Rowand Company hires an accounting intern who says that intangible assets should always be amortized over their legal lives. Is the intern correct? Explain.
> At May 31, Brunet Company has net sales of $340,000 and cost of goods available for sale of $230,000. Compute the estimated cost of the ending inventory, assuming the gross profit rate is 35%.
> Rosario Department Store uses a perpetual inventory system. Data for product E2-D2 include the following purchases. On June 1, Rosario sold 26 units, and on August 27, 40 more units. Prepare the perpetual inventory schedule for the above transactions u
> At December 31, 2020, the following information was available for E. Hetzel Company: ending inventory $40,000, beginning inventory $56,000, cost of goods sold $270,000, and sales revenue $380,000. Calculate inventory turnover and days in inventory for E
> Your friend Ben Johnson has been hired to help take the physical inventory in Pearson Hardware Store. Explain to Ben what this job will entail.
> Cruz Video Center accumulates the following cost and net realizable data at December 31. Compute the lower-of-cost-or-net realizable value valuation for the company’s total inventory. Inventory Categories Cost Net Realizable Data
> Larkin Company reports net income of $90,000 in 2020. However, ending inventory was understated $7,000. What is the correct net income for 2020? What effect, if any, will this error have on total assets as reported in the balance sheet at December 31, 20
> Financial Statement In its first month of operation, Hoff man 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 wou
> Financial Statement The management of Mastronardo Corp. is considering the effects of 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 wil
> Data for Weatherall Company are presented in BE6.3. Compute the cost of the ending inventory under the average-cost method, assuming there are 380 units on hand.
> Which payroll tax is levied on both employers and employees?
> What is the difference between gross pay and net pay? Which amount should a company record as wages and salaries expense?
> Under what circumstances is a contingent liability disclosed only in the notes to the financial statements? Under what circumstances is a contingent liability not recorded in the accounts nor disclosed in the notes to the financial statements?
> What is a contingent liability? Give an example of a contingent liability that is usually recorded in the accounts.
> What is liquidity? What are two measures of liquidity?
> Wilkinson Company established a $100 petty cash fund on August 1. On August 31, the fund had $7 cash remaining and petty cash receipts for postage $31, office supplies $42, and miscellaneous expense $16. Prepare journal entries to establish the fund on A
> Ottawa University sold 15,000 season football tickets at $80 each for its six-game home schedule. What entries should be made (a) when the tickets were sold, and (b) after each game?
> a. Your roommate says, “Sales taxes are reported as an expense in the income statement.” Do you agree? Explain. b. Jensen Company has cash proceeds from sales of $8,400. This amount includes $400 of sales taxes. Give the entry to record the proceeds.
> What is the principal difference between a defined-contribution pension plan and a defined benefit pension plan?
> Explain how a 401(k) plan works.
> What are two types of postretirement benefits?
> Petrocelli Company obtains $40,000 in cash by signing a 7%, 6-month, $40,000 note payable to First Bank on July 1. Petrocelli’s fiscal year ends on September 30. What information should be reported for the note payable in the annual financial statements?
> Often during job interviews, the candidate asks the potential employer about the firm’s paid absences policy. What are paid absences? How are they accounted for?
> Identify two additional types of fringe benefits associated with employees’ compensation.
> What are the four functions associated with payroll activities?
> You are a newly hired accountant with Nolasco Company. On your first day, the controller asks you to identify the main internal control objectives related to payroll accounting. How would you respond?
> Pinewood Corporation purchased a piece of equipment for $70,000. It estimated an 8-year life and $2,000 salvage value. At the end of year four (before the depreciation adjustment), it estimated the new total life to be 10 years and the new salvage value
> a. Identify the three types of employer payroll taxes. b. How are tax liability accounts and payroll tax expense accounts classified in the financial statements?
> What are the primary uses of the employee earnings record?
> Distinguish between the two types of payroll deductions and give examples of each.
> What information is shown in a W-2 statement?
