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principles financial accounting

Questions and Answers of Principles Financial Accounting

There are many situations in business where it is difficult to determine the proper period in which to record revenue. Suppose that after graduation with a degree in finance, you take a job as a
Explain the difference between the “nature-of-expense” and “function-ofexpense”classifications.
For each of the following income statement line items, state whether the item is a “by nature” expense item or a “by function” expense item.________ Cost of goods sold. ________ Utilities
The financial statements of Louis Vuitton are presented in Appendix F. Instructions for accessing and using the company’s complete annual report, including the notes to its financial statements,
Mika Sorbino, an auditor with Martinez CPAs, is performing a review of Sergei Company’s inventory account. Sergei’s did not have a good year and top management is under pressure to boost reported
Included in the company’s count were goods with a cost of $200,000 that the company is holding on consignment. The goods belong to Bosnia Corporation.
The physical count did not include goods purchased by Sergei with a cost of $40,000 that were shipped FOB shipping point on December 28 and did not arrive at Sergei’s warehouse until January 3.
Included in the inventory account was $15,000 of offi ce supplies that were stored in the warehouse and were to be used by the company’s supervisors and managers during the coming year.
The company received an order on December 28 that was boxed and was sitting on the loading dock awaiting pick-up on December
The shipper picked up the goods on January 1 and delivered them on January
The shipping terms were FOB shipping point. The goods had a selling price of $40,000 and a cost of $30,000. The goods were not included in the count because they were sitting on the dock.
On December 29, Sergei shipped goods with a selling price of $80,000 and a cost of$60,000 to Oman Sales Corporation FOB shipping point. The goods arrived on January
Oman Sales had only ordered goods with a selling price of $10,000 and a cost of$8,000. However, a Sergei’s sales manager had authorized the shipment and said that if Oman wanted to ship the goods
Included in the count was $30,000 of goods that were parts for a machine that the company no longer made. Given the high-tech nature of Sergei’s products, it was unlikely that these obsolete parts
Creve Couer Camera Inc. uses the lower-of-cost-or-market basis for its inventory. The following data are available at December 31.Cost Market Units per Unit per Unit Cameras:Minolta 5 $160 $156 Canon
Englehart Company has the following inventory, purchases, and sales data for the month of March.Inventory: March 1 200 units @ $4.00 $ 800 Purchases:March 10 500 units @ $4.50 2,250 March 20 400
Practice Problem 1 showed cost of goods sold computations under a periodic inventory system. Now let’s assume that Englehart Company uses a perpetual inventory system.The company has the same
(a) Bonita Company ships merchandise to Myan Corporation on December
The merchandise reaches the buyer on January
Indicate the terms of sale that will result in the goods being included in (1) Bonita’s December 31 inventory and(2) Myan’s December 31 inventory.(b) Under what circumstances should Bonita
What is the primary basis of accounting for inventories?
