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College Accounting
Refer to Best Buy’s financial statements in Appendix A to answer the following.I. Identify and write down the revenue recognition principle as explained in the chapter.2. Research Best Buy’s
Merchandising companies, such as Best Buy and Circuit City, sell gift cards to their customers.Best Buy and Circuit City would record these as unearned revenue, When the gift cards are redeemed,
Recall the ethical dilemma in the “You Call It” box on page 317 that suggested delaying recognition of accrued expenses and early revenue recognition.Required1. Relying on the matching principle,
Merchandising companies, such as Best Buy and Circuit City, sell gift cards to their customers to generate future revenues.Required Visit the Websites of Best Buy (BestBuy.com) and Circuit City
Refer to the chapter’s opening feature about Tony Lee and his Ring Masters company. Required1. At the end of each reporting period, Tony Lee makes adjusting journal entries. Give examples of each
Describe a company’s annual reporting period.
Why do companies prepare interim financial statements?
What two accounting principles most directly drive the adjusting process?
If your company pays a \($4,800\) premium on April 1, 2007, for two years’ insurance coverage, how much insurance expense is reported in 2008 using cash basis accounting? Using accrual basis
If an adjusting entry for accrued revenues of \($200\) at year-end is omitted, what is this error’s effect on the year-end income statement and balance sheet?
Describe how an accrued revenue arises. Give an example.
Why is the accrual basis of accounting generally preferred over simply using cash payments and receipts?
What is an accrued expense and where is it reported in the financial statements?
What is unearned revenue and where is it reported in financial statements?
Review the balance sheet of Best Buy in Appendix A. Identify the liability accounts that require adjust- Cad ment before annual financial statements can be prepared.What would be the effect on the
Review the balance sheet of Circuit City in Appendix A.Identify two asset accounts requiring adjusting entries.Appendix A: Consolidated Balance Sheets $ in millions, except per share amounts Assets
Adjusting for unearned revenuesa. Tao receives \($10,000\) cash in advance for 4 months of legal services on October 1, 2008, and records it by debiting Cash and crediting Unearned Revenue both for
Preparing adjusting entries Prepare adjusting journal entries for the year ended December 31, 2008, for each of these separate sit-uations. Assume that prepaid expenses are initially recorded in
Preparing adjusting entries For each of the following separate cases, prepare adjusting entries required of financial statements for the year ended December 31, 2008. Assume that prepaid expenses are
Adjusting and paying accrued wages Reese Management has four part-time employees, each of whom earns \($300\) per day. They are normally paid on Fridays for work completed Monday through Friday of
Adjusting and paying accrued expenses The following three separate situations require adjusting journal entries to prepare financial statements as of April 30. For each situation, present both the
Refer to Best Buy’s financial statements in Appendix A to answer the following.Required 1. Assume that the amounts reported for inventories and cost of sales reflect items purchased in a form ready
Key comparative figures ($ millions) for both Best Buy and Circuit City follow.Required 1. Compute the dollar amount of gross margin and the gross margin ratio for the two years shown for both
Access the SEC’s EDGAR database (www.sEC.gov) and obtain the April 29, 2005, filing of its fiscal 2005 10-K report (for year ended January 29, 2005) for J. Crew Group, Inc.Required Prepare a
Refer to the opening feature about CoCaLo. Assume that Renee Pepys Lowe estimates current annual sales at approximately $10 million and reports the following income statement.CoCaLo sells to
Describe a merchandiser’s cost of goods sold.
What is gross profit for a merchandising company?
A merchandiser had \($20,000\) of beginning inventory. Its net purchases cost \($115,000\). If it has \($17,000\) of ending inventory, compute(a) merchandise available for sale and(b) cost of goods
How long are the credit and discount periods when credit terms are 2/10, n/60?
Identify which items are subtracted from the list amount and not recorded when computing purchase price: (a) transportation-in; (b) trade discount; (c) purchase discount; (d) purchase return.
What does FOB mean? What does FOB destination mean?
What are the normal recording and posting procedures when using special journals and controlling accounts with subsidiary ledgers?
What is the process for posting to a subsidiary ledger and its controlling account?
How do we prove the accuracy of account balances in the general ledger and subsidiary ledgers after posting?
The accounting principle that requires revenue to be reported when earned is thea. Matching principle.b. Revenue recognition principle.c. Time period principle.d. Accrual reporting principle.e.
