Questions and Answers of Introduction To Accounting

When is a loss on impairment recognized?
Kaltenheuser Corporation purchased a patent with a 17-year legal life and an 8-year useful life. The patent cost $40,000. What is the amortization expense each year if Kaltenheuser uses the
Teruya Corporation provided the following relevant information for its fiscal year ending September 30, 2019:On October 1, 2018, Teruya’s retained earnings balance was $238,790. On March 1, 2019,
What is a natural resource? What is depletion?
Refer to E16.15. How would the patent appear on Kaltenheuser’s balance sheet after the third year?Data FROM E16.15Kaltenheuser Corporation purchased a patent with a 17-year legal life and an 8-year
What is an intangible asset? What is amortization?
The Riedl Corporation has the following information available on December 31, 2019. The tax rate is 20 percent. Show how this information is presented to external users in a multistep format.
Refer to E16.15. If Kaltenheuser determined in Year 2 that the patent’s useful life was only five years, what would be the amortization expense for Years 2 through 5?Data from in E16.15Kaltenheuser
Refer to E16.15. Assume Kaltenheuser spent $100,000 developing the process that led to the patent. What is the amortization expense each year? Why?Data FROM E16.15Kaltenheuser Corporation purchased a
This income statement was prepared by Bob’s Bookkeeping Service for the Atlas Corporation:Required:A. Make a list of all the errors found on this income statement and briefly describe what is
How are investing activities reported on the statement of cash flows?
Worth Company recently purchased an oil well for $3.5 million. This well is expected to produce 700,000 barrels of oil overits life. What is the depletion rate if Worth uses the units-of production
Refer to E16.19. If Worth Company produced 100,000 barrels of oil in its first year, what would be the accumulated depletion balance?Data from E16.19Worth Company recently purchased an oil well for
What is the one difference between accounting for Trading Securities and Available-for-Sale Securities when the Market Value Approach is used?
Julia Barton is responsible for accounting for Equine Inc.’s short-and long-term investments. This is Equine’s first year in business and she reports to you that she has $102,000 of Trading
Hora Sporting Goods decided to sell its children’s toy division during 2019. The following relevant information is available. Use this information to determine the income (loss) from operations of
Explain the difference between the Market Value Approach and the Fair Value Option when accounting for available-for sale securities.
Use the information in E16.21 and apply the Fair Value Option. Make the necessary entries for the securities and show how they would be reported on the Equine Inc. financial statements.Data from
Select a company of your choice and answer the following questions:A. What was the income from operations during the year?B. What was the income from continuing operations during the year?C. What was
What is the nonoperating event that changes equity that is reported as a separate item on the income statement? Why is this treatment important?
The Sakai Stores Corporation calculated its income before taxes and the loss on the sale of its shoe division but wants you to advise it on how to present this information to external users.
By consulting NEXIS, Disclosure, or a similar annual report database, determine the following:A. How many companies reported discontinued operations during the period?B. Of the companies that
You have just been hired by a midsized manufacturing firm and part of your new job is to determine how income should be measured for internal reporting purposes. Discuss the benefits and drawbacks of
Refer to the income statement of Pepsico, Inc. (www.pepsico.com) or (EDGAR at SEC.gov), and answer the following questions:A. What was the income from operations during the year?B. What was the
When reporting discontinued operations, why should the income (loss) from a segment be disclosed separately from the gain (loss) on disposal of the segment’s assets? Where is this information
Refer to the income statement of Walt Disney Company (www.disney.com) or (EDGAR at SEC.gov) and answer the following questions:A. What was the income from operations during the year?B. What was the
Acme Company sold its distribution warehouse and hired an outside company to distribute its products. Should the loss on the disposal of the warehouse be classified as a discontinued operation? Why?
Refer to the income statement of Dell Computer (www.dell.com) or (EDGAR at SEC.gov) and answer the following questions:A. What was the income from operations during the year?B. What was the income
Shamburg Corporation sold its Oil Distribution Division with a book value of $1,000,000 for $1,500,000 on October 31, 2019. From January 2019 to the date of the sale, the Oil Distribution Division
Guan Company had 1,500,000 shares of $1 par common stock authorized, and 200,000 shares of common stock issued and outstanding on January 1, 2019. On March 31, 2019, Guan repurchased 20,000 shares of
If a company produces more units than it sells in its first year of operations, which method (absorption, variable, or throughput) reports the highest profit? Why?
