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Accounting
Using the present value tables, solve the following problems:Required1. What is the present value on January 1, 2007 of $30,000 due on January 1, 2012 and discounted at 12% compounded annually?2.
Using appropriate tables, solve the following future value of annuity problems:Required1. What is the future value on December 31, 2013 of seven cash flows of $10,000, with the first cash payment
Samuel David wants to make five equal annual withdrawals of $8,000 from a fund that will earn interest at 10% compounded annually.RequiredHow much would David have to invest on:1. January 1, 2007 if
Six equal annual contributions are made to a fund, with the first deposit on December 31, 2007.RequiredUsing the future value tables, determine the equal contributions that, if invested at 10%
Beginning December 31, 2011, five equal annual withdrawals are to be made.RequiredUsing the appropriate tables, determine the equal annual withdrawals if $25,000 is invested at an interest of 12%
R. Lee Rouse borrows $10,000 that is to be repaid in 24 equal monthly installments payable at the end of each subsequent month with interest at the rate of 11⁄2% a month.RequiredUsing the
On January 1, 2007 Charles Jamison borrows $40,000 from his father to open a business. The son is the beneficiary of a trust created by his favorite aunt from which he will receive $25,000 on January
Beginning with January 1, 2007, five equal deposits are to be made in a fund.RequiredUsing the appropriate tables, determine the equal deposits if interest at 10% is compounded annually and if
The following are several situations involving compound interest.RequiredUsing the appropriate table, solve each of the following:1. Hope Dearborn invests $40,000 on January 1, 2007 in a savings
John Goodheart wishes to provide for six annual withdrawals of $3,000 each beginning January 1, 2017. He wishes to make 10 annual deposits beginning January 1, 2007, with the last deposit to be made
On January 1, 2007 Ashly Farms leased a hay baler from Agrico Tractor Company. Ashly was having cash flow problems, so Agrico drew up the lease to allow Ashly to reestablish itself. The lease
On July 1, 2007 Boston Company purchased a machine at a cost of $80,000. It paid $56,046.06 in cash and signed a 10% note for the difference. This note is to be paid off in annual installments of
Using the future value tables, solve the following:Required1. What is the future value on December 31, 2011 of a deposit of $35,000 made on December 31, 2007 assuming interest of 10% compounded
Using the present value tables, solve the following:Required1. What is the present value on January 1, 2007 of $30,000 due on January 1, 2011 and discounted at 10% compounded annually?2. What is the
Using the future values tables, solve the following:Required1. What is the future value on December 31, 2016 of 10 cash flows of $20,000 with the first cash payment made on December 31, 2007 and
On December 31, 2014 Michael McDowell desires to have $60,000. He plans to make six deposits in a fund to provide this amount. Interest is compounded annually at 12%.RequiredCompute the equal annual
John Joshua wants to make five equal annual withdrawals of $20,000 from a fund that will earn interest at 12% compounded annually.RequiredHow much would Joshua have to invest on January 1, 2007 if he
Ralph Benke wants to make eight equal semiannual withdrawals of $8,000 from a fund that will earn interest at 11% compounded semiannually.RequiredHow much would Benke have to invest on:1. January 1,
You are given the following situations:1. Thomas Petry owes a debt of $7,000 from the purchase of a boat. The debt bears interest of 12% payable annually. Petry will pay the debt and interest in five
Using the appropriate tables, solve each of the following:Required1. Beginning December 31, 2008, five equal withdrawals are to be made. Determine the equal annual withdrawals if $30,000 is invested
On January 1, 2007 Philip Holding invests $40,000 in an annuity to provide eight equal semiannual payments. Interest is 10%, compounded semiannually.RequiredCompute the equal semiannual amounts that
The following are two independent situations.1. Houser wishes to accumulate a fund of $40,000 for the purchase of a house and lot. He plans to deposit $4,000 semiannually at the end of each six
Ronald McDuffie purchases a new car at a cost of $14,400. He pays $3,000 down and issues an installment note payable by which he promises to pay the balance in 18 equal monthly installments, which
Rockness needs $40,000 to pay off a loan due on December 31, 2016. His plans included the making of 10 annual deposits beginning on December 31, 2007 in accumulating a fund to pay off the loan.
