Companies must report or disclose in their financial statements information about all liabilities, including potential liabilities related to environmental cleanup. There are many situations in which you will be asked to provide personal financial information about your assets, liabilities, revenue, and expenses. Sometimes you will face difficult decisions regarding what to disclose and how to disclose it. Instructions Suppose that you are putting together a loan application to purchase a home. Based on your income and assets, you qualify for the mortgage loan, but just barely. How would you address each of the following situations in reporting your financial position for the loan application? Provide responses for each of the following situations. (a) You signed a guarantee for a bank loan that a friend took out for $20,000. If your friend doesn’t pay, you will have to pay. Your friend has made all of the payments so far, and it appears he will be able to pay in the future. (b) You were involved in an auto accident in which you were at fault. There is the possibility that you may have to pay as much as $50,000 as part of a settlement. The issue will not be resolved before the bank processes your mortgage request. (c) The company for which you work isn’t doing very well, and it has recently laid off employees. You are still employed, but it is quite possible that you will lose your job in the next few months.
> Two items are omitted from each of the following summaries of balance sheet and income statement data for two corporations for the year 2019, Plunkett Co. and Herring Enterprises. Instructions Determine the missing amounts. Plunkett Herring Enterpr
> Toth Company had the following assets and liabilities on the dates indicated. Toth began business on January 1, 2018, with an investment of $100,000 from stockholders. Instructions From an analysis of the change in stockholders’ equi
> An analysis of transactions for Foley & Co. was presented in E1–8. Assume that August is the company’s first month of business. Reference Figure E1-8: Instructions Prepare an income statement and a retained earn
> An analysis of the transactions made by Foley & Co., a certified public accounting firm, for the month of August is shown below. Each increase and decrease in stockholders’ equity is explained. Instructions (a) Describe each trans
> Keystone Computer Timeshare Company entered into the following transactions during May 2019. 1. Purchased computers for $20,000 from Data Equipment on account. 2. Paid $3,000 cash for May rent on storage space. 3. Received $15,000 cash from customers for
> Selected transactions for Verdent Lawn Care Company are as follows. 1. Sold common stock for cash to start business. 2. Paid monthly rent. 3. Purchased equipment on account. 4. Billed customers for services performed. 5. Paid dividends. 6. Received cash
> “When perpetual inventory records are kept, the results under the FIFO and LIFO methods are the same as they would be in a periodic inventory system.” Do you agree? Explain.
> Bailey Cleaners has the following balance sheet items. Accounts payable………………Accounts receivable Cash…………………………………………Notes payable Equipment……………Salaries and wages payable Supplies…………………………………..Common stock Instructions Classify each item as an asset,
> The following situations involve accounting principles and assumptions. 1. Tina Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Tina reports the buildings at fair valu
> Sam Cresco, president of Cresco Company, has instructed Sharon Gross, the head of the accounting department for Cresco Company, to report the company’s land in the company’s accounting reports at its fair value of $170,000 instead of its cost of $100,000
> (a) The following are users of financial statements. ______ Customers ______ Securities and Exchange Commission ______ Internal Revenue Service ______ Store manager ______ Labor unions ______ Suppliers ______ Marketing manager ______ Vice preside
> Callison Company performs the following accounting tasks during the year. ______ Analyzing and interpreting information. ______ Classifying economic events. ______ Explaining uses, meaning, and limitations of data. ______ Keeping a systematic chronologic
> If your school has a subscription to the FASB Codification, go to http://aaahq.org/ascLogin. cfm to log in and prepare responses to the following. (a) How is cash defined in the Codification? (b) How are cash equivalents defined in the Codification? (c)
> You are the assistant controller in charge of general ledger accounting at Linbarger Bottling Company. Your company has a large loan from an insurance company. The loan agreement requires that the company’s cash account balance be maintained at $200,000
> As a new auditor for the CPA firm of Eaton, Quayle, and Hale, you have been assigned to review the internal controls over mail cash receipts of Pritchard Company. Your review reveals the following. Checks are promptly endorsed “For Deposit Only,” but no
> The board of trustees of a local church is concerned about the internal accounting controls for the offering collections made at weekly services. The trustees ask you to serve on a three-person audit team with the internal auditor of a local college and
> All organizations should have systems of internal control. Universities are no exception. This site discusses the basics of internal control in a university setting. Address: www.bc.edu/offices/audit/controls Steps: Go to the site shown above. Instructi
> Josh Kuchin is studying for the next accounting midterm examination. What should Josh know about (a) departing from the cost basis of accounting for inventories and (b) the meaning of “net realizable value” in the lower-of-cost-or-net realizable value
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. Instructions for accessing and using the complete annual reports of Amazon and Wal-Mart, including the notes t
> PepsiCo’s financial statements are presented in Appendix B. Financial statements of The Coca- Cola Company are presented in Appendix C. Instructions for accessing and using the complete annual reports of PepsiCo and Coca-Cola, including the notes to the
> The financial statements of Apple Inc. are presented in Appendix A at the end of this textbook. Instructions for accessing and using the company’s complete annual report, including the notes to the financial statements, are also provided in Appendix A.
