Lambert Department Store is located in midtown Metropolis. During the past several years, net income has been declining because suburban shopping centers have been attracting business away from city areas. At the end of the company’s fiscal year on November 30, 2014, these accounts appeared in its adjusted trial balance. Accounts Payable …………………………………………………………..$ 26,800 Accounts Receivable …………………………………………………………. 17,200 Accumulated Depreciation—Equipment ……………….……………68,000 Cash ………………………………………………………………….………………. 8,000 Common Stock …………………………………………………….…………. 35,000 Cost of Goods Sold …………………………………………….……………. 614,300 Freight-Out …………………………………………………………………………. 6,200 Equipment ………………………………………………………………………. 157,000 Depreciation Expense ……………………………………………….………. 13,500 Dividends …………………………………………………………………………..12,000 Gain on Disposal of Plant Assets …………………………………………..2,000 Income Tax Expense ……………………………………………………. …. 10,000 Insurance Expense ……………………………………………………………..9,000 Interest Expense …………………………………………………………………5,000 Inventory …………………………………………………………………………. 26,200 Notes Payable ……………………………………………………………………. 43,500 Prepaid Insurance ………………………………………………………………. 6,000 Advertising Expense …………………………………………………………..33,500 Rent Expense ……………………………………………………………………. 34,000 Retained Earnings ……………………………………………………………..14,200 Salaries and Wages Expense ……………………………………………..117,000 Sales Revenue …………………………………………………………………904,000 Salaries and Wages Payable …………………………………………………6,000 Sales Returns and Allowances ……………………………………………20,000 Utilities Expense …………………………………………………………………10,600 Additional data: Notes payable are due in 2018. Instructions: (a) Prepare a multiple-step income statement, a retained earnings statement, and a classified balance sheet. (b) Calculate the profit margin and the gross profit rate. (c) The vice president of marketing and the director of human resources have developed a proposal whereby the company would compensate the sales force on a strictly commission basis. Given the increased incentive, they expect net sales to increase by 15%. As a result, they estimate that gross profit will increase by $40,443 and expenses by $58,600. Compute the expected new net income. Then, compute the revised profit margin and gross profit rate. Comment on the effect that this plan would have on net income and on the ratios, and evaluate the merit of this proposal. (Ignore income tax effects.)
> Lifetime Distribution markets classic children’s books. At the beginning of June, Lifetime had in beginning inventory 1,200 books with a unit cost of $3. During June, Lifetime made the following purchases of books. June 3 ………………… 4,000 @ $3 June 18 …………
> Nickels Company reports net income of $92,000 in 2014. However, ending inventory was understated by $7,000. What is the correct net income for 2014? What effect, if any, will this error have on total assets as reported in the balance sheet at December 31
> At the beginning of the current season on November 1, the ledger of Winona Sports showed Cash $3,300, Inventory $4,700, and Common Stock $8,000. The following transactions occurred during November 2014. Nov. 5 Purchased hockey sticks and pucks on accou
> Sandy Melon operates a clothing retail operation. She purchases all inventory on credit and uses a periodic inventory system. The Accounts Payable account is used for recording inventory purchases only; all other current liabilities are accrued in separa
> At the end of Alma’s Department Store’s fiscal year on December 31, 2014, these accounts appeared in its adjusted trial balance. Freight-In ………………………………………………………. $ 7,200 Inventory (beginning) ………………………………………40,500 Purchases ………………………………………………………456,000
> The trial balance of Buse’s Fashion Center contained the accounts below at November 30, the end of the company’s fiscal year. Adjustment data: 1. Store supplies on hand total $4,000. 2. Depreciation is $14,000 on the
> An inexperienced accountant prepared this condensed income statement for Wright Company, a retail firm that has been in business for a number of years. WRIGHT COMPANY Income Statement For the Year Ended December 31, 2014 Revenues Net sales …………………………………
> Parker Department Store is located near the Mark Twain Shopping Mall. At the end of the company’s fiscal year on December 31, 2014, the following accounts appeared in its adjusted trial balance. Accounts Payable …………………………………………………..$ 73,300 Accounts Rec
> At the beginning of the current season, the ledger of Connors’ Tennis Shop showed Cash $3,500; Inventory $1,700; and Common Stock $5,200. The following transactions were completed during April 2014. Apr. 4 Purchased racquets and balls from Rawlings Co.