Wahlowitz Video Center accumulates the following cost and market data at December 31.Inventory Cost Market Categories Data Data Cameras $12,500 $13,400 Camcorders 9,000 9,500 DVDs 13,000 12,200
Loggins Department Store uses a perpetual inventory system. Data for product E2-D2 include the following purchases.Number Unit Date of Units Price May 7 50 $10 July 28 30 15 On June 1, Loggins sold
Jeri Company sells three different categories of tools (small, medium and large). The cost and market value of its inventory of tools are as follows.Cost Market Small $ 64,000 $ 61,000 Medium 290,000
Early in 2017, Fedor Company switched to a just-in-time inventory system. Its sales and inventory amounts for 2016 and 2017 are shown below.2016 2017 Sales revenue $3,120,000 $3,713,000 Cost of goods
Mather sells a snowboard, EZslide, that is popular with snowboard enthusiasts.Below is information relating to Mather’s purchases of EZslide snowboards during September.During the same month, 102
Rusthe Inc. uses a periodic inventory system. Its records show the following for the month of May, in which 74 units were sold.Date Explanation Units Unit Cost Total Cost May 1 Inventory 30 $ 9 $270
Jeters Company reports the following for the month of June.Date Explanation Units Unit Cost Total Cost June 1 Inventory 120 $5 $ 600 12 Purchase 370 6 2,220 23 Purchase 200 7 1,400 30 Inventory 230
The following comparative information is available for Rose Company for 2017.LIFO FIFO Sales revenue $86,000 $86,000 Cost of goods sold 38,000 29,000 Operating expenses(including depreciation) 27,000
Digital Camera Shop Inc. uses the lower-of-cost-or-market basis for its inventory.The following data are available at December 31.Cost Market Units per Unit per Unit Cameras Minolta 5 $170 $158 Canon
Tascon Corporation sells coffee beans, which are sensitive to price fluctuations. The following inventory information is available for this product at December 31, 2017.Coffee Bean Units Unit Cost
Suppose this information is available for PepsiCo, Inc. for 2015, 2016, and 2017.(in millions) 2015 2016 2017 Beginning inventory $ 1,926 $ 2,290 $ 2,522 Ending inventory 2,290 2,522 2,618 Cost of
The following information is available for Zoe’s Activewear Inc. for three recent fiscal years.2017 2016 2015 Inventory $ 553,000 $ 568,000 $ 332,000 Net sales 1,948,000 1,725,000 1,311,000 Cost of
Deere & Company is a global manufacturer and distributor of agricultural, construction, and forestry equipment. Suppose it reported the following information in its 2017 annual report.(in millions)
Information about Mather is presented in E6-4. Additional data regarding the company’s sales of EZslide snowboards are provided below. Assume that Mather uses a perpetual inventory system.Date
Mullins Distribution markets CDs of numerous performing artists. At the beginning of March, Mullins had in beginning inventory 2,500 CDs with a unit cost of $7. During March, Mullins made the
Vista Company Inc. had a beginning inventory of 100 units of Product RST at a cost of $8 per unit. During the year, purchases were:Feb. 20 600 units at $ 9 Aug. 12 400 units at $11 May 5 500 units at
You have the following information for Van Gogh Inc. for the month ended October 31, 2017. Van Gogh uses a periodic method for inventory.Date Description Units Unit Cost or Selling Price Oct. 1
Suppose this information (in millions) is available for the Automotive and Other Operations Divisions of General Motors Corporation for a recent year. General Motors uses the LIFO inventory
Bieber Inc. is a retailer operating in Calgary, Alberta. Bieber uses the perpetual inventory method. Assume that there are no credit transactions; all amounts are settled in cash. You are provided
Lyon Center began operations on July 1. It uses a perpetual inventory system. During July, the company had the following purchases and sales.Purchases Date Units Unit Cost Sales Units July 1 7 $62
Natalie is busy establishing both divisions of her business (cookie classes and mixer sales) and completing her business degree. Her goals for the next 11 months are to sell one mixer per month and
On December 1, 2017, Waylon Company had the account balances shown below.Debit Credit Cash $ 4,800 Accumulated Depreciation—Equipment $ 1,500 Accounts Receivable 3,900 Accounts Payable 3,000
The notes that accompany a company’s fi nancial statements provide informative details that would clutter the amounts and descriptions presented in the statements. Refer to the fi nancial
Suppose the following information is from the 2017 annual report of American Greetings Corporation (all dollars in thousands).Feb. 28, Feb. 28, 2017 2016 Inventories Finished goods $232,893 $244,379
Purpose: Use SEC fi lings to learn about a company’s inventory accounting practices.Address: http://biz.yahoo.com/p/_capgds-bldmch.html Steps 1. Go to this site and click on the name of an
The July 15, 2010, edition of CFO.com contains an article by Marie Leone entitled“Sucking the LIFO out of Inventory.”Instructions Read the article, which can be found at
Solar Electronics has enjoyed tremendous sales growth during the last 10 years. However, even though sales have steadily increased, the company’s CEO, Dana Byrnes, is concerned about certain
In a discussion of dramatic increases in coffee-bean prices, a Wall Street Journal article noted the following fact about Starbucks.Before this year’s bean-price hike, Starbucks added several
Caterpillar publishes an annual Sustainability Report to explain its position on sustainability, describe its goals, and report on its achievements. The report can be found at
Listed below are fi ve procedures followed by Shepherd Company.1- Total cash receipts are compared to bank deposits daily by someone who has no other cash responsibilities.2- Time clocks are used for
The information below relates to the Cash account in the ledger of Ansel Company.Balance June 1—$17,450; Cash deposited—$64,000.Balance June 30—$17,704; Checks written—$63,746.The June bank
Trillo Company’s bank statement for May 2017 shows these data.Balance May 1 $12,650 Balance May 31 $14,280 Debit memorandum: Credit memorandum:NSF check 175 Collection of electronic funds transfer
This check, which was a payment on account, was journalized for $325.INSTRUCTIONS(a) Prepare a bank reconciliation at May 31.(b) Journalize the entries required by the reconciliation.