Adjusting entriesa. Affect only income statement accounts.b. Affect only balance sheet accounts.c. Affect both income statement and balance sheet accounts.d. Affect only cash flow statement
On May 1, 2008, a two-year insurance policy was purchased for \($12,000\) with coverage to begin immediately. What is the amount of insurance expense that appears on the company’s income statement
Employees at Guthrie Co. worked three days at the end of 2008 and earned \($5,400\). They will be paid for this work at the next payroll date on January 9, 2009. What is the adjusting entry that
Gomez Corp. has the following credit purchase transactions in the month of October.Oct. 4 Purchased merchandise from Benjamin Inc. under the following terms: \($950\) price; invoice date 10/2, credit
Adriana Lopez created Success Systems on October 1, 2007. The company has been successful, and its list of customers has grown. To accommodate the growth, the accounting system is modified to set up
On May 5, Baker purchases 1,500 units of merchandise from Allied Parts for \($14\) per unit. Baker is a retailer and purchases the units for resale. Three separate transactions a through c also
Preparing journal entries for inventory purchases and sales Journalize the following merchandising transactions for Chilton Systems.1. On November 1, Chilton Systems purchases merchandise for
Why are sales discounts and sales returns and allowances recorded in contra revenue accounts instead of directly in the Sales account?
When merchandise is sold on credit and the seller notifies the buyer of a price allowance, does the seller create and send a credit memorandum or a debit memorandum?
How do debits and credits remain equal when credit sales are posted twice (once to Accounts Receivable and once to the customer's subsidiary account)?
How do we identify the journal from which an amount in a ledger account was posted?
How are sales taxes recorded in the context of special journals?
Merchandise inventorya. Is a long-term asset account.b. Is a current asset account.c. Includes supplies.d. Is classified with investments on the balance sheet.e. Must be sold within one month.
Net purchases includesa. Any purchase discounts.b. Any returns and allowances.c. Any necessary transportation-in costs.d. Any trade discounts.e. All of the above.
In comparing the accounts of a merchandising company with those of a service company, what additional accounts would the merchandising company likely use?
Refer to the income statement for Circuit City in Appendix A. What does Circuit City title its cost of a goods sold account? CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Recording purchases Prepare journal entries to record each of the following purchases transactions of a merchandising company.Mar. 5 Purchased 600 units of product with a list price of \($10\) per
Computing cost of goods sold and gross margin Following are financial figures for five companies. Compute net purchases, cost of goods available for sale, cost of goods sold, gross margin, and the
Computing cost of goods sold and gross margin Following are financial figures for five companies. Solve for the missing items a through e. Beginning inventory Purchases Purchase discounts Purchase
Recording purchases in a purchases journal Account for the following purchases in a purchases journal using Accounts Payable (acct. #207), Purchases (acct. #502), and Transportation-In (acct. #503).
Sales journal and accounts receivable subsidiary ledger Acorn Industries completes the following transactions during July, its first month of operations (the terms of all its credit sales are 2/10,
Using your solution to 11-1B, prove the accuracy of the accounts receivable subsidiary ledger by preparing a schedule of accounts receivable as of July 31.Problem 11-1BSales journal and accounts
Sales journal, subsidiary ledger, and schedule of accounts Grassley Company completes the following transactions during November, its first month of operations (terms for all its credit sales are
Journal entries for sales discounts and sales returns and allowances The November sales transactions of Grassley Company are described in Problem 11-3B. In addition to those transactions, Grassley
Key comparative figures ($ millions) for both Best Buy and Circuit City follow.Required1. Compute the acid-test ratio for the two years shown for both companies. 2. Drawing on results from part 1,
Access the SEC’s EDGAR database (www.SEC.gov) and obtain the April 25, 2006, filing of its fiscal 2005 10-K report (for year ended January 28, 2006) for J. Crew Group, Inc.RequiredPrepare a table
William Fuerst Company completes the following transactions during July of the current year. A tax rate of 8% applies to all sales.July 3 Sold \($6,000\) of merchandise on credit to Susan Scholz,
Refer to the opening feature about Bert and John Jacobs and their Life is good company.RequiredI. Identify the special journals that Life is good would likely use in its operations.2. Identify any
Wiset Company completes the following transactions during April, its first month of operations. A tax rate of 8% applies to all sales.Apr.3 Sold \($4,000\) of merchandise on credit to Page Alistair,
Using your solution to Problem 11-1A, prove the accuracy of the accounts receivable subsidiary ledger by preparing a schedule of accounts receivable as of April 30.Problem 11-1A:Sales journal and
Sales journal, subsidiary ledger, and schedule of accounts receivable Church Company completes the following transactions during March, its first month of operations (terms for all its credit sales
Journal entries for cash receipts, sales discounts, and sales returns and allowances The March sales transactions of Church Company are described in Problem 11-3A. In addition to those transactions,
Recording sales returns and lowance:Allied Parts, a wholesaler, was organized on May 1, 2008, and made its first purchase of merchandise on May 3. The purchase was for 2,000 units at a price of
Posting to subsidiary ledger accounts; preparing a schedule of account receivable At the end of May, the sales journal of Mountain View appears as follows. (There are no sales taxes on Mountain
Keeler Company had the following credit sales to its customers during June.Required 1. Open an accounts receivable subsidiary ledger having a T-account for each customer. Post the invoices to the
Assume the transactions in Exercise 11-5 involve cash sales instead of credit sales. Also assume that the Keeler company receives interest revenue on June 17 of \($350\) from the bank and receives a
How is net sales computed?
