Questions and Answers of Corporate Financial Accounting

Ledger accounts, adjusting entries, financial statements, Obj. 2, 3 and closing entries; optional end-of-period spreadsheet The unadjusted trial balance of Recessive Interiors at January 31, 20Y2,
Complete accounting cycle Obj. 4, 5 For the past several years, Jeff Horton has operated a part-time consulting business from his home. As of April 1, 20Y6, Jeff decided to move to rented quarters
Distinguish between the activities and financial statements of service and retail businesses.AppendixLO1
Describe and illustrate the accounting for merchandise transactions.AppendixLO1
Describe and illustrate the adjusting process for a retail business.AppendixLO1
Describe and illustrate the financial statements and closing entries for a retail business.AppendixLO1
If merchandise purchased on account is returned, the buyer may inform the seller of the details by issuing a(n):a. debit memo.b. credit memo.c. invoice.d. bill.AppendixLO1
If merchandise is sold on account to a customer for $1,000, terms FOB shipping point, 1/10, n/30, and the seller prepays $50 in freight, the amount of the discount for early payment would be:a. $0.b.
The income statement in which the total of all expenses is deducted from the total of all revenues is termed the:a. multiple-step form.b. single-step form.c. account form.d. report form.AppendixLO1
On a multiple-step income statement, the excess of sales over the cost of goods sold is called:a. operating income.b. income from operations.c. gross profit.d. net income.AppendixLO1
Gross profit Obj. 1 During the current year, merchandise is sold for $615,000 cash and $4,110,000 on account. The cost of the goods sold is $2,835,000. What is the amount of the gross
Purchases transactions Obj. 2 Halibut Company purchased merchandise on account from a supplier for $18,600, terms 2/10, n/30. Halibut returned merchandise with an invoice amount of $5,000 and
Sales transactions Obj. 2 Journalize the following merchandise transactions:a. Sold merchandise on account, $72,500 with terms 2/10, n/30. The cost of the goods sold was $43,500.b. Received payment
Freight terms Obj. 2 Determine the amount to be paid in full settlement of each of two invoices, (a) and (b), assuming that credit for returns and allowances was received prior to payment and that
Transactions for buyer and seller Obj. 2 Sather Co. sold merchandise to Boone Co. on account, $31,800, terms 2/15, n/30. The cost of the goods sold is $19,000. Journalize the entries for Sather Co.
Adjusting entries Obj. 3 Castle Furnishings Company uses a perpetual inventory system. Journalize the November 30 adjusting entries based upon the following:a. The inventory account has a balance of
Asset turnover ratio Obj. 5 Financial statement data for the years ended December 31, 20Y7 and 20Y6, for Latchkey Company follow:20Y7 20Y6 Sales $1,734,000 $1,645,000 Total assets:Beginning of year
What distinguishes a retail business from a service business?AppendixLO1
The credit period during which the buyer of merchandise is allowed to pay usually begins with what date?AppendixLO1
What is the meaning of (a) 1/15, n/60; (b) n/30;(c) n/eom?AppendixLO1
How are sales to customers using MasterCard and VISA recorded?AppendixLO1
What is the nature of (a) a credit memo issued by the seller of merchandise, (b) a debit memo issued by the buyer of merchandise?AppendixLO1
Who is responsible for freight when the terms of sale are(a) FOB shipping point, (b) FOB destination?AppendixLO1
Name three accounts that would normally appear in the chart of accounts of a retail business but would not appear in the chart of accounts of a service business.AppendixLO1
Audio Outfitter Inc., which uses a perpetual inventory system, experienced a normal inventory shrinkage of$13,675. What accounts would be debited and credited to record the adjustment for the
Assume that Audio Outfitter Inc. in Discussion Question 9 experienced an abnormal inventory shrinkage of $98,600. Audio Outfitter has decided to record the abnormal inventory shrinkage so that it
Gross profit Obj. 1 During the current year, merchandise is sold for $95,500 cash and $1,315,000 on account. The cost of the goods sold is $848,500. What is the amount of the gross profit?AppendixLO1
Purchases transactions Obj. 2 Elkhorn Company purchased merchandise on account from Springhill Company for $42,000, terms 2/10, n/30. Elkhorn returned merchandise with an invoice amount of $8,000 and
Sales transactions Obj. 2 Journalize the following merchandise transactions:a. Sold merchandise on account, $18,000 with terms 1/10, n/30. The cost of the goods sold was $10,800.b. Received payment
