROBLEM 10-7A (Continued) (c) Dear : Thank you for asking me to clarify some points about the bonds issued by Kellerman Company. (1) The amount of interest expense reported for 2016 related to these bonds is $440,563 ($219,787 + $220,776). […]

*PROBLEM 10-6B (a) (1) 2015 July 1 Cash ……………………………………… 4,543,627 Bonds Payable ………………… 4,000,000 Premium on Bonds Payable ……………………. 543,627 (2) Dec. 31 Interest Expense ($4,543,627 X 4%) …………….. 181,745 Premium on Bonds Payable ……. 18,255 Interest Payable ($4,000,000 X […]

COMPREHENSIVE PROBLEM SOLUTION (Continued) (a) and (b) Optional T accounts Cash Bal. 30,500 481,500 93,600 2,500 230,000 2,500 12,000 24,000 91,000 2,500 47,000 Bal. 194,100 Inventory Bal. 25,750 241,100 250,000 Bal. 16,850 Prepaid Insurance Bal. 5,600 12,000 5,600 5,000 Bal. […]

BYP 10-5 (Continued) 1. The cash flow of the company as it relates to bonds payable will be adversely affected as follows: Annual interest payments on the new issue ($2,000,000 X .11) ……………………………………………….. $220,000 Annual interest payments on the 5-year […]

CHAPTER 11 Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings LEARNING OBJECTIVES 1. IDENTIFY THE MAJOR CHARACTERISTICS OF A CORPORATION. 2. RECORD THE ISSUANCE OF COMMON STOCK. 3. EXPLAIN THE ACCOUNTING FOR TREASURY STOCK. 4. DIFFERENTIATE PREFERRED STOCK FROM COM- […]

INVESTOR INSIGHT Shares in excess of a billion are often traded daily on the New York Stock Exchange. For each listed security, the financial press reports the total volume of stock traded for a given day, the high and low […]

*S. Stockholders’ Equity Statement. 1. A stockholders’ equity statement shows the changes in each stock– holders’ equity account and in total stockholders’ equity during the year. 2. When this statement is presented, a retained earnings statement is not necessary because […]

CHAPTER 11 Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems *1. Identify the major characteristics of a corporation. 1, 2, 3, 4, 5, 6 1 […]

SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 11-1 The advantages and disadvantages of a corporation are as follows: Advantages Disadvantages Separate legal existence Limited liability of stockholders Transferable ownership rights Ability to acquire capital Continuous life Corporation management— professional managers Corporation […]

EXERCISE 11-4 (Continued) (b) Cash ……………………………………………………………. 52,000 Common Stock (2,000 X $5) ……………………. 10,000 Paid-in Capital in Excess of Stated Value—Common Stock ………………………. 42,000 (c) Cash ……………………………………………………………….. 52,000 Common Stock ……………………………………… 52,000 (d) Organization Expense ………………………………….. 52,000 Common Stock (2,000 […]

EXERCISE 11-21 DIRK COMPANY Balance Sheet (Partial) December 31, 2015 Paid-in capital Capital stock Preferred stock …………………………………………. $125,000 Common stock …………………………………………. 500,000 Total capital stock ……………………………….. $ 625,000 Additional paid-in capital In excess of par—preferred stock ………………. 75,000 In excess […]

PROBLEM 11-3A (Continued) (c) CASTLE CORPORATION Stockholders’ equity Paid-in capital Capital stock 8% Preferred stock, $50 par value, cumulative, 10,000 shares authorized, 8,000 shares issued and outstanding ………………………. $ 400,000 Common stock, no par, $1 stated value, 2,000,000 shares authorized, […]

PROBLEM 11-7A (Continued) (c) PRIMO CORPORATION Balance Sheet (Partial) December 31, 2015 Stockholders’ equity Paid-in capital Capital stock Common stock, $5 par value, 165,000 shares issued and outstanding…………… $ 825,000 Additional paid-in capital In excess of par —common stock ………….. […]

PROBLEM 11-3B (Continued) Paid-in Capital in Excess of Par—Preferred Stock Date Explanation Ref. Debit Credit Balance Jan. 1 Balance  20,000 Paid-in Capital in Excess of Stated Value—Common Stock Date Explanation Ref. Debit Credit Balance Jan. 1 Feb. 1 Sept. […]

PROBLEM 11-7B (Continued) *(b) The book value of the common stock is $6.89 computed as follows: Total stockholders’ equity ……………………………………… $6,403,000 Less: Preferred stock equity Call price (16,000 X $60) …………………………….. 960,000 Common stock equity ……………………………………………. $5,443,000 Common shares outstanding […]

BYP 11-6 COMMUNICATION ACTIVITY Dear Uncle Joe: Thanks for your recent letter and for asking me to explain four terms. Here are my explanations: (1) Authorized stock is the total amount of stock that a corporation is given permission to […]

CHAPTER 12 Investments LEARNING OBJECTIVES 1. DISCUSS WHY CORPORATIONS INVEST IN DEBT AND STOCK SECURITIES. 2. EXPLAIN THE ACCOUNTING FOR DEBT INVESTMENTS. 3. EXPLAIN THE ACCOUNTING FOR STOCK INVESTMENTS. 4. DESCRIBE THE USE OF CONSOLIDATED FINANCIAL STATEMENTS. 5. INDICATE HOW […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Instructor’s Manual (For Instructor Use Only) 12-9 2. Fair value is the amount for which a security could be sold in a normal market. 3. Companies report trading […]

CHAPTER 12 Investments ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Discuss why corporations invest in debt and stock securities. 1 1 2. Explain the accounting for debt investments. 2, 3, 4 […]

*BRIEF EXERCISE 12-9 Eliminations Paula Company Shannon Company Dr. Cr. Consolidated Data Investment in Shannon Common Stock 190,000 190,000 0 Common Stock 120,000 120,000 0 Retained Earnings 70,000 70,000 0 *BRIEF EXERCISE 12-10 Eliminations Paula Company Shannon Company Dr. Cr. […]

EXERCISE 12–12 (a) Fair Value Adjustment—Trading ($126,000 – $120,000) ……………………………………………. 6,000 Unrealized Gain—Income …………………………………… 6,000 Unrealized Gain or Loss—Equity ………………………………. 4,000 Fair Value Adjustment—Available-for-Sale ………….. 4,000 (b) Balance Sheet Current assets Short-term investments, at fair value ………………….. $126,000 Investments Investments […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 12–31 PROBLEM 12-4A (Continued) Dec. 31 Stock Investments ………………………….. 64,000 Revenue from Stock Investments ($320,000 X 20%) ………………….. 64,000 (c) Cost Method […]

PROBLEM 12-2B (Continued) (b) Dec. 31 Unrealized Loss—Income …………………… 2,020 Fair Value Adjustment—Trading …… 2,020 Security Cost Fair Value Day common Eldridge common $12,320 20,300 $32,620 $13,200 17,400 $30,600 (200 X $66) (600 X $29) (c) Current assets Trading securities, […]

*PROBLEM 12-7B (Continued) (c) PATEL COMPANY AND SUBSIDIARY Consolidated Balance Sheet December 31, 2015 Assets Current assets …………………………………………. $1,147,000 Plant and equipment, net 2,253,000 Goodwill ………………………………………………….. 50,000 Total assets …………………………………… $3,450,000 Liabilities and Stockholders’ Equity Current liabilities ……………………………………… $ 960,000 […]

BYP 12-3 COMPARATIVE ANALYSIS PROBLEM (a) (in millions) Amazon Wal-Mart 1. Cash used for investing activities $1,930 $16,609 2. Cash used for capital expenditures 1,811 13,510 (b) In its Note 1 to the consolidated financial statements, Amazon states: Principles of […]

CHAPTER 13 Statement of Cash Flows LEARNING OBJECTIVES 1. INDICATE THE USEFULNESS OF THE STATEMENT OF CASH FLOWS. 2. DISTINGUISH AMONG OPERATING, INVESTING, AND FINANCING ACTIVITIES. 3. PREPARE A STATEMENT OF CASH FLOWS USING THE INDIRECT METHOD. 4. ANALYZE THE […]

a. Comparative balance sheets. b. Current income statement. c. Additional information. 2. Preparing the statement of cash flows from these data sources involves three major steps: a. Determine net cash provided/used by operating activities by con– verting net income from […]

CHAPTER 13 Statement of Cash Flows ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems *1. Indicate the usefulness of the statement of cash flows. 1, 2, 15 *2. Distinguish among operating, investing, and […]

BRIEF EXERCISE 13-5 Cash flows from operating activities Net income …………………………………………………… $280,000 Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense …………………………….. $ 70,000 Loss on disposal of plant assets …………….. 12,000 82,000 Net cash […]

EXERCISE 13-9 (a) RODRIQUEZ CORPORATION Statement of Cash Flows For the Year Ended December 31, 2015 Cash flows from operating activities Net income ……………………………………………. $ 18,300) Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense……………………… […]

PROBLEM 13–7A (a) NOSKER COMPANY Statement of Cash Flows For the Year Ended December 31, 2015 Cash flows from operating activities Net income ………………………………………………… $32,000 Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense …………………………… […]

PROBLEM 13–3B EICHORN COMPANY Partial Statement of Cash Flows For the Year Ended December 31, 2015 Cash flows from operating activities Net income ………………………………………………… $1,020,000 Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense ………………………….. […]

PROBLEM 13–11B PESTER COMPANY Statement of Cash Flows For the Year Ended December 31, 2015 Cash flows from operating activities Net income ………………………………………………….. $47,890 Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense ……………………………. $ […]

BYP 13-7 COMMUNICATION ACTIVITY MEMO To: Will Hardin From: Student Re: Statement of cash flows The statement of cash flows provides information about the cash receipts and cash payments of a firm, classified as operating, investing, and financing activities. The […]

CHAPTER 14 Financial Statement Analysis LEARNING OBJECTIVES 1. DISCUSS THE NEED FOR COMPARATIVE ANALYSIS. 2. IDENTIFY THE TOOLS OF FINANCIAL STATEMENT ANALYSIS. 3. EXPLAIN AND APPLY HORIZONTAL ANALYSIS. 4. DESCRIBE AND APPLY VERTICAL ANALYSIS. 5. IDENTIFY AND COMPUTE RATIOS USED […]

INVESTOR INSIGHT The apparent simplicity of the current ratio can have real-world limitations because adding equal amounts to both the numerator and the denominator causes the ratio to decrease. Conversely, decreasing both the numerator and the denominator by equal amounts […]

CHAPTER 14 Financial Statement Analysis ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises Problems 1. Discuss the need for comparative analysis. 1, 2, 3, 5 1 2. Identify the tools of financial statement analysis. 2, 3, 5, […]

BRIEF EXERCISE 14-2 (a) The three tools of financial statement analysis are horizontal analysis, vertical analysis, and ratio analysis. Horizontal analysis evaluates a series of financial statement data over a period of time. Vertical analysis evalu- ates financial statement data […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 14–21 EXERCISE 14-2 NAVARRO CORPORATION Condensed Income Statements For the Years Ended December 31 2015 2014 Amount Percent Amount Percent Net sales […]

PROBLEM 14-2 (a) Earnings per share = $203,000 57,000 = $3.56. (b) Return on common stockholders’ equity = $203,000 $465,400 + $566,700 2    = $203,000 $516,050 = 39.3%. (c) Return on assets = $203,000 $852,800 + $970,200 […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 14–41 PROBLEM 14-7 (Continued) Current ratio = 3.0 = $2,880,000 Current liabilities Current liabilities = $2,880,000 ÷ 3.0 = $960,000 Long-term notes […]

BYP 14-5 DECISION MAKING ACROSS THE ORGANIZATION The current ratio increase is a favorable indication as to liquidity, but alone tells little about the going-concern prospects of the client. From this ratio change alone, it is impossible to know the […]

1 CHAPTER 2 The Recording Process LEARNING OBJECTIVES THE RECORDING PROCESS. 2. DEFINE DEBITS AND CREDITS AND EXPLAIN THEIR USE IN RECORDING BUSINESS TRANSACTIONS. 3. IDENTIFY THE BASIC STEPS IN THE RECORDING PROCESS. 4. EXPLAIN WHAT A JOURNAL IS AND […]

G. Trial Balance. A trial balance is a list of accounts and their balances at a given time. 1. It proves the mathematical equality of debits and credits after posting. 2. It may also uncover errors in journalizing and posting. […]

CHAPTER 2 The Recording Process ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Explain what an account is and how it helps in the recording process. 1 1 2. Define debits and […]

BRIEF EXERCISE 2-6 Aug. 1 Cash ……………………………………………………………. 5,000 Common Stock ……………………………………… 5,000 4 Prepaid Insurance ………………………………………… 1,800 Cash …………………………………………………….. 1,800 16 Cash ……………………………………………………………. 1,900 Service Revenue …………………………………… 1,900 27 Salaries and Wages Expense ………………………… 1,000 Cash …………………………………………………….. 1,000 BRIEF EXERCISE […]

EXERCISE 2-10 (a) General Journal Date Account Titles and Explanation Ref. Debit Credit Apr. 1 Cash ……………………………………………. Common Stock …………………………. (Issued shares of stock for cash) 10,000 10,000 12 Cash ……………………………………………. Service Revenue ………………………. (Received cash for services provided) 900 […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 2-31 PROBLEM 2-3A (a) & (c) Cash Balance 8,000 (1) 1,000 (3) 1,700 (4) 13,000 (5) 14,400 (6) 5,000 (7) 3,000 (8) […]

PROBLEM 2-1B (Continued) Date Account Titles and Explanation Ref. Debit Credit Mar. 25 Dividends …………………………………….. Cash ……………………………………… (Declared and paid cash dividend) 800 800 30 Salaries and Wages Expense …………. Cash ……………………………………… (Paid salaries) 280 280 30 Accounts Payable …………………………. […]

PROBLEM 2-5B (Continued) Salaries and Wages Expense No. 726 Date Explanation Ref. Debit Credit Balance Mar. 31 J1 2,500 2,500 Rent Expense No. 729 Date Explanation Ref. Debit Credit Balance Mar. 2 J1 3,500 3,500 20 J1 2,600 6,100 (b) […]

BYP 2-6 Decision-Making Across the Organization (a) May 1 Correct. 5 Correct. 7 Cash ……………………………………………….. 300 Unearned Service Revenue ………… 300 14 Equipment……………………………………….. 800 Cash …………………………………………. 800 15 Dividends ………………………………………… 400 Cash …………………………………………. 400 20 Cash ……………………………………………….. 184 Service Revenue […]

