J. K. Leask Wholesale Corp. uses the LIFO method of inventory costing. In the current year, profit at J. K. Leask is running unusually high. The corporate tax rate is also high this year, but it is scheduled to decline significantly next year. In an effort to lower the current year’s net income and to take advantage of the changing income tax rate, the president of J. K. Leask Wholesale instructs the accountant to recommend to the purchasing department a large purchase of inventory for delivery three days before the end of the year. The price of the inventory to be purchased has doubled during the year, and the purchase will represent a major portion of the ending inventory value. Instructions: (a) What is the effect of this transaction on this year’s and next year’s income statement and income tax expense? Why? (b) If J. K. Leask Wholesale had been using the FIFO method of inventory costing, would the president give the same directive? (c) Should the plant accountant order the inventory purchase to lower income? What are the ethical implications of this order?
> Chris and Carl have been partners for more than five years in their catering business, where Chris put in 40 percent of the equity and Carl put in the other 60 percent. With the growth of the business, Chris and Carl decide to part ways and each open up
> Lori and Timothy combined their savings to open the Tres Leche Bakery. Lori invested $10,000 in cash, whereas Timothy put in $7,500 in cash and some kitchen equipment with a book value at $8,000, accumulated depreciation at $2,000, and a market value at
> Mia Fitness Club was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order. Instructions: Analyze the foregoing transactions using the following column headings. I
> Prepare journal entries to record the following: (a) Mayorga Fine Foods retires its delivery equipment, which cost $45,000. Accumulated depreciation is also $45,000 on this delivery equipment. No salvage value is received. (b) Assume the same information
> On January 1, 2008, the Villareal Mexican Bakery ledger shows Equipment $40,000 and Accumulated Depreciation $9,000. The depreciation resulted from using the straight-line method with a useful life of ten years and salvage value of $4,000. On this date,
> Foxx Saber Resorts was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order. Instructions: Analyze the foregoing transactions using the following column headings.
> Your parents are considering investing in PepsiCo, Inc., common stock. They ask you, as an accounting expert, to make an analysis of the company for them. Fortunately, excerpts from a current annual report of PepsiCo are presented in Appendix A of this t
> Ellen catering acquires a delivery truck at a cost of $36,000.The truck is expected to have a salvage value of $2,000 at the end of its four-year useful life. Compute annual depreciation for the first and second years using the straight-line method.
> Presented here are two independent situations. (a) On March 3, Hinckley Appliances sells $580,000 of its receivables to Marsh Factors, Inc. Marsh Factors assesses a finance charge of 3 percent of the amount of receivables sold. Prepare the entry on Hinck
> On December 31,2008, Crawford Resorts estimated that 1.5 percent of its net sales of $400,000 would become uncollectible. The company recorded this amount as an addition to Allowance for Doubtful Accounts. On May 11, 2009, Crawford Co. determined that Ke
> Leland Hotels has accounts receivable of $98,100 at March 31. An analysis of the accounts shows the following: Month of Sale ………………………………………………………………… Balance, March 31 March ……………………………………………………………………………………………. $65,000 February ………………………………………………………………
> In providing accounting services to small businesses, you encounter the following situations pertaining to cash sales: (a) Sue Jackson Company rings up sales and sales taxes separately on its cash register. On April 10, the register totals are sales $30,
> On June 1, Padillio Pasta borrows $80,000 from First Bank on a six-month, $80,000, 12 percent note. Instructions: (a) Prepare the entry on June 1. (b) Prepare the adjusting entry on June 30. (c) Prepare the entry at maturity (December 1), assuming month
> Puebla Corporation is a medium-sized hotel corporation. It has ten stockholders, who have been paid a total of $1 million in cash dividends for eight consecutive years. The policy of the board of directors requires that in order for this dividend to be d
> In January, gross earnings in Yoon Company totaled $90,000. All earnings are subject to 8% FICA taxes, 5.4% state unemployment taxes, and 0.8% federal unemployment taxes. Prepare the entry to record January payroll tax expense.