Freight terms Obj. 2 Determine the amount to be paid in full settlement of each of two invoices, (a) and (b), assuming that credit for returns and allowances was received prior to payment and that
Transactions for buyer and seller Obj. 2 Shore Co. sold merchandise to Blue Star Co. on account, $112,000, terms FOB shipping point, 2/10, n/30. The cost of the goods sold is $67,200. Shore paid
Adjusting entries Obj. 3 Hahn Flooring Company uses a perpetual inventory system. Journalize the December 31 adjusting entries based upon the following:a. The inventory account has a balance of
Asset turnover ratio Obj. 5 Financial statement data for years ended December 31, 20Y3 and 20Y2, for Edison Company follow:20Y3 20Y2 Sales $1,884,000 $1,562,000 Total assets:Beginning of year 770,000
Determining gross profit Obj. 1 During the current year, merchandise is sold for $8,100,000. The cost of the goods sold is $4,698,000.a. What is the amount of the gross profit?b. Compute the gross
Determining cost of goods sold Obj. 1 For a recent year, Best Buy (BBY) reported sales of $39,528 million. Its gross profit was $9,191 million. What was the amount of Best Buy’s cost of goods
Chart of accounts Obj. 2 Monet Paints Co. is a newly organized retail business with a list of accounts arranged in alphabetical order, as follows:Accounts Payable Accounts Receivable Accumulated
Purchase-related transactions Obj. 2 The Stationery Company purchased merchandise on account from a supplier for $14,500, terms 2/10, n/30. The Stationery Company returned merchandise with an invoice
Purchase-related transactions Obj. 2 A retailer is considering the purchase of 1,000 units of a specific item from either of two suppliers.Their offers are as follows:Supplier One: $34.80 a unit,
Purchase-related transactions Obj. 2 The debits and credits from four related transactions, (1) through (4), are presented in the following T accounts. Assume that the freight terms were FOB shipping
Purchase-related transactions Obj. 2 Stylon Co., a women’s clothing store, purchased $48,000 of merchandise from a supplier on account, terms FOB destination, 2/10, n/30. Stylon returned
Purchase-related transactions Obj. 2 Journalize entries for the following related transactions of Lilly Heating & Air Company:a. Purchased $36,000 of merchandise from Schell Co. on account, terms
Sales-related transactions, including the use of credit cards Obj. 2 Journalize the entries for the following transactions:a. Sold merchandise for cash, $25,000. The cost of the goods sold was
Customer refund Obj. 2 Senger Company sold merchandise of $15,500, terms 2/10, n/30, to Burris Inc. on April 23. Burris paid Senger for the merchandise on May 2. On May 12, Senger paid Burris $650
Customer return and refund Obj. 2 On December 28, 20Y3, Silverman Enterprises sold $18,500 of merchandise to Beasley Co. with terms 2/10, n/30. The cost of the goods sold was $11,200. On December 31,
Sales-related transactions Obj. 2 After the amount due on a sale of $28,000, terms 2/10, n/eom, is received from a customer within the discount period, the seller consents to the return of the entire
Sales-related transactions Obj. 2 The debits and credits for five related transactions, (1) through (5), are presented in the following T accounts. Assume the credit terms were 2/10, n/30.Cash
Sales-related transactions Obj. 2 Sayers Co. sold merchandise on account to a customer for $80,000 terms 2/10, n/30. The cost of the goods sold was $58,000. Journalize Sayers’ entries to record (a)
Determining amounts to be paid on invoices Obj. 2 Determine the amount to be paid in full settlement of each of the following invoices, assuming that credit for returns and allowances was received
Sales-related transactions Obj. 2 Showcase Co., a furniture wholesaler, sells merchandise to Balboa Co. on account, $254,500, terms n/30. The cost of the goods sold is $152,700. Showcase Co. issues a
Purchase-related transactions Obj. 2 Based on the data presented in Exercise 5-16, journalize Balboa Co.’s entries for (a) the purchase,(b) the return of the merchandise for credit, and (c) the
Sales tax Obj. 2 A sale of merchandise on account for $36,000 is subject to an 8% sales tax. (a) Should the sales tax be recorded at the time of sale or when payment is received? (b) What is the
Sales tax transactions Obj. 2 Journalize the entries to record the following selected transactions:a. Sold $640,000 of merchandise on account, subject to a sales tax of 7%. The cost of the goods sold
Normal balances of accounts for retail business Obj. 2 What is the normal balance of the following accounts: (a) Cost of Goods Sold, (b) Customer Refunds Payable, (c) Delivery Expense, (d) Estimated