CHAPTER 3 ADJUSTING THE ACCOUNTS LEARNING OBJECTIVES 1. EXPLAIN THE TIME PERIOD ASSUMPTION. 2. EXPLAIN THE ACCRUAL BASIS OF ACCOUNTING. 3. EXPLAIN THE REASONS FOR ADJUSTING ENTRIES AND IDENTIFY THE MAJOR TYPES OF ADJUSTING ENTRIES. 4. PREPARE ADJUSTING ENTRIES FOR […]

2. Companies may initially credit revenues received in cash before being recognized to a revenue account instead of a liability account. The adjusting entry requires recording a liability for the portion still to be recognized and debiting the revenue account […]

CHAPTER 3 Adjusting the Accounts ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems *1. Explain the time period assumption. 1 1 1 *2. Explain the accrual basis of accounting. 2, 3, 4, 5 […]

BYP 3-9 ALL ABOUT YOU We address the issue of contingent liabilities in greater detail in Chapter 10. Our primary interest in this exercise is to engage students in a discussion regarding the general nature of the financial statement elements […]

BRIEF EXERCISE 3-7 1. Dec. 31 Interest Expense …………………………………… 400 Interest Payable ……………………………… 400 2. 31 Accounts Receivable …………………………….. 1,900 Service Revenue …………………………….. 1,900 3. 31 Salaries and Wages Expense …………………. 900 Salaries and Wages Payable ……………. 900 BRIEF EXERCISE […]

EXERCISE 3-9 (Continued) 6. Oct. 31 Interest Expense ………………………………. 95 Interest Payable ………………………… 95 7. 31 Salaries and Wages Expense ……………. 1,625 Salaries and Wages Payable ………. 1,625 EXERCISE 3-10 GOPITKUMAR CO. Income Statement For the Month Ended July 31, […]

PROBLEM 3-1A (Continued) Accounts Payable No. 201 Date Explanation Ref. Debit Credit Balance 2015 May 31 31 Balance Adjusting  J4 250 2,200 2,450 Unearned Service Revenue No. 209 Date Explanation Ref. Debit Credit Balance 2015 May 31 31 Balance […]

PROBLEM 3-3A (a) Sept. 30 Accounts Receivable ………………………… 1,100 Service Revenue ………………………….. 1,100 30 Rent Expense …………………………………… 1,000 Prepaid Rent ……………………………….. 1,000 30 Supplies Expense …………………………….. 850 Supplies ……………………………………… 850 30 Depreciation Expense ……………………….. 700 Accum. Depreciation—Equipment ….. 700 30 […]

*PROBLEM 3-6A (a) 1. June 30 Supplies ………………………………………… 1,500 Supplies Expense ……………………. 1,500 2. 30 Interest Expense ($20,000 X 9% X 5/12) ………………….. 750 Interest Payable ………………………. 750 3. 30 Prepaid Insurance [($2,700 ÷ 12) X 8] ……………………….. 1,800 Insurance […]

PROBLEM 3-2B (Continued) Accounts Receivable No. 112 Date Explanation Ref. Debit Credit Balance Aug. 31 Adjusting J1 4,000 4,000 Supplies No. 126 Date Explanation Ref. Debit Credit Balance Aug. 31 31 Balance Adjusting  J1 2,500 3,300 800 Prepaid Insurance […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 3-71 PROBLEM 3-5B (a), (c) & (e) Cash No. 101 Date Explanation Ref. Debit Credit Balance Sept. 1 8 10 12 20 […]

BYP 3-4 REAL–WORLD FOCUS Answers will vary depending on the company and article chosen by the student. Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 3-81 BYP 3-5 REAL-WORLD FOCUS […]

CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE LEARNING OBJECTIVES 1. PREPARE A WORKSHEET. 2. EXPLAIN THE PROCESS OF CLOSING THE BOOKS. 3. DESCRIBE THE CONTENT AND PURPOSE OF A POST-CLOSING TRIAL BALANCE. 4. STATE THE REQUIRED STEPS IN THE ACCOUNTING CYCLE. […]

ACCOUNTING ACROSS THE ORGANIZATION Yale Express, a short-haul trucking firm, turned over much of its cargo to local truckers to complete deliveries and waited 20 days to receive the local truckers’ bills. However, Republic Carloading, a nationwide, long-distance freight forwarder […]

CHAPTER 4 Completing the Accounting Cycle ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems *1. Prepare a worksheet. 1, 2, 3, 4, 5 1, 2, 3 1 1, 2, 3, 5, 6 1A, […]

COMPREHENSIVE PROBLEM (Continued) KRISTIN’S MAIDS CLEANING SERVICE Balance Sheet July 31, 2015 Assets Current assets Cash ……………………………………………………….. $6,600 Accounts receivable ………………………………… 5,200 Supplies ………………………………………………….. 100 Prepaid insurance ……………………………………. 1,650 Total current assets ………………………….. $13,550 Property, plant, and equipment Equipment ………………………………………………. […]

BYP 4-6 COMMUNICATION ACTIVITY MEMO To: Accounting Instructor From: Student Re: Accounting Cycle The required steps in the accounting cycle, in the order in which they should be completed, are: 1. Analyze business transactions. 2. Journalize the transactions. 3. Post […]

BRIEF EXERCISE 4-6 (Continued) Maintenance and Repairs Expense Date Explanation Ref. Debit Credit Balance 7/31 Balance 2,500 2,500 7/31 Closing entry 2,500 0 BRIEF EXERCISE 4-7 The accounts that will appear in the post-closing trial balance are: Accumulated Depreciation—Equipment Common […]

EXERCISE 4-7 (a) Service Revenue ……………………………………………. 4,300 Income Summary ……………………………………… 4,300 Income Summary …………………………..………………. 3,500 Salaries and Wages Expense ……………………. 1,344 Miscellaneous Expense ……………………………. 256 Supplies Expense …………………………………….. 1,900 Income Summary …………………………..………………. 800 Retained Earnings ……………………………………. 800 Retained Earnings …………………………..…………….. […]

EXERCISE 4-17 (Continued) (b) NORSTED COMPANY Balance Sheet July 31, 2015 Assets Current assets Cash ………………………………………………………. $14,200 Accounts receivable ……………………………….. 9,780 Total current assets …………………………. $23,980 Property, plant, and equipment Equipment ……………………………………………… 30,400 Less: Accumulated depreciation— equipment …………………………………….. 6,000 24,400 […]

PROBLEM 4-2A (Continued) Income Summary No. 350 Date Explanation Ref. Debit Credit Balance Dec. 31 Closing entry J14 61,000 61,000 31 Closing entry J14 50,100 10,900 31 Closing entry J14 10,900 0 Service Revenue No. 400 Date Explanation Ref. Debit […]

PROBLEM 4-5A (Continued) (b) & (c) JARA’S CLEANING SERVICE For the Month Ended July 31, 2015 Worksheet Account Titles Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Cash […]

PROBLEM 4-1B (Continued) (b) PEVNICK INC. Income Statement For the Quarter Ended March 31, 2015 Revenues Service revenue……………………………………….. $15,650 Expenses Salaries and wages expense …………………….. $2,200 Travel expense ………………………………………… 1,300 Rent expense …………………………………………… 1,200 Depreciation expense ………………………………. 800 Supplies expense […]

PROBLEM 4-3B (Continued) NIHO COMPANY Balance Sheet (Continued) December 31, 2015 Liabilities and Stockholders’ Equity Current liabilities Accounts payable ………………………………… $11,700 Salaries and wages payable ………………….. 3,000 Total current liabilities …………………… $14,700 Stockholders’ equity Common stock …………………………………….. 20,000 Retained earnings […]

PROBLEM 4-5B (Continued) Service Revenue No. 400 Date Explanation Ref. Debit Credit Balance Mar. 14 J1 4,800 4,800 28 J1 4,500 9,300 31 Adjusting J2 500 9,800 31 Closing J3 9,800 0 Supplies Expense No. 631 Date Explanation Ref. Debit […]

CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS LEARNING OBJECTIVES 1. IDENTIFY THE DIFFERENCES BETWEEN SERVICE AND MERCHANDISING COMPANIES. 2. EXPLAIN THE RECORDING OF PURCHASES UNDER A PERPETUAL INVENTORY SYSTEM. 3. EXPLAIN THE RECORDING OF SALES REVENUES UNDER A PERPETUAL INVENTORY SYSTEM. […]

ACCOUNTING ACROSS THE ORGANIZATION Costco Wholesale Corp. has always had a generous return policy, but adopted a new policy requiring that certain electronics be returned within 90 days of their purchase. The reason for the change was that returned electronics […]

CHAPTER 5 Accounting for Merchandising Operations ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems *1. Identify the differences between service and merchandising companies. 2, 3, 4 1 1 *2. Explain the recording of […]

BYP 5-5 (Continued) (c) FAMILY DEPARTMENT STORE Income Statement For the Year Ended December 31, 2015 Net sales ……………………………………………………. $742,000 Cost of goods sold …………………………………….. 563,920 Gross profit ……………………………………………….. 178,080 Operating expenses Selling expenses …………………………………. $72,840* Administrative expenses ……………………… 20,000* […]

BRIEF EXERCISE 5-7 ARNDT COMPANY Income Statement (Partial) For the Month Ended October 31, 2015 Sales Sales revenue ($280,000 + $100,000) …………….. $380,000 Less: Sales returns and allowances ……………. $11,000 Sales discounts ………………………………… 5,000 16,000 Net sales …………………………………………………….. $364,000 BRIEF […]

EXERCISE 5-6 (a) TSAI COMPANY Income Statement (Partial) For the Year Ended October 31, 2015 Sales Sales revenue …………………………………………. $820,000 Less: Sales returns and allowances ……….. $25,000 Sales discounts ……………………………. 13,000 38,000 Net sales ………………………………………………… $782,000 Note: Freight-out is a […]

PROBLEM 5-1A (a) June 1 Inventory ……………………………………………… 1,600 Accounts Payable …………………………. 1,600 3 Accounts Receivable ……………………………. 2,500 Sales Revenue ………………………………. 2,500 Cost of Goods Sold………………………………. 1,440 Inventory ………………………………………. 1,440 6 Accounts Payable ………………………………… 100 Inventory ………………………………………. 100 9 Accounts Payable […]

PROBLEM 5-3A (Continued) (c) Nov. 30 Sales Revenue …………………………………. 700,000 Interest Revenue ……………………………… 8,000 Income Summary ………………………. 708,000 30 Income Summary …………………………….. 678,900 Sales Returns and Allowances ……………………………. 8,000 Cost of Goods Sold …………………… 507,000 Salaries and Wages Expense …….. […]

*PROBLEM 5-5A (Continued) VALDEZ FASHION CENTER Balance Sheet (Continued) November 30, 2015 Liabilities and Stockholders’ Equity Current liabilities Notes payable (due next year) …………………………… $20,000 Accounts payable …………………………………………….. 48,500 Interest payable ……………………………………………….. 4,000 Total current liabilities ……………………………….. $ 72,500 Long-term […]

PROBLEM 5-1B (Continued) July 22 Accounts Receivable …………………………….. 2,250 Sales Revenue ……………………………….. 2,250 Cost of Goods Sold ……………………………….. 1,350 Inventory ………………………………………… 1,350 30 Accounts Payable ………………………………….. 1,600 Cash ………………………………………………. 1,600 31 Sales Returns and Allowances ………………… 200 Accounts Receivable ………………………. […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 5-69 PROBLEM 5-4B (a) General Journal J1 Date Account Titles and Explanation Ref. Debit Credit Apr. 4 Inventory ……………………………………….. Accounts Payable……………………. 120 […]

COMPREHENSIVE PROBLEM SOLUTION (Continued) (c) Dec. 31 Salaries and Wages Expense ………………..… Salaries and Wages Payable ………….… 800 800 Depreciation Expense ………………………….. Accumulated Depreciation— Equipment ………………………………….… 200 200 Supplies Expense ………………………………..… Supplies ($3,200 – $1,500) ……………..… 1,700 1,700 (b) & […]

CHAPTER 6 INVENTORIES LEARNING OBJECTIVES 1. DETERMINE HOW TO CLASSIFY INVENTORY AND INVENTORY QUANTITIES. 2. EXPLAIN THE ACCOUNTING FOR INVENTORIES AND APPLY THE INVENTORY COST FLOW METHODS. 3. EXPLAIN THE FINANCIAL EFFECTS OF THE INVENTORY COST FLOW ASSUMPTIONS. 4. EXPLAIN […]

6-10 Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Instructor’s Manual (For Instructor Use Only) a. LCM is an example of the accounting convention of conservatism, which means that the approach adopted among accounting alternatives is […]

CHAPTER 6 Inventories ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Determine how to classify inventory and inventory quantities. 1, 2, 3, 4, 5, 6 1 1 1, 2 1A 1B 2. […]

BRIEF EXERCISE 6-4 Average unit cost is $6.89 computed as follows: 300 X $6 = $1,800 400 X $7 = 2,800 200 X $8 = 1,600 900 $6,200 $6,200 ÷ 900 = $6.89 (rounded). The cost of the ending inventory […]

EXERCISE 6-8 (a) Cost of Goods Available for Sale $5,500 ÷ Total Units Available for Sale 900 = Weighted Average Unit Cost $6.11 Ending inventory (100 X $6.11) $ 611 Cost of goods sold (800 X $6.11) 4,889 (b) Ending […]

PROBLEM 6-1A (a) The sale will be recorded on February 26. The goods (cost, $800) should be excluded from Austin’s February 28 inventory. (b) Austin owns the goods once they are shipped on February 26. Include inventory of $480. (c) […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 6-41 *PROBLEM 6-8A (a) Sales: January 8 110 units @ $28 $3,080 January 10 (return) (10 units @ $28) (280) January 20 […]

PROBLEM 6-3B (Continued) (b) LIFO (1) Ending Inventory (2) Cost of Goods Sold Date Units Unit Cost Total Cost Cost of goods available for sale $19,300 1/1 400 $8 $3,200 Less: Ending inventory 4,100 2/20 100 9 900 500 $4,100 […]

*PROBLEM 6-8B (Continued) (b) Gross profit: LIFO FIFO Moving-Average Sales $13,800 $13,800 $13,800 Cost of goods sold 7,260 6,020 6,446 Gross profit $ 6,540 $ 7,780 $ 7,354 Ending inventory $ 2,040 $ 3,280 $ 2,854 In a period of […]

