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, 2014?
> The president of Dickerson Inc. proudly announces her company’s improved liquidity since its current ratio has increased substantially from one year to the next. Does an increase in the current ratio always indicate improved liquidity? What other ratio o
> General Motors Company has accounts receivable and notes receivable. How should the receivables be reported on the balance sheet?
> Carrera Company dishonors a note at maturity. What are the options available to the lender?
> Debbie Trevino, the vice president of sales for Tropical Pools and Spas, wants the company’s credit department to be less restrictive in granting credit. “How can we sell anything when you guys won’t approve anybody?” she asks. Discuss the pros and cons
> Moritz Corporation reported net income of $346,000, cash of $67,800, and net cash provided by operating activities of $221,200. What does this suggest about the quality of the company’s earnings? What further steps should be taken?
> As the company accountant, explain the following ideas to the management of Jurgens Company. (a) The concept of reasonable assurance in internal control. (b) The importance of the human factor in internal control.
> “When perpetual inventory records are kept, the results under the FIFO and LIFO methods are the same as they would be in a periodic inventory system.” Do you agree? Explain.
> Marcia Tague asks your help concerning an NSF check. Explain to Marcia (a) what an NSF check is, (b) how it is treated in a bank reconciliation, and (c) whether it will require an adjusting entry on the company’s books.
> Alison Hinck is studying for the next accounting midterm examination. What should Alison know about (a) departing from the cost basis of accounting for inventories and (b) the meaning of “market” in the lower-of-cost-or-market method?
> Mark Elarton, director of marketing, wants to reduce the selling price of his company’s products by 15% to increase market share. He says, “I know this will reduce our gross profit rate, but the increased number of units sold will make up for the lost ma
> George Orear, a mid-level product manager for Theresa’s Shoes, thinks his company should switch from LIFO to FIFO. He says, “My bonus is based on net income. If we switch it will increase net income and increase my bonus. The company would be better off
> In its year-end earnings announcement press release, Brantley Corp. announced that its earnings increased by $15 million relative to the previous year. This represented a 20% increase. Inspection of its income statement reveals that the company reported
> Luo Company has always provided its customers with payment terms of 1/10, n/30. Members of its sale force have commented that competitors are offering customers 2/10, n/45. Explain what these terms mean, and discuss the implications to Luo of switching i
> (a) Explain the control principle of independent internal verification. (b) What practices are important in applying this principle?
> As the end of Petit Company’s fiscal year approached, it became clear that the company had considerable excess inventory. Ronald Morel, the head of marketing and sales, ordered salespeople to “add 20% more units to each order that you ship. The customers
> Barten Corporation reported net sales $800,000; cost of goods sold $520,000; operating expenses $210,000; and net income $68,000. Calculate the following values and explain what they mean: (a) profit margin and (b) gross profit rate.
> (a) What is the primary source document for recording (1) cash sales and (2) credit sales? (b) Using XXs for amounts, give the journal entry for each of the transactions in part (a), assuming perpetual inventory
> (a) Millar Company ships merchandise to Branyan Corporation on December 30. The merchandise reaches the buyer on January 5. Indicate the terms of sale that will result in the goods being included in (1) Millar’s December 31 inventory and (2) Branyan’s
> Your friend Jill Wurtz has been hired to help take the physical inventory in Proehl’s Hardware Store. Explain to Jill what this job will entail.
