Prepare the necessary adjusting entries for Johnstone Controls at the end of its December 31, 2018, fiscal yearend for each of the following situations. No adjusting entries were recorded during the year. 1. On March 31, 2018, the company lent $50,000 to another company. A note was signed with principal and interest at 6% payable on March 31, 2019. 2. On September 30, 2018, the company paid its landlord $12,000 representing rent for the period September 30, 2018, to September 30, 2019. 3. Supplies on hand at the end of 2017 totaled $3,000. Additional supplies costing $5,000 were purchased during 2018 and debited to the supplies account. At the end of 2018, supplies costing $4,200 remain on hand. 4. Vacation pay of $6,000 for the year that had been earned by employees was not paid or recorded. The company records vacation pay as salaries and wages expense.
> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Determine the specific citation for each of the following items: 1. The topic number for business combinations 2. The topic number for related party disclosures 3. The
> Presented below is income statement information of the Schefter Corporation for the year ended December 31, 2018. Required: Prepare the necessary closing entries at December 31, 2018. 284,000 12,000 4,000 30,000 20,000 Sales revenue $492,000 80,000 6
> Listed below are several transactions that took place during the second and third years of operations for the RPG Company. In addition, you learn that the company incurred advertising costs of $25,000 in year 2, owed the advertising agency $5,000 at the
> American Chip Corporation’s fiscal year-end is December 31. The following is a partial adjusted trial balance as of December 31, 2018. Required: Prepare the necessary closing entries at December 31, 2018. Account Title Deblts Credi
> Listed below are several transactions that took place during the first two years of operations for the law firm of Pete, Pete, and Roy. In addition, you learn that the firm incurred utility costs of $35,000 in year 1, that there were no liabilities at th
> Explain the difference between permanent accounts and temporary accounts. Why does an accounting system include both types of accounts?
> The accounting system of K and M Manufacturing consists of a general journal (GJ), a cash receipts journal (CR), a cash disbursements journal (CD), a sales journal (SJ), and a purchases journal (PJ). For each of the following, indicate which journal shou
> Listed below are accounting concepts discussed in this chapter. a. Economic entity assumption b. Going concern assumption c. Periodicity assumption d. Monetary unit assumption e. Historical cost principle f. Conservatism g. Matching h. Full-disclosure pr
> For each of the following situations, (1) indicate whether you agree or disagree with the financial reporting practice employed and (2) state the accounting concept that is applied (if you agree), or violated (if you disagree). 1. Winderl Corporation
> The White Company’s accounting system consists of a general journal (GJ), a cash receipts journal (CR), a cash disbursements journal (CD), a sales journal (SJ), and a purchases journal (PJ). For each of the following, indicate which jou
> Pastina Company sells various types of pasta to grocery chains as private label brands. The company’s fiscal year-end is December 31. The unadjusted trial balance as of December 31, 2018, appears below. Information necessary to prepare
> For each of the following situations, state whether you agree or disagree with the financial reporting practice employed, and briefly explain the reason for your answer. 1. The controller of the Dumars Corporation increased the carrying value of land fro
> Refer to E 2–9 and respond to the following requirements. Data from E2-9: 1. On October 1, 2018, Microchip lent $90,000 to another company. A note was signed with principal and 8% interest to be paid on September 30, 2019. 2. On November 1, 2018, the co
> For each of the following situations, indicate whether you agree or disagree with the financial reporting practice employed and state the accounting concept that is applied (if you agree) or violated (if you disagree). 1. Wagner Corporation adjusted the
> The employees of Xitrex, Inc., are paid each Friday. The company’s fiscal year-end is June 30, which falls on a Wednesday for the current year. Salaries and wages are earned evenly throughout the five-day work week, and $10,000 will be paid on Friday, Ju
> Identify the accounting concept that was violated in each of the following situations. 1. Pastel Paint Company purchased land two years ago at a price of $250,000. Because the value of the land has appreciated to $400,000, the company has valued the land
> Refer to E 2–9 and respond to the following requirements. Data from E2-9: 1. On October 1, 2018, Microchip lent $90,000 to another company. A note was signed with principal and 8% interest to be paid on September 30, 2019. 2. On November 1, 2018, the co
> Listed below are several statements that relate to financial accounting and reporting. Identify the accounting concept that applies to each statement. 1. Jim Marley is the sole owner of Marley’s Appliances. Jim borrowed $100,000 to buy a new home to be u
> Each economic event or transaction will have a dual effect on financial position. Explain what is meant by this dual effect.
> Explain the roles of the SEC and the FASB in the setting of accounting standards.
> The December 31, 2018, unadjusted trial balance for the Wolkstein Drug Company is presented below. December 31 is the company’s fiscal year-end. The following year-end adjusting entries are required: a. Depreciation expense for the year
> Listed below are several terms and phrases associated with the accounting concepts. Pair each item from List A (by letter) with the item from List B that is most appropriately associated with it. List A List B 1. Expense recognition 2. Periodicity 3.
