Question: A storage tank acquired at the beginning

> What are the major advantages of the use of special journals?

> Why would a company maintain separate accounts receivable ledgers for each customer, as opposed to maintaining a single accounts receivable ledger for all customers?

> What happens to the special journal in a computerized accounting system that uses electronic forms?

> When are transactions posted in a computerized accounting system?

> Assuming the use of a two-column general journal, a purchases journal, and a cash payments journal as illustrated in this chapter, indicate the journal in which each of the following transactions should be recorded: a. Purchase of office supplies on acco

> If bonds issued by a corporation are sold at a discount, is the market rate of interest greater or less than the contract rate?

> Prior to closing, total revenues were $12,840,000 and total expenses were $9,975,000. During the year, the owner made no additional investments and withdrew $630,000. After the closing entries, how much did the owner’s capital account change?

> From the list that follows, identify the accounts that should be closed to the owner’s capital account at the end of the fiscal year: a. Accounts Receivable b. Accumulated Depreciation c. Building d. Depreciation Expense e. Fees Earned f. Jackie Lindsay,

> Why are closing entries required at the end of an accounting period?

> During the current year, merchandise is sold for $18,300 cash and $295,700 on account. The cost of the merchandise sold is $188,000. What is the amount of the gross profit?

> What types of accounts are referred to as temporary accounts?

> Why do some accountants prepare an end-of-period spreadsheet?

> What is the natural business year?

> What is the purpose of the post-closing trial balance?

> What is the difference between adjusting entries and closing entries?

> If the net income for the current year had been $196,400 in Exercise 3-23, what would have been the correct net income if the proper adjusting entries had been made? In Exercise 3-23 The accountant for Healthy Life Company, a medical services consulting

> A corporation issues $26,000,000 of 9% bonds to yield interest at the rate of 7%. (a) Was the amount of cash received from the sale of the bonds greater or less than $26,000,000? (b) Identify the following amounts as they relate to the bond issue: (1) Fa

> For a recent year, the balance sheet for The Campbell Soup Company includes accrued expenses of $553 million. The income before taxes for Campbell for the year was $1,073 million. a. Assume the adjusting entry for $553 million of accrued expenses was not

> For a recent period, the balance sheet for Costco Wholesale Corporation reported accrued expenses of $3,446 million. For the same period, Costco reported income before income taxes of $3,197 million. Assume that the adjusting entry for $3,446 million of

> The balance in the equipment account is $3,150,000, and the balance in the accumulated depreciation—equipment account is $2,075,000. a. What is the book value of the equipment? b. Does the balance in the accumulated depreciation account mean that the equ

> The estimated amount of depreciation on equipment for the current year is $8,200. Journalize the adjusting entry to record the depreciation.

> On February 3, Clairemont Repair Service extended an offer of $360,000 for land that had been priced for sale at $400,000. On February 28, Clairemont Repair Service accepted the seller’s counteroffer of $380,000. On October 23, the land was assessed at a

> At August 31, the end of the first month of operations, the usual adjusting entry transferring prepaid insurance expired to an expense account is omitted. Which items will be incorrectly stated, because of the error, on (a) The income statement for Augus

> The supplies and supplies expense accounts at February 28, after adjusting entries have been posted at the end of the first year of operations, are shown in the following T accounts: Determine the amount of supplies purchased during the year. Suppl

> The balance in the supplies account, before adjustment at the end of the year, is $4,850. Journalize the adjusting entry required if the amount of supplies on hand at the end of the year is $880.

> At the end of January, the first month of the business year, the usual adjusting entry transferring rent earned from the unearned rent account to a revenue account was omitted. Indicate which items will be incorrectly stated, because of the error, on (a)

> The balance in the unearned fees account, before adjustment at the end of the year, is $18,000. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,600.

> Explain the meaning of each of the following terms as they relate to a bond issue: (a) Convertible and (b) Callable.

> What is the primary purpose of a stock split?

