Question: At December 31, 2014, Island Equipment understated

> Lipscomb, Inc., has 200,000 shares of cumulative preferred stock outstanding. The preferred stock pays dividends in the amount of $2 per share but because of cash flow problems, the company did not pay any dividends last year. The board of directors plan

> On April 15, 2011, the board of directors for Auction.com declared a cash dividend of 65 cents per share payable to stockholders of record on May 20. The dividends will be paid on June 14. The company has 100,000 shares of stock outstanding. Prepare any

> Cole Company has 288,000 shares of common stock authorized, 260,000 shares issued, and 60,000 shares of treasury stock. The company’s board of directors has declared a dividend of 65 cents per share. What is the total amount of the dividend that will be

> Carbide Corporation purchased 20,000 shares of its own stock for $45 per share. The next year, the company sold 5,000 shares for $50 per share and the following year, it sold 10,000 shares for $37 per share. Determine the impact (increase, decrease, or n

> The annual report for Philip Morris Companies, Inc., disclosed that 4 billion shares of common stockhave been authorized. At the end of last year, 2,805,961,317 shares had been issued and the number ofshares in treasury stock was 380,474,028. During the

> The financial statements for Highland Publications Corporation included the following selected information: Common stock .......................................................$1,600,000 Retained earnings ................................................

> The charter of Vista West Corporation specifies that it may issue 200,000 shares of common stock. Since the company was incorporated, it has sold a total of 160,000 shares to the public but bought back a total of 20,000. The par value of the stock is $3

> On-line Learning Corporation obtained a charter at the start of 2011 that authorized 52,000 shares of no par common stock and 23,000 shares of preferred stock, par value $10. The corporation was organized by four individuals who purchased 16,000 shares o

> Quick Fix-it Corporation was organized in January 2011 to operate several car repair businesses in a large metropolitan area. The charter issued by the state authorized the following capital stock: Common stock, $10 par value, 98,000 shares Preferred st

> Ruth’s Chris Steakhouse is the largest upscale steakhouse company in the United States, based on total company- and franchisee-owned restaurants. The company’s menu features a broad selection of highqualityUSDA prime grade steaks and other premium offeri

> You work for a small company considering investing in a new Internet business. Financial projections suggest that the company will be able to earn in excess of $40 million per year on an investment of $100 million. The company president suggests borrowin

> Williamson Corporation was organized in 2011 to operate a tax preparation business. The charter authorizedthe following capital stock: common stock, par value $2 per share, 80,000 shares. During the firstyear, the following selected transactions were com

> The stockholders’ equity section on the balance sheet of Dillard’s, a popular department store, is shown below. The company reported a net loss of $241,065,000 and declared and paid dividends of $11,898,000 in 2009.

> Tarrant Corporation was organized in 2011 to operate a financial consulting business. The charter authorized the following capital stock: common stock, par value $10 per share, 11,500 shares. During the first year, the following selected transactions wer

> Tandy, Incorporated, was issued a charter on January 15, 2011, that authorized the following capital stock: Common stock, no-par, 103,000 shares Preferred stock, 9 percent, par value $8 per share, 4,000 shares The board of directors established a state

> Archon Corporation operates the Pioneer Hotel & Gambling Hall in Nevada. In addition, the Company owns real estate on Las Vegas Boulevard South (the “Strip”) in Las Vegas, Nevada, and investment properties in Dorchester, Massachusetts, and Gaithersburg,

> Ford Motor Company is an internationally known manufacturer of automobiles and trucks. The company recently lost over $12 billion in a single year of operations. Despite that staggering loss, the company issued the following press release: DEARBORN, Mich

> Weil Corporation has 80,000 shares of common stock (par value $8) outstanding. Required: Complete the following comparative tabulation based on two independent cases: Case 1: The board of directors declared and issued a 40 percent stock dividend when th

> GameStop issued the following press release when the company’s stock was selling for $27 per share: GRAPEVINE, Texas—(BUSINESS WIRE)—Feb. 12, 2007—GameStop Corp. (NYSE: GME), the world’s largest video game and entertainment software retailer, today annou

> On July 1, 2011, Davidson Corporation had the following capital structure: Common stock (par $3)................... $600,000 Capital in excess of par ......................900,000 Retained earnings.............................. 700,000 Treasury stock ..

