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introductory financial accounting for business

Questions and Answers of Introductory Financial Accounting for Business

69 Comparison of Inventory Methods (Alternates are 56 and 67.) Texas Instruments is a major producer of semiconductors and other electrical and electronic products. Semiconductors are especially
68 Effects of Late Purchases (Alternates are 57 and 70.) Refer to the preceding problem. Suppose the Dell division acquired 50 extra computers at $700 each on February 2, 2012, at a total additional
67 Comparison of Inventory Methods (Alternates are 56 and 69.) Dell Computer Company produces computers. The following data and descriptions are from the company’s annual report ($ in millions):
66 Inventory Errors, 3 Years (Alternate is 59.) In early 20X4 at the Westfall Company, a team of internal auditors discovered that the ending inventory for 20X1 had been overstated by $10 million.
65 Changing Quantities and LIFO Reserve Study the appendix “Characteristics and Consequences of LIFO.” Consider the following data for the year 20X8: Units Unit Cost Beginning inventory 2 *
64 Effects of LIFO on Purchase Decisions The M. J. Chan Corporation is nearing the end of its first year in business. The following purchases of its single product have been made: Units Unit Price
63 Effects of LIFO and FIFO The Brachman Company is starting in business on December 31, 20X0. In each half year, from 20X1 through 20X3, it expects to purchase 1,000 units and sell 500 units for the
62 FIFO and LIFO Two companies, the Lastin Company and the Firstin Company, are in the scrap metal warehousing business as arch competitors. They are about the same size, and in 20X1 coincidentally
61 LIFO, FIFO, and Cash Effects In 20X8, Mehrabi Company had sales revenue of £444,000 for a line of woolen scarves. The company uses a periodic inventory system. Pertinent data for 20X8 included
60 LIFO, FIFO, and Prices Rising and Falling The Stern Company uses a periodic inventory system. Inventory on December 31, 20X1, consisted of 10,000 units @ $10 = $100,000. Purchases during 20X2 were
58 LIFO, FIFO, and Lower-of-Cost-or-Market Altobelli Company began business in Chicago on March 15, 20X0. The following are Altobelli’s purchases of inventory: March 17 100 units @ $10 = $1,000
57 Effects of Late Purchases (Alternates are 68 and 70.) Refer to the preceding problem. Suppose 100 extra units had been acquired on December 30, 20X8, for $80 each, a total of $8,000. How would net
56 Comparison of Inventory Methods (Alternates are 67 and 69.) Contractor Supply Company is a wholesaler for commercial builders. The company uses a periodic inventory system. The data concerning
55 Detailed Income Statement (Alternate is 52.) Sears Holdings Corporation is a major retailer. The company’s annual report contained the following actual data, which has been somewhat summarized,
54 Gross Profit and Turnover Retailers closely watch a number of financial ratios, including the gross profit (gross margin) percentage and inventory turnover. Suppose the results for the furniture
53 Perpetual Inventory Calculations Platt Electric is a wholesaler for commercial builders. The company uses a perpetual inventory system and a FIFO cost-flow assumption. The data concerning a
52 Detailed Income Statement (Alternate is 55.) Following are accounts taken from the adjusted trial balance of the Morlan Bathroom Supply Company, December 31, 20X5. The company uses the periodic
51 Profitability and Turnover Parr Building Supply began 20X9 with inventory of $240,000. Parr’s 20X9 sales were $1,200,000, purchases of inventory totaled $1,035,000, and ending inventory was
50 Gross Profit Percentage Toys “R” Us operates more than 1,500 stores in the United States and abroad. Like most retailers, the managers of Toys “R” Us monitor the company’s gross margin
49 Reconstructing Transactions and Explaining Margins Consider the following account balances of Costco Wholesale Corporation, the Seattle-based warehouse store operator ($ in millions): August 28
48 Lower-of-Cost-or-Market (Alternate is 74.) Crowell Company uses the inventory method “cost or market, whichever is lower.” There were no sales or purchases during the periods indicated,
47 LIFO and FIFO The inventory of the Roseburg Sand and Gravel Company on June 30 shows 1,000 tons at $9 per ton. A physical inventory on July 31 shows a total of 1,200 tons on hand. Revenue from
46 Decision About Pricing Burlingame Gems, Inc., a retail jewelry store, had gross profits of $1,320,000 on sales of $2,500,000 in 20X3. Average inventory was $1,000,000. 1. Compute inventory
45 Inventory Errors At the end of his first business year, Clifford Hudsick counted and priced the inventory. A few very high-value items were hidden in a dark corner of the storage shelves and
44 Inventory Shortage An accounting clerk of the Blakely Company absconded with cash and a truck full of electronic merchandise on May 14, 20X4. The following data have been compiled for 20X4:
43 Cost of Inventory Destroyed by Fire Nguyen Company’s insurance agent requires an estimate of the cost of merchandise lost by fire on March 9. Merchandise inventory on January 1 was $70,000.
