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financial accounting information for decisions

Questions and Answers of Financial Accounting Information For Decisions

Gomez Corp. uses the allowance method to account for uncollectibles. On October 31, it wrote off an $800 account of a customer, C. Green. On December 9, it receives a $300 payment from Green.1
Warner Company’s year-end unadjusted trial balance shows accounts receivable of $99,000, allowance for doubtful accounts of $600 (credit), and sales of $280,000. Uncollectibles are estimated to be
Assume the same facts as in QS 7-3, except that Warner estimates uncollectibles as 0.5% of sales. Prepare the December 31 year-end adjusting entry for uncollectibles.AppendixLO1
On August 2, 2005, Jun Co. receives a $6,000, 90-day, 12% note from customer Ryan Albany as payment on his $6,000 account. Prepare Jun’s journal entries for August 2 and for the note’s maturity
Dominika Company’s December 31 year-end unadjusted trial balance shows a $10,000 balance in Notes Receivable. This balance is from one 6% note dated December 1, with a period of 45 days. Prepare
The following data are taken from the comparative balance sheets of Rodriguez Company. Compute and interpret its accounts receivable turnover for year 2008 (competitors average a turnover of
Levine Company uses the perpetual inventory system and allows customers to use two credit cards in charging purchases. With the Omni Bank Card, Levine receives an immediate credit to its account when
Morales Company recorded the following selected transactions during Exercise 7-2 November 2008.Nov. 5 Accounts Receivable—Ski Shop . . . . . . . . . . . . . . . . 4,615 Sales. . . . . . . . . . . .
At each calendar year-end, Booyah Supply Co. uses the percent of accounts receivable method to estimate bad debts. On December 31, 2008, it has outstanding accounts receivable of $55,000, and it
Prepare journal entries to record these selected transactions for Vitalo Company.Nov. 1 Accepted a $6,000, 180-day, 8% note dated November 1 from Kelly White in granting a time extension on her
Prepare journal entries to record the following selected transactions of Ridge Company.Mar. 21 Accepted a $9,500, 180-day, 8% note dated March 21 from Taurean Jackson in granting a time extension on
Prepare journal entries for the following selected transactions of Dulcinea Company.2007 Dec. 13 Accepted a $9,500, 60-day, 8% note dated December 13 in granting Miranda Lee a time extension on her
The following information is from the annual financial statements of Raheem Company. Compute its accounts receivable turnover for 2007 and 2008. Compare the two years results and give a possible
Liang Company began operations on January 1, 2007. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad
Identify the items making up merchandise inventory. (p. 198)AppendixLO1
Identify the costs of merchandise inventory.AppendixLO1
Analyze the effects of inventory methods for both financial and tax reporting. (p. 205)AppendixLO1
Analyze the effects of inventory errors on current and future financial statements. (p. 208)AppendixLO1
Assess inventory management using both inventory turnover and days’sales in inventory.AppendixLO1
Compute inventory in a perpetual system using the methods of specific identification, FIFO, LIFO, and weighted average. (p. 200)AppendixLO1
Compute the lower of cost or market amount of inventory. (p. 207)AppendixLO1
Appendix 5A—Compute inventory in a periodic system using the methods of specific identification, FIFO, LIFO, and weighted average. (p. 215)AppendixLO1
Appendix 5B—Apply both the retail inventory and gross profit methods to estimate inventory.AppendixLO1
What accounting principle most guides the allocation of cost of goods available for sale between ending inventory and cost of goods sold?AppendixLO1
If Skechers sells goods to Target with terms FOB shipping point, which company reports these goods in its inventory while they are in transit?AppendixLO1
An art gallery purchases a painting for $11,400 on terms FOB shipping point. Additional costs in obtaining and offering the artwork for sale include $130 for transportation-in, $150 for import
Describe one advantage for each of the inventory costing methods: specific identification, FIFO, LIFO, and weighted average.AppendixLO1
When costs are rising, which method reports higher net income—LIFO or FIFO?AppendixLO1
When costs are rising, what effect does LIFO have on a balance sheet compared to FIFO?AppendixLO1
A company takes a physical count of inventory at the end of 2008 and finds that ending inventory is understated by $10,000.Would this error cause cost of goods sold to be overstated or understated in
A company reports the following beginning inventory and purchases, and it ends the period with 30 units in inventory.Beginning Inventory . . . . . . . . 100 units at $10 cost per unit Purchase 1 . .
