Questions and Answers of Fundamental Managerial Accounting Concepts 10th

Gross Margin Method of Estimating Inventory Jason Company needs to estimate the inventory balance for its quarterly financial statements.The periodic inventory method is used. Records show that
Estimating Inventory Amounts Erin’s Boutique was recently destroyed by fire. For insurance purposes, she must determine the value of the destroyed inventory. She knows the following information
Estimating Inventory Ted Smyth manages an electronics store. He suspects that some employees are stealing items from inventory. Determine the cost of the missing inventory. The following information
What Should Be Included in Inventory?Howard is trying to compute the inventory balance for the December 31, 2008, financial statements of his automotive parts shop. He has computed a tentative
Perpetual and Periodic Journal Entries The following transactions for Goodmonth Tire Company occurred during the month of March 2009:a. Purchased 500 automobile tires on account at a cost of $40 each
Income Statement Calculations Stout Company has gross sales of 250% of cost of goods sold. It has also provided the following information for the calendar year 2009:Using the available information,
Inventory Cost Flow Alternatives Stocks, Inc., sells weight-lifting equipment. The sales and inventory records of the company for January through March 2009 were as follows:Required:1. Determine the
Periodic Inventory Cost Flow Method Fresh Wholesale buys peaches from farmers and sells them to canneries. During May 2009, Fresh’s inventory records showed the following:Fresh Wholesale uses the
Calculating and Interpreting Inventory Ratios Captain Geech Boating Company sells fishing boats to fishermen. Its beginning and ending inventories for 2009 are $462 million and $653 million,
The Effect of Inventory Errors The accountant for Steele Company reported the following accounting treatments for several purchase transactions (FOB shipping point) that took place near December 31,
Correction of Inventory Errors The annual reported income for Salazar Company for the years 2006–2009 is shown here.However, a review of the inventory records reveals inventory
The Effect of Inventory Errors You have been hired as the accountant for Christman Company, which uses the periodic inventory method. In reviewing the firm’s records, you have noted what you think
Unifying Concepts: Inventory Cost Flow Alternatives Stan’s Wholesale buys canned tomatoes from canneries and sells them to retail markets.During August 2009, Stan’s inventory records showed the
Perpetual Inventory Cost Flow Alternatives Pump-It, Inc., sells weight-lifting equipment. The sales and inventory records of the company for January through March 2009 were as follows:Required:1.
Unifying Concepts: Inventory Estimation Method McCarlie Clothing Store has the following information availableRequired:1. On the basis of this information, estimate the cost of inventory on hand at
Why Use a Perpetual System?You are a consultant for the ABC Consulting Company. You have been hired by Eddie’s Electronics, a company that owns 25 electronics stores selling radios, televisions,
Should We Reduce Inventory?It has now been two years since you advised Mr. Eddie to switch to the perpetual inventory method. He is very happy with the additional information he has about inventory
You Decide: Should inventory be recorded at cost or fair market value?You recently ran into Bill Autograph, a friend from high school who has been really busy getting his sports
Wal-Mart Using Wal-Mart’s 2006 Form 10-K in Appendix A, answer the following questions:1. What type of items compose Wal-Mart’s inventory?2. Review Wal-Mart’s balance sheet to determine the
General Electric Selected financial statement information relating to inventories for General Electric (GE) is given below.1. Compute GE’s number of days’ sales in inventory for 2005 using (a)
La-Z-Boy and McDonald’s The following information is taken from the 2005 financial statements of La-Z-Boy, Inc., maker of recliners and other home furnishings, and the 2005 financial statements of
Why No LIFO?The LIFO method of accounting for inventory is primarily a U.S. invention. Many countries around the world will not allow LIFO to be used, and other countries discourage its use. For
Shipping Bricks In 1989 the U.S. Department of Justice Criminal Division discovered a massive inventory fraud that was being conducted by managers at Miniscribe Corporation. MiniScribe manufactured
Estimating Inventory Jon Johnson, an accountant with a local CPA firm, has just completed an inventory count for Mom & Pop’s Groceries. Mom and Pop provide audited financial statements to their
Preparing New Forecasts This spreadsheet assignment is a continuation of the spreadsheet assignments given in earlier chapters. If you completed those spreadsheets, you have a head start on this one.