42 Reconstruction of Records An earthquake caused heavy damage to the Sellwood Antique Store on May 3, 20X8. All merchandise was destroyed. Some accounting data are missing. In conjunction with an
41 Reconstruction of Transaction Apple Computer, Inc., produces the well-known iMacs, iPhones, and iPads. Consider the following account balances ($ in millions): September 24, 2011 September 25,
40 Journal Entries, Periodic Inventory System Consider the following data taken from the adjusted trial balance of the Newport Boat Company, December 31, 20X3 ($ in millions): Purchases (on account)
39 Journal Entries, Periodic Inventory System Refer to the data in the preceding problem. Inventories were $71,000 on December 31, 20X0, and $120,000 on December 31, 20X1. Sales were $1,200,000.
38 Entries for Purchase Transactions Swahili Imports uses a periodic inventory system. Prepare journal entries for the following summarized transactions for 20X1 (omit explanations). For simplicity,
system.
37 Entries for Periodic and Perpetual Systems Rajiv, Co., had inventory and accounts payable of $110,000 on December 31, 20X7. Data for 20X8 follow: Gross purchases on account $980,000 Cost of goods
36 Cost of Inventory Acquired On July 5, Horwath Company purchased on account a shipment of sheet steel from Northwest Steel, Co. The invoice price was $195,000, F.O.B. shipping point. Shipping cost
35 Entries for Purchase Transactions The Schubert Company is a Swiss wholesaler of office supplies. Its unit of currency is the Swiss franc (CHF). Schubert uses a periodic inventory system. Prepare
34 Valuing Inventory and Cost of Goods Sold Crowe Metals, Ltd., had the following inventory transactions during the month of March (in British pounds, £):3/1 beginning inventory 3,000 units @ £2.00
33 Journal Entries Coppola Company had sales of $19 million during the year. The goods cost Coppola $17 million. Give the journal entry or entries at the time of sale under the perpetual and periodic
32 Gross Margin Computations and Inventory Costs On January 15, 20X4, Violet Muir valued her inventory at cost, $41,000. Her statements are based on the calendar year, so you find it necessary to
31 Gross Profit Section Given the following, prepare a detailed gross profit section for Kuperstein’s Jewelry Wholesalers for the year ended December 31, 20X8 ($ in thousands), computing the amount
30 Deciding on a Discount Policy You are debating with your boss about whether to give customers a 2% discount for quantity purchases. You favor the idea, but your boss says, “Why give money away?
29 Effect of Overstating Inventories Phar Mor was a large, rapidly growing pharmacy chain that proved to have overstated assets by more than $400 million. Top executives accomplished the
28 Purchasing Operations and LIFO Versus FIFO Suppose a company bases its evaluation of the purchasing officer for a refinery on the gross margin on the oil products produced and sold during the
27 Periodic Versus Perpetual Inventory Systems The Zen Bootist manufactures sheepskin slippers, mittens, gloves, jackets, and leather sandals to sell at craft fairs and similar events. The majority
26 Study the appendix “Inventory in a Manufacturing Environment.” What are the three types of inventory in a manufacturing company? Which of the three is usually the largest?
25 Study the appendix “Characteristics and Consequences of LIFO.” What generally happens to income when a company liquidates old LIFO inventory layers?
