Questions and Answers of Fundamental Managerial Accounting Concepts 10th

Matching Select the one phrase below that best completes the following statement: According to the matching principle, . . .a. The amount of cash collected should be matched and recognized in the
Cash-Basis Accounting A lawn care company started business on January 1, 2009. The company billed clients$85,000 for lawn care services completed in 2009. By December 31, the company had
Accrual-Basis Accounting Refer to PE 4-4. Compute income for 2009 assuming that the company uses accrual-basis accounting.
Unrecorded Receivable: Original Entry Greg operates a sizeable newspaper delivery service. On the last day of each month, Greg receives a statement from the newspaper publisher detailing how much
Unrecorded Receivable: Adjusting Entry Refer to PE 4-6. On December 31, Greg received a statement from the newspaper publisher notifying him that he had earned $13,700 for his December deliveries.
Unrecorded Liability: Original Entry On May 1, the company borrowed $75,000 from Bank of Salt Lake. The loan is for five years and bears an annual interest rate of 9%. Interest on the loan is to be
Unrecorded Liability: Adjusting Entry Refer to PE 4-8. (1) Make the adjusting entry necessary on the company’s books with respect to this loan on December 31. (2) Make the journal entry necessary
Prepaid Expense: Original Entry On August 1, the company paid $72,000 cash for a four-year insurance policy. The policy went into effect on August 1. Make the journal entry necessary on the
Prepaid Expense: Adjusting Entry Refer to PE 4-10. (1) Make the adjusting entry necessary on the company’s books on December 31 with respect to this insurance policy and (2) compute the ending
Unearned Revenue: Original Entry The company provides security services to its clients. On April 1, the company received$270,000 cash for a three-year security contract. The contract went into effect
Unearned Revenue: Adjusting Entry Refer to PE 4-12. (1) Make the adjusting entry necessary on the company’s books on December 31 with respect to this security contract and (2) compute the ending
Wages Payable: Adjusting Entry and Subsequent Payment The company pays its employees at the end of the day Friday for work done during that five-day work week. Total wages for a week are $24,000. In
Supplies: Original Purchase and Adjusting Entry On January 1, the company had office supplies costing $4,600. On March 23, the company bought additional office supplies costing $8,200; the company
Preparing an Adjusted Trial Balance Before any adjusting entries were made, the company prepared the following trial balance as of December 31:In order to make the adjusting entries, the following
Using an Adjusted Trial Balance to Prepare an Income Statement Refer to PE 4-16. Using the adjusted trial balance prepared in part (2), prepare an income statement for the year.
Using an Adjusted Trial Balance to Prepare a Balance Sheet Refer to PE 4-16. Using the adjusted trial balance prepared in part (2), prepare a balance sheet as of the end of the year. Note: The ending
Adjusting Entries and the Audit Consider the auditor’s review of a company’s adjusting entries. For which one of the following would a concerned auditor be required to make a search of items not
Closing Entries: Revenues Below is a list of accounts with corresponding ending balances.Prepare one summary entry to close those accounts that should be closed at the end of the year. Account
Closing Entries: Expenses Below is a list of accounts with corresponding ending balances.Prepare one summary entry to close those accounts that should be closed at the end of the year. a. b. C. d. e.
Closing Entries: Everything Below is a list of accounts with corresponding ending balances.(1) Prepare all entries necessary to close those accounts that should be closed at the end of the year and
Post-Closing Trial Balance Refer to PE 4-16. Prepare a post-closing trial balance. For this exercise, ignore the adjustments described in PE 4-16; just use the reported trial balance.
