Do the terms FIFO, LIFO, and weighted average refer to techniques used in determining quantities of the various classes of merchandise on hand? Explain.
> Why are deductions from employees’ earnings classified as liabilities for the employer?
> What is the role of accounting in business?
> Employees are subject to taxes withheld from their paychecks. a. List the federal taxes withheld from most employee paychecks. b. Give the title of the accounts credited by amounts withheld.
> Does a discounted note payable provide credit without interest? Discuss.
> A storage tank acquired at the beginning of the fiscal year at a cost of $75,000 has an estimated residual value of $10,000 and an estimated useful life of 20 years. Determine the following: (a) The amount of annual depreciation by the straight-line meth
> A diesel-powered tractor with a cost of $90,000 and estimated residual value of $15,000 is expected to have a useful operating life of 30,000 hours. During April, the tractor was operated 120 hours. Determine the depreciation for the month.
> A refrigerator used by a wholesale warehouse has a cost of $64,000, an estimated residual value of $5,200, and an estimated useful life of 12 years. What is the amount of the annual depreciation computed by the straight-line method?
> Bridger Ski Co. has developed a tract of land into a ski resort. The company has cut the trees, cleared and graded the land and hills, and constructed ski lifts. (a) Should the tree cutting, land clearing, and grading costs of constructing the ski slopes
> a. Over what period of time should the cost of a patent acquired by purchase be amortized? b. In general, what is the required accounting treatment for research and development costs? c. How should goodwill be amortized?
> Immediately after a used truck is acquired, a new motor is installed at a total cost of $3,850. Is this a capital expenditure or a revenue expenditure?
> Is it necessary for a business to use the same method of computing depreciation for all classes of its depreciable assets?
> Keyser Company purchased a machine that has a manufacturer’s suggested life of 20 years. The company plans to use the machine on a special project that will last 12 years. At the completion of the project, the machine will be sold. Over how many years sh
> On March 31, Higgins Repair Service extended an offer of $415,000 for land that had been priced for sale at $460,000. On April 15, Higgins Repair Service accepted the seller’s counteroffer of $437,500. On September 9, the land was assessed at a value of
> Alpine Company solicited bids from several contractors to construct an addition to its office building. The lowest bid received was for $1,200,000. Alpine decided to construct the addition itself at a cost of $1,100,000. What amount should be recorded in
> Bullwinkle Co. acquired an adjacent vacant lot with the hope of selling it in the future at a gain. The lot is not intended to be used in Bullwinkle business operations. Where should such real estate be listed on the balance sheet?
> O’Neil Office Supplies has a fleet of automobiles and trucks for use by salespersons and for delivery of office supplies and equipment. Collins Auto Sales Co. has automobiles and trucks for sale. Under what caption would the automobiles and trucks be rep
> A firm has consistently adjusted its allowance account at the end of the fiscal year by adding a fixed percent of the period’s sales on account. After seven years, the balance in Allowance for Doubtful Accounts has become very large in relation to the ba
> What kind of an account (asset, liability, etc.) is Allowance for Doubtful Accounts, and is its normal balance a debit or a credit?
> Dan’s Hardware is a small hardware store in the rural township of Twin Bridges. It rarely extends credit to its customers in the form of an account receivable. The few customers who are allowed to carry accounts receivable are long-time residents of Twin
> What are the three classifications of receivables?
> The maker of a $240,000, 6%, 90-day note receivable failed to pay the note on the due date of November 30. What accounts should be debited and credited by the payee to record the dishonored note receivable?
> Neptune Company issued a note receivable to Sailfish Company. (a) Who is the payee? (b) What is the title of the account used by Sailfish Company in recording the note?
> Which of the two methods of estimating uncollectibles provides for the most accurate estimate of the current net realizable value of the receivables?
