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fundamentals financial accounting
Questions and Answers of
Fundamentals Financial Accounting
Supply the missing income statement amounts for each of the following companies (amounts in millions, at January 31, 2020):Prepare the income statement for Myers Confectionary Ltd., in millions of
Suppose a company you are considering as an investment made sales of \(\$ 54.8\) billion in the year ended December 31, 2020. Collections from customers totalled \(\$ 55\) billion. The company began
Dijon Mustard Llée. reported the following comparative income statement for the years ended September 30, 2019 and 2020 :Dijon's shareholders are thrilled by the company's boost in sales and net
Suppose a technology company's inventory records for a particular computer chip indicate the following at October 31 :The physical count of inventory at October 31 indicates that 8 units of inventory
Use the data in exercise E5-26 to journalize the following for the periodic system:1. Total October purchases in one summary entry. All purchases were on credit.2. Total October sales in a summary
Assume a Roots outlet store began August 2020 with 40 units of inventory that cost \(\$ 30\) each. The sale price of these units was \(\$ 60\). During August, the store completed the following
Accounting records for Cookies for You Ltd. yield the following data for the year ended December 31, 2020 (amounts in thousands):{Requirements}1. Journalize Cookies for You's inventory transactions
Suppose Holt Renfrew, the specialty retailer, had these records for ladies' evening gowns during 2020.Assume sales of evening gowns totalled 130 units during 2020 and that Holt uses the
Cheri's Beauty Products Ltd. reported the figures below at December 31, 2020, 2019 and 2018. The business has declared bankruptcy. You have been asked to review the business and explain why it
Assume a Watererest sports outlet store began ()ctober 2020 with 47 pairs of water skis that cost the store \(\$ 38\) each. The sale price of these water skis was \(\$ 67\). During October, the store
Assume an outlet of The Runner's Store began August 2020 with 40 pairs of running shoes that cost the store \(\$ 40\) each. The sale price of these shoes was \(\$ 70\). During August, the store
The records of Armstrong Aviation Supply Inc. include the following accounts for inventory of aviation fuel at December 31, 2020:{Requirements}1. Prepare a partial income statement through gross
AMC Trade Mart has recently had lacklustre sales. The rate of inventory turnover has dropped, and the merchandise is gathering dust. At the same time, competition has forced AMC's suppliers to lower
Chocolate Treats Ltd. and Coffee Bars Inc. are both specialty food chains. The two companies reported these figures, in thousands:{Requirements}1. Compute the gross profit percentage and the rate of
Columbia Video Sales Ltd. reported the following data. The shareholders are very happy with Columbia's steady increase in net income.Auditors discovered that the ending inventory for 2018 was
Chic Interiors reported the following transactions in November 2020):{Requirements}1. Record the transactions for the month of November assuming the periodic inventory system is used.2. Prepare a
Assume a Cross Country Sports outlet store began March 2020 with 49 pairs of running shoes that cost the store \(\$ 35\) each. The sale price of these shoes was \(\$ 70\). During March, the store
Italian Leather Goods Inc. began 2020 with an inventory of 50,000 units that cost \(\$ 1,500,000\). During the year, the store purchased merchandise on account as follows:Cash payments on account
Whitewater Sports Ltd. began July 2020 with 50 backpacks that cost \(\$ 19\) each. The sale price of each backpack was \(\$ 36\). During July, Whitewater completed these inventory
Spice Inc. began October 2020 with 100 shirts that cost \(\$ 76\) each. During October, the store made the following purchases at cost:Spice sold 500 shirts ( 320 shirts on October 18 and 180 shirts
The records of Sonic Sound Systems Inc. include the following for cases of CDs at December 31, 2020:{Requirements}1. Prepare a partial income statement through gross profit under the
Westside Copiers Ltd. has recently been plagued with lacklustre sales. The rate of inventory turnover has dropped, and some of the company's merchandise is gathering dust. At the same time,
Trans Canada Motors Ltd. and X Country Trucks Inc. are competitors. The companies reported the following amounts, in millions. In January 2020, you wish to make an investment in one of these
The accounting records of Oriental Rugs show these data (in thousands).As the auditor, you discovered that the ending inventory for 2018 was overstated by \(\$ 100,000\) and that the ending inventory
Wolford Interiors reported the following transactions in June{Requirements}1. Record the transactions for the month of June assuming the periodic inventory system is used.2. Prepare a partial income
Argyle Corp. purchased a tract of land, a small office (4) building, and some equipment for \(\$ 1,500,000\). The appraised value of the land was \(\$ 850,000\); the building, \(\$ 675,000\); and the
Which of the following statements about depreciation is false?a. Recording depreciation creates a fund to replace the asset at the end of its useful life.b. The cost of a building minus accumulated
Assume Major Link purchased the equipment on August 1, 2020. If Major Link uses the straight-line method for depreciation, what is the depreciation expense for the year ended December 31, 2020?a.