Luke Roye is uncertain about the control features of a bank account. Explain the control benefi ts of (a) a checking account and (b) a bank statement.
The following reconciling items are applicable to the bank reconciliation for Forde Co. Indicate how each item should be shown on a bank reconciliation.(a) Outstanding checks.(b) Bank debit
At April 30, the bank reconciliation of Back 40 Company shows three outstanding checks: No. 254 $650, No. 255 $700, and No. 257 $410. The May bank statement and the May cash payments journal are
This information relates to the Cash account in the ledger of Howard Company.Balance September 1—$16,400; Cash deposited—$64,000 Balance September 30—$17,600; Checks written—$62,800 The
Perth Inc.’s bank statement from Main Street Bank at August 31, 2017, gives the following information.Balance, August 1 $18,400 Bank debit memorandum:August deposits 71,000 Safety deposit box fee $
The bank portion of the bank reconciliation for Bogalusa Company at October 31, 2017, is shown below.BOGALUSA COMPANY Bank Reconciliation October 31, 2017 Cash balance per bank $12,367.90 Add:
Timmins Company of Emporia, Kansas, spreads herbicides and applies liquid fertilizer for local farmers. On May 31, 2017, the company’s Cash account per its general ledger showed a balance of
Daisey Company is a very profi table small business. It has not, however, given much consideration to internal control. For example, in an attempt to keep clerical and offi ce expenses to a minimum,
Bastille Corporation prepares monthly cash budgets. Here are relevant data from operating budgets for 2017.January February Sales $360,000 $400,000 Purchases 120,000 130,000 Salaries 84,000 81,000
Natalie is struggling to keep up with the recording of her accounting transactions.She is spending a lot of time marketing and selling mixers and giving her cookie classes. Her friend John is an
Natalie decides that she cannot afford to hire John to do her accounting. One way that she can ensure that her Cash account does not have any errors and is accurate and up-to-date is to prepare a
On December 1, 2017, Ravenwood Company had the following account balances.Debit Credit Cash $18,200 Accumulated Depreciation—Notes Receivable 2,000 Equipment $ 3,000 Accounts Receivable 7,500
The fi nancial statements of Apple Inc. are presented in Appendix A. Instructions for accessing and using the company’s complete annual report, including the notes to its fi nancial statements, are
The international accounting fi rm Ernst & Young performed a global survey on fraud. The results of that survey are summarized in a report titled “Driving Ethical Growth—New Markets, New
The Public Company Accounting Oversight Board (PCAOB) was created as a result of the Sarbanes-Oxley Act. It has oversight and enforcement responsibilities over accounting fi rms in the United
Banks charge fees for “bounced” checks—that is, checks that exceed the balance in the account. It has been estimated that processing bounced checks costs a bank roughly$1.50 per check. Thus,
The print and electronic media are full of stories about potential security risks that can arise from your personal computer. It is important to keep in mind, however, that there are also many ways
The Sarbanes-Oxley Act applies to:(a) all U.S. companies listed on U.S. exchanges.(b) all companies that list stock on any stock exchange in any country.(c) all European companies listed on European
Analyze the effect of business transactions on the basic accounting equation. LO9
Explain how accounts, debits, and credits are used to record business transactions. LO9
Indicate how a journal is used in the recording process. LO9
Explain how a ledger and posting help in the recording process. LO9
Prepare a trial balance. LO9
During 2017, Gibson Company assets decreased$50,000 and its liabilities decreased $90,000. Its stockholders’ equity therefore: LO9(a) increased $40,000.(b) decreased $140,000.(c) decreased
Debits: LO9(a) increase both assets and liabilities.(b) decrease both assets and liabilities.(c) increase assets and decrease liabilities.(d) decrease assets and increase liabilities.