> The comparative accounts payable and long-term debt balances for a company follow. Based on this information, what is the amount and percentage of increase or decrease that would be shown on a balance sheet with horizontal analysis? Current Year Pr
> During the preparation of the bank reconciliation for Building Concepts Co., Joel Knolls, the assistant controller, discovered that Lone Peak National Bank incorrectly recorded a $3,290 check written by Building Concepts Co. as $329. Joel has decided not
> The actual cash received from cash sales was $71,315, and the amount indicated by the cash register total was $71,220. Journalize the entry to record the cash receipts and cash sales.
> The actual cash received from cash sales was $18,371, and the amount indicated by the cash register total was $18,400. Journalize the entry to record the cash receipts and cash sales.
> The mailroom employees send all remittances and remittance advices to the cashier. The cashier deposits the cash in the bank and forwards the remittance advices and duplicate deposit slips to the Accounting Department. a. Indicate the weak link in intern
> El Dorado Inc. has monthly cash expenses of $168,500. On December 31, the cash balance is $1,415,400. a. Compute the ratio of cash to monthly cash expenses. b. Based on (a), what are the implications for El Dorado Inc.?
> Accompanying a bank statement for Santee Company is a credit memo for $15,120 representing the principal ($14,000) and interest ($1,120) on a note that had been collected by the bank. The company had been notified by the bank at the time of the collectio
> Why should the responsibility for maintaining the accounting records be separated from the responsibility for operations? Explain.
> Why should the employee who handles cash receipts not have the responsibility for maintaining the accounts receivable records? Explain.
> (a) How are cash equivalents reported in the financial statements? (b) What are some examples of cash equivalents?
> The balance of Cash is likely to differ from the bank statement balance. What two factors are likely to be responsible for the difference?
> Identify whether each of the following would be reported as an operating, investing, or financing activity on the statement of cash flows: a. Purchase of investments b. Purchase of equipment c. Payment for selling expenses d. Collection of accounts recei
> Before a voucher for the purchase of merchandise is approved for payment, supporting documents should be compared to verify the accuracy of the liability. Give an example of supporting documents for the purchase of merchandise.
> A business using the retail method of inventory costing determines that merchandise inventory at retail is $1,235,000. If the ratio of cost to retail price is 54%, what is the amount of inventory to be reported on the financial statements?
> Based on the data in Exercise 7-15 and assuming that cost was determined by the FIFO method, show how the merchandise inventory would appear on the balance sheet. In Exercise 7-15 Inventory Item Inventory Quantity Cost per Unit Market Value per Unit
> The following units of an item were available for sale during the year: Beginning inventory ………………………. 21,600 units at $20.00 Sale ………………………………………………. 14,400 units at $40.00 First purchase ……………………………….. 48,000 units at $25.20 Sale ……………………………………………… 36,
> A business using the retail method of inventory costing determines that merchandise inventory at retail is $775,000. If the ratio of cost to retail price is 66%, what is the amount of inventory to be reported on the financial statements?
> A business using the retail method of inventory costing determines that merchandise inventory at retail is $396,400. If the ratio of cost to retail price is 61%, what is the amount of inventory to be reported on the financial statements?
> A manufacturer shipped merchandise to a retailer on a consignment basis. If the merchandise is unsold at the end of the period, in whose inventory should the merchandise be included?
> Hutch Co. sold merchandise to Bibbins Company on May 31, FOB shipping point. If the merchandise is in transit on May 31, the end of the fiscal year, which company would report it in its financial statements? Explain.
> The inventory at the end of the year was understated by $14,750. (a) Did the error cause an overstatement or an understatement of the gross profit for the year? (b) Which items on the balance sheet at the end of the year were overstated or understated as
> Using the following data, how should the merchandise be valued under lower of cost or market? Original cost …………………………………… $1,350 Estimated selling price ………………………. 1,475 Selling expenses ………………………………….. 180
> On January 26, Nyree Co. borrowed cash from Conrad Bank by issuing a 45-day note with a face amount of $150,000. a. Determine the proceeds of the note, assuming that the note carries an interest rate of 10%. b. Determine the proceeds of the note, assumin
> If inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing—FIFO, LIFO, or weighted average cost—will yield the lowest annual income tax expense? Explain.
