Questions and Answers of Financial Accounting Tool

What event precipitated the establishment of the Securities and Exchange Commission and the requirement for publicly traded companies to issue audited financial statements to stockholders?
What is the role of the Certified Public Accountant in the audit process?
Does the auditor attempt to identify all accounting errors?
What is the auditor's management letter focused on and who is it submitted to?
Why are Generally Accepted Accounting Principles needed and what organization established them?
What is the COSO Opinion concerned with?
What are the benefits of historical cost or acquisition cost as a basis for valuing assets?
What adjustment is made to historical cost for assets that wear out?
What types of assets use fair value or mark-to-market valuation?
What crisis may have been exacerbated by fair value accounting? Why?
What does PLAHC try to adjust for?
What is the primary way that net realizable value differs from fair value accounting?
If you are buying fire insurance, what valuation method should you use?
If you borrow money from the bank, is your liability the day you take out the loan equal to the amount you borrowed or the amount you are obligated to repay?
Suppose you collect payment for your services, but you haven't provided your service yet. What is the basis for valuing the liability? 10 . Does the stockholders' equity we see on a balance sheet
What are some of the benefits of a thorough review of the financial statements?
What does "000 omitted" mean?
Why is a Statement of Cash Flows needed, if we can see the change in cash by looking at the amount of cash on the balance sheet at the beginning and end of the year?
What are some of the benefits or uses of ratio analysis?
There is no "correct" value for ratios, so an organization generally will compare ratios for a specific year to what?
What are the problems of too much or too little liquidity?
Using Exhibits 24-1 and 24-3, calculate the current ratio, days in accounts receivable, total asset turnover, interest coverage, long-term debt to stockholders' equity, profit margin, and return on
What type of information must VHWOs provide in a statement of functional expenses?
Why do we need to distinguish capital gains separately from other income?
What is the primary benefit of an S-corp.?
What is the primary limitation of an S-corp.?
What is the difference between the tax rate and the tax base?
Proponents of a flat tax support what type of tax system?
For the data presented in BEH.4, show the financial statement presentation of the trading securities and related accounts. Data From BEH.4Cost and fair value data for the trading debt securities
Cost and fair value data for the trading debt securities of Lecler Company at December 31, 2022, are $62,000 and $59,600, respectively. Prepare the adjusting entry to record the securities at fair
On July 17, 2021, Keith Urban borrowed $42,000 from his grandfather to open a clothing store. Starting July 17, 2022, Keith has to make 10 equal annual payments of $6,500 each to repay the loan. Use
Using the data in Question 13, how would Pat report the data if the investments were long-term and the debt securities were classified as available-for-sale? Data From Question 13.Pat Ernst is
Pat Ernst is the controller of J-Products, Inc. At December 31, the end of its first year of operations, the company’s investments in trading debt securities cost $74,000 and have a fair value of
Weston Company has these data at December 31, 2022, the end of its first year of operations. The available-for-sale securities are held as a long-term investment.? Instructions? a. Prepare the
Perth Corporation has these long-term investments: common stock of Vejas Co. (10% ownership), cost $108,000, fair value $112,000; common stock of Penn Inc. (30% ownership), cost $210,000, equity
Data for debt investments are presented in EH.6. Assume instead that the investments are classified as available-for-sale debt securities with the same cost and fair value data as indicated in EH.6.
For the data presented in BEH.6, show the financial statement presentation of the securities and related accounts. Assume the securities are noncurrent. Data From BEH.6In its first year of
The following data, presented in alphabetical order, are taken from the records of Manfreid Corporation.? Instructions? Prepare a balance sheet at December 31, 2022. $ 150,000 Accounts payable
At December 31, 2022, the trading debt securities for Gwynn, Inc. are as follows.? Instructions? a. Prepare the adjusting entry at December 31, 2022, to report the securities at fair value.? b.
