Questions and Answers of Accounting Principles 14th Edition

In the “All About You” feature, you learned that there are on-line investment services that provide advice to investors. These services offer stock quotes, company research reports, personal
Name the ratio(s) that should be used to help answer each of the following questions.(a) How efficient is a company at using its assets to produce sales?(b) What is the company’s ability to pay its
If you were an investor interested in buying the shares of a company with growth potential, would you look for a company that had high or low price-earnings and payout ratios? If you were interested
(a) What do profitability ratios measure? (b) What types of users would be most interested in profitability ratios?
(a) What do solvency ratios measure? (b) What types of users would be most interested in solvency ratios?
What base amount is usually assigned a 100% value in a vertical analysis of (a) the balance sheet and (b) the income statement?
Andrew Peller Limited is a leading producer and marketer of quality wines in Canada, with wineries in British Columbia, Ontario, and Nova Scotia. The company’s March 31, 2012, balance sheet
You are provided with the following transactions that took place during a recent fiscal year:InstructionsAssuming the company is reporting under IFRS, complete the above table for each of the
Using the data presented for Pesci Ltd. in E17–2, prepare the operating activities section of the cash flow statement using the direct method.Data From E17-2:Pesci Ltd. is a private company
How is it possible for a company to report positive net cash from operating activities but have a negative free cash flow?
Identify, and describe the differences among, the three types of activities reported in the cash flow statement. Give an example of each.
In this group activity, you will compare the accounting for bonds payable with the accounting for a long-term investment in bonds. Time permitting, your instructor may also ask you to compare this
In this group activity, you will compare the accounting for bonds payable with the accounting for a long-term investment in bonds. Time permitting, your instructor may also ask you to compare this
Plankton Corporation’s trial balance at December 31, 2015, is presented below:All transactions and adjustments for 2015 have been recorded and reported in the trial balance except for the items
Janet, Brian, and Natalie have been approached by Ken Thornton, a shareholder of La Madeleine Ltd., a private company. Ken wants to retire and would like to sell his 1,000 shares in La Madeleine,
Olsztyn Inc., a public company, had the following investment transactions:1. Purchased Arichat Corporation common shares as a trading investment.2. Purchased Bombardier bonds to earn interest.3.
Kroshka Holdings Corporation has several investments in the debt and equity securities of other companies:1. 10-year BCE bonds, purchased to earn interest.2. 10-year GE bonds, intended to be sold if
The following terms were introduced in this chapter:1. Strategic investments2. Non-strategic investments3. Trading investments4. Debt investments reported at amortized costMatch each term with the
When is it appropriate for a public company to report gains and losses on fair value adjustments in other comprehensive income?
For public companies, what are the differences between the accounting for bonds purchased for trading and bonds held to earn interest revenue?
As indicated in the “All About You” feature in this chapter, a student can benefit from financial leverage by borrowing to pay for an education. However, too much leverage can result in graduates
In this group activity, you will analyze and compare three financing alternatives for the purchase of a new vehicle. Your instructor will evaluate your group on your analysis as well as your
Presented below are three different lease transactions that occurred for Klippert Inc., a public company. Assume that all lease contracts start on January 1, 2014. Klippert does not receive title to
Peter Furlong has just approached a venture capitalist for financing for his sailing school. The lenders are willing to lend Peter $120,000 in exchange for a note payable at a high-risk interest rate
A local company has just approached a venture capitalist for financing to develop a ski hill. On April 1, 2013, the venture capitalist loaned the company $1 million at an interest rate of 5%. The
The following instalment payment schedule is for an instalment note payable:Instructions(a) Is this a fixed principal or blended payment schedule?(b) What is the interest rate on the note?(c) Prepare
The following instalment payment schedule is for an instalment note payable:Instructions(a) Is this a fixed principal or blended payment schedule?(b) What is the interest rate on the note?(c) Prepare
What is off –balance sheet financing? Why are long-term operating leases considered to be a form of off – balance sheet financing?
Pavlina borrowed $15,000 from the bank and signed a three-year, 6% instalment note payable with fixed principal payments. She wants to know how to calculate what the annual fixed principal payment
Pavlina borrowed $15,000 from the bank and signed a three-year, 6% instalment note payable with fixed principal payments. She wants to know how to calculate what the annual fixed principal payment
What are discontinued operations? Why is it important to report discontinued operations separately from profit or loss from continuing operations?
The following shareholders’ equity accounts are reported by Talty Inc. on January 1:The following selected transactions occurred during the year:Instructions(a) Prepare a chart that shows for each
The following shareholders’ equity accounts are reported by Branch Inc. on January 1:The following selected transactions occurred during the year:Instructions(a) Prepare a chart that shows for each
Ruby Red Rental Corporation had the following balances in its shareholders’ equity accounts at January 1, 2014:Ruby Red had the following transactions and events during 2014:InstructionsPrepare a
In this group activity, you will be forming a new corporation and making decisions about the number of shares to be issued to the founding shareholders as well as to an individual who becomes a
Identify and explain the four enhancing qualitative characteristics of accounting information.