> Data for Sandy Teter are presented in 11-1. Prepare the journal entries to record (a) Sandy’s pay for the period and (b) the payment of Sandy’s wages. Use January 15 for the end of the pay period and the payment date. Presented in 11-1: Sandy Teter’s
> Sandy Teter’s regular hourly wage rate is $16, and she receives an hourly rate of $24 for work in excess of 40 hours. During a January pay period, Sandy works 45 hours. Sandy’s federal income tax withholding is $95, and she has no voluntary deductions. C
> Refer to the financial statements of PepsiCo, presented in Appendix A, and answer the following questions: Financial statements of PepsiCo: (a) What was the amount of net cash provided by operating activities for the year ended December 30, 2006? For
> On April 30, the bank reconciliation of Ottawa Travel shows three outstanding checks: no. 254, $650; no. 255, $720; and no. 257, $410. The May bank statement and the May cash payments journal show the following: Instructions: Using step 2 in the reconc
> George Hunting Lodge has the following internal control procedures over cash disbursements. Identify the internal control principle that is applicable to each procedure. 1. Company checks are prenumbered. 2. The bank statement is reconciled monthly by an
> Sycamore Resorts has the following internal control procedures over cash receipts. Identify the internal control principle that is applicable to each procedure. 1. All over-the-counter receipts are registered on cash registers. 2. All cashiers are bonded
> On May 31, Stuart Dining has net sales of $330,000 and cost of goods available for sale of $230,000. Compute the estimated cost of the ending inventory, assuming the gross profit is 40 percent.
> On December 31, 2008, the following information was available for Simon Hotels: ending inventory $40,000; beginning inventory $60,000; cost of goods sold $300,000; and sales revenue $380,000. Calculate inventory turnover and days in inventory for Simon H
> Data for Rusch BBQ are presented in 9-2. Compute the cost of the ending inventory under the average-cost method, assuming there are 450 pounds on hand. Presented in 9-2: In its first month of operations Rusch BBQ made three purchases of sausages in the
> The ledger of Perez Company includes the following items: (a) Freight-in, (b) Purchase Returns and Allowances, (c) Purchases, (d) Sales Discounts, and (e) Purchase Discounts. Identify the items that are included in inventoriable costs.
> Harry Smith owns and manages Harry’s Restaurant, a twenty-four-hour restaurant near the city’s medical complex. Harry employs nine full-time employees and sixteen part-time employees. He pays all the full-time employees by check, the amounts of which are
> Augusta Catering had net income of $11.44 million and net revenue of $88 million in 2008. Its assets were $14 million at the beginning of the year and $18 million at the end of the year. What were (a) Augusta’s asset turnover and (b) profit margin for
> If Helene Cruises had net income of $650,000 in 2008 and it experienced a 30 percent increase in net income over 2007, what was its 2007 net income?
> The financial statements of PepsiCo are presented in Appendix A at the end of this textbook. Financial statements of PepsiCo: Instructions: Answer the following questions using the Consolidated Statement of Income: (a) What was the percentage change i
> Net income was $500,000 in 2006; $400,000 in 2007; and $508,000 in 2008.What is the percentage of change from (a) 2006 to 2007 and (b) 2007 to 2008? Is the change an increase or a decrease?
> Using the same data presented above in 7-1 for Solais, illustrate vertical analysis. Data 7-1: Using the following data from the comparative balance sheet of Solais Bed & Breakfast, illustrate horizontal analysis. December 31, 2008 December 31
> The income statement for J and T Seafood appears below. Additional information: 1. The weighted average common shares outstanding in 2008 were 30,000 shares. 2. The market price of J and T Seafood stock was $13 in 2008. 3. Cash dividends of $23,000 wer
> Selected comparative statement data for Isabel Wedding Consultant are presented below. All balance sheet data are as of December 31. Instructions: Compute the following ratios for 2008: (a) Profit margin (b) Asset turnover (c) Return on assets (d) Retu
> Sophia Gourmet has the following comparative balance sheet data. Additional information for 2008: 1. Net income was $25,000. 2. Sales on account were $420,000. Sales returns and allowances were $20,000. 3. Cost of goods sold was $198,000. 4. The allowa
> Selected financial statement data for Jamestown Resorts for the year ending January 31, 2008, are as follows: For the year, net sales were $5,634 million, and cost of goods sold was $3,766 million. Instructions: Compute the four liquidity ratios at th
> Using the following data from the comparative balance sheet of Solais Bed & Breakfast, illustrate horizontal analysis. December 31, 2008 December 31, 2007 Accounts receivable Inventory Total assets $ 540,000 $ 840,000 $ 3,640,000 $ 400,000 $ 600