> If your school has a subscription to the FASB Codifi cation, go to http://aaahq.org/ascLogin. cfm to log in and prepare responses to the following. Instructions (a) The primary basis for accounting for inventories is cost. How is cost defined in the Cod
> Some of the largest business frauds ever perpetrated have involved the misstatement of inventory. Two classics were at Leslie Fay and McKesson Corporation. Instructions There is considerable information regarding inventory frauds available on the Intern
> R. J. Graziano Wholesale Corp. uses the LIFO method of inventory costing. In the current year, profit at R. J. Graziano is running unusually high. The corporate tax rate is also high this year, but it is scheduled to decline significantly next year. In a
> You are the controller of Small Toys Inc. Marta Johns, the president, recently mentioned to you that she found an error in the 2018 financial statements which she believes has corrected itself. She determined, in discussions with the Purchasing Departmen
> On April 10, 2019, fi re damaged the office and warehouse of Corvet Company. Most of the accounting records were destroyed, but the following account balances were determined as of March 31, 2019: Inventory (January 1, 2019), $80,000; Sales Revenue (Janu
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. Instructions for accessing and using the complete annual reports of Amazon and Wal-Mart, including the notes t
> PepsiCo’s financial statements are presented in Appendix B. Financial statements of The Coca-Cola Company are presented in Appendix C. Instructions for accessing and using the complete annual reports of PepsiCo and Coca-Cola, including the notes to the f
> Davey Company has been using the FIFO cost flow method during a prolonged period of inflation. During the same time period, Davey has been paying out all of its net income as dividends. What adverse effects may result from this policy?
> The notes that accompany a company’s financial statements provide informative details that would clutter the amounts and descriptions presented in the statements. Refer to the financial statements of Apple Inc. in Appendix A as well as its annual report.
> If your school has a subscription to the FASB Codifi cation, go to http://aaahq.org/ascLogin.cfm to log in and prepare responses to the following. Instructions (a) Access the glossary (“Master Glossary”) to answer the following: (1) What is the definiti
> There are many situations in business where it is difficult to determine the proper period in which to record revenue. Suppose that after graduation with a degree in finance, you take a job as a manager at a consumer electronics store called Impact Elect
> Jacquie Boynton was just hired as the assistant treasurer of Key West Stores. The company is a specialty chain store with nine retail stores concentrated in one metropolitan area. Among other things, the payment of all invoices is centralized in one of t
> The following situation is in chronological order. 1. Connor decides to buy a surfboard. 2. He calls Surfing USA Co. to inquire about its surfboards. 3. Two days later, he requests Surfing USA Co. to make a surfboard. 4. Three days later, Surfing USA Co.
