Cody Company reports net income of $90,000 in 2010. However, ending inventory was understated $10,000.What is the correct net income for 2010? What effect, if any, will this error have on total assets as reported in the balance sheet at December 31, 2010?
> Josh Cephus has prepared the following list of statements about accounts. 1. An account is an accounting record of either a specific asset or a specific liability. 2. An account shows only increases, not decreases, in the item it relates to. 3. Some item
> Explain the differences between depreciation expense and accumulated depreciation.
> What are the advantages of using a journal in the recording process?
> Maria Gonzalez is the owner of a successful printing shop. Recently her business has been increasing, and Maria has been thinking about changing the organization of her business from a proprietorship to a corporation. Discuss some of the advantages Maria
> (a) Reeves Company ships merchandise to Cox Company on December 30. The merchandise reaches the buyer on January 6. Indicate the terms of sale that will result in the goods being included in (1) Reeves’s December 31 inventory, and (2) Cox’s December 31
> On April 30, the bank reconciliation of Galena Company shows three outstanding checks: no. 254, $650, no. 255, $820, and no. 257, $410.The May bank statement and the May cash payments journal show the following. Instructions Using step 2 in the reconcil
> On March 20, Terrell’s petty cash fund of $100 is replenished when the fund contains $7 in cash and receipts for postage $52, freight-out $26, and travel expense $10. Prepare the journal entry to record the replenishment of the petty cash fund.
> Anna Pelo is unable to reconcile the bank balance at January 31.Anna’s reconciliation is as follows. Cash balance per bank…………………..$3,560.20 Add: NSF check……………………………….690.00 Less: Bank service charge…………………..25.00 Adjusted balance per bank…………..$4,225.2
> Lincolnville Company uses an imprest petty cash system. The fund was established on March 1 with a balance of $100. During March the following petty cash receipts were found in the petty cash box. The fund was replenished on March 15 when the fund contai
> Mingenback Company has the following internal control procedures over cash disbursements. Identify the internal control principle that is applicable to each procedure. 1. Company checks are prenumbered. 2. The bank statement is reconciled monthly by an i
> James Hughes Company established a petty cash fund on May 1, cashing a check for $100.The company reimbursed the fund on June 1 and July 1 with the following results. June 1: Cash in fund $2.75. Receipts: delivery expense $31.25; postage expense $39.00;
> For each of the following accounts indicate the effects of (a) a debit and (b) a credit on the accounts and (c) the normal balance of the account. 1. Accounts Payable. 2. Advertising Expense. 3. Service Revenue. 4. Accounts Receivable. 5. A. J. Ritter
> While examining cash receipts information, the accounting department determined the following information: opening cash balance $150, cash on hand $1,125.74, and cash sales per register tape $990.83. Prepare the required journal entry based upon the cash
> Listed below are five procedures followed by Collins Company. 1. Employees are required to take vacations. 2. Any member of the sales department can approve credit sales. 3. Jethro Bodine ships goods to customers, bills customers, and receives payment fr
> Knobloch Company has the following internal control procedures over cash receipts. Identify the internal control principle that is applicable to each procedure. 1. All over-the-counter receipts are registered on cash registers. 2. All cashiers are bonded
> Listed below are five procedures followed by The Beat Company. 1. Several individuals operate the cash register using the same register drawer. 2. A monthly bank reconciliation is prepared by someone who has no other cash responsibilities. 3. Ellen May w
> At Hutchingson Company, checks are not prenumbered because both the puchasing agent and the treasurer are authorized to issue checks. Each signer has access to unissued checks kept in an unlocked file cabinet. The purchasing agent pays all bills pertaini
> The internal control procedures in Weiser Company provide that: 1. Employees who have physical custody of assets do not have access to the accounting records. 2. Each month the assets on hand are compared to the accounting records by an internal auditor.
> The following control procedures are used in Benton’s Boutique Shoppe for cash disbursements. 1. The company accountant prepares the bank reconciliation and reports any discrepancies to the owner. 2. The store manager personally approves all payments bef
> Heather Bailiff is the new owner of Ready Parking. She has heard about internal control but is not clear about its importance for her business. Explain to Heather the four purposes of internal control and give her one application of each purpose for Read
> Jim Gaffigan has prepared the following list of statements about internal control. 1. One of the objectives of internal control is to safeguard assets from employee theft, robbery, and unauthorized use. 2. One of the objectives of internal control is to
> The following control procedures are used at Gonzales Company for over-the-counter cash receipts. 1. To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked attaché case in the stock room until it is deposited in the bank. 2. All
> Identify and describe the steps in the accounting process.
