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financial accounting tools for business

Questions and Answers of Financial Accounting Tools For Business

Record the following transactions on the books of Massey Co.(a) On July 1 Massey Co. sold merchandise on account to Opal Inc. for $17,000, terms 2/10, n/30.(b) On July 8 Opal Inc. returned
At the end of 2007, Wendy Co. has accounts receivable of $700,000 and an allowance for doubtful accounts of $28,000. On January 24, 2008, it is learned that the company’s receivable from Mayfield
Assume the same information as BE8-3 and that on March 4, 2008, Wendy Co.receives payment of $3,000 in full from Mayfield Inc. Prepare the journal entries to record this transaction.
Presented below are three promissory notes. Determine the missing amounts.Date of Annual Total Note Terms Principal Interest Rate Interest April 1 2 years $900,000 8% (a)July 32 30 days 79,000 (b)
On January 10, 2007, Santiago Co. sold merchandise on account to Croix for$8,000, terms n/30. On February 9 Croix gave Santiago Co. a 7% promissory note in settlement of this account. Prepare the
During its first year of operations, Salizar Company had credit sales of$3,000,000, of which $600,000 remained uncollected at year-end. The credit manager estimates that $24,000 of these receivables
The 2004 financial statements of 3M Company report net sales of $20.0 billion.Accounts receivable (net) are $2.7 billion at the beginning of the year and $2.8 billion at the end of the year. Compute
Consider these transactions:(a) Albanese Restaurant accepted a Visa card in payment of a $100 lunch bill. The bank charges a 3% fee. What entry should Albanese make?(b) Beverly Company sold its
On January 6 Trisha Co. sells merchandise on account to Alma Inc. for $6,000, terms 1/10, n/30. On January 16 Alma pays the amount due.Instructions Prepare the entries on Trisha Co.’s books to
On January 10 Alana Davis uses her Idaho Co. credit card to purchase merchandise from Idaho Co. for $1,400. On February 10 Davis is billed for the amount due of$1,400. On February 12 Davis pays
The ledger of Garcia Company at the end of the current year shows Accounts Receivable$96,000; Credit Sales $780,000; and Sales Returns and Allowances $40,000.Instructions(a) If Garcia uses the direct
Hachey Company has accounts receivable of $95,100 at March 31, 2007. An analysis of the accounts shows these amounts.Balance, March 31 Month of Sale 2007 2006 March $65,000 $75,000 February 12,600
On December 31, 2007, when its Allowance for Doubtful Accounts had a debit balance of $1,000, North Star Co. estimates that 9% of its accounts receivable balance of$70,000 will become uncollectible
Great Plains 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 B. Wedunn on a 1-year, 8% note.Dec. 11 Sold goods
These transactions took place for Pautsch Co.2006 May 1 Received a $4,000, 1-year, 9% note in exchange for an outstanding account receivable from S. Bajwa.Dec. 31 Accrued interest revenue on the S.
Milne Corp. had the following balances in receivable accounts at October 31, 2007(in thousands): Allowance for Doubtful Accounts $56; Accounts Receivable $2,870; Other Receivables $189; Notes
The following information was taken from the 2004 financial statements of FedEx Corporation, a major global transportation/delivery company.(in millions) 2004 2003 Accounts receivable (gross) $ 3,178
The following ratios are available for Tianjin Inc.2004 2003 Current ratio ile sie 5s Receivables turnover 12 times 10 times Inventory turnover 11 times 9 times Instructions(a) Is Tianjin’s
On March 3 Metro Appliances sells $760,000 of its receivables to Universal Factors Inc. Universal Factors Inc. assesses a finance charge of 5% of the amount of receivables sold.Instructions Prepare
On May 10 Oman 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 Alice’s Restaurant accepts a Visa card for a $300 dinner bill. Visa sale. charges a 3% service fee.(SO 9)Instructions Prepare the entry on Alice’s books related to the transaction.
