Whitman Corporation sells six different products. The following information is
available on December 31:
When applying the lower of cost or market rule to each item, what will Whitman’s total
ending inventory balance be?
a.$173,000
b.$166,200
c.$166,550
d.$166,400
If a loss of $9,000 is incurred in selling (for cash) office equipment having a book value
of $80,000, the total amount reported in the cash flows from investing activities section
of the statement of cash flows is
a.$71,000.
b.$80,000.
c.$89,000.
d.$9,000.
What is the role of the FASB?
a.To regulate U.S. financial markets and accounting standard-setting bodies
b.To determine auditing standards in the U.S.
c.To establish accounting standards in the U.S.
d.To regulate foreign companies that do business in the U.S.
Salamagundi, Inc. has the following Income Statement (in millions):
SALAMAGUNDI, INC.
Income Statement
For the Year Ended December 31, 2014
Using vertical analysis, what percentage is assigned to gross profit?
a.43.8%
b.100%
c.60%
d.56.3%
Hickory Hills Pro Shop had a balance in the Accounts Receivable account of $800,000
at the beginning of the year and a balance of $900,000 at the end of the year. Net credit
sales during the year amounted to $7,310,000. The accounts receivable turnover was
a.8.6 times.
b.8.3 times.
c.8.2 times.
d.8.9 times.
If a gain of $13,500 is incurred in selling (for cash) office equipment having a book
value of $100,000, the total amount reported in the cash flows from investing activities
section of the statement of cash flows is
a.$86,500.
b.$113,500.
c.$100,000.
d.$13,500.
The manager of Weiser is given a bonus based on net income before taxes. The net
income after taxes is $35,700 for FIFO and $29,400 for LIFO. The tax rate is 30%. The
bonus rate is 20%. How much higher is the manager’s bonus if FIFO is adopted instead
of LIFO?
a.$9,000
b.$12,600
c.$1,800
d.$6,300
The Rowland Clinic purchased a new surgical laser for $84,000. The estimated salvage
value is $4,000. The laser has a useful life of five years and the clinic expects to use it
10,000 hours. It was used 1,600 hours in year 1; 2,100 hours in year 2; 2,400 hours in
year 3; 1,900 hours in year 4; 2,000 hours in year 5.
Instructions
(a)Compute the annual depreciation for each of the five years under each of the
following methods:
(1)straight-line.
(2)units-of-activity.
(b)If you were the administrator of the clinic, which method would you deem as most
appropriate? Justify your answer.
(c)Which method would result in the lower reported income in the first year? Which
method would result in the lower total reported income over the five-year period?
On May 15, Holt’s Clothiers borrowed some money on a 4-month note to provide cash
during the slow season of the year. The interest rate on the note was 8%. At the time the
note was due, the amount of interest owed was $1,200.
Instructions
(a)Determine the amount borrowed by Holt’s.
(b)Assume the amount borrowed was $54,000. What was the interest rate if the amount
of interest owed was $900?
(c)Prepare the entry for the initial borrowing and the repayment for the facts in part (a).
Characteristics associated with relevant accounting information are
a.comparability and timeliness.
b.predictive value and confirmatory value.
c.neutral and verifiable.
d.consistency and understandability.
In periods of rising prices, what will LIFO produce?
a.Lower income taxes than FIFO
b.Higher net income than FIFO
c.Higher net income than average costing
d.Lower cost of goods sold than FIFO
The following are the gross profit percentages for Naylor Company:
List four possible explanations for the low gross profit percentage in 2015
Gipson Furniture factors $500,000 of receivables to Kwik Factors, Inc. Kwik Factors
assesses a 3% service charge on the amount of receivables sold. Gipson Furniture
factors its receivables regularly with Kwik Factors. What journal entry does Gipson
make when factoring these receivables?
Identify the effect, if any, that each of the following transactions would have upon cash
and retained earnings. Show the dollar amount and the effect (+, -, N).
Before month-end adjustments are made, the February 28 trial balance of Cole’s
Enterprise contains revenue of $11,000 and expenses of $8,900. Adjustments are
necessary for the following items:-
-Depreciation for February is $1,200.
-Revenue earned but not yet billed is $2,800.
-Accrued interest expense is $900.
-Revenue collected in advance that is now earned is $2,500.
-Portion of prepaid insurance expired during February is $500.
Instructions:
Calculate the correct net income for Cole’s Enterprise for February 3
Prepare a corrected trial balance for Shafer Company. All accounts should have a
normal balance
Wolf Camera Shop Inc. uses the lower-of-cost-or-market basis for its inventory. The
following data are available at December 31
Instructions
What amount should be reported on Wolf Camera Shop’s financial statements, assuming
the lower-of-cost-or-market rule is applied?
Presented here are selected transactions for the Foyle Company during April. Foyle uses
the periodic inventory system.
April 1Sold merchandise to Land Company for $4,000, terms 2/10, n/30. The
merchandise sold had a cost of $2,000.
Purchased merchandise from Webb Corporation for $6,000, terms 1/10, n/30.
4Purchased merchandise from Ryan Company for $2,000, n/30.
10Received payment from Land Company for purchase of April 1 less appropriate
discount.
11Paid Webb Corporation for April 2 purchase.
Instructions
Journalize the April transactions for Foyle Company.
Indicate in the space provided by each item whether it would appear on the income
statement (IS), balance sheet (BS), or retained earnings statement (RE):
Dennis Lee, an auditor with Knapp CPAs, is performing a review of Dobson Company’s
inventory account. Dobson did not have a good year, and top management is under
pressure to boost reported income. According to its records, the inventory balance at
year-end was $640,000. However, the following information was not considered when
determining that amount.
1>Included in the company’s count were goods with a cost of $200,000 that the
company is holding on consignment. The goods belong to Agler Corporation.
2>The physical count did not include goods purchased by Dobson with a cost of
$40,000 that were shipped FOB shipping point on December 28 and did not arrive at
Dobson’s warehouse until January 3
3>Included in the inventory account was $22,000 of office supplies that were stored in
the warehouse and were to be used by the company’s supervisors and managers during
the coming year.
4>The company received an order on December 29 that was boxed and was sitting on
the loading dock awaiting pick-up on December 31. The shipper picked up the goods on
January 1 and delivered them on January 6. The shipping terms were FOB shipping
point. The goods had a selling price of $40,000 and a cost of $30,000. The goods were
not included in the count because they were sitting on the dock.
5>On December 29, Dobson shipped goods with a selling price of $90,000 and a cost of
$70,000 to Central Sales Corporation FOB shipping point. The goods arrived on
January 3. Central Sales had only ordered goods with a selling price of $10,000 and a
cost of $8,000. However, a sales manager at Dobson had authorized the shipment and
said that if Central wanted to ship the goods back next week, it could.
6>Included in the count was $50,000 of goods that were parts for a machine that the
company no longer made. Given the high-tech nature of Dobson’s products, it was
unlikely that these obsolete parts had any other use. However, management would
prefer to keep them on the books at cost, ‘since that is what we paid for them, after all.”
Instructions
Prepare a schedule to determine the correct inventory amount. Provide explanations for
each item above, saying why you did or did not make an adjustment for each item.
A company using the cash basis of accounting reports net income for 2014 of $45,460.
If the company had used the accrual basis of accounting it would have reported the
following year-end balances:
Instructions:
Determine the company’s net income under the accrual basis of accounting. Show your
calculations. Use the column headings shown below.
Explanation Amount
A company shows a balance in Salaries and Wages Payable of $40,000 at the end of the
month. The next payroll amounting to $60,000 is to be paid in the following month.
What will be the journal entry to record the payment of salaries?