Compare the rights of preferred shareholders with common shareholders. Include in your answer the areas in which preferred shares are given priority over common shares.
What is the difference between non-cumulative and cumulative preferred shares? What are the differences among convertible, redeemable, and retractable preferred shares?
Sally’s Sweet Shop’s August 31, 2014, bank balance was $11,135. Th e company’s cash balance at August 31 was $10,760. Other information follows:1. Outstanding cheques were #421 for $160, #485
When the accountant of Trillo Company prepared the bank reconciliation on May 31, 2014, there were three outstanding cheques: #690 for $307, #693 for $179, and #694 for $264. There were no deposits
Fraud experts often say there are three primary factors that contribute to employee fraud. Identify the factors and explain what is meant by each.
FirstIn Company reported profit of $90,000 in 2013. When counting its inventory on December 31, 2013, the company forgot to include items stored in a separate room in the warehouse. As a result,
What are the differences, if any, in the valuation and reporting of inventory between companies following IFRS and companies following ASPE?
If an error in ending inventory in one year will have the reverse effect in the following year, does this error need to be corrected when it is discovered?
Distinguish between the three methods of determining cost for inventories: specific identification, FIFO, and average. Give an example of a type of inventory for which each method might be used.
In the “All About You” feature, you learned about inventory theft and a relatively new technology to help prevent theft . You have recently accepted a part-time sales position at a clothing store
The purpose of this group activity is to improve your understanding of merchandising journal entries. You will be given a merchandising company’s general ledger in T account format with missing
The Board Shop, owned by Andrew John, sells skateboards in the summer and snowboards in the winter. The shop has an August 31 fiscal year end and uses a perpetual inventory system. On August 1, 2014,
Because Natalie has had such a successful first few months, she is considering other opportunities to develop her business. One opportunity is the sale of fine European mixers. The owner of Kzinski
Data for Travel Warehouse are presented in P5–4A.InstructionsRecord the July transactions for Travel Warehouse, assuming a periodic inventory system is used instead of a perpetual inventory
Data for Norlan Company are presented in P5–3A.InstructionsRecord the September and October transactions for Norlan Company, assuming a periodic inventory system is used instead of a perpetual
In a periodic inventory system, closing entries are posted to the Merchandise Inventory account. What is the purpose of these entries?
“The steps in the accounting cycle for a merchandising company are different from those in the accounting cycle for a service company.” Do you agree or disagree? Explain.
In this group activity, you will create a classified balance sheet by piecing together the information, and using the clues, given to you by your instructor.
Ullmann Maintenance Co. has a $455 monthly contract with the sports store Rackets Plus for general maintenance services. Ullmann invoices Rackets Plus on the first of the month for the previous
The Higher Education College collects tuition for the fall term in August. The fall term runs from September to December. In what month(s) should the college recognize the revenue earned from tuition
Pierce Dussault, a lawyer, accepts a legal engagement in March, does the work in April, and is paid in May. If Dussault’s law firm prepares monthly financial statements, when should it recognize
Data for Jakmak Interior Design Company are presented in E2–3.InstructionsJournalize the transactions.Exercise 2–3:In the first month of business, Jakmak Interior Design Company had the following
At the beginning of March, Brister Software Company had Cash of $12,000, Accounts Receivable of $18,000, Accounts Payable of $4,000, and G. Brister, Capital of $26,000. During the month of March, the
Below are some items found in the financial statements of Stefan Knoler, MD. Indicate (a) whether each of the following items is an asset (A), liability (L), or part of owner’s equity (OE); and (b)
Match each of the following forms of business organization with the correct set of characteristics: proprietorship (PP), partnership (P), and corporation (C).(a) _________ Shared control; combined
What is the economic entity concept?
Chaffee Company is considering an investment that will return a lump sum of $600,000 5 years from now. What amount should Chaffee Company pay for this investment in order to earn a 10% return?