> Which of the three methods of inventory costing—FIFO, LIFO, or weighted average cost—will in general yield an inventory cost most nearly approximating current replacement cost?
> If merchandise inventory is being valued at cost and the price level is decreasing, which of the three methods of costing—FIFO, LIFO, or weighted average cost—will yield (a) The highest inventory cost, (b) The lowest inventory cost, (c) The highest gross
> Why is it important to take a physical inventory periodically when using a perpetual inventory system?
> For (a) through (d), identify the items designated by X and Y. a. Purchases – (X + Y) = Net purchases. b. Net purchases + X = Cost of merchandise purchased. c. Merchandise inventory (beginning) + Cost of merchandise purchased = X. d. Merchandise availabl
> Complete the following table by indicating for (a) through (g) whether the proper answer is debit or credit: Normal Account Increase Decrease Balance Purchases debit (a) (b) Purchases Discounts credit (c) credit Purchases Returns and Allowances (d)
> From the following list, identify the accounts that should be closed to Tim Button, Capital at the end of the fiscal year under a perpetual inventory system: (a) Accounts Receivable, (b) Cost of Merchandise Sold, (c) Customer Refunds Payable, (d) Estimat
> What is the normal balance of the following accounts: (a) Cost of Merchandise Sold, (b) Customer Refunds Payable, (c) Delivery Expense, (d) Estimated Returns Inventory, (e) Merchandise Inventory, (f) Sales, (g) Sales Tax Payable.
> A sale of merchandise on account for $36,000 is subject to an 8% sales tax. (a) Should the sales tax be recorded at the time of sale or when payment is received? (b) What is the amount recorded as sales? (c) What is the amount debited to Accounts Receiva
> Equipment acquired at the beginning of the year at a cost of $340,000 has an estimated residual value of $45,000 and an estimated useful life of 10 years. Determine (a) The depreciable cost, (b) The straight-line rate, and (c) The annual straight-line de
> Merchandise is sold on account to a customer for $56,500, terms FOB shipping point, 2/10, n/30. The seller paid the freight of $2,100. Determine the following: (a) Amount of the sale, (b) Amount debited to Accounts Receivable, and (c) Amount received wit
> The Wheatland Company purchased merchandise on account from a supplier for $30,000, terms 1/10, n/30. The Wheatland Company returned $8,000 of the merchandise and received full credit. a. What is the amount of cash required for the payment within the dis
> For a recent year, Best Buy reported sales of $40,339 million. Its gross profit was $9,047 million. What was the amount of Best Buy’s cost of merchandise sold?
> How are sales to customers using MasterCard and VISA recorded?
> The credit period during which the buyer of merchandise is allowed to pay usually begins with what date?
> What distinguishes a merchandising business from a service business?
> Assume that Audio Outfitter Inc. in Discussion Question 9 experienced an abnormal inventory shrinkage of $98,600. Audio Outfitter Inc. has decided to record the abnormal inventory shrinkage so that it would be disclosed separately on the income statement
> Audio Outfitter Inc., which uses a perpetual inventory system, experienced a normal inventory shrinkage of $13,675. What accounts would be debited and credited to record the adjustment for the inventory shrinkage at the end of the accounting period?
> Name four accounts that would normally appear in the chart of accounts of a merchandising business but would not appear in the chart of accounts of a service business.
> Who bears the freight when the terms of sale are (a) FOB shipping point, (b) FOB destination?
> Identify each of the following as relating to (a) The control environment, (b) Control procedures, or (c) Information and communication: 1. Organizational structure 2. Report of company’s conformity with environmental laws and regulations 3. Proofs and s
> Name some users of accounting information.
