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fundamentals financial accounting

Questions and Answers of Fundamentals Financial Accounting

Statement of Financial Position Presentation}The following information relates to the assets of Westfield Semiconductors as of December 31, 2018. Westfield uses the straight-line method for
Amortization of Intangibles}On January 1, 2018, Birnbaum Investments Ltd. acquired a franchise to operate a Burger Doodle restaurant. Birnbaum paid \(\$ 275,000\) for a 10 -year franchise and
Depletion Rate}Oxford Quarries purchased 45 hectares of land for \(\$ 185,000\). The land contained stone that Oxford will remove from the ground, finish, and then sell as facing material for
Depletion of Timber}Oldman Development has purchased a 5,000-hectare tract of forested land in northern British Columbia. The tract contains about 1,440,000 pine trees that, when mature, can be used
Financial Statement Presentation of Capital Assets Olympic Acquisitions Corp. prepared the following post-closing trial balance at December 31, 2018:\section*{Required:}Prepare a classified statement
Cost of a Tangible Capital Asset}Mist City Car Wash purchased a new brushless car-washing machine for one of its bays. The machine cost \(\$ 32,300\). Mist City borrowed the purchase price from its
Depreciation Methods}Hansen Supermarkets purchased a radio frequency identification (RFID) system for one of its stores at a cost of \(\$ 130,000\). Hansen determined that the system had an estimated
Depreciation Schedules}Wendt Corporation acquired a new depreciable asset for \(\$ 94,000\). The asset has a four-year estimated life and a residual value of zero.\section*{Required:}1. Prepare a
Expenditures after Acquisition}Pasta, a restaurant specializing in fresh pasta, installed a pasta cooker in early 2016 at a cost of \(\$ 12,400\). The cooker had an estimated life of five years and
Repair Decision}Kingston Transit operates a summer ferry service to islands in the St. Lawrence River. Farmers use the ferry to move farming equipment to and from the islands. Kingston's ferry is in
Disposition of Tangible Capital Assets}In order to provide capital for new hotel construction in other locations, Wilton Hotel Corporation has decided to sell its hotel in Digby, Nova Scotia. Wilton
Natural Resource and Intangible Accounting}McLeansboro Oil Company acquired a small oil company with only three assets during a recent year. The assets were acquired for \(\$ 1,350,000\)
Accounting for Intangible Assets}On January 1, 2011, Technocraft Inc. acquired a patent that was used for manufacturing semiconductor-based electronic circuitry. The patent was originally recorded in
Financial Statement Presentation of Capital Assets}Athena Inc. prepared the following post-closing trial balance at December 31, 2018:\section*{Required:}Prepare a classified statement of financial
Cost of a Tangible Capital Asset}Essex Country Club purchased a new tractor to be used for golf course maintenance. The tractor cost \(\$ 53,800\). Essex borrowed the purchase price from its bank on
Depreciation Methods}Graphic Design Inc. purchased a state-of-the-art laser engraving machine for \(\$ 94,500\). Graphic determined that the system had an estimated life of 10 years (or 2,000,000
Depreciation Schedules}Quito Corporation acquired a new depreciable asset for \(\$ 135,000\). The asset has a five-year estimated life and a residual value of zero.\section*{Required:}1. Prepare a
Expenditures after Acquisition}Murray's Fish Market, a store that specializes in providing fresh fish to the Halifax, Nova Scotia, area, installed a new refrigeration unit in early 2015 at a cost of
Remodelling Decision}Ferinni Company operates a travel agency out of a historic building in Smalltown. Ferinni's CEO believes that the building needs to be remodelled in order to reach a wider
Disposition of Tangible Capital Assets}Salva Pest Control disposed of four assets recently. Salva's accounting records provided the following information about the assets at the time of their
Natural Resource and Intangible Accounting}In 2010, Mudcat Gas Company purchased a small natural gas company with two assets-land and natural gas reserves-for \(\$ 158,000,000\). The fair value of
Accounting for Intangible Assets}OBJECTIVE Blackford and Medford Publishing Company own the copyrights on many top authors. In 2018, Blackford and Medford acquired the copyright on the literary works
Ethics, Internal Controls, and the Capitalization Decision}James Sage, an assistant controller in a large company, has a friend and former classmate, Henry Basil, who sells computers. Sage agrees to
Management's Depreciation Decision}Great Lakes Enterprises, a large holding company, acquired North Spruce Manufacturing, a medium-sized manufacturing business, from its founder, who wishes to
The Effect of Estimates of Life and Residual Value on Depreciation Expense}Summerside Manufacturing purchased a new computer-integrated system to manufacture a group of fabricated metal and plastic
Continuing Problem: Front Row Entertainment}After a successful first year, Cam and Anna decide to expand Front Row Entertainment's operations by becoming a venue operator as well as a tour promoter.
