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financial accounting for decision makers

Questions and Answers of Financial Accounting For Decision Makers

The following situation is presented in chronological order:1. Dexter decides to buy a surfboard.2. He calls Surfing USA Co. to inquire about their surfboards.3. Two days later he requests Surfing
Rita Pelzer was just hired as the assistant treasurer of Yorkshire Stores, a specialty chain store company that has nine retail stores concentrated in one metropolitan area. Among other things, the
Purpose: No financial decision maker should ever rely solely on the financial information reported in the annual report to make decisions. It is important to keep abreast of financial news. This
When goods are purchased for resale by a com- pany using a periodic inventory system: (a) purchases on account are debited to Mer- chandise Inventory. (b) purchases on account are debited to Pur-
In determining cost of goods sold: (a) purchase discounts are deducted from net purchases. (b) freight-out is added to net purchases. (c) purchase returns and allowances are de- ducted from net
If beginning inventory is $60,000, cost of goods purchased is $380,000, and ending inventory is $50,000, what is cost of goods sold? (a) $390,000 (b) $370,000 (c) $330,000 (d) $420,000
Kam Company has the following units and costs:If 9,000 units are on hand at December 31 , what is the cost of the ending inventory under FIFO?(a) \(\$ 99,000\)(c) \(\$ 113,000\)(b) \(\$ 108,000\)(d)
From the data in question 5 , what is the cost of (SO 5) the ending inventory under LIFO?(a) \(\$ 113,000\)(c) \(\$ 99,000\)(b) \(\$ 108,000\)(d) \(\$ 100,000\)
In periods of rising prices, LIFO will (SO 6) produce:(a) higher net income than FIFO.(b) the same net income as FIFO.(c) lower net income than FIFO.(d) higher net income than average costing.
Goods costing \(\$ 1,600\) are purchased on account on July 15 with credit terms of \(2 / 10, n / 30\). On July 18 a \(\$ 100\) credit memo is received from the supplier for damaged goods. Give the
Identify the accounts that are added to or deducted from purchases to determine the cost of goods purchased. For each account, indicate (a) whether it is added or deducted and (b) its normal balance.
Your friend Tom Wetzel has been hired to help take the physical inventory in Casey's Hardware Store. Explain to Tom Wetzel what this job will entail.
(a) Janine Company ships merchandise to Laura Corporation on December 30. The merchandise reaches the buyer on January 5. Indicate the terms of sale that will result in the goods being included in
Mary Ann's Hat Shop received a shipment of hats for which it paid the wholesaler \(\$ 2,940\). The price of the hats was \(\$ 3,000\), but Mary Ann's was given a \(\$ 60\) cash discount and required
Which assumed inventory cost flow method:(a) usually parallels the actual physical flow of merchandise? (b) assumes that goods available for sale during an accounting period are homogeneous?(c)
In a period of rising prices, the inventory reported in Plato Company's balance sheet is close to the current cost of the inventory, whereas York Company's inventory is considerably below its current
Shaunna Corporation has been using the FIFO cost flow method during a prolonged period of inflation. During the same time period, Shaunna has been paying out all of its net income as dividends. What
Lucy Ritter is studying for the next accounting midterm examination. What should Lucy know about (a) departing from the cost basis of accounting for inventories and (b) the meaning of "market" in the
Rock Music Center has five CD players on hand at the balance sheet date that cost \(\$ 400\) each. The current replacement cost is \(\$ 320\) per unit. Under the lower of cost or market basis of
Maureen \& Nathan Company's balance sheet shows Inventories \(\$ 162,800\). What additional disclosures should be made?
Mila Company discovers in 1998 that its ending inventory at December 31, 1997, was \(\$ 5,000\) understated. What effect will this error have on (a) 1997 net income, (b) 1998 net income, and (c) the
Identify and describe the steps in the recording process.
Charles Thon, a fellow student, contends that the double-entry system means each transaction must be recorded twice. Is Charles correct? Explain.
