Questions and Answers of Fundamental Financial Accounting Concepts 11th Edition

Asset recognition and valuation. Citigroup, a financial services firm, provides tuition support for employees who pursue an MBA degree in the evenings. Employees receiving the support must continue
Liability recognition and valuation. Delta Air Lines offers frequent flyer benefits to customers that reach specified levels of miles flown. The present value of the future loss in revenues due to
Asset valuation. Pizza Hut purchased a used van from Domino's Pizza to deliver pizzas. Pizza Hut paid $14,500 for the van. It paid $1,200 to have the Domino's Pizza name removed from the van and
Dual effects on balance sheet equation. Target Stores engaged in the following three transactions: ( 1 ) purchased and received merchandise costing $25 million on account from various suppliers, (2)
Journal entry for acquisition. Leonard Corporation gave $10 million cash and shares of its common stock valued at $60 million for all of the assets of Newsom Corporation. The assets received
Asset recognition and valuation. The following transactions relate to IBM Corporation, a manufacturer of electronic equipment and provider of computer services. Indicate whether or not each
Asset recognition and valuation. The transactions listed below relate to Delta Air Lines, a provider of airline services. Indicate whether or not each transaction immediately gives rise to an asset
Asset recognition and valuation. The transactions listed below relate to McDonald's, a fast food chain. Indicate whether or not each transaction immediately gives rise to an asset under GAAP. If
Asset recognition and valuation. The transactions below relate to Office Depot, an office supply retailer. Indicate whether or not each transaction immediately gives rise to an asset under GAAP. If
Liability recognition and valuation. Indicate whether or not each of the following events immediately gives rise to a liability under GAAP. If accounting recognizes a liability, state the account
Liability recognition and valuation. The transactions below relate to Kansas City Royals, Inc., owner of a professional baseball team and Kauffman Stadium. Indicate whether or not each of the
Liability recognition and valuation. The transactions below relate to the activities of a local college. Indicate whether or not each of the following transactions immediately gives rise to a
Liability recognition and valuation. The events below relate to the Chicago Symphony Orchestra. Indicate whether or not each of the following events immediately gives rise to a liability under GAAP.
Balance sheet classification. GAAP classify items on the balance sheet in one of the following ways:(1) Asset(2) Liability(3) Shareholders' equity (4) Item that would not appear on the balance sheet
Dual effects of transactions on balance sheet equation and journal entries. A firm engages in the following six transactions.(1) The firm issues 5.000 shares of $10 par value common stock for $60,000
Dual effects of transactions on balance sheet equation and journal entries. A firm engages in the following six transactions.(1) The firm issues 12,000 shares of $1 par value common stock for $12
Journal entries for various transactions. Express the following transactions of Winkle Grocery Store, Inc., in journal entry form. If an entry is not required, indicate the reason. You may omit
Preparation of transactions spreadsheet and balance sheet. Moulton Corporation engaged in the following seven transactions during December, Year 12 in preparation for opening the business on January
Preparation of transactions spreadsheet and balance sheet. Veronica Regaldo creates a new business firm in Mexico on January 2, Year 8, to operate a retail store. Transactions of Regaldo Department
Preparation of transactions spreadsheet and balance sheet. Patterson Corporation begins operations on January I. Year 13. See the assumptions given at the end of the list. The firm engages in the
Preparation of transactions spreadsheet and balance sheet. Whitley Products Corporation begins operations on April 1. The firm engages in the following transactions during April:(1) Issues 25.000
Effect of recording errors on the balance sheet equation. A firm recorded various transactions with the journal entries shown below. Using the notation O/S (overstated), U/S (understated), or No (no
Interpreting balance sheet changes. Exhibit 2.14 presents a common-size balance sheet for Outback Steakhouse. a restaurant chain, for two recent years.a. Identify the ways in which the structure of
Identifying industries using common-size -balance sheet percentages. Exhibit 2.18 presents common-size balance sheets for five firms. The firms and a description of their acti\ ities follow :(1)
Ethical issues in asset revaluations. GAAP in the United Kingdom permit firms to report property, plant and equipment on the balance sheet either at acquisition cost (net of depreciation) or current
"Cash flows determine the amount of revenue and expense but not the riming of their recognition." Explain.
