Define net income and explain its computation.
> Part A. Identify the following questions as most likely to be asked by an internal (I) or an external (E) user of accounting information. 1. What are reasonable payroll benefits and wages? 2. Should we make a five-year loan to that business? 3. What are
> Indicate the section where each of the following would appear on the statement of cash flows. O. Cash flows from operating activity I. Cash flows from investing activity F. Cash flows from financing activity 1. Cash purchase of equipment 2. Cash withdra
> The following table shows the effects of five transactions (a through e) on the assets, liabilities, and equity of Mulan’s Boutique. Write short descriptions of the probable nature of each transaction. Assets = Liabilities + Equity
> Four types of adjustments are described in the chapter: (1) prepaid expenses, (2) unearned revenues, (3) accrued expenses, and (4) accrued revenues. Required 1. Form learning teams of four (or more) members. Each team member must select one of the f
> These 16 accounts are from the Adjusted Trial Balance columns of a company’s 10-column work sheet. In the blank space beside each account, write the letter of the appropriate financial statement column (A, B, C, or D) to which a normal account balance is
> Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization’s business activities. Classify the following activities as part of the identifying (I), r
> If an incorrect amount is journalized and posted to the accounts, how should the error be corrected?
> Why does the recordkeeper prepare a trial balance?
> If assets are valuable resources and asset accounts have debit balances, why do expense accounts also have debit balances?
> Should a transaction be recorded first in a journal or the ledger? Why?
> Are debits or credits typically listed first in general journal entries? Are the debits or the credits indented?
> What kinds of transactions can be recorded in a general journal?
> Refer to Google’s most recent balance sheet in Appendix A. Identify the eight accounts listed as current liabilities. Google’s Balance Sheet from Appendix A: Google Inc. CONSOLIDATED BALANCE SHEETS (In millions,
> Refer to Samsung’s most recent balance sheet in Appendix A. Identify and list its nine current assets. Samsung’s Balance Sheet from Appendix A: / Samsung Electronics Co., Ltd. and its subsidiaries CONSOLIDATED
> Jessica Boland works for Sea Biscuit Co. She and Farah Smith, her manager, are preparing adjusting entries for annual financial statements. Boland computes depreciation and records it as Smith agrees with her computation but says the credit entry should
> Refer to the most recent balance sheet for Apple in Appendix A. What five main noncurrent asset categories are used on its classified balance sheet? Apple’s Balance Sheet from Appendix A: Apple Inc. CONSOLIDATED BALANCE SHEETS (I
> How do reversing entries simplify recordkeeping?
> What are the characteristics of plant assets?
> How is unearned revenue classified on the balance sheet?
> If a company initially records prepaid expenses with debits to expense accounts, what type of account is debited in the adjusting entries for those prepaid expenses?
> Assume Samsung has unearned revenue. What is unearned revenue and where is it reported in financial statements?
> What type of assets requires adjusting entries to record depreciation?
> Refer to Samsung’s balance sheet in Appendix A. If it made an adjustment for unpaid wages at year-end, where would the accrued wages be reported on its balance sheet? Samsung’s Balance Sheet from Appendix A: /
> What is the difference between the cash basis and the accrual basis of accounting?
> What information is reported in an income statement?
> Key figures for the recent two years of both Apple and Google follow. Required 1. Compute profit margins for (a) Apple and (b) Google for the two years of data shown. 2. Which company is more successful on the basis of profit margin? Explain. Apple
> What information is reported in a balance sheet?
> Identify the four financial statements of a business.
> Provide the names of two (a) asset accounts, (b) liability accounts, and (c) equity accounts.
> Does the sender (maker) of a debit memorandum record a debit or a credit in the recipient’s account? What entry (debit or credit) does the recipient record?
> Why would a company’s manager be concerned about the quantity of its purchase returns if its suppliers allow unlimited returns?
> What is the difference between a sales discount and a purchase discount?
> How does a company that uses a perpetual inventory system determine the amount of inventory shrinkage?
> Explain how a business can earn a positive gross profit on its sales and still have a net loss.
> In comparing the accounts of a merchandising company with those of a service company, what additional accounts would the merchandising company likely use, assuming it employs a perpetual inventory system?