Income statement and accounts for retail business Obj. 4 For the fiscal year, sales were $46,680,000 and the cost of goods sold was $28,000,000.a. What was the amount of gross profit?b. If total
Adjusting entry for inventory shrinkage Obj. 3 Omega Tire Co.’s perpetual inventory records indicate that $3,145,000 of merchandise should be on hand on August 31, 20Y4. The physical inventory
Adjusting entry for customer refunds, allowances, and returns Obj. 3 Scott Company had sales of $12,350,000 and related cost of goods sold of $7,500,000 for the year ending December 31, 20Y8. Scott
Adjusting entry for customer refunds, allowances, and returns Obj. 3 Statz Company had sales of $1,800,000 and related cost of goods sold of $1,150,000 for its first year of operations ending
Income statement for retail business Obj. 4 The following expenses were incurred by a retail business during the year. In which expense section of the income statement should each be reported: (a)
Determining amounts for items omitted from income statement Obj. 4 One item is omitted in each of the following four lists of income statement data. Determine the amounts of the missing items,
Multiple-step income statement Obj. 4 On March 31, 20Y9, the balances of the accounts appearing in the ledger of Royal Furnishings Company, a furniture store, are as follows:Accounts Receivable $
Multiple-step income statement Obj. 4 The following income statement for Curbstone Company was prepared for the year ended August 31, 20Y5:Curbstone Company Income Statement For the Year Ended August
Single-step income statement Obj. 4 Summary operating data for Custom Wire & Tubing Company during the year ended April 30, 20Y2, are as follows: cost of goods sold, $6,100,000; administrative
Closing the accounts of a retail business Obj. 4 From the following list, identify the accounts that should be closed at the end of the fiscal year under a perpetual inventory system: (a) Accounts
Closing entries; net income Obj. 4 Based on the data presented in Exercise 5-27, journalize the closing entries.AppendixLO1
Closing entries Obj. 4 On July 31, the close of the fiscal year, the balances of the accounts appearing in the ledger of Serbian Interiors Company, a furniture retailer, are as follows:Accumulated
Gross method for sales discounts Obj. 4 Schofield Co. sold merchandise on account to Bernard Retail Inc. for $15,000, terms 2/10, n/30.The cost of the merchandise sold was $8,000. Assuming Schofield
Gross method for sales discounts Obj. 4 The following were selected from among the transactions completed by Essex Company during March of the current year:Mar. 2. Sold merchandise on account to
Adjusting entry for gross method Obj. 4 The following data were extracted from the accounting records of Sacajawea Mercantile Co. for the year ended June 30, 20Y4:June 30, 20Y4 Balances Debit Credit
Discount taken in next fiscal year Obj. 4 Using the data for Sacajawea Mercantile Co. in Exercise 5-35, assume that Mark Bishop pays his June 30, 20Y4, account receivable of $1,500 on July 6, 20Y4,
Gross and net methods for sales discounts Obj. 4 The following were selected from among the transactions completed by Strong Retail Group during August of the current year:Aug. 5. Sold merchandise on
Rules of debit and credit for periodic inventory accounts Complete the following table by indicating for (a) through (g) whether the proper answer is debit or credit:Account Increase Decrease Normal
Journal entries using the periodic inventory system The following selected transactions were completed by Air Systems Company during January of the current year. Air Systems uses the periodic
Identify items missing in determining cost of goods sold For (a) through (e), identify the items designated by X and Y.a. Purchases 2 (X + Y) = Net purchasesb. Net purchases + X = Cost of inventory
Cost of goods sold and related items The following data were extracted from the accounting records of Harkins Company for the year ended April 30, 20Y8:Estimated returns of current year sales $
Cost of goods sold Based on the following data, determine the cost of goods sold for November:Estimated returns of November sales $ 14,500 Inventory, November 1 28,000 Inventory, November 30 31,500
Cost of goods sold Based on the following data, determine the cost of goods sold for July:Estimated returns of July sales $ 34,900 Inventory, July 1 190,850 Inventory, July 31 160,450 Purchases
Cost of goods sold Identify the errors in the following schedule of the cost of goods sold for the year ended May 31, 20Y5:Cost of goods sold:Inventory, May 31, 20Y5 . . . . . . . . . . . . . . . . .