> Two billion times a day, Proctor & Gamble (P&G) brands touch the lives of people around the world. The company has one of the largest and strongest portfolios of trusted, quality brands, including Pampers, Tide, Bounty, Pringles, Folgers, Charmin, Downy,

> Refer to the financial statements of American Eagle Outfitters given in Appendix B at the end of this book. Required: 1. How much interest was paid in cash during the most recent reporting year? 2. Explain why the company does not report bonds payable o

> At the beginning of the year, the stockholders’ equity section of the balance sheet of Solutions Corporation reflected the following: Common stock (par $12; authorized 65,000 shares, outstanding 30,000 shares) ...........................................

> Duke Energy is a utility company that provides gas and electric service in North Carolina, South Carolina, Ohio, Kentucky, and Indiana. The company’s dividend yield is 6.6 percent. Starbucks, a well known retailer of coffee products, does not pay dividen

> A recent annual report for Sears, Roebuck and Co. disclosed that the company paid preferred dividends in the amount of $119.9 million. It declared and paid dividends on common stock in the amount of $2 per share. During the year, Sears had 1,000,000,000

> Service Corporation has the following capital stock outstanding at the end of 2011: Preferred stock, 6 percent, par $15, outstanding shares, 8,000 Common stock, par $8, outstanding shares, 30,000 On October 1, 2011, the board of directors declared divi

> The records of Hollywood Company reflected the following balances in the stockholders’ equity accounts at December 31, 2010: Common stock, par $12 per share, 30,000 shares outstanding Preferred stock, 10 percent, par $10 per share, 5,000 shares outstand

> Peters and Associates is a small manufacturer of electronic connections for local area networks. Consider three independent situations. Case 1: Peters increases its cash dividends by 50 percent, but no other changes occur in the company’s operations. Cas

> During 2011 the following selected transactions affecting stockholders’ equity occurred for TARP Corporation: a. Feb. 1 Purchased in the open market 160 shares of the company’s own common stock at $20 cash per share. b. Jul. 15 Sold 80 of the shares pur

> During 2011 the following selected transactions affecting stockholders’ equity occurred for OrlandoCorporation: a.Apr. 1 Purchased in the market 200 shares of the company’s own common stock at $20 per share. b.Jun. 14 Sold 40 shares of treasury stock fo

> The following account balances were selected from the records of TEAC Corporation at December 31, 2011, after all adjusting entries were completed: Common stock (par $20; authorized 100,000 shares, issued 34,000 shares, of which 2,000 shares are held as

> The business section of The New York Times recently contained the following article: Freeport-McMoRan Copper & Gold Inc., one of the world’s largest copper producers, said yesterday that it would repurchase up to five million shares of its common stock

> JCPenney Company was one of the first companies to issue zero coupon bonds. It issued bonds with a face (maturity) value of $400 million due eight years after issuance. When the bonds were sold to the public, similar bonds paid 15 percent effective inter

> On January 1, 2011, Trucks R Us Corporation issued $2,000,000 in bonds that mature in five years. The bonds have a stated interest rate of 10 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of inte

> Which of the following prevents a company from switching its inventory costing method to a different method each year? a. Consistency principle b. Materiality concept c. Matching principle d. Disclosure principle

> What kind of account is accumulated depreciation? How is it reported on the financial statements?

> What is the primary way in which corporations differ from proprietorships and partnerships? What are some of the factors that might affect a person’s decision about the formof organization that would be best in a given situation?

> In order to purchase equipment and supplies, Sinclair Bike Shop, Inc., borrowed $28,000 on August 1 by signing a note payable to Community One Bank. Interest expense for Sinclair Bike Shop, Inc., is $140 per month. Journalize an adjusting entry to accrue

> The adjusted trial balance shows a. assets, liabilities, and common stock only. b. revenues and expenses only. c. amounts that may be out of balance. d. amounts that are ready for the financial statements.

> What are some similarities and differences between assets and expenses?

> In what order should the financial statements be prepared? Why?

> Suppose you work summers mowing yards. Most of your customers pay you immediately after their lawn is mowed, but a few customers ask you to bill them at the end of the month. It is now July 31, and you have collected $750 from cash-paying customers for s

> For each of the following accounts, indicate if the account’s normal balance is a debitbalance (DR) or a credit balance (CR). DR Cash 1. Rent Expense 2. Accounts Payable 3. Service Revenue 4. Office Furniture 5. Common Stock 6. Land 7. Dividends

> Which of the following is not a closing entry?

> Haskins, Inc., began operations on January 1, 2016. The seven transactions recorded during January by the company accountant are shown in the following T-accounts:

> Christopher Foley, an attorney, has a law corporation, Christopher Foley, Attorney, Inc.,that began the year with total assets of $145,000, total liabilities of $70,000, and stockholders’ equity of $75,000. During the year, Christopher Foley, Attorney, I

> True or false: If the trial balance is in balance, the financial statements will be accurate. Why or why not?