Teresa Alvarez, a beginning accounting student, believes debit balances are favorable and credit balances are unfavorable. Is Teresa correct? Discuss.
What is the normal balance for each of these accounts?(a) Accounts Receivable(b) Cash(c) Dividends(d) Accounts Payable(e) Service Revenue(f) Salaries Expense(g) Common Stock
For each account listed here, indicate whether it generally will have debit entries only, credit entries only, or both debit and credit entries.(a) Cash(b) Accounts Receivable(c) Dividends(d)
(a) Can accounting transaction debits and credits be recorded directly in the ledger accounts?(b) What are the advantages of first recording transactions in the journal and then posting to the ledger?
Journalize these accounting transactions.(a) Doris Wang invests \(\$ 9,000\) in the business in exchange for common stock.(b) Insurance of \(\$ 800\) is paid for the year.(c) Supplies of \(\$ 1,500\)
Kap Shin is confused about how accounting information flows through the accounting system. He believes information flows in this order:(a) Debits and credits are posted to the ledger.(b) Accounting
Presented here are three economic events. On a sheet of paper, list the letters (a), (b), and (c) with columns for assets, liabilities, and stockholders' equity. In each column, indicate whether the
Follow the same format as in BE3-1. Determine the effect on assets, liabilities, and stockholders' equity of the following three events:(a) Issued common stock to investors in exchange for cash(b)
Transactions for the H. J. Oslo Company for the month of June are presented next. Identify the accounts to be debited and credited for each transaction.June 1 Issues common stock to investors in
Use the data in BE3-4 and journalize the transactions. (You may omit explanations.)
Tage Shumway, 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. Norris Corporation has the following transactions during August of the current year. Indicate (a) the basic analysis and (b) the debit-credit analysis illustrated on pages \(105-108\) Aug. 1
Use the data in BE3-7 and journalize the transactions. (You may omit explanations.)
Selected transactions for Gonzales Company are presented in journal form (without explanations). Post the transactions to \(\mathrm{T}\) accounts. Date Account Title Debit Credit May 5 Accounts
From the ledger balances given at the top of the next page, prepare a trial balance for P. J. Carland Company at June 30, 1998. All account balances are normal. Accounts Payable $4,000 Service
Selected transactions for Green Lawn Care Company, Inc., are listed here:1. Issued common stock to investors in exchange for cash received from investors.2. Paid monthly rent.3. Purchased equipment
Li Wang Computer Timeshare Company entered into these transactions during May 1998:1. Purchased computer terminals for \(\$ 19,000\) from Digital Equipment on account.2. Paid \(\$ 4,000\) cash for
A tabular analysis of the transactions made by Roberta Mendez \& Co. Inc. for the month of August is shown below. Each increase and decrease in stockholders' equity is
The tabular analysis of transactions for Roberta Mendez \& Co. is presented in E3-3.\section*{Instructions}Prepare an income statement and a retained earnings statement for August and a balance sheet
Selected transactions for A. Mane, an interior decorator corporation, in its first month of business, are as follows:1. Issued stock to investors for \(\$ 10,000\) in cash.2. Purchased used car for
Data for A. Mane, interior decorator, are presented in E3-5.\section*{Instructions}Journalize the transactions.
This information relates to Marx Real Estate Agency Corporation:Oct. 1 Lynn Marx begins business as a real estate agent with a cash investment of \(\$ 13,000\) in exchange for common stock of the
Transaction data for Marx Real Estate Agency are presented in E3-7.Instructions Journalize the transactions.
