On April 1, Wonder Travel Agency Inc. was established. These transactions were completed during the month. 1. Stockholders invested $30,000 cash in the company in exchange for common stock. 2. Paid $900 cash for April office rent. 3. Purchased office equipment for $3,400 cash. 4. Purchased $200 of advertising in the Chicago Tribune, on account. 5. Paid $500 cash for office supplies. 6. Performed services worth $12,000. Cash of $3,000 is received from customers, and the balance of $9,000 is billed to customers on account. 7. Paid $400 cash dividend. 8. Paid Chicago Tribune amount due in transaction (4). 9. Paid employees’ salaries $1,800. 10. Received $9,000 in cash from customers billed previously in transaction (6). Instructions (a) Prepare a tabular analysis of the transactions using these column headings: Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Common Stock, and Retained Earnings (with separate columns for Revenues, Expenses, and Dividends). Include margin explanations for any changes in Retained Earnings. (b) From an analysis of the Retained Earnings columns, compute the net income or net loss for April.
> The tabular analysis of transactions for Wolfe Company is presented in E3-4(Given below). Instructions Prepare an income statement and a retained earnings statement for August and a classified balance sheet at August 31, 2017. Assets = Liabilities +
> In its first year of operations, Gomes Company recognized $28,000 in service revenue, $6,000 of which was on account and still outstanding at year-end. The remaining $22,000 was received in cash from customers. The company incurred operating expenses of
> The following information is available for Berlin Corp. for the year ended December 31, 2017: Prepare a multiple-step income statement for Berlin Corp. and comprehensive income statement. The company has a tax rate of 30%. This rate also applies to the
> The following accounts are taken from the ledger of Chillin’ Company at December 31, 2017. Notes Payable….………………….……..$20,000 Cash………………………………..…………..$6,000 Common Stock…………………..…………25,000 Supplies………………………………………….5,000 Equipment………………………..………….76,000 Re
> Purpose: This activity provides information about career opportunities for CPAs. Address: www.startheregoplaces.com/why-accounting,orgo to www.wiley.com/college/kimmel Instructions Go the address shown above and then answer the following questions. (a)
> At the end of its first year, the trial balance of Rayburn Company shows Equipment $22,000 and zero balances in Accumulated Depreciation—Equipment and Depreciation Expense. Depreciation for the year is estimated to be $2,750. Prepare the annual adjusting
> For each of the following accounts, indicate the effect of a debit or a credit on the account and the normal balance. (a) Accounts Payable (b) Advertising Expense. (c) Service Revenue. (d) Accounts Receivable. (e) Retained Earnings (f) Dividends.
> Indicate how each business transaction affects the basic accounting equation. (a) Paid cash for janitorial services. (b) Purchased equipment for cash. (c) Issued common stock to investors in exchange for cash. (d) Paid an account payable in full.
> In completing the engagement in Question 3, Wilson pays no costs in March, $2,500 in April, and $2,200 in May (incurred in April). How much expense should the firm deduct from revenues in the month when it recognizes the revenue? Why?
> Bradley’s Miniature Golf and Driving Range Inc. was opened on March 1 by Bob Dean. These selected events and transactions occurred during March. Mar 1 Stockholders invested $50,000 cash in the business in exchange for common stock of the corporation. 3 P
> The Financial Accounting Standards Board (FASB) is a private organization established to improve accounting standards and financial reporting. The FASB conducts extensive research before issuing a “Statement of Financial Accounting Standards,” which repr
> A tabular analysis of the transactions made during August 2017 by Wolfe Company during its first month of operations is shown below. Each increase and decrease in stock-holders’ equity is explained. Instructions (a) Describe each trans
> Your examination of the records of a company that follows the cash basis of accounting tells you that the company’s reported cash-basis earnings in 2017 are $33,640. If this firm had followed accrual-basis accounting practices, it would
> Boyd Docker recorded the following transactions during the month of April. Post these entries to the Cash account of the general ledger to determine the ending balance in cash. The beginning balance in cash on April 1 was $1,900. Аprг. 3 Cash Servi
> Recently, it was announced that two giant French retailers, Carrefour SA and Promodes SA, would merge. A headline in the Wall Street Journal blared, “French Retailers Create New WalMart Rival.” While Wal-Martâ
> a. Indicate in which financial statement each of the following adjusted trial balance accounts would be presented. Service Revenue Accounts Receivable Notes Payable Accumulated Depreciation Common Stock Utilities Expense b. Paloma Company shows the follo
> Chieftain International, Inc., is an oil and natural gas exploration and production company. A recent balance sheet reported $208 million in assets with only $4.6 million in liabilities, all of which were short-term accounts payable. During the year, Chi
> Lahey Advertising Company’s trial balance at December 31 shows Supplies $8,800 and Supplies Expense $0. On December 31, there are $1,100 of supplies on hand. Prepare the adjusting entry at December 31 and, using T-accounts, enter the balances in the acco
> During 2017, Rostock Company entered into the following transactions. 1. Purchased equipment for $286,176 cash. 2. Issued common stock to investors for $137,590 cash. 3. Purchased inventory of $68,480 on account. Using the following tabular analysis, sho
> Here are some accounting reporting situations. (a) East Lake Company recognizes revenue at the end of the production cycle but before sale. The price of the product, as well as the amount that can be sold, is not certain. (b) Hilo Company is in its fifth
> Max Wilson, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Wilson’s law firm prepares monthly financial statements, when should it recognize revenue from this engagement? Why?
