How is the average number of days to collect accounts receivable computed? What information does the ratio provide?
> Brooks Company carries three inventory items. The following information pertains to the ending inventory: a. Determine the ending inventory that Brooks will report on the balance sheet, assuming that it applies the lower-of-cost-or-market rule to indiv
> The following information pertains to Hagen Metal Works’ ending inventory for the current year: Required: a. Determine the value of the ending inventory using the lower-of-cost-or-market rule applied to (1) each individual inventory i
> The Hat Store had the following series of transactions for Year 2: Required: a. Determine the quantity and dollar amount of inventory at the end of the year, assuming The Hat Store uses the FIFO cost flow assumption and keeps perpetual records. b. Writ
> The following inventory transactions apply to Green Company for Year 2: The beginning inventory consisted of 180 units at $48 per unit. All transactions are cash transactions. Required: a. Record these transactions in general journal format assuming G
> The Brick Company had cash sales of $280,000 for Year 1, its first year of operation. On April 2, the company purchased 210 units of inventory at $390 per unit. On September 1, an additional 160 units were purchased for $425 per unit. The company had 110
> The following information pertains to the inventory of Parvin Company during Year 2: During Year 2, Parvin sold 2,700 units of inventory at $90 per unit and incurred $41,500 of operating expenses. Parvin currently uses the FIFO method but is considerin
> The trial balance of Pacilio Security Services, Inc. as of January 1, Year 5, had the following normal balances: During Year 5, Pacilio Security Services experienced the following transactions: 1. Paid the salaries payable from Year 4. 2. On January 15
> The following data were extracted from the 2016 financial statements of Penske Automotive Group, Inc. This company operates automobile dealerships, mostly in the United States, Canada, and Western Europe, and commercial truck dealerships in Australia, Ne
> Ada Fontanez is the president of a large company that owns a chain of athletic shoe stores. The company was in dire financial condition when she was hired three years ago. In an effort to motivate Fontanez, the board of directors included a bonus plan as
> The accounting records of Blue Bird Co. showed the following balances at January 1, Year 2: Transactions for Year 2 were as follows: Required: a. Organize the class into three sections, and divide each section into groups of three to five students. A
> Obtain the Target Corporation’s annual report at http://investors.target.com using the instructions in Appendix B, and use it to answer the following questions: a. What was Target’s inventory turnover ratio and average days to sell inventory for the fisc
> Using either Gap’s most current Form 10-K or the company’s annual report, answer the questions below. To obtain the Form 10-K, use either the EDGAR system, following the instructions in Appendix A, or the companyâ
> Clair Coolage is the chief accountant for a sales company called Far Eastern Imports. The company has been highly successful and is trying to increase its capital base by attracting new investors. The company operates in an inflationary environment and h
> The following information is available for Leno Company: Leno Company currently uses the FIFO cost flow method for financial statement reporting and tax reporting. It is considering changing to the LIFO cost flow method for tax reporting purposes. If L
> Ruby Tuesday’s, Inc. operated 646 casual dining restaurants across the United States as of May 31, 2016. Signet Jewelers Limited claims to be the world’s largest retailer of diamond jewelry. Its stores include Zales, J
> Costco Wholesale Corporation operated 715 stores as of August 28, 2016. The following data were taken from the company’s annual report. All dollar amounts are in millions. Required: a. Compute Costco’s inventory turn
> Mano Company was started in Year 1 when it acquired $40,000 from the issue of common stock. The following data summarize the company’s first three years’ operating activities. Assume that all transactions were cash tra
> Required Indicate whether each of the following costs is a product cost or a period cost: a. Cleaning supplies for the office. b. Freight on goods purchased for resale. c. Salary of the marketing director. d. Freight on goods sold to customer with terms
> The following trial balance pertains to Simmons Hardware as of January 1, Year 2: The following events occurred in Year 2. Assume that Simmons Hardware uses the periodic inventory system. 1. Purchased land for $16,000 cash. 2. Purchased merchandise on
> Bell Farm and Garden Equipment Co. reported the following information for Year 1: Selected information from the balance sheet as of December 31, Year 1, follows: Assume that a major customer returned a large order to Bell on December 31, Year 1. The
> The following account titles and balances were taken from the adjusted trial balance of Hogan Sales Co. at December 31, Year 2. The company uses the periodic inventory method. Required: a. Prepare a schedule to determine the amount of cost of goods sol
> The following information was drawn from the records of Moore Sales Company: Required: a. Prepare a multistep income statement for each year. b. Prepare a common size income statement for each year. c. Assume that the operating trends between Year 1 an
> At the beginning of Year 2, EuRo Enterprises had the following balances in its accounts: During Year 2, EuRo Enterprises experienced the following events: 1. Purchased inventory that cost $11,200 on account from Ivey Company under terms 2/10, n/30. The
> Indicate whether each of the following costs is a product cost or a period (selling and administrative) cost: a. Goods purchased for resale. b. Salaries of salespersons. c. Advertising costs. d. Transportation-out. e. Interest on a note payable. f. Salar
> The following trial balance pertains to Benji’s Grocery as of January 1, Year 2: The following events occurred in Year 2. Assume that Benji’s uses the periodic inventory method. 1. Purchased land for $30,000 cash. 2.