William Thomas intends to purchase a tractor on credit. Two local implement dealers have offered him the following payment plans for identical tractors:1. Redd Truck & Tractor’s plan calls for
At the beginning of 2007 Shanklin Company issued 10-year bonds with a face value of $1,000,000 due on December 31, 2016. The company wants to accumulate a fund to retire these bonds at maturity by
BWP, Inc., is considering the purchase of an asset. BWPs required rate of return on new assets is 12%. The expected net cash inflows generated by the new asset are as
SuMar Company purchased a new piece of machinery by paying $2,000 down and agreeing to pay $1,000 at the end of each year for five years. The appropriate interest rate is 8%.Required1. What is the
Nello Construction Company has just purchased several major pieces of road-building equipment. Since the purchase price is so large, the equipment company is giving Nello an option of choosing one of
Part a. Reproduced in the following table are the first three lines from the 2% columns of each of several tables of mathematical values. For each of the following items, you are to select from among
The following are three independent situations:1. M. Herman has decided to set up a scholarship fund for students. She is willing to deposit $5,000 in a trust fund at the end of each year for 10
The Johnson Company is considering three different time periods for an insurance policy on its main office building. The premiums on a fire insurance policy covering the building for the amount of
The manager of the Taylor Company has consulted you, the controller, as to which of the following plans you would recommend in acquiring the use of a piece of heavy equipment:1. Purchase the
On March 1, 2007 the White Company purchased $400,000 worth of inventory on credit with terms of 1/20, n/60. In the past, White has always followed the policy of making payment one month (30 days)
Jane Dough was a teller in a large northeastern bank. She was single and approaching age 30, and she considered herself an honest and upright citizen. After considering what she might do to build a
You have just been promoted to manager at a national CPA firm. On your first job a new accountant approaches you with the following situation: He has discovered that the president of the client
Jean Perry has a $25,000 whole-life insurance policy that she began many years ago. She is presently 55 years old. One of the benefits of the policy is that Perry can borrow up to a given amount at
What are the components of cash? What items may be confused with cash, but normally are categorized under other balance sheet captions? What are “cash equivalents”?
What is internal control?
What are the two revenue recognition criteria and how do they relate to receivables in some industries?
Briefly discuss the two methods of recording accounts receivable when cash discounts are involved.
What is a sales return? A sales allowance? Conceptually, when should sales returns and allowances be recorded?
Discuss the differences between the estimation (allowance) methods of recording bad debts and the direct write-off method.
Explain how a company estimates bad debts using(a) The sales or income statement approach, and(b) The accounts receivable or balance sheet approach.
Define the net realizable value of a company’s accounts receivable. How is the net realizable value of accounts receivable reported on the company’s balance sheet?
What method of bad debt estimation categorizes individual accounts receivable based on the length of time outstanding? Why is this length of time an important factor?
Why does the write-off of uncollectible accounts have no effect on the net realizable accounts receivable on the balance sheet if bad debts are estimated? What is the effect of this write-off on
Define pledging, assigning, and factoring of accounts receivable.
When does a company record the transfer of accounts receivable as a sale? As a liability?
What is a note receivable? How do notes receivable differ from accounts receivable?
What is a non-interest-bearing note? How does accounting for a short-term non-interest-bearing note differ from a short-term interest-bearing note?
What are notes receivable discounted? How are discounted notes disclosed on the financial statements during the period between the discount date and maturity date?
How are the cash proceeds determined when a note receivable is discounted?
What is the purpose of a petty cash system?
Why are actual expenses, rather than the petty cash account, debited when the fund is replenished?
What is a bank reconciliation? List the causes of the difference between the cash balance listed on a company’s bank statement and the balance shown in the company’s cash account.
Why are adjusting entries made after the bank reconciliation is completed? Give an example of an item on a bank reconciliation which requires an adjusting entry.
Multiple Choice Questions1. Which of the following items should be classified under the heading of cash on the balance sheet?Postdated checks Certificates of deposita. Yes ...... Yesb. Yes
Indicate whether or not each of the following ten items should be included in the cash balance presented on the balance sheet. Also indicate the normal balance sheet treatment for those items not
Your audit of the Watt Corporation discovers the following information:1. Reconciled balance in First National Bank checking account .... $ 2,360.752. Reconciled balance in City National Bank
An examination of the accounting records for the Hutton Corporation indicates that all receivables are being recorded in a single account entitled Receivables. An analysis of the account reveals the
On December 8, 2007, Lynch Incorporated sold $9,000 of merchandise with terms 2/10, n/EOM. On December 18, 2007, collections were made on sales originally billed for $5,000, and on December 31, 2007,
The Eastman Corporation sells merchandise with a list price of $13,000 on February 1, 2007, with terms of 1/10, n/30. On February 10, 2007, payment was received on merchandise originally billed for
Towbin Products sells merchandise on credit for $7,000 on December 1, 2007. The company estimates that returns and allowances will amount to 4% of sales. On December 22, 2007, a customer returns for
The Blunt Company makes credit sales of $21,000 during the month of February 2007. During 2007 collections are received on February sales of $20,400, accounts representing $600 of these sales are
The following information is extracted from the accounting records of the Shelton Corporation at the beginning of 2007:Accounts Receivable .........$63,000Allowance for Doubtful Accounts.....1,400
Cowen’s, a large department store located in a metropolitan area, has been experiencing difficulty in estimating its bad debts. The company has decided to prepare an aging schedule for its
The following information (prior to adjustment) is available from the accounting records of the Bradford Company on December 31, 2007:Cash sales .......... $ 93,100Net credit sales
At January 1, 2007 the credit balance in the Allowance for Doubtful Accounts of the Master Company was $400,000. For 2007 the provision for doubtful accounts is based on a percentage of net sales.
