Questions and Answers of Financial Accounting Tool

In its 1998 annual report, McDonald’s Corporation reports beginning total assets of $18.2 billion; ending total assets of $19.8 billion; beginning property, plant, and equipment (at cost) of $20.1
Nike, Inc. reported the following plant assets and intangible assets for the year ended May 31, 1998 (in millions): leasehold improvements $887.4; land $93; patents and trademarks (at cost) $220.7;
Jerry Englehart Taxi Service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 120,000 miles. Taxi 10 cost$24,500 and is expected to have
The following expenditures relating to plant assets were made by Salvador Company during the first 2 months of 2001:1. Paid $5,000 of accrued taxes at time plant site was acquired.2. Paid $200
On March 1, 2001, Neil Young Company acquired real estate, on which it planned to construct a small office building, by paying $90,000 in cash. An old warehouse on the property was demolished at a
Tory Amos Company purchased a new machine on October 1, 2001, at a cost of$96,000. The company estimated that the machine has a salvage value of $12,000. The machine is expected to be used for 70,000
Bill Simpson, the new controller of Bellingham Company, has reviewed the exExercises 437 Compute revised annual pected useful lives and salvage values of selected depreciable assets at the beginning
Presented here are selected transactions for Chen Company for 2001:Jan. 1 Retired a piece of machinery that was purchased on January 1, 1991.The machine cost $62,000 on that date and had a useful
During 1998 Federal Express reported the following information (in millions):net sales of $13,255, net income of $421, and depreciation expense of $845. Its balance sheet also showed total assets at
These are selected 2001 transactions for Hingis Corporation:Jan. 1 Purchased a small company and recorded goodwill of $140,000. The goodwill has a useful life of 55 years.Purchased a patent with an
Collins Company, organized in 2001, has these transactions related to intangible assets in that year:Jan. 2 Purchased patent (7-year life), $420,000.Apr. 1 Goodwill purchased (indefinite life),
SoftKey International Inc., headquartered in Cambridge, Massachusetts, noted amortization period. in its 1994 annual report that, beginning that year, it changed the estimated life of its(SO 7)
The questions listed below are independent of one another.Answer questions on depreci- Instructions ation and intangibles. Provide a brief answer to each question. (SO 2, 7) (a) Why should a company
Galactic Bus Lines uses the units-of-activity method in depreciating its buses.units-of-activity method. One bus was purchased on January 1, 2001, at a cost of $108,000. Over its 4-year useful(SO 9)
Basic information relating-to a new machine purchased by Tory Amos Company and units-of-activity is presented in E9-3.depreciation. Teetien (SO 9) nstructions Using the facts presented in E9-3,
Hootie and the Blowfish Company was organized on January 1. During the first of land and building. year of operations, the following plant asset expenditures and receipts were recorded in(SO 1)
At December 31, 2001, Jerry Hamsmith Corporation reported these plant assets:During 2002, the following selected cash transactions occurred:Instructions (a) Journalize the transactions. [Hint: You
Ghani Co. has delivery equipment that cost $50,000 and has been depreciated$20,000.Instructions Record entries for the disposal under the following assumptions:(a) It was scrapped as having no
The intangible assets section of El-Gazzar Corporation’s balance sheet at December 31, 2001, is presented here:The patent was acquired in January 2001 and has a useful life of 10 years. The
Due to rapid employee turnover in the accounting department, the following transactions involving intangible assets were improperly recorded by Baird Corporation in 2001:1. Baird developed a new
Croix Corporation and Marais Corporation, two companies of roughly the same size, are both involved in the manufacture of canoes and sea kayaks. Each company depreciates its plant assets using the
In recent years Erie Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation
Earth, Wind, and Fire Company was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order:Instructions Analyze
At December 31, 2001, Los Alamos Corporation reported these plant assets:Instructions (a) Journalize the transactions. [Hint: You may wish to set up T accounts, post beginning balances, and then post
Chon Co. has office furniture that cost $80,000 and has been depreciated $48,000.Instructions Record entries for the disposal under these assumptions:(a) It was scrapped as having no value.(b) It was
The intangible assets section of the balance sheet for De Paul Company at December 31, 2001, is presented here:The patent was acquired in January 2001 and has a useful life of 10 years. The copyright
Due to rapid employee turnover in the accounting department, the following transactions involving intangible assets were improperly recorded by the Coker Company in 2001:1. Coker developed a new
Reggie Corporation and Baxter Corporation, two corporations of roughly the same size, are both involved in the manufacture of in-line skates. Each company depreciates its plant assets using the
In recent years Lakeshore Transportation purchased three used buses. Becauseof frequent employee turnover in the accounting department, a different accountant selected the depreciation method for
Axel Corporation purchased machinery on January 1, 2001, at a cost of $202,000.different methods. The estimated useful life of the machinery is 5 years, with an estimated residual value at(SO 3, 9)
On January 6 Peas Co. sells merchandise on account to Beans Inc. for $4,000, terms 2/10, n/30. On January 16 Beans pays the amount due.Instructions Prepare the entries on Peas Co.’s books to record
On January 10 Elaine Stahl uses her Salizar Co. credit card to purchase merchandise from Salizar Co. for $1,300. On February 10 Stahl is billed for the amount due of $1,300. On February 12 Stahl pays
The ledger of Patillo Company at the end of the current year shows Accounts Receivable $90,000; Credit Sales $840,000; and Sales Returns and Allowances $40,000.Instructions(a) If Allowance for
“Garcia Company has accounts receivable of $92,500 at March 31, 2001. An analyDetermine bad debt expense, and prepare the adjusting entry.Credit terms are 2/10, n/30. At March 31, 2001, there is a
On December 31, 2001, when its Allowance for Doubtful Accounts had a debit balance of $1,000, Lisa Ceja Co. estimates that 12% of its accounts receivable balance of$60,000 will become uncollectible
Northridge Supply Co. has the following transactions related to notes receivable during the last 2 months of the year:Nov. 1 Loaned $30,000 cash to R. Stone on a 1-year, 8% note.Dec. 11 Sold goods to
These transactions took place for Guard Dog Co.:Instructions Record the transactions in the general journal. 2000 May 1 Dec. 31 Received a $7,000, 1-year, 12% note on account from T. Jones. Accrued
On May 2 Gore Company lends $4,000 to Global Inc., issuing a 6-month, 6% note.At the maturity date, November 2, Global indicates that it cannot pay.Instructions (a) Prepare the entry to record the
Deere and Company had the following balances in receivable accounts at October 31, 1998 (in millions): Allowance for Doubtful Accounts $31; Accounts Receivable$2,907; Other Receivables $228; Notes
The following is a list of activities that companies perform in relation to their receivables.1. Selling receivables to a factor.2. Reviewing company ratings in The Dun and Bradstreet Reference Book
The following information was taken from the 1998 financial statements of The Scotts Company.Instructions Answer each of the following questions.(a) Calculate the receivables turnover ratio and
On March 3 Virtual Appliances sells $900,000 of its receivables to Fundamental Factors Inc. Fundamental Factors Inc. assesses a finance charge of 4% of the amount of receivables sold.Instructions
On May 10 Cheng Company sold merchandise for $4,000 and accepted the customer’s First Business Bank MasterCard. At the end of the day, the First Business Bank MasterCard receipts were deposited in
On July 4 Harry’s Restaurant accepts a VISA card for a $200 dinner bill. VISA charges a 4% service fee.Instructions Prepare the entries on Harry's books related to the transaction.
