Fredonia Repair Inc. was started on May 1. A summary of May transactions is presented below. 1. Stockholders invested $10,000 cash in the business in exchange for common stock. 2. Purchased equipment for $5,000 cash. 3. Paid $400 cash for May office rent. 4. Paid $300 cash for supplies. 5. Incurred $250 of advertising costs in the Beacon News on account. 6. Received $4,700 in cash from customers for performing repair service. 7. Paid a $700 cash dividend. 8. Paid part-time employee salaries $1,000. 9. Paid utility bills $140. 10. Performed repair services worth $1,100 on account. 11. Collected cash of $120 for services billed in transaction (10). Instructions (a) Prepare a tabular analysis of the transactions using the following column headings: Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Common Stock, and Retained Earnings (with separate columns for Revenues, Expenses, and Dividends). Include margin explanations for any changes in revenues or expenses. Revenue is called Service Revenue. (b) From an analysis of the Retained Earnings columns, compute the net income or net loss for May.
> What principle(s) of internal control is (are) involved in making daily cash counts of over-the-counter receipts?
> Robbins Inc. owns the following assets at the balance sheet date. Cash in bank—savings account…. $ 8,000 Cash on hand………………………………. 1,100 Cash refund due from the IRS………. 1,000 Checking account balance…………. 12,000 Postdated checks……………………………500 What amo
> Discuss the human resources department’s involvement in internal controls.
> (a) Explain the control principle of independent internal verification. (b) What practices are important in applying this principle?
> What internal control objectives are met by physical controls?
> A local bank reported that it lost $150,000 as the result of employee fraud. Ray Fairburn is not clear on what is meant by “employee fraud.” Explain the meaning of fraud to Ray and give an example of fraud that might occur at a bank.
> “Depreciation is a process of valuation that results in the reporting of the fair value of the asset.” Do you agree? Explain.
> What types of accounts does a company increase or decrease in a prepaid expense adjustment?
> Distinguish between the two categories of adjustments and identify the types of adjustments applicable to each category
> The financial statements of Columbia Sportswear Company are presented in Appendix B. Financial statements of VF Corporation are presented in Appendix C. Instructions (a) Based on the information contained in these financial statements, determine the fol
> “The historical cost principle of accounting requires adjustments.” Do you agree? Explain.
> Maria Lopez, CEO of Sales Bin Stores, is considering a recommendation made by both the company’s purchasing manager and director of finance that the company should invest in a sophisticated new perpetual inventory system to replace its periodic system. E
> In completing the engagement in Question 3, Wilson pays no costs in March, $2,500 in April, and $2,200 in May (incurred in April). How much expense should the firm deduct from revenues in the month when it recognizes the revenue? Why?
> Max Wilson, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Wilson’s law firm prepares monthly financial statements, when should it recognize revenue from this engagement? Why?
> Which balance sheet account provides evidence that Apple records sales on an accrual basis rather than a cash basis? Explain.
> One-half of the adjustment is given below. Indicate the account title for the other half of the adjustment. (a) Salaries and Wages Expense is increased. (b) Depreciation Expense is increased. (c) Interest Payable is increased. (d) Supplies is decreased.
> For each of the following items before adjustment, indicate the type of adjustment—prepaid expense, unearned revenue, accrued revenue, and accrued expense—that is needed to correct the misstatement. If an item could result in more than one type of adjust
> On January 9, a company pays $6,200 for salaries, of which $1,100 was reported as Salaries and Wages Payable on December 31. Indicate all accounts increased or decreased as well as dollar amounts when payment occurs.
> A company makes an accrued revenue adjustment for $780 and an accrued expense adjustment for $510. How much was net income understated or overstated prior to these adjustments? Explain.
> A company fails to recognize an expense incurred but not paid. Indicate which of the following types of accounts is increased or decreased in the adjustment: (a) asset, (b) liability, (c) revenue, or (d) expense.
> The notes that accompany a company’s fi nancial statements provide informative details that would clutter the amounts and descriptions presented in the statements. Refer to the fi nancial statements of Apple Inc. in Appendix A. Instructions for accessing
> Whistler Corp. performed services for a customer but has not received payment nor has it recorded any information related to the work. Which of the following types of accounts are involved in the adjustment: (a) asset, (b) liability, (c) revenue, or (d
> What types of accounts are increased or decreased in an unearned revenue adjustment?
> (a) Explain the income measurement process in a merchandising company. (b) How does income measurement differ between a merchandising company and a service company?
> Steele Company purchased equipment for $15,000. By the current balance sheet date, the company had depreciated $7,000. Indicate the balance sheet presentation of the data.
> Explain the differences between depreciation expense and accumulated depreciation.
