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financial and managerial accounting
Questions and Answers of
Financial And Managerial Accounting
Your company sells \($110,000\) of goods and you collect sales tax of 6%. What current liability does the sale create?a. Sales tax payable of $6,600b. Sales revenue of $116,600c. Unearned revenue of
Burnham Electric (BE) owed Estimated warranty payable of \($1,500\) at the end of 2011. During 2012, BE made sales of \($100,000\) and expects product warranties to cost the company 6% of the sales.
At December 31, your company owes employees for three days of the five-day workweek. The total payroll for the week is \($7,000\). What journal entry should you make at December 31, ignoring payroll
A \($400,000\) bond priced at 105.5 can be bought or sold fora. \($400,000\) + interest.b. $422,000.c. $22,000.d. $42,200
Lafferty Corporation’s bonds payable carry a stated interest rate of 7%, and the market rate of interest is 8%. The price of the Lafferty bonds will be ata. Par value.b. Premium.c. Maturity
Jade Larson Antiques issued its 12%, 10-year bonds payable at a price of \($770,000\) (maturity value is $800,000). The company uses the straight-line amortization method for the bonds. Interest
Sydney Park Fitness Gym has \($500,000\) of 10-year bonds payable outstanding. These bonds had a discount of \($45,000\) at issuance, which was five years ago. The company uses the straight-line
On August 31, 2010, Gordon, Co., purchased \($7,000\) of inventory on a one-year, 12% note payable.Reqyiresraersts1. Journalize the company’s accrual of interest expense on February 28, 2011, their
Catskills Corporation guarantees its snowmobiles for three years. Company experience indicates that warranty costs will add up to 5% of sales.Assume that the Catskills dealer in Colorado Springs made
Gina Tarver is paid \($720\) for a 40-hour workweek and time-and-a-half for hours above 40.Requirements1. Compute Tarver’s gross pay for working 52 hours during the first week of February.2. Tarver
Return to the Gina Tarver payroll situation in Short Exercise 10-4. Tarver’s employer, College of St. Mary, pays all the standard payroll taxes plus benefits for employee retirement plan (4% of
Suppose you work for DePetro-Carr, the accounting firm, all year and earn a monthly salary of \($6,800\). There is no overtime pay. Your withheld income taxes consume 25% of gross pay. In addition to
Arabia Petroleum holds huge reserves of oil and gas assets. Assume that at the end of 2010, Arabia Petroleum’s cost of oil and gas reserves totaled \($84\) billion, representing 7 billion barrels
When one media company buys another, goodwill is often the most costly asset. Decca Publishing paid \($240,000\) to acquire Tri Town Daily, a weekly advertising paper. At the time of the acquisition,
Lexington Precision Tools repaired one of its Boeing 737 aircrafts at a cost of \($100,000\). Lexington Precision Tools erroneously capitalized this cost as part of the cost of the
Ayer Furniture Co. purchased land, paying \($95,000\) cash plus a \($270,000\) note payable. In addition, Ayer paid delinquent property tax of \($2,000\), title insurance costing \($2,500\), and
Maplewood Properties bought three lots in a subdivision for a lump-sum price. An independent appraiser valued the lots as follows:Maplewood paid \($240,000\) in cash.Requirement1. Record the purchase
Ron Zander just slept through the class in which Professor Chen explained the concept of depreciation. Because the next test is scheduled for Friday, Zander telephones Sven Svensen to get his notes
Mama’s Fried Chicken bought equipment on January 2, 2010, for \($15,000\).. The equipment was expected to remain in service 4 years and to perform 3,000 fry jobs. At the end of the equipment’s
Tumble Gymnastics Center paid \($120,000\) for fitness equipment that is expected to have a 10-year life. The expected residual value is $40,000.Requirement1. Select the appropriate depreciation
A-l Computer Consultants purchased a building for \($510,000\) and depreciated it on a straight-line basis over a 40-year period. I he estimated residual value is \($100,000\). After using the
On January 2, 2011, Ditto Clothing Consignments purchased showroom fixtures for \($16,000\) cash, expecting the fixtures to remain in service for five years. Ditto has depreciated the fixtures on a
Peace Bank recently traded in office fixtures. Here are the facts:Old fixtures:• Cost, \($99,000\)• Accumulated depreciation, \($73,000\) New fixtures:• Cash paid, \($105,000\), plus the old