Kellogg Company’s 1998 annual report disclosed the following financial information: net income $503 million; cash dividends $375 million; cash provided by operating activities $720 million; and
Einstein/Noah Bagel Corp.’s 1998 annual report disclosed the following financial information (in thousands): total expenses $575,846; depreciation, depletion, and amortization $34,777; and cash and
Galenti’s Pizza operates strictly on a carryout basis. Customers pick up their orders at a counter where a clerk exchanges the pizza for cash. While at the counter, the customer can see other
The following control procedures are used in Hilga’s Boutique Shoppe for cash disbursements:1. Each week Hilga leaves 100 comipany, checks in an unmarked envelope on a shelf behind the cash
At Vermont Company checks are not prenumbered because both the purchasing agent and the treasurer are authorized to issue checks. Each signer has access to unissued checks kept in an unlocked file
Alana Davis is unable to reconcile the bank balance at January 31. Alana’s reconciliation is shown here:Instructions (a) Prepare a correct bank reconciliation.(b) Journalize the entries required by
At April 30 the bank reconciliation of Bossa Nova Company shows three outstanding checks: No. 254 $650, No. 255 $720, and No. 257 $410. The May bank statement and the May cash payments journal are
The following information pertains to Cody Camera Company:1. Cash balance per bank, July 31, $7,263.. July bank service charge not recorded by the depositor $15.. Cash balance per books, July 31,
This information relates to the Cash account in the ledger of Mawmeg Company:Balance September 1—$17,150; Cash deposited—$64,000 Balance September 30—$17,404; Checks written—$63,746 The
The cash records of Blue Diamond Company show the following:1. The June 30 bank reconciliation indicated that deposits in transit total $750. During July the general ledger account Cash shows
Hanover Company expects to have a cash balance of $46,000 on January 1, 2001.These are the relevant monthly budget data for the first 2 months of 2001:1. Collections from customers: January $70,000;
Burlington Theater is in the Burlington Mall. A cashier's booth is located near eae maernal cormrol the entrance to the theater. Two cashiers are employed. One works from 1:00 to 5:00 P.M., MLO SSEC
Cedar Grove Middle School wants to raise money for a new sound system for weaknesses in cash receipts its auditorium. The primary fund-raising event is a dance at which the famous disc jockey and
On July 31, 2001, Grace Company had a cash balance per books of $6,815.30.The statement from Tri-County Bank on that date showed a balance of $7,695.80. A comparison of the bank statement with the
The bank portion of the bank reconciliation for Zurich Company at October 31, 2001, is shown here:The adjusted cash balance per bank agreed with the cash balance per books at October 31. The November
Agricultural Genetics Company of Emporia, Kansas, spreads herbicides and ap- plies liquid fertilizer for local farmers. On May 31, 2001, the company’s cash account per its general ledger showed a
Pokemon Company prepares monthly cash budgets. Here are relevant data from operating budgets for 2001:All sales are on account. Collections are expected to be 50% in the month of sale, 30%in the
Wizards and Dragons Company is a very profitable small business. It has not, however, given much consideration to internal control. For example, in an attempt to keep clerical and office expenses to
Rabbit Ears Pet Food Company recently changed its system of internal control over cash disbursements. The system includes the following features:Instead of being unnumbered and manually prepared, all
On May 31, 2001, Interactive Company had a cash balance per books of$5,681.50. The bank statement from Community Bank on that date showed a balance of$7,784.60. A comparison of the statement with the
The bank portion of the bank reconciliation for Kona Company at November 30, 2001, is shown here:The adjusted cash balance per bank agreed with the cash balance per books at November 30. The December
Ag-Tech Company of Peoria, Illinois, provides liquid fertilizer and herbicides to regional farmers. On July 31, 2001, the company’s cash account per its general ledger showed a balance of
Hawkeye Company prepares monthly cash budgets. Here are relevant data from operating budgets for 2001:All sales are on account. Collections are expected to be 50% in the month of sale, 40%in the
Giant Company is a very profitable small business. It has not, however, given reconciliation with theftand | much consideration to internal control. For example, in an attempt to keep clerical and
The financial statements of Tootsie Roll are presented in Appendix A of this book, together with an auditor’s report—Report of Independent Auditors.Instructions Using the financial statements and
The financial statements of Hershey Foods are presented in Appendix B, following the financial statements for Tootsie Roll in Appendix A.Instructions Answer the following questions for each
The September 20, 1999, issue of Business Week includes an article entitled‘Dirty Money Goes Digital,” by G. Silverman et al.Instructions Read the article and answer the following questions:(a)
Microsoft is the leading developer of software in the world. To continue to be successful Microsoft must generate new products, and generating new products requires significant amounts of cash. Shown
The international accounting firm KPMG recently performed a global survey on fraud. The following exercise reviews that survey.Address: http://www.kpmg.com (or go to
The Financial Accounting Standards Board (FASB) isa i a private aon enon established to improve accounting standards and financial reporting. The FASB conducts extensive research before issuing a
All organizations should have systems of internal control. Universities are no exception. This site discusses the basics of internal control in a university setting.Address:
Alternative Distributor Corp., a distributor of groceries and related products, is headquartered in Medford, Massachusetts.During a recent audit, Alternative Distributor Corp. was advised that
As anew auditor for the CPA firm of Rawls, Keoto, and Landry, you have been assigned to review the internal controls over mail cash receipts of Adirondack Company.Your review reveals that checks are
As noted in the chapter, banks charge fees of up to $30 for “bounced” checks—that is, checks that exceed the balance in the account. It has been estimated that processing bounced checks costs a
At the end of 2001, Searcy Co. has accounts receivable of $700,000 and an allowance for doubtful accounts of $54,000. On January 24, 2002, it is learned that the company’s receivable from Hutley
Assume the same information as BE8-3 and that on March 4, 2002, Searcy Co.receives payment of $8,000 in full from Hutley Co. Prepare the journal entries to record this transaction.