"The key term for understanding the accrual basis of accounting is matching." Explain.
What is the purpose of using contra accounts? What is the alternative to using them?For additional student resources, content, and interactive quizzes for this chapter visit the FACMU
Analyzing changes in accounts receivable. Microsoft Corporation reported a balance of$5,129 million in accounts receivable at the beginning of Year 13 and $5,196 million at the end of Year 13. Its
Analyzing changes in inventory. General Electric Company reported a balance o\' $8,565 mil- lion in inventory at the beginning Year 12 and $9,247 million at the end of Year 12. Its income statement
Analyzing changes in inventory and accounts payable. Ann Taylor Stores reported a balance in inventories of $180.1 million at the beginning of Year 13 and $185.5 million at the end of Year 1 3. It
Analyzing changes in salaries payable. AMR, the parent company of American Airlines, reported a balance in salaries payable of $721 million at the beginning of Year 12 and $705 million at the end of
Analyzing changes in retained earnings. Johnson & Johnson, a pharmaceutical and medical products company, reported a balance in retained earnings of $23,066 million at the beginning of Year 12 and
Computing interest expense. Gillette borrowed $250 million on October 1, Year 12. The debt carries an annual interest rate of 6 percent and is payable in two installments, on April 1 and October 1 of
Computing income tax expense and income taxes paid. Radio Shack reported a balance in Income Taxes Payable of $78.1 million at the beginning of Year 13 and $60.1 million at the end of Year 13. Net
Journal entry for prepaid rent. A firm reported a balance in its Prepaid Rent account of$ 1 ,200 on January 1 , Year 1 2. On February 1 . Year 1 2, the firm paid $ 1 8,000 as the annual rental for
Journal entry to correct recording error. A firm acquired equipment on January 1, Year 12 for $20,000. The equipment has an expected useful life of 5 years and zero salvage value. The firm recorded
Revenue recognition. Neiman Marcus uses the accrual basis of accounting and recognizes revenue at the time it sells merchandise or renders services. Indicate the amount of revenue (if any) the firm
Revenue recognition. Indicate which of the following transactions or events immediately gives rise to the recognition of revenue under the accrual basis of accounting.a. A custom T-shirt manufacturer
Journal entries for notes receivable and notes payable. Corner Grocery Store borrows$100,000 from Citizen's Bank on December 1, Year 12, using a 90-day note as evidence of the loan. The note bears
Journal entries for inventories. On January 1 , Year 1 2, the Merchandise Inventories account of Dollar General had a balance of $1,131 million. During the Year 12, Dollar General purchased
Journal entries for insurance. Eason Corporation commenced business on September 1 , Year 12. It paid the one-year insurance premium of $3,600 for property and liability protection on this date and
Effect of errors on financial statements. Using the notation O/S (overstated), U/S (under- stated), and NO (no effect), indicate the effects (direction and amount) on assets, liabilities, and
Effect of recording errors on financial statements. Forgetful Corporation neglected to make various adjusting entries on December 3 1 , Year 8, the end of its accounting period. Indicate the effects
Cash versus accrual basis of accounting. Ailawadi Corporation began operations on January 1 . Year 6. The firm's cash account revealed the follow ins transactions for the month of January.Date
Miscellaneous transactions and adjusting entries. Give the journal entry to record (1) each of the following transactions as well as (2) any necessary adjusting entries on December 31, Year 6,
Miscellaneous transactions and adjusting entries. Give the journal entry to record (1) each of the following transactions as well as (2) any necessary adjusting entries on December 31, Year 3,
Spreadsheet analysis of transactions and preparation of income statement and balance sheet. Refer to the information tor Moulton Corporation as of December 31, Year 12 in Problem 29 of Chapter 2.
Spreadsheet analysis of transactions and preparation of income statement and balance sheet. Refer to the information for Regaldo Department Stores as of January 31, Year 8 in Problem 30 of Chapter 2.
