Questions and Answers of Financial Accounting 6th Edition

The 2024 income statement of Adrian Express reports sales of $19,310,000, cost of goods sold of $12,250,000, and net income of $1,700,000. Balance sheet information is provided in the following
Income statement and balance sheet data for Virtual Gaming Systems are provided below.Required:1. Calculate the following risk ratios for 2024 and 2025:a. Receivables turnover ratio.b. Inventory
Income statement and balance sheet data for The Athletic Attic are provided below.Required:1. Calculate the following risk ratios for 2024 and 2025:a. Receivables turnover ratio.b. Inventory turnover
After years of steady growth in net income, Performance Drug Company reported a preliminary net loss in 2024. The CEO, Joe Mammoth, notices the following estimates are included in reported
Roseburg Corporation manufactures cardboard containers. In 2017, the company purchased several large tracts of timber for $20 million with the intention of harvesting its own timber rather than
The balance sheets for Plasma Screens Corporation and additional information are provided below.Required:1. Calculate the following risk ratios for 2024:a. Receivables turnover ratio.b. Inventory
The following condensed information is reported by Sporting Collectibles.Required:1. Calculate the following profitability ratios for 2024:a. Gross profit ratio.b. Return on assets.c. Profit
LeBron’s Bookstores has two divisions: books and electronics. The electronics division had another great year in 2024 with net sales of $11 million, cost of goods sold of $6.5 million, operating
Shaquille Corporation has operating income of $1.7 million, a loss on sale of investments of $200,000, and income tax expense of $425,000 for the year ended December 31, 2024, before considering the
An investments account offers a 12% annual return. If $50,000 is placed in the account for two years, by how much will the investment grow if interest is compounded (a) Annually (b)
Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinic participants wear multiuse (MU)
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2025, for $12,000. They expect to use the
Disney has several types of long-term assets. What are the primary ones shown in its balance sheet?
Solich Sandwich Shop had the following long-term asset balances as of January 1, 2024:Additional information:· Solich purchased all the assets at the beginning of 2022.· The building is depreciated
Togo’s Sandwich Shop had the following long-term asset balances as of January 1, 2024:Additional information:· Togo’s purchased all the assets at the beginning of 2022.· The building is
Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system), find the annual report (10-K) for Facebook for the year ended December 31, 2019. Locate the “Consolidated Statements of
The following information relates to the intangible assets of Lettuce Express:a. On January 1, 2024, Lettuce Express completed the purchase of Farmers Produce, Inc., for $1,600,000 in cash. The fair
The following information relates to the intangible assets of University Testing Services (UTS):a. On January 1, 2024, UTS completed the purchase of Heinrich Corporation for $3,510,000 in cash. The
Edward L. Vincent is CFO of Energy Resources, Inc. The company specializes in the exploration and development of natural gas. It’s near year-end, and Edward is feeling terrific. Natural gas prices
El Tapitio purchased restaurant furniture on September 1, 2024, for $45,000. Residual value at the end of an estimated 10-year service life is expected to be $6,000. Calculate depreciation expense
On January 1, Speedy Delivery Company purchases a delivery van for $90,000. Speedy estimates that at the end of its six-year service life, the van will be worth $30,000. During the six-year period,
Refer to the information in BE7-10. Record depreciation expense for each of the first two years using the straight-line method.Data from in BE7-10On January 1, Hawaiian Specialty Foods purchased
Togo’s Sandwiches acquired equipment on April 1, 2024, for $18,000. The company estimates a residual value of $2,000 and a five-year service life.Required:Calculate depreciation expense using the
Refer to the information in BE7-10. In addition, assume the machine operated for an additional 3,400 hours in the second year. Record depreciation expense for the first two years using the
Tasty Subs acquired a food-service truck on October 1, 2024, for $120,000. The company estimates a residual value of $40,000 and a four-year service life.Required:Calculate depreciation expense using
Tasty Subs acquired a food service truck on October 1, 2024, for $120,000. The company estimates a residual value of $40,000 and a four-year service life. It expects to drive the truck 100,000 miles.
On January 1, 2024, Weaver Corporation purchased a patent for $237,000. The remaining legal life is 20 years, but the company estimates the patent will be useful for only six more years. In January
Which depreciation method is most common for financial reporting? Which depreciation method is most common for tax reporting? Why do companies choose these methods?
Refer to the situation described in BE7–21. Assume the sum of estimated future cash flows is $32 million instead of $38 million. What amount of impairment loss should Vegetarian Delights
Refer to the information in BE7–1. Determine the financial statement effects of the purchase of land.Data from in BE7-1Fresh Veggies, Inc. (FVI), purchases land and a warehouse for $490,000. In
Refer to the information in BE7–11. Determine the financial statement effects of depreciation for each of the first two years using the straight-line method.Data from in BE7-11On January 1,
Refer to the information in BE7–12. Determine the financial statement effects of depreciation using the activity-based method.Data from in BE7-12On January 1, Hawaiian Specialty Foods purchased
Provide an example of a company with a high-profit margin. Provide an example of a company with a high asset turnover.