> What do the following acronyms stand for: FICA, FUTA, and SUTA?
> Are the federal and state income taxes withheld from employee paychecks a payroll tax expense for the employer? Explain your answer.
> Lori Randle believes a current liability is a debt that can be expected to be paid in one year. Is Lori correct? Explain.
> Distinguish between revenue expenditures and capital expenditures during useful life.
> Andrew is studying for the next accounting examination. He asks your help on two questions: (a) What is salvage value? (b) Is salvage value used in determining periodic depreciation under each depreciation method? Answer Andrew’s questions.
> In a recent newspaper release, the president of Downs Company asserted that something has to be done about depreciation. The president said, “Depreciation does not come close to accumulating the cash needed to replace the asset at the end of its useful l
> Neumann Distributors is a growing company whose ability to raise capital has not been growing as quickly as its expanding assets and sales. Neumann’s local banker has indicated that the company cannot increase its borrowing for the foreseeable future. Ne
> Lynn Company acquires the land and building owned by Noble Company. What types of costs may be incurred to make the asset ready for its intended use if Lynn Company wants to use (a) only the land, and (b) both the land and the building?
> Unruh Refrigeration Company trades in an old machine on a new model when the fair value of the old machine is greater than its book value. The transaction has commercial substance. Should Unruh recognize a gain on disposal of plant assets? If the fair va
> When assets are exchanged in a transaction involving commercial substance, how is the gain or loss on disposal of plant assets computed?
> Sosa Company is doing significant work to revitalize its warehouses. It is not sure whether it should capitalize these costs or expense them. What are the implications for current-year net income and future net income of expensing versus capitalizing the
> You are comparing two companies in the same industry. You have determined that Ace Corp. depreciates its plant assets over a 40- year life, whereas Liu Corp. depreciates its plant assets over a 20-year life. Discuss the implications this has for comparin
> Gomez Corporation uses straight-line depreciation for financial reporting purposes but an accelerated method for tax purposes. Is it acceptable to use different methods for the two purposes? What is Gomez’s motivation for doing this?
> Stark Corporation and Zuber Corporation operate in the same industry. Stark uses the straight-line method to account for depreciation; Zuber uses an accelerated method. Explain what complications might arise in trying to compare the results of these two
> McDonald’s Corporation reports total average assets of $28.9 billion and net sales of $20.5 billion. What is the company’s asset turnover?
> Under what conditions is goodwill recorded?
> Jimmy West, a business major, is working on a case problem for one of his classes. In the case problem, the company needs to raise cash to market a new product it developed. Ron Thayer, an engineering major, takes one look at the company’s balance sheet
> Gary Stanten is concerned with control over mail receipts at Gary’s Sporting Goods. All mail receipts are opened by Al Krane. Al sends the checks to the accounting department, where they are stamped “For Deposit Only.” The accounting department records a
> Goodwill has been defined as the value of all favorable attributes that relate to a business. What types of attributes could result in goodwill?
> Explain the concept of depletion and how it is computed.
> What are natural resources, and what are their distinguishing characteristics?
> Romero Corporation owns a machine that is fully depreciated but is still being used. How should Romero account for this asset and report it in the financial statements?
> Sid Watney is uncertain about the applicability of the historical cost principle to plant assets. Explain the principle to Sid.
> Regina Golden, 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 o
> Borke Company has a credit balance of $3,000 in Allowance for Doubtful Accounts before adjustment. The total estimated uncollectibles under the percentage-of-receivables basis is $5,800. Prepare the adjusting entry to record bad debt expense.
> Roger Holloway cannot understand why cash realizable value does not decrease when an uncollectible account is written off under the allowance method. Clarify this point for Roger.
> What percentage does Apple’s 2015 allowance for doubtful accounts represent as a percentage of its gross receivables?
> On January 1, 2020, Emporia Country Club purchased a new riding mower for $15,000. The mower is expected to have an 8-year life with a $3,000 salvage value. What journal entry would Emporia make at December 31, 2020, if it uses straight-line depreciation
> The accounts receivable turnover is 8.14, and average net receivables during the period are $400,000. What is the amount of net credit sales for the period?
