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fundamentals financial accounting
Questions and Answers of
Fundamentals Financial Accounting
Explain the measurement and reporting of natural resources.}- The cost of natural resources is any cost necessary to acquire and prepare the resource for separation from the earth.- As the natural
How do capital assets differ from other assets? What benefits do capital assets provide to the company?(Appendix)
What are the different types of capital assets? How do they differ from one another?(Appendix)
How does the cost concept affect accounting for capital assets? Under this concept, what is included in the cost of a tangible capital asset?(Appendix)
How is the cost of a tangible capital asset measured in a cash transaction? In a noncash transaction?(Appendix)
What is the effect on the financial statements if a company incorrectly records an expense as an asset?(Appendix)
How does the matching concept affect accounting for capital assets?(Appendix)
What factors must be known or estimated in order to compute depreciation expense?(Appendix)
How do the accelerated and straight-line depreciation methods differ?(Appendix)
What objective should guide the selection of a depreciation method for financial reporting purposes?(Appendix)
What objective should be of primary importance in the selection of a depreciation method for income tax reporting?(Appendix)
What accounting concepts should be considered when evaluating the accounting for expenditures that are made for tangible capital assets after acquisition? Be sure to distinguish between revenue and
What is the proper accounting for depreciation when new or additional information becomes available that causes a company to change its estimates of useful life or residual value?(Appendix)
What is an impairment of a tangible capital asset? How is a depreciable capital asset impairment recorded in the financial statements?(Appendix)
How is the sale of equipment at an amount greater than its book value recorded? How would your answer change if the equipment is sold at an amount less than its book value?(Appendix)
What information do the tangible capital asset turnover ratio, the average age of tangible capital assets, and the return on total assets provide users of financial statements?(Appendix)
Describe the benefits that intangible assets provide to a company.(Appendix)
What factors should be considered when selecting the amortization period for an intangible asset?(Appendix)
What basis underlies the computation of depletion?(Appendix)
Which of the following is not a step in the accounting process?a. identification.b. verification.c. recording.d. communication.
Generally accepted accounting principles are:a. the guidelines used to resolve ethical dilemmas.b. established by the Internal Revenue Service.c. primarily established by the Financial Accounting
The cost principle states that:a. assets should be initially recorded at cost and adjusted when the market value changes.b. activities of an entity be kept separate and distinct from its owner.c.
Which of the following statements about basic assumptions is incorrect?a. Basic assumptions are the same as accounting principles.b. The economic entity assumption states that there should be a
Performing services on account will have the following effects on the basic accounting equation:a. increase assets and decrease stockholders' equity.b. increase assets and increase stockholders'
As of December 31, 2005, Tetrick Company has assets of $3,500 and stockholders' equity of $2,000. What are the liabilities for Tetrick Company as of December 31.2005?a. $1,500.b. $1,000.c. $2,500.d.
Jackie Remmers Inc. purchased land for $81,000 cash on December 10. 2005. At December 31. 2006. the land's value has increased to $95,000. What amount should be reported for land on Jackie Remmers'
What is the monetary unit assumption? What impact does inflation have on the monetary unit assumption?
Teresa Speck is the owner of a successful printing shop.Recently her business has been increasing, and Teresa has been thinking about changing the organization of her business from a proprietorship
Which of the following items are liabilities of Richard Westphal Company?(a) Cash. (b) Accounts payable. (c) Inventory. (d) Accounts receivable. (e) Supplies. (f) Equipment. (g) Salaries payable. (h)
Are the following events recorded in the accounting records? Explain your answer in each case.(a) The president of a corporation dies.(b) Supplies are purchased on account.(c) An employee is fired.
Listed below are some items found in the financial statements of Jan Way Inc. Indicate in which financial statement the following items would appear.(a) Advertising expense. (d) Cash.(b) Equipment.
In February 2005, Maggie Sharrer invested $12,000 in Gardentech, Inc. Gardentech's accountant, Jori Aloisio, recorded this receipt as an increase in cash and revenues.Is this treatment appropriate?
Rebecca Sherrick Inc. had a stockholders' equity balance of $164,000 at the beginning of the period. At the end of the accounting period, the stockholders' equity balance was $198,000.(a) Assuming
Summarized operations for the Alica Cosky Co. for the month of July are as follows.Revenues earned: for cash $45,000; on account$95,000.Expenses incurred:$43,000.for cash $26,000; on account
Given the accounting equation, answer each of the following questions.(a) The liabilities of Shumway Company are $100,000 and the stockholders' equity is $232,000.What is the amount of Shumway
Follow the same format as BE1-4 above. Determine the effect on assets, liabilities, and stockholders' equity of the following three transactions.(a) Invested cash in the business.(b) Paid a cash
Classify each of the following items as asset (A), liability (L), revenue (R), or expense (E).(a) Advertising expense (e) Cash (b) Commission revenue (f) Rent revenue (c) Insurance expense (g)
In alphabetical order below are balance sheet items for Gomez Company at December 31, 2006. Prepare a balance sheet, following the format of Illustration 1-9. Accounts payable $85,000 Accounts
Indicate whether each of the following items is an asset (A), liability (L). or part of stockholders' equity (SE).(a) Accounts receivable (d) Office supplies(b) Salaries payable (e) Common stock(c)
Indicate whether the following items would appear on the income statement (IS), balance sheet (BS), or retained earnings statement (RE).(a) Notes payable (d) Cash(b) Advertising expense (e) Service
Robinson Cleaners has the following balance sheet items.Instructions Classify each item as an asset, liability, or stockholders' equity. Accounts payable Cash Cleaning equipment Cleaning supplies
Selected transactions for Green Acres Lawn Care Company are listed below.1. Made cash investment to start business.2. Paid monthly rent.3. Purchased equipment on account.4. Billed customers for
Rollins Computer Timeshare Company entered into the following transactions during May 2006.1. Purchased computer terminals for $21,500 from Digital Equipment on account.2. Paid $4,000 cash for May
An analysis ol transactions for J. I Kang & Co. was presented in El—4.Instructions Prepare an income statemenl and retained earnings statement for August and a balance sheet at August 31, 2006.