Professional and Ethical Behaviour-Controls Relating to Property, Plant, and Equipment}Recall your knowledge of internal controls from Chapter 4. Identify and explain controls that should be in place
Professional and Ethical Behaviour-Ethics Relating to the Recording of Property, Plant, and Equipment and Weaknesses in Internal Controls You have just accepted a job working in the accounts payable
Professional and Ethical Behaviour}Jim was excited to receive his bonus for the current year. He knew that the company didn't have the best year and the company was watching how much money was spent
Explain, measure, and report current liabilities.- Most liabilities are recognized in exchange for goods and services or the borrowing of money.- In theory, the amount reported on the statement of
Identify and record the types of activities that produce current liabilities.- Current liabilities are obligations to outsiders that require the firm to pay cash or another current asset or provide
Explain, measure, and report contingent liabilities.- A contingent liability is an obligation whose amount or timing depends on future events.- A contingent liability is not recognized in the
Explain the nature, measurement, and reporting of provisions such as warranty liabilities.- Provisions are future liabilities that are uncertain in timing or amount such as warranty liabilities.-
Calculate and analyze the current, quick, cash, and operating cash flow and trade payable ratios.- Both investors and creditors are interested in a company's liquidity-that is, its ability to meet
(Appendix 8A) Explain the measurement and reporting for deferred income taxes.
What are liabilities? (Appendix)
How is the amount of a liability measured?(Appendix)
When are most liabilities recognized?(Appendix)
What are current liabilities? Provide some common examples.(Appendix)
Describe two ways in which current liabilities are frequently ordered on the statement of financial position(Appendix)
What is the difference between an account payable and a note payable?(Appendix)
What sort of transaction typically creates an account payable?(Appendix)
What do we mean by accrued liabilities? Provide some common examples.(Appendix)
What type of transaction typically creates a note payable?(Appendix)
Why is interest ignored when valuing accounts payable?(Appendix)
How is interest computed on an interest-bearing short-term note?(Appendix)
When would debt that must be repaid within the next year be classified as long-term instead of current?(Appendix)
Provide examples of payroll taxes that are paid by the employee through reduction of their gross pay. Provide some examples of payroll taxes that are paid by the employer.(Appendix)
Why do unearned revenues and customers' deposits qualify as liabilities?(Appendix)
What are contingent liabilities? Provide an example.(Appendix)
When is a contingency recognized as a liability?(Appendix)
What is a provision? Why is the liability for warranties recognized when products are sold rather than when the warranty services are performed?(Appendix)
Describe the circumstances under which the current, quick, and cash ratios, respectively, are more appropriate measures of short-term liquidity than the other ratios.(Appendix)
Describe the differences between the current, quick, cash, and trade payables ratios. Which ratio is the most conservative measure of short-term liquidity? Why?(Appendix)
How does the rationale for the operating cash flow ratio differ from the rationale for the current, quick, cash, and trade payables ratios?(Appendix)
Liabilities are recognized:a. in exchange for goodsb. in exchange for servicesc. in exchange for borrowing moneyd. all of these
When reporting liabilities on a statement of financial position, in theory, what measurement should be used?a. Future value of the future outflowb. Future value of the present outflowc. Present value
Kinsella Seed borrowed \(\$ 200,000\) on October 1, 2018, at \(10 \%\) interest. The interest and principal are due on October 1, 2019. What journal entry should be recorded on December 31, 2018?a.