> An owner of 2,500 shares of Simmons Company common stock receives a stock dividend of 50 shares. a. What is the effect of the stock dividend on the stockholder’s proportionate interest (equity) in the corporation? b. How does the total equity of 2,550 sh

> A corporation with both preferred stock and common stock outstanding has a substantial credit balance in its retained earnings account at the beginning of the current fiscal year. Although net income for the current year is sufficient to pay the preferre

> A stockbroker advises a client to “buy preferred stock. . . . With that type of stock, . . . [you] will never have to worry about losing the dividends.” Is the broker correct?

> Of two corporations organized at approximately the same time and engaged in competing businesses, one issued $80 par common stock and the other issued $1 par common stock. Do the par designations provide any indication as to which stock is preferable as

> Why might a partnership pay a bonus to a newly admitted partner?

> During the current year, Marsha Engles withdrew $4,000 monthly from the partnership of Engles and Cox Water Management Consultants. Is it possible that her share of partnership net income for the current year might be more or less than $48,000? Explain.

> A truck acquired at a cost of $69,000 has an estimated residual value of $12,000, has an estimated useful life of 300,000 miles, and was driven 77,000 miles during the year. Determine (a) The depreciable cost, (b) The depreciation rate, and (c) The unit

> What are the major features of a partnership agreement for a partnership or an operating agreement for a limited liability company?

> What are the disadvantages of a partnership over a limited liability company form of organization for a profit-making business?

> PepsiCo, Inc., reported the following information about its long-term debt in the notes to a recent financial statement (in millions): Long-term debt is comprised of the following: a. How much of the long-term debt was disclosed as a current liability

> General Motors Corporation reported $2.6 billion of product warranties in the Current Liabilities section of a recent balance sheet. How would costs of repairing a defective product be recorded?

> When should the liability associated with a product warranty be recorded? Discuss.

> Explain how a defined contribution pension plan works.

> To match revenues and expenses properly, should the expense for employee vacation pay be recorded in the period during which the vacation privilege is earned or during the period in which the vacation is taken? Discuss.

> What are the principal reasons for using a special payroll bank account?

> For each of the following payroll-related taxes, indicate whether they generally apply to (a) Employees only, (b) Employers only, or (c) Both employees and employers: 1. Federal income tax 2. Medicare tax 3. Social security tax 4. Federal unemployment co

> Why are deductions from employees’ earnings classified as liabilities for the employer?

> What is the role of accounting in business?

> Employees are subject to taxes withheld from their paychecks. a. List the federal taxes withheld from most employee paychecks. b. Give the title of the accounts credited by amounts withheld.

> Does a discounted note payable provide credit without interest? Discuss.

> A diesel-powered tractor with a cost of $90,000 and estimated residual value of $15,000 is expected to have a useful operating life of 30,000 hours. During April, the tractor was operated 120 hours. Determine the depreciation for the month.

> A refrigerator used by a wholesale warehouse has a cost of $64,000, an estimated residual value of $5,200, and an estimated useful life of 12 years. What is the amount of the annual depreciation computed by the straight-line method?

> Bridger Ski Co. has developed a tract of land into a ski resort. The company has cut the trees, cleared and graded the land and hills, and constructed ski lifts. (a) Should the tree cutting, land clearing, and grading costs of constructing the ski slopes

> a. Over what period of time should the cost of a patent acquired by purchase be amortized? b. In general, what is the required accounting treatment for research and development costs? c. How should goodwill be amortized?

> Immediately after a used truck is acquired, a new motor is installed at a total cost of $3,850. Is this a capital expenditure or a revenue expenditure?

> Is it necessary for a business to use the same method of computing depreciation for all classes of its depreciable assets?