> Classify the following items as an operating, an investing, or a financing activity. Assume all items involve cash unless there is information to the contrary. (a) Purchase of equipment. (b) Sale of building. (c) Redemption of bonds. (d) Depreciation. (e
> You are the assistant controller in charge of general ledger accounting at Springtime Bottling Company. Your company has a large loan from an insurance company. The loan agreement requires that the company’s cash account balance be maintained at $200,000
> Each of the following items must be considered in preparing a statement of cash flows for Janeway Travel for the year ended December 31, 2008. For each item, state how it should be shown in the statement of cash flows for 2008. (a) Issued bonds for $300,
> The financial statements of PepsiCo, Inc., are presented in Appendix A at the end of this textbook. Instructions: Answer the following questions using the Consolidated Balance Sheet and the Notes to Consolidated Financial Statements section. (a) What we
> The net income for Karen Gourmet Foods for 2008 was $280,000. For 2008, depreciation on plant assets was $60,000, and the company incurred a loss on sale of plant assets of $10,000. Compute net cash provided by operating activities under the indirect met
> The T-accounts for Equipment and the related Accumulated Depreciation for Stone Kitchen Equipment Company at the end of 2008 are as follows. Stone Kitchen Equipment Company’s income statement reported a loss on the sale of equipment o
> Antoine Winery had the following transactions during 2008: 1. Issued $50,000 par value common stock for cash. 2. Collected $11,000 of accounts receivable. 3. Declared and paid a cash dividend of $25,000. 4. Sold a long-term investment with a cost of $15,
> The balance sheet debit column of the work sheet for Empanada Supreme includes the following accounts: Prepaid Insurance $4,600; Cash $24,080; Supplies $6,200; Short-term Investments $7,240; and Accounts Receivable $15,670. Prepare the current assets sec
> At Fred’s Fish Chips, the following errors were discovered after the transactions had been journalized and posted. Prepare the correcting entries. 1. A collection on account from a customer for $850 was recorded as a debit to Cash of $850 and a credit to
> Sam Perroni, owner of Perroni’s Harbor Cruise, found the following errors that his bookkeeper made after the transactions had been journalized and posted. Prepare the correcting entries. 1. A collection on account from a customer for $1,280 was recorded
> Using the data in Exercise 5-3, identify the accounts that would be included in a postclosing trial balance. Exercise 5-3: The income statement of Health 24 City Club for the month ending August 31 shows Membership Dues Revenues of $25,000; Salaries Ex
> Indicate which of the following statements are true or false regarding the work sheet. _____ The work sheet is essentially a working tool of the accounting. _____ The work sheet cannot be used as a basis for posting to ledgers. _____ The work sheet is di
> The bookkeeper for Royal Cruises asks you to prepare the following accrued adjusting entries at December 31. 1. Interest on notes payable of $500 is accrued. 2. Services provided but unbilled total $2,520. 3. Salaries earned by employees of $1,800 have n
> The financial statements of PepsiCo are presented in Appendix A. The statements contain the following selected accounts for the year ended, 2006 stated in millions of dollars. Instructions: (a) Answer the following questions. (1) What is the increase a
> Professional Design Company specializes in uniform design for foodservices. Its trial balance on December 31 shows Supplies $9,000 and Supplies Expense $0. On December 31, there are $2,000 of supplies on hand. Prepare the adjusting entry at December 31;
> Selected transactions for Y. K. Catering are presented in journal form below. Post the transactions to T accounts. J1 Date Account Titles and Explanation Ref. Debit Credit May 10 Accounts Receivable 7,200 Service Revenue 7,200 15 Cash 5,500 Accounts
> Presented below are six business transactions. On a sheet of paper, list the letters (a), (b), (c) with columns for assets, liabilities, and stockholders’ equity. For each column, indicate whether the transactions increased (+), decreased (-), or had no
> The operating guidelines of accounting have three parts: assumptions, principles, and constraints. Please match these guidelines with the following by indicating “A” for assumptions, “P” for principles, and “C” for constraints. _____ Going concern _____
> Presented below are four concepts. Please match each one with the correct scenario. Relevance Reliability Comparability Consistency _____ Hotel Del Sol uses the Uniform System of Accounts so that it can assess how it is performing financially against lik
> Which of the following is (Yes) or is not (No) a part of the three objectives of financial reporting under FASB? _____ The information is useful to the employees only. _____ The managerial forms are helpful in assessing current cash flows. _____ The econ
> Which of the following is (Yes) or is not (No) part of the FASB conceptual framework? _____ Objectives of managerial reporting _____ Elements of financial statements _____ Quantitative characteristics of accounting information
