Question: What do these classes of ratios measure? (

> Brady Company, a computer services 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 us

> 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

> Keystone Computer Timeshare Company entered into the following transactions during May 2017. 1. Purchased computers for $20,000 from Data Equipment on account. 2. Paid $3,000 cash for May rent on storage space. 3. Received $15,000 cash from customers for

> Lopez Co. had three major business transactions during 2017. (a) Reported at its fair value of $260,000 merchandise inventory with a cost of $208,000. (b) The president of Lopez Co., Victor Lopez, purchased a truck for personal use and increased the comp

> Presented below are assumptions and principles discussed in this chapter. 1. Full disclosure principle 4. Periodicity assumption 2. Going concern assumption 5. Historical cost principle 3. Monetary unit assumption 6. Economic entity assumption Instructi

> “An adjustment may affect more than one balance sheet or income statement account.” Do you agree? Why or why not?

> Trisha Massey asks for your help concerning an NSF check. Explain to Trisha (a) what an NSF check is, (b) how it is treated in a bank reconciliation, and (c) whether it will require an adjustment on the company’s books.

> Suppose the following data were taken from the 2017 and 2016 financial statements of American Eagle Outfitters. (All numbers, including share data, are in thousands.) Instructions Perform each of the following. (a) Calculate the current ratio for each

> The chief financial officer (CFO) of Myeneke Corporation requested that the accounting department prepare a preliminary balance sheet on December 30, 2017, so that the CFO could get an idea of how the company stood. He knows that certain debt agreements

> Nordstrom, Inc. operates department stores in numerous states. Selected financial statement data (in millions of dollars) for a recent year follow. Instructions (a) Compute working capital and the current ratio at the beginning of the year and at the e

> These financial statement items are for Fairview Corporation at year-end, July 31, 2017. Salaries and wages payable……………………...$ 2,080 Salaries and wages expense………………………57,500 Supplies expense………………………………………15,600 Equipment………………………………………………. 18,500 Acc

> Suppose the following information is available for Callaway Golf Company for the years 2017 and 2016. (Dollars are in thousands, except share information.) There were 73,139,000 shares outstanding at the end of 2015. Instructions (a) What was the comp

> Suppose the following items were taken from the 2017 financial statements of Texas Instruments, Inc. (All dollars are in millions.) Common stock $2,826 Accumulated depreciation— Prepaid rent 164 equipment $3,547 Equipment 6,705 Accounts

> These items are taken from the financial statements of Longhorn Co. at December 31, 2017. Buildings……………………………………………..$105,800 Accounts receivable…………………………………. 12,600 Prepaid insurance………………………………………3,200 Cash………………………………………………………..11,840 Equipment…………

> Suppose the following information (in thousands of dollars) is available for H. J. Heinz Company—famous for ketchup and other fine food products—at April 30, 2017. Prepaid insurance $ 125,765 Buildings $4,033,369 Land 76,193 Cash 373,145 Goo

> Suppose the following items were taken from the December 31, 2017, assets section of the Boeing Company balance sheet. (All dollars are in millions.) Inventory $16,933 Patents $12,528 Notes receivable—due after Buildings 21,579

> The financial statements of Apple Inc. are presented in Appendix A. Instructions for accessing and using the company’s complete annual report, including the notes to its financial statements, are also provided in Appendix A. Instructions Using the finan

> The major balance sheet classifications are listed in E2-1. Reference Data E2-1: The following are the major balance sheet classifications. Current assets (CA) Current liabilities (CL) Long-term investments (LTI) Long-term liabilities (LTL) Proper

> Mamosa Corporation has been using the FIFO cost fl ow method during a prolonged period of infl ation. During the same time period, Mamosa has been paying out all of its net income as dividends. What adverse effects may result from this policy?

> The following are the major balance sheet classifications. Current assets (CA) Current liabilities (CL) Long-term investments (LTI) Long-term liabilities (LTL) Property, plant, and equipment (PPE) Stockholders’ equity (SE) Intangible assets (IA)

> The annual report provides financial information in a variety of formats, including the following. Management discussion and analysis (MD&A) Financial statements Notes to the financial statements Auditor’s opinion Instructions For each of the follow

> The summaries of data from the balance sheet, income statement, and retained earnings statement for two corporations, Walco Corporation and Gunther Enterprises, are presented as follows for 2017. Instructions Determine the missing amounts. Assume all c

> Suppose the following items were taken from the balance sheet of Nike, Inc. (All dollars are in millions.) 1. Cash $2,291.1 7. Inventory $2,357.0 2. Accounts receivable 2,883.9 8. Income taxes payable 86.3 3. Common stock 2,874.2 9. Equipment

> Wayne Holtz is the bookkeeper for Beeson Company. Wayne has been trying to get the following balance sheet of Beeson Company to balance. It finally balanced, but now he’s not sure it is correct. Instructions Prepare a correct balance