> Keyser Company purchased a machine that has a manufacturer’s suggested life of 20 years. The company plans to use the machine on a special project that will last 12 years. At the completion of the project, the machine will be sold. Over how many years sh

> On March 31, Higgins Repair Service extended an offer of $415,000 for land that had been priced for sale at $460,000. On April 15, Higgins Repair Service accepted the seller’s counteroffer of $437,500. On September 9, the land was assessed at a value of

> Alpine Company solicited bids from several contractors to construct an addition to its office building. The lowest bid received was for $1,200,000. Alpine decided to construct the addition itself at a cost of $1,100,000. What amount should be recorded in

> Bullwinkle Co. acquired an adjacent vacant lot with the hope of selling it in the future at a gain. The lot is not intended to be used in Bullwinkle business operations. Where should such real estate be listed on the balance sheet?

> O’Neil Office Supplies has a fleet of automobiles and trucks for use by salespersons and for delivery of office supplies and equipment. Collins Auto Sales Co. has automobiles and trucks for sale. Under what caption would the automobiles and trucks be rep

> A firm has consistently adjusted its allowance account at the end of the fiscal year by adding a fixed percent of the period’s sales on account. After seven years, the balance in Allowance for Doubtful Accounts has become very large in relation to the ba

> What kind of an account (asset, liability, etc.) is Allowance for Doubtful Accounts, and is its normal balance a debit or a credit?

> Dan’s Hardware is a small hardware store in the rural township of Twin Bridges. It rarely extends credit to its customers in the form of an account receivable. The few customers who are allowed to carry accounts receivable are long-time residents of Twin

> What are the three classifications of receivables?

> The maker of a $240,000, 6%, 90-day note receivable failed to pay the note on the due date of November 30. What accounts should be debited and credited by the payee to record the dishonored note receivable?

> Neptune Company issued a note receivable to Sailfish Company. (a) Who is the payee? (b) What is the title of the account used by Sailfish Company in recording the note?

> Which of the two methods of estimating uncollectibles provides for the most accurate estimate of the current net realizable value of the receivables?

> The comparative accounts payable and long-term debt balances for a company follow. Based on this information, what is the amount and percentage of increase or decrease that would be shown on a balance sheet with horizontal analysis? Current Year Pr

> During the preparation of the bank reconciliation for Building Concepts Co., Joel Knolls, the assistant controller, discovered that Lone Peak National Bank incorrectly recorded a $3,290 check written by Building Concepts Co. as $329. Joel has decided not

> The actual cash received from cash sales was $71,315, and the amount indicated by the cash register total was $71,220. Journalize the entry to record the cash receipts and cash sales.

> The actual cash received from cash sales was $18,371, and the amount indicated by the cash register total was $18,400. Journalize the entry to record the cash receipts and cash sales.

> The mailroom employees send all remittances and remittance advices to the cashier. The cashier deposits the cash in the bank and forwards the remittance advices and duplicate deposit slips to the Accounting Department. a. Indicate the weak link in intern

> El Dorado Inc. has monthly cash expenses of $168,500. On December 31, the cash balance is $1,415,400. a. Compute the ratio of cash to monthly cash expenses. b. Based on (a), what are the implications for El Dorado Inc.?

> Accompanying a bank statement for Santee Company is a credit memo for $15,120 representing the principal ($14,000) and interest ($1,120) on a note that had been collected by the bank. The company had been notified by the bank at the time of the collectio

> Why should the responsibility for maintaining the accounting records be separated from the responsibility for operations? Explain.

> Why should the employee who handles cash receipts not have the responsibility for maintaining the accounts receivable records? Explain.

> (a) How are cash equivalents reported in the financial statements? (b) What are some examples of cash equivalents?

> The balance of Cash is likely to differ from the bank statement balance. What two factors are likely to be responsible for the difference?

> Identify whether each of the following would be reported as an operating, investing, or financing activity on the statement of cash flows: a. Purchase of investments b. Purchase of equipment c. Payment for selling expenses d. Collection of accounts recei

> Before a voucher for the purchase of merchandise is approved for payment, supporting documents should be compared to verify the accuracy of the liability. Give an example of supporting documents for the purchase of merchandise.

