Beverly Crusher is a licensed CPA. During the first month of operations of her business (a sole proprietorship), the following events and transactions occurred.
April 2 Invested $32,000 cash and equipment valued at $14,000 in the business.
2 Hired a secretary-receptionist at a salary of $290 per week payable monthly.
3 Purchased supplies on account $700. (Debit an asset account.)
7 Paid office rent of $600 for the month.
11 Completed a tax assignment and billed client $1,100 for services rendered. (Use Service Revenue account.)
12 Received $3,200 advance on a management consulting engagement.
17 Received cash of $2,300 for services completed for Ferengi Co.
21 Paid insurance expense $110.
30 Paid secretary-receptionist $1,160 for the month.
30 A count of supplies indicated that $120 of supplies had been used.
30 Purchased a new computer for $6,100 with personal funds. (The computer will be used exclusively for business purposes.)
Journalize the transactions in the general journal. (Omit explanations.)
> Starr Co. had sales revenue of $540,000 in 2014. Other items recorded during the year were: Prepare a single-step income statement for Starr for 2014. Starr has 100,000 shares of stock outstanding.
> How should the disposal of a component of a business be disclosed in the income statement?
> What is meant by the terms elements and items as they relate to the income statement? Why might items have to be disclosed in the income statement?
> State some of the more serious problems encountered in seeking to achieve the ideal measurement of periodic net income. Explain what accountants do as a practical alternative.
> Generally accepted accounting principles usually require the use of accrual accounting to “fairly present” income. If the cash receipts and disbursements method of accounting will “clearly reflect” taxable income, why does this
> Linus Paper Company decided to close two small pulp mills in Conway, New Hampshire, and Corvallis, Oregon. Would these closings be reported in a separate section entitled “Discontinued operations after income from continuing operations”? Di
> How can information based on past transactions be used to predict future cash flows?
> On January 30, 2013, a suit was filed against Frazier Corporation under the Environmental Protection Act. On August 6, 2014, Frazier Corporation agreed to settle the action and pay $920,000 in damages to certain current and former employees. How should
> During 2014, Liselotte Company earned income of $1,500,000 before income taxes and realized a gain of $450,000 on a government-forced condemnation sale of a division plant facility. The income is subject to income taxation at the rate of 34%. The gain
> When does tax allocation within a period become necessary? How should this allocation be handled?
> What is meant by “tax allocation within a period”? What is the justification for such practice?
> Qualls Corporation reported 2014 earnings per share of $7.21. In 2015, Qualls reported earnings per share as follows. Is the increase in earnings per share from $7.21 to $8.28 a favorable trend?
> Neumann Company computed earnings per share as follows. Net income / Common shared controlling at year-end Neumann has a simple capital structure. What possible errors might the company have made in the computation? Explain.
> What effect does intraperiod tax allocation have on reported net income?
> Lebron Co. owns most but not all of the shares of its subsidiary Bryant Inc. Lebron reported net income of $124,700. The amount to be attributed to the non-controlling interest in Bryant is $30,000. Indicate how Lebron will report the non-controlling i
> Discuss the appropriate treatment in the income statement for the following items: (a) Loss on discontinued operations. (b) Noncontrolling interest allocation. (c) Earnings per share. (d) Gain on sale of equipment.
> Cooper Investments reported an unusual gain from the sale of certain assets in its 2014 income statement. How does intraperiod tax allocation affect the reporting of this unusual gain?
> What kinds of questions about future cash flows do investors and creditors attempt to answer with information in the income statement?
> Santo Corporation has eight expense accounts in its general ledger which could be classified as selling expenses. Should Santo report these eight expenses separately in its income statement or simply report one total amount for selling expenses?
> Perlman Land Development, Inc. purchased land for $70,000 and spent $30,000 developing it. It then sold the land for $160,000. Sheehan Manufacturing purchased land for a future plant site for $100,000. Due to a change in plans, Sheehan later sold the l
> Indicate the section of a multiple-step income statement in which each of the following is shown. (a) Loss on inventory write-down. (b) Loss from strike. (c) Bad debt expense. (d) Loss on disposal of a component of the business. (e) Gain on sale o
> Indicate where the following items would ordinarily appear on the financial statements of Boleyn, Inc. for the year 2014. (a) The service life of certain equipment was changed from 8 to 5 years. If a 5-year life had been used previously, additional de
> Discuss the appropriate treatment in the financial statements of each of the following. (a) An amount of $113,000 realized in excess of the cash surrender value of an insurance policy on the life of one of the founders of the company who died during t
> Distinguish between the modified all-inclusive income statement and the current operating performance income statement. According to present generally accepted accounting principles, which is recommended? Explain.