Refer back to E26-11 to address the following.InstructionsPrepare a memo to Maria Fierro, your supervisor. Show your calculations from E26-11, (a) and (b). In one or two paragraphs, discuss important
Campbell Soup Company is an international provider of soup products. Management is very interested in continuing to grow the company in its core business, while “spinning off” those businesses
Founded in 1983, Beverly Hills Fan Company is located in Woodland Hills, California. With 23 employees and sales of less than $10 million, the company is relatively small. Management feels that there
The management of Shatner Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the
Bentoli Box Corporation is considering adding another machine for the manufacture of corrugated cardboard. The machine would cost $680,000. It would have an estimated life of 6 years and no salvage
Minkle Company is considering purchasing new equipment for $350,000. The equipment has a 5-year useful life, and depreciation would be $70,000 (assuming straight-line depreciation and zero salvage
In Viejo Company, data concerning two products are: Contribution margin per unit—Product A $11, Product B $12; machine hours required for one unit—Product A 2, Product B 2.5. Compute the
Emil Company has an opportunity to buy parts at $9 each that currently cost $12 to make. What manufacturing costs are relevant to this make-or-buy decision?
The executive team at Current Designs has gathered to evaluate the company’s operations for the last month. One of the topics on the agenda is the special order from Huegel Hollow, which was
Using the information in P25-1B, compute the overhead controllable variance and the overhead volume variance.Data From Problem 25-1B:Buil Corporation manufactures a single product. The standard cost
Using the information in P25-2A, compute the overhead controllable variance and the overhead volume variance.Data From Problem 25-2A:Ayala Corporation accumulates the following data relative to jobs
Determine the missing amounts.
Florida Beach Company manufactures sunscreen lotion, called Surtan, in 11-ounce plastic bottles. Surtan is sold in a competitive market. As a result, management is very cost-conscious. Surtan is
Wilbury Company manufactures a nutrient, Everlife, through two manufacturing processes: Blending and Packaging. All materials are entered at the beginning of each process. On August 1, 2014,
In Wayne Company, materials are entered at the beginning of each process. Work in process inventories, with the percentage of work done on conversion costs, and production data for its Sterilizing
Data for Cascio Company are given in BE21-7. Production records indicate that 18,000 units were transferred out, and 2,000 units in ending work in process were 50% complete as to conversion cost and
Factory labor data for Weber Company are given in BE21-2. Manufacturing overhead is assigned to departments on the basis of 200% of labor costs. Journalize the assignment of overhead to the Assembly
Data for Weber Company are given in BE21-1. Supporting records show that(a) the Assembly Department used $24,000 of raw materials and $35,000 of the factory labor, and(b) the Finishing Department
LRF Printing performs printing services for many different corporate clients. Although LRF bids most jobs, some jobs, particularly new ones, are negotiated on a “cost-plus” basis. Cost-plus means
Robert Perez is a contractor specializing in custom-built jacuzzis. On May 1, 2014, his ledger contains the following data.Raw Materials Inventory
Stellar Inc. is a construction company specializing in custom patios. The patios are constructed of concrete, brick, fiberglass, and lumber, depending upon customer preference. On June 1, 2014, the
Data pertaining to job cost sheets for Knox Company are given in BE20-3 and BE20-4. Prepare the job cost sheets for each of the three jobs. (Note: You may omit the column for Manufacturing
Factory labor data for Knox Company is given in BE20-2. During January, time tickets show that the factory labor of $6,000 was used as follows: Job 1 $2,200, Job 2 $1,600, Job 3 $1,400, and general
As noted in this chapter, because of global competition, companies have become increasingly focused on reducing costs. To reduce costs and remain competitive, many companies are turning to
The primary purpose of managerial accounting is to provide information useful for management decisions. Many of the managerial accounting techniques that you learn in this course will be useful for
The following information is available for Aikman Company. Instructions(a) Compute cost of goods manufactured.(b) Prepare an income
Joyce Tombert, the bookkeeper for Marks Consulting, a political consulting firm, has recently completed a managerial accounting course at her local college. One of the topics covered in the course
The following information is available for Fishel Company. Prepare the cost of goods manufactured schedule for the month of
Use the same data from BE19–10 above and the data below. Determine the missing amounts.
Complete the following comparison table between managerial and financial accounting.
The financial statements of Zetar plc are presented in Appendix F. Instructions for accessing and using the company’s complete annual report, including the notes to its financial statements, are
If your school has a subscription to the FASB Codification, go to http://aaahq.org ascLogin.cfm to log in and prepare responses to the following. Use the Master Glossary for determining the proper
PepsiCo’s financial statements are presented in Appendix B. Financial statements of The Coca-Cola Company are presented in Appendix C. Instructions for accessing and using the complete annual
Indicate which of the following items would be reported as an extraordinary item in Stumfol Corporation’s income statement.(a) Loss from damages caused by volcano eruption.(b) Loss from sale of
Why must preferred dividends be subtracted from net income in computing earnings per share?
The financial statements of Zetar plc are presented in Appendix F. Instructions for accessing and using the company’s complete annual report, including the notes to its financial statements, are
If your school has a subscription to the FASB Codification, go to http://aaahq.org/ ascLogin.cfm to log in and prepare responses to the following. Use the Master Glossary to determine the proper

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