A revenue account: LO9(a) is increased by debits.(b) is decreased by credits.(c) has a normal balance of a debit.(d) is increased by credits.
Which is not part of the recording process? LO9(a) Analyzing transactions.(b) Preparing an income statement.(c) Entering transactions in a journal.(d) Posting journal entries.
A trial balance: LO9(a) is a list of accounts with their balances at a given time.(b) proves that proper account titles were used.(c) will not balance if a correct journal entry is posted twice.(d)
Presented below is information related to Conan Real Estate Agency. LO9 Oct. 1 Arnold Conan begins business as a real estate agent with a cash investment of $18,000 in exchange for common stock.2
Bob Sample and other student investors opened Campus Carpet Cleaning, Inc. on September 1, 2017. During the fi rst month of operations, the following transactions occurred. LO9 Sept. 1 Stockholders
Describe the accounting information system.2.0 Can a business enter into a transaction that affects only the left side of the basic accounting equation? If so, give an example. LO9
Why is an account referred to as a T-account? LO9
The terms debit and credit mean “increase” and“decrease,” respectively. Do you agree? Explain. LO9
Barry Barack, a fellow student, contends that the double-entry system means each transaction must be recorded twice. Is Barry correct? Explain. LO9
Misty Reno, a beginning accounting student, believes debit balances are favorable and credit balances are unfavorable. Is Misty correct? Discuss. LO9
State the rules of debit and credit as applied to (a) asset accounts, (b) liability accounts, and (c) the Common Stock account. LO9
What is the normal balance for each of these accounts? LO9(a) Accounts Receivable.(b) Cash.(c) Dividends.(d) Accounts Payable.(e) Service Revenue.(f) Salaries and Wages Expense.(g) Common Stock.
What are the normal balances for the following accounts of Apple? (a) Accounts Receivable, (b) Accounts Payable, (c) Sales, and (d) Selling, General, and Administrative Expenses. LO9
(a) When entering a transaction in the journal, should the debit or credit be written fi rst? LO9(b) Which should be indented, the debit or the credit?
(a) What is a ledger?(b) Why is a chart of accounts important? LO9
What is a trial balance and what are its purposes? LO9
Two students are discussing the use of a trial balance. They wonder whether the following errors, each considered separately, would prevent the trial balance from balancing. What would you tell them?
During 2017, Manion Corp. entered into the following transactions. LO9 1. Borrowed $60,000 by issuing bonds.2. Paid $9,000 cash dividend to stockholders.3. Received $13,000 cash from a previously
During 2017, Rostock Company entered into the following transactions. LO9 1. Purchased equipment for $286,176 cash.2. Issued common stock to investors for $137,590 cash.3. Purchased inventory of
Use the data in BE3-5 and journalize the transactions. (You may omit explanations.) LO9
Rae Mohlee, a fellow student, is unclear about the basic steps in the recording process. Identify and briefl y explain the steps in the order in which they occur. LO9

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