Donedeal.com uses the allowance method to estimate uncollectible accounts rerelatedto bad debts. ceivable. The company produced the following aging of the accounts receivable at year{sO12,, 3)
At December 31, 2007, Curtis Imports reported this information on its balance related to bad debt expense, sheet.and compute ratios.(SO 2, 3, 8) Accounts receivable $600,000 Cae Less: Allowance for
Presented below is an aging schedule for Joplin Company.At December 31, 2007, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $8,000. |Instructions (a) Journalize and post
Here is information related to Kettle Moraine Company for 2007. Compute bad debt amounts.SOI Total credit sales $1,500,000 (Accounts receivable at December 31 440,000 Bad debts written off 31,000
At December 31, 2007, the trial balance of Nora Company contained the fol- Journalize entries to record lowing amounts before adjustment. pote related to bad ebts.Debits Credits (SO 2, 3)Accounts
On January 1, 2007, Paris Company had Accounts Receivable of $54,200 and Allowance for Doubtful Accounts of $3,700. Paris Company prepares financial statements annually and uses a perpetual inventory
The president of Starz Enterprises asks if you could indicate the impact certain transactions have on the following ratios.Average Current Receivables Collection Ratio Turnover Period Transaction
NewBay Company closes its books on July 31. On June 30 the Notes Receivable account balance is $23,800. Notes Receivable include the following.Date Maker Face Value Term Maturity Date Interest Rate
Presented here is basic financial information (in millions) from the 2004 annual reports of Nike and Reebok.Nike Reebok Sales $12,253.1 $3,785.3 Allowance for doubtful accounts, Jan. 1 81.9 70.8
The following represents selected information taken from a company’s aging schedule to estimate uncollectible accounts receivable at year end.Instructions (a) Calculate the total estimated bad
At December 31, 2007, Guardian Company reported this information on its balrelated to bad debt expense, ance sheet.and compute ratios.(S@y2, 3/73) Accounts receivable $960,000 5 Less: Allowance for
Presented here is an aging schedule for West Beach Company.At December 31, 2007, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $11,700.Instructions (a) Journalize and post
Here is information related to Virtual Company for 2007.(SO 3)Total credit sales $2,000,000 Accounts receivable at December 31 500,000 Bad debts written off 19,000 Instructions(a) What amount of bad
At December 31, 2007, the trial balance of Thews Company contained the following amounts before adjustment.Debits Credits Accounts Receivable $400,000 Allowance for Doubtful Accounts $ 4,800 Sales
On January 1, 2007, Kenyan Company had Accounts Receivable $154,000; Notes Receivable of $11,000; and Allowance for Doubtful Accounts of $13,200. The note receivable is from Brennan Company. It is a
The president of Castle Enterprises Ltd., Nicole Castle, is considering the impact that certain transactions have on its receivables turnover and average collection period ratios. Prior to the
Haley Company closes its books on October 31. On September 30 the Notes Receivable account balance is $24,700. Notes Receivable include the following.Date Maker Face Value Term Maturity Date Interest
Presented here is basic financial information from the 2004 annual reports of Intel and Advanced Micro Devices (AMD), the two primary manufacturers of silicon chips for personal computers.(in
Refer to the financial statements of Tootsie Roll Industries and the accompa- ee @ nying notes to its financial statements in Appendix A.Instructions(a) Calculate the receivables turnover ratio and
The financial statements of Hershey Foods are presented in Appendix B, following the financial statements for Tootsie Roll in Appendix A.‘yf RATS Tae?Roll Instructions(a) Based on the information
The February 21, 2005, issue of Business Week includes an article by Amey Stone titled “How Banks Pretty up the Profit Picture.”Instructions Read the article and answer the following
The information below and the notes on page 414 are from the 2004 financial statements and accompanying notes of The Scotts Company, a major manufacturer of lawn-care products.(in millions) 2004 2003
Art World Industries, Inc., was incorporated in 1986 in Delaware, although it is located in Los Angeles. The company prints, publishes, and sells limited-edition graphics and reproductive prints in
