CIA Review, Inc. provides review courses twice each year for students studying to take the CIA exam. The cost of textbooks is included in the registration fee. Text material requires constant updating and is useful for only one course. To minimize printing costs and ensure availability of books on the first day of class, CIA Review has books printed and delivered to its offices two weeks in advance of the first class. To ensure that enough books are available, CIA Review normally orders 10 percent more than expected enrollment. Usually there is an oversupply and books are thrown away. However, demand occasionally exceeds expectations by more than 10 percent and there are too few books available for student use. CIA Review has been forced to turn away students because of a lack of textbooks. CIA Review expects to enroll approximately 200 students per course. The tuition fee is $2,000 per student. The cost of teachers is $50,000 per course, textbooks cost $150 each, and other operating expenses are estimated to be $75,000 per course. Assume all financial statements data are prepared in accordance with GAAP. Required: a. Prepare an income statement, assuming that 200 students enroll in a course. Determine the cost of waste associated with unused books. b. Prepare an income statement, assuming that 240 students attempt to enroll in the course. Note that 20 students are turned away because of too few textbooks. Determine the amount of lost profit resulting from the inability to serve the 20 additional students. c. Suppose that textbooks can be produced through a high-speed copying process that permits delivery just in time for class to start. The cost of books made using this process, however, is $160 each. Assume that all books must be made using the same production process. In other words, CIA Review cannot order some of the books using the regular copy process and the rest using the high-speed process. Prepare an income statement under the JIT system assuming that 200 students enroll in a course. Compare the income statement under JIT with the income statement prepared in Requirement a. Comment on how the JIT system would affect profitability. d. Assume the same facts as in Requirement c with respect to a JIT system that enables immediate delivery of books at a cost of $160 each. Prepare an income statement under the JIT system, assuming that 240 students enroll in a course. Compare the income statement under JIT with the income statement prepared in Requirement b. Comment on how the JIT system would affect profitability. e. Discuss the possible effect of the JIT system on the level of customer satisfaction.
> Northwest Sales had the following transactions in 2018: 1. Acquired $200,000 cash from the issue of common stock. 2. Purchased $900,000 of merchandise for cash in 2018. 3. Sold merchandise that cost $710,000 for $1,200,000 during the year under the follo
> The following information comes from the accounts of James Company: Required: a. There were $190,000 of sales on account during the accounting period. Write-offs of uncollectible accounts were $1,450. What was the amount of cash collected from accounts
> Use the Target Corporation’s Form 10-K to answer the following questions related to Target’s 2015 fiscal year (year ended January 30, 2016). Target’s Form 10-K is available on the company’s website or through the SEC’s EDGAR database. Appendix A provides
> Use the following information to prepare a multistep income statement and a classified balance sheet for Chun Equipment Co. for 2018. Salaries expense $ 41,200 $ 2,100 Interest receivable (short term) Beginning retained earnings Operating expenses C
> The following transactions apply to Hooper Co. for 2018, its first year of operations: 1. Issued $60,000 of common stock for cash. 2. Provided $90,000 of services on account. 3. Collected $78,000 cash from accounts receivable. 4. Loaned $20,000 to Mosby
> Sage Inc. experienced the following transactions for 2018, its first year of operations: 1. Issued common stock for $50,000 cash. 2. Purchased $140,000 of merchandise on account. 3. Sold merchandise that cost $110,000 for $250,000 on account. 4. Collecte
> During the first year of operation, 2018, McGinnis Appliance recognized $275,000 of service revenue on account. At the end of 2018, the accounts receivable balance was $55,300. Even though this is his first year in business, the owner believes he will co
> The following information is available for Quality Book Sales's sales on account and accounts receivable: Accounts Receivable Balance, January 1, 2018………………………………$ 78,500 Allowance for Doubtful Accounts, January 1, 2018……………………………….4,710 Sales on Accoun