> Suppose the following data are derived from the 2017 financial statements of Southwest Airlines. (All dollars are in millions.) Southwest has a December 31 year-end. Cash balance, January 1, 2017…………………………. $1,390 Cash paid for repayment of debt………………………

> This information is for Williams Corporation for the year ended December 31, 2017. Cash received from lenders……………………$20,000 Cash received from customers…………………50,000 Cash paid for new equipment…………………..28,000 Cash dividends paid…………………………………. 8,000 Cas

> Kellogg Company is the world’s leading producer of ready-to-eat cereal and a leading producer of grain-based convenience foods such as frozen waffles and cereal bars. Suppose the following items were taken from its 2017 income statement and balance sheet

> Companies prepare balance sheets in order to know their financial position at a specific point in time. This enables them to make a comparison to their position at previous points in time and gives them a basis for planning for the future. In order to ev

> Otay Lakes Park is a private camping ground near the Mount Miguel Recreation Area. It has compiled the following financial information as of December 31, 2017. Service revenue (from camping fees) $132,000 Dividends $ 9,000 Sales revenue (fro

> Here are incomplete financial statements for Donavan, Inc. Instructions Calculate the missing amounts. DONAVAN, INC. Balance Sheet Assets Liabilities and Stockholders' Equity Cash $ 7,000 Liabilities $ 5,000 Inventory Buildings 10,000 45,000 Accoun

> (a) What information do accrual-basis financial statements provide that cash-basis statements do not? (b) What information do cash-basis financial statements provide that accrual-basis statements do not?

> The following items and amounts were taken from Lonyear Inc.’s 2017 income statement and balance sheet. ______ Cash $ 84,700 ______ Accounts receivable $ 88,419 ______ Retained earnings 123,192 ______ Sales revenue 584,951 _____

> Consider each of the following independent situations. (a) The retained earnings statement of Lee Corporation shows dividends of $68,000, while net income for the year was $75,000. (b) The statement of cash flows for Steele Corporation shows that cash pr

> Presented here is information for Zheng Inc. for 2017. Retained earnings, January 1……………..$130,000 Service revenue…………………………………. 400,000 Total expenses……………………………………..175,000 Dividends……………………………………………. 65,000 Instructions Prepare the 2017 retained earn

> Suppose the following information was taken from the 2017 financial statements of pharmaceutical giant Merck and Co. (All dollar amounts are in millions.) Retained earnings, January 1, 2017…………………..$43,698.8 Cost of goods sold………………………………………………..9,018.9

> This information relates to Benser Co. for the year 2017. Retained earnings, January 1, 2017………………..$67,000 Advertising expense…………………………………………. 1,800 Dividends………………………………………………………..6,000 Rent expense…………………………………………………. 10,400 Service revenue………………………

> The Bonita Vista Golf & Country Club details the following accounts in its financial statements. Accounts payable……………………._____ Accounts receivable…………………_____ Equipment………………………………_____ Sales revenue………………………….._____ Service revenue……………………….._____ Inv

> What are the three main categories of the statement of cash flows? Why do you think these categories were chosen?

> What is the primary purpose of the statement of cash flows?

> What is meant by the term operating cycle?

> All businesses are involved in three types of activities—financing, investing, and operating. Listed below are the names and descriptions of companies in several different industries. Abitibi Consolidated Inc.—manufacturer and marketer of newsprint Cal S

> Wells Company is a pesticide manufacturer. Its sales declined greatly this year due to the passage of legislation outlawing the sale of several of Wells’ chemical pesticides. During the coming year, Wells will have environmentally safe and competitive re

> Why would a bank want to monitor the dividend payment practices of the corporations to which it lends money?

> Listed here are some items found in the financial statements of Finzelberg. Indicate in which financial statement(s) each item would appear. (a) Service revenue. (b) Equipment. (c) Advertising expense. (d) Accounts receivable. (e) Common stock. (f) Inter

> Who are the external users of accounting data? Give examples.

> Who are the internal users of accounting data? How does accounting provide relevant data to the internal users?

> “Accounting is ingrained in our society and is vital to our economic system.” Do you agree? Explain.

> What are the advantages to a business of being formed as a partnership or sole proprietorship? What are the disadvantages?

> What are the advantages to a business of being formed as a corporation? What are the disadvantages?

> Ken McCall believes that the allocation of cost of goods available for sale should be based on the actual physical flow of the goods. Explain to Ken why this may be both impractical and inappropriate.

> An item must possess two characteristics to be classified as inventory. What are these two characteristics?

> Here is a list of words or phrases discussed in this chapter: 1. Corporation 4. Partnership 7. Accounts payable 2. Creditor 5. Stockholder 8. Auditor’s opinion 3. Accounts receivable 6. Common stock Instructions Match each word or phrase with th

> Why is the normal operating cycle for a merchandising company likely to be longer than for a service company?