Travel Trucking Company uses the units-of-production (UOP) depreciation method because UOP best measures wear and tear on the trucks. Consider these facts about one Mack truck in the company’s
Cannon Mountain Mining paid \($488,500\) for the right to extract mineral assets from a 400,000-ton deposit. In addition to the purchase price, Cannon also paid a \($500\) filing fee, a \($1,000\)
Maynard Printers (MP) manufactures printers. Assume that MP recently paid \($400,000\) for a patent on a new laser printer. Although it gives legal protection for 20 years, the patent is expected to
Pilgrim, Inc., has acquired several other companies. Assume that Pilgrim purchased Kate, Co., for \($9\) million cash. The book value of Kate’s assets is \($15\) million (market value, \($18\)
Reader.com uses automated shipping equipment. Assume that early in year 1, Reader purchased equipment at a cost of \($500,000\). Management expects the equipment to remain in service 5 years, with
Airport Parking, near an airport, incurred the following costs to acquire land, make land improvements, and construct and furnish a small building:Airport Parking depreciates land improvements over
On January 9, 2010, Swifty Delivery Service purchased a truck at a cost of \($67,000\). Before placing the truck in service, Swifty spent \($2,200\) painting it, \($500\) replacing tires, and
Whitney Plumb Associates surveys American eating habits. The company’s accounts include Land, Buildings, Office equipment, and Communication equipment, with a separate accumulated depreciation
Donahue Oil Company has an account titled Oil and Gas Properties. Donahue paid \($6,400,000\) for oil reserves holding an estimated 500,000 barrels of oil. Assume the company paid \($590,000\) for
Central States Telecom provides communication services in Iowa, Nebraska, the Dakotas, and Montana. Central States purchased goodwill as part of the acquisition of Sheldon Wireless Company, which had
On May 31, 2010, Deliver It, the overnight shipper, had total assets of \($24\) billion and total liabilities of \($17\) billion. Included among the assets were property, plant, and equipment with a
Park and Fly Parking, near an airport, incurred the following costs to acquire land, make land improvements, and construct and furnish a small building:Park and Fly Airport Parking depreciates land
On January 4, 2010, Swifty Delivery Service purchased a truck at a cost of \($62,000\). Before placing the truck in service, Swifty spent \($2,200\) painting it, \($300\) replacing tires, and
Guilda Bell Associates surveys American eating habits. The company’s accounts include Land, Buildings, Office equipment, and Communication equipment, with a separate accumulated depreciation
Chapman Oil Company has an account titled Oil and Gas Properties. Chapman paid \($6,600,000\) for oil reserves holding an estimated 500,000 barrels of oil. Assume the company paid \($590,000\) for
Midtown Telecom provides communication services in Iowa, Nebraska, the Dakotas, and Montana. Midtown purchased goodwill as part of the acquisition of Surety Wireless Company, which had the following
On May 31, 2010, Ship It, the overnight shipper, had total assets of \($25\) billion and total liabilities of \($16\) billion. Included among the assets were property, plant, and equipment with a
We learned that Sherman Lawn Service, Inc., had purchased a lawn mower and weed whacker on August 3 and that they were expected to last four years.Requirements1. Calculate the amount of depreciation
We learned that Haupt Consulting, Inc., had purchased a Dell computer and office furniture on December 3 and 4, respectively, and that they were expected to last five years.Requirements1. Calculate
Advanced Automotive pays \($140,000\) for a group purchase of land, building, and equipment. At the time of your acquisition, the land has a market value of \($75,000\), the building \($60,000\), and
At the beginning of the year, Logan Services purchased a used airplane for \($65,000,000\). Logan Services expects the plane to remain useful for 4 years (6 million miles) and to have a residual
At the beginning of 2011, Texas Aero purchased a used airplane at a cost of \($59,000,000\). Texas Aero expects the plane to remain useful for 5 years (6 million miles) and to have a residual value
This exercise uses the Logan Services data from Short Exercise 9-3. Logan Services is deciding which depreciation method to use for income tax purposes.Requirements1. Which depreciation method offers
On February 28, 2011, Solar Energy Consulting purchased a Xerox copy machine for \($23,100\). Solar Energy Consulting expects the machine to last for 3 years and to have a residual value of
