Total liabilities on a balance sheet at the end of the year are $150,000, retained earnings at the end of the year are $80,000, net income for the year is $60,000, common stock is $40,000, and additional paid-in capital is $20,000. What amount of total assets would be reported on the balance sheet at the end of the year? a. $290,000 b. $270,000 c. $205,000 d. $15,000
> Granger Service Company, Inc., was organized by Ted Granger and five other investors. The following activities occurred during the year: a. Received $70,000 cash from the investors; each was issued 8,400 shares of common stock with a par value of $0.10 p
> Kelsey Baker founded GolfDeals.com at the beginning of February. GolfDeals.com sells new and used golf equipment online. The following events occurred in February. a. Borrowed $30,000 cash from a bank, signing a note due in three years. b. Received inves
> Refer to Exercise 5. Required: 1. For each of the events (a) through (f) in E2-5, prepare journal entries, checking that debits equal credits. 2. Explain your response to event (e).
> Refer to Exercise 4 Required: For each of the events (a) through (e) in E2-4, prepare journal entries, checking that debits equal credits.
> Nike, Inc., with headquarters in Beaverton, Oregon, is one of the world’s leading manufacturers of athletic shoes and sports apparel. The following activities occurred during a recent year. The amounts are rounded to millions. a. Purchased additional bui
> The following events occurred for Johnson Company: a. Received investment of cash by organizers and distributed to them 1,000 shares of $1 par value common stock with a market price of $40 per share. b. Purchased $15,000 of equipment, paying $3,000 in ca
> As described in a recent annual report, Verizon Communications provides wireless voice and data services across one of the most extensive wireless networks in the United States. Verizon now serves more than 100 million customers, making it the largest wi
> The following are independent situations. a. A new company is formed and sells 100 shares of $1 par value stock for $12 per share to investors. b. A company purchases for $18,000 cash a new delivery truck that has a list, or sticker, price of $21,000. c.
> Explain what the time period assumption means.
> How is the current ratio computed and interpreted?
> What criteria must normally be met for revenue to be recognized under accrual basis accounting?
> Explain the difference between a. Revenues and gains. b. Expenses and losses.
> This period a company collects $100 cash on an account receivable from a customer for a sale last period. How would the receipt of cash impact the following two financial statements this period? Income Statement ……………………………………………Statement of Cash Flows
> Cash payments for salaries are reported in what section of the statement of cash flows? a. Operating. b. Investing. c. Financing. d. None of the above.
> Write the income statement equation and define each element.
> You have observed that the net profit margin ratio for a retail chain has increased steadily over the last three years. The most likely explanation is which of the following? a. Salaries for upper management as a percentage of total expenses have decreas
> Which of the following is the entry to be recorded by a law firm when it receives a $2,000 retainer from a new client at the initial client meeting? a. Debit to Cash, $2,000; credit to Legal Fees Revenue, $2,000. b. Debit to Accounts Receivable, $2,000;
> During 2016, CliffCo Inc. incurred operating expenses of $250,000, of which $150,000 was paid in cash; the balance will be paid in January 2017. Transaction analysis of operating expenses for 2016 should reflect only the following: a. Decrease stockholde
> On January 1, 2017, Anson Company started the year with a $300,000 credit balance in Retained Earnings, a $50,000 balance in Common Stock, and a $300,000 balance in Additional Paid-in Capital. During 2017, the company earned net income of $45,000, declar
> When expenses exceed revenues in a given period, a. Retained earnings are not impacted. b. Retained earnings are decreased. c. Retained earnings are increased. d. One cannot determine the impact on retained earnings without additional information.
> The expense recognition principle controls a. Where on the income statement expenses should be presented. b. When costs are recognized as expenses on the income statement. c. The ordering of current assets and current liabilities on the balance sheet. d.
> Which of the following is not one of the criteria that normally must be met for revenue to be recognized according to the revenue recognition principle for accrual basis accounting? a. Cash has been collected. b. Services have been performed. c. Goods ha
> Which of the following is not a specific account in a company’s chart of accounts? a. Gain on Sale of Assets b. Interest Revenue c. Net Income d. Unearned Revenue
> What is a journal entry?