Assume Major Link purchased the equipment on January 1, 2020. If Major Link uses the straight-line method for depreciation, what is the asset's carrying amount at the end of 2021?a. \(\$ 13,500\)b.
Assume Major Link purchased the equipment on January 1,2020. If Major Link uses the double-diminishing-balance method of depreciation, what is the depreciation expense for the year ended December 31,
Return to Major Link's original purchase date of August 1, 2020. Assume that Major Link uses the straight-line method of depreciation and sells the equipment for \(\$ 11,500\) on August 1, 2024.
A company bought a new machine for \(\$ 17,000\) on January 1. The machine is expected to last four years and to have a residual value of \(\$ 2,000\). If the company uses the
Which of the following is not a capital expenditure?a. The addition of a building wingb. A complete overhaul of an air-conditioning systemc. A tune-up of a company vehicled. Replacement of an old
Which of the following assets is not subject to a decreasing carrying amount through amortization /depreciation?a. Goodwillb. Patentsc. Land improvementsd. Copyrights
Why would a business select an accelerated method of Q depreciation for reporting purposes?a. Accelerated depreciation results in a constant amount of depreciation.b. Accelerated depreciation
A company sells an asset that originally cost \(\$ 300,000\) for( \(\$ 100,000\) on December 31, 2020. The accumulated depreciation account had a balance of \(\$ 120,000\) after the current year's
Which item among the following is not an intangible asset?a. A trademarkb. A copyrightc. A patentd. All of the above are intangible assets
An important measure of profitability isa. inventory turnover.b. quick (acid test) ratio.c. return on assets (ROA).d. net sales.
In 2020, return on assets for JBC Company has increased. This means that thea. company has become more effective.b. company has become more efficient.c. company has become more effective and more
Examine Riverside's assets as follows:1. What is Riverside's largest category of assets? List all 2020 assets in the largest category and their amounts as reported by Riverside.2. What was
Assume WestJet repaired one of its Boeing 737 aircraft at a cost of \(\$ 0.8\) million, which West Jet paid in cash. Further, assume that the WestJet accountant erroneously capitalized this cost as
Assume that at the beginning of 2020, Porter Airlines purchased a Bombardier Q400 aircraft at a cost of \(\$ 25,000,000\). Porter expects the plane to remain useful for five years \((5,000,000
Assume that on September 30, 2020, Swiss, the national airline of Switzerland, purchased an Airbus aircraft at a cost of \(€ 40,000,000\) ( \(€\) is the symbol for the euro). Swiss expects the
On January 1, 2017, Big Rock Brewery purchased a van for \(\$ 45,000\). Big Rock expects the van to have a useful life of five years and a residual value of \(\$ 5,000\). The depreciation method used
Consider the purchase of a supplier by Canadian Tire.1. Suppose the fair value of the net assets at the date of purchase (February 1,2020 ) had been \$180.3 million. What would the goodwill cost have
Suppose Jaguar Automobiles Ltd. paid \(\$ 500,000\) to research a new global positioning system. Jaguar also paid \(\$ 1,200,000\) to acquire a patent on a new motor. After readying the motor for
You are reviewing the financial statements of Rising Yeast Co. During 2020, Rising Yeast purchased two other companies for \(\$ 17\) million. Also during fiscal 2020, Rising Yeast made capital
In 2020, Artesia, Inc, reported \(\$ 300\) million in sales, \(\$ 17\) million in net income, \(\$ 1\) million in interest expense, and average total assets of \(\$ 120\) million. What is Artesia's
Ochoa Optical, Inc., provides a full line of designer eyewear to optical dispensaries. Ochoa reported the following information for 2019 and 2020:Compute return on assets for 2019 and 2020. Did the
Identify each of the following items as either a capital expenditure (C), expense on the income statement \((\mathrm{E})\), or neither \((\mathrm{N})\) : Type of Expenditure (C, E, or N) Transaction
For each of the following scenarios, indicate whether a long-term asset has been impaired (Y for yes and \(\mathrm{N}\) for no) and, if so, the amount of the loss that should be recorded. Prepare any