> Refer to the balance sheet and income statement for Apple in Appendix A. What does the company title its inventory account? Does the company present a detailed calculation of its cost of goods sold? Apple’s Balance Sheet & Income S
> Refer to Apple’s financial statements in Appendix A to answer the following. 1. Identify and write down the revenue recognition principle as explained in the chapter. 2. Review Apple’s footnotes (in Appendix A and/or from its 10-K on its website) to disc
> What items appear in financial statements of merchandising companies but not in the statements of service companies?
> What classes of assets and liabilities are shown on a typical classified balance sheet?
> What is a company’s operating cycle?
> What tasks are aided by a work sheet?
> What two purposes are accomplished by recording closing entries?
> The statement of cash flows reports on what major activities?
> What information is reported in a balance sheet?
> What is the purpose of the statement of owner’s equity?
> Give two examples of expenses a business might incur.
> What information is reported in an income statement?
> Angel Martin is a young entrepreneur who operates Martin Music Services, offering singing lessons and instruction on musical instruments. Martin wishes to expand but needs a $30,000 loan. The bank requests that Martin prepare a balance sheet and key fina
> Identify the four basic financial statements of a business.
> What do accountants mean by the term revenue?
> What contra account is used when recording and reporting the effects of depreciation? Why is it used?
> What events or transactions change equity?
> Review the Google balance sheet in Appendix A. Identify an asset with the word receivable in its account title and a liability with the word payable in its account title. Google’s Balance Sheet from Appendix A: Google Inc. CONSOLI
> What is a prepaid expense and where is it reported in the financial statements?
> Which financial statement is sometimes called the statement of financial position?
> A business reports its own office stationery on the balance sheet at its $400 cost, although it cannot be sold for more than $10 as scrap paper. Which accounting principle and/or assumption justifies this treatment?
> What does the concept of objectivity imply for information reported in financial statements? Why?
> Assume that Brittany Merrill Underwood of Akola Project plans on expanding her business to accommodate more product lines. She is considering financing her expansion in one of two ways: (1) contributing more of her own funds to the business or (2) borro
> Why is accounting described as a service activity?
> How do ethics rules affect auditors’ choice of clients?
> What are some accounting-related professions?
> Samsung (Samsung.com) is a leading manufacturer of consumer electronic products. The following selected information is available from Samsung’s financial statements. Required 1. Compute Samsung’s current ratio for bo
> What type of accounting information might be useful to the marketing managers of a business?
> Identify three types of services typically offered by accounting professionals.
> Describe the internal role of accounting for organizations.
> Identify three actual businesses that offer services and three actual businesses that offer products.
> What are at least three questions business owners and managers might be able to answer by looking at accounting information?
> What type of business is most likely to select a fiscal year that corresponds to its natural business year instead of the calendar year?
> Lila Corentine is an aspiring entrepreneur and your friend. She is having difficulty understanding the purposes of financial statements and how they fit together across time. Required Write a one-page memorandum to Corentine explaining the purposes of t
> Why is the accrual basis of accounting generally preferred over the cash basis?
> Use Samsung’s December 31, 2013, financial statements, in Appendix A near the end of the book, to answer the following: a. Identify the amounts (in millions of Korean won) of its 2013 (1) assets, (2) liabilities, and (3) equity. b. Using amounts from
> After the success of the company’s first two months, Santana Rey continues to operate Business Solutions. (Transactions for the first two months are described in the serial problem of Chapter 2.) The November 30, 2015, unadjusted trial
> On October 1, 2015, Santana Rey launched a computer services company called Business Solutions, which provides consulting services, computer system installations, and custom program development. Rey adopts the calendar year for reporting purposes and exp
> SP 1 On October 1, 2015, Santana Rey launched a computer services company, Business Solutions, that is organized as a proprietorship and provides consulting services, computer system installations, and custom program development. Rey adopts the calendar
> List the following steps of the accounting cycle in their proper order. a. Posting the journal entries. b. Journalizing and posting adjusting entries. c. Preparing the adjusted trial balance. d. Journalizing and posting closing entries. e. Analyzing tran
> The ledger of Mai Company includes the following accounts with normal balances: D. Mai, Capital $9,000; D. Mai, Withdrawals $800; Services Revenue $13,000; Wages Expense $8,400; and Rent Expense $1,600. Prepare the necessary closing entries from the avai