> The following account titles and balances were taken from the adjusted trial balance of King Co. for Year 2. The company uses the periodic inventory system. Required: a. Prepare a schedule to determine the amount of cost of goods sold. b. Prepare a mul
> The following information was drawn from the records of Toner Sales Company: a. Prepare a multistep income statement for each year. b. Prepare a common size income statement for each year. c. At a recent meeting of the stockholders, Tonerâ€&
> At the beginning of Year 2, the Redd Company had the following balances in its accounts: During Year 2, the company experienced the following events: 1. Purchased inventory that cost $5,200 on account from Ross Company under terms 1/10, n/30. The merch
> Blooming Flower Company was started in Year 1 when it acquired $60,000 cash from the issue of common stock. The following data summarize the company’s first three years’ operating activities. Assume that all transactio
> During Year 1, Rondor Merchandising Company purchased $40,000 of inventory on account. The company sold inventory on account that cost $30,000 for $50,000. Cash payments on accounts payable were $24,500. There was $38,000 cash collected from accounts rec
> The Kroger Co. was founded in 1883 and is one of the largest retailers in the world, based on annual sales. Whole Foods Market claims to be the world’s largest retailer of natural and organic foods. Whole Foods offers specialty products
> Jason Kidd started a small merchandising business in Year 1. The business experienced the following events during its first year of operation. Assume that Kidd uses the perpetual inventory system. 1. Acquired $90,000 cash from the issue of common stock.
> The following information is available for two different types of businesses for the Year 1 accounting year. Diamond Consulting is a service business that provides consulting services to small businesses. University Bookstore is a merchandising business
> The following events apply to Sally’s Gift Shop for Year 1, its first year of operation: 1. Acquired $60,000 cash from the issue of common stock. 2. Issued common stock to Sally Quin, one of the owners, in exchange for merchandise inventory worth $3,200
> Far East Retailers uses the periodic inventory system to account for its inventory transactions. The following account titles and balances were drawn from Far East’s records for Year 2: beginning balance in inventory, $46,200; purchases, $352,400; purcha
> Rick Dove is the owner of RD Cleaning. At the beginning of the year, RD Cleaning had $4,800 in inventory. During the year, RD Cleaning purchased inventory that cost $26,000. At the end of the year, inventory on hand amounted to $3,600. Required: Calcula
> The following information is available for Billings and Phoenix companies: Required: a. Prepare a common size income statement for each company. b. Compute the return on assets and return on equity for each company. c. Which company is more profitable
> The following income statements were drawn from the annual reports of Athens Company and Boulder Company: Required: a. One of the companies is a high-end retailer that operates in exclusive shopping malls. The other operates discount stores located in
> What different kinds of expenditures might be included in the recorded cost of a building?
> Custom Auto Parts (CAP) started the Year 2 accounting period with the balances given in the financial statements model shown below. During Year 2, CAP experienced the following business events: 1.  Purchased $60,000 of merchandise inven
> Define amortization. Which kinds of assets are amortized?
> Why is it necessary to make an entry to reinstate a previously written-off account receivable before the collection is recorded?
> Why is it necessary to make an adjusting entry at the end of the accounting period for unpaid interest on a note payable?
> What type of account is Discount on Notes Payable?
> What items are included in compensation cost for a company in addition to the gross salaries of the employees?
> How does the amortization of a discount affect the income statement, balance sheet, and statement of cash flows?
> Why are amounts withheld from employees’ pay considered liabilities of the employer?
> How is the carrying value of a discount note computed?
> What is the operating cycle of a business?
> Hollis Company began the Year 2 accounting period with $36,000 cash, $80,000 inventory, $70,000 common stock, and $46,000 retained earnings. During the Year 2 accounting period, Hollis experienced the following events: 1. Sold merchandise costing $51,500
> How is the accounts receivable turnover ratio computed? What information does the ratio provide?
> Give two examples of fringe benefits.
> Define deferred taxes. Where does the account Deferred Taxes appear in the financial statements?
> What is the purpose of the Federal Unemployment Tax? What is the maximum amount of wages subject to the tax?
> Assume that on July 1, Year 1, Big Corp. loaned Little Corp. $12,000 for a period of one year at 6 percent interest. What amount of interest revenue will Big report for Year 1? What amount of cash will Big receive upon maturity of the note?
> What two taxes are components of the FICA tax? What programs do they fund?
> What is the difference between wages and salaries?
> When is it acceptable to use the direct write-off method of accounting for uncollectible accounts?