> The following is the post-closing trial balance for the Whitlow Manufacturing Corporation as of December 31, 2017. / The following transactions occurred during January 2018: Jan. 1 Sold merchandise for cash, $3,500. The cost of the merchandise was $2,0
> Haskins and Jones, Attorneys-at-Law, maintain its books on a cash basis. During 2018, the company collected $545,000 in fees from its clients and paid out $412,000 in expenses. You are able to determine the following information about accounts receivable
> The conceptual framework indicates the desired fundamental and enhancing qualitative characteristics of accounting information. Several constraints impede achieving these desired characteristics. Answer each of the following questions related to these ch
> Stanley and Jones Lawn Service Company (S&J) maintains its books on a cash basis. However, the company recently borrowed $100,000 from a local bank and the bank requires S&J to provide annual financial statements prepared on an accrual basis. Dur
> Target Corporation prepares its financial statements according to U.S. GAAP. Target’s financial statements and disclosure notes for the year ended January 30, 2016, are available in the Connect. This material also is available under the Investor Relation
> During the course of your examination of the financial statements of the Hales Corporation for the year ended December 31, 2018, you discover the following: a. An insurance policy covering three years was purchased on January 1, 2018, for $6,000. The en
> Listed below are several terms and phrases associated with the FASB’s conceptual framework. Pair each item from List A (by letter) with the item from List B that is most appropriately associated with it. List A List B a. Decreases i
> The following transactions occurred during 2018 for the Beehive Honey Corporation: Required: 1. Record each transaction in general journal form. Omit explanations. 2. Prepare any necessary adjusting entries at the year-end on December 31, 2018. No adju
> What is the purpose of special journals? In what ways do they simplify the recording process?
> Access the financial statements for the year ended January 30, 2016 for The Gap, Inc. by downloading them from www.gapinc.com, and use them to answer the following questions. Required: 1. What amounts did The Gap report for the following items for the f
> Explain the difference between external events and internal events. Give an example of each type of event.
> The Righter Shoe Store Company prepares monthly financial statements for its bank. The November 30 and December 31, 2018, trial balances contained the following account information: The following information also is known: a. The December income statemen
> Halogen Laminated Products Company began business on January 1, 2018. During January, the following transactions occurred: Required: 1. Prepare general journal entries to record each transaction. Omit explanations. 2. Post the entries to T-accounts. 3.
> When a company makes an expenditure that is neither a payment to a creditor nor a distribution to an owner, management must decide if the expenditure should be capitalized (recorded as an increase in an asset) or expensed (recorded as an expense thereby
> Target Corporation prepares its financial statements according to U.S. GAAP. Target’s financial statements and disclosure notes for the year ended January 30, 2016, are available in Connect. This material is also available under the Investor Relations li
> Revenues measure the accomplishments of a company during the period. Expenses are then matched with revenues to produce a periodic measure of performance called net income. Required: 1. Explain what is meant by the phrase matched with revenues. 2. Descr
> Newman Consulting Company maintains its records on a cash basis. During 2018 the following cash flows were recorded: cash received from customers, $420,000; and cash paid for salaries, utilities, and advertising, $240,000, $35,000, and $12,000, respectiv
> A new client, the Wolf Company, asks your advice concerning the point in time that the company should recognize revenue from the rental of its office buildings. Renters usually pay rent on a quarterly basis at the beginning of the quarter. The owners con
> The year-end adjusted trial balance of the Timmons Tool and Die Corporation included the following account balances: retained earnings, $220,000; sales revenue, $850,000; cost of goods sold, $580,000; salaries expense, $180,000; rent expense, $40,000; an
> Prepare the necessary adjusting entries at December 31 for each of the items listed in BE 2–4. Depreciation on the equipment is $12,000 per year. Items from BE 2-4: (1) on October 1, $12,000 was paid for a one-year fire insurance policy; (2) on June 30
> Assume that the FASB is considering revising an important accounting standard. Required: 1. What is the desired benefit from revising an accounting standard? 2. What are some of the possible costs that could result from a revision of an accounting stand
> The following account balances were taken from the 2018 post-closing trial balance of the Bowler Corporation: cash, $5,000; accounts receivable, $10,000; inventory, $16,000; equipment, $100,000; accumulated depreciation—equipment, $40,000; accounts payab
> Mary McQuire is trying to decide how to invest her money. A friend recommended that she buy the stock of one of two corporations and suggested that she should compare the financial statements of the two companies before making a decision. Required: 1. D
> Explain the difference between the general ledger and a subsidiary ledger.
