Questions and Answers of Fundamental Managerial Accounting Concepts 10th

Payroll Tax Expense Journal Entry Refer to the data in PE 8-1. Make the journal entry necessary to record payroll tax expense for the period.
Salaries and Payroll Tax Payments Refer to the data in PE 8-1. Make the journal entries necessary to record the payment of the payable accounts related to salaries expense and payroll tax expense to
Accruing Compensated Absences Assume an employee earns $150 per day and accrues one sick day each month. Make the journal entry necessary at the end of the quarter to record the accrual of the sick
Using Compensated Absences The employee mentioned in PE 8-6 used one sick day. For simplicity, combine the various taxes into one account called “Various Taxes Payable.” The effective tax rate
Accounting for Employee Stock Options An employee receives stock options as part of her compensation package. Those options allow the employee to purchase 1,000 shares of stock for $40 per share. If
Postemployment Benefits Because of a drop in demand for its products, the company found it necessary to lay off 350 employees. The employment contract grants termination benefits worth an
Pension Terminology Identify which one of the following terms correctly matches the following definition: The amount a company’s pension obligation increases as a result of employees working and
Net Pension Asset/Liability Companies A, B, and C report the following information:For each of the companies, determine the amount of the net pension asset/liability. Be sure to specify whether the
Pension Expense Using the following numbers, compute pension expense. Expected return on fund assets Pension benefit obligation Service cost Interest cost. Pension fund assets $ 445 3,200 265 320
Sales Tax The company sold merchandise for $448; this price does not include sales tax. The state sales tax rate is 6.25%. Make the journal entry necessary to record this transaction.
Property Taxes The company paid $10,800 in advance for one year of property taxes on September 24.The property taxes are for the one-year period beginning October 1. Make the journal entries
Income Tax Expense Which one of the following statements correctly describes income tax expense?a. The amount of cash paid for income taxes during the year.b. The amount of income tax owed as of the
Deferred Tax Liability The company invested $2,500 in a mutual fund on April 1. By December 31, the value of the mutual fund had increased to $3,100, and the company did not sell any portion of the
Deferred Tax Assets The company invested $5,600 in a mutual fund on August 1. By December 31, the value of the mutual fund had declined to $3,900, and the company did not sell any portion of the
Contingent Liabilities Which one of the following correctly describes the circumstances in which a contingent liability should be recognized as a liability in the financial statements?a. The chance
Capitalize versus Expense Which one of the following statements is correct?a. When there is significant uncertainty about whether an expenditure should be capitalized or expensed, capitalize it.b.
Income Statement Classification Using the following data, prepare a classified income statement. The income tax rate on all items is 25%. (Hint: Net income is $52,050.) Advertising expense 4,000
Earnings per Share The company had 300,000 shares of stock outstanding throughout the year. In addition, as of January 1 the company had issued stock options that allowed employees to receive 50,000
Payroll Accounting Stockbridge Stores, Inc., has three employees, Frank Wall, Mary Jones, and Susan Wright.Summaries of their 2009 salaries and withholdings are as follows:1. Prepare the summary
Bonus Computation and Journal Entry Chris Anger is the president of Anger Company, and his brother, George Anger, is the vice president. Their compensation package includes bonuses of 5% for Chris
Stock Options: Fair Value Method On January 1, 2009, the Magily Company established a stock option plan for its senior employees.A total of 60,000 options were granted that permit employees to
Stock Options: Fair Value Method Refer to the information in E 8-24. If those holding stock options can purchase a share of stock for $48 and the market value of a share of stock on 1/1/09 is $50,
Pensions on the Balance Sheet Pension plan information for Brassfield Company is as follows:How will this information be reported on Brassfield’s balance sheet as of December 31, 2009? December 31,
Computing Pension Expense Chanelle Company reports the following pension information for 2009:1. What pension amount would Chanelle report on its balance sheet as of the end of the year?2. Compute
Pension Computations The following pension information is for three different companies. For each company, compute the missing amount or amounts. Company 1 Company 2 Company 3 $100,000 $75,000 (e)
Accounting for Property Taxes In June 2008, Hans Company received a bill from the county government for property taxes on its land and buildings for the period July 1, 2008, through June 30, 2009.