The Kimm Company had the following assets and liabilities on the dates indicated.Kimm began business on January 1, 2005, with an investment of $100,000.Instructions From an analysis of the change
Two items are omitted from each of the following summaries of balance sheet and income statement data for two corporations for the year 2006, Craig Corporation and Holly Enterprises.Instructions
The following information relates to Karin Weigel Co. for the year 2006.Instructions After analyzing the data, prepare an income statement and a retained earnings statement for the year ending
Lynn Close is the bookkeeper for Sanculi Company. Lynn has been trying to get the balance sheet of Sanculi Company to balance. Sanculi's balance sheet is as follows.Instructions Prepare a correct
Griswold Inc.. a public camping ground near the Boundary Waters Canoe Area, has compiled the following financial information as of December 31. 2006.Instructions (a) Determine Griswold's net income
Presented below is financial information related to the 2006 operations of Debra-Joan Cruise Company.Instructions Prepare the 2006 income statement for Debra-Joan Cruise Company. Maintenance expense
Presented below is information related to Douglas. Inc.Instructions Prepare the 2006 retained earnings statement for Douglas. Inc. Retained earnings, January 1. 2006 Legal service revenue earned-2006
On April !. Matrix Travel Agencj was established. The following transactions were completed during the month.1. Stockholders invested $10,000 cash, receiving stock in exchange.2. Paid $400 cash tor
Mandy Arnold opened a law office, Mandy Arnold, Attorney at Law, on July 1, 2006.On July 31, the balance sheet showed Cash $4,000, Accounts Receivable $1,500, Supplies $500, Office Equipment $5,000.
Divine Cosmetics Co., a company that provides skin care treatment, was started on June 1 with an investment of $26,200 cash. Following are the assets and liabilities of the company at June 30 and the
Laura Stiner started her own consulting firm, Stiner Consulting, Inc. on May 1. 2006.The following transactions occurred during the month of May.May 1 Stiner invested $8,000 cash in the business.2
Financial statement information about four different companies is as follows.Instructions (a) Determine the missing amounts. ( Hint: For examj)le, to solve for (a). Assets - Liabilities =
Mclnnes's Repair Inc. was started on May 1. A summary of May transactions is presented below.1. Stockholders' invested $10,000 cash to start the repair company.2. Purchased equipment for $5,000
On August 31, the balance sheet of Nashville Corporation showed Cash $9,000. Accounts Receivable $1,700. Supplies $600. Office Equipment $6,000. Accounts Payable $3,600.Common Stock $13,000. and
On May 1. Skyward Flying School Inc.. a company that provides flying lessons, was started with an investment of $45,000 cash in the business. Following are the assets and liabilities of the company
Pat Donahue started his own delivery service. Donahue Deliveries. Inc. on June 1. 2006. The following transactions occurred during the month of June.Instructions (a) Show the effects of the previous
Financial statement information about four different companies is as follows.Instructions (a) Determine the missing amounts.(b) Prepare the retained earnings statement for Karma Company. Assume that
The actual financial statements of PepsiCo, as presented in the company's 2003 Annual Report, are contained in Appendix A (at the back of the textbook).Instructions Refer to PepsiCo's financial
PepsiCo's financial statements are presented in Appendix A. Coca-Cola's financial statements are presented in Appendix B.Instructions(a) Based on the information contained in these financial
The February 6. 2002, issue of the Wall Street Journal includes an article by Steve Liesman, Jonathan Weil, and Michael Schroeder titled "Accounting Debacles Spark Calls for Change: Here's the
The year 2000 was not a particularly pleasant year for the managers of Xerox Corporation, or its shareholders. The company's stock price had already fallen in the previous year from $60 per share to
Today companies must compete in a global economy. Nestle, a Swiss company, is the largest food company in the world. If you were interested in broadening your investment portfolio, you might consider
Lucy and Nick Lars, local golf stars, opened the Chip-Shot Driving Range on March 1 , 2005, by investing $20,000 of their cash savings in the business. A caddy shack was constructed for cash at a
Erin Danielle, the accountant for Bloomington Company, has been trying to get the balance sheet to balance. The company's balance sheet is as follows.Instructions Explain to Erin Danielle in a memo
After numerous campus interviews. Jeff Hunter, a senior at Great Northern College, received two office interview invitations from the Baltimore offices of two large firms. Both firms offered to cover
Natalie Koebel spent much of her childhood learning the art of cookie making from her grandmother. They passed many happy hours together, mastering every type of cookie imaginable and later devising
A trial balance will not balance if:a. a correct journal entry is posted twice.b. the purchase of supplies on account is debited to Supplies and credited to Cash.c. a $100 cash dividend by the
Britney Spears, a fellow student, contends that the doubleentry system means each transaction must be recorded twice. Is Britney correct? Explain.
