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financial accounting information for decisions

Questions and Answers of Financial Accounting Information For Decisions

A company is considering an investment expected to yield $70,000 after six years. If this company demands an 8% return, how much is it willing to pay for this investment?AppendixLO1
Apply future value concepts to an annuity by using interest tables.AppendixLO1
Apply present value concepts to an annuity by using interest tables.(p. B-6)AppendixLO1
Apply future value concepts to a single amount by using interest tables. (p. B-5)AppendixLO1
Apply present value concepts to a single amount by using interest tables.(p. B-3)AppendixLO1
Describe the earning of interest and the concepts of present and future values.AppendixLO1
Nishi Corporation prepares financial statements for each month-end. As part of its accounting process, estimated income taxes are accrued each month for 30% of the current month’s net income. The
Lucinda Florita, an unmarried employee, works 48 hours in the week ended January 12. Her pay rate is$14 per hour, and her wages are subject to no deductions other than FICA—Social Security,
The payroll records of One Click Software show the following information about Keisha LeShon, an employee, for the weekly pay period ending September 30, 2008. LeShon is single and claims one
Use the following information from separate companies a through f to compute times interest earned.Which company indicates the strongest ability to pay interest expense as it comes due?Exercise 9-9
Hitzu Co. sold a copier costing $4,800 with a two-year parts warranty to a customer on August 16, 2008, for $6,000 cash. Hitzu uses the perpetual inventory system. On November 22, 2009, the copier
Using the data in situation a of Exercise 9-6, prepare the employer’s September 30 journal entries to record(1) salary expense and its related payroll liabilities for this employee and (2) the
BMX Co. has one employee, and the company is subject to the Exercise 9-6 following taxes:Tax Rate Applied To FICA—Social Security . . . . . . . 6.20% First $94,200 FICA—Medicare . . . . . . . . .
Keesha Co. borrows $200,000 cash on November 1, 2008, by signing a 90-day, 9% note with a face value of $200,000.1 On what date does this note mature?2 How much interest expense results from this
Ideal Systems borrows $104,000 cash on May 15, 2008, by signing a 60-day, 12% note.1 On what date does this note mature?2 Suppose the face value of the note equals $104,000, the principal of the
For the year ended December 31, 2008, Lopez Company has implemented an employee bonus program equal to 3% of Lopez’s net income, which employees will share equally. Lopez’s net income
Prepare any necessary adjusting entries at December 31, 2008, for Casco Company’s year-end financial statements for each of the following separate transactions and events.1 During December, Casco
The following items appear on the balance sheet of a company with a two-month operating cycle. Identify the proper classification of each item as follows: C if it is a current liability, L if it is a
Sera Corporation has made and recorded its quarterly income tax payments. After a final review of taxes for the year, the company identifies an additional $40,000 of income tax expense that should be
Compute the times interest earned for Park Company, which reports income before interest expense and income taxes of $1,885,000, and interest expense of $145,000. Interpret its times interest earned
The following legal claims exist for Kewa Co. Identify the accounting treatment for each claim as either(a) a liability that is recorded or (b) an item described in notes to its financial statements.
On September 11, 2007, Lawn Outfitters sells a mower for $500 with a one-year warranty that covers parts. Warranty expense is estimated at 5% of sales. On July 24, 2008, the mower is brought in for
Noura Company offers an annual bonus to employees if the company meets certain net income goals.Prepare the journal entry to record a $15,000 bonus owed to its workers (to be shared equally) at
Chavez Co.’s salaried employees earn four weeks vacation per year. It pays $312,000 in total employee salaries for 52 weeks but its employees work only 48 weeks. This means Chavez’s total weekly
Major Co. has five employees, each of whom earns $2,500 per month and has been employed since January 1. FICA Social Security taxes are 6.2% of the first $94,200 paid to each employee, and FICA
On November 7, 2008, Mura Company borrows $160,000 cash by signing a 90-day, 8% note payable with a face value of $160,000. (1) Compute the accrued interest payable on December 31, 2008, (2) prepare
Dextra Computing sells merchandise for $6,000 cash on September 30 (cost of merchandise is $3,900).The sales tax law requires Dextra to collect 5% sales tax on every dollar of merchandise sold.