> What is the basis for distinguishing between operating and non-operating items?
> Mason Advertising Agency was founded in January 2010. Presented below are adjusted and unadjusted trial balances as of December 31, 2014. Instructions (a) Journalize the annual adjusting entries that were made. (Omit explanations.) (b) Prepare a
> Listed below are the transactions of Yasunari Kawabata, D.D.S., for the month of September. Sept. 1 Kawabata begins practice as a dentist and invests $20,000 cash. 2 Purchases dental equipment on account from Green Jacket Co. for $17,280. 4 Pays ren
> Scratch Miniature Golf and Driving Range Inc. was opened on March 1 by Scott Verplank. The following selected events and transactions occurred during March. Mar. 1 Invested $50,000 cash in the business in exchange for common stock. 3 Purchased Michel
> What are the advantages and disadvantages of the single step income statement?
> Presented below are selected account balances for Homer Winslow Co. as of December 31, 2014. Instructions Prepare closing entries for Homer Winslow Co. on December 31, 2014. (Omit explanations.)
> Presented below is financial information for two different companies. Instructions Instructions Compute the missing amounts.
> Presented below is information related to Gonzales Corporation for the month of January 2014. Instructions Prepare the necessary closing entries.
> The adjusted trial balance of Lopez Company shows the following data pertaining to sales at the end of its fiscal year, October 31, 2014: Sales Revenue $800,000, Delivery Expense $12,000, Sales Returns and Allowances $24,000, and Sales Discounts $15,00
> The adjusted trial balance of Anderson Cooper Co. as of December 31, 2014, contains the following. Instructions (a) Prepare an income statement. (b) Prepare a statement of retained earnings. (c) Prepare a classified balance sheet.
> Greco Resort opened for business on June 1 with eight air-conditioned units. Its trial balance on August 31 is as follows. Other data: 1. The balance in prepaid insurance is a one-year premium paid on June 1, 2014. 2. An inventory count on Augus
> Andy Roddick is the new owner of Ace Computer Services. At the end of August 2014, his first month of ownership, Roddick is trying to prepare monthly financial statements. Below is some information related to unrecorded expenses that the business incur
> Presented below are selected accounts for Alvarez Company as reported in the worksheet at the end of May 2014. Instructions Complete the worksheet by extending amounts reported in the adjusted trial balance to the appropriate columns in the works
> What is the major distinction (a) between revenues and gains and (b) between expenses and losses?
> A partial adjusted trial balance of Piper Company at January 31, 2014, shows the following. Instructions Answer the following questions, assuming the year begins January 1. (a) If the amount in Supplies Expense is the January 31 adjusting entry,
> Karen Weller, D.D.S., opened a dental practice on January 1, 2014. During the first month of operations, the following transactions occurred. 1. Performed services for patients who had dental plan insurance. At January 31, $750 of such services was pe
> The ledger of Duggan Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared. An analysis of the accounts shows the following. 1. The equipment depreciates $250 per month.
> The trial balance of Watteau Co. (shown on the next page) does not balance. Each of the listed accounts should have a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors. 1. Cash received f
> The trial balance of Blues Traveler Corporation does not balance. An examination of the ledger shows these errors. 1. Cash received from a customer on account was recorded (both debit and credit) as $1,380 instead of $1,830. 2. The purchase on a
> The trial balance of Wanda Landowska Company (shown on the next page) does not balance. Your review of the ledger reveals the following.(a) Each account had a normal balance.(b) The debit footings in Prepaid Insurance, Accounts Payable, and Property Ta
> Assume that Best Buy made a December 31 adjusting entry to debit Salaries and Wages Expense and credit Salaries and Wages Payable for $4,200 for one of its departments. On January 2, Best Buy paid the weekly payroll of $7,000. Prepare Best Buy’s
> Kelly Company had cash receipts from customers in 2014 of $142,000. Cash payments for operating expenses were $97,000. Kelly has determined that at January 1, accounts receivable was $13,000, and prepaid expenses were $17,500. At December 31, accounts
> Side Kicks has year-end account balances of Sales Revenue $808,900; Interest Revenue $13,500; Cost of Goods Sold $556,200; Administrative Expenses $189,000; Income Tax Expense $35,100; and Dividends $18,900. Prepare the year-end closing entries.
> A Wall Street Journal article noted that Apple reported higher income than its competitors by using a more aggressive policy for recognizing revenue on future upgrades to its products. Some contend that Apple’s quality of earnings is low. What do
> Identify three situations in which accounting measures are based on present values. Do these present value applications involve single sums or annuities, or both single sums and annuities? Explain.
> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marksand-Spencer-Annual-report-and-financial-statements-2012.p
> Recording transactions in the accounting system requires knowledge of the important characteristics of the elements of financial statements, such as assets and liabilities. In addition, accountants must understand the inherent uncertainty in accounting m
> What are the steps to be completed in preparing the opening IFRS statement of financial position?
> What are the characteristics of high-quality information in a company’s first IFRS financial statements?
> Cooke Company has a fiscal year ending on September 30. Selected data from the September 30 worksheet are presented below. Instructions(a) Prepare a complete worksheet.(b) Prepare a classified balance sheet. (Note: $10,000 of the mortgage payable is d
> Jill Accardo, M.D., maintains the accounting records of Accardo Clinic on a cash basis. During 2014, Dr. Accardo collected $142,600 from her patients and paid $55,470 in expenses. At January 1, 2014, and December 31, 2014, she had accounts receivable, un
> The Kellys are planning for a retirement home. They estimate they will need $200,000 4 years from now to purchase this home. Assuming an interest rate of 10%, what amount must be deposited at the end of each of the 4 years to fund the home price? (Round
> Access the glossary (“Master Glossary”) to answer the following. (a) What is the definition of present value? (b) Briefly describe the term “discount rate adjustment technique.” (c) Identify the other codification referen
> Dunn Inc. owns and operates a number of hardware stores in the New England region. Recently, the company has decided to locate another store in a rapidly growing area of Maryland. The company is trying to decide whether to purchase or lease the building
> James Kirk is a financial executive with McDowell Enterprises.Although James Kirk has not had any formal training in finance or accounting, he has a “good sense” for numbers and has helped the company grow from a very small company ($500,000
> Will Smith will receive $80,000 on December 31, 2019 (5 years from now), from a trust fund established by his father. Assuming the appropriate interest rate for discounting is 12% (compounded semiannually), what is the present value of this amount today?
> Ellison Inc., a manufacturer of steel school lockers, plans to purchase a new punch press for use in its manufacturing process. After contacting the appropriate vendors, the purchasing department received differing terms and options from each vendor. The
> Answer the following questions related to Dubois Inc. (a) Dubois Inc. has $600,000 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides $80,000 at the end of each year for 12 years, and the oth
> During the past year, Stacy McGill planted a new vineyard on 150 acres of land that she leases for $30,000 a year. She has asked you, as her accountant, to assist her in determining the value of her vineyard operation.The vineyard will bear no grapes for
> Julia Baker died, leaving to her husband Brent an insurance policy contract that provides that the beneficiary (Brent) can choose any one of the following four options. (a) $55,000 immediate cash. (b) $4,000 every 3 months payable at the end of eac
> Howie Long has just learned he has won a $500,000 prize in the lottery. The lottery has given him two options for receiving the payments. (1) If Howie takes all the money today, the state and federal governments will deduct taxes at a rate of 46% imme
> Assume that Wal-Mart Stores, Inc. has decided to surface and maintain for 10 years a vacant lot next to one of its stores to serve as a parking lot for customers. Management is considering the following bids involving two different qualities of surfacing
> Using the appropriate interest table, provide the solution to each of the following four questions by computing the unknowns. (a) What is the amount of the payments that Ned Winslow must make at the end of each of 8 years to accumulate a fund of $90,0
> Answer each of these unrelated questions. (a) On January 1, 2014, Fishbone Corporation sold a building that cost $250,000 and that had accumulated depreciation of $100,000 on the date of sale. Fishbone received as consideration a $240,000 non-interest
> Killroy Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Killroy
> Keith Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 2 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 2 years, by conducting s
> Regina Henry deposited $20,000 in a money market certificate that provides interest of 10% compounded quarterly if the amount is maintained for 3 years. How much will Regina Henry have at the end of 3 years?
> For each of the following, determine the expected cash flows. Cash Flow Probability Estimate Assessment $ 4,800 6,300 7,500 (a) 20% 50% 30% (b) $ 5,400 30% 7,200 8,400 50% 20% $(1,000) 3,000 5,000 (c) 10% 80% 10%
> Assuming the same facts as those in E6-18 except that the payments must begin now and be made on the first day of each of the 15 years, what payment method would you recommend?
> Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two means of settlement. It can either make immediate payment of $2,600,000, or it can make annual payments of $300,000 for 15 years, each payment due on the la
> Your client, Keith Moreland Leasing Company, is preparing a contract to lease a machine to Souvenirs Corporation for a period of 25 years. Moreland has an investment cost of $365,755 in the machine, which has a useful life of 25 years and no salvage valu
> JesperParnevik borrowed $70,000 on March 1, 2012. This amount plus accrued interest at 12% compounded semiannually is to be repaid March 1, 2022. To retire this debt, Jesper plans to contribute to a debt retirement fund five equal amounts starting on Mar
> Andrew Bogut just received a signing bonus of $1,000,000. His plan is to invest this payment in a fund that will earn 8%, compounded annually. Instructions (a) If Bogut plans to establish the AB Foundation once the fund grows to $1,999,000, how ma
> Nerwin, Inc. is a furniture manufacturing company with 50 employees. Recently, after a long negotiation with the local labor union, the company decided to initiate a pension plan as a part of its compensation plan. The plan will start on January 1, 2014.
> George Hincapie Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the company’s bikes. After a careful evaluation of the reques
> The Black Knights Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in the Sunbelt. In order to do so, Black Knights has decided to locate a new factory in the Panama City area. Black Knigh
> Sosa Excavating Inc. is purchasing a bulldozer. The equipment has a price of $100,000. The manufacturer has offered a payment plan that would allow Sosa to make 10 equal annual payments of $16,274.53, with the first payment due one year after the purchas
> Jose Oliva is considering two investment options for a $1,500 gift he received for graduation. Both investments have 8% annual interest rates. One offers quarterly compounding; the other compounds on a semiannual basis. Which investment should he choose?
> Consider the following independent situations. (a) Mike Finley wishes to become a millionaire. His money market fund has a balance of $92,296 and has a guaranteed interest rate of 10%. How many years must Mike leave that balance in the fund in order t
> LEW Company purchased a machine at a price of $100,000 by signing a note payable, which requires a single payment of $123,210 in 2 years. Assuming annual compounding of interest, what rate of interest is being paid on the loan?
> Clarence Weatherspoon, a super salesman contemplating retirement on his fifty-fifth birthday, decides to create a fund on an 8% basis that will enable him to withdraw $20,000 per year on June 30, beginning in 2018 and continuing through 2021. To develop
> Presented below are three unrelated situations. (a) Dwayne Wade Company recently signed a lease for a new office building, for a lease period of 10 years. Under the lease agreement, a security deposit of $12,000 is made, with the deposit to be returned a
> Using the appropriate interest table, compute the present values of the following periodic amounts due at the end of the designated periods. (a) $30,000 receivable at the end of each period for 8 periods compounded at 12%. (b) $30,000 payments to be made
> Using the appropriate interest table, answer the following questions. (Each case is independent of the others). (a) What is the future value of 20 periodic payments of $4,000 each made at the beginning of each period and compounded at 8%? (b) What is the
> Using the appropriate interest table, answer each of the following questions. (Each case is independent of the others.) (a) What is the future value of $7,000 at the end of 5 periods at 8% compounded interest? (b) What is the present value of $7,000 due
> Alan Jackson invests $20,000 at 8% annual interest, leaving the money invested without withdrawing any of the interest for 8 years. At the end of the 8 years, Alan withdraws the accumulated amount of money. Instructions (a) Compute the amount Alan would
> For each of the following cases, indicate (a) to what rate columns, and (b) to what number of periods you would refer in looking up the interest factor. 1. In a future value of 1 table 2. In a present value of an annuity of 1 table
> Consider the loan in BE6-16. What payments must Zach Taylor make to settle the loan at the same interest rate but with the 6 payments beginning on the day the loan is signed?
> The following are a number of values taken from compound interest tables involving the same number of periods and the same rate of interest. Indicate what each of these four values represents. (a) 6.71008. (b) 2.15892. (c) .46319. (d) 14.48656.
> Clancey Inc. issues $2,000,000 of 7% bonds due in 10 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 8%. What amount will Clancey receive when it issues the bonds?
> Amy Monroe wants to create a fund today that will enable her to withdraw $25,000 per year for 8 years, with the first withdrawal to take place 5 years from today. If the fund earns 8% interest, how much must Amy invest today?
> Adams Inc. will deposit $30,000 in a 12% fund at the end of each year for 8 years beginning December 31, 2014. What amount will be in the fund immediately after the last deposit?
> Maria Alvarez is investing $300,000 in a fund that earns 8% interest compounded annually. What equal amounts can Maria withdraw at the end of each of the next 20 years?
> Leon Tyler’s VISA balance is $793.15. He may pay it off in 12 equal end-of-month payments of $75 each. What interest rate is Leon paying?
> Henry Quincy wants to withdraw $30,000 each year for 10 years from a fund that earns 8% interest. How much must he invest today if the first withdrawal is at year-end? How much must he invest today if the first withdrawal takes place immediately?
> Morgan Freeman is investing $16,380 at the end of each year in a fund that earns 10% interest. In how many years will the fund be at $100,000?