> The Brick Company had cash sales of $280,000 for 2018, its first year of operation. On April 2, the company purchased 210 units of inventory at $390 per unit. On September 1, an additional 160 units were purchased for $425 per unit. The company had 110 u
> The accounting records of Wall’s China Shop reflected the following balances as of January 1, 2018: Cash……………………………………………………………….$80,100 Beginning inventory……………33,000 (220 units @ $150) Common stock…………………………………………………50,000 Retained earnings……………………………
> The following trial balance was prepared for Tile, Etc., Inc. on December 31, 2017, after the closing entries were posted: Account Title Cash………………………………………………………………….$110,000 Accounts Receivable…………………………………………….125,000
> The following transactions apply to Jova Company for 2018, the first year of operation: 1. Issued $10,000 of common stock for cash. 2. Recognized $210,000 of service revenue earned on account. 3. Collected $162,000 from accounts receivable. 4. Paid opera
> You have probably heard it is unwise to bite the hand that feeds you. Independent auditors are chosen by, paid by, and can be fired by the companies they audit. What keeps the auditor independent? In other words, what stops an auditor from blindly follow
> David Sheridan was a well-respected CPA in his mid-fifties. After spending 10 years at a national accounting firm, he was hired by Global, Inc., a multinational corporation headquartered in the United States. He patiently worked his way up to the top of
> Sam Sharp is an accountant with a shady past. Suffice it to say that he owes some very unsavory characters a lot of money. Despite his past, Sam works hard at keeping up a strong professional image. He is a manager at Flowers and Associates, a fast-growi
> The following information is available for Pyle Garage for March 2018: The following is a list of checks and deposits recorded on the books of Pyle Garage for March 2018: Other Information 1. Check no. 1462 was outstanding from February. 2. A credit
> Determine whether the following items included in Wong Company’s January 2018 bank reconciliation will require adjustments on Wong’s books and indicate the amount of any necessary adjustment. a. Service charges of $50 for the month of January were listed
> The following data apply to Pro Beauty Supply Inc. for May 2018: 1. Balance per the bank on May 31, $9,150. 2. Deposits in transit not recorded by the bank, $1,510. 3. Bank error; check written by Best Beauty Supply was charged to Pro Beauty Supply’s acc
> Rick Hall owns a card shop, Hall’s Cards. The following cash information is available for the month of August 2018: As of August 31, the bank statement shows a balance of $16,140. The August 31 unadjusted balance in the Cash account of Hall’s Cards is $
> Following is a bank reconciliation for Zocar Enterprises for June 30, 2018. When reviewing the bank reconciliation, Zocar’s auditor was unable to locate any reference to the NSF check on the bank statement. Furthermore, the clerk who
> Connie Stevens is a partner of a regional accounting firm. Stevens was hired by a client to audit the company’s books. After extensive work, Stevens determined that she was unable to perform the appropriate audit procedures. Required: a. Name the type o
> For each of the following fraudulent acts, describe one or more internal control procedures that could have prevented (or helped prevent) the problems. a. Everyone in the office has noticed what a dedicated employee Carley Trap is. She never misses work,
> The following trial balance pertains to Benji’s Grocery as of January 1, 2018: Account Title Beginning………………â
> The following income statements were drawn from the annual reports of Toner Sales Company: *All dollar amounts are reported in thousands. The president’s message in the company’s annual report stated that the company
> Putting “yum” on people’s faces around the world is the mission of Yum! Brands, Inc. Yum! was spun off from PepsiCo in 1997. A spin-off occurs when a company separates its operations into two or more distinct companies. The company was originally compo
> Complete the following requirements using the most recent financial statements available on the McDonald’s Corporation’s website. Obtain the statements on the Internet by following the steps given. (The formatting of the company’s website may have change
> At the beginning of 2018, the Redd Company had the following balances in its accounts: Cash…………………â€&b
> Blooming Flower Company was started in 2018 when it acquired $60,000 cash from the issue of common stock. The following data summarize the company’s first three years’ operating activities. Assume that all transaction
> The following account titles and balances were taken from the adjusted trial balance of King Co. for 2018. The company uses the periodic inventory system. Account Title………………………………………………………………….Balance Sales returns and allowances………………………………………………..$