> Using the information from P 2–8, prepare and complete a worksheet similar to Illustration 2A–1. Use the information in the worksheet to prepare an income statement and a statement of shareholders’ eq
> The following account balances were taken from the 2018 adjusted trial balance of the Bowler Corporation: sales revenue, $325,000; cost of goods sold, $168,000; salaries expense, $45,000; rent expense, $20,000; depreciation expense, $30,000; and miscella
> Generally accepted accounting principles do not require companies to disclose forecasts of any financial variables to external users. A friend, who is a finance major, is puzzled by this and asks you to explain why such relevant information is not provid
> It is the responsibility of management to apply accounting standards when communicating with investors and creditors through financial statements. Another group, auditors, serves as an independent intermediary to help ensure that management has in fact a
> Prepare journal entries for each of the following transactions for a company that has a fiscal year-end of December 31: (1) on October 1, $12,000 was paid for a one-year fire insurance policy; (2) on June 30 the company lent its chief financial officer
> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Required: 1. Identify the Codification topic number that provides guidance on fair value measurements. 2. What is the specific citation that lists the disclosures requ
> You have recently been hired by Davis & Company, a small public accounting firm. One of the firm’s partners, Alice Davis, has asked you to deal with a disgruntled client, Mr. Sean Pitt, owner of the city’s largest hardware store. Mr. Pitt is applying to
> In 1934, Congress created the Securities and Exchange Commission (SEC) and gave the commission both the power and responsibility for setting accounting and reporting standards in the United States. Required: 1. Explain the relationship between the SEC a
> Prepare journal entries for each of the transactions listed in BE 2–1. Transactions from BE 2–1: The Marchetti Soup Company entered into the following transactions during the month of June: (1) purchased inventory on account for $165,000 (assume Marche
> Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows: Cash collected from customers, $340,000; Cash paid for rent, $40,000; Cash paid to employees for services rendered during the year, $120,000; Cash pa
> Zambrano Wholesale Corporation maintains its records on a cash basis. At the end of each year the company’s accountant obtains the necessary information to prepare accrual basis financial statements. The following cash flows occurred du
> “I don’t understand,” complained Chris, who responded to your bulletin board posting for tutoring in introductory accounting. The complaint was in response to your statements that recording adjusting entries is a critical step in the accounting processin
> Identify the accounting concept that was violated in each of the following situations. 1. Astro Turf Company recognizes an expense, cost of goods sold, in the period the product is manufactured. 2. McCloud Drug Company owns a patent that it purchased thr
> Define reversing entries and discuss their purpose.
> You are in your third year as an accountant with McCarver-Lynn Industries, a multidivisional company involved in the manufacturing, marketing, and sales of surgical prosthetic devices. After the fiscal year-end, you are working with the controller of the
> What is a proxy statement? What information does it provide?
> Disclosure notes are an integral part of the information provided in financial statements. In what ways are the notes critical to understanding the financial statements and to evaluating the firm’s performance and financial health?
> The current asset section of Stibbe Pharmaceutical Company’s balance sheet included cash of $20,000 and accounts receivable of $40,000. The only other current asset is inventories. The company’s current ratio is 2.0 and its acid-test ratio is 1.5. Determ
> You have been asked to review the December 31, 2018, balance sheet for Champion Cleaning. After completing your review, you list the following three items for discussion with your superior: 1. An investment of $30,000 is included in current assets. Manag
> The following is a December 31, 2018, post-closing trial balance for Culver City Lighting, Inc. Prepare a classified balance sheet for the company. Account Title Debits Credits $ 55,000 39,000 45,000 15,000 Cash Accounts receivable Inventories Prepai
> Levens Co. operates in several distinct business segments. The company does not have any reportable foreign operations or major customers. Required: 1. What is the purpose of operating segment disclosures? 2. Define an operating segment. 3. List the amou
> Define current liabilities and list the typical liability categories included in this classification.
> Refer to the situation described in BE 3–2. Prepare a classified balance sheet for K and J Nursery, Inc. The equipment originally cost $140,000. Situation in BE 3-2 The trial balance for K and J Nursery, Inc., listed the following account balances at De
> Define current assets and list the typical asset categories included in this classification.
> EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, performs automated collection, validation, indexing, and forwarding of submissions by companies and others who are required by law to file forms with the SEC. All publicly traded domes
> Refer to the situation described in BE 3–2. Determine the year-end balance in retained earnings for K and J Nursery, Inc. Situation in BE 3-2 The trial balance for K and J Nursery, Inc., listed the following account balances at December 31, 2018, the en
> Explain why the balance sheet does not portray the market value of the entity.
> The trial balance for K and J Nursery, Inc., listed the following account balances at December 31, 2018, the end of its fiscal year: cash, $16,000; accounts receivable, $11,000; inventories, $25,000; equipment (net), $80,000; accounts payable, $14,000; w
> Describe the purpose of the balance sheet.