Ticketmaster receives $5,000,000 in advance ticket sales for a four-date tour of the Rolling Stones.Record the advance ticket sales on October 31. Record the revenue earned for the first concert date
Which of the following items are normally classified as a current liability for a company that has a 15-month operating cycle?1. Note payable due in 18 months.2. Note payable maturing in 2 years. 3.
Describe current and long-term liabilities and their characteristics.AppendixLO1
Identify and describe known current liabilities. (p. 358)AppendixLO1
Explain how to account for contingent liabilities.AppendixLO1
Compute the times interest earned ratio and use it to analyze liabilities.AppendixLO1
Prepare entries to account for shortterm notes payable. (p. 359)AppendixLO1
Compute and record employee payroll deductions and liabilities. (p. 361)AppendixLO1
Compute and record employer payroll expenses and liabilities.(p. 363)AppendixLO1
Account for estimated liabilities, including warranties and bonuses.(p. 365)AppendixLO1
Appendix 9A—Identify and describe the details of payroll reports, records, and procedures.AppendixLO1
What is a liability? Identify its crucial characteristics.AppendixLO1
Is every expected future payment a liability?AppendixLO1
If a liability is payable in 15 months, is it classified as current or long term?AppendixLO1
Why does a creditor prefer a note payable to a past-due account payable?AppendixLO1
A company pays its one employee $3,000 per month. This company’s FUTA rate is 0.8% on the first $7,000 earned; its SUTA rate is 4.0% on the first $7,000; its Social Security tax rate is 6.2%of the
Identify whether the employer or employee or both incurs each of the following: (a) FICA taxes,(b) FUTA taxes, (c) SUTA taxes, and (d ) withheld income taxes.AppendixLO1
Estimated liabilities involve an obligation to pay which of these? (a) An uncertain but reasonably estimated amount owed on a known obligation or (b) A known amount to a specific entity on an
A car is sold for $15,000 on June 1, 2007, with a one-year warranty on parts.Warranty expense is estimated at 1.5% of selling price at each calendar year-end. On March 1, 2008, the car is returned
A future payment is reported as a liability on the balance sheet if payment is contingent on a future event that (a) is reasonably possible but the payment cannot be reasonably estimated;(b) is
Under what circumstances is a future payment reported in the notes to the financial statements as a contingent liability?AppendixLO1
What two items determine the amount deducted from an employee’s wages for federal income taxes?AppendixLO1
What amount of income tax is withheld from the salary of an employee who is single with three withholding allowances and earnings of $675 in a week? (Hint: Use the wage bracket withholding table in
Which of the following steps are executed when a company draws one check for total payroll and deposits it in a special payroll bank account? (a) Write a check to the payroll bank account for the
On December 1, a company signed a $6,000, 90-day, 5% note payable, with principal plus interest due on March 1 of the following year. What amount of interest expense should be accrued at December 31
An employee earned $50,000 during the year. FICA tax for social security is 6.2% and FICA tax for Medicare is 1.45%.The employer’s share of FICA taxes isa. Zero, since the employee’s pay exceeds
Assume the FUTA tax rate is 0.8% and the SUTA tax rate is 5.4%. Both taxes are applied to the first $7,000 of an employee’s pay. What is the total unemployment tax an employer must pay on an
A company sells big screen televisions for $3,000 each. Each television has a two-year warranty that covers the replacement of defective parts. It is estimated that 1% of all televisions sold will be
Employees earn vacation pay at the rate of 1 day per month.During October, 150 employees qualify for one vacation day each. Their average daily wage is $175 per day. What is the amount of vacation
What are the three important questions concerning the uncertainty of liabilities?AppendixLO1
What is the difference between a current and a long-term liability?AppendixLO1
What is an estimated liability?AppendixLO1
If $988 is the total of a sale that includes its sales tax of 4%, what is the selling price of the item only?AppendixLO1
What is the combined amount (in percent) of the employee and employer Social Security tax rate?AppendixLO1
What is the current Medicare tax rate? This rate is applied to what maximum level of salary and wages?AppendixLO1
What determines the amount deducted from an employee’s wages for federal income taxes?AppendixLO1
Which payroll taxes are the employee’s responsibility and which are the employer’s responsibility?Discussion Questions AppendixLO1