> Indicate whether each of the following statements is true (T) or false (F). _____ GAAP stands for generally accepted accounting practices. _____ FASB stands for Financial Accounting Standards Board. _____ Together with the Securities and Exchange Commiss
> Indicate whether each of the following statements is true (T) or false (F) in the foodservice or club environment. _____ Purchasing and yield analysis are the two most important items for a foodservice operations that are related to accounting. _____ It
> Indicate whether each of the following statements is true (T) or false (F) in a hotel accounting department. _____ The night auditors get their name because of the long hours they work. _____ There is no difference between a city ledger and a guest ledge
> Purpose: Learn about the Securities and Exchange Commission (SEC). Address: www.sec.gov/index.html Step From the SEC homepage, choose About the SEC. Instructions: Answer the following questions: (a) How many enforcement actions does the SEC take each ye
> When the Financial Accounting Standards Board issues new standards, the required implementation date is usually 12 months or more from the date of issuance, with early implementation encouraged. Richard Keith, accountant at Manchester Corporation, discus
> Indicate whether each of the following statements is true (T) or false (F). _____ The Uniform System of Accounts for the Gaming Industry is a joint effort of the Nevada and New Jersey governments. _____ The Hospitality Financial and Technology Profession
> No financial decision maker should ever rely solely on the financial information reported in the annual report to make decisions. It is important to keep abreast of financial news. This activity demonstrates how to search for financial news on the Web. A
> In which step of the accounting cycle will one compile the income statement, the retained earnings statement, and the balance sheet?
> The Internal Revenue Service provides considerable information over the Internet. The following demonstrates how useful one of its sites is in answering payroll tax questions faced by employers. Address:www.irs.ustreas.gov/formspubs/index.html, or go to
> Empire Bakers accumulates the following adjustment data on December 31. Indicate (a) the type of adjustment (prepaid expense, accrued revenues, and so on) and (b) the accounts before adjustment (overstated or understated). 1. Prepaid supplies of $800 are
> A wealth of accounting-related information is available via the Internet. For example, the Rutgers Accounting Web offers access to a great variety of sources. Address: accounting.rutgers.edu Steps: Click on Accounting Resources. (Note: Once on this page,
> The financial statements of PepsiCo are presented in Appendix A at the end of this textbook. Instructions: (a) Using the consolidated financial statements and related information, identify items that may result in adjusting entries for prepayments. (b)
> The Thayer Motel, Inc. opened for business on May 1, 2008. 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 Thayer Mo- tel also contains the following acco
> Alyson Clark is a licensed incorporated CPA. During the first month of operations of the business, the following events and transactions occurred: The company uses the following chart of accounts: No. 101 Cash, No. 112 Accounts Receivable, No. 126 Supp
> Evergreen Campground was started on June 1 by Jolene and David Collier. The following selected events and transactions occurred during June. Evergreen uses the following accounts: Cash; Prepaid Insurance; Land; Accounts Payable; Unearned Admissions; Co
> The T accounts below summarize the ledger of Mardi Gras Catering Corporation at the end of the first month of operations: Instructions: (a) Prepare the complete general journal entries (including explanations) from which the postings to Cash were made.
> A June 1999 issue of Money magazine included an article by David Futrelle entitled “Stock Splits: How the Dumb Get Rich.” Instructions: Read the article and answer the following questions: (a) What is a stock split? (b) How do anxious traders and invest
> On June 1, Maui Travel Agency, Inc., was established. The following transactions were completed during the month. 1. Stockholders invested $40,000 cash, receiving common stock in exchange. 2. Paid $1,000 cash for June office rent. 3. Purchased office equ
> From 1 to 9, arrange the following steps of the accounting cycle in order: _____ Posting _____ Financial statements _____ Transaction analysis _____ Closing entries _____ Postclosing trial balance _____ Trial balance _____ Adjusted trial balance _____ Jo
> On March 1, 2008, Peluso Hotels had retained earnings of $690,000. During the year, Peluso had the following selected transactions: 1. Declared cash dividends $155,000. 2. Corrected understatement of 2007 net income because of inventory valuation error o
> On June 1, Meyers Hotel Corporation had 80,000 shares of no-par common stock issued and outstanding. The stock has a stated value of $10 per share. During the year, the following occurred: Instructions: (a) Prepare the entries, if any, on each of the t