> (a) How does the periodicity assumption affect an accountant’s analysis of accounting transactions? (b) Explain the term fiscal year.
> Describe the accounting information system.
> Wanda Roberts is president of Best Texts. She has no accounting background. Wanda cannot understand why fair value is not used as the basis for all accounting measurement and reporting. Discuss.
> Your roommate believes that accounting standards are uniform throughout the world. Is your roommate correct? Explain.
> Describe the constraint inherent in the presentation of accounting information.
> Banks charge fees for “bounced” checks—that is, checks that exceed the balance in the account. It has been estimated that processing bounced checks costs a bank roughly $1.50 per check. Thus, the prof
> Timmins Company of Emporia, Kansas, spreads herbicides and applies liquid fertilizer for local farmers. On May 31, 2017, the company’s Cash account showed a balance of $6,738.90. The bank statement from Emporia State Bank on that date s
> The bank portion of the bank reconciliation for Bogalusa Company at October 31, 2017, is as follows. The adjusted cash balance per bank agreed with the cash balance per books at October 31. The November bank statement showed the following checks and de
> What is the distinction between comparability and consistency?
> On July 31, 2017, Keeds Company had a cash balance per books of $6,140. The statement from Dakota State Bank on that date showed a balance of $7,690.80. A comparison of the bank statement with the Cash account revealed the following facts. 1. The bank se
> Blue Bayou Middle School wants to raise money for a new sound system for its auditorium. The primary fund-raising event is a dance at which the famous disc jockey Kray Zee will play classic and not-so-classic dance tunes. Grant Hill, the music and theate
> Gary Theater is in the Hoosier Mall. A cashier’s booth is located near the entrance to the theater. Two cashiers are employed. One works from 1:00 to 5:00 P.M., the other from 5:00 to 9:00 P.M. Each cashier is bonded. The cashiers receive cash from custo
> Soho Equipment Repair began operating in September 2017. It prepares financial statements at the end of each month. On November 1, 2017, a tabular summary includes the following information. Note that Soho began the month with $3,000 in Retained Earnings
> Roadside Travel Court was organized on July 1, 2016, by Betty Johnson. Betty is a good manager but a poor accountant. From the unadjusted tabular summary, Betty prepared the following income statement for her fourth quarter, which ended June 30, 2017.
> A review of the unadjusted balances for Lewis Company at December 31, 2017, produces these data pertaining to the preparation of annual adjustments. 1. Prepaid Insurance $15,200. The company has separate insurance policies on its buildings and its motor
> Salt Creek Golf Inc. was organized on July 1, 2017. Quarterly financial statements are prepared. Information from the unadjusted and adjusted tabular summary on September 30 is shown as follows. The $14,800 in the revenue column includes Service Revenue:
> As a new auditor for the CPA firm of Blacke and Whyte, you have been assigned to review the internal controls over mail cash receipts of Simon Company. Your review reveals that checks are promptly endorsed “For Deposit Only,” but no list of the checks is
> The Moto Hotel opened for business on May 1, 2017. The May transactions resulted in a tabular summary, with May 31 unadjusted balances shown below in the first row. The $9,000 in the revenue column resulted from Rent Revenue. The $4,300 in the expense co
> Len Kumar started his own consulting firm, Kumar Consulting, on June 1, 2017. The June transactions resulted in a tabular summary, with June 30 unadjusted balances shown here. Instructions (a) Record adjustments for the month of June that reflect the f
> The following selected data are taken from the comparative financial statements of Yankee Curling Club. The club prepares its financial statements using the accrual basis of accounting. Dues are billed to members based upon their use of the clubâ
> Merle Hawkins, the president of Pathway Company, is pleased. Pathway substantially increased its net income in 2017 while keeping its unit inventory relatively the same. Jon Dietz, chief accountant, cautions Merle, however. Dietz says that since Pathway
> Nancy Tercek started a delivery service, Tercek Deliveries, on June 1, 2017. The following transactions occurred during the month of June. June 1 Stockholders invested $10,000 cash in the business in exchange for common stock. 2 Purchased a used van for
> On August 31, the balance sheet of La Brava Veterinary Clinic showed Cash $9,000, Accounts Receivable $1,700, Supplies $600, Equipment $6,000, Accounts Payable $3,600, Common Stock $13,000, and Retained Earnings $700. During September, the following tran
> Bindy Crawford created a corporation providing legal services, Bindy Crawford Inc., on July 1, 2017. On July 31 the balance sheet showed Cash $4,000, Accounts Receivable $2,500, Supplies $500, Equipment $5,000, Accounts Payable $4,200, Common Stock $6,20
> Nona Curry started her own consulting firm, Curry Consulting Inc., on May 1, 2017. The following transactions occurred during the month of May. May 1 Stockholders invested $15,000 cash in the business in exchange for common stock. 2 Paid $600 for offic
> On April 1, Wonder Travel Agency Inc. was established. These transactions were completed during the month. 1. Stockholders invested $30,000 cash in the company in exchange for common stock. 2. Paid $900 cash for April office rent. 3. Purchased office equ
> Alternative Distributor Corp., a distributor of groceries and related products, is headquartered in Medford, Massachusetts. During a recent audit, Alternative Distributor Corp. was advised that existing internal controls necessary for the company to deve
> A friend of yours, Saira Ortiz, recently completed an undergraduate degree in science and has just started working with a biotechnology company. Saira tells you that the owners of the business are trying to secure new sources of financing which are neede
> Selected financial data of two competitors, Target and Wal-Mart, are presented here. (All dollars are in millions.) Suppose the data were taken from the 2017 financial statements of each company. Instructions For each company, compute these values and
> Condensed balance sheet and income statement data for Danke Corporation are presented as follows. Instructions Compute these values and ratios for 2016 and 2017. (a) Earnings per share. (b) Working capital. (c) Current ratio. (d) Debt to assets ratio.