During 2020, Roberts Inc. paid \(\$ 200,000\) for land and built a restaurant in Collingwood, Ontario. Prior to construction, the City of Collingwood charged Roberts Inc. \(\$ 2,250\) for a building
Assume you have a flower shop and you bought a delivery van for \(\$ 30,000\). You expect the van to remain in service for three years \((150,000 \mathrm{~km})\). At the end of its useful life, you
In January 2020, suppose a Starbucks franchise in Regina purchased a building, paying \(\$ 50,000\) cash and signing a \(\$ 100,000\) note payable. The franchise paid another \(\$ 50,000\) to remodel
Suppose Loblaws, one of the nation's largest grocery retailers, reported the following information (adapted) for its fiscal year ended January 31, 2020.{Requirements}1. Compute return on assets for
Assume The Salvation Army purchased a building for \($900,000\) and depreciated it on a straight-line basis over 30 years. The estimated residual value was \($100,000.\) After using the building for
Assume that on January 2, 2019, a Pizza Hut franchise purchased fixtures for \(\$ 15.000\) cash. expecting the fixtures to remain in service five years. The restaurant has depreciated the fixtures on
Bison Transport is a large trucking company that operates from (Ontario to British Columbia in Canada and in the United States. Bison uses the units-of-production (UOP) method to depreciate its
Following is an excerpt from the balance sheet of On the Edge Technologies Inc.:A potential investor in Or the Edge has asked you for advice. Identify the information that you would look for in the
Holze Music Company purchased for \(\$ 600,000\) a patent for a new sound system. Although it gives legal protection for 20 years, the patent is expected to provide the company with a competitive
BlackBerry, who sells BlackBerry smartphones, recently reported in the statement of cash flows and notes to the financial statements in its annual report that it had made acquisitions of USD \(\$
Assume Flowers to Go Lid., a chain of flower shops, completed the following transactions. For each transaction, show what the company would report for investing activities on its statement of cash
Lowe's Companies, Inc. reported the following information (adapted) for its fiscal year ended January 31, 2020:Using the facts provided, identify or calculate the information that is relevant to
Good Life Clubs purchased exercise equipment at a cost of \(\$ 100,000\) each. In addition, Good Life paid \(\$ 2,000\) for a special platform on which to stabilize the equipment for use. Freight
Collicutt Energy Services Ltd: of Calgary, Alberta, reported the following for land, buildings, and equipment (in millions):During 2020, Collicutt Energy paid \(\$ 74.2\) million for new property and
Rindy Inc. has a popular line of beaded jewellery. Rindy reported net earnings of \(\$ 21,000\) for 2020. Rindy depreciates furniture, fixtures, equipment and automotive assets on a straightline
Air New Zealand (ANZ) is a Star Aliance member airline. Assume that early in 2020, ANZ purchased equipment at a cost of \(\$ 200,000(\mathrm{NZ})\). Management expects the equipment to remain in
Assume Milne's Moving \& Storage Ltd. (MMS) of Regina, Saskatchewan, incurred the following costs in acquiring land, making land improvements, and constructing and furnishing its own storage
Lifestyle Lighting Lid. reported the following on its balance sheed at December 31. 2019:In early July 2020, Lifestyle Lighting Ltd. expanded operations and purchased additional equipment at a cost
Assume that Inter-Provincial Transport Lid's balance sheet includes the following assets under Property, Plant, and Equipment: Land, Buildings, and Motor-Carrier Equipment. Inter-Provincial has a
The board of directors of Special Services is reviewing its 2020 annual report. A new board member-a nurse with little business experience-questions the accountant about the depreciation amounts. The
On January 3, 2020, B.W. Soffer Inc. paid \(\$ 224,000\) for a computer system. In addition to the basic purchase price, the company paid a setup fee of \(\$ 6,200, \$ 6,700\) sales tax, and \(\$
The excerpts that follow are adapted from financial statements of a Canadian not-for profit organization.{Requirements}1. How much was the entity's cost of property, plant, and equipment at March 31,
Part 1. Sobeys Inc.'s balance sheet reports the asset Cost in Excess of Net Assets of Purchased Businesses. Assume that Sobeys acquired another company, which carried these figures:{Requirements}1.