Reporting Income: Cash versus Accrual Accounting On December 31, 2009, Matt Morgan completed the first year of operations for his new computer retail store. The following data were obtained from the
Reporting Income: Cash versus Accrual Accounting On December 31, Daniel McGrath completed the first year of operations for his new business.The following data are available from the company’s
Classifications of Accounts Requiring Adjusting Entries For each type of adjustment listed, indicate whether it is an unrecorded receivable, an unrecorded liability, an unearned revenue, or a prepaid
Adjusting Entries: Prepaid Expenses and Unearned Revenues Kearl Associates is a professional corporation providing management consulting services.The company initially debits assets in recording
Adjusting Entries: Prepaid Expenses and Unearned Revenues Erickson Group provides computer network consulting services. The company initially debits assets in recording prepaid expenses and credits
Adjusting Entries Shop Rite Services is ready to prepare its financial statements for the year ended December 31, 2009. The following information can be determined by analyzing the accounts:1. On
Adjusting Entries Consider the following two independent situations:1. On June 1, Hatch Company received $3,600 cash for a two-year subscription to its monthly magazine. The term of the subscription
The company uses an account called Unearned Subscription Revenue.2. Clark Company pays its employees every Friday for a five-day workweek. Salaries of$150,000 are earned equally throughout the week.
Adjusting Entries Wallin Enterprises disclosed the following information on December 31, 2009 (before any adjusting entries were made):1. In June, Wallin purchased an insurance premium for $54,000
Adjusting Entries Consider the following information related to the Timmy Thompson Company:1. At the beginning of the year, the company had $460 in supplies on hand. During the year, the company
Adjusting Entries Consider the following information related to Pendleton Consulting:1. On October 1, 2009, Pendleton Consulting entered into an agreement to provide consulting services for six
Analysis of Accounts Answer the following questions:1. If office supplies on hand amounted to $3,500 at the beginning of the period and total purchases of office supplies during the period amounted
Classifying Account Balances For each of the following accounts, indicate whether it would be found in the income statement or in the balance sheet.1. Cash 2. Inventory 3. Salaries Expense 4. Prepaid
Real and Nominal Accounts Classify each of the following accounts as either a real account (R) or a nominal account (N):1. Cash 14. Prepaid Salaries 2. Sales Revenue 15. Utilities Expense 3. Accounts
Closing Entry The income statement for Roberts Enterprises for the year ended June 30, 2009, is provided.1. Prepare a journal entry to close the accounts to Retained Earnings.2. What problem may
Closing Entry Revenue and expense accounts of Reschke Training Services for November 30, 2009, are given as follows. Prepare a compound journal entry that will close the revenue and expense accounts
Closing Entries Johstoneaux, Inc. reports the following numbers for 2009:Prepare journal entries to close the revenue and expense accounts to the retained earnings account. Johstoneaux, Inc. Income
Closing Entries The following information relates to the Wycherly CompanyPrepare journal entries to close the revenue and expense accounts to the retained earnings account. Sales revenue Interest
Closing Dividends and Preparing a Post-Closing Trial Balance A listing of account balances taken from the adjusted ledger account balances of The Miners’Guild shows the following:All revenue and
Closing Dividends and Preparing a Post-Closing Trial Balance Below is a listing of account balances taken from the adjusted ledger account balances of Jolley Manufacturing Corporation.All revenues
Cash- and Accrual-Basis Accounting In the course of your examination of the books and records of Karen Company, you find the following data:Required:1. Compute Karen’s net income for 2009 using
Adjusting Entries The information presented below is for MedQuest Pharmacy, Inc.a. Salaries for the period December 26, 2009, through December 31, 2009, amounted to$17,840 and have not been recorded
Adjusting Entries The information presented below is for Susan’s Sweet Shop.a. Interest of $9,600 is payable for September 2009 through December 2009 on a 9%,$320,000 loan and has not been
Year-End Analysis of Accounts An analysis of cash records and account balances of Wells, Inc., for 2009 is as follows:Required:Determine the amounts that should be included on the 2009 income
Year-End Analysis of Accounts An analysis of cash records and account balances of Apartment Renters, Inc., for 2009 is as follows:Required:Determine the amounts that should be included on the 2009
Account Classifications and Debit-Credit Relationships Using the format provided, for each account identify (1) whether the account is a balance sheet (B/S) or an income statement (I/S) account; (2)
Closing Entries The income statement for Joe’s Asphalt, Inc., for the year ended December 31, 2009, is as followsRequired:Dividends of $36,000 were paid on December 30, 2009.1. Give the entry
Closing Entries The income statement for Squared Carpentry, Inc., for the year ended December 31, 2009, is as follows:Dividends of $18,600 were paid on December 30, 2009.Required:1. Give the entry
Unifying Concepts: Adjusting and Closing Entries The unadjusted and adjusted trial balances of White Company as of December 31, 2009, are presented below.Required:1. Prepare the journal entries that
Unifying Concepts: Analysis of Accounts The bookkeeper for Davey James Company accidentally pressed the wrong computer key and erased the amount of Retained Earnings. You have been asked to analyze
Unifying Concepts: Analysis and Correction of Errors At the end of November 2009, the general ledger of Peacock Clothing Company showed the following amounts:The company’s bookkeeper is new on the
Unifying Concepts: The Accounting Cycle The post-closing trial balance of Anderson Company at December 31, 2008, is shown here.During 2009, Anderson Company had the following transactions:a.
