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financial accounting information for decisions

Questions and Answers of Financial Accounting Information For Decisions

Review the balance sheet of Circuit City in Appendix A. Identify two accounts (either assets or liabilities)requiring adjusting entries.AppendixLO1
Refer to Apple’s balance sheet in Appendix A. If it made an adjustment for unpaid wages at year-end, where would the accrued wages expense be reported on its balance sheet?AppendixLO1
What accounts are affected by closing entries? What accounts are not affected?AppendixLO1
What two purposes are accomplished by recording closing entries?AppendixLO1
What are the steps in recording closing entries?AppendixLO1
What is the purpose of the Income Summary account?AppendixLO1
Explain whether an error has occurred if a post-closing trial balance includes a Depreciation Expense account.AppendixLO1
What tasks are aided by a work sheet?AppendixLO1
Why are the debit and credit entries in the Adjustments columns of the work sheet identified with letters?AppendixLO1
What is a company’s operating cycle?AppendixLO1
What classes of assets and liabilities are shown on a typical classified balance sheet?AppendixLO1
How is unearned revenue classified on the balance sheet?AppendixLO1
What are the characteristics of plant assets?AppendixLO1
How do reversing entries simplify recordkeeping?AppendixLO1
If a company recorded accrued salaries expense of $500 at the end of its fiscal year, what reversing entry could be made?When would it be made?AppendixLO1
Refer to the balance sheet for Best Buy in Appendix A. What five noncurrent asset categories are used on its classified balance sheet?AppendixLO1
Refer to Circuit City’s balance sheet in Appendix A.Identify the accounts listed as current liabilities.AppendixLO1
Refer to Apple’s financial statements in Appendix A.What journal entry was likely recorded as of September 25, 2004, to close its Income Summary account?AppendixLO1
Classify the following adjusting entries as involving prepaid expenses (PE), unearned revenues (UR), accrued expenses (AE), or accrued revenues (AR).a. To record revenue earned that was previously
a. On July 1, 2008, Lamis Company paid $1,200 for six months of insurance coverage. No adjustments have been made to the Prepaid Insurance account, and it is now December 31, 2008. Prepare the
a. Chika Company purchases $20,000 of equipment on January 1, 2008. The equipment is expected to last five years and be worth $2,000 at the end of that time. Prepare the entry to record one year’s
Lakia Rowa employs one college student every summer in her coffee shop. The student works the five weekdays and is paid on the following Monday. (For example, a student who works Monday through
a. Tao receives $10,000 cash in advance for 4 months of legal services on October 1, 2008, and records it by debiting Cash and crediting Unearned Revenue both for $10,000. It is now December 31,
During the year, Sereno Co. recorded prepayments of expenses in asset accounts, and cash receipts of unearned revenues in liability accounts. At the end of its annual accounting period, the company
The following information is taken from Booke Company’s unadjusted and adjusted trial balances:Unadjusted Adjusted Debit Credit Debit Credit Prepaid insurance . . . . . . . $4,100 $3,700 Interest
In its first year of operations, Ronna Co. earned $45,000 in revenues and received $37,000 cash from these customers. The company incurred expenses of $25,500 but had not paid $5,250 of them at
Gloriosa Company began the current period with a $28,000 credit balance in the Retained Earnings account.At the end of the period, the company’s adjusted account balances include the following
List the following steps of the accounting cycle in their proper order:a. Posting the journal entries.f. Preparing the financial statements.b. Journalizing and posting adjusting entries. g. Preparing
The following are common categories on a classified balance sheet:A. Current assets B. Long-term investments C. Plant assets D. Intangible assets E. Current liabilities F. Long-term liabilities.For
The ledger of Mai Company includes the following accounts with normal balances: Retained Earnings$9,000; Dividends $800; Services Revenue $13,000; Wages Expense $8,400; and Rent Expense
Identify the accounts listed in QS 3-14 that would be included in a post-closing trial balance.