Refer to the information in Exercise 8-3. What journal entry should be made with respect to the interest payment on October 1,2019 ?a. Debit Cash 20,000; credit Interest Expense 15,000; credit
Which of the following is not a current liability?a. Sales tax payableb. Bonds payable due in five yearsc. Accounts payabled. Unearned revenue
Which of the following is not an example of an accrued liability?a. Wages payableb. Interest payablec. Accounts payabled. Property taxes payable
Labrador Inc. sold 350 oil drums to Tesla Manufacturing for \(\$ 75\) each. In addition to the \(\$ 75\) sale price per drum, there is a \(\$ 1\) per drum federal tax and a \(7 \%\) provincial sales
All of the following represent taxes commonly collected by businesses except:a. Employment Insurance taxesb. Federal sales taxesc. Provincial sales taxesd. Harmonized sales taxes
Payroll taxes typically include all of the following except:a. Health care plan deductionsb. Employment Insurance contributionsc. Canada Pension Plan contributionsd. Federal excise taxes
When a credit is made to the income taxes payable account related to taxes withheld from an employee, the corresponding debit is made to:a. Cashb. Taxes Expensec. Taxes Payabled. Wages Expense
When should a contingent liability be recognized?a. When the contingent liability is probableb. When a reasonable estimation can be madec. Neither A nor Bd. A and B
Which of the following is true?a. A contingent liability should always be disclosed in the financial statements.b. A contingent liability should always be recorded within the financial statements.c.
Arcand Advisers is being sued by a former customer. Arcand's lawyers say that it is possible, but not probable, that the company will lose the lawsuit and that the trial should last approximately 18
Warranty expense is:a. recorded as it is incurredb. capitalized as a warranty assetc. recorded in the period of saled. none of these
To record warranties, the adjusting journal entry would be:a. a debit to Warranty Liability and a credit to Cashb. a debit to Warranty Expense and a credit to Warranty Liabilityc. a debit to Warranty
How is the current ratio calculated?a. Cash flows from operating activities/ Current liabilitiesb. Current assets/Current liabilitiesc. (Cash + Marketable securities)/Current liabilitiesd. (Cash +
How is the cash ratio calculated?a. (Cash + Marketable securities)/ Current liabilitiesb. Current assets/Current liabilitiesc. Cash flows from operating activities/ Current liabilitiesd. (Cash +
Which of the following transactions would cause the current ratio to increase (assuming the current ratio is currently greater than 1 )?a. Receiving money from a customer related to an account
Issuing Notes Payable}On June 30, Carmean Corp. borrows \(\$ 250,000\) from CIBC with an 8 -month, \(7 \%\) note.\section*{Required:}What journal entry is made on June 30 ?\section*{Cornerstone
Notes Payable}Raja Machinery Company borrowed \(\$ 400,000\) on June 1, with a three-month, \(7 \%\), interestbearing note.Required:1. Record the borrowing transaction.2. Record the repayment
Accrued Interest}On August 1, Wilshire Company borrowed \(\$ 150,000\) from National Bank on a one-year, \(8 \%\) note.\section*{Required:}What adjusting entry should Wilshire make at December
Accrued Interest}On March 1, Gamal Corporation borrowed \(\$ 75,000\) from TD Bank on a one-year, \(5 \%\) note.\section*{Required:}If the company keeps its records on a calendar year, what adjusting
Accrued Wages}Skiles Company's weekly payroll amounts to \(\$ 10,000\) and payday is every Friday. Employees work five days per week, Monday through Friday. The appropriate journal entry was recorded
Sales Tax}Trudeau's Antique Hot Rods recently sold a 1957 Chevy for \(\$ 75,000\) on account. The provincial sales tax is \(6 \%\), and there is a \(\$ 500\)-per-car federal
Sales Tax CORNERSTONE 8.2 Cobb Baseball Bats sold 60 bats for \(\$ 70\) each, plus an additional harmonized sales tax of \(13 \%\). The customer paid cash.\section*{Required:}Prepare the journal