> Sue Merando is the owner of Merando’s Pizza. Merando’s is operated strictly on a carryout basis. Customers pick up their orders at a counter where a clerk exchanges the pizza for cash. While at the counter, the customer can see other employees making the
> Match each situation with the fraud triangle factor—opportunity, financial pressure, or rationalization—that best describes it. 1. An employee’s monthly credit card payments are nearly 75% of their monthly earnings. 2. An employee earns minimum wage at a
> Distinguish between FOB shipping point and FOB destination. Identify the freight terms that will result in a debit to Merchandise Inventory by the purchaser and a debit to Freight-out by the seller.
> Below are some typical transactions incurred by Kwun Company. 1. Payment of creditors on account. 2. Return of merchandise sold for credit. 3. Collection on account from customers. 4. Sale of land for cash. 5. Sale of merchandise on account. 6. Sale of m
> Velasquez Company has the following selected transactions during March. Mar. 2 Purchased equipment costing $9,400 from Chang Company on account. 5 Received credit of $410 from Lyden Company for merchandise damaged in shipment to Velasquez. 7 Issued cred
> Wick Company uses the columnar cash journals illustrated in the textbook. In April, the following selected cash transactions occurred. 1. Made a refund to a customer as an allowance for damaged goods. 2. Received collection from customer within the 3% di
> Pherigo Co. uses special journals and a general journal. The following transactions occurred during May 2010. May 1 I. Pherigo invested $50,000 cash in the business. 2 Sold merchandise to B. Sherrick for $6,300 cash.The cost of the merchandise sold was
> Montalvo Company uses special journals and a general journal. The following transactions occurred during September 2010. Sept. 2 Sold merchandise on account to T. Hossfeld, invoice no. 101, $720, terms n/30. The cost of the merchandise sold was $420. 10
> Identify the journal in which each of the following transactions is recorded. 1. Cash sales 4. Credit sales 2. Owner withdrawal of cash 5. Purchase of merchandise on account 3. Cash purchase of land 6. Receipt of cash for services performed
> Nobo Uematsu Company has a balance in its Accounts Payable control account of $8,250 on January 1, 2010. The subsidiary ledger contains three accounts: Jones Company, balance $3,000; Brown Company, balance $1,875; and Aatski Company. During January, the
> Two items are omitted from each of the following summaries of balance sheet and income statement data for two proprietorships for the year 2010, Craig Cantrel and Mills Enterprises. Instructions Determine the missing amounts. Mills Craig Cantrel Ente
> Identify in what ledger (general or subsidiary) each of the following accounts is shown. 1. Rent Expense 3. Notes Payable 2. Accounts Receivable—Char 4. Accounts Payable—Thebeau
> Presented below is information related to Kienholz Company for its first month of operations. Identify the balances that appear in the accounts receivable subsidiary ledger and the accounts receivable balance that appears in the general ledger at the end
> Yu Suzuki Company has a balance in its Accounts Receivable control account of $11,000 on January 1, 2010. The subsidiary ledger contains three accounts: Smith Company, balance $4,000; Green Company, balance $2,500; and Koyan Company. During January, the
> On September 1 the balance of the Accounts Receivable control account in the general ledger of Seaver Company was $10,960.The customers’ subsidiary ledger contained account balances as follows: Ruiz $1,440, Kingston $2,640, Bannister $2,060, Crampton $4,
> Beka Borke has prepared the following list of statements about accounting information systems. 1. The accounting information system includes each of the steps of the accounting cycle, the documents that provide evidence of transactions that have occurred
> Presented below is the subsidiary accounts receivable account of Jeremy Dody Instructions Write a memo to Andrea Barden, chief financial officer, that explains each transaction. Date Ref. Debit Credit Balance 2010 Sept. 2 S31 61,000 61,000 9 G4 14,00
> Here is a list of words or phrases related to computerized accounting systems. 1. Entry-level software. 2. Enterprise resource planning systems. 3. Network-compatible. 4. Audit trail. 5. Internal control. Instructions Match each word or phrase with the
> Donahue Company uses both special journals and a general journal as described in this chapter. On June 30, after all monthly postings had been completed, the Accounts Receivable control account in the general ledger had a debit balance of $320,000; the A
> Indicate whether each of the following statements is true or false. 1. When designing an accounting system, we need to think about the needs and knowledge of both the top managers and various other users. 2. When the environment changes as a result of te
> Why may a trial balance not contain up-to-date and complete financial information?
