If a company’s revenues are $125,000 and its expenses are $113,000, in which financial statement columns of the worksheet will the net income of $12,000 appear? When expenses exceed revenues, in which columns will the difference appear?
> Selected transactions for the Nikolai Company are presented in journal form below. Post the transactions to T-accounts. Make one T-account for each item and determine each account’s ending balance. J1 Date Account Titles and Explan
> Using the data in BE2-5, journalize the transactions. (You may omit explanations.) Reference Data BE 2-5: Aug. 1 Opens an office as a financial advisor, investing $5,000 in cash in exchange for common stock. 4 Pays insurance in advance for 6 months, $1,
> Using the data in BE2-2, journalize the transactions. (You may omit explanations.) Reference Data BE 2-2: June 1 Sheldon Cooper invests $4,000 cash in exchange for shares of common stock in a small welding business. 2 Purchases equipment on account for
> In alphabetical order below are balance sheet items for Ellerby Company at December 31, 2019. Prepare a balance sheet, following the format of Illustration 1-10. Accounts payable……………………. $85,000 Accounts receivable…………………..72,500 Cash………………………………………..4
> Given the accounting equation, answer each of the following questions. (a) The liabilities of Holland Company are $120,000 and its stockholders’ equity is $232,000. What is the amount of Holland Company’s total assets? (b) The total assets of Holland Com
> Presented below is the basic accounting equation. Determine the missing amounts. Assets Liabilities Stockholders' Equity (a) $78,000 (b) (c) $94,000 $50,000 $45,000 ? $70,000 $60,000 ? ? II
> Goods costing $3,000 are purchased on account on July 15 with credit terms of 2/10, n/30. On July 18, a $200 credit was received from the supplier for damaged goods. Give the journal entry on July 24 to record payment of the balance due within the discou
> Goods costing $2,000 are purchased on account on July 15 with credit terms of 2/10, n/30. On July 18, a $200 credit memo is received from the supplier for damaged goods. Give the journal entry on July 24 to record payment of the balance due within the di
> What is the major advantage and major disadvantage of the specific identification method of inventory costing?
> Kyle Ebert believes that the allocation of cost of goods available for sale should be based on the actual physical flow of the goods. Explain to Kyle why this may be both impractical and inappropriate.
> Explain the difference between the terms FOB shipping point and FOB destination.
> Katz Hat Shop received a shipment of hats for which it paid the wholesaler $2,970. The price of the hats was $3,000, but Katz was given a $30 cash discount and required to pay freight charges of $50. What amount will Katz record for inventory? Why?
> Your friend Theo Dolan has been hired to help take the physical inventory in Silker Hardware Store. Explain to Theo Dolan what this job will entail.
> Emporia Shoe Shop had goods available for sale in 2019 with a retail price of $120,000. The cost of these goods was $84,000. If sales during the period were $80,000, what is the estimated cost of ending inventory using the retail inventory method?
> Wiggins Company has net sales of $400,000 and cost of goods available for sale of $300,000. If the gross profit rate is 35%, what is the estimated cost of the ending inventory? Show computations.
> When is it necessary to estimate inventories?
> How does the average-cost method of inventory costing differ between a perpetual inventory system and a periodic inventory system?
> An item must possess two characteristics to be classified as inventory by a merchandiser. What are these two characteristics?
> Distinguish between FOB shipping point and FOB destination. Identify the freight terms that will result in a debit to Inventory by the buyer and a debit to Freight-Out by the seller.
> What inventory cost flow does Apple use for its inventories? (Hint: You will need to examine the notes for Apple’s financial statements.)
> Under what circumstances might inventory turnover be too high? That is, what possible negative consequences might occur?
> Ryder Company’s balance sheet shows Inventory $162,800. What additional disclosures should be made?
> Kuzu Company discovers in 2019 that its ending inventory at December 31, 2018, was $7,000 understated. What effect will this error have on (a) 2018 net income, (b) 2019 net income, and (c) the combined net income for the 2 years?
> Bonnie Stores has 20 toasters on hand at the balance sheet date. Each costs $27. The net realizable value is $30 per unit. Under the lower-of-cost-or-net realizable value basis of accounting for inventories, what value should Bonnie report for the toaste
> Taylor Entertainment Center has 5 TVs on hand at the balance sheet date that cost $400 each. The net realizable value is $350 per unit. Under the lower-of-cost-or net realizable value basis of accounting for inventories, what value should Taylor report f
> Which assumed inventory cost flow method: (a) usually parallels the actual physical flow of merchandise? (b) divides cost of goods available for sale by total units available for sale to determine a unit cost? (c) assumes that the latest units purchased
> “The key to successful business operations is effective inventory management.” Do you agree? Explain.
> Ming Xu believes revenues from credit sales may be recorded before they are collected in cash. Do you agree? Explain.