BYP 6-1 FINANCIAL REPORTING PROBLEM (a) September 24, 2011 September 25, 2010 Inventories $776 million $1,051 million (b) Dollar change in inventories between 2010 and 2011: $776 – $1,051 = $275 million decrease Percentage change in inventories between 2010 and […]

BYP 6-7 ETHICS CASE (a) The higher cost of the items ordered, received, and on hand at year– end will be charged to cost of goods sold, thereby lowering current year’s income and income taxes. If the purchase at year-end […]

CHAPTER 7 FRAUD, INTERNAL CONTROL, AND CASH LEARNING OBJECTIVES 1. DEFINE FRAUD AND INTERNAL CONTROL. 2. IDENTIFY THE PRINCIPLES OF INTERNAL CONTROL ACTIVITIES. 3. EXPLAIN THE APPLICATIONS OF INTERNAL CONTROL PRINCIPLES TO CASH RECEIPTS. 4. EXPLAIN THE APPLICATIONS OF INTERNAL […]

7-10 Copyright © 2014 John Wiley & Sons, Inc. Weygandt Financial Accounting, 9/e, Instructor’s Manual (For Instructor Use Only) Answer: Some common-sense approaches are to make sure only certain desig- nated individuals can sign checks. In addition, make sure that […]

CHAPTER 7 Fraud, Internal Control, and Cash ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Define fraud and internal control. 1, 2, 3, 4 1, 2, 3 2. Identify the principles of […]

BRIEF EXERCISE 7-9 Mar. 20 Postage Expense …………………………………………………. 52 Freight-Out ………………………………………………………….. 26 Travel Expense ……………………………………………………. 10 Cash Over and Short ……………………………………………. 3 Cash …………………………………………………………….. 91 BRIEF EXERCISE 7-10 1. A check provides documentary evidence of the payment of a specified […]

EXERCISE 7-10 The outstanding checks are as follows: No. Amount 255 260 264 Total $ 620 890 560 $2,070 EXERCISE 7-11 (a) CRANE VIDEO COMPANY Bank Reconciliation July 31 Cash balance per bank statement ……………………………… $7,263 Add: Deposits in transit […]

PROBLEM 7-6A Matt has created a situation that leaves many opportunities for undetected theft. Here is a list of some of the deficiencies in internal control. You may find others. 1. Documentation procedures. The tickets were unnumbered. By numbering the […]

PROBLEM 7-6B (a) GAMEL COMPANY Bank Reconciliation October 31, 2015 Cash balance per bank statement ……………………………… $15,313.00 Plus: Undeposited receipts ……………………………………… 3,226.18 18,539.18 Less: Outstanding checks No. Amount No. Amount 62 183 284 $107.74 127.50 215.26 862 863 864 $132.10 […]

BYP 7-4 REAL-WORLD FOCUS (a) The system of internal control should be evaluated by: (1) responsible individuals from a particular university unit, (2) internal auditors, and (3) university management. (b) Some red flags which may indicate existence of white-collar crime […]

CHAPTER 8 ACCOUNTING FOR RECEIVABLES LEARNING OBJECTIVES 1. IDENTIFY THE DIFFERENT TYPES OF RECEIVABLES. 2. EXPLAIN HOW COMPANIES RECOGNIZE ACCOUNTS RECEIVABLE. 3. DISTINGUISH BETWEEN THE METHODS AND BASES COMPANIES USE TO VALUE ACCOUNTS RECEIVABLE. 4. DESCRIBE THE ENTRIES TO RECORD […]

ACCOUNTING ACROSS THE ORGANIZATION Assume you use a Visa card to purchase some new ties at Nordstrom. Visa acts as the clearing agent for the transaction and transfers funds from the bank that issued your Visa card to Nordstrom’s bank […]

CHAPTER 8 Accounting for Receivables ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Identify the different types of receivables. 1, 2 1 2. Explain how companies recognize accounts receivable. 3 2 1, […]

SOLUTIONS FOR DO IT! REVIEW EXERCISES DO IT! 8-1 The following entry should be prepared to increase the balance in the Allowance for Doubtful Accounts from $6,100 credit to $15,500 credit (5% X $310,000): Bad Debt Expense …………………………………………….. 9,400 Allowance […]

PROBLEM 8-1A (Continued) (c) Balance before adjustment [see (b)] ……………………………… $ 19,000 Balance needed …………………………………………………………… 115,000 Adjustment required …………………………………………………….. $ 96,000 The journal entry would therefore be as follows: Bad Debt Expense ……………………………………. 96,000 Allowance for Doubtful Accounts ………. 96,000 […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 8-31 PROBLEM 8-3B (a) Dec. 31 Bad Debt Expense ……………………………… 31,970 Allowance for Doubtful Accounts ($47,970 – $16,000) ………………….. 31,970 (a) & […]

COMPREHENSIVE PROBLEM SOLUTION (Continued) WINTER COMPANY Retained Earnings Statement For the Month Ending January 31, 2015 Retained Earnings, January 1 ……………………………………. $12,730 Add: Net income ………………………………………………………. 3,093 Retained Earnings, January 31 ………………………………….. $15,823 WINTER COMPANY Balance Sheet January 31, 2015 […]

BYP 8-5 (Continued) Finally, the decision hinges on: (1) the accuracy of the estimate of investment earnings, (2) the expected trend in credit sales, and (3) the effect the new policy will have on sales. Nonfinancial factors include the effects […]

CHAPTER 9 PLANT ASSETS, NATURAL RESOURCES, AND INTANGIBLE ASSETS LEARNING OBJECTIVES 1. DESCRIBE HOW THE HISTORICAL COST PRINCIPLE APPLIES TO PLANT ASSETS. 2. EXPLAIN THE CONCEPT OF DEPRECIATION AND HOW TO COMPUTE IT. 3. DISTINGUISH BETWEEN REVENUE AND CAPITAL EXPENDITURES, […]

D. Factors in Computing Depreciation/Depreciation Methods. 1. The computation of depreciation expense is based on three factors: a. Cost. b. Useful life is an estimate of the expected productive life of the asset for its owner. Useful life may be […]

b. A loss results when the book value is greater than the fair value of the asset given up. 3. Gains on exchange of plant assets are recognized by crediting Gain on Disposal of Plant Assets. a. The cost of […]

CHAPTER 9 Plant Assets, Natural Resources, and Intangible Assets ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Describe how the historical cost principle applies to plant assets. 1, 2, 3 1, 2 […]

BRIEF EXERCISE 9-9 (Continued) Cost of equipment $41,000 Less accumulated depreciation 37,000 Book value at date of disposal 4,000 Proceeds from disposal 0 Loss on disposal $ 4,000 BRIEF EXERCISE 9-10 (a) Depreciation Expense ……………………………………….. 5,250 Accumulated Depreciation— Equipment ……………………………………………… […]

EXERCISE 9-10 (Continued) (c) Cash ………………………………………………………………… 11,000 Accumulated Depreciation—Equipment ……………… 36,000 Loss on Disposal of Plant Assets ………………………. 18,000 Equipment ………………………………………………….. 65,000 (d) Depreciation Expense [($65,000 – $5,000) ÷ 5 X 9/12] …………………………. 9,000 Accumulated Depreciation—Equipment ……….. 9,000 Cash ………………………………………………………………… […]

PROBLEM 9-5A (Continued) Cost $500,000 Accum. depreciation— equipment 500,000 ($500,000 X 1/10 X 10) Book value $ 0 (b) Dec. 31 Depreciation Expense ………………… 570,000 Accumulated Depreciation— Buildings ………………………… 570,000 ($28,500,000 X 1/50) 31 Depreciation Expense ………………… 4,800,000 Accumulated Depreciation— […]

PROBLEM 9-4B Year Depreciation Expense Accumulated Depreciation 2013 2014 2015 2016 2017 2018 2019 $45,000(a) 45,000 36,000(b) 36,000 36,000 48,500(c) 48,500 $ 45,000 90,000 126,000 162,000 198,000 246,500 295,000 (a) $300,000 – $30,000 6 years = $45,000 (b) Book value […]

Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 9-51 COMPREHENSIVE PROBLEM (Continued) (b) HASSELLHOUF COMPANY Trial Balance December 31, 2015 Debits Credits Cash ………………………………………………………….. Accounts Receivable ………………………………….. Notes Receivable ……………………………………….. […]

BYP 9-5 (Continued) (1) its earnings are generating more cash than the earnings of Pinson Company, and (2) depreciation expense has no effect on cash. Cash generated by operations can be arrived at by adding depreciation expense to net income. […]

Which of the following assets does not decline in service potential over the course of its useful life? a. Equipment b. Furnishings c. Land d. Fixtures Answer: The following financial statement information is available for James Corporation: The profit margin […]

The operating expense section of an income statement for a wholesaler would not include a. freight-out. b. utilities expense. c. cost of goods sold. d. insurance expense. Answer: Match the principle of internal control to each of the following cases. […]

Dividends in arrears on cumulative preferred stock a. are shown in stockholders’ equity of the balance sheet. b. must be paid before common stockholders can receive a dividend. c. should be recorded as a current liability until they are paid. […]

Which one of the following is usually performed only at the end of a company’s annual accounting period? a. Preparing financial statements b. Journalizing and posting adjusting entries c. Journalizing and posting closing entries d. Preparing an adjusted trial balance […]

If the market interest rate is greater than the contractual interest rate, bonds will sell a. at a premium. b. at face value. c. at a discount. d. only after the stated interest rate is increased. Answer: The consistent application […]

An incorrect debit to Accounts Receivable instead of the correct account Notes Receivable does not require a correcting entry because total assets will not be misstated. Answer: When recording bond interest, Interest Receivable is reported as a fixed asset in […]

The multiple-step form of income statement is easier to read than the single-step form. Answer: Casey Company retired $500,000 face value, 9% bonds on June 30, 2015 at 96. The carrying value of the bonds at the redemption date was […]

The income statement for the year 2015 of Fugazi Co. contains the following information: The entry to close the expense accounts includes a a. debit to Income Summary for $7,500. b. credit to Income Summary for $7,500. c. debit to […]

If a check correctly written and paid by the bank for $584 is incorrectly recorded on the company’s books for $548, the appropriate treatment on the bank reconciliation would be to a. deduct $36 from the book’s balance. b. add […]

The best managed companies will have a. no uncollectible accounts. b. a very strict credit policy. c. a very lenient credit policy. d. some accounts that will prove to be uncollectible. Answer: An accounting record of the balances of all […]

Accounts receivable, which are also referred to as ______________ receivables, are amounts owed by customers on account. Answer: The three primary accounting problems associated with accounts receivable are (1) ______________, (2) _______________, and (3) ______________ of accounts receivable. Answer: recognizing, […]

Which of the following errors will cause a trial balance to be out of balance? The entry to record a payment on account was a. not posted at all. b. posted as a debit to Cash and a credit to […]

1> Name at least three factors that influence the market value of stock. 2> Corporations acquire treasury stock for a variety of purposes. Name three reasons why treasury stock may be acquired by a corporation. Answer: Identify the impact on […]

Useful life is expressed in terms of use expected from the asset under the a. declining-balance method. b. straight-line method. c. units-of-activity method. d. none of these answer choices are correct. Answer: Inventory is a. reported under the classification of […]

The X Company has the following stock outstanding: Preferred stock dividends are in arrears for 2013 and 2014. If the company declares and pays $150,000 in dividends in 2015, the amount received by the preferred stockholders would be a. $84,000. […]

Which of the following is not necessary to know in computing the future value of an annuity? a. Amount of the periodic payments b. Interest rate c. Number of compounding periods d. Year the payments begin Answer: Flite Corporation has […]

Stockholders are most interested in evaluating a. liquidity and solvency. b. profitability and solvency. c. liquidity and profitability. d. marketability and solvency. Answer: In the Garnet Company, the beginning and ending balances in Land were $198,000 and $240,000 respectively. During […]

Ramos Corporation sold 400 shares of treasury stock for $45 per share. The cost for the shares was $35. The entry to record the sale will include a a. credit to Gain on Sale of Treasury Stock for $14,000. b. […]

Gain on sale of equipment and interest expense are reported under other revenues and gains in a multiple-step income statement. Answer: To be classified as a short-term investment, the investment must be readily marketable and intended to be converted into […]

Newton Company has the following accounts in its general ledger at July 31: Accounts Receivable $40,000 and Allowance for Doubtful Accounts $2,500. During August, the following transactions occurred. Oct. 15 Sold $15,000 of accounts receivable to Fast Factors, Inc. who […]

The asset turnover is computed by dividing a. net income by average total assets. b. net sales by average total assets. c. net income by ending total assets. d. net sales by ending total assets. Answer: In the Papyrus Corporation, […]

An error that overstates the ending inventory will also cause net income for the period to be overstated. Answer: On March 8, Black Candy Company bought supplies on account from the Arcade Fire Company for $550. Black Candy Company incorrectly […]

The following transactions were made by Allen Company. Assume all investments are short-term and are readily marketable. Instructions Journalize the transactions. Answer: The worksheet for Montoya Company has been completed through the adjusted trial balance. You are ready to extend […]

Horizontal analysis evaluates a series of financial statement data over a period of time a. that has been arranged from the highest number to the lowest number. b. that has been arranged from the lowest number to the highest number. […]

Stable Company issued $500,000 of 6%, 5-year bonds at 98, with interest paid annually. Assuming straight-line amortization, what is the total interest cost of the bonds? a. $150,000 b. $160,000 c. $145,000 d. $140,000 Answer: Which of the following is […]

Current liabilities are obligations that the company is to pay within the coming year. Answer: Wise Company had the following transactions. 1> Issued 7,000 shares of common stock with a stated value of $10 for $130,000. 2> Issued 2,000 shares […]

Nord Company had $375,000 of current assets and $150,000 of current liabilities before borrowing $70,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on the amount of Nord Company’s working capital? a. No […]

Once an asset is fully depreciated, no additional depreciation can be taken even though the asset is still being used by the business. Answer: Journalize the following transactions for Xiu Xiu Company for June 2015, the company’s first month of […]

The renting of an apartment is an example of a capital lease. Answer: Harnish Company needs to make adjusting entries for each of the following reconciling items. Identify the account to be debited and the account to be credited in […]

Ritter Company issues $1,200,000 of 10%, 10-year bonds on January 1, 2015, at 102. Interest is payable semiannually on July 1 and January The company uses the straight-line method of amortization. Instructions (a) Journalize the entries for the bonds on […]