> Three years ago, Dana Mann and her brother-in-law Eric Boldt opened Family Department Store. For the first two years, business was good, but the following condensed income results for 2018 were disappointing. Dana believes the problem lies in the relat
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. (Use Wal-Mart’s January 31, 2016, financial statements for comparative purposes.) Instructions for accessing a
> PepsiCo’s financial statements are presented in Appendix B. Financial statements of The Coca- Cola Company are presented in Appendix C. Instructions for accessing and using the complete annual reports of PepsiCo and Coca-Cola, including the notes to the
> The financial statements of Apple Inc. are presented in Appendix A at the end of this textbook. Instructions for accessing and using the company’s complete annual report, including the notes to the financial statements, are also provided in Appendix A.
> If your school has a subscription to the FASB Codification, go to http://aaahq.org/ascLogin. cfm to log in and prepare responses to the following. Instructions (a) Access the glossary (“Master Glossary”) at the FASB Codifi cation website to answer the f
> In a period of rising prices, the inventory reported in Gumby Company’s balance sheet is close to the current cost of the inventory, whereas Pokey Company’s inventory is considerably below its current cost. Identify the inventory cost flow method being u
> Companies prepare balance sheets in order to know their financial position at a specific point in time. This enables them to make a comparison to their position at previous points in time, and gives them a basis for planning for the future. In order to e
> As the controller of Take No Prisoners Perfume Company, you discover a misstatement that overstated net income in the prior year’s financial statements. The misleading financial statements appear in the company’s annual report which was issued to banks a
> The accounting cycle is important in understanding the accounting process. Instructions Write a memo to your instructor that lists the steps of the accounting cycle in the order they should be completed. End with a paragraph that explains the optional s
> White gloves Janitorial Service was started 2 years ago by Lynn Sanders. Because business has been exceptionally good, Lynn decided on July 1, 2019, to expand operations by acquiring an additional truck and hiring two more assistants. To finance the expa
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. Instructions for accessing and using the complete annual reports of Amazon and Wal-Mart, including the notes t
> PepsiCo’s financial statements are presented in Appendix B. Financial statements of The Coca-Cola Company are presented in Appendix C. Instructions for accessing and using the complete annual reports of PepsiCo and Coca-Cola, including the notes to the f
> The financial statements of Apple Inc. are presented in Appendix A at the end of this textbook. Instructions for accessing and using the company’s complete annual report, including the notes to the financial statements, are also provided in Appendix A.
> If your school has a subscription to the FASB Codification, go to http://aaahq.org/asclogin. cfm to log in and prepare responses to the following. Instructions Access the glossary (“Master Glossary”) to answer the following. (a) What is the definition o
> Many companies have potential pollution or environmental-disposal problems—not only for electronic gadgets, but also for the lead paint or asbestos they sold. How do we fit these issues into the accounting equation? Are these costs and related liabilitie
> (a) What is the term used to describe the owners’ equity section of a corporation? (b) Identify the two owners’ equity accounts in a corporation and indicate the purpose of each.
> Kellner Company is a pesticide manufacturer. Its sales declined greatly this year due to the passage of legislation outlawing the sale of several of Kellner’s chemical pesticides. In the coming year, Kellner will have environmentally safe and competitive
> In reviewing the accounts of Gloria Jean Co. at the end of the year, you discover that adjusting entries have not been made. Instructions Write a memo to Gloria Jean Hall, the owner of Gloria Jean Co., that explains the following: the nature and purpos
> Happy Camper Park, Inc. was organized on April 1, 2018, by Barbara Evans. Barbara is a good manager but a poor accountant. From the trial balance prepared by a part-time bookkeeper, Barbara prepared the following income statement for the quarter that end
> The July 6, 2011, edition of the Wall Street Journal Online includes an article by Michael Rapoport entitled “U.S. Firms Clash Over Accounting Rules.” The article discusses why some U.S. companies favored adoption of International Financial Reporting Sta
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. Instructions for accessing and using the complete annual reports of Amazon and Wal-Mart, including the notes t
> PepsiCo’s financial statements are presented in Appendix B. Financial statements of The Coca- Cola Company are presented in Appendix C. Instructions for accessing and using the complete annual reports of PepsiCo and Coca-Cola, including the notes to the
> The financial statements of Apple Inc. are presented in Appendix A at the end of this textbook. Instructions for accessing and using the company’s complete annual report, including the notes to the financial statements, are also provided in Appendix A.