> The following events were completed by Dana’s Imports in September 2018: Sept. 1 Acquired $50,000 cash from the issue of common stock. 1 Purchased $28,000 of merchandise on account with terms 2/10, n/30. 5 Paid $600 cash for freight to
> For each of the following events, determine the amount of freight paid by The Box Company. Also indicate whether the freight cost would be classified as a product or period (selling and administrative) cost. a. Purchased inventory with freight costs of $
> Indicate whether each of the following costs is a product cost or a period (selling and administrative) cost: a. Goods purchased for resale. b. Salaries of salespersons. c. Advertising costs. d. Transportation-out. e. Interest on a note payable. f. Salar
> Alcorn Service Company was formed on January 1, 2018. Events Affecting the 2018 Accounting Period 1. Acquired $20,000 cash from the issue of common stock. 2. Purchased $800 of supplies on account. 3. Purchased land that cost $14,000 cash. 4. Paid $800 ca
> Fill in the blanks (indicated by the alphabetic letters in parentheses) in the following financial statements. Assume the company started operations January 1, 2018, and all transactions involve cash. For the Years 2018 2019 2020 Income Statements
> The following accounts and balances were drawn from the records of Barker Company at December 31, 2018: Required: Use the accounts and balances from Barker Company to construct an income statement, statement of changes in stockholders’
> Waddell Company had the following balances in its accounting records as of December 31, 2018: The following accounting events apply to Waddell Company’s 2018 fiscal year: Jan. 1 Acquired $20,000 cash from the issue of common stock. Fe
> Complete the requirements below using the most current annual reports or the Forms 10-K for Lowe’s, a company that sells home-building supplies, and Dominion Resources, one of the nation’s leading generators of energy. To obtain the Forms 10-K, use eithe
> The following selected accounts and account balances were taken from the records of Nowell Company. Except as otherwise indicated, all balances are as of December 31, 2018, before the closing entries were recorded. Required: a. Prepare the income state
> Each of the following independent events requires a year-end adjusting entry. Show how each event and its related adjusting entry affect the accounting equation. Assume a December 31 closing date. The first event is recorded as an example. a. Paid $4,8
> The following events pertain to Super Cleaning Company: 1. Acquired $10,000 cash from the issue of common stock. 2. Provided $15,000 of services on account. 3. Provided services for $5,000 cash. 4. Received $2,800 cash in advance for services to be perfo
> Maben Company was started on January 1, 2018, and experienced the following events during its first year of operation: 1. Acquired $30,000 cash from the issue of common stock. 2. Borrowed $40,000 cash from National Bank. 3. Earned cash revenues of $48,00
> Prat Corp. started the 2018 accounting period with $30,000 of assets (all cash), $12,000 of liabilities, and $13,000 of common stock. During the year, the Retained Earnings account increased by $7,550. The bookkeeper reported that Pratt paid cash expense
> Mark’s Consulting experienced the following transactions for 2018, its first year of operations, and 2019. Assume that all transactions involve the receipt or payment of cash. Transactions for 2018 1. Acquired $20,000 by issuing common stock. 2. Received
> Identify the financial statements on which each of the following items (titles, date descriptions, and accounts) appears by placing a check mark in the appropriate column. If an item appears on more than one statement, place a check mark in every applica
> The following unrelated events are typical of those experienced by business entities: 1. Acquire cash by issuing common stock. 2. Pay cash for operating expenses. 3. Agree to represent a client in an IRS audit and to receive payment when the audit is com
> Match the terms (identified as a through r) with the definitions and phrases (marked 1 through 16). For example the term “a. Assets” matches with definition “15. Equal to liabilities plus stockholder
> The following business scenarios are independent from one another: 1. Bob Wilder starts a business by transferring $10,000 from his personal checking account into a checking account for his business, Wilder Co. 2. A business that Sam Pace owns earns $4,6
> The following three companies issued the following bonds: 1. Lot, Inc. issued $100,000 of 8 percent, five-year bonds at 102¼ on January 1, 2018. Interest is payable annually on December 31. 2. Max, Inc. issued $100,000 of 8 percent, five-year bonds at 98