At the end of 2019, Geothermal Heating Lid. had total assets of \(\$ 17.4\) million and total liabilities of \(\$ 9.2\) million. Included among the assets were property, plant, and equipment with a
Black Corporation operates general merchandise and food discount stores in the United States. The company reported the following information for the three years ending January
Cook Corporation reported the following related to property and equipment (all in millions):From the balance sheets:{Requirements}1. Draw T-accounts for Property and Equipment and Accumulated
McMillan Tire Inc. operates in several provinces. The head office incurred the following costs in acquiring land and a building, making land improvements, and constructing and furnishing a garage
Moreau Lock \& Key Ltd. has a hefty investment in security equipment, as reported in the company's balance sheet at December 31, 2019:In early October 2020, Moreau Lock \& Key purchased
Schmaltz Cable Company's balance sheet reports the following assets under Property, Plant, and Equipment: Land, Buildings, Office Furniture, Communication Equipment, and Televideo Equipment. The
The board of directors of the Canadian Red Cross is having its regular quarterly meeting. Accounting policies are on the agenda, and depreciation is being discussed. A new board member, a social
On January 2, 2018, Yuki Sporting Goods Ltd. purchased branding equipment at a cost of \(\$ 63,000\). Before placing the equipment in service, the company spent \(\$ 2,200\) for delivery, \(\$
CrossCanada Transport Inc. (CC) provides warehouse and distribution services. The excerpts that follow are adapted from CC's financial statements for fiscal year 2020.{Requirements}1. How much was
Part 1. The Coca-Cola Company's (CCC) balance sheet reports the asset Goodwill. Assume that CCC purchased an asset to be included in Goodwill as part of the acquisition of another company, which
At the end of 2019, a telecommunications company had total assets of \(\$ 15.3\) billion and total liabilities of \(\$ 10.7\) billion. Included among the assets were property, plant, and equipment
Kohl's Corporation operates family oriented department stores that sell moderately priced apparel and housewares. The company reported the following information (adapted) for the three years ending
Morgan Corporation reported the following related to property and equipment (all in millions):From the balance sheets:{Requirements}1. Draw T-accounts for Property and Equipment and Accumulated
Sportscar Warehouse operates in a province with a \(6 \%\) sales tax. For convenience, Sportscar Warehouse credits Sales Revenue for the total amount (selling price plus sales tax) collected from
What kind of account is Unearned Revenue?a. Asset accountb. Liability accountc. Revenue accountd. Expense account
An end-of-period adjusting entry that debits Unearned Revenue will most likely credit which of the following?a. A revenueb. An assetc. An expensed. A liability
Adrian Inc. manufactures and sells computer monitors with a three-year warranty. Warranty costs are expected to average \(8 \%\) of sales during the warranty period. The following table shows the
Today's Fashions has a debt that has been properly (1. reported as a long-term liability up to the present year (2020). Some of this debt comes due in 2020. If Today's Fashions continues to report
A bond with a face amount of \(\$ 10,000\) has a current price quote of 102.875 . What is the bond's price?a. \(\$ 1,028,750\)b. \(\$ 10,200.88\)c. \(\$ 10,028.75\)d. \(\$ 10,287.50\)
What type of account is Discount on Bonds Payable, and what is its normal balance? Type of account a. Contra liability b. Reversing account c. Adjusting amount d. Contra liability Normal balance
Sweetwater Company sells \(\$ 100,000\) of \(10 \%, 15\)-year bonds for 97 on April 1, 2020. The market rate of interest on that day is \(10^{1} / 2 \%\). Interest is paid each year on April 1. The
Sweetwater Company uses the straight-line amortization method. The sale price of the bonds was \(\$ 97,000\). The amount of interest expense on April 1 of each year will be which of the following?a.
Write the adjusting entry required at December 31, 2020 . a. Cash....... 97,000 Bonds Payable. 97,000 b. Cash......... 100,000 Bonds Payable. 100,000 c. Cash........... 97,000 Discount on Bonds
Write the journal entry required at April 1, 2021. a. Cash....... 97,000 Bonds Payable. 97,000 b. Cash......... 100,000 Bonds Payable. 100,000 c. Cash........... 97,000 Discount on Bonds
McPherson Corporation issued \(\$ 100,000\) of \(10 \%\), five(\$.) year bonds on January 1,2020 , for \(\$ 92,280\). The market interest rate when the bonds were issued was \(12 \%\). Interest is
Using the facts in the preceding question, McPherson's journal entry to record the interest expense on July 1 , 2020 , will include aa. debit to Bonds Payable.b. credit to Interest Expense.c. debit
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