> Explain the meaning of the credit terms 2/10, n/30.
> Define two generally accepted accounting principles that relate to adjusting the accounts.
> When is cost of goods sold determined in a perpetual inventory system?
> How does income measurement differ between a merchandising and a service company?
> What components of revenues and expenses are different between merchandising and service companies?
> Identify the accounts that are added to or deducted from Purchases in a periodic system to determine the cost of goods purchased. For each account, indicate whether it is added or deducted.
> Indicate the columns of the worksheet in a perpetual system in which (a) inventory and (b) cost of goods sold will be shown.
> Determine Apple’s gross profit rate for 2015 and 2014. Indicate whether it increased or decreased from 2014 to 2015.
> Why is the normal operating cycle for a merchandising company likely to be longer than for a service company?
> How does the single-step form of income statement differ from the multiple-step form?
> Identify the sections of a multiple-step income statement that relate to (a) operating activities, and (b) non-operating activities.
> Identify the distinguishing features of an income statement for a merchandising company.
> Why may a trial balance not contain up-to-date and complete financial information?
> What merchandising account(s) will appear in the post-closing trial balance?
> Explain why the Inventory account will usually require adjustment at year-end.
> (a) “The steps in the accounting cycle for a merchandising company are different from the accounting cycle for a service company.” Do you agree or disagree? (b) Is the measurement of net income for a merchandising company conceptually the same as for a s
> Which of the following accounts would not appear in the post-closing trial balance? Interest Payable; Equipment; Depreciation Expense; Dividends; Unearned Service Revenue; Accumulated Depreciation— Equipment; and Service Revenue.
> What are the content and purpose of a post-closing trial balance?
> Describe the nature of the Income Summary account and identify the types of summary data that may be posted to this account.
> Identify the account(s) debited and credited in each of the four closing entries, assuming the company has net income for the year.
> Why is it necessary to prepare formal financial statements if all of the data are in the statement columns of the worksheet?
> What is the relationship, if any, between the amount shown in the adjusted trial balance column for an account and that account’s ledger balance?
> Harper Travel Agency purchased land for $85,000 cash on December 10, 2019. At December 31, 2019, the land’s value has increased to $93,000. What amount should be reported for land on Harper’s balance sheet at December 31, 2019? Explain.
> Cigale Company prepares reversing entries. If the adjusting entry for interest payable is reversed, what type of an account balance, if any, will there be in Interest Payable and Interest Expense after the reversing entry is posted?
> Explain the purpose of the worksheet.
> Using Apple’s annual report, determine its current liabilities at September 27, 2014, and September 26, 2015. Were current liabilities higher or lower than current assets in these two years?
> Distinguish between long-term investments and property, plant, and equipment.
> What is meant by the term “operating cycle?”
> What standard classifications are used in preparing a classified balance sheet?
> How do correcting entries differ from adjusting entries?
> Identify, in the sequence in which they are prepared, the three trial balances that are used in the accounting cycle.
> Indicate, in the sequence in which they are made, the three required steps in the accounting cycle that involve journalizing.
> Distinguish between a reversing entry and an adjusting entry. Are reversing entries required?
> (a) How does the time period assumption affect an accountant’s analysis of business transactions? (b) Explain the terms fiscal year, calendar year, and interim periods.
> “A worksheet is a permanent accounting record and its use is required in the accounting cycle.” Do you agree? Explain.
> What is the debit/credit effect of a prepaid expense adjusting entry?
> Distinguish between the two categories of adjusting entries, and identify the types of adjustments applicable to each category.
> “Adjusting entries are required by the historical cost principle of accounting.” Do you agree? Explain.
> In completing the engagement in Question 3, Zupan pays no costs in March, $2,000 in April, and $2,500 in May (incurred in April). How much expense should the firm deduct from revenues in the month when it recognizes the revenue? Why?
> Susan Zupan, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Zupan’s law firm prepares monthly financial statements, when should it recognize revenue from this engagement? Why?
> Laurie Belk is president of Better Books. She has no accounting background. Belk cannot understand why fair value is not used as the basis for all accounting measurement and reporting. Discuss.
> Describe the constraint inherent in the presentation of accounting information.
> What is the distinction between comparability and consistency?
> The bank portion of the bank reconciliation for Bogalusa Company at October 31, 2019, is shown below. 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
> On July 31, 2019, 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
> Kael Company maintains a petty cash fund for small expenditures. These transactions occurred during the month of August. Aug. 1 Established the petty cash fund by writing a check payable to the petty cash custodian for $200. 15 Replenished the petty cas
> How do documentation procedures contribute to good internal control?
> Why do accrual-basis financial statements provide more useful information than cash-basis statements?