> Ivy Company purchased land and a building on January 1, 2017. 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 buildin
> During 2017, its first year of operations as a delivery service, Persimmon Corp. entered into the following transactions. 1. Issued shares of common stock to investors in exchange for $100,000 in cash. 2. Borrowed $45,000 by issuing bonds. 3. Purchased d
> Are the following events recorded in the accounting records? Explain your answer in each case. (a) A major stockholder of the company dies. (b) Supplies are purchased on account. (c) An employee is fired. (d) The company pays a cash dividend to its stock
> Bindy Crawford created a corporation providing legal services, Bindy Crawford Inc., on July 1, 2017. On July 31 the balance sheet showed Cash $4,000, Accounts Receivable $2,500, Supplies $500, Equipment $5,000, Accounts Payable $4,200, Common Stock $6,20
> Boyd Docker engaged in the following activities in establishing his photography studio, SnapShot!: 1. Opened a bank account in the name of SnapShot! and deposited $8,000 of his own money into this account in exchange for common stock. 2. Purchased photog
> Salt Creek Golf Inc. was organized on July 1, 2017. Quarterly financial statements are prepared. The trial balance and adjusted trial balance on September 30 are shown below. Instructions (a) Journalize the adjusting entries that were made. (b) Prepare
> Briefly describe some of the similarities and differences between GAAP and IFRS with respect to the accounting for inventories.
> Jean Karns is the new owner of Jean’s Computer Services. At the end of July 2017, her first month of ownership, Jean is trying to prepare monthly financial statements. She has the following information for the month. 1. At July 31, Jean owed employees $1
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. Instructions (a) Based on the information contained in the financial statements, determine t
> Cortina Company accumulates the following adjustment data at December 31. Indicate (1) the type of adjustment (prepaid expense, accrued revenue, and so on) and (2) the status of the accounts before adjustment (for example, “assets understated and revenu
> During 2017, Manion Corp. entered into the following transactions. 1. Borrowed $60,000 by issuing bonds. 2. Paid $9,000 cash dividend to stockholders. 3. Received $13,000 cash from a previously billed customer for services performed. 4. Purchased supplie
> At December 31, 2017, the trial balance of Malone Company contained the following amounts before adjustment. Instructions (a) Prepare the adjusting entry at December 31, 2017, to record bad debt expense, assuming that the aging schedule indicates that $1
> The financial statements of Apple Inc. are presented in Appendix A at the end of this textbook. Instructions Answer the following questions using the financial statements and the notes to the financial statements. (a) What were Apple’s total current asse
> Boyd Docker has just rented space in a strip mall. In this space, he will open a photography studio, to be called SnapShot! A friend has advised Boyd to set up a double-entry set of accounting records in which to record all of his business transactions.
> These accounting concepts were discussed in this and previous chapters. 1. Economic entity assumption. 2. Expense recognition principle. 3. Monetary unit assumption. 4. Periodicity assumption. 5. Historical cost principle. 6. Materiality. 7. Full disclos
> Brady Company entered into these transactions during May 2017, its first month of operations. 1. Stockholders invested $40,000 in the business in exchange for common stock of the company. 2. Purchased computers for office use for $30,000 from Ladd on acc
> Can a business enter into a transaction that affects only the left side of the basic accounting equation? If so, give an example.
> Identify and state two generally accepted accounting principles that relate to adjusting the accounts.
> Nona Curry started her own consulting firm, Curry Consulting Inc., on May 1, 2017. The following transactions occurred during the month of May. May 1 Stockholders invested $15,000 cash in the business in exchange for common stock. 2 Paid $600 for office
> Your friend Will Juritz has been hired to help take the physical inventory in Byrd’s Hardware Store. Explain to Will what this job will entail.
> The ledger of Umatilla, Inc. on March 31, 2017, includes the following selected accounts before adjusting entries. An analysis of the accounts shows the following. 1. Insurance expires at the rate of $300 per month. 2. Supplies on hand total $900. 3. Th
> The financial statements of Columbia Sportswear Company are presented in Appendix B. Financial statements of VF Corporation are presented in Appendix C. Instructions (a) Based on the information contained in these financial statements, determine the norm
> The ledger of Melmann Company includes the following accounts. Explain why each account may require adjustment. (a) Prepaid Insurance. (b) Depreciation Expense. (c) Unearned Service Revenue (d) Interest Payable.