> Beverly Moore is struggling to pass her introductory accounting course. Beverly is intelligent but she likes to party. Studying is a low priority for Beverly. When one of her friends tells her that she is going to have trouble in business if she doesn’t
> Kenta Manufacturing Company obtains its raw materials from a variety of suppliers. Kenta’s strategy is to obtain the best price by letting the suppliers know that it buys from the lowest bidder. Approximately four years ago, unexpected increases in deman
> Antioch Company makes eBook readers. The company had the following amounts at the beginning of 2018: Cash, $660,000; Raw Materials Inventory, $51,000; Work in Process Inventory, $18,000; Finished Goods Inventory, $43,000; Common Stock, $583,000; and Reta
> Wang Company began operations on January 1, 2018, by issuing common stock for $70,000 cash. During 2018, Wang received $88,000 cash from revenue and incurred costs that required $65,000 of cash payments. Required: Prepare a GAAP-based income statement a
> Power-To-Spare, Inc. makes a smart phone case that includes a battery that extends the operating life of an I Phone. The manufacturing costs per unit include $15 direct materials, $17 direct labor, and $8 manufacturing overhead. These costs are based on
> The following transactions pertain to 2018, the first-year operations of Gibson Company. All inventory was started and completed during 2018. Assume that all transactions are cash transactions. 1. Acquired $12,000 cash by issuing common stock. 2. Paid $4
> Sinclair Manufacturing Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, assume that all transactions are cash transactions and that financial statement d
> Stuart Manufacturing Company was started on January 1, 2018, when it acquired $89,000 cash by issuing common stock. Stuart immediately purchased office furniture and manufacturing equipment costing $32,000 and $40,000, respectively. The office furniture
> Vernon Company invented a new process for manufacturing ice cream. The ingredients are mixed in high-tech machinery that forms the product into small round beads. Like a bag of balls, the ice cream beads are surrounded by air pockets in packages. This de
> Use the Target Corporation’s Form 10-K to answer the following questions related to Target’s 2015 fiscal year (year ended January 30, 2016). Target’s Form 10-K is available on the company’s website or through the SEC’s EDGAR database. Appendix A provides
> Ted Cowan is a model employee. He has not missed a day of work in the last five years. He even forfeits his vacation time to make sure that things run smoothly. Ted literally does the work of two people. He started out working as the purchasing agent in
> Campbell Manufacturing Company (CMC) was started when it acquired $80,000 by issuing common stock. During the first year of operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $75,000. CM
> Use the following table to indicate whether the information is more representative of managerial versus financial accounting. The first item is shown as an example. Financial Managerial Accounting Information Item Accounting Estimates of future reve
> Use the financial statements for Allendale Company from Problem 9-17 to calculate the following ratios for 2019 and 2018: a. Working capital. b. Current ratio. c. Quick ratio. d. Receivables turnover (beginning receivables at January 1, 2018, were $47,00
> The following financial statements apply to Karl Company: Required: Calculate the following ratios for 2018 and 2019. When data limitations prohibit computing averages, use year-end balances in your calculations. Round computations to two decimal poin
> Otis Company’s income statement information follows: The average number of shares outstanding was 9,600 for 2018 and 8,000 for 2017. Required: Compute the following ratios for Otis for 2018 and 2017 and round the computation to two d
> Selected data for Dalton Company for 2018 and additional information on industry averages follow: Industry averages Earnings per share………â€
> The bookkeeper for Packard’s Country Music Bar left this incomplete balance sheet. Packard’s working capital is $90,000 and its debt to assets ratio is 40 percent. Assets Current assets Cash……………………..………………………….$ 21,000 Acc
> Riley Manufacturing has a current ratio of 3:1 on December 31, 2018. Indicate whether each of the following transactions would increase (+), decrease (−), or have no effect (NA) on Riley’s current ratio and its working capital. Required: a. Paid cash for
> Use the financial statements for Allendale Company from Problem 9-17 to perform a vertical analysis of both the balance sheets and income statements for 2019 and 2018. Round computations to two decimal points.