Sidone Company reported net income of $48,152 and net sales of $425,000 for the current year. Calculate Sidone’s profit margin and interpret the result. Assume that Sidone’s competitors achieve
Calvin Consulting initially records prepaid and unearned items in income statement accounts. Given Calvin Consulting’s accounting practices, which of the following applies to the preparation of
In preparing a work sheet, indicate the financial statement Debit column to which a normal balance in the following accounts should be extended. Use I for the Income Statement Debit column and B for
The ledger of Claudell Company includes the following unadjusted normal balances: Prepaid Rent $1,000, Services Revenue $55,000, and Wages Expense $25,000. Adjusting entries are required for (a)
Prepare adjusting journal entries for the year ended (date of) December 31, 2008, for each of these separate situations. Assume that prepaid expenses are initially recorded in asset accounts. Also
For each of the following separate cases, prepare adjusting entries required of financial statements for the year ended (date of) December 31, 2008. (Assume that prepaid expenses are initially
Lopez Management has five part-time employees, each of whom earns $250 per day. They are normally paid on Fridays for work completed Monday through Friday of the same week. They were paid in full on
The following three separate situations require adjusting journal entries to prepare financial statements as of April 30. For each situation, present both the April 30 adjusting entry and the
On March 1, 2006, a company paid an $18,000 premium on a 36-month insurance policy for coverage beginning on that date. Refer to that policy and fill in the blanks in the following table:Balance
The following adjusted trial balance contains the accounts and balances of Cruz Company as of December 31, 2008, the end of its fiscal year. (1) Prepare the December 31, 2008, closing entries for
Use the following adjusted trial balance of Wilson Trucking Company to prepare the (1) income statement, and (2) statement of retained earnings, for the year ended December 31, 2008.Account Title
Use the information in the adjusted trial balance reported in Exercise 3-7 to prepare Wilson Trucking Company’s classified balance sheet as of December 31, 2008.
Use the information from Exercise 3-7 to calculate Wilson Trucking Company’s profit margin. Interpret the profit margin for this company. (Assume the industry average is 15%.)
Use the information in the adjusted trial balance reported in Exercise 3-7 to compute the current ratio as of the balance sheet date. Interpret the current ratio for this company. (Assume that the
Use the following information to compute profit margin for each separate company a through e:Net Income Net Sales Net Income Net Salesa. $ 4,390 $ 44,830d. $65,234 $1,458,999b. 97,644 398,954e.
Calculate the current ratio in each of the following separate cases. Identify the company case with the strongest liquidity position. (These cases represent competing companies in the same
The following unadjusted trial balance contains the accounts and balances of Dylan Delivery Company as of December 31, 2008, its first year of operations.(1) Use the following information about the
Hawk Company records prepaid assets and unearned revenues in balance sheet accounts. The following information was used to prepare adjusting entries for Hawk Company as of August 31, the end of the
Describe merchandising activities and identify income components for a merchandising company. (p. 152)AppendixLO1
Identify and explain the inventory asset of a merchandising company.( p. 153)AppendixLO1
Describe both perpetual and periodic inventory systems. ( p. 153)AppendixLO1
Analyze and interpret cost flows and operating activities of a merchandising company.AppendixLO1
Compute the acid-test ratio and explain its use to assess liquidity.(p. 167)AppendixLO1
Compute the gross margin ratio and explain its use to assess profitability.AppendixLO1
Analyze and record transactions for merchandise purchases using a perpetual system. (p. 154)AppendixLO1
Analyze and record transactions for merchandise sales using a perpetual system. (p. 159)AppendixLO1
Prepare adjustments and close accounts for a merchandising company. (p. 162)AppendixLO1
Define and prepare multiple-step and single-step income statements.(p. 165)AppendixLO1
Appendix 4A—Record and compare merchandising transactions using both periodic and perpetual inventory systems.AppendixLO1
Describe a merchandiser’s cost of goods sold.AppendixLO1
What is gross profit for a merchandising company?AppendixLO1
Explain why use of the perpetual inventory system has dramatically increased.AppendixLO1
How long are the credit and discount periods when credit terms are 2 10, n 60?AppendixLO1
Identify which items are subtracted from the list amount and not recorded when computing purchase price: (a) freight-in; (b) trade discount; (c) purchase discount; (d ) purchase return.AppendixLO1
What does FOB mean? What does FOB destination mean?AppendixLO1