What is an employer’s unemployment merit rating? How are these ratings assigned to employers?AppendixLO1
Why are warranty liabilities usually recognized on the balance sheet as liabilities even when they are uncertain?AppendixLO1
Suppose that a company has a facility located where disastrous weather conditions often occur. Should it report a probable loss from a future disaster as a liability on its balance
What is a wage bracket withholding table?AppendixLO1
What amount of income tax is withheld from the salary of an employee who is single with two withholding allowances and earning $725 per week? What if the employee earned $625 and has no withholding
Refer to Best Buy’s balance sheet in Appendix A.What payroll-related liability does Best Buy report at February 26, 2005?AppendixLO1
Refer to Circuit City’s balance sheet in Appendix A.What accounts related to income taxes are on its balance sheet? Explain the meaning of each income tax account you identify.AppendixLO1
Refer to Apple’s balance sheet in Appendix A. List Apple’s current liabilities as of September 25, 2004.AppendixLO1
Match each document in a voucher system in column one with its description in column two.AppendixLO1 Document 1. Purchase requisition 2. Purchase order 3. Invoice 4. Receiving report 5. Invoice
Describe accounts receivable and how they occur and are recorded. (p. 282)AppendixLO1
Describe a note receivable and the computation of its maturity date and interest. (p. 292)AppendixLO1
Explain how receivables can be converted to cash before maturity.AppendixLO1
Compute accounts receivable turnover and use it to help assess financial condition.AppendixLO1
Apply the direct write-off and allowance methods to account for accounts receivable. (p. 286)AppendixLO1
Estimate uncollectibles using methods based on sales and accounts receivable. (p. 289)AppendixLO1
Record the receipt of a note receivable. (p. 293)AppendixLO1
Record the honoring and dishonoring of a note and adjustments for interest.AppendixLO1
In recording credit card sales, when do you debit Accounts Receivable and when do you debit Cash?AppendixLO1
A company accumulates sales receipts and remits them to the credit card company for payment.When are the credit card expenses recorded? When are these expenses incurred?AppendixLO1
Why must bad debts expense be estimated if such an estimate is possible?AppendixLO1
What term describes the balance sheet valuation of Accounts Receivable less the Allowance for Doubtful Accounts?AppendixLO1
Why is estimated bad debts expense credited to a contra account (Allowance for Doubtful Accounts) rather than to the Accounts Receivable account?AppendixLO1
SnoBoard Company’s year-end balance in its Allowance for Doubtful Accounts is a credit of $440.By aging accounts receivable, it estimates that $6,142 is uncollectible. Prepare SnoBoard’s year-end
Record entries for these transactions assuming the allowance method is used:Jan. 10 The $300 account of customer Cool Jam is determined uncollectible.April 12 Cool Jam unexpectedly pays in full the
Irwin purchases $7,000 of merchandise from Stamford on December 16, 2007. Stamford accepts Irwin’s $7,000, 90-day, 12% note as payment. Stamford’s accounting period ends on December 31, and it
Using the information in Quick Check 8, prepare Stamford’s March 16, 2008, entry if Irwin dishonors the note.AppendixLO1
How do sellers benefit from allowing their customers to use credit cards?AppendixLO1
Why does the direct write-off method of accounting for bad debts usually fail to match revenues and expenses?AppendixLO1
Explain the accounting principle of materiality.AppendixLO1
Explain why writing off a bad debt against the Allowance for Doubtful Accounts does not reduce the estimated realizable value of a company’s accounts receivable.AppendixLO1
Why does the Bad Debts Expense account usually not have the same adjusted balance as the Allowance for Doubtful Accounts?AppendixLO1
Why might a business prefer a note receivable to an account receivable?AppendixLO1
Refer to the financial statements of Best Buy in Appendix A. In its presentation of accounts receivable, Best Buy does not mention uncollectible accounts, nor does it list its receivables as
Refer to the balance sheet of Circuit City in Appendix A. Does it use the direct write-off method or allowance method to account for doubtful accounts? What is the realizable value of its accounts
Refer to the financial statements of Apple in Appendix A.What are Apple’s gross accounts receivable at September 25, 2004? What percentage of its accounts receivable does Apple believe to be
Prepare journal entries for the following credit card sales transactions (the company uses the perpetual inventory system).1 Sold $20,000 of merchandise, that cost $15,000, on MasterCard credit

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