> Lily Company had the following assets and liabilities on the dates indicated. Lily began business on January 1, 2009, with an investment of $100,000. Instructions From an analysis of the change in owner’s equity during the year, comput
> Jensen’s Department Store uses a perpetual inventory system. Data for product E2-D2 include the following purchases. On June 1 Jensen’s sold 30 units, and on August 27, 40 more units. Prepare the perpetual inventory sc
> Conan Company applied FIFO to its inventory and got the following results for its ending inventory. Cameras……………………100 units at a cost per unit of $65 DVD players……………...150 units at a cost per unit of $75 iPods………………………..125 units at a cost per unit of
> At December 31, 2010, the following information was available for J. Graff Company: ending inventory $40,000, beginning inventory $60,000, cost of goods sold $270,000, and sales revenue $380,000. Calculate inventory turnover and days in inventory for J.
> Americus Camera Shop uses the lower-of-cost-or-market basis for its inventory. The following data are available at December 31. Instructions Determine the amount of the ending inventory by applying the lower-of-cost-or-market basis. Item Units Unit
> Inventory data for Yount Company are presented in E6-6. Instructions (a) Compute the cost of the ending inventory and the cost of goods sold using the average-cost method. (b) Will the results in (a) be higher or lower than the results under (1) FIFO a
> Jones Company had 100 units in beginning inventory at a total cost of $10,000. The company purchased 200 units at a total cost of $26,000. At the end of the year, Jones had 80 units in ending inventory. Instructions (a) Compute the cost of the ending in
> Alou Appliance Center accumulates the following cost and market data at December 31. Compute the lower-of-cost-or-market valuation for the company’s total inventory. Inventory Categories Cost Market Data Data $12,000 9,500 14,000 $1
> In its first month of operation, Gulletson Company purchased 100 units of inventory for $6, then 200 units for $7, and finally 150 units for $8.At the end of the month, 180 units remained. Compute the amount of phantom profit that would result if the com
> Yount Company reports the following for the month of June. Instructions (a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO and (2) LIFO. (b) Which costing method gives the higher ending inventory? Why? (c) Which metho
> An analysis of transactions for S. Moses & Co. was presented in E1–8. Instructions Prepare an income statement and an owner’s equity statement for August and a balance sheet at August 31, 2010. Accounts Office
> (a) How does the time period assumption affect an accountant’s analysis of business transactions? (b) Explain the terms fiscal year, calendar year, and interim periods.
> Rick Kleckner Corporation recorded a capital lease at $300,000 on January 1, 2012. The interest rate is 12%. Kleckner Corporation made the first lease payment of $53,920 on January 1, 2012. The lease requires eight annual payments. The equipment has a us
> Novak Corporation is preparing its 2012 statement of cash flows, using the indirect method. Presented below is a list of items that may affect the statement. Using the code below, indicate how each item will affect Novak’s 2012 statement of cash flows.
> Shannon, Inc., changed from the LIFO cost flow assumption to the FIFO cost flow assumption in 2012. The increase in the prior year’s income before taxes is $1,200,000. The tax rate is 40%. Prepare Shannon’s 2012 journal entry to record the change in acco
> For Warren Corporation, year-end plan assets were $2,000,000. At the beginning of the year, plan assets were $1,780,000. During the year, contributions to the pension fund were $120,000, and benefits paid were $200,000. Compute Warren’s actual return on
> Veldre Company provides the following information about its defined benefit pension plan for the year 2012. Service cost ……………………………………………………………………………….. $ 90,000 Contribution to the plan ………………………………………………….…………… 105,000 Prior service cost amortization
> Stansfield Corporation had the following activities in 2012. 1. Payment of accounts payable $770,000 2. Issuance of common stock $250,000 3. Payment of dividends $350,000 4. Collection of note receivable $100,000 5. Issuance of bonds payable $510,000
> Garner Inc. provides the following information related to its postretirement benefits for the year 2012. Accumulated postretirement benefit obligation at January 1, 2012 …………………. $710,000 Actual and expected return on plan assets ………………………………………………………. 3
> For 2012, Sampsell Inc. computed its annual postretirement expense as $240,900. Sampsell’s contribution to the plan during 2012 was $180,000. Prepare Sampsell’s 2012 entry to record postretirement expense.