Closing entries using periodic inventory system United Rug Company is a small rug retailer owned and operated by Pat Kirwan. After the accounts have been adjusted on December 31, the following
Purchase-related transactions using perpetual inventory system Obj. 2 The following selected transactions were completed by Betz Company during July of the current year:July 1. Purchased merchandise
Sales-related transactions using perpetual inventory system Obj. 2 The following selected transactions were completed by Amsterdam Supply Co., which sells office supplies primarily to other
Sales and purchase-related transactions using perpetual inventory Obj. 2 system The following were selected from among the transactions completed by Babcock Company during November of the current
Sales and purchase-related transactions for seller and buyer Obj. 2 using perpetual inventory system The following selected transactions were completed during August between Summit Company and
Multiple-step income statement and balance sheet Obj. 4 The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 20Y2:Cash $
Single-step income statement and balance sheet Obj. 4 Selected accounts and related amounts for Clairemont Co. for the fiscal year ended May 31, 20Y2, are presented in Problem 5-5A.Instructions 1.
Purchase-related transactions using periodic inventory system Selected transactions for Betz Company during July of the current year are listed in Problem 5-1A.Instructions Journalize the entries to
Sales and purchase-related transactions using periodic inventory system Selected transactions for Babcock Company during November of the current year are listed in Problem 5-3A.Instructions
Sales and purchase-related transactions for buyer and seller using periodic inventory system Selected transactions during August between Summit Company and Beartooth Co. are listed in Problem
Periodic inventory accounts, multiple-step income statement, closing entries On December 31, 20Y5, the balances of the accounts appearing in the ledger of Wyman Company are as follows:Cash $ 13,500
Purchase-related transactions using perpetual inventory system Obj. 2 The following selected transactions were completed by Niles Co. during March of the current year:Mar. 1. Purchased merchandise
Sales-related transactions using perpetual inventory system Obj. 2 The following selected transactions were completed by Green Lawn Supplies Co., which sells irrigation supplies primarily to other
Sales and purchase-related transactions using perpetual Obj. 2 inventory system The following were selected from among the transactions completed by Essex Company during July of the current year:July
Sales and purchase-related transactions for seller and buyer using Obj. 2 perpetual inventory system The following selected transactions were completed during April between Swan Company and Bird
Multiple-step income statement and balance sheet Obj. 4 The following selected accounts and their current balances appear in the ledger of Kanpur Co.for the fiscal year ended June 30, 20Y7:Cash $
Single-step income statement and balance sheet Obj. 4 Selected accounts and related amounts for Kanpur Co. for the fiscal year ended June 30, 20Y7, are presented in Problem 5-5B.Instructions 1.
Purchase-related transactions using periodic inventory system Selected transactions for Niles Co. during March of the current year are listed in Problem 5-1B.Instructions Journalize the entries to
Sales and purchase-related transactions using periodic inventory system Selected transactions for Essex Company during July of the current year are listed in Problem 5-3B.Instructions Journalize the
Sales and purchase-related transactions for buyer and seller using periodic inventory system Selected transactions during April between Swan Company and Bird Company are listed in Problem
Periodic inventory accounts, multiple-step income statement, closing entries On June 30, 20Y9, the balances of the accounts appearing in the ledger of Simkins Company are as follows:Cash $125,000
Describe the characteristics of an account and a chart of accounts.AppendixLO1
Describe and illustrate journalizing transactions using the double-entry accounting system.AppendixLO1

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