Selected transactions from the journal of J. L. Kang, Inc., an investment brokerage corporation, are presented here:\section*{Instructions}(a) Post the transactions to \(\mathrm{T}\) accounts.(b)
These T accounts summarize the ledger of Lush Landscaping Company, Inc., at the end of the first month of operations:\section*{Instructions}(a) Prepare the journal entries (including explanations)
Here is the ledger for Holly Co.:\section*{Instructions}(a) Reproduce the journal entries for the transactions that occurred on October 1, 10, and 20 and provide explanations for each.(b) Prepare a
Selected transactions for the Basler Corporation during its first month in business are presented below:Sept. 1 Issued common stock in exchange for \(\$ 15,000\) cash received from investors.5
The bookkeeper for John Castle's Equipment Repair Corporation made these errors in journalizing and posting:1. A credit posting of \(\$ 400\) to Accounts Receivable was omitted.2. A debit posting of
The accounts in the ledger of Speedy Delivery Service contain the following balances on July 31, 1998:\section*{Instructions}Prepare a trial balance with the accounts arranged as illustrated in the
These November 1998 transactions affected the retained earnings account of the Larsson Corporation:In reviewing the account, Lars Larsson realized that the new bookkeeper had made the following
On April 1 Laura Seall established Seall Travel Agency, Inc. These transactions were completed during the month:1. Laura invested \(\$ 20,000\) cash in the company in exchange for common stock.2.
Ivan Izo created a corporation providing legal services, Ivan Izo, Inc., on July 1, 1998. On July 31 the balance sheet showed: Cash \(\$ 4,000\); Accounts Receivable \(\$ 1,500\); Supplies \(\$
Surepar Miniature Golf and Driving Range, Inc., was opened on March 1 by Jim McInnes. These selected events and transactions occurred during March:Mar. 1 McInnes invested \(\$ 50,000\) cash in the
Patricia Perez incorporated as a licensed architect. During the first month of the operation of her business, these events and transactions occurred:Apr: 1 Patricia invested \(\$ 13,000\) cash in
This is the trial balance of Jane's Laundry Corporation on September 30:The October transactions were as follows:Oct. 5 Received \(\$ 900\) cash from customers on account.10 Billed customers for
This trial balance of Thom Wargo Co. does not balance.Each of the listed accounts has a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors:1.
Star Theater, Inc., was recently formed by Leo Baerga. It will begin operations in March. The Star will be unique in that it will show only triple features of sequential theme movies. As of February
Upton Consulting Co. was started on March 1, 1998. The stockholders' equity column of the tabular summary for the month of March contained these recorded data:All data were properly recorded except
Tony's Repair Shop, Inc., was started on May 1 by R. Antonio. Here is a summary of the May transactions:1. Invested \(\$ 15,000\) cash in the company in exchange for common stock.2. Purchased
Donna Corso opened a veterinary business in Hills, Iowa, on August 1, 1998. On August 31 the balance sheet showed: Cash \(\$ 9,000\); Accounts Receivable \(\$ 1,700\); Supplies \(\$ 600\); Office
The Frontier Park was started on April 1 by Ed Quinn. These selected events and transactions occurred during April:Apr. 1 Invested \(\$ 60,000\) cash in the business in exchange for common stock.4
Iva Holz operates an incorporated accounting practice. During the first month of operations of her business, these events and transactions occurred:May 1 Invested \(\$ 42,000\) cash in exchange for
The trial balance of Sterling Dry Cleaners on June 30 is given here:The July transactions were as follows:July 8 Collected \(\$ 4,936\) in cash on June 30 accounts receivable.9 Paid employee
This trial balance of Saginaw Company does not balance.Your review of the ledger reveals that each account has a normal balance. You also discover the following errors:1. The totals of the debit
Lake Theater, Inc., was recently begun by Frances Hill. All facilities were completed on March 31. At this time, the ledger showed: Cash \(\$ 6,000\); Land \(\$ 10,000\); Buildings (concession stand,
The financial statements of Starbucks in Appendix A at the back of this book contain the following selected accounts, all in thousands of dollars:\section*{Instructions}(a) What is the increase and
The financial statements of Green Mountain Coffee are presented in Appendix B, following the financial statements for Starbucks in Appendix A.\section*{Instructions}(a) Based on the information
The Enterprise Standard Industrial Classification (SIC) coding scheme, a published classification of firms into separate industries, is commonly used in practice. SIC codes permit identification of