Spreadsheet analysis of transactions and preparation of income statement and balance sheet. Refer to the information for Patterson Corporation for January, Year 13, in Problem 31 in Chapter 2. The
Spreadsheet analysis of transactions and preparation of income statement and balance sheet. Zealock Bookstore opened a bookstore near a college campus on July 1. Year 10.Transactions and events of
Spreadsheet analysis of transactions and preparation of comparative income statements and balance sheets. Refer to the information for Zealock Bookstore in problem 35. The follow ing transactions
Working backward to the balance sheet at the beginning of the period. (Problems 37 through 39 derive from problems by George H. Sorter.) The following data relate to the Prima Company.(1) Exhibit
Working backward to cash receipts and disbursements. Exhibit 3.15 presents the comparative balance sheet of The Secunda Company as of the beginning and end of Year 2. Exhibit 3.16 presents the income
Working backward to the income statement. Tertia Company presents balance sheets at the beginning and end of Year 2 (Exhibit 3.17). as well as a statement of cash receipts and disbursements (Exhibit
Reconstructing the income statement and balance sheet. (Adapted from a problem b)Stephen A. Zeff.) Portobello Co., a firm that sells merchandise to retail customers, is in its tenth year of
Reconstructing the income statement and balance sheet. Computer Needs. Inc.. operates a retail store that sells computer hardware and software. It began operations on January 2. Year 8.and operated
Interpreting common-size income statements. Exhibit 3.23 presents common-si/e income statements for The GAP and Limited Brands. (WO apparel retailing firms, for three recent years.In addition to the
Interpreting common-size income statements. The Coca-Cola Company (Coke) and PepsiCo dominate the non-alcoholic beverage segment in the United States. Most beverage manufacturing involves adding
Interpreting common-size income statements. McDonald's is the largest fast food restaurant chain in the United States. This segment of the restaurant market has experienced increased competition in
Preparing adjusting entries. To achieve efficient recording of day-to-day cash receipts and disbursements relating to operations, a firm may credit all cash receipts to revenue accounts and debit all
Ethical issues in accounting choices. Finns must make various choices in applying generally accepted accounting principles under the accrual basis of accounting (for example, depreciable lives for
"Research on the efficiency of capital markets suggests that market prices adjust quickly and in an unbiased manner to new information about a firm. The efficiency of capital markets therefore
Balance sheet relations. The balance sheet of Harley-Davidson Company, a manufacturer of motorcycles, showed current assets of $2,067 million, current liabilities of $990 million, shareholders'
Balance sheet relations. The balance sheet of Mattel, a creator and manufacturer of toys and games, showed noncurrent assets of $2,071 million, noncurrent liabilities of $832 million, shareholders'
Retained earnings relations. The balance sheet of Reebok, a designer and manufacturer of athletic shoes, showed retained earnings of $41 1 million at the end of Year 1 1 and $446 million at the end
Retained earnings relations. The balance sheet of Ruby Tuesday, a restaurant chain, showed retained earnings of $326 million at the end of Year 12. Net income for Year 12 was $58 million and
Cash flow relations. The statement of cash flows for Yahoo, Inc., an Internet service provider, showed a net cash inflow from operations of $303 million, a net cash outflow for investing of$346
Cash flow relations. The statement of cash flows for Nike, a designer and manufacturer of athletic shoes, showed a net cash inflow from operations of S917.4 million and a net cash outflow for
Classifying financial statement accounts. The balance sheet or income statement classifies various items in one of the following ways:CA— Current assets NA — Noncurrent assets CL — Current
Balance sheet relations. Selected balance sheet amounts for Lowe's, a retailer of home construction and repair supplies, for four recent years appear below (amounts in millions):Year 9 Year 10 Year
Balance sheet relations. Selected balance sheet amounts for PepsiCo, a manufacturer of soft drinks and snacks, for four recent years appear below (amounts in millions):Year 8 Total Assets $22,660
Balance sheet relations. Selected balance sheet amounts for Intel, a developer and manufac- turer of semiconductors, for four recent years appear below (amounts in millions):Year 9 Year 10 Year 11
Retained earnings relations. Hewlett-Packard Corporation develops and manufactures a diversified line of computer products. Its sales tend to vary with changes in the business cycle. Selected data