> The daily demand of a product is very stable at 250 units per day. However, the order lead time varies and can be specified by a normal distribution with a mean lead time of 12 days and standard deviation of 3 days. What is the safety stock and reorder p
> Lindner Congress Bookstore sells a unique calculator to college students. The demand for this calculator has a normal distribution with an average daily demand of 15 units and a standard deviation of 4 units per day. The order lead time for this calculat
> Paris Store stocks a part that has a normal distribution demand pattern during the order lead time period. Its average demand during the order lead time is 650 units and the standard deviation of demand during the order lead time is 60 units. What is the
> Frankfurt Electronics produces a component internally using the state of the art technology. The operations manager wants to determine the optimal lot size to ensure that the total annual inventory cost is minimized. The daily production rate for the com
> Using the Steamy Speedboats problem above, assume that the holding rate has dropped from 32 percent to 15 percent. What are the (a) optimal order quantity, (b) annual purchase cost, (c) annual holding cost, (d) annual order cost, and (e) total annual inv
> Use the Steamy Speedboats problem above and assume that the order cost has dropped from $300 to $50. What is the optimal order quantity, annual purchase cost, annual holding cost, annual order cost and total annual inventory cost?
> Steamy Speedboats has an annual demand of 1,500 speedboats. Its supplier offers quantity discounts to promote larger order quantities. The cost to place an order is $300, and the holding rate is 32 percent of the purchase cost. The purchase cost for each
> Icy Snowmobile Inc. has an annual demand of 1,200 snowmobiles. Their purchase cost for each snowmobile is $2,500. It costs about $250 to place an order, and the holding rate is 35 percent of the unit cost. Compute the EOQ, annual holding cost, annual ord
> The monthly demand for a part is 1,500 units. The order cost is $285 per order, the holding cost is $56 per unit per year and the part cost is $850 per unit. The firm operates twelve months per year. Compute the (a) EOQ, (b) annual holding cost, (c) annu
> The annual requirement of a part is 360,000 units. The order cost is $120 per order, the holding rate is 12 percent and the part cost is $2,500 per unit. What are the (a) EOQ, (b) annual holding cost, (c) annual order cost, and (d) annual total inventory
> How does a merchant differ from an industrial buyer?
> Given the following information, compute the economic order quantity, annual holding cost, annual ordering cost, and total annual inventory cost. Annual requirements (R) = 50,000 units Setup cost (S) = $150 per order Holding rate (k) = 15% Unit cost (C)
> Given the following information, what is the annual inventory turnover ratio? Revenue $2,2000,000 Cost of Revenue $1,250,000 Quarter 1 Ending Inventory $85,000 Quarter 2 Ending Inventory $98,000 Quarter 3 Ending Inventory $125,000 Qua
> The revenue for a firm is $2,500,000. Its cost of revenue is $850,000 and its average inventory value for the year is $62,000. What is the inventory turnover?
> Why is inventory management important to SCM?
> What is the order quantity when the annual order or setup cost equals the annual holding cost in the (a) EOQ model, (b) quantity discount model, and (c) EMQ model?
> Use the inventory turnover ratios in Table 7.2 to comment on which firm is the most efficient in deploying its inventory to generate sales.
> Assume that you have used the EOQ model to compute the order quantity for an item, and the answer was twenty units. Unfortunately, the minimum lot size for the item is twenty-four units. Discuss how this is going to impact your annual holding cost, annua
> Discuss whether the EOQ model is still useful if a small error was made while estimating one of the cost parameters used in the EOQ computation.
> How is the EMQ model related to the classic EOQ model?
> How is the quantity discount model related to the EOQ model?
> What are the four foundation elements of supply chain management? Describe some activities within each element.
> What are the two major costs considered in the EOQ model? Why is the total purchase price not a factor affecting the order quantity?
> What are the assumptions of the EOQ model?
> Explain why item-level tagging is more expensive than case-level tagging in RFID.
> Briefly describe how RFID can be used to manage inventory.
> What is the electronic product code (EPC)?
> Why is it important to conduct cycle counting?
> Describe inventory turnover and how is it used to manage inventory.
> What is the ABC inventory system, and how is it used to manage inventory?
> Explain why many ERP implementations have failed to yield the expected benefits over the last ten years.
> What are the advantages of an ERP system over the legacy MRP system?