> Briefly explain what is meant by transaction analysis. What are the two steps in transaction analysis?
> Explain the expense recognition principle.
> Explain what debit and credit mean.
> Define a business transaction in the broad sense, and give an example of two different kinds of transactions
> For accounting purposes, what is an account? Explain why accounts are used in an accounting system.
> Refer to Problem 3. Problem 3: Cougar Plastics Company has been operating for three years. At December 31 of last year, the accounting records reflected the following: Cash $22,000 Accounts payable $15,000
> Explain what the following accounting terms mean: a. Separate entity assumption b. Monetary unit assumption c. Going concern assumption d. Historical cost
> Define the following: a. Asset b. Current asset c. Liability d. Current liability e. Additional paid-in capital f. Retained earnings
> What is the primary objective of financial reporting for external users?
> Starting with the beginning balances in Mini Exercise 9 and given the transactions in M2-5 (including the sample), prepare a balance sheet for Dennen, Inc., as of January 31, classified into current and noncurrent assets and liabilities.
> Complete Mini Exercise 9, and then prepare a trial balance for Dennen, Inc., as of January 31.
> For each transaction in Mini Exercise 5 (including the sample), post the effects to the appropriate T-accounts and determine ending account balances. Beginning balances are provided. Cash Notes Receivable Equipment Beg. bal. 900 Beg. bal. 1,000 Beg.
> What transactions are classified as investing activities in a statement of cash flows? What transactions are classified as financing activities?
> For each transaction in Mini Exercise 5 (including the sample), write the journal entry in the proper form. Data from Mini Exercise 5: For each of the following transactions of Dennen, Inc., for the month of January, indicate the accounts, the amounts,
> For each of the following transactions of Dennen, Inc., for the month of January, indicate the accounts, the amounts, and the direction of the effects on the accounting equation. A sample is provided. a. (Sample) Borrowed $30,000 from a local bank. b. Le
> The following are the accounts of Rosa-Perez Company: (1) Accounts Payable (2) Accounts Receivable (3) Buildings (4) Cash (5) Common Stock (6) Land (7) Merchandise Inventory (8) Income Taxes Payable (9) Long-Term Investments (10) Notes Payable (due in th
> Calculate the current ratio for Sal’s Taco Company at the end of 2013 and 2014, based on the following data: What does the result suggest about the company over time? What can you say about Sal’s Taco Companyâ
> Which of the following is not a financing activity on the statement of cash flows? a. When the company lends money. b. When the company borrows money. c. When the company pays dividends. d. When the company issues stock to shareholders.
> At the end of a recent year, The Gap, Inc., reported total assets of $7,422 million, current assets of $4,309 million, total liabilities of $4,667, current liabilities of $2,128 million, and stockholders’ equity of $2,755 million. What is its current rat
> Which of the following statements are true regarding the balance sheet? 1. One cannot determine the true fair market value of a company by reviewing its balance sheet. 2. Certain internally generated assets, such as a trademark, are not reported on a com
> The Cash T-account has a beginning balance of $21,000. During the year, $100,000 was debited and $110,000 was credited to the account. What is the ending balance of Cash? a. $11,000 debit balance b. $11,000 credit balance c. $31,000 credit balance d. $31
> Which of the following describes how assets are listed on the balance sheet? a. In alphabetical order b. In order of magnitude, lowest value to highest value c. From most liquid to least liquid d. From least liquid to most liquid
> The T-account is a tool commonly used for analyzing which of the following? a. Increases and decreases to a single account in the accounting system. b. Debits and credits to a single account in the accounting system. c. Changes in specific account balanc
> What is a T-account? What is its purpose?
> The dual effects concept can best be described as follows: a. When one records a transaction in the accounting system, at least two effects on the basic accounting equation will result. b. When an exchange takes place between two parties, both parties mu
> Which of the following is not an asset? a. Investments b. Land c. Prepaid Expense d. Additional Paid-in Capital
> If a publicly traded company is trying to maximize its perceived value to decision makers external to the corporation, the company is most likely to understate which of the following on its balance sheet? a. Assets b. Common Stock c. Retained Earnings d.