> Cosmotologist Warehouse distributes commercial hair care products in onegallon bottles to hair salons and extends credit terms of 3/10, n/30 to all of its customers. During the month of April, the following merchandising transactions occurred. Apr. 1 P
> Krey Distributing Company completed these merchandising transactions in the month of April. At the beginning of April, the ledger of Krey showed Cash of $10,000 and Common Stock of $10,000. Apr. 2 Purchased merchandise on account from Am-Bev Co. $8,700
> Boscan Corporation purchased machinery on January 1, 2014, at a cost of $250,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $30,000. The company is considering different depreciati
> Hogan’s Department Store uses a perpetual inventory system. On June 1, Hogan sold 25 units, and on August 27, 30 more units. Compute the cost of goods sold using (a) FIFO, (b) LIFO, and (c) average-cost. (Round the cost per unit to
> In recent years, Farr Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used
> Danner Corporation and London Corporation, two companies of roughly the same size, are both involved in the manufacture of shoe-tracing devices. Each company depreciates its plant assets using the straight-line approach. An investigation of their financi
> The intangible assets section of Cedeno Corporation’s balance sheet at December 31, 2014, is presented here. Patents ($60,000 cost less $6,000 amortization) ……………………………$54,000 Copyrights ($36,000 cost less $25,200 amortization) ………………………..10,800 Total …
> Presented here are selected transactions for Pine Company for 2014. Jan. 1 Retired a piece of machinery that was purchased on January 1, 2004. The machine cost $71,000 on that date and had a useful life of 10 years with no salvage value. June 30 Sol
> At December 31, 2014, Navaro Corporation reported the following plant assets. During 2015, the following selected cash transactions occurred. Apr. 1 Purchased land for $2,200,000. May 1 Sold equipment that cost $600,000 when purchased on January 1,
> Seger Company was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order. Debit 1. Cost of real estate purchased as a plant site (land $255,000 and building $25,000)
> Kolton Company closes its books on its July 31 year-end. The company does not make entries to accrue for interest except at its year-end. On June 30, the Notes Receivable account balance is $23,800. Notes Receivable include the following. During July,
> The president of Giraldi Enterprises asks if you could indicate the impact certain transactions have on the following ratios Instructions: Complete the table, indicating whether each transaction will increase (I), decrease (D), or have no effect (NE) o
> On January 1, 2014, Oswalt Company had Accounts Receivable of $54,200 and Allowance for Doubtful Accounts of $3,700. Oswalt Company prepares financial statements annually. During the year, the following selected transactions occurred. Jan. 5 Sold $4,0
> At December 31, 2014, the trial balance of Sloane Company contained the following amounts before adjustment. Instructions: (a) Prepare the adjusting entry at December 31, 2014, to record bad debt expense, assuming that the aging schedule indicates that
> Suppose this information (in millions) is available for the Automotive and Other Operations Divisions of General Motors Corporation for a recent year. General Motors uses the LIFO inventory method. Beginning inventory ………………………………$ 13,921 Ending invento
> Here is information related to Freeman Company for 2014. Total credit sales ……………………………………………..$1,500,000 Accounts receivable at December 31 ……………………..840,000 Bad debts written off ………………………………………………37,000 Instructions: (a) What amount of bad debt expe
> Presented below is an aging schedule for Bosworth Company. At December 31, 2013, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $8,000. Instructions: (a) Journalize and post the adjusting entry for bad debts at December 31, 2
> Reynolds.com uses the allowance method of accounting for bad debts. The company produced the following aging of the accounts receivable at year-end. Instructions: (a) Calculate the total estimated bad debts based on the above information. (b) Prepare t
> Heisey Company is a very profitable small business. It has not, however, given much consideration to internal control. For example, in an attempt to keep clerical and office expenses to a minimum, the company has combined the jobs of cashier and bookkeep
> Castle Corporation prepares monthly cash budgets. Here are relevant data from operating budgets for 2014. All sales and purchases are on account. Budgeted collections and disbursement data are given below. All other expenses are paid in the month incur
> You are provided with the following information taken from Langerhan Inc.’s March 31, 2014, balance sheet. Cash ……………â€&brvb
> Zimmerman Company of Shawnee, Kansas, spreads herbicides and applies liquid fertilizer for local farmers. On May 31, 2014, the company’s Cash account per its general ledger showed a balance of $6,738.90. The bank statement from Shawnee
> The bank portion of the bank reconciliation for LaRoche Company at October 31, 2014, 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, 2014, Redeker Company had a cash balance per books of $6,140. The statement from Nashota 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
