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 record accrued salaries expense of $2,000. As a result of these two oversights, the financial statements for the reporting period will [choose one] (1) understate assets by $3,200; (2) understate expenses by $5,200; (3) understate net income by $2,000; or (4) overstate liabilities by $2,000.
> 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.
> Define net income and explain its computation.
> 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
> 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
> Samsung (www.Samsung.com) is a market leader in high-tech electronics manufacturing and digital media, and it competes to some extent with both Apple and Google. Key financial ratios for the current fiscal year follow. Required 1. Which company is most
> Key financial figures for Apple’s fiscal year ended September 28, 2013, follow. Required 1. What is the total amount of assets invested in Apple? 2. What is Apple’s return on assets for fiscal year 2013? Its assets a
> What economic costs and benefits might a business experience if it decided to adopt a more socially responsible position? How might such costs and benefits change over the longer term?
> In what ways might business be socially responsible?
> How suitable are legal restrictions in the following cases? (a) Ensuring adequate vehicle safety (e.g. tyres with sufficient tread or roadworthy vehicles). (b) Reducing traffic congestion. (c) Preventing the use of monopoly power. (d) Ensuring that merge
> Why might it be better to ban certain activities that cause environmental damage rather than to tax them?
> Make a list of pieces of information a firm might want to know and consider whether it could buy the information and how reliable that information might be.
> Some roads could be regarded as a public good, but some could be provided by the market. Which types of road could be provided by the market? Why? Would it be a good idea?
> Distinguish between publicly provided goods, public goods and merit goods.
> Should regulators of utilities that have been privatised into several separate company’s permit (a) horizontal mergers (within the industry); (b) vertical mergers; (c) mergers with firms in other related industries (e.g. gas and electricity suppliers)?
> Should governments or regulators always attempt to eliminate the supernormal profits of monopolists/oligopolists?
> If two or more firms were charging similar prices, what types of evidence would you look for to prove that this was collusion rather than mere coincidence?
> How would you use the principle of weighing up marginal costs and marginal benefits when deciding whether to (a) buy a new car; (b) study for an extra hour? How would a firm use the same principle when deciding whether to (c) purchase a new machine; (
> If anti-monopoly legislation is effective enough, is there ever any need to prevent mergers from going ahead?
> What problems are likely to arise in identifying which firms’ practices are anti-competitive? Should the CMA take firms’ assurances into account when deciding whether to grant an exemption?
> Assume that a firm discharges waste into a river. As a result, the marginal social costs (MSC) are greater than the firm’s marginal (private) costs (MC). The following table shows how MC, MSC, AR and MR vary with output. (a) How much
> What is the efficiency wage hypothesis? Explain what employers might gain from paying wages above the market-clearing level.
> Do any of the following contradict the theory that the demand for labour equals the marginal revenue product: wage scales related to length of service (incremental scales), nationally negotiated wage rates, discrimination, firms taking the lead from othe
> Drawing on recent examples, consider the extent to which strike action is likely to help trade union members achieve their various aims.
> To what extent could a trade union succeed in gaining a pay increase from an employer with no loss in employment?
> The following are figures for a monopsonist employer: Fill in the missing figures for columns (3) and (4). How many workers should the firm employ if it wishes to maximise profits? Marginal cost of labour (£) Number of Wage rate (£) (2) 100 Total cos
> If, unlike a perfectly competitive employer, a monopsonist has to pay a higher wage to attract more workers, why, other things being equal, will a monopsonist pay a lower wage than a perfectly competitive employer?
> For what types of reason does the marginal revenue product differ between workers in different jobs?
> Make a list of three things you did yesterday. What was the opportunity cost of each?
> The wage rate a firm has to pay and the output it can produce varies with the number of workers as follows (all figures are hourly): Assume that output sells at £2 per unit. (a) Copy the table and add additional rows for TCL, MCL, TRPL and
> Provide a case for and against high bonuses.
> How have changes in society, laws and technology affected the UK labour market?
> Identify the potential costs and benefits of the flexible firm to (a) employers and (b) employees.
> ‘Statutory minimum wages will cause unemployment.’ Is this so?
> If a firm faces a shortage of workers with very specific skills, it may decide to undertake the necessary training itself. If on the other hand it faces a shortage of unskilled workers it may well offer a small wage increase in order to obtain the extra
> Assess the advantages and disadvantages facing a host state when receiving MNC investment
> Explain the link between the life cycle of a product and multinational business.