Refer to the information in BE7–15. Determine the financial statement effects of the gain or loss on the sale of the equipment.Data from in BE7-15Granite Stone Creamery sold ice cream equipment for
Refer to the information in BE7–16. Determine the financial statement effects of the gain or loss on the sale of the equipment.Data from in BE7-16Piper’s Pizza sold baking equipment for $25,000.
At the end of 2025, the following information is available for Great Adventures.• Additional interest for five months needs to be accrued on the $30,000, 6% note payable obtained on August 1, 2024.
What is the definition of a liability?
Precision Castparts, a manufacturer of processed engine parts in the automotive and airline industries, borrows $41 million cash on October 1, 2024, to provide working capital for anticipated
Eskimo Joe’s, designer of the world’s second best-selling T-shirt (just behind Hard Rock Cafe), borrows $21 million cash on November 1, 2024. Eskimo Joe’s signs a six-month, 7% promissory note
How do we define current liabilities? Long-term liabilities?
On November 1, 2024, Aviation Training Corp. borrows $60,000 cash from Community Savings and Loan. Aviation Training signs a three-month, 7% note payable. Interest is payable at maturity.
On August 1, 2024, Trico Technologies, an aeronautic electronics company, borrows $21 million cash to expand operations. The loan is made by FirstBanc Corp. under a short-term line of credit
Financial information for American Eagle is presented in Appendix A at the end of the book, and financial information for Buckle is presented in Appendix B at the end of the book.Required:1.
Provide examples of current liabilities in the airline industry.
On August 1, 2024, Trico Technologies, an aeronautic electronics company, borrows $21 million cash to expand operations. The loan is made by FirstBanc Corp. under a short-term line of credit
Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system), find the annual report (10-K) for Target Corporation for the year ended February 1, 2020. Locate the “Consolidated
Mike Samson is a college football coach making a base salary of $652,800 a year ($54,400 per month). Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a
The ink-jet printing division of Environmental Printing has grown tremendously in recent years. Assume the following transactions related to the ink-jet division occur during the year ended December
Compact Electronics is a leading manufacturer of digital camera equipment. Assume the following transactions occur during the year ended December 31, 2024.Required:Determine the appropriate way
Western Manufacturing is involved with several potential contingent liabilities. Your assignment is to draft the appropriate accounting treatment for each situation described below. Western’s
Dinoco Petroleum faces three potential contingency situations, described below. Dinoco’s fiscal year ends December 31, 2024, and it issues its 2024 financial statements on March 15,
Authors Academic Press faces three potential contingency situations, described below. Authors’ fiscal year ends December 31, 2024.Required:Determine the appropriate means of reporting each
Quattro Technologies, a hydraulic manufacturer in the aeronautics industry, has reported steadily increasing net income over the past few years. The company reported net income of $120 million in
During January, Luxury Cruise Lines incurs employee salaries of $3 million. Withholdings in January are $229,500 for the employee portion of FICA, and $667,500 for employee federal and state. The
On September 1, 2024, Southwest Airlines borrows $41 million, and records the full amount as Notes Payable (long-term). On December 31, 2024 (balance sheet date), Southwest determines $10 million of
On September 1, 2024, Southwest Airlines borrows $41 million, of which $10 million is due next year. Show how Southwest Airlines would report the $41 million debt on its December 31, 2024, balance
Apple Inc. is one of the top online music retailers through its iTunes music store. Assume Apple sells $21 million in iTunes gift cards in November, and customers redeem $14 million of the gift cards
Vail is one of the largest ski resorts in the United States. Suppose that on October 1, 2024, Vail sells gift cards (lift passes) for $100,000. The gift cards are redeemable for one day of skiing
On September 1, 2024, Lindsey Engineering borrows $400,000 cash. The loan is made by FirstLending, under the agreement that Lindsey will repay the principal with four payments of $100,000. Payments
Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December 2024 of a circuit flaw in an amplifier that poses a potential fire
Lindy Appliance begins operations in 2024 and offers a one-year warranty on all products sold. Total appliance sales in 2024 are $1,600,000, and Lindy estimates future warranty costs in 2025 to be 2%
Refer to the information in BE8–1. Determine the financial statement effects of (1) the issuance of the note and (2) the adjusting entry for interest owed by December 31, the end of the reporting
On January 1, 2024, the general ledger of ACME Fireworks includes the following account balances:During January 2024, the following transactions occur:January 2 Sold gift cards totaling $8,000. The
Refer to the information in BE8–6. Determine the financial statement effects of (1) the collection of the down payment on December 18 and (2) the delivery of inventory and collection of remaining
Refer to the information in BE8–8. Determine the financial statement effects of sales and sales tax payable.Data from in BE8-8During December, Far West Services makes a credit sale of $3,200
Refer to the information in BE8–11. Determine the financial statement effects of accounting for expected future warranty costs.Data from in BE8-11Sony introduces a new compact music player that
Baskin-Robbins is one of the world’s largest specialty ice cream shops. The company offers dozens of different flavors, from Very Berry Strawberry to lowfat Espresso ’n Cream. Assume that a local
Refer to the information in BE6–5. Calculate ending inventory and cost of goods sold for the year, assuming the company uses weighted-average cost.Data from in BE6-5During the year, Wright Company
The Fun Zone sells a variety of children’s toys, games, books, and accessories. Assume that a local store has the following amounts for the month of March 2024.Required:1. Prepare a multiple-step
Eddie’s Galleria sells billiard tables. The company has the following purchases and sales for 2024.Eddie is worried about the company’s financial performance. He has noticed an increase in the
Over a four-year period, Jackie Corporation reported the following series of gross profits.In 2024, the company performed a comprehensive review of its inventory accounting procedures. Based on this
Sylvester has a bird shop that sells canaries. Sylvester maintains accurate records on the number of birds purchased from its suppliers and the number sold to customers. The records show the
Refer to the information in BE6–14. Record any necessary adjusting entry for the lower of cost and net realizable value.Data from in BE6-14Powder Ski Shop reports inventory using the lower of cost
Below are amounts found in the income statements of three companies.Required:1. For each company, calculate (a) gross profit, (b) operating income, (c) income before income taxes, and (d) net
What is the inventory turnover ratio? What is it designed to measure?