Julia Roberts, a beginning accounting student, believes debit balances are favorable and credit balances are unfavorable.Is Julia correct? Discuss.
State the rules of debit and credit as applied to (a) asset accounts, (b) liability accounts, and (c) stockholders'equity.
What is the normal balance for each of the following accounts?(a) Accounts Receivable, (b) Cash, (c) Dividends,(d) Accounts Payable, (e) Service Revenue, (f) Salaries Expense, (g) Common Stock.
Indicate whether each of the following accounts is an asset, a liability, or a stockholders' equity account and whether it would have a debit or credit balance: (a) Accounts Receivable, (b) Accounts
Presented below is a series of accounts. Indicate whether these accounts generally will have (a) debit entries only,(b) credit entries only, (c) both debit and credit entries.(1) Cash. «>^-(2)
What are the advantages of using the journal in the recording process?
Journalize the following business transactions.(a) Tom Cruise invests $12,000 in the business in exchange for shares of common stock.(b) Insurance of $720 is paid for the year.(c) Supplies of $900
Joe Alverez is confused about how accounting information flows through the accounting system. He believes the flow of information is as follows.(a) Debits and credits posted to the ledger.(b)
For each of the following accounts indicate (a) the effect of a debit or a credit on the account and (b) the normal balance.1. Accounts Payable.2. Advertising Expense.3. Service Revenue.4. Accounts
Transactions for the Kaustav Sen Company for the month of June are presented below.Identify the accounts to be debited and credited for each transaction.June 1 Kausta\ Sen invests $4,000 cash in
1 lll l I> Tim Weber, a fellow student, is unclear about the basic steps in the recording process. Identify and briefly explain the steps in the order in which they occur.
J. A. Motzek Inc. has the following transactions during August of the current year. Indicate(a) the effect on the accounting equation and (b) the debit-credit analysis illustrated on pages 62-66 of
Selected journal entries for the ( lilies Companj are presented in BE2-7. Post the transactions asms: the standard form oi account.
From the ledger balances given below, prepare a trial balance for the P. J. Farve Cornpain al June 30. 2006. 1 isl the accounts in the order shown on page 61 of the text. All account balances are
An inexperienced bookkeepei prepared the following trial balance. Prepare a correct dial balance, assuming all account balances are normal. CHENG CORPORATION Trial Balance December 31, 2006 Debit
Selected transactions for H. Burns, Inc., an interior decorating firm, in its first month of business, are as follows.Jan. 2 Invested $15,000 cash in business in exchange for common stock.3 Purchased
Data for H. Burns, Inc.. interior decorating, are presented in E2-1.Instructions Journalize the transactions using journal page Jl. (You may omit explanations.)
Presented below is information related to Robbins Real Estate Agency, Inc.Oct. 1 Lynn Robbins begins business as a real estate agent with a cash investment of $20,000 in exchange for common stock.2
Transaction data for Rohbins Real Estate Agency are presented in E2-3.Instructions Journalize the transactions. (You may omit explanations.)
Selected transactions from the journal of Roberta Mendez. investment broker, are presented below.Instructions (a) Post the transactions to T accounts.(b) Prepare a trial balance at August 31. 2006.
The T accounts below summarize the ledger of Padre Landscaping Company at the end(it the Erst month of operations.Instructions (a» Prepare the complete general journal entries (including
Presented below is the ledger for Maxim Co.Instructions (a) Reproduce the journal entries for the transactions that occurred on October 1, 10, and 20, and provide explanations for each.(b) Determine
Selected transactions for Neve Campbell Company during its first month in business are presented below.Sept. 1 Invested $10,000 cash in the business in exchange for common stock.5 Purchased equipment
The accounts in the ledger of Speedy Delivery Service contain the following balances on July 31, 2006.Instructions Prepare a trial balance with the accounts arranged as illustrated in the chapter and
Which of the following is not one of the criteria for revenue recognition?a. Significant risks and rewards of ownership have been transferred.b. Continuing managerial involvement does not exist.c.
Food To Go is a local catering service. Conceptually, when should Food To Go recognize revenue from its catering service?a. At the date the invoice is mailed to the customerb. At the date the
When should revenue from the sale of merchandise normally be recognized?a. When the customer pays for the merchandiseb. When the customer takes possession of the merchandisec. Either on the date the
What does the phrase "Revenue is recognized at the point of sale" mean?a. Revenue is recorded in the accounting records when the cash is received from a customer and reported on the statement of
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