What is the main purpose of the balance sheet?
> If Roc Co. issued $100,000 of 5 percent, 10-year bonds at the face amount, what is the effect of the issuance of the bonds on the financial statements? What amount of interest expense will Roc Co. recognize each year?
> As of June 30, 2018, the bank statement showed an ending balance of $19,500. The unadjusted Cash account balance was $15,200. The following information is available: 1. Deposit in transit, $2,400. 2. Credit memo in bank statement for interest earned in J
> Why can a company usually issue bonds at a lower interest rate than the company would pay if the funds were borrowed from a bank?
> What are the primary sources of debt financing for most large companies?
> What is the purpose of a line of credit for a business? Why would a company choose to obtain a line of credit instead of issuing bonds?
> At the beginning of year 1, B Co. has a note payable of $72,000 that calls for an annual payment of $16,246, which includes both principal and interest. If the interest rate is 8 percent, what is the amount of interest expense in year 1 and in year 2?
> Explain the historical cost concept as it applies to long-term operational assets. Why is the book value of an asset likely to be different from the current market value of the asset?
> How can judgment and estimation affect information reported in the financial statements?
> List several common intangible assets. How is the life determined that is to be used to compute amortization?
> Define depletion. What is the most commonly used method of computing depletion?
> When a long-term operational asset is sold at a gain, how is the balance sheet affected? Is the statement of cash flows affected? If so, how?
> How are capital expenditures made to improve the quality of a capital asset accounted for? Would the answer change if the expenditure extended the life of the asset but did not improve quality? Explain.
> Emma Emerson is a proud woman with a problem. Her daughter has been accepted into a prestigious law school. While Ms. Emerson beams with pride, she is worried sick about how to pay for the school; she is a single parent who has worked hard to support her
> Why may it be necessary to revise the estimated life of a plant asset? When the estimated life is revised, does it affect the amount of depreciation per year? Why or why not?
> Why would a company choose to depreciate one piece of equipment using the double-declining- balance method and another piece of equipment using straight-line depreciation?
> Assume that a piece of equipment cost $5,000 and had accumulated depreciation of $3,000. What is the book value of the equipment? Is the book value equal to the fair market value of the equipment? Explain.
> Why is depreciation that has been recognized over the life of an asset shown in a contra account? Why not just reduce the asset account?
> What type of account (classification) is Accumulated Depreciation?
> MalMax purchased a depreciable asset. What would be the difference in total assets at the end of the first year if MalMax chooses straight-line depreciation versus double- declining-balance depreciation?
> Explain straight-line, units-of-production, and double-declining-balance depreciation. When is it appropriate to use each of these depreciation methods?
> What is a basket purchase of assets? When a basket purchase is made, how is cost assigned to individual assets?
> Which inventory cost flow method produces the highest net income in a deflationary period?
> Refer to Questions 35 and 36. Which method might be preferable for financial statements? For income tax reporting? Explain. Data from Question 35: Assume that Key Co. purchased 1,000 units of merchandise in its first year of operations for $25 per unit.
> Use the January 3, 2015, Form 10-K for Stanley Black & Decker, Inc. (Stanley) to complete the following requirements. To obtain the Form 10-K, you can use the EDGAR system following the instructions in Appendix A, or it can be found under “Corporate Info
> Assume that Key Co. purchased 1,500 units of merchandise in its second year of operation for $27 per unit. Its beginning inventory was determined in Question 35. Assuming that 1,500 units are sold, what is the amount of cost of goods sold using FIFO? LIF
> Assume that Key Co. purchased 1,000 units of merchandise in its first year of operations for $25 per unit. The company sold 850 units for $40. What is the amount of cost of goods sold using FIFO? LIFO? Weighted average?
> Does the choice of cost flow method (FIFO, LIFO, or weighted average) affect the statement of cash flows? Explain.
> What is the difference between the flow of costs and the physical flow of goods?
> In an inflationary period, which inventory cost flow method will produce the highest net income? Explain.
> What are some advantages and disadvantages of using the LIFO method of inventory valuation?
> What are some advantages and disadvantages of using the FIFO method of inventory valuation?
> What are some advantages and disadvantages of the specific identification method of accounting for inventory?
> Name and describe the four cost flow methods discussed in this chapter.
> Define the following terms: a. Maker b. Payee c. Principal d. Interest e. Maturity date f. Collateral
> Victor Holt, the accounting manager of Sexton, Inc., gathered the following information for 2017. Some of it can be used to construct an income statement for 2017. Ignore items that do not appear on an income statement. Some computation may be required.
> What information is normally included in a bank statement?
> What procedures can help protect cash disbursements?
> What procedures can help protect cash receipts?
> Giving written copies of receipts to customers can help prevent what type of illegal acts?
> What is U.S. GAAP? What is IFRS?
> List and describe the four stages of the accounting cycle discussed earlier in this chapter.
> Identify the three types of accounting transactions discussed in this chapter. Provide an example of each type of transaction, and explain how it affects the accounting equation.
> What is the historical cost concept and how does it relate to verifiability?
> How do temporary accounts differ from permanent accounts? Name three temporary accounts. Is retained earnings a temporary or a permanent account?
> What is the advantage of using common size income statements to present financial information for several accounting periods?
> The following information was taken from GoPro, Inc.’s SEC filings. Required: a. Explain whether each line of information in the table would best be described as being primarily financial accounting or managerial accountin
> What does the term adjusting entry mean? Give an example.