A basic assumption of accounting that requires activities of an entity be kept separate from the activities of its owner is referred to as the a. stand alone concept. b. monetary unit assumption. c. corporate form of ownership. d. economic […]

Which of the following is a true statement about inventory systems? a. Periodic inventory systems require more detailed inventory records. b. Perpetual inventory systems require more detailed inventory records. c. A periodic system requires cost of goods sold be determined […]

The state unemployment tax rate is usually 4% on the first $7,000 of wages paid to an employee during the year. Answer: When counting the exact number of days to determine the maturity date of a note, the date of […]

During December 2014, Markowitz Publishing sold 4,500 12-month annual magazine subscriptions at a rate of $20 each. The first issues were mailed in February 2015. Prepare the entries on Markowitz’s books to record the sale of the subscriptions and the […]

Which of the following activities is excluded from the statement of cash flows under IFRS? a. Financing activities b. Investing activities c. Noncash investing and financing activities d. Operating activities Answer: Marke Inc. had cash sales of $400,000 and credit […]

Bank errors a. occur because of time lags. b. must be corrected by debits. c. are infrequent in occurrence. d. are corrected by making an adjusting entry on the depositor’s books. Answer: Which of the following is not a true […]

What is the order in which assets are generally listed on a classified balance sheet? •Current and long-term •Current; property, plant, and equipment; long-term investments; intangible assets •Current; property, plant, and equipment; intangible assets; long-term investments •Current; long-term investments; property, […]

The use of computers in recording business events a. has made the recording process more efficient. b. does not use the same principles as manual accounting systems. c. has greatly impacted the identification stage of the accounting process. d. is […]

Cash equivalents are highly liquid investments that can be converted into a specific amount of cash. Answer: Three dates are important in connection with cash dividends. Identify these dates, and explain their significance to the corporation and its stockholders. Answer: […]

The sale of bonds above face value a. is a rare occurrence. b. will cause the total cost of borrowing to be less than the bond interest paid. c. will cause the total cost of borrowing to be more than […]

Cash flow from investing activities is considered the most important category on the statement of cash flows because it is considered the best measure of expected income. Answer: On January 1, 2013 Grier Company purchased and installed a telephone system […]

The paid-in capital section of the balance sheet consists of two classifications: ______________________ and ______________________. Answer: Aeroplane Insurance Agency prepares monthly financial statements. Presented below is an income statement for the month of June that is correct on the basis […]

The _________________ assumption requires that the activities of an entity be kept separate from the activities of its owner. Answer: Trane Corporation has the following stockholders’ equity accounts: Preferred Stock Paid-in Capital in Excess of Par’”Preferred Stock Common Stock Paid-in […]

Selected financial statement data for Homer Company are presented below. Total assets at the beginning of the year were $800,000; total common stockholders’ equity was $500,000 at the beginning of the period. Instructions Compute each of the following: (a) Asset […]

Stanton Corporation had net income for the year of $200,000 and a profit margin of 20%. If total average assets were $400,000, the asset turnover ratio was ____________ times. Answer: Yeloe Corporation sells 400 shares of common stock being held […]

Which board(s) has(have) faced bitter opposition when working to implement fair value measurement for financial instruments? a. FASB, but not IASB. b. IASB, but not FASB. c. both FASB and IASB. d. neither FASB nor IASB. Answer: Costs incurred to […]

Firms use physical controls primarily to safeguard their assets. Answer: A debit memorandum could show the collection of a note receivable by the bank. Answer: F Identify which of the following would be classified as current liabilities as of December […]

Trudy, Inc. had the following bank reconciliation at March 31, 2015: All reconciling items at March 31, 2015 cleared the bank in April. Outstanding checks at April 30, 2015 totaled $6,000. There were no deposits in transit at April 30, […]

Each transaction must be analyzed in terms of its effect on the accounts before it can be recorded in a journal. Answer: In computing cash payments for operating expenses, a decrease in prepaid expenses is ______________ and an increase in […]

In horizontal analysis, if an item has a negative amount in the base year, and a positive amount in the following year, no percentage change for that item can be computed. Answer: Consolidated financial statements should be prepared only when […]

Which of the following journal entries is recorded correctly and in the standard format? Answer: A fellow classmate is confused about how debits and credits relate to the basic accounting equation. State the basic accounting equation, convert it into the […]

The ______________ of an asset should not have access to the accounting records of that asset. Answer: Shellhammer Company’s inventory records show the following data for the month of September: A physical inventory on September 30 shows 200 units on […]

Transactions that can be measured in dollars and cents are recorded in the financial information system. Answer: An error in the physical count of goods on hand at the end of a period resulted in a $15,000 overstatement of the […]

The following information was taken from the financial statements of Lawson Company: Instructions (a) Compute the net sales for each year. (b) Compute the cost of goods sold in dollars and as a percentage of net sales for each year. […]

In the first month of operations, the total of the debit entries to the cash account amounted to $1,200 and the total of the credit entries to the cash account amounted to $800. The cash account has a(n) a. $800 […]

What do the following classes of ratios measure? (a) Liquidity ratios. (b) Profitability ratios. (c) Solvency ratios. Answer: At April 30, Yaddof Company has the following bank information: cash balance per bank $2,300; outstanding checks $390; deposits in transit $275; […]

Match the items below by entering the appropriate code letter in the space provided. 1> An entry that involves three or more accounts. 2> Transferring journal entries to ledger accounts. 3> The side which increases an account. 4> A list […]

Which of the following methods of computing depreciation is production based? a. Straight-line b. Declining-balance c. Units-of-activity d. None of these answer choices are correct. Answer: Additions and improvements a. occur frequently during the ownership of a plant asset. b. […]

Lakeland, Inc. has 25,000 shares of 6%, $100 par value, noncumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2015. There were no dividends declared in 2014. The board of directors declares and […]

Under a double-entry system, show how the entry in each statement is entered in the ledger by using debit or credit to indicate the increase or decrease in the affected account. Answer: If the unit price of inventory is increasing […]

In its first year of operations, Arid Corporation had the following transactions pertaining to its $20 par value preferred stock. Instructions (a) Journalize the transactions. (b) Indicate the amount to be reported for (1) preferred stock, and (2) paid-in capital […]

On July 1, 2015, Jenks Company purchased the copyright to Jackson Computer tutorials for $324,000. It is estimated that the copyright will have a useful life of 5 years with an estimated salvage value of $24,000. The amount of Amortization […]

GAAP, compared to IFRS, tends to be more a. simple in accounting requirements. b. rules-based. c. principles-based. d. simple in disclosure requirements. Answer: The steps in preparing a trial balance include all of the following except a. listing the account […]

A check correctly written and paid by the bank for $271 is incorrectly recorded on the company’s books for $217. The appropriate adjustment on bank reconciliation would be to a. deduct $271 from the book’s balance. b. deduct $54 from […]

The amortization period for a patent cannot exceed a. 50 years. b. 40 years. c. 20 years. d. 10 years. Answer: Bank errors a. occur because of time lags. b. must be corrected by debits. c. are infrequent in occurrence. […]

Which of the following would not be considered internal users of accounting data for a company? a. The president of a company. b. The controller of a company. c. Creditors of a company. d. Salesmen of the company. Answer: Vega […]

A cash payments journal should not be used to record transactions which require payment by check. Answer: A __________________ fund is used to pay relatively small expenditures. Answer: petty cash The book value of a plant asset is always equal […]

In a single-step income statement, all data are classified under two categories: (1) Revenues, or (2) Expenses. If the income statement is recast in a multiple-step format, what additional information or intermediate components of income would be presented? Answer: The […]

At December 31, 2014, the trading securities for Wolfe Company are as follows: Instructions Prepare the adjusting entry at December 31, 2014, to report the securities at fair value. Answer: The cost of natural resources is not allocated to expense […]

The basic issues in accounting for notes receivable include each of the following except a. analyzing notes receivable. b. disposing of notes receivable. c. recognizing notes receivable. d. valuing notes receivable. Answer: Proving the equality of the totals in the […]

Match the items below by entering the appropriate code letter in the space provided. 1> A twelve month accounting period 2> Expenses paid before they are incurred 3> Cost less accumulated depreciation 4> Divides the economic life of a business […]

Using the percentage-of-receivables basis, the uncollectible accounts for the year is estimated to be $38,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 credit before adjustment, what is the amount of bad debt expense for the […]

A plant asset cost $288,000 and is estimated to have a $36,000 salvage value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double-declining-balance method would be a. $24,120. b. […]

Return on common stockholders’ equity is computed by dividing net income by ending stockholders’ equity. Answer: In computing cash payments for operating expenses, a decrease in prepaid expenses is ______________ and an increase in accrued expenses payable is ______________ to […]

An adjusted trial balance should be prepared before the adjusting entries are made. Answer: After all closing entries have been journalized and posted, the final step in the accounting cycle is to prepare a ______________ trial balance. Answer: post-closing With […]

Holmes Corporation manufactures electronic components for use in many consumer products. Their raw materials are purchased literally from all over the world. Depending on the country involved, purchase terms vary widely. Some suppliers, for example, require full prepayment, while others […]

North Company reports the following amounts for 2015: The 2015 rate of return on common stockholders’ equity is: a. 5.8%. b. 6.6%. c. 8.0%. d. 9.1%. Answer: A factory machine was purchased for $375,000 on January 1, 2015. It was […]

The process of recording transactions has become more efficient because a. fewer events can be quantified in financial terms. b. computers are used in processing business events. c. more people have been hired to record business transactions. d. business events […]

In preparing the statement of cash flows, determining the net increase or decrease in cash requires the use of a. the adjusted trial balance. b. the current period’s balance sheet. c. a comparative balance sheet. d. a comparative income statement. […]

Debit postings to the individual accounts in an accounts receivable subsidiary ledger generally come from the a. sales journal. b. cash receipts journal. c. purchases journal. d. cash payments journal. Answer: A $100 petty cash fund has cash of $16 […]

Winsor Company uses the perpetual inventory system and the LIFO method. The following information is available for the month of May: Instructions Prepare a schedule to show cost of goods sold and the value of the ending inventory for the […]

The ratios used in evaluating a company’s liquidity and short-term debt paying ability that complement each other are the ______________ ratio and the ______________ ratio. Answer: Each bondholder may vote for the board of directors in proportion to the number […]

Magnolia Electric Car Cleaning has the following accounts: Answer: An event or transaction should be classified as an extraordinary item if it is unusual in nature or if it occurs infrequently. Answer: F (1) Assets’”Equipment, Cash, Supplies, Accounts Receivable (2) […]

The use of reversing entries a. is a required step in the accounting cycle. b. changes the amounts reported in the financial statements. c. simplifies the recording of subsequent transactions. d. is required for all adjusting entries. Answer: A stock […]

Closing the dividends account to Retained Earnings is not necessary if net income is greater than dividends during the period. Answer: Match the ratios with the appropriate ratio computation by entering the appropriate letter in the space provided. F Answer: […]

If a parent company acquires wholly owned subsidiary at an amount greater than the book value, the excess should be a. allocated to expense on the date of acquisition. b. allocated to identifiable assets to the extent of their fair […]

On October 1, 2015, Ellington Company establishes an imprest petty cash fund by issuing a check for $200 to Erin Angelo, the custodian of the petty cash fund. On October 31, 2015, Erin Angelo submitted the following paid petty cash […]

Equipment was purchased for $96,000 and has a book value of $32,000 and a depreciable cost of $80,000. The estimated salvage value is a. $32,000. b. $64,000. c. $48,000. d. $16,000. Answer: The major IFRS requirements related to accounting for […]

GAAP’s accounting and internal control procedures related to cash and the definition of cash equivalents, as compared to IFRS are: Answer: Banks that issue credit cards generally charge retailers a fee of 2 to 4% of the amount of sale. […]

A debit balance in the Retained Earnings account is identified as a deficit. Answer: For each of the ratios listed below, indicate by the appropriate code letter, whether it is a liquidity ratio (L), a profitability ratio (P), or a […]

Turnbull Department Store had net credit sales of $18,000,000 and cost of goods sold of $15,000,000 for the year. The average inventory for the year amounted to $2,500,000. The average number of days in inventory during the year was a. […]

On May 1, Howard Corporation purchased 2,000 shares of its $10 par value common stock at a cash price of $15/share. On July 15, 900 shares of the treasury stock were sold for cash at $17/share. Instructions Journalize the two […]

Financial statements can be prepared from the information provided by an adjusted trial balance. Answer: The expense recognition principle requires that expenses be matched with revenues. Answer: T Control over cash disbursements is improved if major expenditures are paid by […]

If a company uses the FIFO cost flow assumption, the cost of goods sold for the period will be the same under a perpetual or periodic inventory system. Answer: The Financial Accounting Standards Board is a part of the Securities […]

Securities bought and held primarily for sale in the near term to generate income on short-term price differences are a. trading securities. b. available-for-sale securities. c. never-sell securities. d. held-to-maturity securities. Answer: In analyzing the financial statements of a company, […]

Match the items below by entering the appropriate code letter in the space provided. 1> A general ledger account that summarizes detailed information in a subsidiary ledger. 2> A subsidiary ledger that contains accounts with individual creditors. 3> A special […]

Which one of the following items would not be considered cash? a. Coins b. Money orders c. Currency d. Postdated checks Answer: At May 1, 2015, Kibbee Company had beginning inventory consisting of 200 units with a unit cost of […]

The major difference between the balance sheets of a service company and a merchandising company is inventory. Answer: The process of determining the present value is referred to as _________________ the future amount. Answer: discounting To determine a new depreciation […]

An aging of a company’s accounts receivable indicates that $7,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a a. debit to […]

The information for preparing a trial balance on a worksheet is obtained from a. financial statements. b. general ledger accounts. c. general journal entries. d. business documents. Answer: IFRS requires the use of a. the term balance sheet. b. the […]

Penny Company owns 20% interest in the stock of Lynn Corporation. During the year, Lynn pays $25,000 in dividends, and reports $200,000 in net income. Penny Company’s investment in Lynn will increase by a. $25,000. b. $40,000. c. $45,000. d. […]

The cash proceeds from issuing par value stock may be equal to or greater than, but not less than par value. Answer: S. Lamar performed legal services for E. Garr. Due to a cash shortage, an agreement was reached whereby […]

Prior period adjustments to income are reported in the current year’s income statement. Answer: If a corporation’s stock is traded on the major stock exchanges, the corporation must generally report periodically to a federal agency known as the ____________________. Answer: […]