Explain how direct materials and other operating costs are treated using the throughput costing method.
Refer to E17.11. Calculate the return on investment using the Du Pont method. What is revealed?Data from E17.11Woollen, Inc., evaluates its divisions as investment centers. The sales, income, and
Yang Company began operations in 2019. Its operating information follows:Required:A. Using absorption costing, determine Yang’s gross margin and profit for the year.B. Using variable costing,
Daniel Company has 5,000,000 shares of common authorized, 500,000 shares of common stock issued, and 450,000 shares of common stock outstanding. Determine the earnings per share for 2019 if its net
Pearson Corporation has 1,000,000 shares of common stock authorized, 60,000 shares common stock issued, and 50,000 shares of common stock outstanding. It also has 90,000 of $100 par value, 4 percent
Cox Enterprises had 1,000,000 shares of $1 par common stock authorized with 210,000 shares of common stock issued and 200,000 outstanding on January 1, 2019. On March 31, 2019, Cox issued an
Explain how a company can increase net income by increasing production even though sales remain the same.
Explain how production and nonproduction costs are treated using absorption costing.
Explain how variable and non variable costs are treated using the variable costing method.
When a company computes an employee’s withholdings for income taxes, they use the information provided by the employee on the employee’s W-4, which indicates the employee’s filing status
Refer to PepsiCo, Inc. (www.pepsico.com). Based on your knowledge of this company, determine its environment, organizational structure, and strategy. Environment .......................
Based on your knowledge of the company you chose in C1.1, summarize the company’s business processes. What is that firm’s strategy? What are its operating processes? What are its capital
Refer to Walt Disney Company (www.disney.com). Based on your knowledge of this company, determine its environment, organizational structure, and strategy. Environment .......................
Refer to Ford Motor Company (www.ford.com). Based on your knowledge of this company, determine its environment, organizational structure, and strategy. Environment .......................
Refer to PepsiCo, Inc. (www.pepsico.com).Required:A. Based on your knowledge of this company, prepare a balanced scorecard.B. Calculate the following ratios: (1) Quick, (2) Return on
Refer to Walt Disney Company (www.disney.com).Required:A. Based on your knowledge of this company, prepare a balanced scorecard.B. Calculate the following ratios: (1) Quick, (2) Return on
Refer to Ford Motor Company (www.ford.com).Required:A. Based on your knowledge of this company, prepare a balanced scorecard.B. Calculate the following ratios: (1) Quick, (2) Return on
Discovered that indicated that the benefits of accounting information should outweigh the costs of providing the information in order for information to be useful. Discuss the use of the high/low
Refer to C9.1 and complete the following.A. Determine the overhead applied to each product line.B. Determine the overhead cost per unit assuming the number of units producedequaled the number of
Tyrell Company had inventories at the beginning and end of June 2018 as follows:During June, Tyrell purchased direct materials of $400,000, incurred direct labor costs of $150,000, and applied
Planned the operating activities of our start-up company, PD Retail. Review the budgets developed for this company and prepare a chart of accounts for PD Retail.
If the Direct Materials Inventory account decreased during the period, were purchases greater than or less than the amount of materials issued into production? Why?
If Work-in-Process Inventory increased during the period, was cost of goods manufactured greater than or less than the total product costs transferred into Work-in-Process during the period? Why?
Hamilton, Inc., incurred the following costs during fiscal 2019:During 2019, cost of goods manufactured totaled $920,000 while cost of goods sold was $930,000. Inventory balances at January 1, 2019,
Given the following information, prepare journal entries for Spainhower Manufacturing to record the monthly payroll at March 31, 2018 (ignore payroll withholding). President Factory
If the Finished Goods account decreases during the period, is cost of goods manufactured greater than or less than cost of goods sold? Why?
Carlson Company incurred the following manufacturing overhead costs during the month of June 2018. Prepare the journal entry to record the costs.Erickson Company applies unit-related manufacturing
The following information was provided by Alley Manufacturing for the month of August 2019:Additional information:Required: Calculate the following amounts:A. Direct materials used in production.B.
Using the following information, determine the cost of goods manufactured and the ending direct materials inventory balance for Steele Company during August 2019. Assume that over- or underapplied
Erickson Company applies unit-related manufacturing overhead on the basis of machine hours. The following unit-related overhead data were accumulated by the accounting department:What is the amount
Henry Enterprises reports the following direct labor information for the month of December when production was 18,000 units. What is the standard price for direct labor per hour? Actual direct labor
What is the difference between actual and applied manufacturing overhead? When are they recorded?