Payroll Taxes Hernandez Builders has a gross payroll for January amounting to \(\$ 500,000\). The following amounts have been withheld:\section*{Required:}1. What is the amount of net pay recorded by
Payroll Taxes}Kinsella Inc. has a gross payroll of \(\$ 10,000\) for the pay period. Kinsella must also withhold \(\$ 1,200\) in income taxes from the employees, Employment Insurance premiums of \(\$
Payroll Taxes}During October, Seger Insurance employees earned \(\$ 100,000\) in wages. The employer's share of Canada Pension Plan contributions was \(\$ 3,000\) and employer Employment Insurance
Property Taxes}Lassoo Engineering Inc. has a December 31 year-end. The company incurred property taxes of \(\$ 10,000\) for 2018 . At year-end the company paid \(\$ 7,500\) to the municipal
Property Taxes Kellman Jerkirer Inc. has a December 31 year-end. The local municipality billed the entire 2018 property taxes of \(\$ 20,000\) on April 1, 2018. Kellman paid \(\$ 4,000\) of the 2018
Unearned Sales Revenue}Brodsky Landscaping offers a promotion where they will mow your lawn 20 times if you pay \(\$ 700\) in advance.Required:Prepare the journal entry of Brodsky to record (1) your
Unearned Rent Revenue}EWO Property Management leases commercial properties. A new client signs a five-year lease and agrees to pay the first six months in advance. The monthly rent is \(\$
Warranties}In 2018, BMJ Plumbing Company sold 300 water heaters for \(\$ 850\) each. The water heaters carry a two-year warranty for repairs. BMJ Plumbing estimates that repair costs will average \(1
Warranties}In 2018, Wang Balloons sold 50 hot air balloons at \(\$ 25,000\) each. The balloons carry a five-year warranty for defects. Wang estimates that repair costs will average \(3 \%\) of the
Liquidity Ratios}GWA's financial statements contain the following information:Assume the accounts payable balance is all trade payables and opening and closing balances are the same. Note: Round
Liquidity Ratios \\ CORNERSTONE 8.7 DER's financial statements contain the following information:}Assume the accounts payable balance is all trade payables and opening and closing balances are the
Accounts Payable On May 18, Stanton Electronics purchased, on credit, 1,000 TV sets for \(\$ 400\) each. Stanton plans to resell these TVs in its store. Stanton paid the supplier on June
Accounts and Notes Payable}On February 15, Barbour Industries buys \(\$ 800,000\) of inventory on credit. On March 31, Barbour approaches its supplier because it cannot pay the \(\$ 800,000\). The
Issuing Notes Payable}On September 30, Bello International borrows \(\$ 320,000\) from Chase Bank with a 9 -month, \(8 \%\) note\section*{Required:}What journal entry is made at Bello's year-end,
Notes Payable}Renchen Company, which manufactures steel tubing and casing for automobile production, borrowed \(\$ 500,000\) on January 1 to finance the purchase of a new piece of machinery with new
Accrued Interest}\section*{OBJECTIVE 2}On July 1, Brimley Company issued a note with First National Bank with terms of two years and \(10 \%\) interest to finance its inventory purchase of 1,000
Accrued Interest OBJECTIVE 2 On May 1, the Garnett Corporation wanted to purchase a \(\$ 200,000\) piece of equipment, but Garnett was only able to furnish \(\$ 75,000\) of its own cash to purchase
Accrued Property Taxes Annual property taxes covering the preceding 12 months are always paid on July 1. Lou Inc. is always assessed \(\$ 11,000\) property taxes.\section*{Required:}Given this
Accrued Income Taxes}Nolan Inc. had taxable income of \(\$ 400,000\) in 2017 . Its effective tax rate is \(35 \%\). Nolan pays its 2017 income taxes on April 30, 2018.\section*{Required:}1. Given
Accrued Wages}Natalie's Bakery pays its 20 hourly employees every Friday. Each of Natalie's employees earns a wage of \(\$ 10\) per hour and works 35 hours per week, spread evenly from Monday through

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