The primary source of revenue for a wholesaler is a. investment income. b. service fees. c. the sale of merchandise. d. the sale of fixed assets the company owns. Answer: Under IFRS, the term reserves relates to each of the […]

Which accounts in the general ledger are affected when the monthly posting is made from the sales journal? a. Accounts Receivable; accounts receivable subsidiary accounts b. Accounts receivable subsidiary accounts; Sales Revenue c. Accounts Receivable; Sales Revenue d. Accounts Receivable; […]

If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future. Answer: Luis Rodriguez wants to buy a car in 3 years. He will need $3,000 for a down payment. The annual interest […]

The process of transferring the information in the journal to the general ledger is called posting. Explain the posting process, including the importance of the journal page number and the account numbers. Answer: The ________________ principle states that assets should […]

The current source of “GAAP” in the private sector is the a. Accounting Principles Board. b. Internal Revenue Service. c. Financial Accounting Standards Board. d. Securities Exchange Commission. Answer: Jack’s, a popular pizza hang-out, has a thriving delivery business. Jack’s […]

Which of the following is true regarding the corporate form of business organization? a. Corporations are the most prevalent form of business organization. b. Corporate businesses are generally smaller in size than partnerships and proprietor-ships. c. The revenues of corporations […]

An unrealized gain or loss on trading securities is reported as a separate component of stockholders’ equity. Answer: Financial information is presented below for two different companies. Instructions Determine the missing amounts. Answer: (*Missing amount) F On January 1, 2014, […]

Under generally accepted accounting principles, management has the choice of physically counting inventory on hand at the end of the year or using the gross profit method to estimate the ending inventory. Answer: Goodwill is an unusual asset in that […]

The following transactions were made by Allen Company. Assume all investments are short-term and are readily marketable. Instructions Journalize the transactions. Answer: Gerber Corporation purchased the following long-term investments in stock securities on January 10, 2015: 10,000 shares of the […]

In a periodic inventory system, a return of defective merchandise to a supplier is recorded by crediting a. Accounts Payable. b. Inventory. c. Purchases. d. Purchase Returns and Allowances. Answer: Which of the following would not be needed to determine […]

On February 1, 2015, Fugit Company sells merchandise on account to Armen Company for $6,500. The entry to record this transaction by Fugit Company is Answer: There are three parties to a check: (1)_______________, (2)______________, and the (3)______________. Answer: maker, […]

If the equity method is being used, the Revenue from Stock Investments account is a. just another name for a Dividend Revenue account. b. credited when dividends are declared by the investee. c. credited when net income is reported by […]

Given the following information, compute the amount of cash finally remitted by the customer. Oct. 22’”Sale on credit, terms of 2/10, n/30’”$6,000 Oct. 27’”Allowance granted due to some items being damaged’”$600 Oct. 31’”Payment in full received from customer’”$? a. $5,292. […]

Which of the following factors does not affect the initial market price of a stock? a. The company’s anticipated future earnings b. The par value of the stock c. The current state of the economy d. The expected dividend rate […]

Langer Company has the following inventory information. Assuming that a perpetual inventory system is used, what is the ending inventory (round all calculations to nearest dollar) under the moving-average cost method? a. $2,930 b. $2,966 c. $2,986 d. $3,054 Answer: […]

In recording business transactions, evidence that an accounting transaction has taken place is obtained from a. business documents. b. the Internal Revenue Service. c. the public relations department. d. the SEC. Answer: Hull Company acquires land for $86,000 cash. Additional […]

Accrued expenses are a. paid and recorded in an asset account before they are used or consumed. b. paid and recorded in an asset account after they are used or consumed. c. incurred but not yet paid or recorded. d. […]

Roxy Corporation makes a short-term investment in 180 shares of Sager Company’s common stock. The stock is purchased for $53 a share. The entry for the purchase is Answer: A 75-day note receivable dated June 10 would mature on ______________. […]

In the balance sheet the account Premium on Bonds Payable is a. added to Bonds Payable. b. deducted from Bonds Payable. c. classified as a stockholders’ equity account. d. classified as a revenue account. Answer: On January 1, Runner Corporation […]

Which of the following is not an external user of accounting data? a. Company officers b. Regulatory agency c. Labor union d. Taxing authority Answer: Which of the following is false? a. Current assets are listed in the order of […]

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method which a. is used for tax purposes. b. must be used for financial statement purposes. c. is required by the SEC. d. expenses an asset over a single year […]

Presented below are two independent situations: (a) Yount Company exchanged an old machine (cost $150,000 less $90,000 accumulated depreciation) plus $10,000 cash for a new machine. The old machine had a fair value of $54,000. Prepare the entry to record […]

Cost of goods available for sale includes each of the following except a. beginning inventory. b. freight-in. c. ending inventory. d. net purchases. Answer: A plant asset was purchased on January 1 for $100,000 with an estimated salvage value of […]

If a corporation distributes cash to its stockholders, then a. there has been a violation of accounting principles. b. stockholders’ equity will increase. c. stockholders’ equity will decrease. d. there will be a new liability showing the stockholders owes money […]

The amount you must deposit now in your savings account, paying 6% interest, in order to accumulate $6,000 for a down payment 5 years from now on a new car is a. $1,200. b. $4,484. c. $4,477. d. $4,200. Answer: […]

The ending retained earnings amount is shown on a. the balance sheet only. b. the retained earnings statement only. c. both the income statement and the retained earnings statement. d. both the balance sheet and the retained earnings statement. Answer: […]

A good internal control feature is to have several employees choose one person to punch all of their time cards. Answer: Amy Pond, a fellow employee, wants to understand the basic steps in the recording process. Identify and briefly explain […]

Logan Company debited Prepaid Insurance for $1,080 on July 1, 2015, for a one-year fire insurance policy. If the company prepares monthly financial statements, failure to make an adjusting entry on July 31 for the amount of insurance that has […]

Identify which of the following reconciling items would require an adjusting entry to be made by Danielle Doyle Company. 1> Deposits in transit totaled $2,000. 2> A check written to the company for $415 by Cartography Company was returned NSF. […]

Hungh Company had the following transactions pertaining to short-term investments in equity securities. Instructions (a) Journalize the transactions. (b) Indicate the income statement effects of the transactions. Answer: Newton Company has recorded the following items in its financial records. (a) […]

Wainwright Stores accepts both its own and national credit cards. During the year the following selected summary transactions occurred. Instructions (a) Journalize the transactions for Wainwright Stores. (b) Indicate the statement presentation of the financing charges and the credit card […]

The ledger accounts of the Fabulous Muscles Gym at June 30, 2015 are shown below: Instructions Prepare a trial balance with the ledger accounts arranged in the proper financial statement order. Include the appropriate heading. Answer: Comparative information taken from […]

Income will always be greater under the cash basis of accounting than under the accrual basis of accounting. Answer: Freight terms of FOB Destination means that the seller pays the freight costs. Answer: T There are three parties to a […]

Stine Co. sells Christmas angels. Patel determines that at the end of December, it has the following aging schedule of Accounts Receivable: Compute the net receivables based on the above information at the end of December. (There was no beginning […]

The financial statement columns of the worksheet for Booer Company as of December 31, 2015 are as follows: Instructions Prepare a classified balance sheet for Booer Company. Answer: For accounting purposes, business transactions should be kept separate from the personal […]

A purchased patent has a legal life of 20 years. It should be a. expensed in the year of acquisition. b. amortized over 20 years regardless of its useful life. c. amortized over its useful life if less than 20 […]

If a plant asset is retired before it is fully depreciated and no salvage value is received, a. a gain on disposal occurs. b. a loss on disposal occurs. c. either a gain or a loss can occur. d. neither […]

The organization(s) primarily responsible for establishing generally accepted accounting principles is(are) the Answer: Treasury stock is a contra stockholders’ equity account. Answer: T Identify the factors that are considered in classifying an expenditure as a capital or a revenue expenditure. […]

The principles of internal control include all of the following except a. establishment of responsibility. b. combining of duties. c. physical, mechanical, and electronic controls. d. independent internal verification. Answer: Depreciable cost is the a. book value of an asset […]

The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items. Answer: Unearned revenues should be classified as Other Revenues and Gains on the Income Statement. Answer: F In preparing a […]

The entry to record the issuance of an interest-bearing note credits Notes Payable for the note’s a. maturity value. b. market value. c. face value. d. cash realizable value. Answer: Martin Corporation purchased land in 2007 for $290,000. In 2015, […]

The standard format of a journal would not include a. a reference column. b. an account title column. c. a T-account. d. a date column. Answer: The stockholders’ equity section of Barrel Corporation’s balance sheet at December 31, 2014, appears […]

Match the items below by entering the appropriate code letter in the space provided. ____ 1> Net income retained in the corporation. ____ 2> The amount that must be retained in the business for the protection of creditors. ____ 3> […]

The market value (present value) of a bond is a function of all of the following except the a. dollar amounts to be received. b. length of time until the amounts are received. c. market rate of interest. d. length […]

Mott Company uses the units-of-activity method in computing depreciation. A new plant asset is purchased for $48,000 that will produce an estimated 100,000 units over its useful life. Estimated salvage value at the end of its useful life is $4,000. […]

In preparing its bank reconciliation for the month of April 2015, Delano, Inc. has available the following information. What should be the adjusted cash balance at April 30, 2015? a. $77,260. b. $77,600. c. $78,020. d. $78,200. Answer: The following […]

If Sloane Joyner invests $10,514.81 now and she will receive $30,000 at the end of 11 years, what annual rate of interest will she be earning on her investment? a. 8% b. 8.5% c. 9% d. 10% Answer: Ward Corporation […]

Foley Word Processing Service uses the straight-line method of depreciation. The company’s fiscal year end is December 31. The following transactions and events occurred during the first three years. Instructions Prepare the necessary entries. (Show computations.) Answer: A change in […]

Stocks traded on the New York Stock Exchange are considered readily marketable. Answer: The percentage of sales basis for estimating uncollectible accounts always results in more Bad Debt Expense being recognized than the percentage of receivables basis. Answer: F Short-term […]

Which account below is not a subdivision of retained earnings? a. Dividends b. Revenues c. Expenses d. Common stock Answer: At January 31, 2015, the balance in Aislers Inc.’s supplies account was $750. During February, Aislers purchased supplies of $900 […]

On December 1, 2014, Crawley Corporation incurs a 15-year $600,000 mortgage liability in conjunction with the acquisition of an office building. This mortgage is payable in monthly installments of $7,200, which include interest computed at the rate of 12% per […]

Molina Company had a $700 credit balance in Allowance for Doubtful Accounts at December 31, 2015, before the current year’s provision for uncollectible accounts. An aging of the accounts receivable revealed the following: Instructions (a) Prepare the adjusting entry on […]

The basic accounting equation is in balance when the creditor and ownership claims against the business equal the assets. Answer: If a company changes its inventory valuation method, the effect of the change on net income should be disclosed in […]

The carrying value of bonds will equal the market price a. at the close of every trading day. b. at the end of the fiscal period. c. on the date of issuance. d. every six months on the date interest […]

Generally accepted accounting principles are a. income tax regulations of the Internal Revenue Service. b. standards that indicate how to report economic events. c. theories that are based on physical laws of the universe. d. principles that have been proven […]

Either the straight-line method or the effective-interest method of amortization will always result in a. the same amount of interest expense being recognized over the term of the bonds. b. the same amount of interest expense being recognized each year. […]

Credit terms of 2/10, n/30 mean that a. a 10% cash discount may be taken if payment is made immediately; a 2% discount if paid within 30 days. b. a 2% cash discount may be taken if payment is made […]

A debit to an asset account indicates a. an error. b. a credit was made to a liability account. c. a decrease in the asset. d. an increase in the asset. Answer: Lester Company sells many products. Hackenberry is one […]

A contra asset account is subtracted from a related account in the balance sheet. Answer: When plant assets are exchanged, the cost of the new asset is the book value of the old asset plus any cash paid. Answer: F […]

Vertical and horizontal analyses are concerned with the format used to prepare financial statements. Answer: The following information was used to prepare the March 2015, bank reconciliation for Walker Machine Works. Identify the items that require adjustment to the cash […]

Present value is based on a. the dollar amount to be received. b. the length of time until the amount is received. c. the interest rate. d. all of these. Answer: Which of the following is a true statement about […]

If Kelly Cranford invests $11,970 now, she will receive $40,000 at the end of 14 years. What annual rate of return will Kelly earn on her investment? Answer: If the present value of the cash ______________ exceeds the present value […]

Interest expense on an interest-bearing note is a. always equal to zero. b. accrued over the life of the note. c. only recorded at the time the note is issued. d. only recorded at maturity when the note is paid. […]

A corporate board of directors does not generally a. select officers. b. formulate operating policies. c. declare dividends. d. execute policy. Answer: On January 1, 2015, Bose Company issued bonds with a face value of $600,000. The bonds carry a […]

The expense recognition principle requires that expenses be matched with revenues. Answer: Sales returns and allowances and sales discounts are subtracted from sales in reporting net sales in the income statement. Answer: T Natural resources are long-lived productive assets that […]

Which of the following is not a true statement about a multiple-step income statement? a. Operating expenses are similar for merchandising and service enterprises. b. There may be a section for nonoperating activities. c. There may be a section for […]

An adjusting entry is not required for a. outstanding checks. b. collection of a note by the bank. c. NSF checks. d. bank service charges. Answer: A flower shop makes a large sale for $1,200 on November 30. The customer […]

A good internal control feature is to have several employees choose one person to punch all of their time cards. Answer: Other receivables include nontrade receivables such as loans to company officers. Answer: T Indicate in the space provided by […]

Match the items below by entering the appropriate letter in the space. 1> Partnership 2> Liabilities 3> Revenues 4> General ledger 5> Expense recognition principle 6> Unearned service revenue 7> Income summary 8> Intangible assets 9> Freight-out 10> Sales returns […]

The selection of an appropriate inventory cost flow assumption for an individual company is made by a. the external auditors. b. the SEC. c. the internal auditors. d. management. Answer: The historical cost principle requires that when assets are acquired, […]

Salon Company originally issued 4,000 shares of $10 par value common stock for $120,000 ($30 per share). Salon subsequently purchases 400 shares of treasury stock for $27 per share and resells the 400 shares of treasury stock for $29 per […]

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense? a. FIFO b. LIFO c. Average Cost d. Income tax expense for the period will be the same under all […]

Mize Company owns 30% interest in the stock of Lyte Corporation. During the year, Lyte pays $20,000 in dividends to Mize, and reports $300,000 in net income. Mize Company’s investment in Lyte will increase Mize ‚s net income by a. […]