> Match each of the following items with its location in the expanded accounting equation. Use the most detailed category appropriate: ______ 1. Utilities Expense ______ 2. Accounts Receivable ______ 3. Common Stock ______ 4. Office Supplies ______ 5.

> The balance sheet reports a. financial position on a specific date. b. results of operations on a specific date. c. results of operations for a specific period. d. financial position for a specific period

> Under which of the inventory methods, periodic or perpetual, would a company be better equipped to detect inventory shrinkage? Why

> Suppose Paul’s Hardware sells merchandise on account, terms 1/10, n/45, for $920 (cost of the inventory is $550) on March 17, 2016. Paul’s Hardware later received $290 of goods (cost, $175) as sales returns on March 21, 2016. The customer paid the balanc

> Which journal entry records obtaining a bank loan of $10,000?

> The income statement format that shows important subtotals is referred to as a. a subtotaled income statement. b. a single-step income statement. c. a multi-step income statement. d. a classified income statement.

> What is the difference between a single-step and multi-step income statement? For what type of business is a multi-step income statement most appropriate?

> How is the accounting equation affected by each of these transactions? a. Owners contribute cash to start the business in exchange for common stock. b. The company borrows money from the bank. c. The company provides services for a client who promises to

> Journalize the following adjusting entries at August 31: 1. Services provided but not recorded, $2,700 2. Salaries earned by employees but not recorded, $3,200 3. Accrued interest on a note payable, $260

> What do closing entries accomplish? a. Bring the Retained Earnings account to its correct ending balance b. Transfer revenues, expenses, and dividends to retained earnings c. Zero out the revenues, expenses, and dividends to prepare them for the next acc

> Describe the type of transaction that gives rise to a deferred revenue journal entry during the year. Why might deferred revenues require adjustment?

> Complete the following table. For each account listed, identify the type of account, how the account is increased (debit or credit), and how the account is decreased (debit or credit). Use the most detailed account type appropriate.

> The Blue Ox Restaurant recorded a cash collection on account by debiting Cash and crediting Accounts Payable. What will the trial balance show for this error? a. Too much for liabilities b. Too much for assets c. The trial balance will not balance. d. Bo

> Distinguish between journalizing and posting.

> Sanchez Towing Service, Inc., earns service revenue by towing vehicles for AAA. Sanchez Towing Service’s main expenses are the salaries paid to its employees. Account for thefollowing transactions in the expanded accounting equation: a. Sanchez Towing Se

> You learned in this chapter that Cash is increased with a debit. When you deposit your paycheck in your account, however, the teller might say that he or she is going to credit your account. Why?

> Consider the overall effects of the transactions in questions 5, 6, and 7 on Wave Rider.What is Wave Rider’s net income or net loss? a. Net loss of $4,000 b. Net income of $46,000 c. Net income of $14,000 d. It cannot be determined from the data given.

> Which of the following is most closely linked to the accounting principle of conservatism? a. Consistency principle b. Disclosure principle c. Lower-of-cost-or-market rule d. Materiality concept

> Describe some business and economic conditions that might make the lower-of-cost-or market rule more likely to result in a write-down of inventory.

> Suppose Peter’s Hardware sells merchandise on account, terms 2/10, n/30, for $640 (cost of the inventory is $360) on March 17, 2016. Peter’s Hardware later received $185 of goods (cost, $110) as sales returns on March 21, 2016. The customer paid the bala

> An asset is classified as current if it a. will last longer than one year. b. will become cash, be sold, or be used up within 12 months. c. was purchased within the last six months. d. was purchased with cash

> What does the term “free on board” mean? Why is this an important term to understand if you are involved in making decisions about the purchasing of inventory or the setting of prices for your products?

> What is the fundamental accounting equation? Define each of the components of thisequation.

> Backcountry, Inc., an outdoor magazine, collected $2,700 on June 1 for one-year subscriptions from subscribers in advance. Journalize and post the adjusting entry on December 31 to record the revenue that Backcountry, Inc., has earned, assuming no other

> Which of the following accounts is not closed? a. Salaries Expense b. Dividends c. Accumulated Depreciation, Equipment d. Service Revenue

> What type of account (asset, liability, revenue, or expense) would Joe’s Towing Company debit when it pays (credits) cash for each of the following transactions? a. Pays $100 to fill tow truck with gas b. Pays $1,000 to have a gas company deliver gas for

> Boehms, Inc., has cash of $36,000, supplies costing $1,500, and stockholders’ equityof $28,000. Determine the liabilities of the business. Write the accounting equation forBoehms, Inc.