> Jana Company dishonors a note at maturity. What are the options available to the lender?
> Indicate the maturity date of each of the following promissory notes: Date of Note Terms a. March 13 one year after date of note b. Мay 4 c. June 20 d. July 1 3 months after date 30 days after date 60 days after date
> Westside Textiles decides to sell $800,000 of its accounts receivable to First Factors Inc. First Factors assesses a service charge of 3% of the amount of receivables sold. Prepare the journal entry that Westside Textiles makes to record this sale.
> Cinderella Shoe Shop had goods available for sale in 2020 with a retail price of $120,000. The cost of these goods was $84,000. If sales during the period were $80,000, what is the ending inventory at cost using the retail inventory method?
> Pawlowski Company has net sales of $400,000 and cost of goods available for sale of $300,000. If the gross profit rate is 35%, what is the estimated cost of the ending inventory? Show computations.
> You are the controller of Small Toys Inc. Pamela Bames, the president, recently mentioned to you that she found an error in the 2019 financial statements which she believes has corrected itself. She determined, in discussions with the Purchasing Departme
> Both the gross profit method and the retail inventory method are based on averages. For each method, indicate the average used, how it is determined, and how it is applied.
> On April 10, 2020, fire damaged the office and warehouse of Corvet Company. Most of the accounting records were destroyed, but the following account balances were determined as of March 31, 2020: Inventory (January 1, 2020), $80,000; Sales Revenue (Janua
> All organizations should have systems of internal control to combat fraud. Instructions Go to the Association of Certified Fraud Examiner (ACFE) website, search “Report to the Nations on Occupational Fraud and Abuse,” click Costs, and then answer the fo
> McBride Company has the following opening account balances in its general and subsidiary ledgers on January 1 and uses the periodic inventory system. All accounts have normal debit and credit balances. In addition, the following transactions have not b
> Wiemers Products Company operates three divisions, each with its own manufacturing plant and marketing/sales force. The corporate headquarters and central accounting office are in Wiemers, and the plants are in Freeport, Rockport, and Bayport, all within
> On December 1, 2020, Fullerton Company had the following account balances. During December, the company completed the following transactions. Dec. 7 Received $3,600 cash from customers in payment of account (no discount allowed). 12 Purchased merchan
> Jeter Co. uses a perpetual inventory system and both an accounts receivable and an accounts payable subsidiary ledger. Balances related to both the general ledger and the subsidiary ledgers for Jeter are indicated in the working papers presented below. A
> On December 1, 2020, Annalise Company had the account balances shown below. The following transactions occurred during December. Dec. 3 Purchased 4,000 units of inventory on account at a cost of $0.74 per unit. 5 Sold 4,400 units of inventory on acco
> Hassellhouf Company’s trial balance at December 31, 2020, is as follows. All 2020 transactions have been recorded except for the items described following the trial balance. // Unrecorded transactions: 1. On May 1, 2020, Hassellhouf purchased equipment
> Winter Company’s balance sheet at December 31, 2019, is presented below. During January 2020, the following transactions occurred. Winter uses the perpetual inventory method. Jan. 1 Winter accepted a 4-month, 8% note from Merando Comp
> Turner Container Company is suffering declining sales of its principal product, nonbiodegradeable plastic cartons. The president, Robert Griffin, instructs his controller, Alexis Landrum, to lengthen asset lives to reduce depreciation expense. A processi
> An article recently appeared in the Wall Street Journal indicating that companies are selling their receivables at a record rate. Why are companies selling their receivables?