> What three categories of cash receipts and cash payments do businesses report on the statement of cash flows? Explain the types of cash flows reported in each category.
> Why is the balance sheet dated as of a specific date when the income statement, statement of changes in stockholders’ equity, and statement of cash flows are dated with the phrase for the period ended?
> What four general-purpose financial statements do business enterprises use?
> What are the similarities and differences between dividends and expenses?
> What is the purpose of the statement of changes in stockholders’ equity?
> Explain how the periodic inventory system works. What are some advantages of using the periodic inventory system? What are some disadvantages of using the periodic inventory system? Is it necessary to take a physical inventory when using the periodic inv
> What is the difference between a multistep income statement and a single-step income statement?
> How and when is the cost of the supplies used recognized in an accounting period?
> J. Talbot is the accounting manager for Kolla Waste Disposal Corporation. Kolla is having its worst financial year since its inception. The company is expected to report a net loss. In the midst of such bad news, Ms. Talbot surprised the company presiden
> Sam and his sister Blair both attend the state university. As a reward for their successful completion of the past year (Sam had a 3.2 GPA in business, and Blair had a 3.7 GPA in art), their father gave each of them 100 shares of The Walt Disney Company
> When does a cost become an expense? Do all costs become expenses?
> Explain the difference between gross margin and a gain.
> Explain the difference between purchase returns and sales returns. How do purchase returns affect the financial statements of both buyer and seller? How do sales returns affect the financial statements of both buyer and seller?
> Why may net cash flow from operating activities on the cash flow statement be different from the amount of net income reported on the income statement?
> What is the accounting equation? Describe each of its three components.
> How do companies determine the percentage estimate of uncollectible accounts when using the percent of revenue method?
> What is “aging of accounts receivable”?
> What procedures are important in the physical control of assets and accounting records?
> What is the difference between specific and general authorizations?
> Distinguish between elements of financial statements and accounts.
> The following ratios are for four companies in different industries. Some of these ratios have been discussed in the textbook and others have not, but their names explain how the ratio was computed. These data are for the companies’ 201
> Explain how a career in public accounting differs from a career in private accounting.
> Why is it important that every employee periodically take a leave of absence or vacation?
> List several control activities of an effective internal control system.
> What are the effects of the following types of transactions on the accounting equation? Also identify the financial statements that are affected. (Assume that the perpetual inventory system is used.) a. Acquisition of cash from the issue of common stock
> Describe how the perpetual inventory system works. What are some advantages of using the perpetual inventory system? Is it necessary to take a physical inventory when using the perpetual inventory system?
> If PetCo had net sales of $600,000, goods available for sale of $450,000, and cost of goods sold of $375,000, what is its gross margin? What amount of inventory will be shown on its balance sheet?
> What is the difference between goodwill and specifically identifiable intangible assets?
> Name and briefly define the five components of COSO’s internal control framework.
> Explain the relationship between SOX and COSO.
> What is the difference between accounts receivable and notes receivable?
> In 2012 Duke Energy, a large utility company with its headquarters in North Carolina, completed its $32 billion acquisition of Progress Energy. To get an idea of the size of this deal, in 2011 Duke Energy reported revenues of $14.5 billion. In 2012, with
> Explain the term stakeholder. Distinguish between stakeholders with a direct versus an indirect interest in the companies that issue financial reports.
> Why is cost classification important to managers?
> How does a product cost differ from a general, selling, and administrative cost? Give examples of each.
> How do product costs affect the financial statements? How does the classification of product cost (as an asset vs. an expense) affect net income?
> What does the statement “costs can be assets or expenses” mean?
> How does product costing used in financial accounting differ from product costing used in managerial accounting?
> What does the value added principle mean as it applies to managerial accounting information? Give an example of value added information that may be included in managerial accounting reports but is not shown in publicly reported financial statements.
> What do the terms value added activity and non value-added activity mean? Provide an example of each type of activity. (Appendix)
> What does the term activity-based management mean? (Appendix)
> How has the Institute of Management Accountants responded to the need for high standards of ethical conduct in the accounting profession?
> Presented here are selected data from the 10-K reports of four companies for their 2015 fiscal years. The four companies, in alphabetical order, are: Caterpillar, Inc., a company that manufactures heavy machinery. Oracle Corporation, a company that devel
> What are the two dimensions of a total quality management (TQM) program? Why is TQM being used in business practice? (Appendix)
> What is a just-in-time (JIT) inventory system? Name some inventory costs that can be eliminated or reduced by its use.
> What costs should be considered in determining the sales price of a product?
> What are some of the common ethical conflicts that accountants encounter?
> What is cost allocation? Give an example of a cost that needs to be allocated.
> What are some differences between financial and managerial accounting?
> What are some limitations of the earnings per share figure?
> How do accounting principles affect financial statement analysis?
> Financial statements for Allendale Company follow: Required: Prepare a horizontal analysis of the balance sheet and income statement for 2019 and 2018. Round percentages to one decimal point. Balance Sheets As of December 31 2019 2018 Assets Curre
> The following percentages apply to Thornton Company for 2018 and 2019: Required: Assuming that sales were $800,000 in 2018 and $960,000 in 2019, prepare income statements for the two years. 2019 2018 Sales 100.0% 100.0% Cost of goods sold 61.0 64.0