> Several years ago, Wilson Blowhard founded a communications company. The company became successful and grew by expanding its customer base and acquiring some of its competitors. In fact, most of its growth resulted from acquiring other companies. Mr. Blo
> Rossie Equipment Manufacturing Co. acquired the assets of Alba Inc., a competitor, in 2018. It recorded goodwill of $70,000 at acquisition. Because of defective machinery Alba had produced prior to the acquisition, it has been determined that all of the
> Lakeside, Inc. purchased land in January 2009 at a cost of $250,000. The estimated market value of the land is $425,000 as of December 31, 2018. Required: a. Name the December 31, 2018, financial statement(s) on which the land will be shown. b. At what
> After reviewing the financial statements of Perez Company, Lou Brewer concluded that the company was a service company. Mr. Brewer based his conclusion on the fact that Perez’s financial statements displayed no inventory accounts. Required: Explain how
> Sound wave Company manufactures and sells high-quality audio speakers. The speakers are encased in solid walnut cabinets supplied by Walton Cabinet, Inc. Walton packages the speakers in durable moisture-proof boxes and ships them by truck to Sound wave’s
> a. Describe an expense recognition event that results in an increase in liabilities. b. Describe an expense recognition event that results in a decrease in assets. c. Describe a revenue recognition event that results in a decrease in liabilities. d. Desc
> For each of the following situations, calculate the amount of bond discount or premium, if any. a. Gray Co. issued $80,000 of 6 percent bonds at 101¼. b. Bush, Inc. issued $200,000 of 10-year, 6 percent bonds at 97½. c. Oak, Inc. issued $100,000 of 20-ye
> Indicate whether a bond will sell at a premium (P), discount (D), or face value (F) for each of the following conditions. a. The stated rate of interest is higher than the market rate. b. The market rate of interest is equal to the stated rate. c. The ma
> Which of the following would be added to the Inventory account for a merchandising business using the perpetual inventory system? Required: a. Transportation-out. b. Purchase discount. c. Transportation-in. d. Purchase of a new computer to be used by th
> The beginning account balances for Terry’s Auto Shop as of January 1, 2018, follow: Account Titles……………………………………………….Beginning Balances Cash……………………………………………………………………….$16,000 Inventory…………………………………………………………………..8,000 Common stock…………………………………………………………2
> For each of the following events, indicate whether the freight terms are FOB destination or FOB shipping point. a. Sold merchandise and the buyer paid the freight costs. b. Purchased merchandise and the seller paid the freight costs. c. Sold merchandise
> Companies in different industries often use different proportions of current versus long-term assets to accomplish their business objective. The technology revolution resulting from the silicon microchip has often been led by two well-known companies: Mi
> Milo Clothing experienced the following events during 2018, its first year of operation: 1. Acquired $30,000 cash from the issue of common stock. 2. Purchased inventory for $15,000 cash. 3. Sold inventory costing $9,000 for $20,000 cash. 4. Paid $1,500 f
> During 2018, Hardy Merchandising Company purchased $40,000 of inventory on account. Hardy sold inventory on account that cost $24,500 for $38,000. Cash payments on accounts payable were $22,000. There was $26,000 cash collected from accounts receivable.
> Dan Watson started a small merchandising business in 2018. The business experienced the following events during its first year of operation. Assume that Watson uses the perpetual inventory system. 1. Acquired $30,000 cash from the issue of common stock.