Why are sales discounts and sales returns and allowances recorded in contra revenue accounts instead of directly in the Sales account?AppendixLO1
Under what conditions are two entries necessary to record a sales return?AppendixLO1
When merchandise is sold on credit and the seller notifies the buyer of a price allowance, does the seller create and send a credit memorandum or a debit memorandum?AppendixLO1
When a merchandiser uses a perpetual inventory system, why is it sometimes necessary to adjust the Merchandise Inventory balance with an adjusting entry?AppendixLO1
What temporary accounts do you expect to find in a merchandising business but not in a service business?AppendixLO1
Describe the closing entries normally made by a merchandising company.AppendixLO1
What account is used in a perpetual inventory system but not in a periodic system?AppendixLO1
Which of the following accounts are temporary accounts under a periodic system?(a) Merchandise Inventory; (b) Purchases; (c) Transportation-In.AppendixLO1
How is cost of goods sold computed under a periodic inventory system?AppendixLO1
Do reported amounts of ending inventory and net income differ if the adjusting entry method of recording the change in inventory is used instead of the closing entry method?AppendixLO1
What items appear in financial statements of merchandising companies but not in the statements of service companies?AppendixLO1
Explain how a business can earn a positive gross profit on its sales and still have a net loss.AppendixLO1
Why do companies offer a cash discount?AppendixLO1
How does a company that uses a perpetual inventory system determine the amount of inventory shrinkage?AppendixLO1
Distinguish between cash discounts and trade discounts. Is the amount of a trade discount on purchased merchandise recorded in the accounts?AppendixLO1
What is the difference between a sales discount and a purchase discount?AppendixLO1
Why would a company’s manager be concerned about the quantity of its purchase returns if its suppliers allow unlimited returns?AppendixLO1
Does the sender (maker) of a debit memorandum record a debit or a credit in the recipient’s account? What entry (debit or credit) does the recipient record?AppendixLO1
What is the difference between the single-step and multiplestep income statement formats?AppendixLO1
Refer to the balance sheet and income statement for Best Buy in Appendix A. What does the company title its inventory account? Does the company present a detailed calculation of its cost of goods
Refer to the income statement of Apple in Appendix A.Does its income statement report a gross profit figure?If yes, what is the amount?
Prepare journal entries to record each of the following purchases transactions of a merchandising company.Show supporting calculations and assume a perpetual inventory system.Mar. 5 Purchased 600
Compute net sales, gross profit, and the gross margin ratio for each separate case a throughd. Interpret the gross margin ratio for case a.a b c d Sales . . . . . . . . . . . . . . . . . . . . . . .
Nix’It Company’s ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (Nix’It uses the perpetual inventory system):Merchandise inventory .
Refer to QS 4-4 and prepare journal entries to close the balances in temporary revenue and expense accounts.Remember to consider the entry for shrinkage that is made to solve QS 4-4.AppendixLO1
Use the following information on current assets and current liabilities to compute and interpret the acidtest ratio. Explain what the acid-test ratio of a company measures.Cash . . . . . . . . . . .
Identify whether each description best applies to a periodic or a perpetual inventory system.a. Provides more timely information to managers.b. Requires an adjusting entry to record inventory
Refer to QS 4-1 and prepare journal entries to record each of the merchandising transactions assuming that the periodic inventory system is used.AppendixLO1
Refer to QS 4-2 and prepare journal entries to record each of the merchandising transactions assuming that the periodic inventory system is used.AppendixLO1
Santa Fe Company purchased merchandise for resale from Mesa Company with an invoice price of$24,000 and credit terms of 3 10, n 60. The merchandise had cost Mesa $16,000. Santa Fe paid within the
Insert the letter for each term in the blank space beside the definition that it most closely matches.A. Cash discount E. FOB shipping point H. Purchase discount B. Credit period F. Gross profit I.
Allied Parts was organized on May 1, 2008, and made its first purchase of merchandise on May 3.The purchase was for 2,000 units at a price of $10 per unit. On May 5, Allied Parts sold 1,500 of the
Refer to Exercise 4-4 and prepare the appropriate journal entries for Baker Co. to record the May 5 purchase and each of the three separate transactions a throughc. Baker is a retailer that uses a
Using your accounting knowledge, fill in the blanks in the following separate income statements a throughe. Identify any negative amount by putting it in parentheses.a b c d e Sales . . . . . . . . .

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