> Flint Hills 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 Jay Dee will play classic and not-so-classic dance tunes. Trent Greeley, the music and the
> Suppose the 2014 financial statements of 3M Company report net sales of $23.1 billion. Accounts receivable (net) are $3.2 billion at the beginning of the year and $3.25 billion at the end of the year. Compute 3M’s accounts receivable turnover. Compute 3M
> Granada Theater is in the Greenbelt 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
> Lambert Center began operations on July 1. It uses a perpetual inventory system. During July, the company had the following purchases and sales. Instructions: (a) Determine the ending inventory under a perpetual inventory system using (1) FIFO, (2) mo
> Pember Inc. is a retailer operating in Edmonton, Alberta. Pember uses the perpetual inventory method. Assume that there are no credit transactions; all amounts are settled in cash. You are provided with the following information for Pember Inc. for the m
> You have the following information for Wooderson Gems. Wooderson uses the periodic method of accounting for its inventory transactions. Wooderson only carries one brand and size of diamonds—all are identical. Each batch of diamonds purc
> The management of Tinker Inc. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2014, the accounting records show these data. Inventory, January 1 (10,000 units) ………………………………. $ 35,000 Cost of 12
> Groves Company Inc. had a beginning inventory of 100 units of Product MLN at a cost of $8 per unit. During the year, purchases were: Groves Company uses a periodic inventory system. Sales totaled 1,500 units. Instructions: (a) Determine the cost of go
> Dunbar Distribution markets CDs of numerous performing artists. At the beginning of March, Dunbar had in beginning inventory 2,500 CDs with a unit cost of $7. During March, Dunbar made the following purchases of CDs. During March 12,000 units were sold
> P6-1A Aber Limited is trying to determine the value of its ending inventory as of February 28, 2014, the company’s year-end. The accountant counted everything that was in the warehouse, as of February 28, which resulted in an ending inventory valuation o
> At the beginning of the current season on April 1, the ledger of Flint Hills Pro Shop showed Cash $2,500; Inventory $3,500; and Common Stock $6,000. The following transactions occurred during April 2014. Apr. 5 Purchased golf bags, clubs, and balls on
> Yang Inc. operates a retail operation that purchases and sells snowmobiles, among other outdoor products. The company purchases all inventory on credit and uses a periodic inventory system. The Accounts Payable account is used for recording inventory pur
> During its first year of operations, Gehrig Company had credit sales of $3,000,000, of which $400,000 remained uncollected at year-end. The credit manager estimates that $18,000 of these receivables will become uncollectible. (a) Prepare the journal entr
> At the end of Ermler Department Store’s fiscal year on November 30, 2014, these accounts appeared in its adjusted trial balance. Freight-In ……………………………………………………. $ 5,060 Inventory (beginning) ……………………………………. 41,300 Purchases ……………………………………………………. 613,000
> The trial balance of Customer Choice Wholesale Company contained the accounts shown at December 31, the end of the company’s fiscal year. Adjustment data: 1. Depreciation is $8,000 on buildings and $7,000 on equipment. (Both are opera
> An inexperienced accountant prepared this condensed income statement for Sundberg Company, a retail firm that has been in business for a number of years. SUNDBERG COMPANY Income Statement For the Year Ended December 31, 2014 Revenues Net sales ………………………
> At the beginning of the current season on April 1, the ledger of Flint Hills Pro Shop showed Cash $2,500; Inventory $3,500; and Common Stock $6,000. The following transactions were completed during April 2014. Apr. 5 Purchased golf bags, clubs, and bal
> McCoy Warehouse distributes hardback books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. During the month of June, the following merchandising transactions occurred. June 1 Purchased books on account for $1,040 (inclu
> Waters Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, Waters’ ledger showed Cash of $8,000 and Common Stock of $8,000. May 1 Purchased merchandise on account from Hauke Wholesale Supply f
> At the end of its first year of operations, Mordica Company chose to use the revaluation framework allowed under IFRS. Mordica’s ledger shows Plant Assets $480,000 and Accumulated Depreciation—Plant Assets $60,000. Prepare journal entries to record the f
> The financial statements of Zetar plc are presented in Appendix C. The company’s complete annual report, including the notes to its financial statements, is available in the Investors section at www.zetarplc.com. Instructions: Visit Zetar’s corporate we
> The financial statements of Zetar plc are presented in Appendix C. The company’s complete annual report, including the notes to its financial statements, is available in the Investors section at www.zetarplc.com. Instructions: Using the notes to the com