Inventory Cost Flow Alternatives Lehi Wholesale Distributors buys printers from manufacturers and sells them to office supply stores. During January 2009, its periodic inventory records showed the
Perpetual Inventory Cost Flow Alternatives Using the above example, we assume Lehi Wholesale Distributors buys printers from manufacturers and sells them to office supply stores. During January 2009,
Classifying Major Business Activities Classify each of the following business activities as an operating, investing, or financing activity.a. Acquiring inventory for resale.b. Buying and selling
Revenue Recognition Make the journal entry necessary to record the sale of 120 books at $32 per book. Sixty-five of the books were sold for cash, and 55 were sold on credit.
Cash Collection Refer to the data in PE 6-3. Make the journal entry necessary when the company receives payment for the 55 books sold on credit.
Sales Discounts Refer to the data in PE 6-3. Assume that all of the books were sold to a single customer and that the terms of the credit sale were 2/10, n/30. Make the journal entry necessary to
Sales Returns and Allowances Refer to the data in PE 6-3. Assume a customer found that 20 of the books were misprinted and returned the 20 books for a refund. Prepare the journal entry necessary in
Computing Net Sales Using the following data, compute net sales. Sales discounts Accounts receivable, ending Gross sales Inventory, ending Sales returns and allowances 50,000 125,000 2,500,000
Control of Cash Which one of the following is not an important control associated with cash?a. All cash expenditures must be made with prenumbered checks.b. The cash balance must never fall below the
The Direct Write-Off Method The company has an accounts receivable balance of $3,000,000 at the end of the year. The company decides that $90,000 of those accounts receivable are uncollectible
The Allowance Method The company had credit sales of $2,500,000 during the year, its first year of business. The company has estimated that $50,000 of these sales on account will ultimately be
Computing Net Accounts Receivable Refer to the data in PE 6-10. Taking into account the allowance for bad debts established at the end of the year, compute the net realizable value of accounts
Collecting an Account Previously Written Off Refer to the data in PE 6-10. Assume that one customer, whose account had previously been written off, returned from exile in the Bahamas and paid his
Estimating Uncollectible Accounts Receivable as a Percentage of Credit Sales The company had an Accounts Receivable balance of $85,000 and an Allowance for Bad Debts balance of $3,400 (credit) at the
Estimating Uncollectible Accounts Receivable as a Percentage of Total Receivables The company had an Accounts Receivable balance of $85,000 and an Allowance for Bad Debts balance of $3,400 (credit)
Estimating Uncollectible Accounts Receivable Using Aging Accounts Receivable The company reports the following aging accounts receivable data:In addition, the company provides the following estimates
Evaluating Quality of Accounts Receivable The company reports the following data for the past three years:Compute the allowance for bad debts as a percentage of accounts receivable and evaluate the
Accounts Receivable Turnover Using the following data, calculate the company’s accounts receivable turnover. Accounts receivable balance, December 31 Inventory balance, December 31 Sales
Average Collection Period Refer to the data in PE 6-17. Calculate the company’s average collection period.
Warranty Expense The company has determined, based on past experience, that 15% of all tires sold will need repairs within the warranty period. When customers request a tire repair under the warranty
Repairs under Warranty Refer to the data in PE 6-19. Assume that during the following year, 20 customers bring in 80 tires for warranty repairs. The labor and supplies associated with these repairs
Bank Reconciliation The company received a bank statement at the end of the month. The statement contained the following:In comparing the bank statement to its own cash records, the company found the
Journal Entries from a Bank Reconciliation Refer to PE 6-21. Make all journal entries necessary on the company’s books to adjust the reported cash balance in response to the receipt of the bank
Journal Entry to Record a Foreign Currency Transaction On November 6 of Year 1, the company provided services (on account) to a client located in Thailand. The contract price is 100,000 Thai baht. On
Computation of Foreign Exchange Gains and Losses Refer to PE 6-23. Compute the foreign exchange gain or loss that should be reported in (1)Year 1 and (2) Year 2.