Purpose: To learn more about factoring from a website that provides factoring services.Address: www.invoicefinancial.com (or go to www.wiley.com/college/kimmel)Instructions Go to the website and
Rae and Rob Tillman own Glad Rags. From its inception Glad Rags has sold merchandise on either a cash or credit basis, but no credit cards have been accepted.During the past several months, the
Home Fibers Corporation is a recently formed business selling the “World's Best Doormat.” The corporation is selling doormats faster than Home Fibers can make them. It has been selling the
The controller of Rojas Corporation believes that the company’s yearly allowance for doubtful accounts should be 2% of net credit sales. The president of Rojas Corporation, nervous that the
Describe how the cost principle applies to plant assets.AppendixLO1
Explain the concept of depreciation.AppendixLO1
Compute periodic depreciation using the straight-line method, and contrast its expense pattern with those of other methods.AppendixLO1
Describe the procedure for revising periodic depreciation.AppendixLO1
Explain how to account for the disposal of plant assets.AppendixLO1
Describe methods for evaluating the use of plant assets.AppendixLO1
Identify the basic issues related to reporting intangible assets.AppendixLO1
Indicate how long-lived assets are reported on the balance sheet.AppendixLO1
Corrieten Company purchased equipment and incurred these costs: Cash price Sales taxes $24,000 1,200 Insurance during transit 200 Installation and testing 400 $25,800 Total costs What amount should
C Harrington Corporation recently leased a number of trucks from Andre Corpo- ration. In inspecting the books of Harrington Corporation, you notice that the trucks have not been recorded as assets on
Depreciation is a process of: (a) valuation. (b) cost allocation. (c) cash accumulation. (d) appraisal.AppendixLO1
Cuso Company purchased equipment on January 1, 2006, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the
(a) $80,000. (c) $78,000. (b) $160,000. (d) $156,000. A company would minimize its de- preciation expense in the first year of owning an asset if it used: (a) a high estimated life, a high salvage
When there is a change in estimated deprecia- tion: (a) previous depreciation should be corrected. (b) current and future years' depreciation should be revised. (c) only future years' depreciation
Additions to plant assets: (a) are revenue expenditures. (b) increase a Repair Expense account. (c) increase a Purchases account. (d) are capital expenditures.AppendixLO1
Which of the following measures provides an indication of how efficient a company is in employing its assets? (a) Current ratio. (b) Profit margin ratio. (c) Debt to total assets ratio. (d) Asset
Pierce Company incurred $150,000 of research and development costs in its laboratory to de- velop a new product. It spent $20,000 in legal fees for a patent granted on January 2, 2007. On July 31,
Kant Enterprises purchased a truck for $11,000 on January 1, 2006. The truck will have an esti- mated salvage value of $1,000 at the end of 5 years. If you use the units-of-activity method, the
Mrs. Whistler is uncertain about how the cost princi- ple applies to plant assets. Explain the principle to Mrs. Whistler.AppendixLO1
How is the cost for a plant asset measured in a cash transaction? In a noncash transaction?AppendixLO1
What are the primary advantages of leasing?AppendixLO1
HaiFat Company acquires the land and building owned by Benz Company. What types of costs may be incurred to make the asset ready for its intended use if HaiFat Company wants to use only the land? If
Stellar Inc. needs to upgrade its diagnostic equipment. At the time of purchase, Stellar had expected the equipment to last 8 years. Unfortunately, it was obsolete after only 4 years. Randy Waters,
In a recent newspaper release, the president of Heller Company asserted that something has to be done about depreciation. The president said, "Depreciation does not come close to accumulating the
Daria is studying for the next accounting examina- tion. She asks your help on two questions: (a) What is salvage value? (b) How is salvage value used in determining depreciable cost under the
Contrast the straight-line method and the units-of-activity method in relation to (a) useful life and (b) the pattern of periodic depreciation over use- ful life.AppendixLO1
Contrast the effects of the three depreci- ation methods on annual depreciation expense.AppendixLO1