> Does the recognition of depreciation expense affect cash flows? Why or why not?
> What is the purpose of internal controls in an organization?
> The following information was drawn from the Year 1 accounting records of Cozart Merchandisers. 1. Inventory with a list price of $40,000 was purchased under terms 2/10, net/30. 2. Cozart returned $4,200 of the inventory to the supplier five days after p
> Bloomin’ Brands, Inc. is the corporation behind five restaurant chains: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse and Wine Bar, and Roy’
> In what circumstances can an auditor disclose confidential information about a client without the client’s permission?
> When might an auditor issue a disclaimer on financial statements?
> What are the implications of an unqualified audit opinion?
> What is the difference between the liquidity and the solvency of a business?
> What makes an error in the financial statements material?
> What is an independent auditor? Why must auditors be independent?
> What is a financial statement audit? Who is qualified to perform it?
> What types of expenditures are usually made from a petty cash fund?
> What is the purpose of a petty cash fund?
> What is the purpose of the Cash Short and Over account?
> The following information was taken from the accounts of Adams’s Eatery, a delicatessen, at December 31, Year 1. The accounts are listed in alphabetical order, and each has a normal balance. Required: First, prepare an income statemen
> Is accounting terminology standard in all countries? What term is used in the United Kingdom to refer to sales? What term is used to refer to inventory? What is a gearing ratio? Is it important to know about these differences?
> Ripley Lumber Company purchased $240,000 of equipment on September 1, Year 1. Required: a. Compute the amount of depreciation expense that is deductible under MACRS for Year 1 and Year 2, assuming that the equipment is classified as a seven-year propert
> Crossroads Eye Care Company purchased $60,000 of equipment on March 1, Year 1. Required: a. Compute the amount of depreciation expense that is deductible under MACRS for Year 1 and Year 2, assuming that the equipment is classified as a seven-year proper
> What information is provided by the net income percentage (return-on-sales ratio)?
> What is the purpose of independent verification of performance?
> Consider the following events: 1. A petty cash fund of $200 was established on April 1, Year 1. 2. Employees were reimbursed when they presented petty cash vouchers to the petty cash custodian. 3. On April 30, Year 1, the petty cash fund contained vouche
> What is an example of a business that would have a high inventory turnover? A low inventory turnover?
> What information does inventory turnover provide?
> Suda Company sold land that cost $40,000 for $37,000 cash. Explain how this transaction would be shown on the statement of cash flows.
> Explain the difference between losses and expenses.
> In Year 1, Image Incorporated sold land for $82,000 cash. The land had originally cost $50,000. Also, Image sold inventory that had cost $176,000 for $265,000 cash. Operating expenses amounted to $41,000. Required: a. Prepare a Year 1 multistep income s
> Explain the difference between gains and revenues.
> Suzanne Hurley discovered significant fraud in the accounting records of a high profile client. Due to her client’s prestige, the story aired in the mainstream media. Unable to resolve her client’s remaining concerns with the company’s management team, H
> Consider the following events: 1. A petty cash fund of $200 was established on April 1, Year 1. 2. Employees were reimbursed when they presented petty cash vouchers to the petty cash custodian. 3. On April 30, Year 1, the petty cash fund contained vouche
> What is the purpose of giving credit terms to customers?
> If some merchandise declines in value because of damage or obsolescence, what effect will the lower-of-cost-or-market rule have on the income statement? Explain.
> How does the phrase lower-of-cost-or-market apply to inventory valuation?
> Why do you think natural resources are called wasting assets?
> What is the advantage of using the allowance method of accounting for uncollectible accounts? What is the advantage of using the direct write-off method?
> Assume that on October 1, Year 1, Big Company borrowed $10,000 from the local bank at 6 percent interest. The note is due on October 1, Year 2. How much interest does Big pay in Year 1? How much interest does Big pay in Year 2? What amount of cash does B
> What is meant by segregation of duties? Give an illustration.
> The trial balance for The Bolt Co. as of January 1, Year 2, was as follows: The following events affected the company during the Year 2 accounting period: 1. Purchased merchandise on account that cost $8,200. 2. The goods in Event 1 were purchased FOB
> What is the difference between accounting controls and administrative controls?
> Sarah Johnson was a trusted employee of Evergreen Trust Bank. She was involved in everything. She worked as a teller, accounted for the cash at the other teller windows, and recorded many of the transactions in the accounting records. She was so loyal th
> Determine which party (buyer or seller) is responsible for freight charges in each of the following situations: a. Purchased merchandise, freight terms, FOB destination. b. Purchased merchandise, freight terms, FOB shipping point. c. Sold merchandise, fr
> For each of the following events, indicate whether the freight terms are FOB destination or FOB shipping point. a. Sold merchandise and the buyer paid the freight costs. b. Purchased merchandise and the seller paid the freight costs. c. Sold merchandise
> List the internal control procedures that pertain to the protection of business equipment.