Using the retail method and the following data, estimate the cost of ending inventory.Cost Retail Beginning inventory . . . . . . . . . . . . $324,000 $530,000 Cost of goods purchased . . . . . . . .
Assume that Marvel uses a perpetual FIFO inventory system.What is the dollar value of its ending inventory?a. $2,940d. $2,852b. $2,685e. $2,705c. $2,625 July 1 Beginning inventory . . . . . . . . 75
Assume that Marvel uses a perpetual LIFO inventory system.What is the dollar value of its ending inventory?a. $2,940d. $2,852b. $2,685e. $2,705c. $2,625.July 1 Beginning inventory . . . . . . . . 75
Assume that Marvel uses a perpetual specific identification inventory system. Its ending inventory consists of 20 units from beginning inventory, 40 units from the July 3 purchase, and 45 units from
A Assume that Marvel uses a periodic FIFO inventory system.What is the dollar value of its ending inventory?a. $2,940d. $2,852b. $2,685e. $2,705c. $2,625 July 1 Beginning inventory . . . . . . . . 75
A company has cost of goods sold of $85,000 and ending inventory of $18,000. Its days’ sales in inventory equals:a. 49.32 daysd. 77.29 daysb. 0.21 dayse. 1,723.61 daysc. 4.72 days.AppendixLO1
Describe how costs flow from inventory to cost of goods sold for the following methods: (a) FIFO and (b) LIFO.AppendixLO1
Where is the amount of merchandise inventory disclosed in the financial statements?AppendixLO1
Why are incidental costs sometimes ignored in inventory costing?Under what principle is this permitted?AppendixLO1
If costs are declining, will the LIFO or FIFO method of inventory valuation yield the lower cost of goods sold? Why?AppendixLO1
What does the full-disclosure principle prescribe if a company changes from one acceptable accounting method to another?AppendixLO1
Can a company change its inventory method each accounting period? Explain.AppendixLO1
Does the accounting principle of consistency preclude any changes from one accounting method to another?AppendixLO1
If inventory errors are said to correct themselves, why are accounting users concerned when such errors are made?AppendixLO1
Explain the following statement: “Inventory errors correct themselves.”AppendixLO1
What is the meaning of market as it is used in determining the lower of cost or market for inventory?AppendixLO1
What guidance does the principle of conservatism offer?AppendixLO1
What factors contribute to (or cause) inventory shrinkage?AppendixLO1
What accounts are used in a periodic inventory system but not in a perpetual inventory system?AppendixLO1
When preparing interim financial statements, what two methods can companies utilize to estimate cost of goods sold and ending inventory?AppendixLO1
Refer to Best Buy’s financial statements in Appendix A. On February 26, 2005, what percent of current assets are represented by inventory?AppendixLO1
Refer to Circuit City’s financial statements in Appendix A. Compute its cost of goods available for sale for the year ended February 28, 2005.AppendixLO1
What percent of Apple’s current assets are inventory as of September 25, 2004, and as of September 25, 2003?AppendixLO1
A company reports the following beginning inventory and purchases for the month of January. On January 26, 355 units were sold. What is the cost of the 160 units that remain in ending inventory at
Wattan Company reports beginning inventory of 10 units at $60 each. Every week for four weeks it purchases an additional 10 units at respective costs of $61, $62, $65, and $70 per unit for weeks 1
Trey Monson starts a merchandising business on December 1 and enters into three inventory purchases:December 7 10 units @ $ 7 cost December 14 20 units @ $ 8 cost December 21 15 units @ $10 cost
Identify the inventory costing method best described by each of the following separate statements. Assume a period of increasing costs. 1. Yields a balance sheet inventory amount often markedly less
1. At year-end, Liu Co. had shipped $750 of merchandise FOB destination to Kwon Co. Which company should include the $750 of merchandise in transit as part of its year-end inventory? 2. Jabar Company
Majors & Son, antique dealers, purchased the contents of an estate for $38,500. Terms of the purchase were FOB shipping point, and the cost of transporting the goods to Majors & Son’s warehouse
Amulet Trading Co. has the following products in its ending inventory. Compute lower of cost or market for inventory (a) as a whole and (b) applied separately to each product.Product Quantity Cost
In taking a physical inventory at the end of year 2008, Peña Company erroneously forgot to count certain units. Explain how this error affects the following: (a) 2008 cost of goods sold, (b) 2008
Refer to QS 5-1 and assume the periodic inventory system is used. Determine the costs assigned to the ending inventory when costs are assigned based on (a) FIFO, (b) LIFO, and (c) weighted average.