Retained earnings relations. Selected data affecting retained earnings for Ford Motor Company, an automobile manufacturer, for four recent years appear below (amounts in millions):Year 9 Year 10 Year
Relating net income to balance sheet changes. The comparative balance sheets for Target Corporation, a discount retailer, as of January 3 1 , Year 1 1 : January 3 1 . Year 12: and January 3 1 .Year
Income statement relations. Selected income statement information for Dell Computer, a manufacturer of personal computers, for three recent years appears below (amounts in millions):Year 10 Sales
Income statement relations. Selected income statement information for Pfizer, a pharmaceutical company, for three recent years appears below (amounts in millions):Year 10 Year 11 Year 12 Sales
Statement of cash flows relations. Selected data from the statement of cash flows for Amazon.com, an on-line retailer, for Year 10, Year 1 1, and Year 12 appear below (amounts in thousands):Year 10
Statement of cash flows relations. Selected data from the statement of cash flows for AMR Corporation, the parent company of American Airlines, for three recent years appear below(amounts in
Relations between financial statements. Compute the missing information in each of the following four independent cases. The letters in parentheses refer to the following:BS — Balance sheet IS —
Preparing a balance sheet and income statement. The accounting records of eBay appear below (amounts in thousands).December 31 Balance Sheet Items Year 11 Cash $ 723,419 Accounts Receivable 101,703
Preparing a balance sheet and income statement. The accounting records of The GAP. a retail clothing store, reveal the following for a recent year (amounts in thousands):Balance Sheet Items Accounts
Preparing a balance sheet and income statement. The accounting records of Southwest Airlines reveal the following for a recent year (amounts in thousands):December 31 Balance Sheet Items Year 8 Year
Relations between net income and cash flows. The ABC Company starts the year in tine shape. The firm makes widgets — just what the customer wants. It makes them for $0.75 each and sells them for
Ethical issues in financial reporting. A multinational computer equipment manufacturer reported the following amounts for two recent years (in millions).Year 9 Year 10 Revenues $87,548 Expenses
Using the following categories, indicate the effects (direction and amount) of the transactions referenced in MD-5. Use + for increase and − for decrease.Data From MD-5:Using the data in MD-3,
Using the data in MD-3, assume that Princeton Company purchased the voting stock of Cox Corporation for its portfolio of available-for-sale securities instead of its trading securities portfolio.
Princeton Company acquired some of the 50,000 outstanding shares of the common stock of Cox Corporation as trading securities. The accounting period for both companies ends December 31. Give the
Using the following categories, indicate the effects (direction and amount) of the transactions listed in MD-1. Use + for increase and − for decrease.Data From MD-1:On January 2, Ubuy.com paid
Assume the same facts as described in 9, except that Winterpeg considers its investment in LDC to be trading securities. What amount will Winterpeg report on its income statement this year?a.
Realized gains and losses are recorded on the income statement for which of the following transactions in trading securities and available-for-sale securities?a. When adjusting trading securities to
Dividends received from stock that is reported as available-for-sale securities in the balance sheet are reported as which of the following?a. An increase to cash and a decrease to the
Company A purchases 10 percent of Company X and intends to hold the stock for at least five years. At the end of the current year, how would Company A’s investment in Company X be reported on
What are the two sources of return for passive investments?
You plan to retire in 20 years. Use present value tables to calculate whether it is better for you to save $25,000 a year for the last 10 years before retirement or $15,000 for each of the 20 years.
Assuming the facts in question 6, what is the car’s equivalent cost if you were to pay for it today? Round to the nearest hundred dollars.a. $2,600b. $3,600c. $8,000d. $9,600
If you hold a valid contract that will pay you $8,000 cash 10 years from now and the going rate of interest is 10 percent, what is its present value? Use a convenient format to display your
As a team, select an industry to analyze. Using your web browser, each team member should access the annual report or 10-K for one publicly traded company in the industry, with each member selecting
The financial statements for Thor and Gunnar companies are summarized here:These two companies are in the same business and state but different cities. Each company has been in operation for about 10

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