There are four levels of production activities. What are they and why are they important?
Explain the concept of cost pool and how to determine cost pools.
How do companies use the predetermined overhead rate to assign overhead to work-in-process?
Explain the process of applying manufacturing overhead to Work-in-Process Inventory.
If the actual wage rate is greater than the standard wage rate, is the direct labor price variance favorable or unfavorable? Why?
If the actual price paid for direct materials is less than the standard price, is the direct materials price variance favorable or unfavorable? Why?
Patton, Inc., has the following information available concerning direct materials:Patton standards allow for 6 liters of direct materials for each unit produced. During the period, Patton produced
Refer to C1.1. Based on your knowledge of this company, describe its revenue, expenditure, and conversion (if applicable) processes.Data from C1.1Select a company you are interested in and obtain a
Refer to the annual report of the company you chose in C1.1. Based on your knowledge of this company, which of the decisions discussed in this chapter might the company you chose face? Is there any
Refer to the company you selected in C1.1. Based on your knowledge of this company, answer the following:A. What budgeting strategy do you think it uses?B. What budgeting approach do you think it
Barrows Company estimates sales of 40,000 next month and expects a 5 percent increase in sales each month for next year. Barrows Company’s beginning finished goods inventory is 2,000 and it desires
Dixon Company experienced the following transactions during the month of November 2018:3 Purchased $90,200 in merchandise from Maris Manufacturing Company; terms 2/10, ny/30, FOB shipping point.11
Piesik Company had the following transactions during May 2018:3 Purchased direct materials from Holtman Company, $8,600; terms 1/10, n/30, FOB destination.10 Purchased direct materials from Lambson
Sondeno Company has gathered the following payroll data for the month of July 2019.Assume the following rates: FICA, 7.65 percent (no employees have reached the maximum withholding for social
Explain the purpose of each of the following accounts:(a) Purchases,(b) Purchase Discounts,(c) Purchase Returns and Allowances.
What is the difference between Direct Materials Inventory and Merchandise Inventory?
Refer to E8.6. Make the journal entries assuming Murray uses the gross price method.Data from E8.6Using perpetual inventory procedures, journalize the following transactions on the books of Murray
What is the difference between the gross price method and the net price method of recording inventory purchases?
Duthie Company had the following transactions during May 2018:Required:A. Prepare the journal entry for each of the preceding events assuming Duthie uses the perpetual inventory system and the gross
What is the difference between a loss and an expense?
Does a company’s Salary and Wage Expense reflect employees’ gross pay or net pay? Why?
Refer to the company you selected in C1.1. Based on your knowledge of this company, answer the following questions.A. Describe its customers, competitors, and legal/social environment.B. Do you
Biando Corporation began operations on May 1, 2018, and completed the following transactions during its first month of operations.A. Sold capital stock for $30,000.B. Purchased land and a building
Refer to the company you chose in C1.1. Examine this company’s financial statements and answer the following questions:Required:1. Examine the balance sheet of this company. Which accounts have
During the banking “crisis” in 2008, many financial institutions blamed their problems on an accounting rule called mark-to-market which essentially requires companies to report certain assets at
What is GAAP?
The following accounting events (A–I) affected the assets, liabilities, and owners’ equity of Buckingham Company during the fiscal year ended December 31, 2019.A. Purchased $26,000 in merchandise
A bookkeeping client of yours made the following journal entry to record the purchase of a piece of equipment to be used in the sales office. The useful life of the equipment is estimated at five
Given this adjusted trial balance for Wagner Services, Inc., prepare the income statement and statement of retained earnings for the month ended August 31, 2018 (its first month of operations).
What is the accounting equation and why is it important?
The following accounting events (A–I) affected the assets, liabilities, and owners’ equity of Pauley Enterprises during the year ended September 30, 2019.A. Capital stock sold for $25,000 cash.B.
What are the three characteristics required for an accounting event?
What does debit mean?
Monger Company has the following information available from fiscal 2019. Use the relevant information to prepare the income statement and statement of cash flows (ignore beginning balance) for the
What does credit mean?
To decrease an asset account, is a debit or credit required?
To decrease a liability account, is a debit or credit required?

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