Deferred Income Taxes Yosef Company began operating on January 1, 2009. At the end of the first year of operations, Yosef reported $750,000 income before income taxes on its income statement but only
Deferred Income Taxes Oranjestad Company began operating on January 1, 2009. At the end of the first year of operations, Oranjestad reported $650,000 income before income taxes on its income
Contingent Liabilities Rayn Company is involved in the following legal matters:a. A customer is suing Rayn for allegedly selling a faulty and dangerous product. Rayn’s attorneys believe that there
Classifying Expenditures as Assets or Expenses Determining whether an expenditure should be expensed or capitalized is often difficult. Consider each of the following independent situations and
Preparing an Income Statement Bateman Company is preparing financial statements for the calendar year 2009. The following totals for each account have been verified as correct:Prepare an income
Unifying Concepts: The Income Statement Use the following information to prepare an income statement for Fairchild Corporation for the year ended December 31, 2009. You should show separate
Payroll Accounting Orange County Bank has three employees, Albert Myers, Juan Moreno, and Michi Endo.During January 2009, these three employees earned $6,000, $4,200, and $4,000, respectively.The
Determining Payroll Costs Parley Pharmaceuticals pays its salespeople a base salary of $2,000 per month plus a commission.Each salesperson starts with a commission of 1.5% of total gross sales for
Stock Options On January 1, 2009, Tiger Man Company established a stock option plan for its senior employees.A total of 400,000 options were granted that permit employees to purchase 400,000 shares
Accounting for Pensions The following information is available from John Gammon Company relating to its defined benefit pension plan:Required:1. Compute the amount of pension expense to be reported
Accounting for Pensions Marseille Company reported the following information relating to its pension plan for the years 2007 through 2010:Required:1. Compute the amount of pension expense to be
Life Cycle of a Deferred Tax Item Black Kitty Company recorded certain revenues of $10,000 and $20,000 on its books in 2007 and 2008, respectively. However, these revenues were not subject to income
Unifying Concepts: The Income Statement From the following information, prepare an income statement for Moriancumer, Inc., for the year ended December 31, 2009. (Hint: Net income is $98,500.) Assume
Income Statement Analysis The following table represents portions of the income statements of Brinkerhoff Company for the years 2007–2009:Required:Fill in the missing numbers. Assume that gross
Recording Liabilities and the Effect on Bonuses John Flowers, president of Marquette Company, is paid a salary plus a bonus equal to 10%of pretax income. The company has just computed its pretax
Questioning the Accounting for Pensions, Research, and Income Taxes Tatia Wilks, the president of Lewbacca Company, is concerned about the low earnings that Lewbacca is scheduled to report this year.
You Decide: Are stock options and bonus plans an appropriate incentive or a cause for corruption?Do employee bonus plans provide incentives to work harder and achieve personal and corporate goals, or
You Decide: Should start-up costs be capitalized or expensed?Your spouse is setting up a home-based Web design business. Her purpose for setting up the business is to earn some extra income now and,
Wal-Mart The 2006 Form 10-K for Wal-Mart is included in Appendix A. Locate that Form 10-K and consider the following questions:1. Find Wal-Mart’s financial statement note on “Income taxes.”a.
General Motors General Motors has the largest set of private pension plans in the world. The company has many different pension plans covering different groups of employees. The following information
IBM Note P to IBM’s 2005 financial statements describes how taxes affect IBM’s operations.Among the information given is the following (all amounts are in millions of U.S. dollars):The continuing
Hutchison Whampoa In Hong Kong, Li Ka-shing is known as “Superman.” Li’s personal wealth is estimated to be in excess of $1 billion, and there is a saying in Hong Kong that for every dollar
Twisting the Contingency Rules to Save the Environment You are a member of an environmental group that is working to clean up Valley River, which runs through your town. Right now, the group is
Computing the Total Compensation for a Professor Eunice Burns is a new assistant professor of phrenology at the University of Winnemucca. Her academic year salary is $30,000. In addition, she
Computing Changes in Debt Ratio and Return on Equity This spreadsheet assignment is a continuation of the spreadsheet assignments given in earlier chapters. If you completed those spreadsheets, you
LIFO Cost Flow AssumptionRefer to the data in PE 7-16. Determine (1) the cost of goods sold for the month and (2) theending inventory balance for October 31 using the LIFO cost flow assumption
Average Cost Flow AssumptionRefer to the data in PE 7-16. Determine (1) the cost of goods sold for the month and (2) theending inventory balance for October 31 using the average cost flow assumption.