> The accounting records of Ohm Electronics show the following data. Beginning inventory……………………………….3,000 units at $5 Purchases………………………………………………8,000 units at $7 Sales………………………………………..…………...9,400 units at $10 Determine cost of goods sold during the per
> Presented below are three economic events. On a sheet of paper, list the letters (a), (b), and (c) with columns for assets, liabilities, and stockholders’ equity. In each column, indicate whether the event increased (+), decreased (−), or had no effect (
> A list of concepts is provided below in the left column, with descriptions of the concepts in the right column. There are more descriptions provided than concepts. Match the description to the concept. 1. ______ Cash-basis accounting. 2. ______ Fiscal ye
> Describe the accounting information system.
> (a) How does the periodicity assumption affect an accountant’s analysis of accounting transactions? (b) Explain the term fiscal year.
> The financial statements of Louis Vuitton are presented in Appendix F. Instructions for accessing and using the company’s complete annual report, including the notes to its financial statements, are also provided in Appendix F. Instructions Describe in w
> Selected transactions for Thyme Advertising Company, Inc. are listed here. 1. Issued common stock to investors in exchange for cash received from investors. 2. Paid monthly rent. 3. Received cash from customers when service was performed. 4. Billed custo
> Mather sells a snowboard, EZslide, that is popular with snowboard enthusiasts. Below is information relating to Mather’s purchases of EZslide snowboards during September. During the same month, 102 EZslide snowboards were sold. Mather u
> The following independent situations require professional judgment for determining when to recognize revenue from the transactions. (a) Southwest Airlines sells you an advance-purchase airline ticket in September for your flight home in December. (b) Ult
> Transactions made by Mickelson Co. for the month of March are shown below. Prepare a tabular analysis that shows the effects of these transactions on the expanded accounting equation, similar to that shown in Illustration 3-3 (given below). 1. The compan
> Godfreid Company has accounts receivable of $95,400 at March 31, 2017. Credit terms are 2/10, n/30. At March 31, 2017, there is a $2,100 credit balance in Allowance for Doubtful Accounts prior to adjustment. The company uses the percentage-of-receivables
> The financial statements of Apple Inc. in Appendix A at the back of this textbook contain the following selected accounts, all in thousands of dollars. Common Stock……………………………….……………………………………………………………………..$ 23,313 Accounts Payable…………………………………..……………………
> Tim Rian, a friend of yours, has recently purchased a home for $125,000, paying $25,000 down and the remainder financed by a 6.5%, 20-year mortgage, payable at $745.57 per month. At the end of the first month, Tim receives a statement from the bank indic
> Your friend just received a car loan. It is a 7-year installment note. He does not understand the mechanics of how the loan works. Explain the important aspects of the installment note.
> Dotsin Corporation issues $400,000 of 9%, 5-year bonds on January 1, 2017, at 104. If Dotsin uses the effective interest method in amortizing the premium, will the annual interest expense increase or decrease over the life of the bonds? Explain.
> Honore Draper is discussing the advantages of the effective interest method of bond amortization with her accounting staff. What do you think Honore is saying?
> Robbins Corporation issues $200,000 of 6%, 5-year bonds on January 1, 2017, at 103. Assuming that the straight-line method is used to amortize the premium, what is the total amount of interest expense for 2017?
> Sauer Corp. has a return on assets of 12%. It plans to issue bonds at 8% and use the cash to repurchase stock. What effect will this have on its debt to assets ratio and on its return on common stockholders’ equity?
> Explain the straight-line method of amortizing discount and premium on bonds payable.
> Suppose the following information is from the 2017 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, w
> Waite Corporation issued a $50,000, 10%, 10-year installment note payable on January 1, 2017. Payments of $8,137 are made each January 1, beginning January 1, 2018. Instructions (a) What amounts should be reported under current liabilities related to the
> Purpose: To learn more about factoring from websites that provide factoring services. Address: www.ccapital.net, or go to www.wiley.com/college/kimmel Instructions Go to the website, click on Invoice Factoring, and answer the following questions. (a) Wha
> What criteria must be met before a contingency must be recorded as a liability? How should the contingency be disclosed if the criteria are not met?
> Under what circumstances will the return on assets and the return on common stockholders’ equity be equal?
> Yancey Co. receives $300,000 when it issues a $300,000, 10%, mortgage note payable to finance the construction of a building at December 31, 2017. The terms provide for annual installment payments of $50,000 on December 31. Instructions Prepare the journ
> What are the implications for analysis if a company has significant operating leases?
> Explain the circumstances under which debt financing will increase the return on common stockholders’ equity.