> Choose from the following list of terms/phrases to best complete the statements below. a. Temporary b. Permanent c. One or more d. One e. Zero balances f. Income Summary 1. ______ accounts generally consist of all balance sheet accounts, and these ac
> For each separate case below, follow the 3-step process for adjusting the accumulated depreciation account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3:
> For each separate case below, follow the 3-step process for adjusting the accrued expense account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record t
> Review the Decision Ethics case from the first part of this chapter involving the cashier. The guidance answer suggests that you should not comply with the assistant manager’s request. Required Propose and evaluate two other courses of action you might
> In making adjusting entries at the end of its accounting period, Chao Consulting failed to record $3,200 of insurance coverage that had expired. This $3,200 cost had been initially debited to the Prepaid Insurance account. The company also failed to reco
> Adjusting entries affect at least one balance sheet account and at least one income statement account. For the following entries, identify the account to be debited and the account to be credited. Indicate which of the accounts is the income statement ac
> For each separate case below, follow the 3-step process for adjusting the accrued revenue account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record t
> For each separate case below, follow the 3-step process for adjusting the unearned revenue liability account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step
> Indicate in which financial statement each item would most likely appear: income statement (I), balance sheet (B), statement of owner’s equity (E), or statement of cash flows (CF). a. Assets c. Withdrawals b. Cash from operating activities d. Equipment
> Create a table like the one in Exhibit 1.9, using the following headings for columns: Cash; Supplies; Equipment; Land; Accounts Payable; Notes Payable; A. Carr, Capital; A. Carr, Withdrawals; Revenues; and Expenses. Then use additions and subtractions to
> Answer each of the following questions related to international accounting standards. a. What type of journal entry system is applied when accounting follows IFRS? b. Identify the number and usual titles of the financial statements prepared under IFRS. c
> A trial balance has total debits of $20,000 and total credits of $24,500. Which one of the following errors would create this imbalance? Explain. a. A $2,250 debit to Utilities Expense in a journal entry is incorrectly posted to the ledger as a $2,250 cr
> 1. Use the accounting equation to compute the missing financial statement amounts (a), (b), and (c). 2. Use the expanded accounting equation to compute the missing financial statement amounts (a) and (b). А B D 1 Company Assets Liabilities + Equit
> For each separate case below, follow the 3-step process for adjusting the supplies asset account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record th
> Key comparative figures for Apple and Google follow. 1. What is the debt ratio for Apple in the current year and for the prior year? 2. What is the debt ratio for Google in the current year and for the prior year? 3. Which of the two companies has the
> For each separate case below, follow the 3-step process for adjusting the prepaid asset account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the
> The ledger of Claudell Company includes the following unadjusted normal balances: Prepaid Rent $1,000, Services Revenue $55,600, and Wages Expense $5,000. Adjusting entries are required for (a) prepaid rent expired, $200; (b) accrued services revenue $90
> a. Accounting professionals must sometimes choose between two or more acceptable methods of accounting for business transactions and events. Explain why these situations can involve difficult matters of ethical concern. b. An important responsibility of
> The following adjusted trial balance contains the accounts and balances of Cruz Company as of December 31, 2015, the end of its fiscal year. (1) Prepare the December 31, 2015, closing entries for Cruz Company. Assume the account number for Income Summar
> Use the May 31 fiscal year-end information from the following ledger accounts (assume that all accounts have normal balances) to prepare closing journal entries and then post those entries to the appropriate ledger accounts. General Ledger M. Muncel
> The following unadjusted trial balance contains the accounts and balances of Dylan Delivery Company as of December 31, 2015. 1. Use the following information about the company’s adjustments to complete a 10-column work sheet. a. Unrecor
> These partially completed Income Statement columns from a 10-column work sheet are for Brown’s Bike Rental Company. (1) Use the information to determine the amount that should be entered on the net income line of the work sheet. (2) P
> Capri Company began the current period with a $20,000 credit balance in the K. Capri, Capital account. At the end of the period, the company’s adjusted account balances include the following temporary accounts with normal balances. Af
> The following data are taken from the unadjusted trial balance of the Westcott Company at December 31, 2015. Each account carries a normal balance and the accounts are shown here in alphabetical order. 1. Use the data above to prepare a work sheet. Ent