Using the following data, compute inventory turnover Inventory, December 31, year 1 Cost of goods sold Sales Inventory, January 1, year 1 $ 82,000 342,000 694,000 74,000
Inventory Identification Which one of the following is not an example of inventory?a. Cranes at a construction siteb. Books on the shelves of a bookstorec. Apples in a supermarketd. Screws to be used
Costs Included in Inventory Which one of the following costs is not included in inventory?a. Salaries paid to assembly workersb. Direct materials used in assemblyc. Salary paid to the company
Goods in Transit Collin Wholesale sold $2,500 inventory to Jennifer Company on December 27, year 1, with shipping terms of FOB destination. The inventory arrived on January 2, year 2. Which company
Computing Cost of Goods Sold Using the following data, compute cost of goods sold. Inventory, December 31 Inventory, January 1 Cash, December 31 Purchases during the year Sales during the year $
Perpetual and Periodic Inventory Systems For each of the following businesses, indicate whether the business would be more likely to use a perpetual or a periodic inventory system.a. Automobile
Inventory Purchases The company purchased (on account) 180 tables to be resold to customers. The cost of each table was $200. Make the journal entry to record this transaction under (1) a perpetual
Transportation Costs The company incurred $830 in shipping costs related to the inventory purchases in PE 7-6.The company paid for the shipping costs in cash. Make the journal entry necessary to
Purchase Returns The company returned 15 of the tables purchased in PE 7-6 because of defects in assembly.Make the journal entry necessary to record this return under (1) a perpetual inventory system
Purchase Discounts The company paid for the tables purchased in PE 7-6 (less the tables returned in PE 7-8).Because the company paid within 10 days, it received a 2% discount on the purchase. Make
Sales The company sold 70 tables on account for $240 each. Make the journal entry or entries necessary to record this transaction under (1) a perpetual inventory system and (2) a periodic inventory
Sales Returns A dissatisfied customer returned six of the tables that were sold in PE 7-10. Make the journal entry or entries necessary to record this transaction under (1) a perpetual inventory
Closing Inventory Entries for a Periodic System Refer to the data in PE 7-6 through PE 7-11. Assume the beginning balance in the inventory account was $0 for the periodic inventory system. A physical
Inventory Shrinkage The company’s perpetual inventory records show that the ending inventory balance should be $182,000. However, a physical count of the inventory reveals the true ending balance
Computing Cost of Goods Sold with a Periodic System The company uses a periodic inventory system. Beginning inventory was $6,000. Net purchases (including freight in, purchase returns, and purchase
Errors in Ending Inventory The company uses a periodic inventory system and overstated its ending inventory by$20,000. How will this inventory error affect reported net income for the company?
Specific Identification Inventory Cost Flow The company reports the following activity during October related to its inventory of cameras:Oct. 1 Beginning inventory consisted of 8 cameras costing
FIFO Cost Flow Assumption Refer to the data in PE 7-16. Determine (1) the cost of goods sold for the month and (2) the ending inventory balance for October 31 using the FIFO cost flow assumption.
Number of Days’ Sales in Inventory Refer to the data in PE 7-20. Compute number of days’ sales in inventory.
Number of Days’ Purchases in Accounts Payable Using the following data, compute number of days’ purchases in accounts payable. Accounts payable, December 31, year 1 Cost of goods sold. Accounts
Inventory Errors—Multiple Years At the beginning of year 1, the company’s inventory level was stated correctly. At the end of year 1, inventory was understated by $2,000. At the end of year 2,
Inventory Errors—Multiple Years Refer to PE 7-23. Compute the correct amount of net income in year 2.