> Miriam Corporation purchased machinery on January 1, 2014, at a cost of $380,000. The estimated useful life of the machinery is 5 years, with an estimated salvage value at the end of that period of $20,000. The company is considering different depreciati
> In recent years Howard 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 use
> Quiver Corporation and Swaze Corporation, two corporations of roughly the same size, are both involved in the manufacture of umbrellas. Each company depreciates its plant assets using the straight-line approach. An investigation of their financial statem
> The intangible assets section of the balance sheet for Venable Company at December 31, 2014, is presented here. Patents ($70,000 cost less $7,000 amortization) ……………………………………. $63,000 Copyrights ($48,000 cost less $18,000 amortization) ………………………………..30,
> Here are selected transactions for Evan’s Corporation for 2014. Jan. 1 Retired a piece of machinery that was purchased on January 1, 2004. The machine cost $47,000 and had a useful life of 10 years with no salvage value. Mar. 31 Sold a computer th
> At December 31, 2013, Tong Corporation reported these plant assets. During 2014, the following selected cash transactions occurred. Apr. 1 Purchased land for $2,600,000. May 1 Sold equipment that cost $750,000 when purchased on January 1, 2009. The
> Durhan Company closes its books on its October 31 year-end. The company does not make entries to accrue for interest except at its year-end. On September 30, the Notes Receivable account balance is $22,800. Notes Receivable include the following. Inter
> Durbin Corporation reported net sales of $250,000, cost of goods sold of $150,000, operating expenses of $50,000, net income of $32,500, beginning total assets of $520,000, and ending total assets of $600,000. Calculate each of the following values and e
> The president of Thompson 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)
> On January 1, 2014, Alter Company had Accounts Receivable $154,000; Notes Receivable of $12,000; and Allowance for Doubtful Accounts of $13,200. The note receivable is from Hartwig Company. It is a 4-month, 9% note dated December 31, 2013. Alter Company
> At December 31, 2014, the trial balance of Valcik 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
> Presented below is an aging schedule for Harper Company. At December 31, 2013, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $9,000. Instructions: (a) Journalize and post the adjusting entry for bad debts at December 31, 201
> The following represents selected information taken from a company’s aging schedule to estimate uncollectible accounts receivable at year-end. Instructions: (a) Calculate the total estimated bad debts based on the above information. (
> Elite Service 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 b
> Noble Corporation prepares monthly cash budgets. Relevant data from operating budgets for 2014 are shown 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 Items Inc.’s May 31, 2014, balance sheet. Cash ………………&ac
> Bug Busters Company performs insect extermination services. On October 31, 2014, the company’s cash account per its general ledger showed a balance of $4,632. The bank statement from Central Bank on that date showed the following balanc
> The bank portion of the bank reconciliation for Triad Imports, Inc. at July 31, 2014, is shown below. TRIAD IMPORTS, INC. Bank Reconciliation July 31, 2014 Cash balance per bank ………â€
> Suppose the following financial information (in millions) is from the 2014 annual reports of Redbird Sportswear and The Carwright Company. Instructions: Calculate the accounts receivable turnover and average collection period for both companies. Commen
> Laurie Massoth, CEO of Bargain Den Stores, is considering a recommendation made by both the company’s purchasing manager and director of finance that the company should invest in a sophisticated new perpetual inventory system to replace its periodic syst
> On March 31, 2014, Taggert Company had a cash balance per books of $5,174.20. The statement from Western Bank on that date showed a balance of $6,041.40. A comparison of the bank statement with the cash account revealed the following facts. 1. The bank s
> Tom Hall has worked for Dr. Johnson for several years. Tom demonstrates a loyalty that is rare among employees. He is always willing to “cover” for other employees and hasn’t taken a vacation in three years. One of Tom’s primary duties at the dental offi
> The Soccer Club decided to sell coupon books as a fund-raising activity. The books allow users to enjoy restaurants, entertainment, and services such as oil changes, at substantial discounts. The club bought 100 books for $16 each, and members will sell
> Liberty Inc. is a retailer operating in Centralia. Liberty uses the perpetual inventory method. All sales returns from customers result in the goods being returned to inventory. (Assume that the inventory is not damaged.) Assume that there are no credit
> Suppose this information is available for the Automotive Sector of NoGo Motor Company for 2014. NoGo uses the LIFO inventory method. (in millions) Beginning inventory.…………………………………. $ 10,017 Ending inventory ……………………………………………10,121 LIFO reserve ……………………
> You have the following information for Limex Watches. Limex uses the periodic method of accounting for its inventory transactions. Limex carries only one brand of hand-crafted jeweled watches—all are identical. Each batch of watches pur
> You have the following information for Crystal Inc. for the month ended May 31, 2014. Crystal uses a periodic method for inventory. Instructions: (a) Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profit, and (iv) gross profit
> The management of Weigel 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 (4,000 units) ………………………………$ 16,000 Cost of 105,00
> Smythe Company Inc. had a beginning inventory of 200 units of Product ERV at a cost of $6 per unit. During the year, purchases were: Smythe Company uses a periodic inventory system. Sales totaled 1,900 units. Instructions: (a) Determine the cost of go
> 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 …………
> 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 ………………………
> 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 Novem
> 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