Identify which of the following reconciling items would require an adjusting entry to be made by Danielle Doyle Company. 1> Deposits in transit totaled $2,000. 2> A check written to the company for $415 by Cartography Company was returned NSF. […]

The SEC and FASB are two organizations that are primarily responsible for establishing generally accepted accounting principles. It is true that a. they are both governmental agencies. b. the SEC is a private organization of accountants. c. the SEC often […]

Which one of the following payroll taxes does not result in a payroll tax expense for the employer? a. FICA tax b. Federal income tax c. Federal unemployment tax d. State unemployment tax Answer: The December 31, 2014 balance sheet […]

Your friend, Dean, has opened a movie theater. Dean states that he does not have time to develop and implement a system of internal controls. a. Provide Dean with the objectives of a system of internal controls. b. Explain to […]

A journal provides a. the balances for each account. b. information about a transaction in several different places. c. a list of all accounts used in the business. d. a chronological record of transactions. Answer: An increase in an expense […]

Which of the following items will increase inventoriable costs for the buyer of goods? a. Purchase returns and allowances granted by the seller b. Purchase discounts taken by the purchaser c. Freight charges paid by the seller d. Freight charges […]

The income statement for the month of June, 2015 of Camera Obscura Enterprises contains the following information: The entry to close the expense accounts includes a a. debit to Income Summary for $1,300. b. credit to Rent Expense for $1,500. […]

A segregation of duties among employees eliminates the possibility of collusion. Answer: A company may use more than one inventory costing method concurrently. Answer: T A change in the estimated salvage value of a plant asset requires a restatement of […]

A capital lease requires the lessee to record the lease as a purchase of an asset. Answer: The residual claim on total assets of a business is known as ________________ and is equal to total assets minus total liabilities. Answer: […]

Adama Company reported a net loss of $6,000 for the year ended December 31, 2014. During the year, accounts receivable increased $15,000, merchandise inventory decreased $12,000, accounts payable decreased by $20,000, and depreciation expense of $12,000 was recorded. During 2014, […]

If a plant asset is retired before it is fully depreciated and no salvage value is received, a. a gain on disposal occurs. b. a loss on disposal occurs. c. either a gain or a loss can occur. d. neither […]

Sales Returns and Allowances and Sales Discounts are both designed to encourage customers to pay their accounts promptly. Answer: The adjustments on a worksheet can be posted directly to the accounts in the ledger from the worksheet. Answer: F Halpern […]

Allowance for Doubtful Accounts is a _____________ account which is ______________ from Accounts Receivable on the balance sheet. Answer: The fair value of a plant asset is always the same as its book value. Answer: F Owners’ claims to total […]

Profitability ratios include a. times interest earned. b. inventory turnover. c. the payout ratio. d. the acid-test ratio. Answer: The principles of internal control activities are used in the a. U.S. but not globally. b. internationally but not in the […]

Sales Returns and Allowances is increased when a. an employee does a good job. b. goods are sold on credit. c. goods that were sold on credit are returned. d. customers refuse to pay their accounts. Answer: An account will […]

A separate paid-in capital account is used to record each of the following except the issuance of a. no-par stock. b. par value stock. c. stated value stock. d. treasury stock above cost. Answer: The following exhibit is for Kmart […]

The balance in the Unrealized Gain or Loss’”Equity account will a. appear on the balance sheet as a contra asset. b. appear on the income statement under Other Expenses and Losses. c. appear as a deduction in the stockholders’ equity […]

Roxy Inc. issues a $1,500,000, 10%, 10-year mortgage note on December 31, 2015, to obtain financing for a new building. The terms provide for semiannual installment payments of $122,643. Instructions Prepare the entry to record the mortgage loan on December […]

In horizontal analysis, if an item has a negative amount in the base year, and a positive amount in the following year, no percentage change for that item can be computed. Answer: Handel Company uses the allowance method for estimating […]

In the stockholders’ equity section of the balance sheet, the classification of capital stock consists of a. additional paid-in capital and common stock. b. common stock and treasury stock. c. common stock, preferred stock, and treasury stock. d. common stock […]

Which of the following is not a true statement about a multiple-step income statement? a. Operating expenses are similar for merchandising and service enterprises. b. There may be a section for nonoperating activities. c. There may be a section for […]

The ledger accounts given below, with an identification number for each, are used by Kiner Company which uses perpetual inventory methods. Instructions: Prepare appropriate entries for the month of August by placing the appropriate identification number(s) in the debit and […]

Which of the following time periods would not be referred to as an interim period? a. Monthly b. Quarterly c. Semi-annually d. Annually Answer: A company just starting business made the following four inventory purchases in June: A physical count […]

Under the cost method, dividends received from an investee company are credited to the _______________ account, whereas under the equity method, dividends received from an investee company are credited to the _______________ account. Answer: Identify which principle of internal control […]

Delta72 Company received a cash advance of $700 from a customer. As a result of this event, a. assets increased by $700. b. stockholders’ equity increased by $700. c. liabilities decreased by $700. d. assets and stockholders’ equity increased by […]

The balance in the Prepaid Rent account before adjustment at the end of the year is $21,000, which represents three months’ rent paid on December 1. The adjusting entry required on December 31 is to a. debit Rent Expense, $7,000; […]

Consistency in accounting means that a company uses the same accounting principles from one accounting period to the next accounting period. Answer: On April 1, Sign Company buys 4,000 shares of Polk common stock for $61,500. On October 1, Sign […]

If a corporation distributes cash to its stockholders, then a. there has been a violation of accounting principles. b. stockholders’ equity will increase. c. stockholders’ equity will decrease. d. there will be a new liability showing the stockholders owes money […]

A company purchased a delivery truck on January 1, 2014, for $18,000. It is estimated that the delivery truck will have a $4,000 salvage value at the end of its 5-year useful life. If the company recorded depreciation expense of […]

Bates Company has a $300,000 balance in Accounts Receivable and a $1,000 debit balance in Allowance for Doubtful Accounts. Credit sales for the period totaled $1,800,000. What is the amount of the bad debt adjusting entry if Bates uses a […]

The basic accounting equation may be expressed as a. Assets = Equities. b. Assets ‘“ Liabilities = Stockholders’ Equity. c. Assets = Liabilities + Stockholders’ Equity. d. All of these answers are correct. Answer: A small stock dividend is defined […]

Dividends in arrears on cumulative preferred stock are considered a liability. Answer: Dolan Company exchanges equipment with Eaton Company and Pawnee Company exchanges equipment with Fiero Company. The following information pertains to the exchanges: Instructions Prepare the journal entries to […]

The _________________ basis of estimating uncollectibles normally results in the best approximation of _______________ value and therefore emphasizes balance sheet relationships. Answer: Cash registers are an important internal control device used in controlling over-the-counter receipts. Answer: T A new sales […]

Haven Company uses the percentage of sales method for recording bad debt expense. For the year, cash sales are $600,000 and credit sales are $2,700,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Haven […]

The following information pertains to Rural Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the return on common stockholders’ equity for Rural? a. 4.8% b. […]

The following terms relate to the fundamental qualities of useful information. Match the key letter of the correct term with the descriptive statement below. _____ 1> Accounting information that is not biased toward one position or another. _____ 2> Providing […]

Crawford Company has total proceeds (before segregation of sales taxes) from sales of $7,155. If the sales tax is 6%, the amount to be credited to the account Sales Revenue is: a. $7,155. b. $6,726. c. $7,584. d. $6,750. Answer: […]

A Sales Returns and Allowances account is not debited if a customer a. returns defective merchandise. b. receives a credit for merchandise of inferior quality. c. utilizes a prompt payment incentive. d. returns goods that are not in accordance with […]

Carson Packaging Corporation began business in 2015 by issuing 30,000 shares of $3 par common stock for $8 per share and 12,000 shares of 6%, $10 par preferred stock for par. At year end, the common stock had a market […]

The following information was available for Pete Company at December 31, 2015: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $984,000; and sales $1,350,000. Pete’s inventory turnover in 2015 was a. 10.9 times. b. 12.3 times. c. 14.1 […]

In accounting for stock investments of less than 20%, the equity method is used. Answer: Indicate whether the following items would appear on the balance sheet (BS), income statement (IS), or retained earnings statement (RE). 1> Advertising expense 2> Accounts […]

The closing entry process consists of closing a. all asset and liability accounts. b. out the retained earnings account. c. all permanent accounts. d. all temporary accounts. Answer: Prior period adjustments are reported a. in the footnotes of the current […]

Anne Company has total cash register receipts of $39,690. This total includes a 5% sales tax. The entry to record the receipts will include a a. debit to Sales Tax Expense for $1,890. b. credit to Sales Revenue for $36,690. […]

Corporations invest excess cash for short periods of time in each of the following except a. equity securities. b. highly liquid securities. c. low-risk securities. d. government securities. Answer: Liabilities are generally classified on a balance sheet as a. small […]

A corporation must be incorporated in each state in which it does business. Answer: The times interest earned ratio is computed by dividing net income by interest expense. Answer: F A finance company or bank that purchases receivables from businesses […]

Sarah Denny purchased an investment for $40,260.48. From this investment, she will receive $6,000 annually for the next 10 years starting one year from now. What rate of interest will Sarah be earning on her investment? Answer: Which of the […]

Match the following external users of financial accounting information with the type of decision that user will make with the information. a. Creditor b. Investor c. Regulatory Agency d Internal Revenue Service _______ (1) Is the company operating within prescribed […]

On October 1, Steve’s Carpet Service borrows $350,000 from First National Bank on a 3-month, $350,000, 8% note. The entry by Steve’s Carpet Service to record payment of the note and accrued interest on January 1 is Answer: Transactions are […]

Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs. Answer: Goodwill is not recognized in accounting unless it is acquired from purchasing another business enterprise. Answer: T Bell Food Store developed the […]

Transactions are initially recorded in the a. general ledger. b. trial balance. c. general journal. d. balance sheet. Answer: Horton Company uses four special journals, (cash receipts, cash payments, sales, and purchases journal) in addition to a general journal. On […]

Each of the following decreases total stockholders’ equity except a a. cash dividend. b. liquidating dividend. c. stock dividend. d. All of these decrease total stockholders’ equity. Answer: Equipment that cost $420,000 and on which $200,000 of accumulated depreciation has […]

On January 2, 2012, Porter Corporation issued 30,000 shares of 5% cumulative preferred stock at $100 par value. On December 31, 2015, Porter Corporation declared and paid its first dividend. What dividends are the preferred stockholders entitled to receive in […]

In calculating depreciation, both plant asset cost and useful life are based on estimates. Answer: The dividends account is a permanent account whose balance is carried forward to the next accounting period. Answer: F F Using the cash payments journal […]

During the year, Salaries Payable decreased by $5,000. If Salary Expense amounted to $174,000 for the year, the cash paid to employees (including deductions from gross pay) is a. $179,000. b. $174,000. c. $169,000. d. $184,000. Answer: A statement of […]

Ordinary repairs should be recognized when incurred as revenue expenditures. Answer: Give the definition of current assets and current liabilities and provide two examples of each. Answer: Current assets are assets that a company expects to convert to cash or […]

Stable Company issued $500,000 of 6%, 5-year bonds at 98, with interest paid annually. Assuming straight-line amortization, what is the total interest cost of the bonds? a. $150,000 b. $160,000 c. $145,000 d. $140,000 Answer: Stanley Company had inventory of […]

Which of the following is not true of the terms debit and credit? a. They can be abbreviated as Dr. and Cr. b. They can be interpreted to mean increase and decrease. c. They can be used to describe the […]

Cost of goods sold is determined only at the end of the accounting period in a. a perpetual inventory system. b. a periodic inventory system. c. both a perpetual and a periodic inventory system. d. neither a perpetual nor a […]

Quayle Mining Company purchased land containing an estimated 15 million tons of ore at a cost of $4,200,000. The land without the ore is estimated to be worth $600,000. The company expects to operate the mine for 12 years. Buildings […]

Which of the following is an incorrect statement about a corporation? a. A corporation is an entity separate and distinct from its owners. b. Creditors ordinarily have recourse only to corporate assets in satisfaction of their claims. c. A corporation […]

Which of the following items would not be identified if a contingent liability were disclosed in a financial statement note? a. The nature of the item b. The expected outcome of the future event c. A numerical probability of the […]

Eneri Company’s inventory records show the following data: A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic inventory […]

Saira, Inc. has the following income statement (in millions): Using vertical analysis, what percentage is assigned to Cost of Goods Sold? a. 40% b. 60% c. 100% d. None of these answer choices are correct. Answer: The receivable that is […]

Which of the following accounts is not included in the computation of net sales? a. Sales Discounts b. Sales c. Sales Returns and Allowances d. Freight Out Answer: The information in a statement of cash flows will not help investors […]

The calculation of depreciation using the declining balance method, a. ignores salvage value in determining the amount to which a constant rate is applied. b. multiplies a constant percentage times the previous year’s depreciation expense. c. yields an increasing depreciation […]

The sale of receivables by a business a. indicates that the business is in financial difficulty. b. is generally the major revenue item on its income statement. c. is an indication that the business is owned by a factor. d. […]

The entries in the Accounts Receivable Credit column of the cash receipts journal must be posted _______________ to the accounts in the accounts receivable subsidiary ledger and in _______________ to the control account in the general ledger. Answer: Identify the […]

An expense is recorded under the cash basis only when a. services are performed. b. it is earned. c. cash is paid. d. it is incurred. Answer: Which one of the following would not cause a bank to debit a […]

A truck that cost $72,000 and on which $60,000 of accumulated depreciation has been recorded was disposed of for $18,000 cash. The entry to record this event would include a a. gain of $6,000. b. loss of $6,000. c. credit […]

Jose Reynolds deposited $10,000 in an account paying interest of 4% compounded annually. What amount will be in the account at the end of 4 years? Answer: A detailed stockholders’ equity section in the balance sheet will list the names […]

The accounts payable subsidiary ledger provides detailed information about amounts owed to creditors. Answer: The future value of a single amount is the value at a future date of a given amount invested now, assuming compound interest. Answer: T If […]

If stock is issued in exchange for noncash assets, the assets should be valued at the ____________________ of the consideration ___________________ or the assets ____________________, whichever is more clearly evident. Answer: If a worksheet is used, financial statements can be […]

During July, the following purchases and sales were made by Big Dan Company. There was no beginning inventory. Big Dan Company uses a perpetual inventory system. Under the FIFO method, the cost of goods sold for each sale is: Answer: […]