LIFO and a Perpetual Inventory System The company reported the following inventory data for the year:Sales occurred as follows:Compute (1) cost of goods sold and (2) ending inventory making a LIFO
Average Cost and a Perpetual Inventory System Refer to PE 7-25. Compute (1) cost of goods sold and (2) ending inventory making an average cost assumption. The company uses a perpetual inventory
Lower of Cost or Market The following information pertains to the company’s ending inventory:Apply lower-of-cost-or-market accounting to each inventory item individually. What total amount should
Recording an Inventory Write-Down The company started business at the beginning of year 1. The company applies the lower-ofcost-or-market (LCM) rule to its inventory as a whole. Inventory cost and
Estimating Inventory On August 17, the company’s inventory was destroyed in a hurricane-related flood. For insurance purposes, the company must reliably estimate the amount of inventory on hand on
Goods on Consignment Company A has consignment arrangements with Supplier B and with Customer C. In particular, Supplier B ships some of its goods to Company A on consignment, and Company A ships
Recording Sales Transactions—Perpetual Inventory Method On June 24, 2009, Reed Company sold merchandise to Emily Clark for $95,000 with terms 2/10, n/30. On June 30, Clark paid $44,100, receiving
Perpetual Inventory Method Orser Furniture purchases and sells dining room furniture. Its management uses the perpetual method of inventory accounting. Journalize the following transactions that
Recording Sales Transactions—Periodic Inventory Method On June 24, 2009, Mowen Company sold merchandise to Jack Simpson for $80,000 with terms 2/10, n/30. On June 30, Simpson paid $39,200,
Cost of Goods Sold Calculations Complete the Cost of Goods Sold section for the income statements of the following five companies: Able Baker Carter Delmont Eureka Company Company Company Company
Journalizing Inventory Transactions Shannon Parts uses the periodic method of inventory accounting.1. Journalize the following transactions relating to the company’s purchases in 2009:Jan. 24
Adjusting Inventory (Perpetual Method)Deer Company’s perpetual inventory records show an inventory balance of $120,000. Deer Company’s records also show cost of goods sold totaling $240,000. A
Adjusting Inventory and Closing Entries (Periodic Method)As of December 31, 2009, Whitney Company had the following account balances:A physical count of inventory on December 31, 2009, showed
Cost of Goods Sold Calculation The accounts of Berrett Company have the following balances for 2009:The inventory count on December 31, 2009, is $96,000. Using the information given, compute the cost
Adjusting Inventory Records for Physical Counts Cleopatra, Inc., which uses the perpetual inventory method, recently had an agency count its inventory of frozen burritos. The agency left the
Specific Identification Method E’s Diamond Shop is computing its inventory and cost of goods sold for November 2009. At the beginning of the month, these items were in stock:During the month, the
Inventory Costing Methods For each of the descriptions listed below, identify the inventory costing method to which it applies. The costing methods are: average cost, LIFO, and FIFO.1. The value of
FIFO and LIFO Inventory Costing Jefferson’s Jewelry Store is computing its inventory and cost of goods sold for November 2009. At the beginning of the month, the following jewelry items were in
FIFO, LIFO, and Average Cost Calculations (Periodic Inventory Method)The following transactions took place with respect to Model B computers in Jackson’s Computer Store during November
Inventory Ratios The following data are available for 2009, regarding the inventory of two companies:Compute inventory turnover and number of days’ sales in inventory for both companies.Which
Analysis of the Operating Cycle The following information was taken from the records of Dallen Company for the year 2010:1. Compute the number of days’ sales in inventory.2. Compute the ending
Inventory Errors As the accountant for Synergy Solutions, you are in the process of preparing the income statement for the year ended December 31, 2009. In doing so, you have noticed that merchandise
FIFO, LIFO, and Average Cost Calculations (Perpetual Inventory Method)The July 2009 inventory records of Mario’s Bookstore showed the following:1. Using the perpetual inventory method, compute the
Lower of Cost or Market Prepare the necessary journal entries to account for the purchases and year-end adjustments of the inventory of Payson Manufacturing Company. All purchases are made on
Lower of Cost or Market Duncan Company sells lumber. Inventory cost data per 1,000 board feet of lumber for Duncan Company are as follows:1. By what amount, if any, should each item (considered

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