> A business using the retail method of inventory costing determines that merchandise inventory at retail is $1,235,000. If the ratio of cost to retail price is 54%, what is the amount of inventory to be reported on the financial statements?

> Based on the data in Exercise 7-15 and assuming that cost was determined by the FIFO method, show how the merchandise inventory would appear on the balance sheet. In Exercise 7-15 Inventory Item Inventory Quantity Cost per Unit Market Value per Unit

> The following units of an item were available for sale during the year: Beginning inventory ………………………. 21,600 units at $20.00 Sale ………………………………………………. 14,400 units at $40.00 First purchase ……………………………….. 48,000 units at $25.20 Sale ……………………………………………… 36,

> A business using the retail method of inventory costing determines that merchandise inventory at retail is $775,000. If the ratio of cost to retail price is 66%, what is the amount of inventory to be reported on the financial statements?

> A business using the retail method of inventory costing determines that merchandise inventory at retail is $396,400. If the ratio of cost to retail price is 61%, what is the amount of inventory to be reported on the financial statements?

> A manufacturer shipped merchandise to a retailer on a consignment basis. If the merchandise is unsold at the end of the period, in whose inventory should the merchandise be included?

> Hutch Co. sold merchandise to Bibbins Company on May 31, FOB shipping point. If the merchandise is in transit on May 31, the end of the fiscal year, which company would report it in its financial statements? Explain.

> The inventory at the end of the year was understated by $14,750. (a) Did the error cause an overstatement or an understatement of the gross profit for the year? (b) Which items on the balance sheet at the end of the year were overstated or understated as

> Using the following data, how should the merchandise be valued under lower of cost or market? Original cost …………………………………… $1,350 Estimated selling price ………………………. 1,475 Selling expenses ………………………………….. 180

> On January 26, Nyree Co. borrowed cash from Conrad Bank by issuing a 45-day note with a face amount of $150,000. a. Determine the proceeds of the note, assuming that the note carries an interest rate of 10%. b. Determine the proceeds of the note, assumin

> If inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing—FIFO, LIFO, or weighted average cost—will yield the lowest annual income tax expense? Explain.

> Which of the three methods of inventory costing—FIFO, LIFO, or weighted average cost—will in general yield an inventory cost most nearly approximating current replacement cost?

> If merchandise inventory is being valued at cost and the price level is decreasing, which of the three methods of costing—FIFO, LIFO, or weighted average cost—will yield (a) The highest inventory cost, (b) The lowest inventory cost, (c) The highest gross

> Do the terms FIFO, LIFO, and weighted average refer to techniques used in determining quantities of the various classes of merchandise on hand? Explain.

> Why is it important to take a physical inventory periodically when using a perpetual inventory system?

> For (a) through (d), identify the items designated by X and Y. a. Purchases – (X + Y) = Net purchases. b. Net purchases + X = Cost of merchandise purchased. c. Merchandise inventory (beginning) + Cost of merchandise purchased = X. d. Merchandise availabl

> Complete the following table by indicating for (a) through (g) whether the proper answer is debit or credit: Normal Account Increase Decrease Balance Purchases debit (a) (b) Purchases Discounts credit (c) credit Purchases Returns and Allowances (d)

> From the following list, identify the accounts that should be closed to Tim Button, Capital at the end of the fiscal year under a perpetual inventory system: (a) Accounts Receivable, (b) Cost of Merchandise Sold, (c) Customer Refunds Payable, (d) Estimat

> What is the normal balance of the following accounts: (a) Cost of Merchandise Sold, (b) Customer Refunds Payable, (c) Delivery Expense, (d) Estimated Returns Inventory, (e) Merchandise Inventory, (f) Sales, (g) Sales Tax Payable.

> A sale of merchandise on account for $36,000 is subject to an 8% sales tax. (a) Should the sales tax be recorded at the time of sale or when payment is received? (b) What is the amount recorded as sales? (c) What is the amount debited to Accounts Receiva