> The controller of Diaz Co. believes that the yearly allowance for doubtful accounts for Diaz Co. should be 2% of its accounts receivable balance at the end of the year. The president of Diaz Co., nervous that the owners might expect the company to sustai
> The financial statements of Louis Vuitton are presented in Appendix F. The complete annual report, including the notes to its financial statements, is available at the company’s website. Instructions Use the company’s
> LaTour Inc. is based in France and prepares its financial statements (in euros) in accordance with IFRS. In 2020, it reported cost of goods sold of €578 million and average inventory of €154 million. Briefly discuss how analysis of LaTour’s inventory tur
> The financial statements of Louis Vuitton are presented in Appendix F. The complete annual report, including the notes to its financial statements, is available at the company’s website. Instructions Use the company’s
> The financial statements of Louis Vuitton are presented in Appendix F. The complete annual report, including the notes to its financial statements, is available at the company’s website. Instructions Using the notes to the company&acir
> The financial statements of Louis Vuitton are presented in Appendix F. The complete annual report, including the notes to the financial statements, is available at the company’s website. Instructions a. What were the total current liab
> Amazon.com, Inc.’s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. The complete annual reports of Amazon and Wal-Mart, including the notes to the financial sta
> PepsiCo, Inc.’s financial statements are presented in Appendix B. Financial statements of The Coca-Cola Company are presented in Appendix C. The complete annual reports of PepsiCo and Coca-Cola, including the notes to the financial stat
> RLF Company sells office equipment and supplies to many organizations in the city and surrounding area on contract terms of 2/10, n/30. In the past, over 75% of the credit customers have taken advantage of the discount by paying within 10 days of the inv
> If your school has a subscription to the FASB Codification, log in and prepare responses to the following. a. How are receivables defined in the Codification? b. What are the conditions under which losses from uncollectible receivables (Bad Debt Expense)
> How does the average-cost method of inventory costing diff er between a perpetual inventory system and a periodic inventory system?
> Credit card usage in the United States is substantial. Many startup companies use credit cards as a way to help meet short-term financial needs. The most common forms of debt for startups are use of credit cards and loans from relatives. Suppose that you
> Jill Epp, a friend of yours, overheard a discussion at work about changes her employer wants to make in accounting for uncollectible accounts. Jill knows little about accounting, and she asks you to help make sense of what she heard. Specifically, she as
> Carol and Sam Foyle own Campus Fashions. From its inception Campus Fashions has sold merchandise on either a cash or credit basis, but no credit cards have been accepted. During the past several months, the Foyles have begun to question their sales polic
> Purpose: To learn more about factoring. Instructions Search the Internet under “commercial capital factoring” and then go to the corresponding Commercial Capital LLC website. Click on Invoice Factoring and answer the following questions. a. What are som
> Pinson Company and Estes Company are two proprietorships that are similar in many respects. One difference is that Pinson Company uses the straight-line method and Estes Company uses the declining-balance method at double the straight-line rate. On Janua
> In this chapter, you learned about a basic manual accounting information system. Computerized accounting systems range from the very basic and inexpensive to the very elaborate and expensive. However, even the most sophisticated systems are based on the
> Jill Locey, a classmate, has a part-time bookkeeping job. She is concerned about the ineffi ciencies in journalizing and posting transactions. Ben Newell is the owner of the company where Jill works. In response to numerous complaints from Jill and othe
> Ermler & Trump is a wholesaler of small appliances and parts. Ermler & Trump is operated by two owners, Jack Ermler and Andrea Trump. In addition, the company has one employee, a repair specialist, who is on a fixed salary. Revenues are earned through th
> Sage 50 provides some of the leading accounting software packages. Information related to its products is found at its website. Instructions Review the features related to its products and then be ready to discuss them with the class.
> If your school has a subscription to the FASB Codification, log in and prepare responses to the following. a. What is the definition of current liabilities? b. What is the definition of a contingent liability? c. What guidance does the Codification provi
> Give some examples of appropriate general journal transactions for an organization using special journals.
> Gonzalez Company has been in business several years. At the end of the current year, the ledger shows the following: Accounts Receivable …………………………… $ 310,000 Dr. Sales Revenue ……………………………………. 2,200,000 Cr. Allowance for Doubtful …………………… Accounts 6,100