Assume that Smith’s Auto Sales paid \($50,000\) for equipment with a 10-year life and zero expected residual value. After using the equipment for 4 years, the company determines that the asset will
ABC Catering Service purchased equipment on January 1, 2010, for \($58,500\). ABC Catering Service expected the equipment to last for 6 years and to have a residual value of \($4,500\). Suppose ABC
Micron Precision purchased a computer for \($3,100\), debiting Computer equipment. During 2010 and 2011, Micron Precision recorded total depreciation of \($2,200\) on the computer. On January 1,
Use Amazon.com’s balance sheet and the Note 1 data on “Allowance for doubtful accounts”.Requirements 1. Do accounts receivable appear to be an important asset for Amazon.com? What about
British Tran bought four used Unlimited Airline airplanes. Each plane was worth \($39\) million, but the owner sold the combination for \($144\) million. How much is British Tran’s cost of each
An Unlimited Airlines jet costs \($42\) million and is expected to fly 370 million miles during its 8-year life. Residual value is expected to be zero because the plane was used when acquired. If the
A copy machine costs \($43,000\) when new and has accumulated depreciation of \($28,000\). Suppose Johnson Printing junks this machine, receiving nothing. What is the result of the disposal
Suppose Johnson Printing in the preceding question sold the machine for \($15,000\). What is the result of this disposal transaction?a. Loss of $5,000b. Gain of $36,000c. Gain of $5,000d. No gain or
During its first year of operations, World Class Sport Shoes earned revenue of \($388,000\) on account. Industry experience suggests that bad debts will amount to 4% of revenues. At December 31,
The Accounts receivable balance for Turning Leaves Furniture Restoration at December 31, 2010, was \($15,000\). During 2011, Turning Leaves completed the following transactions:a. Sales revenue on
Spring Garden Flowers had the following balances at December 31, 2011, before the year-end adjustments:The aging of accounts receivable yields the following data:Requirements1. Journalize Spring’s
Sheena Stone 1S an attorney in Los Angeles. Stone uses the direct write-off method to account for uncollectible receivables.At November 30, 2010, Stone’s accounts receivable totaled \($21,000\).
Foleys Furniture Repair had trouble collecting its account receivable from Steve Stone. On July 19, 2012, Foley’s finally wrote off Stone’s \($900\) account receivable. Foley’s turned the
Lakeland Medical Center included the following items in its financial statements:Requirements1. How much net income did Lakeland earn for the month?2. Show two ways Lakeland can report receivables on
Restaurants do a large volume of business by credit cards and bankcards. Suppose Salad Company restaurant had these transactions on January 28, 2011:Suppose National Express charges merchants 2.00%
A table of notes receivable for 2012 follows:Requirement1. For each of the notes receivable, compute the amount of interest revenue earne during 2012. Use a 360-day year, and round to the nearest
Lantana Bank & Trust Company lent \($90,000\) to Sylvia Peters on a 30-day, 11% note. Requirement 1. Journalize the following transactions for the bank (explanations are not required):a. Lending the
West Highland Clothiers reported the following items at August 31, 2012 (amounts in thousands, with last year’s—2011—amounts also given as needed):Requirement1. Compute West Highland’s (a)
Suppose Big Trucks Dealership is opening a regional office in St. Louis. Lesa Carter, the office manager, is designing the internal control system. Carter proposes the following procedures for credit
At December 31, 2012, the Accounts receivable balance of Solar Energy Manufacturing is \($170,000\). The Allowance for doubtful accounts has a \($10,100\) credit balance. Solar Energy Manufacturing
At September 30, 2011, Eagle Mountain Flagpoles had Accounts receivable of \($33,000\) and Allowance for uncollectible accounts had a credit balance of \($4,000\). During October 2011, Eagle Mountain
Top Performance Cell Phones sold \($18,000\) of merchandise to Andrew Trucking Company on account. Andrew fell on hard times and paid only \($4,000\) of the account receivable. After repeated
Speedy Running Shoes reports the following:Requirement1. Journalize all entries required for Speedy Running Shoes. 2011 Jan 3 Oct 1 Dec 31 Recorded Estate bankcard sales of $104,000, less a 2%
On April 30, 2011, Statewide Bank loaned \($80,000\) to Kelsey Sperry on a one-year 11% note. ’Requirements 1. Journalize all entries related to the note for 2011 and 2012.2. Which party has aa.