> Penny Cassidy has decided to start her business, Penny’s Pool Service & Supply, Inc. (PPSS). There is much to do when starting a new business. Here are some transactions that have occurred in the business in March. a. Received $25,0
> Your best friend from home writes you a letter about an investment opportunity that has come her way. A company is raising money by issuing shares of stock and wants her to invest $20,000 (her recent inheritance from her great-aunt’s es
> Refer to Alternate Problem 3. Alternate Problem 3: Ethan Allen Interiors, Inc., is a leading manufacturer and retailer of home furnishings in the United States and abroad. The following is adapted from Ethan Allen’s recent annual finan
> The following is a list of important abbreviations used in the chapter. These abbreviations also are used widely in business. For each abbreviation, give the full designation. The first one is an example. Abbreviation ……………………….……………………
> Mark each item in the following list as an asset (A), liability (L), or stockholders’ equity (SE) item that would appear on the balance sheet or a revenue (R) or expense (E) item that would appear on the income statement. (1) Retained earnings (2) Accoun
> What two accounting equalities must be maintained in transaction analysis?
> Match each element with its financial statement by entering the appropriate letter in the space provided. Element Financial Statement (1) Expenses (2) Cash flow from investing activities (3) Assets (4) Dividends (5) Revenues A. Balance sheet B. Incom
> Recent balance sheets are provided for Twitter, Inc., a global platform for real-time public self-expression and conversation. Required: 1. Is Twitter a corporation, sole proprietorship, or partnership? Explain the basis of your answer. 2. Use the compa
> Frances Sabatier asked a local bank for a $50,000 loan to expand her small company. The bank asked Frances to submit a financial statement of the business to supplement the loan application. Frances prepared the following balance sheet. Required: The ba
> The Securities and Exchange Commission (SEC) regulates companies that issue stock on the stock market. It receives financial reports from public companies electronically under a system called EDGAR (Electronic Data Gathering and Retrieval Service). Using
> Adamson Incorporated is a small manufacturing company that makes model trains to sell to toy stores. It has a small service department that repairs customers’ trains for a fee. The company has been in business for five years. At the end
> According to a recent Form 10-K report of Mattel, Inc., the company “designs, manufactures, and markets a broad variety of toy products worldwide.” Mattel’s brands include Barbie, Hot Wheels, FisherPr
> Ethan Allen Interiors, Inc., is a leading manufacturer and retailer of home furnishings in the United States and abroad. The following is adapted from Ethan Allen’s recent annual financial report (fiscal year ending on June 30). Amounts
> A key factor that an auditor provides is independence. The AICPA Code of Professional Conduct states that “a member in public practice should be independent in fact and appearance when providing auditing and other attestation services.” Required: Do you
> You are one of three partners who own and operate Mary’s Maid Service. The company has been operating for seven years. One of the other partners has always prepared the company’s annual financial statements. Recently you proposed that the statements be a
> Performance Corporation was organized on January 1, 2015. At the end of 2015, the company had not yet employed an accountant; however, an employee who was “good with numbers” prepared the following statements at that d
> What is the fundamental accounting model?
> Clint’s Stonework Corporation was organized on January 1, 2015. For its first two years of operations, it reported the following: Net income for 2015…………………………………………………….$ 31,000 Net income for 2016……………………………………………………….42,000 Dividends for 2015………………………
> Clay Corporation was organized on January 1, current year. At the end of the current year, the following financial data are available: Total revenues…………………………………………………………………..$299,000 Total expenses (excluding income taxes)………………………………184,000 Income tax
> Painter Corporation was organized by five individuals on January 1 of the current year. At the end of January of the current year, the following monthly financial data are available: Total revenues ……………………………………………….………….$305,000 Total expenses (excludi
> Review the chapter explanations of the income statement and the balance sheet equations. Apply these equations in each independent case to compute the two missing amounts for each case. Assume that it is the end of the first full year of operations for t
> Review the chapter explanations of the income statement and the balance sheet equations. Apply these equations in each independent case to compute the two missing amounts for each case. Assume that it is the end of the first full year of operations for t
> Neighborhood Realty, Incorporated, has been operating for three years and is owned by three investors. S. Bhojraj owns 60 percent of the total outstanding stock of 9,000 shares and is the managing executive in charge. On December 31, current year, the fo
> Walgreen Co. is one of the nation’s leading drugstore chains. Its recent income statement contained the following items (in millions). Prepare an income statement for the year ended August 31, current year. Cost of sales .…………………………………….……………...$51,692 P
> Carlos Ramirez and Camila Garza organized New World Book Store as a corporation; each contributed $80,000 cash to start the business and received 4,000 shares of common stock. The store completed its first year of operations on December 31, current year.