Recognizing Revenue Supposedly, there is an over 200-year wait to buy Green Bay Packers season football tickets.The fiscal year-end (when they close their books) for the Green Bay Packers is March 30
Recognizing Revenue James Dee Company cleans the outside walls of buildings. The average job generates revenue of $800,000 and takes about two weeks to complete. Customers are required to pay for a
Recognizing Revenue—Long-Term Construction Projects In the year 2002, Salt Lake City, Utah, hosted the Winter Olympics. To get ready for the Olympics, most of the major roads and highways in and
Revenue Recognition Yummy, Inc., is a franchiser that offers for sale an exclusive franchise agreement for$30,000. Under the terms of the agreement, the purchaser of a franchise receives a variety of
Control of Cash Molly Maloney is an employee of Marshall Company, a small manufacturing concern. Her responsibilities include opening the daily mail, depositing the cash and checks received into the
Recording Sales Transactions On June 24, 2009, Sudweeks Company sold merchandise to Brooke Bowman for $70,000 with terms 2/10, n/30. On June 30, Bowman paid $39,200 on her account and was allowed a
Recording Sales Transactions Lee Company sold merchandise on account to Peart Company for $16,000 on June 3, 2009, with terms 2/10, n/30. On June 7, 2009, Lee Company received $650 of returned
Estimating Bad Debts The trial balance of Sparkling Jewelry Company at the end of its 2009 fiscal year included the following account balances:The company has not yet recorded any bad debt expense
Accounting for Bad Debts The following data were associated with the accounts receivable and uncollectible accounts of Julia Jay, Inc., during 2009:a. The opening credit balance in Allowance for Bad
Accounting for Uncollectible Accounts Receivable Dodge Company had the following information relating to its accounts receivable at December 31, 2008, and for the year ended December 31, 2009:Dodge
Aging of Accounts Receivable Smoot Company’s accounts receivable reveal the following balances:The credit balance in Allowance for Bad Debts is now $42,000. After a thorough analysis of its
Aging of Accounts Receivable The following aging of accounts receivable is for Harry Company at the end of its first year of business:Harry Company has collected the following bad debt information
Direct Write-Off versus Allowance Method The vice president for Tres Corporation provides you with the following list of accounts receivable written off in the current year. (These accounts were
Accounting for Uncollectible Receivables—Percentage of Sales Method The trial balance of Beecher’s Sporting Warehouse, Inc., shows a $110,000 outstanding balance in Accounts Receivable at the end
Comparing the Percentage of Sales and the Percentage of Receivables Methods Keefer Company uses the percentage of sales method for computing bad debt expense. As of January 1, 2009, the balance of
Ratio Analysis The following are summary financial data for Parker Enterprises, Inc., and Boulder, Inc., for three recent years:1. Using the above data, compute the accounts receivable turnover and
Assessing How Well Companies Manage Their Receivables Assume that Hickory Company has the following data related to its accounts receivable:Use these data to compute accounts receivable turnover
Measuring Accounts Receivable Quality The following accounts receivable information is for Kayley CompanyDid the creditworthiness of Kayley’s customers increase or decrease between 2007 and 2009?
Accounting for Warranties Rick Procter, president of Sharp Television Stores, has been concerned recently about declining sales due to increased competition in the area. Rick has noticed that many of
Accounting for Warranties Ainge Auto sells used cars and trucks. During 2009, it sold 53 cars and trucks for a total of$1,400,000. Ainge provides a 24-month, 30,000-mile warranty on the used cars and
Preparing a Bank Reconciliation Prepare a bank reconciliation for Eugene Company at January 31, 2009, using the information shown.1. Cash per the accounting records at January 31 amounted to
Preparing a Bank Reconciliation The records of Denna Corporation show the following bank statement information for December:a. Bank balance, December 31, 2009, $87,450b. Service charges for December,
Reconciling Book and Bank Balances Jensen Company has just received the September 30, 2009, bank statement summarized in the following schedule:Cash on hand (recorded on Jensen’s books but not
Foreign Currency Transaction Apple Core, a U.S. company, sold 125,000 cases of tropical fruit to Minh Market, a Vietnamese firm, for 3.2 billion Vietnamese dong. The sale was made on November 17,
Foreign Currency Transaction American, Inc., sells one widget to Japanese Company at an agreed-upon price of 1,000,000 yen. On the day of the sale, one yen is equal to $0.01. American, Inc.,
Sales Transactions Money Company and Profit Company entered into the following transactions:a. Money Company sold merchandise to Profit Company for $60,000, terms 2/10, n/30.b. Prior to payment,
Analysis of Allowance for Bad Debts Boulder View Corporation accounts for uncollectible accounts receivable using the allowance method.As of December 31, 2008, the credit balance in Allowance for Bad
Accounting for Accounts Receivable Assume that Dominum Company had the following balances in its receivable accounts on December 31, 2008:Required:1. Prepare entries for the 2009 transactions.2. What
Analysis of Receivables Juniper Company was formed in 1999. Sales have increased on the average of 5% per year during its first 10 years of existence, with total sales for 2008 amounting to $400,000.