24 Study the appendix “Characteristics and Consequences of LIFO.” What is an inventory holding gain (or inventory profit)?
23 Study the appendix “Characteristics and Consequences of LIFO.” LIFO can produce absurd inventory valuations. Why?
22 Study the appendix “Characteristics and Consequences of LIFO.” “An inventory profit is a fictitious profit.” Do you agree? Explain.
21 The branch manager of a national retail grocery chain has stated, “My managers are judged more heavily on the basis of their merchandise-shrinkage control than on their overall sales volume.”
20 “Gross profit percentages help in the preparation of interim financial statements.” Explain.
19 “Inventory errors are counterbalancing.” Explain.
18 “The lower-of-cost-or-market method is inherently inconsistent.” Do you agree? Explain.
17 What does market mean in the application of the lower-of-cost-or-market method of inventory accounting?
16 “There is a single dominant reason why more and more U.S. companies have adopted LIFO.” What is the reason?
15 Will LIFO or FIFO produce higher cost of goods sold during a period of falling prices? Explain.
14 Assume that the physical level of inventory is the same at the beginning and end of the year and that the cost of inventory items is rising. Which will produce a higher ending inventory value,
13 “Gamma Company has six units of inventory, two purchased for $4 each and four purchased for $5 each. Thus, the weighted-average cost of the inventory is ($4 + $5) , 2 = $4.50 per unit.” Do you
12 “Purchases of inventory at the end of a fiscal period can have a direct effect on income under LIFO.” Do you agree? Explain.
11 Why is LIFO a good news/bad news inventory method?
10 If a company uses a FIFO cost flow assumption, will it report the same cost of goods sold using the periodic inventory method that it reports using the perpetual method? Why or why not?
9 For which of the following items would a company be likely to use the specific identification inventory method?a. Corporate jet aircraftb. Large sailboatsc. Pencilsd. Diamond ringse. Timex
8 Name the four inventory cost flow assumptions or valuation methods that are commonly used in the United States. Give a brief phrase describing each.
7 “Freight out should be classified as a direct offset to sales, not as an expense.” Do you agree? Explain.
5 “An advantage of the perpetual inventory system is that a physical count of inventory is unnecessary. The periodic method requires a physical count to compute cost of goods sold.” Do you agree?
4 Distinguish between the perpetual and periodic inventory systems.
3 “There are two steps in conducting a physical count of inventories.” What are they?
2 When a company records a sales transaction, it also records another related transaction. Explain the related transaction.
1 Express the cost of goods sold section of the income statement as an equation.
92 Analyzing Financial Statements Using the Internet: Oracle Go to www.sec.gov to search for Oracle Corporation in the EDGAR database or go to the Oracle Web site. Find Oracle Corporation’s latest
91 Analyzing Starbucks’ Financial Statements Find Starbucks’ 2011 financial statements either through the SEC EDGAR database or on Starbucks’ Web site. 1. Starbucks combines cash and cash
90 Financial Statement Research Select an industry and choose two companies within that industry. Calculate the accounts receivable turnover and days to collect accounts receivable for the two
89 Revenue Recognition Form groups of three to six students. Each student should pick one of the six industries listed below. The Standard Industrial Classification (SIC) number is provided for each
88 Ethics and Bank Reconciliations Study the appendix. The Farmington Chamber of Commerce recently hired you as an accounting assistant. On assuming your position on September 15, one of your first
87 Bank Reconciliation Study the appendix. The City of Rockport has a checking account with First Bank. The city’s cash balance on February 28, 20X1, was $30,000. The deposit balance on the
86 Cooking the Books In The Accounting Wars, author Mark Stevens presents a chapter on “Book Cooking, Number Juggling, and Other Tricks of the Trade.” He quotes Glen Perry, a former chief
85 Internal Control Weaknesses Identify the internal control weaknesses in each of the following situations. 1. Richard Tuiamu, a football star at the local university, was hired by football
84 Employee Dishonesty Consider the following true newspaper reports of dishonesty: 1. At a small manufacturer, supervisors had access to time cards and handed out W-2 forms each year. The