> A first-year accounting student is confused by a statement made in a recent class. Her instructor stated that the assets listed in the balance sheet of the IBM Corporation include computers that are classified as current assets as well as computers that
> The following is the ending balances of accounts at December 31, 2018 for the Vosburgh Electronics Corporation. Additional Information: 1. The common stock represents 1 million shares of no par stock authorized, 500,000 shares issued and outstanding. 2.
> Every annual report of a public company includes an extensive discussion and analysis provided by the company’s management. Specifically, which aspects of the company must this discussion address? Isn’t management’s perspective too biased to be of use to
> The following is the ending balances of accounts at June 30, 2018 for Excell Company. Additional Information: 1. The short-term investments account includes $18,000 in U.S. treasury bills purchased in May. The bills mature in July. 2. The accounts receiv
> The following is the ending balances of accounts at December 31, 2018, for the Weismuller Publishing Company. /\ Additional Information: 1. Prepaid expenses include $120,000 paid on December 31, 2018, for a two-year lease on the building that houses both
> The following is a December 31, 2018, post-closing trial balance for Almway Corporation. Additional Information: 1. The investment account includes an investment in common stock of another corporation of $30,000 which management intends to hold for at le
> The data listed below are taken from a balance sheet of Trident Corporation at December 31, 2018. Some amounts, indicated by question marks, have been intentionally omitted. Required: 1. Determine the missing amounts. 2. Prepare Trident’
> Refer to the trial balance information in BE 3–5. Calculate the (a) current ratio, (b) acid-test ratio, and (c) debt to equity ratio. Information from B3-5: The following is a December 31, 2018, post-closing trial balance for Culver Ci
> Presented below is a list of balance sheet accounts. Required: Prepare a classified balance sheet ignoring monetary amounts. Accounts payable Cash Accounts receivable Common stock Accumulated depreciation-buildings Accumulated depreciation-equipment
> Melody Lane Music Company was started by John Ross early in 2018. Initial capital was acquired by issuing shares of common stock to various investors and by obtaining a bank loan. The company operates a retail store that sells records, tapes, and compact
> Presented below is the balance sheet for HHD, Inc., at December 31, 2018. The captions shown in the summarized statement above include the following: a. Current assets: cash, $150,000; accounts receivable, $200,000; inventories, $225,000; and prepaid ins
> The following incomplete balance sheet for the Sanderson Manufacturing Company was prepared by the company’s controller. As accounting manager for Sanderson, you are attempting to reconstruct and revise the balance sheet. Additional Inf
> The following balance sheet for the Hubbard Corporation was prepared by the company: Additional Information: 1. The buildings, land, and machinery are all stated at cost except for a parcel of land that the company is holding for future sale. The land or
> Target Corporation prepares its financial statements according to U.S. GAAP. Target’s financial statements and disclosure notes for the year ended January 30, 2016, are available in the Connect library. This material also is available under the Investor
> Presented next are the ending balances of accounts for the Kansas Instruments Corporation at December 31, 2018. Additional Information: 1. The note receivable, along with any accrued interest, is due on November 22, 2019. 2. The note payable is due in 20
> The following are the ending balances of accounts at December 31, 2018, for the Valley Pump Corporation. Additional Information: 1. The $120,000 balance in the land account consists of $100,000 for the cost of land where the plant and office buildings ar
> The following is a December 31, 2018, post-closing trial balance for the Jackson Corporation. Required: Prepare a classified balance sheet for Jackson Corporation at December 31, 2018. Account Title Debits Credits $ 40,000 34,000 75,000 16,000 10,000
> The following are the typical classifications used in a balance sheet: a. Current assets b. Investments and funds c. Property, plant, and equipment d. Intangible assets e. Other assets f. Current liabilities g. Long-term liabilities h. Paid-in-capital i.
> The following are the typical classifications used in a balance sheet: a. Current assets b. Investments and funds c. Property, plant, and equipment d. Intangible assets e. Other assets f. Current liabilities g. Long-term liabilities h. Paid-in-capital i.
> Distinguish between property, plant, and equipment and intangible assets.
> The following December 31, 2018, fiscal year-end account balance information is available for the Stonebridge Corporation: The only asset not listed is short-term investments. The only liabilities not listed are a $30,000 note payable due in two years an
> Refer to E 3–21. Information from E3-21 The Canton Corporation operates in four distinct business segments. The segments, along with 2018 information on revenues, assets, and net income, are listed below ($ in thousands): Required: H
> The Canton Corporation operates in four distinct business segments. The segments, along with 2018 information on revenues, assets, and net income, are listed below ($ in thousands): Required: 1. For which segments must Canton report supplementary informa
> Most decisions made by management impact the ratios analysts use to evaluate performance. Indicate (by letter) whether each of the actions listed below will immediately increase (I), decrease (D), or have no effect (N) on the ratios shown. Assume each ra
> Define a subsequent event.