Refer to QS 5-3 and assume the periodic inventory system is used. Determine the costs assigned to the December 31 ending inventory when costs are assigned based on (a) FIFO, (b) LIFO, (c) weighted
Kauai Store’s inventory is destroyed by a fire on September 5, 2008. The following data for year 2008 are available from the accounting records. Estimate the cost of the inventory destroyed.Jan. 1
Laker Company reported the following January purchases and sales data for its only product.Date Activities Units Acquired at Cost Units Sold at Retail Jan. 1 Beginning inventory . . . . . . . . . 140
Use the data in Exercise 5-1 to prepare comparative income statements for the month of January for Laker Company similar to those shown in Exhibit 5.8 for the four inventory methods. Assume expenses
Hemming Co. reported the following current-year purchases and sales data for its only product.Date Activities Units Acquired at Cost Units Sold at Retail Jan. 1 Beginning inventory . . . . . . . 200
Refer to the data in Exercise 5-3. Assume that ending inventory is made up of 45 units from the March 14 purchase, 75 units from the July 30 purchase, and all the units of the October 26 purchase.
Martinez Company’s ending inventory includes the following items. Compute the lower of cost or market for ending inventory (a) as a whole and (b) applied separately to each product.Per Unit Product
Vibrant Company had $850,000 of sales in each of three consecutive years 2007–2009, and it purchased merchandise costing $500,000 in each of those years. It also maintained a $250,000 physical
Use the following information for Palmer Co. to compute inventory turnover for 2008 and 2007, and its days’ sales in inventory at December 31, 2008 and 2007. (Round answers to the tenth place.)
Cruz Company uses LIFO for inventory costing and reports the following financial data. It also recomputed inventory and cost of goods sold using FIFO for comparison purposes.2008 2007 LIFO inventory
Refer to Exercise 5-1 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory and to cost of goods sold using (a) specific identification, (b) weighted
Refer to Exercise 5-3 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory and to cost of goods sold using (a) FIFO, and (b) LIFO. Compute the gross
Martinez Co. reported the following current-year data for its only product. The company uses a periodic inventory system, and its ending inventory consists of 150 units—50 from each of the last
Flora’s Gifts reported the following current-year data for its only product. The company uses a periodic inventory system, and its ending inventory consists of 150 units—50 from each of the last
In 2008, Dakota Company had net sales (at retail) of $260,000. The following additional information is available from its records at the end of 2008. Use the retail inventory method to estimate
On January 1, JKR Store had $225,000 of inventory at cost. In the first quarter of the year, it purchased$795,000 of merchandise, returned $11,550, and paid freight charges of $18,800 on purchased
Montoure Company uses a perpetual inventory system. It entered into the following calendar-year 2008 purchases and sales transactions.Date Activities Units Acquired at Cost Units Sold at Retail Jan.
Explain the steps in processing transactions. (p. 48)AppendixLO1
Describe source documents and their purpose. (p. 49)AppendixLO1
Describe an account and its use in recording transactions. (p. 49)AppendixLO1
Describe a ledger and a chart of accounts. (p. 52)AppendixLO1
Define debits and credits and explain their role in double-entry accounting.AppendixLO1
Analyze the impact of transactions on accounts and financial statements. (p. 57)AppendixLO1
Compute the debt ratio and describe its use in analyzing financial condition.AppendixLO1
Record transactions in a journal and post entries to a ledger. (p. 54)AppendixLO1
Prepare and explain the use of a trial balance. (p. 63)AppendixLO1
Prepare financial statements from business transactions.AppendixLO1
Identify examples of accounting source documents.AppendixLO1
Explain the importance of source documents.AppendixLO1
Identify each of the following as either an asset, a liability, or equity: (a) Prepaid Rent,(b) Unearned Fees, (c) Building, (d ) Wages Payable, and (e) Office Supplies.AppendixLO1
What is an account? What is a ledger?AppendixLO1
What determines the number and types of accounts a company uses?AppendixLO1
Does debit always mean increase and credit always mean decrease?AppendixLO1
Describe a chart of accounts.AppendixLO1
What types of transactions increase equity? What types decrease equity?AppendixLO1
Why are accounting systems called double entry?AppendixLO1
For each transaction, double-entry accounting requires which of the following: (a) Debits to asset accounts must create credits to liability or equity accounts, (b) a debit to a liability account

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