White Corporation has entered into a long-term assignment agreement with a finance company. Under the terms of this agreement, White receives 80% of the value of all accounts assigned and is charged
The Inder Corporation is experiencing a temporary cash shortage and decides to factor a group of its accounts receivable. The factor accepts $80,000 of Inder’s accounts receivable, remits 90% of
The Guide Company requires additional cash for its business. Guide has decided to use its accounts receivable to raise the additional cash as follows:1. On June 30, 2007, Guide assigned $200,000 of
On December 11, 2007, the Hooper Bank loans a customer $12,000 on a 60-day, 12% note.RequiredPrepare the journal entries necessary to record the receipt of the note by Hooper, the accrual of interest
Below are several customer notes.1. An $8,000, 60-day, non-interest-bearing note discounted after 15 days at 12%.2. A $9,000, 12%, 60-day note discounted after 30 days at 14%.3. A $6,000, 10%, 90-day
The following are events of the Singer Corporation for the current year:June 30 Barney Manufacturing gives Singer a $5,000, 11%, 90-day note for merchandise purchased.July 15 Dillon Construction Co.
The Crown Company established a petty cash fund of $600 for incidental expenditures on January 2, 2007. At the end of the month the count of cash on hand indicated that $57.35 remained in the fund. A
The information that follows is available from the general ledger and the bank statement of the Gentry Corporation for the month of August 2007:1. Bank statement balance, August 31 $1,342.502.
The following information is extracted from the bank statement and the accounting records of the Sun Corporation for the month of July 2007:1. Cash balance from books, July 31 .......... $1,967.352.
The Odum Corporation’s cash account showed a balance of $17,198 on March 31, 2007. The bank statement balance for the same date indicated a balance of $17,924.55. The following additional
Your cashier I. Amakrook has notified you that he has misplaced all the bank statements for the past year. You decide to review selected accounting records during the year and discover that the
The following information has been extracted from the accounting records of the AtwoodCorporation:1. Cash on hand (undeposited sales receipts) ............ $ 1,0202. Certificates of deposit
In 2008, 3 years after it began operations, the Pearce Corporation decided to change from the direct write-off method of recording bad debts to estimating bad debts. The following information is
The June 30, 2006 balance sheet of the Upham Company included the following information:*The company is contingently liable for discounted notes receivable of $38,000. During the company's fiscal
The following information is extracted from the accounting records of the Tara Corporation:May 1 Received a $6,000, 12%, 90-day note from V. Leigh, a customer.May 6 Received a $9,000, 10%, 120-day
The 2008 audit of the accounting records of the Lane Company discloses the following information:Required1. Reconstruct the journal entries that were made by Lane during 2008 to record changes in the
The Lambert Corporation sells merchandise at a list price of $70,000 with accompanying terms of 2/10, n/30 on December 8, 2007. By December 18, 2007, Lambert had collected from customers for
On September 30, 2007 (the end of its fiscal year), the Lufkin Corporation reported accounts receivable of $331,750 and an allowance for doubtful accounts of $16,700. During fiscal 2008 the
An examination of the accounting records of the Keegan Corporation disclosed the following information for 2007:Cash sales ............ $680,000Net credit sales .......... 527,000Accounts
The following notes receivable transactions occurred for the Harris Company during the last three months of the current year. (Assume all notes are dated the day the transaction occurred.)Oct. 9
The Furman Corporation entered into an assignment agreement with a finance company whereby Furman would be advanced 80% of all accounts assigned, less a $2,000 service charge. During the year,
Textile Company frequently factors its accounts receivable. During 2007, Faeber made credit sales of $100,000 to customers, under terms of 2/10, n/30. Faeber records its credit sales using the gross
The Lazard Corporation has experienced cash flow problems and decides to improve its current cash position by factoring 30% of its receivables and assigning the remainder with the same finance
You are engaged in the annual examination of Faulane Company, a wholesale office supply business, for the year ended June 30, 2007. You have been assigned to examine the accounts receivable. The
The Installment Jewelry Company has been in business for 5 years but has never had an audit made of its financial statements. Engaged to make an audit for 2007, you find that the company's balance
From inception of operations to December 31, 2006, Harris Corporation provided for uncollectible accounts receivable under the allowance method: Provisions were made monthly at 2% of credit sales;
From inception of operations in 2004 Summit carried no allowance for doubtful accounts. Uncollectible receivables were expensed as written off, and recoveries were credited to income as collected. On
The December 31, 2006 balance sheet of the Blackmon Corporation disclosed the following information relating to its receivables:*The company is contingently liable for a discounted note receivable
The December 31, 2007 bank statement for Miller Corporation showed a $2,049.25 balance. On this date the company’s Cash account reflected a $325.60 overdraft. In reconciling these amounts, the
The following information pertains to the Cash account of the Nakamoto Corporation for the month of July 2007:Bank statementBalance July 31 ......................... $22,639.54Service charge for
The Daisy Company received a bank statement for February 2007, as follows: From: Central Bank, Denver, Co. 80222To: Daisy Company, 1313 Williams St., Denver, Co. 80218The receipt of $460 on February
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