> Cocoa Beach Hotels and Resorts had the following transactions during the current period: Instructions: Please prepare the necessary journal entries for these transactions. Feb. 22 Issued 10,000 shares of $1 par value common stock to attorneys in pa
> During the first year of operations, Benji’s Health Club had the following transactions pertaining to its common stock: Instructions: (a) Journalize the transactions, assuming that the common stock has a par value of $1 per share. (b)
> Referring back to 14-3, please prepare the partner’s capital statement for the year ended December 31, 2008, for 5-Star Gourmet Desserts if Mike withdraws $1,000 from the partnership. Referring 14-3: After Carl starts his own catering company, he reali
> At the beginning of 2008, Bellamy Seafood acquired equipment costing $60,000. It was estimated that this equipment would have a useful life of six years and a residual value of $6,000 at that time. The straight-line method of depreciation was considered
> Solo Country Club purchased a new computer system on October 1, 2008, at a cost of $96,000. The company estimated that the machine would have a salvage value of $12,000. The system is expected to be used for 10,000 working hours during its five-year life
> Waterways Tours uses the units-of-activity method in depreciating its tour boats. One boat was purchased on January 1, 2006, at a cost of $148,000. Over its four-year useful life, the boat is expected to be driven 100,000 miles. Salvage value is expected
> On March 1, 2006, Tanger Resorts acquired real estate on which it planned to coustruct a small bed-and-breakfast. The company paid $90,000 in cash. An old warehouse on the property was razed at a cost of $6,600; the salvaged materials were sold for $1,70
> Tuscany Tours uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2008, at a cost of $115,000. Over its five-year useful life, the bus is expected to be driven 100,000 miles. Salvage value is expected to be $9
> Sunny’s Noodles has the following balance sheet items. Accounts payable …………………………………………………….. Accounts receivable Insurance expense ……………………………………………………………. Taxes payable Wages expense ………………………………………………………………… Food inventory Cash Kitchen …………………………………
> W. S. Blaskowski Foodservices entered into the following transactions during May 2008. 1. Purchased kitchen equipment for $30,000 from General Appliances on account. 2. Paid $3,000 cash for May rent. 3. Received $5,000 cash from customers for services bi
> Mexico Timeshare, Inc., has the following transactions related to notes receivable during the last two months of 2008: Instructions: (a) Journalize the transactions for Mexico Timeshare, Inc. (b) Record the collection of the Hanson note at its maturity
> Presented here are two independent situations. (a) On April 2, Julie Keiser uses her Kitchen Mart Company credit card to purchase kitchen supply from a Kitchen Mart store for $1,800. On May 1, Keiser is billed for the $1,800 amount due. Keiser pays $700
> The ledger of Elburn Grill at the end of the current years shows Accounts Receivable $110,000; Sales $840,000; and Sales Returns and Allowances $28,000. Instructions: (a) If Elburn uses the direct write-off method to account for uncollectible accounts,
> Presented here are two independent situations. (a) On January 6, Bennett Catering sells food and services on account to Jackie, Inc., for $7,000, terms 2/10, n/30. On January 16, Jackie, Inc., pays the amount due. Prepare the entries on Bennett’s books t
> The following is an aging schedule for Griffin Hotel: On December 31, 2008, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $12,000. Instructions: (a) Journalize and post the adjusting entry for bad debts at December 31, 2008.
> Record the following transactions for Amy Ice Co. in the general journal: 2008 May 1 Received a $12,000, one-year, 10 percent note on account from Rosa's Hamburger. Dec. 31 Accrued interest on the note. Dec. 31 Closed the interest revenue account. 2
> Brantley Food Supply Co. has the following transactions related to notes receivable during the last two months of the year: Instructions: Journalize the transactions for Brantley Food Supply Co. Nov. 1 Loaned $15,000 cash to Bayou Bend Restaurant o
> At December 31, 2008, Sycamore International Foods reported the following information on its balance sheet: Accounts receivable ………………
> Record the following transactions for Sandwich, Co., in the gereral journal: 2006 May 1 Received an $8,700, one-year, 10 percent note in exchange for Linda Anderson's out- standing accounts receivable. Dec. 31 Accrued interest on the Anderson note.
> Classify each of the following items as asset (A), liability (L), revenue (R), or expense (E). _(a) Food inventory (e) Taxes payable (b) Rooms revenue (f) Rent expense (c) Salaries and wages expense (g) Beverage revenue (d) Property management syste
> For the year ended December 31, 2010, R. Visnak Company reports the following summary payroll data: Gross earnings Administrative salaries ……………â&#
> Selected transactions for Golden Apples Catering Company are listed below. 1. Made cash investment to start business. 2. Paid monthly electricity bill. 3. Purchased food on account. 4. Received cash from customers. 5. Paid dividends. 6. Paid weekly wages