> Calculate each account balance.

> RV Wholesale, Inc., paid $1,200 for supplies and purchased additional supplies on accountor $1,000. RV Wholesale, Inc., also paid $200 of the accounts payable. What is the balancen the Supplies account? a. $1,200 b. $1,000 c. $2,400 d. $2,200

> What would be the implications of a credit balance in the Cash account?

> Qwick Care Clinic, Inc., started a business when Dr. Hamm purchased $15,000 of commonstock in the business for cash. Before starting operations, Qwick Care Clinic, Inc., borrowed$18,000 cash by signing a note payable to 1st National Bank. Account for the

> Assume that Wave Rider paid expenses totaling $32,000. How does this transaction affectWave Rider’s accounting equation? a. Increases assets and decreases liabilities b. Decreases both assets and stockholders’ equity c. Increases both assets and stockhol

> Which of the following prevents a company from switching its inventory costing methodto a different method each year? a. Consistency principle b. Materiality concept c. Matching principle d. Disclosure principle

> Let’s say that two companies, identical in every way except that one used FIFO and one used LIFO, went into a bank on the same day to get a loan to deal with the rising cost of acquiring inventory. Despite the fact that they both engaged in the same tran

> Journalize the following transactions for the Pool Palace. Explanations are not required. a. Sold $81,000 of merchandise to Regal Spas, Inc., on account, terms 4/15, n/60; the merchandise cost the Pool Palace $44,500 b. Received payment for the goods fr

> If Holiboards, Inc., returned $2,750 of snowboards to a supplier, which of the following entries would be used to record the transaction?

> What is a credit memorandum? Give an example of the type of transaction in which it would be used.

> Assume that Wave Rider sold skateboards to another department store for $18,000 onaccount. Which parts of the accounting equation does a sale on account affect? a. Accounts Payable and Cash b. Accounts Receivable and Retained Earnings c. Accounts Receiva

> In a period of rising inventory costs, which cost-flow assumption would produce the highest net income? Why?

> Journalize the following transactions for Jammin’ Joe’s music store. a. Purchased $4,200 of merchandise on account, terms 3/15, n/30, FOB shipping point b. Paid $140 to the freight company for the delivery of the merchandise purchased c. Paid for the in

> Suppose Perfect Picture Photography Supply’s Inventory account showed a balance of $44,700. A physical count showed $43,300 of goods on hand. To adjust the inventory account, Perfect Picture Photography Supply, Inc., would make which of the following ent

> What kind of account is Sales Returns and Allowances? Where would it appear on thefinancial statements?

> The April 30, 2016, adjusted trial balance of The Grind Finale, Inc., is shown next.
Requirements 1. Prepare the April closing entries for The Grind Finale, Inc. 2. Calculate the ending balance in Retained Earnings. 3. Prepare a post-closing trial ba

> The adjusted trial balance for Bayside Realty, Inc., at November 30, 2016, follows:
Requirements 1. Prepare Bayside Realty’s income statement and statement of retained earnings for the year ended November 30, 2016, and year-end balance sheet. List ex

> Fischer Remodeling, Inc., completed the following selected transactions and prepared these adjusting entries during August:
Requirements 1. State whether the transaction would increase revenues, decrease revenues, increase expenses, decrease expenses

> The trial balance of A-1 Web Design, Inc., at June 30, 2016, and the data needed for the month-end adjustments follow:
a. Insurance coverage still remaining at June 30, $575 b. Supplies used during the month, $875 c. Depreciation for the month, $1,65

> What are some of the uses of financial statements?

> Julie’s Flower Shop’s Office Supplies balance on October 1 is $1,200, and the balance in Office Supplies Expense is $0. On October 31, $480 of supplies are on hand. Journalize and post the adjusting entry on October 31 for the supplies used. Compute the

> Unearned Revenue is always a. revenue. b. stockholders’ equity. c. a liability. d. an asset.

> Why do companies prepare adjusting entries?

> Demonstrate your knowledge of accounting terminology by filling in the blanks toreview some key definitions. Dillon Baker is describing the accounting process for a friend who is a psychology major. Dillon states, “The basic summary device in accounting

> Posting a $500 purchase of supplies on account appears as which of the following? a.
b.
c.
d.

> What is a “normal balance”? What are normal balances for the following accounts? a. Accounts Receivable b. Prepaid Expenses c. Notes Payable d. Retained Earnings e. Salaries Expense