> In its first month of operation, Kuhlman Company purchased 100 units of inventory for $6, then 200 units for $7, and finally 140 units for $8. At the end of the month, 180 units remained. Compute the amount of phantom profit that would result if the comp
> The financial statements of Zetar plc are presented in Appendix C. The company’s complete annual report, including the notes to its financial statements, is available in the Investors section at www.zetarplc.com. Instructions: Visit Zetar’s corporate we
> Reinsch Company reported the following amounts (in euros) in 2014: Net income, €150,000; Unrealized gain related to revaluation of buildings, €10,000; and Unrealized loss on nontrading securities, €(35,000). Determine Reinsch’s total comprehensive income
> Purpose: Use an annual report to identify a company’s plant assets and the depreciation method used. Address: www.annualreports.com, or go to www.wiley.com/college/kimmel Steps 1. Select a particular company. 2. Search by company name. 3. Follow instruct
> The financial statements of The Hershey Company are presented in Appendix B, following the financial statements for Tootsie Roll Industries in Appendix A. Instructions: (a) Based on the information in these financial statements and the accompanying note
> Refer to the financial statements and the Notes to Consolidated Financial Statements of Tootsie Roll Industries in Appendix A. Appendix A: Instructions: Answer the following questions. (a) What were the total cost and book value of property, plant, an
> Purpose: Use an annual report to identify a company’s plant assets and the depreciation method used. Address: www.annualreports.com, or go to www.wiley.com/college/kimmel Steps 1. Select a particular company. 2. Search by company name. 3. Follow instruct
> The financial statements of The Hershey Company are presented in Appendix B, following the financial statements for Tootsie Roll in Appendix A. Appendix A: Appendix B: Instructions (a) Based on the information contained in these financial statement
> Refer to the financial statements of Tootsie Roll Industries and the accompanying notes to its financial statements in Appendix A. Appendix A: Instructions: (a) Calculate the accounts receivable turnover and average collection period for 2011. (Use &a
> As a new auditor for the CPA firm of Good and Rich, you have been assigned to review the internal controls over mail cash receipts of Lyman Company. Your review reveals that checks are promptly endorsed “For Deposit Only,” but no list of the checks is pr
> The international accounting firm Ernst & Young performed a global survey on fraud. The results of that survey are summarized in a report titled “Driving Ethical Growth—New Markets, New Challenges” (Ernst & Young, 11th Global Fraud Survey). You can find
> Presented below is information for Zhou Co. for the month of January 2014. Instructions: (a) Prepare an income statement using the format presented on page 245. Assume a 25% tax rate. (b) Calculate the profit margin and the gross profit rate. Cost
> The financial statements of The Hershey Company are presented in Appendix B, following the financial statements for Tootsie Roll in Appendix A. Appendix B: Appendix A: Instructions: Answer the following questions for each company. (a) What is the bala
> The financial statements of Tootsie Roll are presented in Appendix A of this book, together with an auditor’s report—Report of Independent Auditors. Instructions: Using the financial statements and reports, answer these questions about Tootsie Roll’s i
> Suppose the following information is from the 2014 annual report of American Greetings Corporation (all dollars in thousands). The notes to the company’s financial statements also include the following information. Finished products,
> If your school has a subscription to the FASB Codification, go to http://aaahg.org/ ascLogin.cfm to log in and prepare responses to the following. (a) Access the glossary (“Master Glossary”) to answer the following. (1) What is the definition provided fo
> There are many situations in business where it is difficult to determine the proper period in which to record revenue. Suppose that after graduation with a degree in finance, you take a job as a manager at a consumer electronics store called Midwest Ele
> Andrea Tabares was just hired as the assistant treasurer of Northshore Stores, a specialty chain store company that has nine retail stores concentrated in one metropolitan area. Among other things, the payment of all invoices is centralized in one of the
> The following situation is presented in chronological order. 1. Shafer decides to buy a surfboard. 2. He calls Surfing USA Co. to inquire about their surfboards. 3. Two days later, he requests Surfing USA Co. to make him a surfboard. 4. Three days later,
> Three years ago, Sue Kienholz and her brother-in-law Jeremy Reyes opened Megamart Department Store. For the first 2 years, business was good, but the following condensed income statement results for 2014 were disappointing. Sue believes the problem lie
> The July 15, 2010, edition of CFO.com contains an article by Marie Leone entitled “Sucking the LIFO out of Inventory.” Instructions: Read the article, which can be found at www.cfo.com/printable/article.cfm/14508745, and answer the following questions.