The following selected transactions occurred during 2012 for Mediterranean Importers. The company ends its accounting year on June 30, 2012:Requirement1. Journalize all required entries from April 1
Beautiful Steam Cleaning performs service on account. When a customer account becomes four months old, Beautiful converts the account to a note receivable. During 2012, the company completed the
Abanaki Carpets reported the following amounts in its 2011 financial statements. The 2010 figures are given for comparison.Requirements1. Calculate Abanaki’s acid-test ratio for 2011. Determine
Modern Media Sign Company sells on account. Recently, Modern reported the following figures:Requirements1. Compute Modern’s average collection period on receivables during 2012.2. Suppose
Mail Plus performs mailing services on account, so virtually all cash receipts arrive m the mail. Gina Star, the owner, has just returned from a meeting with new ideas for the business. Among other
"Bad debts" are the same asa. Uncollectible accounts.b. Doubtful accounts.c. Neither of the aboved. Botha. and b.
Your company uses the allowance method to account for uncollectible receivables. At the beginning of the year, Allowance for uncollectible accounts had a credit balance of \($1,400\). During the year
Your ending balance of Accounts receivable is \($20,500\). Use the data in the preceding question to compute the net realizable value of Accounts receivable at year-end.a. $17,600b. $3,300c.
What is wrong with the direct write-off method of accounting for uncollectibles?a. The direct write-off method does not set up an allowance for uncollectibles.b. The direct write-off method
At December 31, you have a \($9,900\) note receivable from a customer. Interest of 7% has accrued for 7 months on the note. What will your financial statements report for this situation?a. Nothing,
Return to the data in the preceding question. What will the income statement report for this situation?a. Nothing, because you have not received the cash yetb. Interest revenue of $404c. Note
At year-end, your company has cash of \($11,800\), receivables of \($47,700\), inventory of \($36,200\), and prepaid expenses totaling \($4,800\). Liabilities of \($62,800\) must be paid next year.
Return to the data in the preceding question. A year ago receivables stood at \($66,900\), and sales for the current year totaled \($706,600\). How many days did it take you to collect your average
On April 1, Rockin’ Salad Dressings creates a petty cash fund with an imprest balance of \($500\). During April, Melody Tau, the fund custodian, signs the following petty cash tickets:On April 30,
Suppose that on June 1, Cool Gyrations, a disc jockey service, creates a petty cash fund with an imprest balance of \($500\). During June, Jackson Demers, fund custo¬ dian, signs the following petty
North Bank has a loan receivable from Westminster Publishing Company. Westminster is late making payments to the bank, and Richard Connelly, a North Bank vice president, is helping Westminster
During October, Sherman Lawn Service decided that it needed a petty cash fund. Sherman started the fund by cashing a check from her business bank account for \($150\). At the end of October, Sherman
Haupt performs systems consulting. Haupt’s February Cash from its general ledger appears below:Haupt’s bank statement dated February 28 follows:Requirements1. Prepare the February bank
Consider the April 2009 transactions for Crystal Clear Cleaning. The bank statement dated April 30, 2009, for Crystal Clear follows.Requirements1. Prepare bank reconciliation.2. Journalize any
There are 5 characteristics identified in the chapter as pitfalls of e-commerce.Requirement1. List the 5 characteristics identified in the chapter as pitfalls of e-commerce.
The Cash account of Safe and Secure Security Systems reported a balance of \($2,490\) at May 31, 2011. There were outstanding checks totaling \($500\) and a May 31 deposit in transit of \($300\). The
The following petty cash transactions of Lexite Laminated Surfaces occurred m August.Requirement1. Prepare journal entries without explanations. Aug 1 31 Established a petty cash fund with a $300
Gwen O’Malley, an accountant for Ireland Limited, discovers that her supervisor, Blarney Stone, made several errors last year. Overall, the errors overstated the company s net income by 20%. It is
Lori Root owns Root’s Boot City. She fears that a trusted employee has been stealing from the company. This employee receives cash from customers and also prepares the monthly bank reconciliation.
The following items could appear on a bank reconciliation:a. Outstanding checksb. Deposits in transitc. NSF checkd. Bank collection of our note receivablee. Interest earned on bank balancef. Service
D. J. Hill’s checkbook lists the following:Hill’s May bank statement shows the following:Requirements1. Prepare Hill’s bank reconciliation at May 31, 2012.2. How much cash does Hill actually
Fred Root operates four bowling alleys. He just received the February 28 bank statement from City National Bank, and the statement shows an ending balance of \($890\). Listed on the statement are an
Louise’s Dance Studio created a \($200\) imprest petty cash fund. During the month, the fund custodian authorized and signed petty cash tickets as follows:Requirement 1.Make the general journal
Steppin’ Out Night Club maintains an imprest petty cash fund of \($150\), which is under the control of Brenda Montague. At December 31, the fund holds \($14\) cash and petty cash tickets for
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