The accounts receivable turnover is calculated by dividing _________________ by average ___________________. Answer: The gross profit method is based on the assumption that the rate of gross profit remains constant from one year to the next. Answer: T Transactions for […]

If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the a. Inventory account will be increased. b. Inventory account will not be affected. c. seller will bear the freight cost. d. carrier will […]

On September 5, Borton Corporation acquired 2,500 shares of its own $1 par common stock for $22 per share. On October 15, 1,000 shares of the treasury stock is sold for $25 per share. Instructions Journalize the purchase and sale […]

The information needs of a specific user of financial accounting information depends upon the kinds of decisions that user makes. Identify the major users of accounting information and discuss what questions financial accounting information answers for each group of users. […]

The process of excluding intercompany transactions in preparing consolidated statements is referred to as intercompany eliminations. Answer: At the end of an accounting period, all revenue and expense accounts are closed to a temporary account called ______________. Answer: Income Summary […]

Using the following information: During 2015, sales on account were $145,000 and collections on account were $100,000. Also during 2015, the company wrote off $4,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that uncollectible […]

Which one of the following would not be considered an advantage of the corporate form of organization? a. Limited liability of owners b. Separate legal existence c. Continuous life d. Government regulation Answer: On January 1, Soft Corporation had 80,000 […]

Eaton Company’s ledger at the end of the current year shows Accounts Receivable of $150,000. Instructions a. If Allowance for Doubtful Accounts has a credit balance of $4,400 in the trial balance and bad debts are expected to be 10% […]

Farris Company borrowed $800,000 from BankTwo on January 1, 2014 in order to expand its mining capabilities. The five-year note required annual payments of $208,349 and carried an annual interest rate of 8.5%. What is the amount of expense Farris […]

At the time of acquisition of a debt investment, a. no journal entry is required. b. the historical cost principle applies. c. the Stock Investments account is debited when bonds are purchased. d. the Investment account is credited for its […]

Stahl Consulting started the year with total assets of $60,000 and total liabilities of $15,000. During the year, the business recorded $48,000 in catering revenues and $30,000 in expenses. Stahl issued stock of $9,000 and paid dividends of $15,000 during […]

The steps in the preparation of a worksheet do not include a. analyzing documentary evidence. b. preparing a trial balance on the worksheet. c. entering the adjustments in the adjustment columns. d. entering adjusted balances in the adjusted trial balance […]

Internal control is defined, in part, as a plan that safeguards a. all balance sheet accounts. b. assets. c. liabilities. d. capital stock. Answer: The entry to record an installment payment on a long-term note payable is a. Mortgage Payable […]

The acid-test (quick) ratio a. is used to quickly determine a company’s solvency and long-term debt paying ability. b. relates cash, short-term investments, and net receivables to current liabilities. c. is calculated by taking one item from the income statement […]

Additions and improvements to a plant asset that increase the asset’s operating efficiency, productive capacity, or expected useful life are generally expensed in the period incurred. Answer: Compute the net income for 2015 based on the following amounts presented on […]

A corporation purchases 30,000 shares of its own $15 par common stock for $30 per share, recording it at cost. What will be the effect on total stockholders’ equity? a. Increase by $450,000 b. Decrease by $900,000 c. Increase by […]

Jim’s Pharmacy has collected $600 in sales taxes during March. If sales taxes must be remitted to the state government monthly, what entry will Jim’s Pharmacy make to show the March remittance? Answer: Interest expense on a note payable is […]

Cost of goods sold for the year amounted to $130,000, and during the year, accounts payable ______________ by $9,000 and inventory ______________ by $5,000 resulting in cash paid to suppliers of $116,000. Answer: Richter Company sells merchandise on account for […]

At June 30, Yaddof Company has the following bank information: cash balance per bank $1,800; outstanding checks $340; deposits in transit $275; credit memo for interest $75; bank service charge $10. What is Mareska’s adjusted cash balance on June 30? […]

Sales taxes collected by a retailer are expenses a. of the retailer. b. of the customers. c. of the government. d. that are not recognized by the retailer until they are submitted to the government. Answer: On January 1, 2014, […]

A typical investment to house excess cash until needed is a. stocks of companies in a related industry. b. debt securities. c. low-risk, highly liquid securities. d. stock securities. Answer: Bacher Company developed the following reconciling information in preparing its […]

Regular dividends are declared out of a. Paid-in Capital in Excess of Par. b. Treasury Stock. c. Common Stock. d. Retained Earnings. Answer: The following information pertains to Rural Company. Assume that all balance sheet amounts represent both average and […]

If stock is issued in exchange for noncash assets, the assets should be valued at the ____________________ of the consideration ___________________ or the assets ____________________, whichever is more clearly evident. Answer: Retained earnings that are restricted are unavailable for dividends. […]

On January 1, 2014, Gene Corp. paid $800,000 for 100,000 shares of Onofine Company’s common stock, which represents 30% of Onofine ‚s outstanding common stock. Onofine reported net income of $200,000 and paid cash dividends of $60,000 during 2014. Gene […]

Horizontal analysis (trend analysis) percentages for Staas Company’s sales, cost of goods sold, and expenses are listed here. Instructions Explain whether Staas’ net income increased, decreased, or remained unchanged over the 3-year period. Answer: Prepare an income statement, a retained […]

On the statement of cash flows worksheet, a. significant noncash investing and financing activities are not entered in the reconciling columns. b. a decrease in cash will be offset by a debit in the reconciling items columns at the bottom […]

Patton Company bought real estate, on which there was an old office building, for $500,000. It paid $50,000 in cash as a down payment and signed a 10% mortgage for the remainder. It immediately had the old building razed at […]

The information to prepare the statement of cash flows usually comes from each of the following except a. the comparative balance sheet. b. the prior year’s income statement. c. additional information. d. the current income statement. Answer: Which one of […]

Mt. Zion Inc. pays its employees twice a month, on the 7thand the 21st. On June 21, Mt. Zion Inc. paid employee salaries of $5,000. This transaction would a. increase stockholders’ equity by $5,000. b. decrease the balance in Salaries […]

Ranier Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Ranier issues 5,000 shares of preferred stock for land […]

In 2015, Warehouse 13 had net credit sales of $750,000. On January 1, 2015, Allowance for Doubtful Accounts had a credit balance of $16,000. During 2015, $29,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance […]

Which one of the following accounts is not closed at the end of an accounting period? a. Retained Earnings account b. Dividends account c. Service Revenue account d. Insurance Expense account Answer: Sandra Sikes sells exercise machines for home use. […]

The ___________________ is calculated by dividing net sales by average total assets. Answer: Phast Express specializes in the overnight transportation of medical equipment and laboratory specimens. The company has selected the following information from its most recent annual report to […]

What is the effect on total paid-in capital of a stock dividend and a stock split, respectively? Answer: A change in the estimated useful life of a plant asset may cause a change in the amount of depreciation recognized in […]

Ford Co. uses a periodic inventory system. Its records show the following for the month of May, in which 75 units were sold. Instructions Compute the ending inventory at May 31 and cost of goods sold using the FIFO and […]

Why is it important to report discontinued operations separately from income from continuing operations? Answer: Buffalo Tom Cruises purchased a five-year insurance policy for its ships on April 1, 2015 for $60,000. Assuming that April 1 is the effective date […]

Match the basic step in the recording process described by each of the following statements. A. Analyze each transaction B. Enter each transaction in a journal C. Transfer journal information to ledger accounts ____ 1> This step is called posting. […]

Bond discount should be amortized to comply with a. the historical cost principle. b. the matching principle. c. the revenue recognition principle. d. conservatism. Answer: A reversing entry a. reverses entries that were made in error. b. is the exact […]

Short-term receivables are reported in the current assets section before temporary investments. Answer: The worksheet for Gibler Rental Company appears below. Using the adjustment data below, complete the worksheet. Add any accounts that are necessary. Adjustment data: [a] Prepaid rent […]

The adjusted trial balance is prepared a. after financial statements are prepared. b. before the trial balance. c. to prove the equality of total assets and total liabilities. d. after adjusting entries have been journalized and posted. Answer: The daily […]

Blank checks a. should be safeguarded. b. should be pre-signed. c. do not need to be safeguarded since they must be signed to be valid. d. should not be prenumbered. Answer: For companies that use a perpetual inventory system, all […]

Fitzgerald Company wrote checks totaling $34,160 during October and $37,300 during November. $32,480 of these checks cleared the bank in October, and $36,440 cleared the bank in November. What was the amount of outstanding checks on November 30? a. $2,860 […]

Which of the following statements concerning taxation is accurate? a. Partnerships pay state income taxes but not federal income taxes. b. Corporations pay federal income taxes but not state income taxes. c. Corporations pay federal and state income taxes. d. […]

Double Nickels Company purchased equipment for $9,000 on January 1, 2015. The company expects to use the equipment for 3 years. It has no salvage value. Monthly depreciation expense on the asset is a. $0. b. $250. c. $3,000. d. […]

Greyhound Stables, Inc. operates several dog racing tracks throughout the United States. Since most facilities are outdoor tracks only, most of the cash receipts for Greyhound are received from April through October. These funds are usually invested in short-term, very […]

Operating expenses are different for merchandising and service enterprises. Answer: With the exception of land, plant assets experience a ______________ in service potential over their useful lives. Answer: decline Gross profit rate is computed by dividing cost of goods sold […]

On March 31, 2015, $6,000,000 of 6%, 10-year bonds payable, dated December 31, 2014, are issued. Interest on the bonds is payable semiannually each June 30 and December 31. The total amount received (including accrued interest) by the issuing corporation […]

The number of years of income statement information to be presented is a. 2 years under both GAAP and IFRS. b. 3 years under both GAAP and IFRS. c. 2 years under GAAP and 3 years under IFRS. d. 3 […]

Under IFRS, companies can choose which inventory system? Answer: All major financing and investing activities affect cash. Answer: F Cash which is restricted for a specific use should be separately reported. Answer: T C NMadisun Company issued common stock for […]

Moroni Industries has the following inventory information. Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a FIFO basis? a. $11,500 b. $11,520 c. $33,960 d. $33,980 Answer: Under the retail inventory […]

Transactions that affect inventories on hand have an effect on both the balance sheet and the income statement. Answer: Free _______________ equals cash provided by operations less capital expenditures and cash dividends. Answer: cash flow S. Lamar performed legal services […]

An asset that cannot be sold individually in the market place is a. a patent. b. goodwill. c. a copyright. d. a trade name. Answer: Under IFRS, comprehensive income may be displayed (reported) in a. the equity section of the […]

On a classified balance sheet, inventory is classified as a. an intangible asset. b. property, plant, and equipment. c. a current asset. d. a long-term investment. Answer: The usual sequence of steps in the transaction recording process is: a. journal […]

The subtotal net assets is used in a. both GAAP and IFRS. b. GAAP but not IFRS. c. IFRS but not GAAP. d. neither IFRS nor GAAP. Answer: Interest may be included in the acquisition cost of a plant asset […]

Under a perpetual inventory system, inventory shrinkage and lost or stolen goods are more readily determined. Answer: The entries in the Accounts Receivable Credit column of the cash receipts journal must be posted _______________ to the accounts in the accounts […]

Indicate where the purchase of land for cash would appear, if at all, on the indirect statement of cash flows. a. Operating activities section b. Investing activities section c. Financing activities section d. Does not represent a cash flow Answer: […]

In computing the present value of an annuity, it is not necessary to know the number of discount periods. Answer: Expressing an opinion as to the fairness of the information presented in financial statements is a service performed by CPAs. […]

Restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends. Answer: A subsidiary ledger is a group of control accounts which provides information to the managers for controlling the operation of the company. Answer: F […]

Management of a business enterprise is the major external user of information. Answer: Recognition of depreciation permits the accumulation of cash for the replacement of the asset. Answer: F If an acquired franchise or license has an indefinite life, the […]

If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates a. no errors have been made. b. no errors can be discovered. c. that all accounts reflect correct balances. d. […]

Journal entries are required by the depositor for all of the following except a. collection of a note receivable. b. bank errors. c. bank service charges. d. an NSF check. Answer: IFRS defines market for lower-of-cost-or market as a. net […]

Goodwill is not recognized in accounting unless it is acquired from purchasing another business enterprise. Answer: Personnel who handle cash receipts should have the option of taking a vacation or not. Answer: F Garth Company sold goods on account to […]

The general ledger of Link Company provides the following information: The company’s net sales for the year was $2,200,000 and cost of goods sold amounted to $1,500,000. Instructions Compute the following: (a) Cash receipts from customers. (b) Cash payments to […]

After a transaction has been posted, the reference column in the journal should not be blank. Answer: Boxer Corporation is issuing $800,000 of 8%, 5-year bonds when potential bond investors want a return of 10%. Interest is payable semiannually. The […]

English Company billed its customers a total of $1,785,000 for the month of November. The total includes a 5% state sales tax. Instructions (a) Determine the proper amount of revenue to report for the month. (b) Prepare the general journal […]

On January 2, 2015, Parr Company purchased 100% of the common stock of Sneed Company for $420,000. The fair value of Sneed Company’s assets and liabilities are equal to their book values except that land has a fair value of […]

Postings are made daily to subsidiary ledgers so that a. employees are kept busy. b. debits equal credits. c. individual account information is kept current. d. the control account will balance to the subsidiary ledger. Answer: An aging of a […]

The current portion of long-term debt should a. be paid immediately. b. be reclassified as a current liability. c. be classified as a long-term liability. d. not be separated from the long-term portion of debt. Answer: Eneri Company’s inventory records […]

In accordance with the historical cost principle, brokerage fees should be added to the cost of an investment. Answer: Treasury stock purchased for $25 per share that is reissued at $20 per share, results in a Loss on Sale of […]

If a company acquires a 40% common stock interest in another company, a. the equity method is usually applicable. b. all influence is classified as controlling. c. the cost method is usually applicable. d. the ability to exert significant influence […]

Which of the following presents key aspects of the process of accounting in the correct chronological order? a. Totaling, auditing, and budgeting b. Budgeting, recording, and communicating c. Recording, totaling, and auditing d. Identifying, recording, and communicating Answer: Instructions: Present […]

Condensed financial data of Drake Company appear below: Additional information: 1> New plant assets costing $100,000 were purchased for cash in 2015. 2> Old plant assets costing $25,000 were sold for $10,000 cash when book value was $13,000. 3> Bonds […]