> Hernandez Company issued $380,000, 7%, 10-year bonds on January 1, 2017, for $407,968. This price resulted in an effective-interest rate of 6% on the bonds. Interest is payable annually on January 1. Hernandez uses the effective-interest method to amorti
> What is the formula for the payout ratio? What does it indicate?
> Anglo Corporation has a current ratio of 1.1. Jon has always been told that a corporation’s current ratio should exceed 2.0. The company maintains that its ratio is low because it has a minimal amount of inventory on hand so as to reduce operating costs.
> Woode Corporation issued $400,000, 7%, 20-year bonds on January 1, 2017, for $360,727. This price resulted in an effective-interest rate of 8% on the bonds. Interest is payable annually on January 1. Woode uses the effective-interest method to amortize b
> The management of Milque 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) provide t
> A Timmins Company of Emporia, Kansas, spreads herbicides and applies liquid fertilizer for local farmers. On May 31, 2017, the company’s Cash account per its general ledger showed a balance of $6,738.90. The bank statement from Emporia
> In the direct method, why is depreciation expense not reported in the cash flows from operating activities section?
> Hank Mays needs a few new trucks for his business. He is considering buying the trucks but is concerned that the additional debt he will need to incur will make his liquidity and solvency ratios look bad. What options does he have other than purchasing t
> Keanu Inc. has net income of $200,000, average shares of common stock outstanding of 40,000, and preferred dividends for the period of $20,000. What is Keanu’s earnings per share of common stock? Fred Tyme, the president of Keanu, believes that the compu
> Thom Inc.’s common stock has a par value of $1 and a current market price of $15. Explain why these amounts are different.
> Motley Company issued $300,000, 8%, 15-year bonds on December 31, 2016, for $288,000. Interest is payable annually on December 31. Motley uses the straight-line method to amortize bond premium or discount. Instructions Prepare the journal entries to reco
> (a) What is the purpose of a retained earnings restriction? (b) Identify the possible causes of retained earnings restrictions.
> The management of Ingolls Corporation is concerned because survey data suggest that many potential customers do not buy vehicles due to quality concerns. It is considering taking the bold step of increasing the length of its warranty from the industry st
> Which two ratios do you think should be of greatest interest in each of the following cases? (a) A pension fund considering the purchase of 20-year bonds. (b) A bank contemplating a short-term loan. (c) A common stockholder.
> Sehr Company issued $500,000, 6%, 30-year bonds on January 1, 2017, at 103. Interest is payable annually on January 1. Sehr uses straight-line amortization for bond premium or discount. Instructions Prepare the journal entries to record the following eve
> Ernie Sams says that liquidity and solvency are the same thing. Is he correct? If not, how do they differ?
> At Martinez Company, checks are not pre numbered because both the purchasing agent and the treasurer are authorized to issue checks. Each signer has access to unissued checks kept in an unlocked file cabinet. The purchasing agent pays all bills pertainin
> What was the total cost of Apple’s treasury stock at September 27, 2014? What was the amount of the 2014 cash dividend? What was the size of the 2014 stock split?
> Give the formulas under the direct method for computing (a) cash receipts from customers and (b) cash payments to suppliers.
> The return on assets for Ayala Corporation is 7.6%. During the same year, Ayala’s return on common stockholders’ equity is 12.8%. What is the explanation for the difference in the two rates?
> Jenseng Inc. issues a $800,000, 10%, 10-year mortgage note on December 31, 2017, to obtain financing for a new building. The terms provide for annual installment payments of $130,196. Prepare the entry to record the mortgage loan on December 31, 2017, an
> The board of directors is considering a stock split or a stock dividend. They understand that total stockholders’ equity will remain the same under either action. However, they are not sure of the different effects of the two actions on other aspects of
> (a) In general, what are the requirements for the financial statement presentation of long-term liabilities? (b) What ratios may be computed to evaluate a company’s liquidity and solvency?
> Describe the direct method for determining net cash provided by operating activities.
> Holding all other factors constant, indicate whether each of the following changes generally signals good or bad news about a company. (a) Increase in profit margin. (b) Decrease in inventory turnover. (c) Increase in current ratio. (d) Decrease in earni
> A large retailer was sued nearly 5,000 times in a recent year—about once every 2 hours every day of the year. It has been sued for everything imaginable—ranging from falls on icy parking lots to injuries sustained in shoppers’ stampedes to a murder with
> 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, 13th Global Fraud Survey). You can find
> Presented below is the partial bond discount amortization schedule for Rohr Corp., which uses the effective-interest method of amortization. Instructions (a) Prepare the journal entry to record the payment of interest and the discount amortization at th
> Comparative financial statement data for Loeb Corporation and Bowsh Corporation, two competitors, appear below. All balance sheet data are as of December 31, 2017. Instructions (a) Comment on the relative profitability of the companies by computing the n