> What is the primary source document for recording (1) cash sales and (2) credit sales?

> Waymon Co. has net sales of $100,000, cost of goods sold of $70,000, and operating expenses of $18,000. What is its gross profit?

> Lance Morrow cannot understand why the cash realizable value does not decrease when an uncollectible account is written off under the allowance method. Clarify this point for Lance.

> How do the components of revenues and expenses differ between a merchandising company and a service company?

> What are some common types of receivables other than accounts receivable or notes receivable?

> What is the difference between an account receivable and a note receivable?

> Discuss the impact the use of LIFO has on taxes paid and cash flows relative to the impact of FIFO when prices are increasing.

> What is the economic entity assumption? Give an example of its violation.

> Which assumed inventory cost flow method: (a) usually parallels the actual physical flow of merchandise? (b) divides cost of goods available for sale by total units available for sale to determine a unit cost? (c) assumes that the latest units purchased

> The July 15, 2010, edition of CFO.com contains an article by Marie Leone entitled “Sucking the LIFO out of Inventory.” Instructions Read the article, which can be found at www.cfo.com/printable/article.cfm/14508745, and answer the following questions. (

> “The selection of an inventory cost flow method is a decision made by accountants.” Do you agree? Explain. Once a method has been selected, what accounting requirement applies?

> What is the major advantage and major disadvantage of the specific identification method of inventory costing?

> (a) “The steps in the accounting cycle for a merchandising company differ from the steps in the accounting cycle for a service company.” Do you agree or disagree? (b) Is the measurement of net income in a merchandising company conceptually the same as in

> Branden Doyle is reviewing the principle of segregation of duties. What are the two common applications of this principle?

> In the corner grocery store, all sales clerks make change out of one cash register drawer. Is this a violation of internal control? Why?

> What principles of internal control apply to most businesses?

> Discuss how the Sarbanes-Oxley Act has increased the importance of internal control to top managers of a company.

> “Internal control is concerned only with enhancing the accuracy of the accounting records.” Do you agree? Explain.

> Identify the five components of a good internal control system.

> What are the three main types of business activity? Give examples of each activity.

> 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 Wal-Mart Rival.” While Wal-Martâ&#

> What was Apple’s balance in cash and cash equivalents at September 27, 2014? Did it report any restricted cash? How did Apple define cash equivalents?

> Identify the basic principles of cash management.

> Hank Cook is confused about the lack of agreement between the cash balance per books and the balance per bank. Explain the causes for the lack of agreement to Hank and give an example of each cause.

> “The use of a bank contributes significantly to good internal control over cash.” Is this true? Why?

> What is the essential feature of an electronic funds transfer (EFT) procedure?

> How do these principles apply to cash disbursements? (a) Physical controls. (b) Human resource controls.

> Fraud experts often say that there are three primary factors that contribute to employee fraud. Identify the three factors and explain what is meant by each.

> Pauli Company’s internal controls over cash disbursements provide for the treasurer to sign checks imprinted by a check writer after comparing the check with the approved invoice. Identify the internal control principles that are present in these control

> “To have maximum effective internal control over cash disbursements, all payments should be made by check.” Is this true? Explain.

> At Lazlo Wholesale Company, two mail clerks open all mail receipts. How does this strengthen internal control?

> In a period of rising prices, the inventory reported in Short Company’s balance sheet is close to the current cost of the inventory, whereas King Company’s inventory is considerably below its current cost. Identify the inventory cost flow method used by

> Why may the financial information from unadjusted accounts not be up-to-date and complete?

> What principle(s) of internal control is (are) involved in making daily cash counts of over-the-counter receipts?

> Robbins Inc. owns the following assets at the balance sheet date. Cash in bank—savings account…. $ 8,000 Cash on hand………………………………. 1,100 Cash refund due from the IRS………. 1,000 Checking account balance…………. 12,000 Postdated checks……………………………500 What amo

> Discuss the human resources department’s involvement in internal controls.

> (a) Explain the control principle of independent internal verification. (b) What practices are important in applying this principle?

> What internal control objectives are met by physical controls?

> A local bank reported that it lost $150,000 as the result of employee fraud. Ray Fairburn is not clear on what is meant by “employee fraud.” Explain the meaning of fraud to Ray and give an example of fraud that might occur at a bank.

> “Depreciation is a process of valuation that results in the reporting of the fair value of the asset.” Do you agree? Explain.

> What types of accounts does a company increase or decrease in a prepaid expense adjustment?

> Distinguish between the two categories of adjustments and identify the types of adjustments applicable to each category

> 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 fol

> “The historical cost principle of accounting requires adjustments.” Do you agree? Explain.

> Maria Lopez, CEO of Sales Bin 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 system. E

> 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?

> 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?