> In 2012, Leppard Inc. issued 1,000 shares of $10 par value common stock for land worth $40,000. (a) Prepare Leppard’s journal entry to record the transaction. (b) Indicate the effect the transaction has on cash. (c) Indicate how the transaction is report
> Manno Corporation has the following information available concerning its postretirement benefit plan for 2012. Service cost ………………………………………………………………………. $40,000 Interest cost ………………………………………………………………………… 47,400 Actual and expected return on plan assets …
> In 2012, Wild Corporation reported a net loss of $70,000. Wild’s only net income adjustments were depreciation expense $81,000, and increase in accounts receivable $8,100. Compute Wild’s net cash provided (used) by operating activities.
> Geiberger Corporation manufactures replicators. On January 1, 2012, it leased to Althaus Company a replicator that had cost $110,000 to manufacture. The lease agreement covers the 5-year useful life of the replicator and requires 5 equal annual rentals o
> Refer to the accounting change by Wertz Construction Company in BE22-1. Wertz has a profit sharing plan, which pays all employees a bonus at year-end based on 1% of pretax income. Compute the indirect effect of Wertz’s change in accounting principle that
> Lahey Corp. has three defined benefit pension plans as follows. How will Lahey report these multiple plans in its financial statements? Projected Benefit Obligation Pension Assets (at Fair Value) Plan X Plan Y $600,000 $500,000 900,000 720,000 Plan
> Hendrickson Corporation reported net income of $50,000 in 2012. Depreciation expense was$17,000. The following working capital accounts changed. Accounts receivable………….……………………….. $11,000 increase Available-for-sale securities…………………………. 16,000 increase
> Use the information for Indiana Jones Corporation from BE21-9. Assume that for Lost Ark Company, the lessor, collectibility is reasonably predictable, there are no important uncertainties concerning costs, and the carrying amount of the equipment is $202
> Indiana Jones Corporation enters into a 6-year lease of equipment on January 1, 2012, which requires 6 annual payments of $40,000 each, beginning January 1, 2012. In addition, Indiana Jones guarantees the lessor a residual value of $20,000 at lease-end.
> Hawkins Corporation has the following balances at December 31, 2012. Projected benefi t obligation …………………………. $2,600,000 Plan assets at fair value ………………………………….. 2,000,000 Accumulated OCI (PSC) …………………………….…… 1,100,000 How should these balances be rep
> In 2012, Elbert Corporation had net cash provided by operating activities of $531,000; net cash used by investing activities of $963,000; and net cash provided by financing activities of $585,000. At January 1, 2012, the cash balance was $333,000. Comput
> Jennifer Brent Corporation owns equipment that cost $80,000 and has a useful life of 8 years with no salvage value. On January 1, 2012, Jennifer Brent leases the equipment to Donna Havaci Inc. for one year with one rental payment of $15,000 on January 1.
> Shin Corporation had a projected benefit obligation of $3,100,000 and plan assets of $3,300,000 at January 1, 2012. Shin also had a net actuarial loss of $465,000 in accumulated OCI at January 1, 2012. The average remaining service period of Shin’s emplo
> Moxley Corporation had January 1 and December 31 balances as follows. For 2012, cost of goods sold was $500,000. Compute Moxley’s 2012 cash payments to suppliers. 1/1/12 12/31/12 Inventory Accounts payable $95,000 61,000 $113,000
> Use the information for IBM from BE21-6. Assume the direct-financing lease was recorded at a present value of $150,000. Prepare IBM’s December 31, 2012, entry to record interest. In BE21-6 Assume that IBM leased equipment that was carried at a cost of $
> AMR Corporation (parent company of American Airlines) reported the following for 2009 (in millions). Service cost ………………………………………………….. $333 Interest on P.B.O. …………………………………………… 712 Return on plan assets …………………………………….. 566 Amortization of prior service
> At December 31, 2012, Besler Corporation had a projected benefit obligation of $560,000, plan assets of $322,000, and prior service cost of $127,000 in accumulated other comprehensive income. Determine the pension asset/liability at December 31, 2012.