> Auditors provide a type of certification of corporate financial statements. Certification is used in many other aspects of business as well. For example, it plays a critical role in the sustainability movement. The February 7, 2012, issue of the New York
> If you haven’t already done so, in the not-too-distant future you will prepare a résumé. In some ways, your résumé is like a company’s annual report. Its purpose is to enable others to evaluate your past, in an effort to predict your future. A résumé is
> Meredith Ward is the assistant chief accountant at Frazier Company, a manufacturer of computer chips and cellular phones. The company presently has total sales of $20 million. It is the end of the first quarter. Meredith is hurriedly trying to prepare a
> Define current assets. What basis is used for arranging individual items within the current assets section?
> Keller’s Maid Company offers home-cleaning service. Two recurring transactions for the company are billing customers for services performed and paying employee salaries. For example, on March 15, bills totaling $6,000 were sent to customers and $2,000 wa
> Dyanna Craig operates Craig Riding Academy. The academy’s primary sources of revenue are riding fees and lesson fees, which are paid on a cash basis. Dyanna also boards horses for owners, who are billed monthly for boarding fees. In a f
> The January 27, 2011, edition of the New York Times contains an article by Richard Sandomir entitled “N.F.L. Finances, as Seen Through Packers’ Records.” The author of the article discusses the fact that the Green Bay Packers are the only NFL team that p
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. Instructions for accessing and using the complete annual reports of Amazon and Wal-Mart, inc
> PepsiCo’s financial statements are presented in Appendix B. Financial statements of The Coca- Cola Company are presented in Appendix C. Instructions for accessing and using the complete annual reports of PepsiCo and Coca-Cola, including
> The financial statements of Apple Inc. are presented in Appendix A. Instructions for accessing and using the company’s complete annual report, including the notes to the financial statements, are also provided in Appendix A. Apple’s financial statements
> Zhang Company has the following cash balances: Cash in Bank $15,742, Payroll Bank Account $6,000, and Plant Expansion Fund Cash $25,000 to be used two years from now. Explain how each balance should be reported on the balance sheet.
> In the month of November, Fiesta Company Inc. wrote checks in the amount of $9,750. In December, checks in the amount of $11,762 were written. In November, $8,800 of these checks were presented to the bank for payment, and $10,889 in December. What is th
> At August 31, Pratt Company has a cash balance per books of $9,500 and the following additional data from the bank statement: charge for printing Pratt Company checks $35 and interest earned on checking account balance $40. In addition, Pratt Company has
> At July 31, Ramirez Company has the following bank information: cash balance per bank $7,420, outstanding checks $762, deposits in transit $1,620, and a bank service charge $20. Determine the adjusted cash balance per bank at July 31.
> At December 31, accrued salaries payable totaled $3,500. On January 10, total salaries of $8,000 are paid. (a) Assume that reversing entries are made at January 1. Give the January 10 entry, and indicate the Salaries and Wages Expense account balance af
> Using the data in BE7-11, indicate (a) the items that will result in an adjustment to the depositor’s records and (b) why the other items do not require adjustment. Reference Data BE 7-11: The following reconciling items are applicable to the bank rec
> The following reconciling items are applicable to the bank reconciliation for Ellington Company. Indicate how each item should be shown on a bank reconciliation. (a) Outstanding checks. (b) Bank debit memorandum for service charge. (c) Bank credit memora
> Lance Bachman is uncertain about the control features of a bank account. Explain the control benefits of (a) a check and (b) a bank statement.
> On March 20, Dody’s petty cash fund of $100 is replenished when the fund contains $9 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.