In its first year of operations, Machin Corporation purchased available-for-sale debt securities costing $72,000 as a long-term investment. At December 31, 2022, the fair value of the securities is
These are two independent situations: 1. Sosey Cosmetics acquired 12% of the 300,000 shares of common stock of Elite Fashion at a total cost of $14 per share on March 18, 2022. On June 30,
Wellman Company acquired 30% of the outstanding common stock of Grinwold Inc. on January 1, 2022, by paying $1,800,000 for 60,000 shares. Grinwold declared and paid a $0.50 per share cash dividend
On December 31, 2021, the end of its first year of operations, Botani Associates owned the following securities that are held as long-term investments.? On this date, the total fair value of the
In January 2022, the management of Northern Company concludes that it has suffi cient cash to purchase some short-term investments in debt and stock securities. During the year, the following
Penn Farms is a grower of hybrid seed corn for Bend Genetics Corporation. It has had two exceptionally good years and has elected to invest its excess funds in bonds. The following selected
Craig Corporation purchased debt investments for $40,800 on January 1, 2022. On July 1, 2022, Craig received cash interest of $1,660. Journalize the purchase and the receipt of interest. Assume no
Renolds Corporation is considering two alternative investments in excavating equipment. Investment A requires an initial investment of $184,000, has positive cash flows of $27,500 per year, and has
Using a financial calculator, solve for the unknowns in each of the following situations. a. On June 1, 2021, Jennifer Lawrence purchases lakefront property from her neighbor, Josh Hutcherson,
Carly Simon wishes to invest $18,000 on July 1, 2022, and have it accumulate to $50,000 by July 1, 2032. Use a fi nancial calculator to determine at what exact annual rate of interest Carly must
Gleason Enterprises issued 6%, 8-year, $2,500,000 par value bonds that pay interest annually on April 1. The bonds are dated April 1, 2022, and are issued on that date. The discount rate of
For each of the following cases, indicate (a) what interest rate columns and (b) what number of periods you would refer to in looking up the discount rate.? 1. In Table 3 (future value of 1):? 2.
Hugh Curtin borrowed $35,000 on July 1, 2022. This amount plus accrued interest at 8% compounded annually is to be repaid on July 1, 2027. How much will Hugh have to repay on July 1, 2027?
You can use the Internet to view SEC filings. Instructions Choose a company, go to the Yahoo! Finance website, and then answer the following questions. a. What company did you
You should become familiar with reviewing the stockholders’ equity section of an annual report to identify its major components. Instructions Select a well-known company, search the
The print and electronic media are full of stories about potential security risks that can arise from your personal computer. It is important to keep in mind, however, that there are also many ways
In a discussion of dramatic increases in coffee-bean prices, a Wall Street Journal article noted the following fact about Starbucks. Before this year’s bean-price hike, Starbucks added several
Ross Music Inc. reported the following selected information at March 31. Calculate (a) the current ratio, (b) the debt to assets ratio, and (c) free cash flow for March 31, 2022. The company paid
The Feature Story described the dramatic effect that investment bulletin boards are having on the investment world. This exercise will allow you to evaluate a bulletin board discussing a company of
The FASB has developed the Financial Accounting Standards Board Accounting Standards Codification (or more simply “the Codification”). The FASB’s primary goal in developing the Codification is
The stockholders’ equity accounts of Ripley Corporation on January 1, 2022, were as follows. Preferred Stock (8%, $100 par noncumulative, 5,000 shares authorized).................$
P On October 31, the stockholders’ equity section of Manolo Company’s balance sheet consists of common stock $648,000 and retained earnings $400,000. Manolo is considering the following two
a. 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
a. Sparks Corporation has 3,000 shares of 8%, $100 par value preferred stock outstanding at December 31, 2022. At December 31, 2022, the company declared a $105,000 cash dividend. Determine the
SUPERVALU, one of the largest grocery retailers in the United States, is headquartered in Minneapolis. Suppose the following financial information (in millions) was taken from the company’s 2022
Indicate whether each of the following transactions would increase (+), decrease (−), or not affect (N/A) total assets, total liabilities, and total stockholders’ equity Stockholders' Liabilities
Bayfiew Corp uses the percentage-of-receivables basis to record bad debt expense. Accounts receivable (ending balance).............$550,000 (debit) Allowance for doubtful accounts
The accounting equation is Assets = Liabilities + Stockholders’ Equity. Appendix A reproduces Apple’s financial statements. Replacing words in the equation with dollar amounts, what is Apple’s
a. Gray Corporation began operations on January 1, 2022. The following information is available for Gray on December 31, 2022. Prepare an income statement, a retained earnings statement, and a
Use the basic accounting equation to answer these questions.a. The liabilities of Lantz Company are $90,000 and the stockholders’ equity is $230,000. What is the amount of Lantz’s total
In alphabetical order below are balance sheet items for Karol Company at December 31, 2022. Prepare a balance sheet following the format of Illustration 1.7. Accounts payable $65,000 Accounts
Indicate to which business activity, operating activity (O), investing activity (I), or financing activity (F), each item relates a. _____ Cash received from customers. b. _____ Cash paid
Hetty Grey has just approached a venture capitalist for financing for her new business venture, the development of a local ski hill. On July 1, 2021, Hetty was loaned $150,000 at an annual interest
Laverne purchased a new piece of equipment to be used in its new facility. The $370,000 piece of equipment was purchased with a $50,000 down payment and with cash received through the issuance of a
On January 1, 2022, Opal Company issued $2,000,000 face value, 7%, 10-year bonds at $2,147,202. This price resulted in a 6% effective-interest rate on the bonds. Opal uses the effective interest
On January 1, 2022, Lachte Corporation issued $1,800,000 face value, 5%, 10-year bonds at $1,667,518. This price resulted in an effective-interest rate of 6% on the bonds. Lachte uses the
Saylor Co. sold $3,000,000, 8%, 10-year bonds on January 1, 2022. The bonds were dated January 1, 2022, and pay interest on January 1. The company uses straight-line amortization on bond premiums and
Fong Corporation sold $2,000,000, 7%, 5-year bonds on January 1, 2022. The bonds were dated January 1, 2022, and pay interest on January 1. Fong Corporation uses the straight-line method to amortize
The following information is taken from Lassen Corp.’s balance sheet at December 31, 2021. Interest is payable annually on January 1. The bonds are callable on any annual interest date.