Mini case 1 Bob Evans Farms, Inc.}Bob Evans Farms, Inc., operates 354 restaurants and several food processing plants. The plants primarily process pork into sausage, some of which is used in the
Minicase 2 Chieftain International, Inc.}Chieftain International, Inc., is an oil and natural gas exploration and production company. The company's 1994 balance sheet reported \(\$ 208\) million in
Lucy Lars operates Lucy Riding Academy, Inc. The academy's primary sources of revenue are riding fees and lesson fees, which are provided on a cash basis. Lucy also boards horses for owners, who are
Automated Security Holdings operates multinationally, with principal markets in the United States and the United Kingdom. The company designs, produces, installs, and maintains security systems to
The expanded basic accounting equation contains seven account categories: assets, liabilities, common stock, retained earnings, dividends, revenues, and expenses.\section*{Instructions}With the class
Milly Maid Company offers home cleaning service. Two recurring transactions for the company are billing customers for services rendered and paying employee salaries. For example, on March 15 bills
Mary Vonesh is the assistant chief accountant at Staples Company, a manufacturer of computer chips and cellular phones. The company presently has total sales of \(\$ 20\) million. It is the end of
Purpose: This exercise will familiarize you with skill requirements, job descriptions, and salaries for accounting careers.Address:
What is the time period assumption?(a) Revenue should be recognized in the accounting period in which it is earned.(b) Expenses should be matched with revenues.(c) The economic life of a business can
Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)?(a) Matching principle(b) Cost principle(c) Periodicity principle(d) Revenue recognition principle
Kathy Kiska earned a salary of \(\$ 400\) for the last week of September. She will be paid on Octo-.ber 1. The adjusting entry for Kathy's employer at September 30 is:(a) No entry is required.Cash
Which statement is incorrect concerning the adjusted trial balance?(a) An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all
Which one of these statements about the accrual basis of accounting is false?(a) Events that change a company's financial statements are recorded in the periods in which the events occur.(b) Revenue
Which account will have a zero balance after closing entries have been journalized and posted?(a) Service Revenue(b) Advertising Supplies(c) Prepaid Insurance(d) Accumulated Depreciation
Which types of accounts will appear in the postclosing trial balance?(a) Permanent accounts(b) Temporary accounts(c) Accounts shown in the income statement columns of a work sheet(d) None of the above
All of the following are required steps in the accounting cycle except:(a) journalizing and posting closing entries.(b) preparing an adjusted trial balance.(c) preparing a post-closing trial
(a) How does the time period assumption affect an accountant's analysis of accounting transactions?(b) Explain the term fiscal year.
\(\quad\) Tony Galego, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Galego's law firm prepares monthly financial statements, when should it
In completing the engagement in question 3, Galego incurs \(\$ 2,000\) of expenses in March, \(\$ 2,500\) in April, and none in May. How much expense should be deducted from revenues in the month the
Why may the financial information in a trial balance not be up to date and complete?
What accounts are debited and credited in a prepaid expense adjusting entry?
"Depreciation is a process of valuation that results in the reporting of the fair market value of the asset." Do you agree? Explain.
What accounts are debited and credited in an unearned revenue adjusting entry?
On January 9 a company pays \(\$ 5,000\) for salaries, of which \(\$ 1,700\) was reported as Salaries Payable on December 31 . Give the entry to record the payment.
What items are disclosed on a post-closing trial balance and what is the purpose of this work paper?
The ledger of Lena Company includes the following accounts. Explain why each account may require adjustment.(a) Prepaid Insurance(b) Depreciation Expense(c) Unearned Service Revenue(d) Interest
Riko Company accumulates the following adjustment data at December 31. Indicate (1) the type of adjustment (prepaid expense, accrued revenues, and so on) and (2) the status of the accounts before
Sain Advertising Company's trial balance at December 31 shows Advertising Supplies \(\$ 9,700\) and Advertising Supplies Expense \(\$ 0\). On December 31 there are \(\$ 1,500\) of supplies on hand.
At the end of its first year, the trial balance of Shah Company shows Equipment \(\$ 25,000\) and zero balances in Accumulated Depreciation-Equipment and Depreciation Expense. Depreciation for the

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