On January 10, 2001, Raja Co. sold merchandise on account to R. Opal for $12,000, terms n/30. On February 9 R. Opal gave Raja Co. a 10% promissory note in set- tlement of this account. Prepare the
During its first year of operations, Wendy Company had credit sales of$3,000,000, of which $600,000 remained uncollected at year-end. The credit manager estimates that $40,000 of these receivables
The 1998 financial statements af Minnesota Mining and Manufacturing Company (3M) report net sales of $15.0 billion. Accounts receivable are $2.5 billion at the beginning of the year and $2.8 billion
What was the total cost of Apple's treasury stock at September 27, 2014? What was the amount of the 2014 cash dividend? What was the size of the 2014 stock split?
Orand What is the formula for the payout ratio? What does it indicate?
Oxplain the circumstances under which debt financing will increase the return on common stockholders' equity.
Preferred stock may have priority over common (LO stock except in:(a) dividend preference.(b) preference to assets in the event of liquidation.(c) cumulative dividends.(d) voting.
U-Bet Corporation has 10,000 shares of $8 \%, \$ 100$ par value, cumulative preferred stock outstanding at December 31, 2017. No dividends were declared in 2015 or 2016 . If U-Bet wants to pay \(\$
O-ar The return on common stockholders' equity ( $L 0 \mathrm{~L}$ ) is usually increased by all of the following, except:(a) an increase in the return on assets ratio.(b) an increase in the use of
Jackson Inc. reported net income of $\$ 186,000$ during 2017 and paid dividends of $\$ 26,000$ on common stock. It also paid dividends on its 10,000 shares of $6 \%, \$ 100$ par value,
Beauty Island Corporation began operations on April 1 by issuing 55,000 shares of $\$ 5$ par value common stock for cash at $\$ 13$ per share. In addition, Beauty Island issued 1,000 shares of
Dinosso Corporation purchased 2,000 shares of its $\$ 10$ par value common stock for $\$ 76,000$ on August 1. It will hold these in the treasury until resold. Journalize the treasury stock
Spears Company has had 4 years of record earnings. Due to this success, the market price of its 400,000 shares of $\$ 2$ par value common stock has increased from $\$ 6$ per share to $\$ 50$.
Hoyle Corporation has issued 100,000 shares of $\$ 5$ par value common stock. It was authorized 500,000 shares. The paid-in capital in excess of par value on the common stock is $\$ 263,000$. The
On January 1, 2017, Vahsholtz Corporation purchased 5,000 shares of trea-Compute return on stock sury stock. Other information regarding Vahsholtz Corporation is provided as follows.Compute (a)
Wells Fargo & Company, headquartered in San Francisco, is one of the nation’s largest financial institutions. Suppose it reported the following selected accounts (in millions) as of December
The following stockholders’ equity accounts, arranged alphabetically, are in the ledger of Ryder Corporation at December 31, 2017.Instructions Prepare the stockholders’ equity section of the
The following accounts appear in the ledger of Paisan Inc. after the books are closed at December 31, 2017.Instructions Prepare the stockholders’ equity section at December 31, assuming $100,000 of
Suppose the following financial information is available for Walgreen Company.Instructions Calculate the payout ratio and return on common stockholders’ equity for 2017 and 2016.Comment on your
The stockholders’ equity section of Apple Inc.’s balance sheet is shown in the Consolidated Statement of Financial Position in Appendix A. Instructions for accessing and using the company’s

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