Suppose you have been presented with selected information taken from the financial statements of Southwest Airlines Co. a. Calculate each of the following ratios for 2022 and 2021. 1.
Malcolm Company sold $6,000,000, 7%, 15-year bonds on January 1, 2022. The bonds were dated January 1, 2022, and pay interest on December 31. The bonds were sold at 98. Instructions a.
On October 1, 2021, Kristal Corp. issued $700,000, 5%, 10-year bonds at face value. The bonds were dated October 1, 2021, and pay interest annually on October 1. Financial statements are prepared
The following section is taken from Hardesty’s balance sheet at December 31, 2021. Current liabilities Interest payable.................$ 40,000 Long-term liabilities Bonds
g enthusiasts. During the last part of 2022, Ehler had the following transactions related to notes payable. Sept. 1 Issued a $12,000 note to Pippen to purchase inventory. The 3-month note
The condensed financial statements of Ness Company for the years 2021 and 2022 are presented below. Compute the following ratios for 2022 and 2021. a. Current ratio. b. Inventory
Panza Corporation experienced a fire on December 31, 2022, in which its financial records were partially destroyed. It has been able to salvage some of the records and has ascertained the following
Here is the income statement for Myers, Inc. Additional information: 1. Common stock outstanding January 1, 2022, was 32,000 shares, and 40,000 shares were outstanding at December 31,
Selected hypothetical comparative statement data for the giant bookseller Barnes & Noble are presented here. All balance sheet data are as of the end of the fiscal year (in
Lendell Company has these comparative balance sheet data: Additional information for 2022: 1. Net income was $25,000. 2. Sales on account were $375,000. Sales returns and allowances
Gwynn Incorporated had the following transactions involving current assets and current liabilities during February 2022. Feb. 3 Collected accounts receivable of $15,000. 7 Purchased
Nordstrom, Inc. operates department stores in numerous states. Selected hypothetical financial statement data (in millions) for 2022 are presented below. For the year, net credit sales were
Here are the comparative income statements of Delaney Corporation. Instructions a. Prepare a horizontal analysis of the income statement data for Delaney Corporation, using 2021 as a
Hypothetical balance sheets of Nike, Inc. are presented here. Instructions a. Prepare a horizontal analysis of the balance sheet data for Nike, using 2021 as a base. b. Prepare a
Operating data for Joshua Corporation are presented below. Instructions Prepare a schedule showing a vertical analysis for 2022 and 2021. 2022 2021 Sales revenue Cost of goods sold Selling
Here is financial information for Glitter Inc.Instructions Prepare a schedule showing a horizontal analysis for 2022, using 2021 as the base year. December 31, 2022 December 31, 2021 Current
Trayer Corporation has income from continuing operations of $290,000 for the year ended December 31, 2022. It also has the following items (before considering income taxes). 1. An unrealized
For its fiscal year ending October 31, 2022, Haas Corporation reports the following partial data shown below. The loss on discontinued operations was comprised of a $50,000 loss from operations
The condensed financial statements of Murawski Company for the years 2021 and 2022 are presented as follows. (Amounts in thousands.)Compute the following ratios for 2022 and 2021. a. Current
Summary financial information for Gandaulf Company is as follows. Compute the amount and percentage changes in 2022 using horizontal analysis, assuming 2021 is the base year Dec. 31, 2022 Dec.
In its proposed 2022 income statement, Hrabik Corporation reports income before income taxes $500,000, income taxes $100,000 (not including unusual items), loss on operation of discontinued music
The following data were taken from the income statements of Mydorf Company. Compute for each year (a) the inventory turnover and (b) days in inventory. What conclusions concerning the management

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