> Rondelli 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 D.J. Sound will play classic and not-so-classic dance tunes. Matt Ballester, the music and th
> Bolz Office Supply Company recently changed its system of internal control over cash disbursements. The system includes the following features. Instead of being unnumbered and manually prepared, all checks must now be prenumbered and prepared by using th
> The management of Felipe Inc. is reevaluating the appropriateness of using its present inventory cost fl ow method, which is average-cost. The company requests your help in determining the results of operations for 2019 if either the FIFO or the LIFO met
> Ziad Company had a beginning inventory on January 1 of 150 units of Product 4-18-15 at a cost of $20 per unit. During the year, the following purchases were made. Mar. 15 400 units at $23………..Sept. 4 350 units at $26 July 20 250 units at $24………….Dec. 2
> Express Distribution markets CDs of the performing artist Fishe. At the beginning of October, Express had in beginning inventory 2,000 of Fishe’s CDs with a unit cost of $7. During October, Express made the following purchases of Fishe’s CDs. Oct. 3 2,5
> Austin Limited is trying to determine the value of its ending inventory as of February 28, 2019, the company’s year-end. The following transactions occurred, and the accountant asked your help in determining whether they should be recorded or not. (a) On
> The trial balance of Valdez Fashion Center contained the following accounts at November 30, the end of the company’s fiscal year. Adjustment data: 1. Supplies on hand totaled $2,000. 2. Depreciation is $11,500 on the equipment. 3. Int
> Adam Nichols, a former disc golf star, operates Adam’s Discorama. At the beginning of the current season on April 1, the ledger of Adam’s Discorama showed Cash $1,800, Inventory $2,500, and Common Stock $4,300. The following transactions were completed d
> The Deluxe Store is located in midtown Madison. During the past several years, net income has been declining because of suburban shopping centers. At the end of the company’s fi scal year on November 30, 2019, the following accounts app
> Latona Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, the ledger of Latona showed Cash of $5,000 and Common Stock of $5,000. May 1 Purchased merchandise on account from Gray’s Wholesale Sup
> Identify the five components of a good internal control system.
> Powell’s Book Warehouse distributes hardcover books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. At the end of May, Powell’s inventory consisted of books purchased for $1,800. During June, the following merchandising t
> Dao Vang, CPA, was retained by Universal Cable to prepare financial statements for April 2019. Vang accumulated all the ledger balances per Universal’s records and found the following. Dao Vang reviewed the records and found the follow
> Heidi Jara opened Jara’s Cleaning Service on July 1, 2019. During July, the following transactions were completed. July 1 Stockholders invested $20,000 cash in the business in exchange for common stock. 1 Purchased used truck for $9,000, paying $4,000 ca
> Jarmuz Management Services began business on January 1, 2018, with a capital investment of $90,000. The company manages condominiums for owners (service revenue) and rents space in its own office building (rent revenue). The trial balance and adjusted tr
> The completed financial statement columns of the worksheet for Fleming Company are as follows. Instructions (a) Prepare an income statement, a retained earnings statement, and a classified balance sheet. (b) Prepare the closing entries. (c) Post the clo
> The adjusted trial balance columns of the worksheet for Alshwer Company are as follows. Instructions (a) Complete the worksheet by extending the balances to the financial statement columns. (b) Prepare an income statement, a retained earnings statement,
> The trial balance columns of the worksheet for Lampert Roofing at March 31, 2019, are as follows. Other data: 1. A physical count reveals only $550 of roofing supplies on hand. 2. Depreciation for March is $250. 3. Unearned service revenue amounted to $2
> A review of the ledger of Carmel Company at December 31, 2019, produces the following data pertaining to the preparation of annual adjusting entries. 1. Prepaid Insurance $10,440. The company has separate insurance policies on its buildings and its motor
> Everett Co. was organized on July 1, 2019. Quarterly financial statements are prepared. The unadjusted and adjusted trial balances as of September 30 are shown as follows. Instructions (a) Journalize the adjusting entries that were made. (b) Prepare an
> The Skyline Motel opened for business on May 1, 2019. Its trial balance before adjustment on May 31 is as follows. In addition to those accounts listed on the trial balance, the chart of accounts for Skyline Motel also contains the following accounts an
> (a) “Cash equivalents are the same as cash.” Do you agree? Explain. (b) How should restricted cash funds be reported on the balance sheet?
> Deanna Nardelli started her own consulting firm, Nardelli Consulting, on May 1, 2019. The trial balance at May 31 is as follows. In addition to those accounts listed on the trial balance, the chart of accounts for Nardelli Consulting also contains the f
> The Palace Theater opened on April 1. All facilities were completed on March 31. At this time, the ledger showed No. 101 Cash $6,000, No. 140 Land $12,000, No. 145 Buildings (concession stand, projection room, ticket booth, and screen) $8,000, No. 157 Eq