> Tippah Antiques uses the periodic inventory system to account for its inventory transactions. The following account titles and balances were drawn from Tippah’s records for the year 2018: beginning balance in inventory, $42,000; purchases, $128,000; purc
> The following information is available for two different types of businesses for the 2018 accounting year. Hopkins CPAs is a service business that provides accounting services to small businesses. Sports Clothing is a merchandising business that sells sp
> Bill Rose owns Rose Sporting Goods. At the beginning of the year, Rose Sporting Goods had $18,000 in inventory. During the year, Rose Sporting Goods purchased inventory that cost $66,000. At the end of the year, inventory on hand amounted to $28,500. Re
> At the end of 2018 the following information is available for Billings and Phoneix companies: Required: a. Prepare common size income statements for each company. b. One company is a high-end retailer, and the other operates a discount store. Which is
> Expert Computers was started in 2018. The company experienced the following accounting events during its first year of operation: 1. Started business when it acquired $40,000 cash from the issue of common stock. 2. Purchased merchandise with a list price
> Powell Company began the 2018 accounting period with $40,000 cash, $86,000 inventory, $60,000 common stock, and $66,000 retained earnings. During 2018, Powell experienced the following events: 1. Sold merchandise costing $58,000 for $99,500 on account to
> The following information was taken from the accounts of Green Market, a delicatessen, at December 31, 2018. The accounts are listed in alphabetical order, and each has a normal balance. Accounts payable…………………………………………………………..$ 800 Accounts receivable…
> Sweet’s Bakery makes cakes, pies, and other pastries that it sells to local grocery stores. The company experienced the following transactions during 2018: 1. Started business by acquiring $60,000 cash from the issue of common stock. 2. Purchased bakery
> Lopez Sales Company had the following balances in its accounts on January 1, 2018: Cash……………………………………………….$42,000 Merchandise Inventory……………………36,000 Land……………………………………………….50,000 Common Stock………………………………..70,000 Retained Earnings…………………………...58,000 Lo
> Ho Designs experienced the following events during 2018, its first year of operation: 1. Started the business when it acquired $70,000 cash from the issue of common stock. 2. Paid $41,000 cash to purchase inventory. 3. Sold inventory costing $37,500 for
> Bill Norman comes to you for advice. He has just purchased a large amount of inventory with the terms 2/10, n/30. The amount of the invoice is $310,000. He is currently short of cash but has decent credit. He can borrow the money needed to settle the acc
> Bali Sales Company experienced the following events: 1. Purchased merchandise inventory for cash. 2. Purchased merchandise inventory on account. 3. Returned merchandise purchased on account. 4. Sold merchandise inventory for cash. Label the revenue recog
> On April 6, 2018, Home Furnishings purchased $25,200 of merchandise from Una’s Imports, terms 2/10, n/45. On April 8, Home Furnishings returned $2,400 of the merchandise to Una’s Imports for credit. Home Furnishings pa
> On January 1, 2018, Jana started a small flower merchandising business that she named Jana’s Flowers. The company experienced the following events during the first year of operation: 1. Started the business by issuing common stock for $30,000 cash. 2. Pa
> Yard Professionals Inc. experienced the following events in 2018, its first year of operation: 1. Performed services for $35,000 cash. 2. Purchased $6,000 of supplies on account. 3. A physical count on December 31, 2018, found that there was $1,800 of su
> Pizza Express Inc. began the 2018 accounting period with $2,500 cash, $1,400 of common stock, and $1,100 of retained earnings. Pizza Express was affected by the following accounting events during 2018: 1. Purchased $3,600 of supplies on account. 2. Earne
> In 2018, Lee Inc. billed its customers $62,000 for services performed. The company collected $51,000 of the amount billed. Lee incurred $39,000 of other operating expenses on account. Lee paid $31,000 of the accounts payable. Lee acquired $40,000 cash fr