Using Financial Statements for Investment Decisions Several doctors are considering the purchase of a small real estate business as an investment.Because you have some training in the mechanics of
Accounting and Ethical Issues Involving the Closing Process Silva and Wanita Rodriques are the owners of Year-Round Landscape, Inc., a small landscape and yard service business in southern
Wrestling with Your Conscience and GAAP You are the controller for South Valley Industries. Your assistant has just completed the financial statements for the current year and has given them to you
You Decide: Should deferred compensation packages be disclosed in the notes to the financial statements, or should they be recorded as liabilities?Recently, corporate accounting scandals have brought
You Decide: Should intellectual properties be recorded as assets on the balance sheet or disclosed in the notes to the financial statements?Intellectual property refers to creations of the mind.
Home Depot Selected financial statement information for Home Depot is given in the table below. Using this information, answer the following questions:(all numbers in millions)Retained Earnings
Campbell Soup Information from the 2005 income statement for Campbell Soup Company is shown below.Using the information from the income statement, perform the following:1. Prepare the entries made by
Do Two Wrongs Make a Right?Jex Varner, chief financial officer of Wyndam, Inc., is involved in a meeting with the firm’s newly hired external auditors, Ernst & Price. The external auditors have
Are Adjusting Entries More Trouble Than They Are Worth?You are taking an introductory accounting class. You think that making regular journal entries is not too difficult, but making adjusting
Preparing 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.1.
The Accounting Cycle This review problem provides a useful summary of the entire accounting cycle. The following post-closing trial balance is for Sports Haven Company as of December 31,
What are the five labels in the earnings management continuum (see Exhibit 3), and what general types of actions are associated with each of the labels?
Accounting Errors—Transaction Errors How would the following errors affect the account balances and the basic accounting equation, Assets Liabilities Owners’ Equity? How do the misstatements
Errors in Financial Statements The following financial statements are available for Sherwood Real Estate Company:Sherwood Company is using these financial statements to entice investors to buy stock
Appropriateness of Accounting Rules In the early 1990s, the top executive of a large oil refining company (based in New York)was convicted of financial statement fraud. One of the issues in the case
Internal Control Procedures As an auditor, you have discovered the following problems with the accounting system control procedures of Jim’s Supply Store. For each of the following occurrences,
Internal Auditing—Staffing Internal Audits A manufacturing corporation recently reassigned one of its accounting managers to the internal audit department. He had successfully directed the
Internal Auditing Which of the following is not applicable to the internal audit function?a. Deter or catch employee fraud.b. Issue an opinion for investors regarding the reliability of the financial
Internal Auditing—External Auditor’s Reliance on Internal Auditors Pierson, CPA, is planning an audit of the financial statements of Generic Company. In determining the nature, timing, and extent
Ensuring the Integrity of Financial Reporting Three college seniors with majors in accounting are discussing alternative career plans. All three want to enter careers that will help to ensure the
External Auditors—Purpose of an Audit What is the purpose of external auditors providing an opinion on a company’s financial statements?