> Pennington Company has the following internal control procedures over cash disbursements. Identify the internal control principle that is applicable to each procedure. (a) Company checks are prenumbered. (b) The bank statement is reconciled monthly by an
> While examining cash receipts information, the accounting department determined the following information: opening cash balance $160, cash on hand $1,125.74, and cash sales per register tape $980.83. Prepare the required journal entry based upon the cash
> The cash register tape for Bluestem Industries reported sales of $6,871.50. Record the journal entry that would be necessary for each of the following situations. (a) Sales per cash register tape exceeds cash on hand by $50.75. (b) Cash on hand exceeds c
> Rosenquist Company has the following internal control procedures over cash receipts. Identify the internal control principle that is applicable to each procedure. (a) All over-the-counter receipts are entered in cash registers. (b) All cashiers are bonde
> The internal control procedures in Valentine Company result in the following provisions. Identify the principles of internal control that are being followed in each case. (a) Employees who have physical custody of assets do not have access to the account
> Jessica Mahan is the new owner of Penny Parking. She has heard about internal control but is not clear about its importance for her business. Explain to Jessica the four purposes of internal control and give her one application of each purpose for Penny
> What is a trial balance and what are its purposes?
> Identify and describe the steps in the accounting process.
> Shelly Eckert has prepared the following list of statements about internal control. (a) One of the objectives of internal control is to safeguard assets from employee theft, robbery, and unauthorized use. (b) One of the objectives of internal control is
> Match each situation with the fraud triangle factor—opportunity, financial pressure, or rationalization—that best describes it. (a) An employee’s monthly credit card payments are nearly 75% of his or her monthly earnings. (b) An employee earns minimum wa
> Gregory Department Store uses a perpetual inventory system. Data for product E2-D2 include the following purchases. On June 1, Gregory sold 26 units, and on August 27, 40 more units. Prepare the perpetual inventory schedule for the above transactions u
> At December 31, 2019, the following information was available for A. Kamble 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 A.
> Central Appliance Center accumulates the following cost and net realizable value data at December 31. Compute the lower-of-cost-or-net realizable value for the company’s total inventory. Inventory Cost Net Realizable Categories Da
> Pettit Company reports net income of $90,000 in 2019. However, ending inventory was understated $7,000. What is the correct net income for 2019? What effect, if any, will this error have on total assets as reported in the balance sheet at December 31, 20
> In its first month of operation, Hoffman Company purchased 100 units of inventory for $6, then 200 units for $7, and finally 140 units for $8. At the end of the month, 180 units remained. Compute the amount of phantom profit that would result if the comp
> The management of Svetlana Corp. is considering the effects of inventory-costing methods on its financial statements and its income tax expense. Assuming that the price the company pays for inventory is increasing, which method will: (a) Provide the high
> Data for Bethke Company are presented in BE6-3. Compute the cost of the ending inventory under the average-cost method, assuming there are 360 units on hand. (Round average cost per unit to nearest cent.)
> In its first month of operations, Bethke Company made three purchases of merchandise in the following sequence: (1) 300 units at $6, (2) 400 units at $7, and (3) 200 units at $8. Assuming there are 360 units on hand, compute the cost of the ending inv
> “A company’s net income appears directly on the income statement and the retained earnings statement, and it is included indirectly in the company’s balance sheet.” Do you agree? Explain.
> Stallman Company took a physical inventory on December 31 and determined that goods costing $200,000 were on hand. Not included in the physical count were $25,000 of goods purchased from Pelzer Corporation, FOB shipping point, and $22,000 of goods sold t
> Farley Company identifies the following items for possible inclusion in the taking of a physical inventory. Indicate whether each item should be included or excluded from the inventory taking. (a) Goods shipped on consignment by Farley to another company
> Presented below is the format of the worksheet using the perpetual inventory system presented in Appendix 5A. Indicate where the following items will appear on the worksheet: (a) Cash, (b) Inventory, (c) Sales revenue, and (d) Cost of goods sold. Exampl
> Explain where each of the following items would appear on (1) a multiple step income statement, and on (2) a single-step income statement: (a) gain on sale of equipment, (b) interest expense, (c) casualty loss from vandalism, and (d) cost of goods sold.
> At year-end, the perpetual inventory records of Litwin Company showed merchandise inventory of $98,000. The company determined, however, that its actual inventory on hand was $95,700. Record the necessary adjusting entry.