Mulligan Corporation purchases inventory on account with terms FOB shipping point. The goods are shipped on December 30, 2024, but do not reach Mulligan until January 5, 2025. Mulligan correctly
On January 1, 2024, the general ledger of Big Blast Fireworks includes the following account balances:The $30,000 beginning balance of inventory consists of 300 units, each costing $100. During
Refer to the information in BE6–22. What impact will this error have on ending inventory and retained earnings in the current year and following year? Ignore any tax effects.Data from in
Refer to the information in BE6–10. Determine the financial statement effects for (a) the purchase of inventory on account and (b) the sale of inventory on account.Data from in BE6-10Shankar
Refer to the information in BE6–15. Determine the financial statement effects of adjusting inventory for the lower of cost and net realizable value.Data from in BE6-15Powder Ski Shop reports
Crimson Tide Music Academy offers lessons in playing a wide range of musical instruments. The unadjusted trial balance as of December 31, 2024, appears below. December 31 is the company’s fiscal
Assume the following scenarios.Scenario 1: During 2024, IBM provides consulting services on its mainframe computer for $11,000 on account. The customer does not pay for those services until
Assume the following scenarios.Scenario 1: During 2024, The Hubbard Group provides services of $900,000 for repair of a state highway. The company receives an initial payment of $300,000 with the
Tony and Suzie are ready to expand Great Adventures even further in 2025. Tony believes that many groups in the community (for example, Boys and Girls Clubs, church groups, civic groups, and local
On February 3, a company provides services on account for $25,000, terms 2/10, n/30. On February 9, the company receives payment from the customer for those services on February 3. Record the service
The following events occur for The Underwood Corporation during 2024 and 2025, its first two years of operations. June 12, 2024 Provide services to customers on account for $41,000. September 17,
The following events occur for Municipal Engineering during 2024 and 2025, its first two years of operations. February 2, 2024 Provide services to customers on account for $38,000. July 23, 2024
Pearl E. White Orthodontist specializes in correcting misaligned teeth. During 2024, Pearl provides services on account of $590,000. Of this amount, $80,000 remains receivable at the end of the year.
Refer to the information in BE5–17.Data from in BE5-17On October 1, 2024, Ogneva Corporation loans one of its employees $40,000 and accepts a 12-month, 9% note receivable. Calculate the amount of
Facial Cosmetics provides plastic surgery primarily to hide the appearance of unwanted scars and other blemishes. During 2024, the company provides services of $410,000 on account. Of this amount,
Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system), find the annual report (10-K) for Avon Products for the year ended December 31, 2019. Locate the “Consolidated Statement of
During 2024, its first year of operations, Pave Construction provides services on account of $160,000. By the end of 2024, cash collections on these accounts total $110,000. Pave estimates that 25%
Humanity International sells medical and food supplies to those in need in underdeveloped countries. Customers in these countries are often very poor and must purchase items on account. At the end of
Physicians’ Hospital has the following balances on December 31, 2024, before any adjustment: Accounts Receivable = $60,000; Allowance for Uncollectible Accounts = $1,100 (credit). On December 31,
Refer to the information in BE5–7, but now assume that the balance of Allowance for Uncollectible Accounts before adjustment is $600 (debit). The company still estimates future uncollectible
On December 1, 2024, Liang Chemical provides services to a customer for $90,000. In payment for the services, the customer signs a three-year, 10% note. The face amount is due at the end of the third
On April 15, 2024, Sampson Consulting provides services to a customer for $110,000. To pay for the services, the customer signs a three-year, 12% note. The face amount is due at the end of the third
Southwest Pediatrics has the following balances on December 31, 2024, before any adjustment: Accounts Receivable = $130,000; Allowance for Uncollectible Accounts = $2,100 (debit). On December 31,
We report accounts receivable in the balance sheet at the amount expected to be collected. Explain what this term means.
Mercy Hospital has the following balances on December 31, 2024, before any adjustment: Accounts Receivable = $70,000; Allowance for Uncollectible Accounts = $1,400 (credit). Mercy estimates

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