83 Casino Skimming An article in the Wall Street Journal reported that about $7 million in quarters disappeared from the slot machines of four casinos of Argent Corporation in an 18-month period. The
82 Film Processing Write no more than one page about the possible areas where internal controls should be instituted in the following business described briefly. Keep in mind the size of the
81 Embezzlement of Cash Receipts Rapid Repair Company is a small auto body shop. It has only a few employees. The owner of Rapid Repair, who is also its president and general manager, makes daily
80 Audit Committee Role In a recent court decision, a U.S. corporation was required to delegate certain responsibilities to its audit committee. The audit committee was required to do the
79 Managing Cash Volvo Group, the Swedish auto company, had 2011 sales of SEK310 billion, where SEK stands for Swedish kroner. Among the SEK353 billion in total assets on its balance sheet were cash
78 Classic Case of Sales, Accounts Receivable, and Ethics Writing in Corporate Cashflow, Howard Schillit described how the market value of Comptronix fell from $238 million to $67 million in a few
77 Average Collection Period Consider the following: 20X3 20X2 20X1 Sales $2,000,000 $2,500,000 $2,400,000 December 31 20X3 20X2 20X1 Accounts receivable $ 170,000 $ 190,000 $ 180,000 Of the total
76 Negative Balance in Allowance for Bad Debts Account This problem is an extension of Exercise 54. Only the amount of write-off of bad debts is different. Kansas Furniture Mart had sales of
75 Uncollectible Accounts Oracle is the world’s largest supplier of database software. Its balance sheet included the following presentation:May 31 2011 2010 ($ in millions) Trade receivables, net
74 Uncollectible Accounts Google Inc., is a global technology company that has been an innovative leader in Web search. Its balance sheet on December 31, 2011, included the following data ($ in
73 Discounts and Doubtful Items Eli Lilly, a major pharmaceutical company, includes the following in its December 31, 2011, balance sheet ($ amounts in millions): Accounts receivable, net of
72 Student Loans The 2011 annual report of the University of Washington includes information about its receivables from student loans in a footnote to the financial statements ($ in thousands): 2011
71 Percentage of Sales and Percentage of Ending Accounts Receivable Cottonwood Equipment Company had credit sales of $7 million during 20X0. Most customers paid promptly (within 30 days), but a few
70 Estimates of Uncollectible Accounts Ramsey Company has made an analysis of its sales and accounts receivable for the past 5 years. Assume that all accounts written off in a year related to sales
69 Percentage of Ending Accounts Receivable Consider the following data: Accounts Receivable at End of Year Accounts Receivable Deemed Uncollectible and Written Off During Subsequent Years 20X1
68 Aging of Accounts Consider the following analysis of Accounts Receivable, February 28, 20X0: Name of Customer Total Remarks Akita Nurseries $ 25,000 20% over 90 days, 80% 61–90 days Michael’s
67 Allowance for Credit Losses Tompkins Financial Corporation, a multibank holding company headquartered in Ithaca, New York, reported the following changes in the company’s Allowance for Loan and
66 Gross and Net Methods for Cash Discounts Belkin Company offers a cash discount of 2% if payment is received within 15 days, with full payment due in 30 days. Belkin sold some merchandise to
65 Sales Returns and Allowances Crown Crafts, Inc., produces children’s products such as infant and toddler bedding, bibs, soft goods, and accessories. Major customers include Wal-Mart and Target.
64 Bank Cards VISA and MasterCard are used to pay for a large percentage of retail purchases. The financial arrangements are similar for both bank cards. A news story provided the following example.
63 Revenue Recognition on Long-term Contracts On January 2, 20X0, Kowalski Construction Company signed a contract to provide paved roads to a new housing development. The project will last 2 years,
62 Simple Bank Reconciliation Study the appendix. East End Hospital has a bank account. Consider the following information:a. Balances as of July 31: per books, $50,000; per bank statement,
61 Assignment of Duties Fleetfoot Wholesalers is a distributor of several popular lines of sports and leisure shoes. It purchases merchandise from several suppliers and sells to hundreds of retail

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