> At January 1, 2012, Eikenberry Inc. had accounts receivable of $72,000. At December 31, 2012, accounts receivable is $54,000. Sales for 2012 total $420,000. Compute Eikenberry’s 2012 cash receipts from customers.
> In 2012, Bailey Corporation discovered that equipment purchased on January 1, 2010, for $50,000 was expensed at that time. The equipment should have been depreciated over 5 years, with no salvage value. The effective tax rate is 30%. Prepare Bailey’s 201
> Assume that IBM leased equipment that was carried at a cost of $150,000 to Sharon Swander Company. The term of the lease is 6 years beginning January 1, 2012, with equal rental payments of $30,044 at the beginning of each year. All executory costs are pa
> Mancuso Corporation amended its pension plan on January 1, 2012, and granted $160,000 of prior service costs to its employees. The employees are expected to provide 2,000 service years in the future, with 350 service years in 2012. Compute prior service
> Use the information from BE23-4 for Bloom Corporation. Prepare the cash flows from operating activities section of Bloom’s 2012 statement of cash flows using the indirect method. In BE23-4 Bloom Corporation had the following 2012 income statement. Sales
> Jana Kingston Corporation enters into a lease on January 1, 2012, that does not transfer ownership or contain a bargain-purchase option. It covers 3 years of the equipment’s 8-year useful life, and the present value of the minimum lease payments is less
> For 2010, Campbell Soup Company had pension expense of $68 million and contributed $284 million to the pension fund. Prepare Campbell Soup Company’s journal entry to record pension expense and funding.
> Bloom Corporation had the following 2012 income statement. Sales …………………………………………………………….…………. $200,000 Cost of goods sold ……………………………………………………….. 120,000 Gross profit …………………………………………………………….……… 80,000 Operating expenses (includes depreciation of $21,00
> Use the information for Rick Kleckner Corporation from BE21-3. Assume that at December 31, 2012, Kleckner made an adjusting entry to accrue interest expense of $29,530 on the lease. Prepare Kleckner’s January 1, 2013, journal entry to record the second l
> Wainwright Corporation had the following activities in 2012. 1. Sale of land $180,000 2. Purchase of inventory $845,000 3. Purchase of treasury stock $72,000 4. Purchase of equipment $415,000 5. Issuance of common stock $320,000 6. Purchase of availab
> Dexter Company appropriately uses the asset liability method to record deferred income taxes. Dexter reports depreciation expense for certain machinery purchased this year using the modified accelerated cost recovery system (MACRS) for income tax purpose
> Shanahan Construction Company has entered into a contract beginning January 1, 2012, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take 3 years to construct. The complex will be billed to the purchasing co
> Jackson Company adopts acceptable accounting for its defined benefit pension plan on January 1, 2011, with the following beginning balances: plan assets $200,000; projected benefit obligation $250,000. Other data relating to 3 years’ op
> The comparative balance sheets for Hinckley Corporation show the following information. Additional data related to 2012 are as follows. 1. Equipment that had cost $11,000 and was 40% depreciated at time of disposal was sold for $2,500. 2. $10,000 of th
> Botticelli Inc. was organized in late 2010 to manufacture and sell hosiery. At the end of its fourth year of operation, the company has been fairly successful, as indicated by the following reported net incomes. The company has decided to expand operat
> Cleveland Inc. leased a new crane to Abriendo Construction under a 5-year noncancelable contract starting January 1, 2012. Terms of the lease require payments of $33,000 each January 1, starting January 1, 2012. Cleveland will pay insurance, taxes, and m
> The pretax financial income of Truttman Company differs from its taxable income throughout each of 4 years as follows. Pretax financial income for each year includes a nondeductible expense of $30,000 (never deductible for tax purposes). The remainder
> The following information is available for McKee Corporation for 2012. 1. Excess of tax depreciation over book depreciation, $40,000. This $40,000 difference will reverse equally over the years 2013–2016. 2. Deferral, for book purposes, of $25,000 of ren
> Whitman Company began operations on January 1, 2010, and uses the average cost method of pricing inventory. Management is contemplating a change in inventory methods for 2013. The following information is available for the years 2010–20