> The following are financial statements of Ohara Company. Additional information: The net cash provided by operating activities for 2017 was $190,800. The cash used for capital expenditures was $92,000. The cash used for dividends was $31,000. The weigh
> (a) What is the primary objective of financial reporting? (b) Identify the characteristics of useful accounting information.
> Distinguish between long-term investments and property, plant, and equipment.
> Comparative financial statement data for Loeb Corporation and Bowsh Corporation, two competitors, appear below. All balance sheet data are as of December 31, 2017. Instructions (a) Comment on the relative profitability of the companies by computing the
> You are provided with the following information for Lazuris Enterprises, effective as of its April 30, 2017, year-end. Accounts payable………………………. $ 834 Accounts receivable………………………810 Accumulated depreciation—equipment.670 Cash…………………………………………. 1,270 Co
> These items are taken from the financial statements of Martin Corporation for 2017. Retained earnings (beginning of year) ……$31,000 Utilities expense……………………………………. 2,000 Equipment…………………………………………. 66,000 Accounts payable…………………………………. 18,300 Cash………………
> Suppose the following items are taken from the 2017 balance sheet of Yahoo! Inc. (All dollars are in millions.) Goodwill……………………………………………. $3,927 Common stock………………………………………6,283 Equipment……………………………………………. 1,737 Accounts payable…………………………………….152 Paten
> The website www.cpa2biz.com has an article dated February 4, 2010, by Mary Schaeffer entitled “Emerging Issues: Demise of Paper Checks.” Instructions Go to the website and do a search on the article title. Read the article and answer the following quest
> On numerous occasions, proposals have surfaced to put the federal government on the accrual basis of accounting. This is no small issue because if this basis were used, it would mean that billions in unrecorded liabilities would have to be booked and the
> Abbey Park was organized on April 1, 2016, by Trudy Crawford. Trudy is a good manager but a poor accountant. Trudy used information from the unadjusted tabular summary to prepare the following income statement for the quarter that ended March 31, 2017.
> Purpose: To learn about the functions of the Securities and Exchange Commission (SEC). Address: www.sec.gov/about/whatwedo.shtml Instructions Use the information in this site to answer the following questions. (a) What event spurred the creation of the
> Laser Recording Systems, founded in 1981, produces disks for use in the home market. The following is an excerpt from Laser Recording Systems’ financial statements (all dollars in thousands). Instructions (a) Can you tell from the dis
> The financial statements of Columbia Sportswear Company are presented in Appendix B. Financial statements of VF Corporation are presented in Appendix C. Instructions (a) Identify two accounts on Columbia’s balance sheet that provide evidence that Columb
> The financial statements of Apple Inc. are presented in Appendix A at the end of this textbook. Instructions (a) Using the consolidated income statement and balance sheet, identify items that may result in adjustments for deferrals. (b) Using the consol
> In their annual reports to stockholders, companies must report or disclose information about all liabilities, including potential liabilities related to environmental clean-up. There are many situations in which you will be asked to provide personal fina
> How do documentation procedures contribute to good internal control?
> Identify and state two generally accepted accounting principles that relate to adjusting the accounts.