Computing and Recording Bad Debt Expense During 2009, Wishbone Corporation had a total of $5,000,000 in sales, of which 80% were on credit. At year-end, the Accounts Receivable balance showed a total
Unifying Concepts: Aging of Accounts Receivable and Uncollectible Accounts Capital Edge Company has found that, historically, 0.5% of its current accounts receivable, 3% of accounts 1 to 30 days past
Estimating Uncollectible Accounts Ulysis Corporation makes and sells clothing to fashion stores throughout the country. On December 31, 2009, before adjusting entries were made, it had the following
Analysis of Accounts Receivable Quantity and Quality The following accounts receivable information is for Rouge Company:Required:1. With the big increase in Allowance for Bad Debts in 2009, Rouge
Preparing a Bank Reconciliation Milton Company has just received the following monthly bank statement for June 2009.Data from the cash account of Milton Company for June are as follows:At the end of
Determining Where the Cash Went Kim Lee, the bookkeeper for Briton Company, had never missed a day’s work for the past 10 years until last week. Since that time, he has not been located. You now
Accounting for a Foreign Currency Transaction On December 19, 2009, Mr. Jones Company performed services for Lamour Company. The contracted price for the services was 35,000 euros, to be paid on
ZZZZ Best and Fictitious Receivables ZZZZ Best was a Los Angeles-based company specializing in carpet cleaning and insurance restoration. Prior to allegations of fraud and its declaration of
You Decide: Can pre-billing customers increase revenues?For the past year, you have been working as an accountant for a local Internet Service Provider. Business is growing steadily with the holiday
You Decide: Can a company overestimate bad debts in good years and then use lower estimates when times are bad?The company you work for has been highly profitable this year. Your boss tells you to
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. Provide the summary journal entry that Wal-Mart would have made to
Bank of America Bank of America is one of the oldest banks in America, as well as one of the largest.Founded in the late 1800s, Bank of America has grown from a strictly California-based bank to one
Microsoft and IBM Information from comparative income statements and balance sheets for Microsoft and IBM is given below. (Amounts are in millions.)Use this information to answer the following
Samsung The economic downturn in South Korea in late 1997 focused world attention on what had heretofore been viewed as one of the world’s economic powerhouses. Symptomatic of the economic collapse
Changing Our Estimates in Order to Meet Analysts’ Expectations John Verner is the controller for BioMedic, Inc., a biotechnology company. John is finishing his preparation of the preliminary
Revenue Recognition for Health Clubs The health fitness business has become increasingly popular as the sedentary lifestyle of most Americans has caused a large percentage of the population to feel,
Creating a Forecasted Balance Sheet and Income Statement This spreadsheet assignment is a continuation of the spreadsheet assignments given in earlier chapters. If you completed those spreadsheets,
Accounting for Receivables and Warranty Obligations Douglas Company sells furniture. Approximately 10% of its sales are cash; the remainder are on credit. During the year ended December 31, 2009, the
The Aging Method The following aging of accounts receivable is for Coby Company at the end of 2009:Coby Company had a credit balance of $20,000 in its allowance for bad debts account at the beginning
Periodic Reporting Which one of the following statements is true with respect to periodic reporting?a. All companies in the United States are required to have a fiscal year that ends on December
Revenue Recognition In which one of the following situations should revenue be recognized?a. The earnings process has begun and cash collectibility is reasonably assured.b. The earnings process has

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