> The financial statements of The Hershey Company appear in Appendix B, following the financial statements for Tootsie Roll in Appendix A. Appendix A: Instructions: (a) Based on the information in the financial statements, compute these 2011 values for
> You have the following information for Vincent Inc. for the month ended October 31, 2014. Vincent uses a periodic method for inventory. Instructions: (a) Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profit, and (iv) gross pr
> The February 21, 2012, edition of the New York Times contains an article by Stephanie Clifford entitled “High-End Retailers Report Strong Profits, but Wal-Mart Still Struggles.” Instructions: Read the article and answer the following questions. (a) Expl
> The financial statements of The Hershey Company appear in Appendix B, following the financial statements for Tootsie Roll in Appendix A. Appendix A: Appendix B: Instructions: (a) Based on the information contained in these financial statements, determ
> The financial statements for Tootsie Roll Industries appear in Appendix A at the end of this textbook. Instructions: Answer these questions using the Consolidated Income Statement. (a) What was the percentage change in total revenue and in net income fr
> On March 1, 2014, Zobrist Company acquired real estate, on which it planned to construct a small office building, by paying $80,000 in cash. An old warehouse on the property was demolished at a cost of $8,200; the salvaged materials were sold for $1,700.
> Basic information relating to a new machine purchased by Hinshaw Company is presented in E9-5. Data given in E 9-5: Hinshaw Company purchased a new machine on October 1, 2014, at a cost of $90,000. The company estimated that the machine has a salvage va
> Jayhawk Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2014, at a cost of $100,000. Over its 4-year useful life, the bus is expected to be driven 160,000 miles. Salvage value is expected to be $
> Gonzalez Corporation reported net income of $58,000. Depreciation expense for the year was $132,000. The company calculates depreciation expense using the straight line method, with a useful life of 10 years. Top management would like to switch to a 15-y
> Haley Company, organized in 2014, has these transactions related to intangible assets in that year: Jan. 2 Purchased a patent (5-year life) $280,000. Apr. 1 Goodwill acquired as a result of purchased business (indefinite life) $360,000. July 1 Acqu
> Bakely Company reports the following information (in millions) during a recent year: net sales, $11,408.5; net earnings, $264.8; total assets, ending, $4,312.6; and total assets, beginning, $4,254.3. Instructions: (a) Calculate the (1) return on assets
> Shonrock International is considering a significant expansion to its product line. The sales force is excited about the opportunities that the new products will bring. The new products are a significant step up in quality above the companyâ€&#
> The management of Rosenquist Corp. is considering the effects of various inventory costing methods on its financial statements and its income tax expense. Assuming that the price the company pays for inventory is increasing, which method will: (a) provid
> The following expenditures relating to plant assets were made by Watkens Company during the first 2 months of 2014. 1. Paid $7,000 of accrued taxes at the time the plant site was acquired. 2. Paid $200 insurance to cover a possible accident loss on new f
> Shannon Corp. had the following balances in receivable accounts at October 31, 2014 (in thousands): Allowance for Doubtful Accounts $52; Accounts Receivable $2,910; Other Receivables $189; Notes Receivable $1,353. Instructions: Prepare the balance sheet
> Malone Supply Co. has the following transactions related to notes receivable during the last 2 months of the year. The company does not make entries to accrue interest except at December 31. Nov. 1 Loaned $60,000 cash to B. Carr on a 12-month, 7% note
> Stine Company has accounts receivable of $95,400 at March 31, 2014. An analysis of the accounts shows these amounts Credit terms are 2/10, n/30. At March 31, 2014, there is a $2,100 credit balance in Allowance for Doubtful Accounts prior to adjustment.
> At the beginning of the current period, Griffey Corp. had balances in Accounts Receivable of $200,000 and in Allowance for Doubtful Accounts of $9,000 (credit). During the period, it had net credit sales of $800,000 and collections of $763,000. It wrote
> Kimbrel Corp. significantly reduced its requirements for credit sales. As a result, sales during the current year increased dramatically. It had receivables at the beginning of the year of $38,000 and ending receivables of $191,000. Credit sales were $38
> The following ratios are available for Lin Inc. Instructions: (a) Is Lin’s short-term liquidity improving or deteriorating in 2014? Be specific in your answer, referring to relevant ratios. (b) Do changes in turnover ratios affect pro
> Suppose the following information was taken from the 2014 financial statements of FedEx Corporation, a major global transportation/delivery company. Instructions: Answer each of the following questions. (a) Calculate the accounts receivable turnover an
> The cash records of Downs Company show the following. For July: 1. The June 30 bank reconciliation indicated that deposits in transit total $580. During July, the general ledger account Cash shows deposits of $16,900, but the bank statement indicates tha
> This information relates to the Cash account in the ledger of Treanor Company. Balance September 1—$16,400; Cash deposited—$64,000 Balance September 30—$17,600; Checks written—$62,8
> Iris Company purchased land and a building on January 1, 2014. Management’s best estimate of the value of the land was $100,000 and of the building $250,000. However, management told the accounting department to record the land at $230,000 and the buildi