What account is used to show that a company has collected sales tax but has not yet remitted it to the state or local goyernment?Is this account an asset, a liability, or an equity account?
Why do businesses monitor the amount of sales returns and allowances?
Why would one merchandising company use a sales journal,but another merchandising company would not?
Why does a company maintain an accounts receivable subsidiary ledger?
What type of account is Sales Discounts? What is its normal balance?
When a company uses an accounts receivable subsidiary ledger, it must make one entry into the individual account of the subsidiary ledger and another entry into the accounts receivable account of the
Refer to the income statement for Best Buy in Appendix A. How does Best Buy title its net sales revenue account? Does it disclose sales returns and allowances separately? Appendix A: Consolidated
Refer to the income statement for Circuit City in any 10 Appendix A. How does Circuit City title its net sales revenue account?Appendix A: Consolidated Statements of Earnings $ in millions, except
Journalizing credit sales Show the general journal entries for the following sale transactions for Martindale Company from June 2009. Sales tax equals 8% of sales price.June 2 Sold merchandise on
Interpreting credit terms Interpret the meaning of the following credit terms.a. 2/10, n/60b. 2/EOM,n/60c. 3/10, n/30d. 2/10, n/30
Identifying special journals Steele Manufacturing uses special journals in its accounting system. Indicate the journal that would be used for each of the following transactions. (Hint: Use Exhibit
Journalizing credit sales in a sales journal Refer to the transactions in QS 11-1. Show how these transactions would be entered in a sales journal.(Use Exhibit 11.6 as a guide.)QS 11-1:Journalizing
Computing net sales Compute net sales for 2007 for Snedigar Company given the following information. Sales (Gross) 43,251 Sales Discounts 757 Sales Returns and Allowances 2,253
Compute and interpreting acid-test ratio Use the following information on current assets and current liabilities to compute and interpret the acidtest ratio. Explain what the acid-test ratio of a
Whaarte t he limits on an employee's annual payf or computing-t e employer's (a) Social Security tax; (b) Medicare tax; (c) federal unemployment tax ; and (d) state unemployment tax?
Indicate whether the employer or employee or both incur each of following (a) FICA taxes;(b) FUTA taxes; (c) SUTA taxes; and (d) withheld income taxes.
A company pays its an employee \($3,0\) 00 per month.The company's FUTA rate is 0.8% on the first \($7,000\) earned; its SUTA rate is 4.0% on the first \($7,000;\) its: Social Security tax rate is
For each of the following separate cases determine how frequently (monthly or semiweekly) the employer must deposit payroll taxes for 2008:(a) a new business expects to pay \($55,000\) in payroll
How frequently does the employer report federal payroll taxes? What tax form is used?
What is a Form W-2? A Form W-3?
A company has 10 employees. This company’s FUTA rate is 0.8% on the first \($7,000\) earned; its SUTA rate is 2.5% on the first \($7,000\). Each employee earns over \($7,000\) in 2008, and the
How frequently does an employer report state and federal unemployment taxes?
A company has office staff and construction workers. The company pays workers’ compensation insurance premiums of \($0.20\) per \($100\) of office staff wages and \($3.00\) per \($100\) of
What journal entry will the company in question 9 make to record the payment of its estimated workers’ compensation insurance premium at the beginning of 2008?
Assume the company in question 9 actually pays \($66,000\) in total pay to office staff and \($209,400\) in total pay to construction workers during 2008. What journal entry will the company make to
The sales journal is used to recorda. Credit salesb. Cash sales¢. Cash receiptsd. Cash purchasese. Credit purchases 7
The ledger that contains the financial statement accounts of a company is thea. General journalb. Column balance journalc. Special ledgerd. General ledgere. Special journal
A subsidiary ledger that contains a separate account for each customer to the company is thea. Controlling accountb. Accounts payable ledgerc. Accounts receivable ledgerd. General ledgere. Special
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