Auditing Financial Statements The Utah Lakers professional basketball team has recently decided to sell stock and become a public company. In determining what it must do to file a registration
Auditing Negligence A few years ago, the officers of Phar-Mor, a discount retail chain, were convicted of issuing fraudulent financial statements. It was learned at the trial that the company
Securities and Exchange Commission—Authority to Set Accounting Standards Which organization—the Securities and Exchange Commission, the American Institute of Certified Public Accountants, or the
Securities and Exchange Commission—Role of the SEC Describe the role of the Securities and Exchange Commission and its influence on the practice of auditing.
Securities and Exchange Commission—Information Needed for Investing As an investor you are considering buying stock in a relatively new company.Medical Horizons, Inc., has been in existence for 10
Securities and Exchange Commission Many people have argued that the purpose of the SEC is to protect investors.Some believe that the best way to do this is by preventing weak companies from issuing
Auditing a Company Jerry Stillwell, the owner of a small company, asked Jones, a CPA, to conduct an audit of the company’s financial statements. Stillwell told Jones that the audit needed to be
Auditing Practice A few years ago, the owners of an electronics wholesale company committed massive fraud by overstating revenues on the financial statements. They recorded three large fictitious
Income Smoothing and an IPO You are an analyst for an investment fund that invests in initial public offerings (IPOs). You are looking at the financial statements of two companies, Clark Company and
If It Isn’t Fraud, Then It’s Ethical Cruella DeVil is the chief financial officer (CFO) of a local publicly-traded company. Cruella was recently invited to speak to accounting students at the
GAAP Is a Point, Not an Oval!You are the chief financial officer (CFO) of Lorien Company, which is publicly traded. At the annual shareholders’ meeting, you have been asked to discuss the
You Decide: Which is more important—having a good system of internal controls or hiring honest employees?Is an internal control structure really necessary? Your uncle doesn’t seem to think so. He
You Decide: Can auditors rely on client personnel to assist them with their audit?Should external auditors do all audit procedures themselves, or should the relationship between the auditor and the
Circle K At one time, Circle K was the second-largest convenience store chain in the United States(behind 7-Eleven). At its peak, Circle K, based in Phoenix, Arizona, operated 4,685 stores in 32
Do the Financial Statements Give a True and Fair View?Swire Pacific, Ltd., based in Hong Kong, is one of the largest companies in the world. The primary operations of the company are in the region of
Blowing the Whistle on Former Partners On St. Patrick’s Day in 1992, Chambers Development Company, one of the largest landfill and waste management firms in the United States, announced that it had
External Auditors Visit or call a local CPA firm (or the local office of a multi-office CPA firm). Ask about career opportunities, the size of the firm’s staff, who some of its major clients are,
Analyzing the Impact of Errors This spreadsheet assignment is a continuation of the spreadsheet assignment given in Chapter 2. If you completed that spreadsheet, you have a head start on this one.1.
As a recently hired accountant for a small business, Bearing, Inc., you are provided with last year’s balance sheet, income statement, and post-closing trial balance to familiarize yourself with
Impact of a Transaction The company borrowed $85,000 in cash from Eastern Bank.a. List the accounts impacted by the transaction.b. For each account, indicate whether the transaction increased or
Impact of a Transaction The company used $45,000 in cash to purchase land on the west side of Hatu Lake.a. List the accounts impacted by the transaction.b. For each account, indicate whether the
Impact of a Transaction The company used $30,000 in cash to repay a portion of its bank loan (see PE 3-1). For simplicity, assume that there is no interest on the loan.a. List the accounts impacted
Impact of a Transaction The company received $75,000 in cash as an additional investment by the stockholders(owners) of the company.a. List the accounts impacted by the transaction.b. For each
Impact of a Transaction The company purchased a building for $130,000. The company paid $50,000 of the purchase price in cash and signed a mortgage contract obligating it to pay the remaining$80,000
Computing Ending Account Balances Refer to PE 3-1 through 3-5. Construct a spreadsheet similar to the one shown on page 91.Enter each transaction into the spreadsheet and compute the ending balance
Understanding Debits Below is a list of accounts. For each account, indicate whether a debit increases or decreases the account balance. Account 0. Cash 1. Accounts Payable 2. Capital Stock Debit

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