> Honda Motor Corporation of Japan is a leading international manufacturer of automobiles, motorcycles, all-terrain vehicles, and personal watercraft. As a Japanese company, it follows Japanese GAAP and reports its financial statements in billions of yen (
> Tootsie Roll Industries is engaged in the manufacture and sale of candy. Major products include Tootsie Roll, Tootsie Roll Pops, Tootsie Pop Drops, Tootsie Flavor Rolls, Charms, and Blow-Pop lollipops. The following items were listed on Tootsie Roll’s re
> Why are accounting assumptions necessary?
> Describe a typical business operating cycle.
> In December of 20x4, Memphis Plastics sold a forklift for $9,255. The machine was purchased in 20x1 for $50,000. Since then $38,845 in depreciation has been recorded on the forklift. Required: 1. What was the forklift’s book value at the time of sale? 2
> Serendipity Sound, Inc., manufactures home theater sound systems in its Minneapolis Division. The divisional sales manager has estimated the following demand-curve data. Quantity Sold per Month Unit Sal
> Wolverine Valve and Fitting Company, located in southern Michigan, manufactures a variety of industrial valves and pipe fittings. Currently, the company is operating at about 70 percent capacity. Management has been approached by Glasgow Industries Ltd.
> Manhattan Pharmaceuticals, Inc., specializes in packaging bulk drugs in standard dosages for local hospitals. Wyant Memorial Hospital has asked Manhattan Pharmaceuticals to bid on the packaging of one million doses of medication at total cost plus a retu
> Suburban Heating, Inc., installs heating systems in n e w homes built in suburban Philadelphia. Jobs are priced using the time and materials method. The following predictions pertain to the company’s operations for the next year. Labor rate, including fr
> Refer to the cost and production data for the Wave Darter in Exhibit 15–5. The target profit is $60,000. Exhibit 15-5: Required: Use the general formula for determining a markup percentage to compute the required markup percentages wi
> The following data pertain to Legion Lighting Company’s oak-clad, contemporary chandelier. Variable manufacturing cost ............................................................... $300 Applied fixed manufacturing cost .................................
> Should actual or budgeted service department costs be allocated? Why?
> Rosario Company produces a single product in its Buenos Aires plant, which currently sells for 7.50 p per unit. Fixed costs are expected to amount to 90,000 p for the year, and all variable manufacturing and administrative costs are expected to be incurr
> The following data pertain to LawnMate Corporation’s top-of-the-line lawn mower. Variable manufacturing cost ....................................................... $275 Applied fixed manufacturing cost ...................................................
> Refer to the data given in the preceding two exercises. 1. Prepare a table of Serendipity Sound’s revenue, cost, and profit relationships. For guidance refer to panel C of Exhibit 15–3. 2. Draw a graph similar to panel
> Refer to the preceding exercise. The divisional controller at Serendipity Sound’s Minneapolis Division has estimated the following cost data for the division’s sound systems. (Assume there are no fixed costs.) Quantit
> List the seven steps in the decision-making process
> Are the concepts underlying a relevant-cost analysis still valid in an advanced manufacturing environment? Are these concepts valid when activity-based costing is used? Explain.
> “Accounting systems should produce only relevant data and forget about the irrelevant data. Then I’d know what was relevant and what wasn’t!” Comment on this remark by a company president.
> Give two examples of sunk costs, and explain why they are irrelevant in decision making.
> There is an important link between decision making and managerial performance evaluation. Explain
> How is sensitivity analysis used to cope with uncertainty in decision making?
> Briefly describe the proper approach to making a production decision when limited resources are involved.
> What is a joint production process? Describe a special decision that commonly arises in the context of a joint production process. Briefly describe the proper approach for making this type of decision.