In the fourth year of an asset's 5-year useful life, the company decides that the asset will have a 6-year ser- vice life. How should the revision of depreciation be recorded? Why?AppendixLO1
Distinguish between revenue expenditures and capi- tal expenditures during an asset's useful life.AppendixLO1
How is a gain or a loss on the sale of a plant asset computed?AppendixLO1
LaBelle Corporation owns a machine that is fully de- preciated but is still being used. How should LaBelle account for this asset and report it in the financial statements?AppendixLO1
What are the similarities and differences between de- preciation and amortization?AppendixLO1
During a recent management meeting, Roger Bees, director of marketing, proposed that the com- pany should begin capitalizing its marketing expen- ditures as goodwill. In his words, "Marketing expen-
Omega Company hires an accounting intern who says that intangible assets should always be amortized over their legal lives. Is the intern correct? Explain.AppendixLO1
Goodwill has been defined as the value of all favor- able attributes that relate to a business enterprise. What types of attributes could result in goodwill?AppendixLO1
Susan Day, a business major, is working on a case prob- lem for one of her classes. In this case problem, the company needs to raise cash to market a new product it developed. Anthony Capp, an
Under what conditions is goodwill recorded? What is the proper accounting treatment for amortizing goodwill?AppendixLO1
Often research and development costs provide com- panies with benefits that last a number of years. (For example, these costs can lead to the development of a patent that will increase the company's
In 2004 Campbell Soup Company reported average total assets of $6,440 million, net sales of $7,109 million, and net income of $647 million. What was Campbell Soup's return on assets ratio?AppendixLO1
Stacy Simmons, a marketing executive for Fresh Views Inc., has proposed expanding its prod- uct line of framed graphic art by producing a line of lower-quality products. These would require less pro-
Give an example of an industry that would be characterized by (a) a high asset turnover ratio and a low profit margin ratio, and (b) a low as- set turnover ratio and a high profit margin ratio.
Rocky Corporation uses straight- line depreciation for financial reporting purposes but an accelerated method for tax purposes. Is it accept- able to use different methods for the two purposes? What
You are comparing two companies in the same industry. You have determined that Leno Corp. depreciates its plant assets over a 40-year life, whereas Letterman Corp. depreciates its plant assets over a
These expenditures were incurred by Gerald Ford Company in purchasing land: tl cash price $50,000; accrued taxes $5,000; attorney's fees $2,100; real estate broker's commission$2,800; and clearing
HeFlin Company incurs these expenditures in purchasing a truck: cash price$18,000; accident insurance (during use) $2,000; sales taxes $1,080; motor vehicle license$300; and painting and lettering
Apex Chemicals Company acquires a delivery truck at a cost of $26,000 on depreciation. January 1, 2007. The truck is expected to have a salvage value of $4,000 at the end of its(SO 3) 5-year useful
On January 1, 2007, the Ewing Company ledger shows Equipment $32,000 and depreciation. Accumulated Depreciation $14,000. The depreciation resulted from using the straight-(SO 4) line method with a
Prepare journal entries to record these transactions: (a) Blaska Company retires its disposal of plant assets. delivery equipment, which cost $41,000. Accumulated depreciation is also $41,000 on this
Carlton Company sells office equipment on September 30, 2007, for $21,000 plant assets. cash. The office equipment originally cost $72,000 and as of January 1, 2007, had accu-(SO 5) mulated
Jazz Company purchases a patent for $180,000 on January 2, 2007. Its estimated patents. useful life is 5 years.(SO 7) (a) Prepare the journal entry to record amortization expense for the first
In its 2004 annual report, McDonald’s Corporation reports beginning total asratio and asset turnover ratio. _ sets of $25.5 billion; ending total assets of $27.8 billion; net sales of $19.1
Nike, Inc. reported the following plant assets and intangible assets for the year ae balance sheet. ended May 31, 2004 (in millions): other plant assets $530.6; land $179.5; patents and trademarks

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