> At one time, Boeing closed a giant deal to acquire another manufacturer, McDonnell Douglas. Boeing paid for the acquisition by issuing shares of its own stock to the stockholders of McDonnell Douglas. In order for the deal not to be revoked, the value of
> The July 28, 2007, issue of the Wall Street Journal includes an article by Kathryn Kranhold entitled “GE’s Accounting Draws Fresh Focus on News of Improper Sales Bookings.” Instructions Read the article and answer the following questions. (a) What impro
> 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 article discusses the fact that the Green Bay Packers are the only NFL team that publicly publis
> Purpose: This activity provides information about career opportunities for CPAs. Address: www.startheregoplaces.com/why-accounting Instructions Go to the address shown above and then answer the following questions. (a) Where do CPAs work? (b) What skill
> Chieftain International, Inc., is an oil and natural gas exploration and production company. A recent balance sheet reported $208 million in assets with only $4.6 million in liabilities, all of which were short-term accounts payable. During the year, Chi
> The financial statements of Columbia Sportswear Company are presented in Appendix B. Financial statements of VF Corporation are presented in Appendix C. Instructions Based on the information contained in these financial statements, identify the other ac
> The financial statements of Apple Inc. in Appendix A at the back of this textbook contain the following selected accounts, all in thousands of dollars. Common Stock………………………………………………. $23,313 Accounts Payable……………………………………………..30,196 Accounts Receivable
> 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
> At one time, Boeing closed a giant deal to acquire another manufacturer, Mc-Donnell Douglas. Boeing paid for the acquisition by issuing shares of its own stock to the stockholders of McDonnell Douglas. In order for the deal not to be revoked, the value o
> B. P. Palmer is the chief executive officer of Future Products. Palmer is an expert engineer but a novice in accounting. Instructions Write a letter to B. P. Palmer that explains (a) the three main types of ratios; (b) examples of each, how they are c
> Assume that Kohl’s Department Stores installed new cash registers in its stores. How do cash registers improve internal control over cash receipts?
> As a financial analyst in the planning department for Erin Industries, Inc., you must develop ratios from the comparative financial statements. This information is to be used to convince creditors that, despite a slight decline in sales, Erin Industries,
> 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
> Suppose the following information was reported by Gap, Inc. (a) Determine the overall percentage decrease in Gap’s total assets from 2013 to 2017. What was the average decrease per year? (b) Comment on the change in Gapâ€&#
> The financial statements of Columbia Sportswear Company are presented in Appendix B. Financial statements of VF Corporation are presented in Appendix C. Instructions (a) For each company, calculate the following values for 2014. (1) Working capital. (3
> The financial statements of Apple Inc. are presented in Appendix A at the end of this textbook. Instructions Answer the following questions using the financial statements and the notes to the financial statements. (a) What were Apple’s total current ass
> Although Clif Bar & Company is not a public company, it does share its financial information with its employees as part of its open-book management approach. Further, although it does not publicly share its financial information, it does provide a differ
> Some people are tempted to make their finances look worse to get financial aid. Companies sometimes also manage their financial numbers in order to accomplish certain goals. Earnings management is the planned timing of revenues, expenses, gains, and loss
> Rules governing the investment practices of individual certified public accountants prohibit them from investing in the stock of a company that their firm audits. The Securities and Exchange Commission (SEC) became concerned that some accountants were vi
> Marci Ling is the bookkeeper for Samco Company, Inc. Marci has been trying to get the company’s balance sheet to balance. She finally got it to balance, but she still isn’t sure that it is correct. Instructions Expl
> Sylvia Ayala recently accepted a job in the production department at Apple. Before she starts work, she decides to review the company’s annual report to better understand its operations. The content and organization of corporate annual reports have becom
> As the company accountant, explain the following ideas to the management of Ortiz Company. (a) The concept of reasonable assurance in internal control. (b) The importance of the human factor in internal control.
> The June 22, 2011, issue of the Wall Street Journal Online includes an article by Michael Rapoport entitled “Auditors Urged to Tell More.” It provides an interesting discussion of the possible expanding role of CPAs. Instructions Read the article and an
> Purpose: Identify summary information about companies. This information includes basic descriptions of the company’s location, activities, industry, financial health, and financial performance. Address: http://biz.yahoo.com/i Steps 1. Type in a company n
> Xerox was not having a particularly pleasant year. The company’s stock price had already fallen in the previous year from $60 per share to $30. Just when it seemed things couldn’t get worse, Xerox’s s
> Columbia Sportswear Company’s financial statements are presented in Appendix B. Financial statements of VF Corporation are presented in Appendix C. Instructions (a) Based on the information in these financial statements, determine the following for each
> The financial statements of Apple Inc. for 2014 are presented in Appendix A. Instructions Refer to Apple’s financial statements and answer the following questions. (a) What were Apple’s total assets at September 27, 2014? At September 28, 2013? (b) How