Determine the interest on the following notes: (a) $2,000 at 6% for 90 days. (b) $900 at 9% for 5 months. (c) $3,000 at 8% for 60 days (d) $1,600 at 7% for 6 months Answer: Which of the following […]

The interest charged on a $50,000, 60-day note payable, at the rate of 6%, would be a. $3,000. b. $1,667. c. $750. d. $500. Answer: Adjusting entries are a. not necessary if the accounting system is operating properly. b. usually […]

If an investor owns between 20% and 50% of an investee’s common stock, it is presumed that the investor has significant influence on the investee. Answer: The book value of a plant asset is obtained by subtracting ______________ from the […]

Purchase Returns and Allowances and Purchase Discounts are subtracted from Purchases to produce net purchases. Answer: The following data exists for Carley Company. Calculate the accounts receivable turnover and the average collection period for accounts receivable in days for 2015. […]

Cobb Company’s accounting records show the following at the year ending on December 31, 2015: Using the periodic system, the cost of goods sold is a. $378,000. b. $383,000. c. $393,600. d. $404,200. Answer: Deerhoof Company purchases equipment for $2,700 […]

To close net income to retained earnings, Income Summary is debited and Retained Earnings is credited. Answer: Postings are generally made more frequently to the general ledger control accounts than to the individual accounts in the subsidiary ledgers. Answer: F […]

Sales resulting from the use of Visa and MasterCard are considered ______________ by the retailer. Answer: The following information is available for Gordon Corporation: Instructions Based on the preceding information, calculate the book value per share. Answer: Book value per […]

Which of the following show the proper effect of a stock split and a stock dividend? Answer: Internal control over cash disbursements is more effective when payments are made by ______________, rather than by ______________. Answer: check, cash The financial […]

The two optional steps in the accounting cycle are preparing a. a post-closing trial balance and reversing entries. b. a worksheet and post-closing trial balances. c. reversing entries and a worksheet. d. an adjusted trial balance and a post-closing trial […]

King Corporation had net income of $260,000 and paid dividends of $40,000 to common stockholders and $10,000 to preferred stockholders in 2015. King Corporation’s common stockholders’ equity at the beginning and end of 2015 was $870,000 and $1,130,000, respectively. There […]

Vertical and horizontal analyses are concerned with the format used to prepare financial statements. Answer: In calculating depreciation, both plant asset cost and useful life are based on estimates. Answer: F Cash provided by operating activities fails to take into […]

The book value of an asset is equal to the a. asset’s fair value less its historical cost. b. blue book value relied on by secondary markets. c. replacement cost of the asset. d. asset’s cost less accumulated depreciation. Answer: […]

A credit balance in retained earnings represents a. the amount of cash retained in the business. b. a claim on specific assets of the corporation. c. a claim on the aggregate assets of the corporation. d. the amount of stockholders’ […]

The economic entity assumption requires that the activities a. of different entities can be combined if all the entities are corporations. b. must be reported to the Securities and Exchange Commission. c. of a sole proprietorship cannot be distinguished from […]

Tangible frauds include a. asset misappropriation. b. false pretenses. c. counterfeiting. d. all of the above. Answer: Most companies that follow IFRS present balance sheet (statement of financial position) information in this order: a. current assets; investments; property, plant and […]

Profitability ratios are frequently used as a basis for evaluating management’s operating effectiveness. Answer: At June 1, 2015, Coquehcot Industries had an accounts receivable balance of $12,000. During the month, the company performed credit services of $30,000 and collected accounts […]

The end of the period account balances after adjustments of Dixon Cleaners and Laundry are as follows: Instructions Prepare the end of the period closing entries for Dixon Cleaners and Laundry. You may omit journal entry explanations. Answer: A prior […]

A comparative balance sheet for Rocker Company appears below: Additional information: 1> Net income for the year ending December 31, 2015 was $35,000. 2> Cash dividends of $15,000 were declared and paid during the year. 3> Long-term investments that had […]

Wilco Legal Eagles Company entered into the following transactions during March 2015. 1> Purchased office equipment for $23,000 from Business Equipment, Inc. on account. 2> Paid $3,000 cash for March rent on office furniture. 3> Received $15,000 cash from customers […]

The use of fair value to report assets a. is not allowed under GAAP or IFRS. b. is required by GAAP and IFRS. c. is increasing under GAAP and IFRS, but GAAP has adopted it more broadly. d. is increasing […]

Under IFRS, equity investments are generally recorded and reported at a. amortized cost. b. fair value. c. original cost. d. maturity value. Answer: Dividends are predominantly paid in a. earnings. b. property. c. cash. d. stock. Answer: c A company […]

Corporations invest in other companies for all of the following reasons except to a. house excess cash until needed. b. generate earnings. c. meet strategic goals. d. increase trading of the other companies’ stock. Answer: Use the following information to […]

Instructions: Place a check in the appropriate columns to designate whether each of the following accounts: (1) has a debit or credit normal balance; and (2) is an asset, liability, or stockholders’ equity account. Answer: Accrued revenues are amounts recorded […]

Shipping terms of FOB destination mean that the a. purchaser is responsible for the shipping charges. b. shipping charges are debited to Freight-Out. c. items should be in the purchaser’s inventory account at year-end if the items are in transit. […]

A technique for evaluating financial statements that expresses the relationship among selected items of financial statement data is a. common size analysis. b. horizontal analysis. c. ratio analysis. d. vertical analysis. Answer: Which of the following events cannot be quantified […]

The board of directors of Moore Corporation is considering two plans for financing the purchase of new plant equipment. Plan #1 would require the issuance of $5,000,000, 6%, 20-year bonds at face value. Plan #2 would require the issuance of […]

Horizontal analysis evaluates a series of financial statement data over a period of time a. that has been arranged from the highest number to the lowest number. b. that has been arranged from the lowest number to the highest number. […]

A correction in income of a prior period involves either a debit or credit to the Retained Earnings account. Answer: Recording depreciation each period is an application of the expense recognition principle. Answer: T A corporation acts under its own […]

The Dividends account is closed to the ______________ account at the end of the accounting period. Answer: Working capital is current assets divided by current liabilities. Answer: F The accounts in the ledger of Ace Delivery Service contain ithe following […]

Which of the following presents key aspects of the process of accounting in the correct chronological order? a. Totaling, auditing, and budgeting b. Budgeting, recording, and communicating c. Recording, totaling, and auditing d. Identifying, recording, and communicating Answer: A company […]

A comparative balance sheet for Halpern Corporation is presented below: Additional information: 1> Net loss for 2015 is $20,000. 2> Cash dividends of $14,000 were declared and paid in 2015. 3> Land was sold for cash at a loss of […]

McKendrick Shoe Store has a beginning inventory of $45,000. During the period, purchases were $195,000; purchase returns, $6,000; and freight-in $15,000. A physical count of inventory at the end of the period revealed that $30,000 was still on hand. The […]

[a) What is the term used to describe the owner’s equity section of a corporation? [b) Identify the two owners’ equity accounts in a corporation and indicate the purpose of each. Answer: The entry to replenish a petty cash fund […]

Randie Company lends Luann Company $10,000 on April 1, accepting a four-month, 6% interest note. Randie Company prepares financial statements on April 30. What adjusting entry should be made before the financial statements can be prepared? Answer: When making a […]

Cross-footing a cash receipts journal means a. the equality of debits and credits in the journal has been proved. b. each line of the journal has a horizontal total. c. the columns of the journal have been cross-referenced. d. all […]

The allowance method of accounting for uncollectible accounts is required if a. the company makes any credit sales. b. bad debts are significant in amount. c. the company is a retailer. d. the company charges interest on accounts receivable. Answer: […]

Short-term liquidity ratios include the a. profit margin ratio. b. payout ratio. c. debt to assets ratio. d. acid-test ratio. Answer: Either the straight-line method or the effective-interest method of amortization will always result in a. the same amount of […]

Jack’s, a popular pizza hang-out, has a thriving delivery business. Jack’s has a fleet of three delivery automobiles. Prior to making the entry for this year’s depreciation expense, the subsidiary ledger for the fleet is as follows: Instructions (a) Determine […]

Replenishing the petty cash fund requires a. a debit to Cash. b. a credit to Petty Cash. c. a debit to various expense accounts. d. no accounting entry. Answer: Which of the following receivables would not be classified as an […]

The following information is available for Lighten Company: Lighten’s cost of goods sold is a. $125,000. b. $120,000. c. $108,000. d. $105,000. Answer: The purpose of the post-closing trial balance is to a. prove that no mistakes were made. b. […]

Arens Corporation purchased 4,000 shares of its $5 par value common stock for a cash price of $10 per share. Two months later, Arens sold the treasury stock for a cash price of $8 per share. Instructions Prepare the journal […]

Monthly and quarterly time periods are called a. calendar periods. b. fiscal periods. c. interim periods. d. quarterly periods. Answer: The interest rate investors demand for loaning funds is the a. market interest rate. b. stated rate. c. contractual interest […]

Which of the following receivables would not be classified as an “other receivable”? a. Advance to an employee b. Refundable income tax c. Notes receivable d. Interest receivable Answer: Effie Company uses a periodic inventory system. Details for the inventory […]

Sandra Sikes sells exercise machines for home use. The machines carry a 2-year warranty. Past experience indicates that 5% of the units sold will be returned during the warranty period for repairs. The average cost of repairs under warranty is […]

A credit is not the normal balance for which account listed below? a. Common stock account b. Revenue account c. Liability account d. Dividends account Answer: Each of the following is correct regarding bonds except they are a. a form […]

Which of the following statements about liabilities in incorrect? Under IFRS, companies sometimes show a. liabilities before assets. b. long-term liabilities before current assets. c. current liabilities netted against current assets. d. liabilities in order of magnitude. Answer: Goods in […]

Greyhound Stables, Inc. operates several dog racing tracks throughout the United States. Since most facilities are outdoor tracks only, most of the cash receipts for Greyhound are received from April through October. These funds are usually invested in short-term, very […]

The process of entering an amount on the left side of an account is called ____________ the account, and making an entry on the right side is called _________________ the account. Answer: An aging of accounts receivable schedule is based […]

Show Company had total operating expenses of $153,000 in 2014, which included Depreciation Expense of $30,000. Also during 2014, prepaid expenses decreased by $9,500 and accrued expenses increased by $8,500. Instructions Calculate the amount of cash payments for operating expenses […]

Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments? a. Monetary unit assumption. b. Economic entity assumption. c. Periodicity assumption. d. Going concern assumption. Answer: The standard form […]

Hoppmann Company wrote checks totaling $25,620 during October and $27,975 during November. $24,360 of these checks cleared the bank in October, and $27,330 cleared the bank in November. What was the amount of outstanding checks on November 30? a. $645 […]

The lower-of-cost-or-market basis is an example of the accounting concept of conservatism. Answer: A company uses the periodic inventory method and the beginning inventory is overstated by $7,000 because the ending inventory in the previous period was overstated by $7,000. […]

For each of the following accounts indicate (a) the type of account (Asset, Liability, Stockholders’ Equity, Revenue, Expense), (b) the debit and credit effects, and (c) the normal account balance. Example 0 Cash a. Asset account b. Debit increases, credit […]

Changes from cost are reported as part of net income for a. available-for-sale securities. b. held-to-maturity securities. c. debt securities. d. trading securities. Answer: Use the following information to calculate for the year ended December 31, 2015 (a) net income, […]

Rent received in advance and credited to a rent revenue account which is still unearned at the end of the period, will require an adjusting entry crediting a liability account for the amount still unearned. Answer: Using the indirect approach, […]

Which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company? a. Current ratio b. Acid-test ratio c. Asset turnover d. Accounts receivable turnover Answer: The […]

Short-term investments are a. (1) readily marketable and (2) intended to be converted into cash after the current year or operating cycle, whichever is shorter. b. (1) readily marketable and (2) intended to be converted into cash within the current […]

Which of the following would not be an adjustment to net income using the indirect method? a. Depreciation Expense b. An increase in Prepaid Insurance c. Amortization Expense d. An increase in Land Answer: Lager Company has other operating expenses […]

Of the items below, the one that appears first on the statement of cash flows is a. noncash investing and financing activities. b. net increase (decrease) in cash. c. cash at the end of the period. d. cash at the […]

If the unit cost of inventory has continuously increased, the ______________, first-out inventory valuation method will result in a higher valued ending inventory than if the ______________, first-out method had been used. Answer: A corporation must be incorporated in each […]

An inexperienced accountant for Douglas Corporation made the following entries. Instructions On the basis of the explanation for each entry, prepare the entry that should have been made for the transactions. Answer: On May 1, Howard Corporation purchased 2,000 shares […]

The post-closing trial balance contains only a. income statement accounts. b. balance sheet accounts. c. balance sheet and income statement accounts. d. income statement, balance sheet, and retained earnings statement accounts. Answer: A lease where the intent is temporary use […]

The following ledger accounts are used by the Sebastopol Dog Track: Accounts Receivable Prepaid Advertising Prepaid Rent Unearned Ticket Revenue Advertising Expense Rent Expense Ticket Revenue Sales Revenue Instructions For each of the following transactions below, prepare the journal entry […]

Each of the following decreases retained earnings except a a. cash dividend. b. liquidating dividend. c. stock dividend. d. All of these decrease retained earnings. Answer: When using the direct method to compute cash provided by operations, a. income taxes […]

Kill Corporation’s unadjusted trial balance includes the following balances (assume normal balances): Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt expense will the company record? a. $15,000 b. $36,000 c. $50,100 d. $51,000 […]

Sargent Corporation bought equipment on January 1, 2015. The equipment cost $360,000 and had an expected salvage value of $60,000. The life of the equipment was estimated to be 6 years. Assuming straight-line deprecation, the book value of the equipment […]

Dougan Company purchased equipment on January 1, 2014 for $90,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 […]

An inexperienced accountant made the following entries. In each case, the explanation to the entry is correct. Instructions Prepare the correcting entries. Answer: If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the […]

Kate Company uses a perpetual inventory system and purchased inventory from Phoebe Company. The shipping costs were $500 and the terms of the shipment were FOB shipping point. Kate would have the following entry regarding the shipping charges: Answer: Conceptually, […]

On May 1, 2015, Pinkley Company sells office furniture for $300,000 cash. The office furniture originally cost $750,000 when purchased on January 1, 2008. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75,000. […]

Prepare the necessary adjusting entry for each of the following: 1> Services provided but unrecorded totaled $700. 2> Accrued salaries at year-end are $1,000. 3> Depreciation on equipment for the year is $600. Answer: If a company has sales of […]