1. An officer of Westway Corporation recently commented that when he receives the firm’s financial statements, he looks at just the bottom line of the income statement—the line that shows the net income or net loss for the period. He said that he does not bother with the rest of the income statement because “it’s only the bottom line that counts.” He also does not read the balance sheet. Do you think this manager is correct in the way he uses the financial statements? Why or why not? 2. The president of Brown Corporation is concerned about the firm’s ability to pay its debts on time. What items on the balance sheet would help her to assess the firm’s debt-paying ability? 3. Why is it important that a firm’s financial records be kept up-to-date and that management receive the financial statements promptly after the end of each accounting period? 4. What kinds of operating and general policy decisions might be influenced by data on the financial statements? Internal Control and Fraud Prevention and Certified Bookkeeper Internal control and fraud prevention is an area tested on the Certified Bookkeeper’s exam. Certification in your field indicates you have a certain level of education and training. Go to the American Institute of Professional Bookkeepers’ website at www.aipb.org. From the certification program icon, determine the three requirements to become a certified bookkeeper and the four areas tested on the exam. Income Statement In 2018, CSX Corporation, which operates under the name Surface Transportation, reported operating expenses of $7,381 million. A partial list of the company’s operating expenses follows. CSX Corporation reported revenues of $12,250 million for the year. Consolidated Income Statement (Dollars in millions) Revenue: $12,250 Operating Expenses (Dollars in millions) Labor and Fringe Benefits: $2,738 Materials, Supplies, and Other: 1,967 Fuel: 1,046 Depreciation: 1,331 Equipment and Other Rents: 395 Analyze: 1. If the given categories represent the related general ledger accounts, what journal entry would be made to close the expense accounts at year-end? 2. What journal entry would be made to close the revenue accounts? Analyze Online: Locate the website for CSX Corporation (www.csx.com). Click on Investors. Within the Annual Report link, find the most recent annual report. 3. On the consolidated statement of earnings, what was the amount reported for operating expenses? 4. What percentage increase or decrease does this figure represent from the operating expenses reported in the prior fiscal year? Accounting Cycle Understanding the steps in the accounting cycle is important to get accurate information about the financial condition of your company. In teams, make strips of paper with the nine steps of the accounting cycle. Give two or three strips to each member of the group. Each team member needs to put his or her strips in the proper order of the nine steps.
> After Copper Corporation paid its employees on July 15 and recorded the corporation’s share of payroll taxes for the payroll paid that date, the firm’s general ledger showed a balance of $20,584 in the Social Security Tax Payable account, a balance of $4
> Given the following scenario, choose the best answer. At the end of the quarter, the business owed $2,000 in total payroll taxes. The amount due must be deposited: a. on the last business day of the quarter. b. on the last day of the quarter. c. on the d
> On July 31, the payroll register for Red Company showed the following totals for the month: gross earnings, $38,950; social security tax, $2,414.90; Medicare tax, $564.78; income tax, $5,842.00; and net amount due, $30,128.32. Of the total earnings, $30,
> Private Investigations has two office employees. A summary of their earnings and the related taxes withheld from their pay for the week ending June 7, 20X1, follows. 1. Prepare the general journal entry to record the company’s payroll f
> Fashion Standards is a retail clothing store. Sales of merchandise and purchases of goods on account for January 20X1, the first month of operations, appear below. INSTRUCTIONS 1. Record the purchases of goods on account on page 1 of a three-column purch
> Data about the marital status, withholding allowances, and weekly salaries of the four office workers at Ollie’s Office Supply Company follow. Use the tax tables in Figure 10.2 to find the amount of federal income tax to be deducted fro
> Using the earnings data given in Exercise 10.3, determine the amount of Medicare tax to be withheld from each employee’s gross pay for December. Assume a 1.45 percent Medicare tax rate and that all salaries and wages are subject to the
> The monthly salaries for December and the year-to-date earnings of the employees of Cross Consulting Company as of November 30 follow. Determine the amount of social security tax to be withheld from each employee’s gross pay for Decembe
> During one week, four production employees of Morgan Manufacturing Company worked the hours shown below. All these employees receive overtime pay at one and one-half times their regular hourly rate for any hours worked beyond 40 in a week. Determine the
> The hourly rates of four employees of European Enterprises follow, along with the hours that these employees worked during one week. Determine the gross earnings of each employee.
> After returning from a three-day business trip, the accountant for Southeast Sales, Johanna Estrada, checked bank activity in the company’s checking account online. The activity for the last three days follows. After matching these tran
> Flores Company received a bank statement showing a balance of $13,000 on November 30, 20X1. During the bank reconciliation process, Flores Company’s accountant noted the following bank errors: 1. A check for $153 issued by Flora, Inc., was mistakenly cha
> Venturi Office Supplies received a bank statement showing a balance of $73,027 as of March 31, 20X1. The firm’s records showed a book balance of $72,987 on March 31. The difference between the two balances was caused by the following items. Prepare a ban
> At Livermore Delivery and Courier Service, the following items were found to cause a difference between the bank statement and the firm’s records. Indicate whether each item will affect the bank balance or the book balance when the bank reconciliation st
> Johnson Corporation received a bank statement showing a balance of $15,900 as of October 31, 20X1. The firm’s records showed a book balance of $15,572 on October 31. The difference between the two balances was caused by the following items. Prepare a ban
> Tony Zendejas is the owner of Housewares Galore, a housewares store that sells a wide variety of items for the kitchen, bathroom, and home. Housewares Galore offers a company credit card to customers. The company has experienced an increase in sales sinc
> On January 2, Vanessa’s Floral Supplies Inc. issued Check 3100 for $400 to establish a petty cash fund. On January 31, Check 3159 was issued to replenish the petty cash fund. An analysis of payments from the fund showed these totals: Supplies, $78; Deliv
> On January 2, The Orange Legal Clinic issued Check 2108 for $400 to establish a petty cash fund. Indicate how this transaction would be recorded in a cash payments journal. Use 1 as the page number for the cash payments journal.
> The following transactions took place at Nickie’s Sports Gear during the first week of October 20X1. Record these transactions in a cash payments journal. Use 15 as the page number of the cash payments journal.
> Bushell Company (buyer) and Schiff, Inc. (seller), engaged in the following transactions during February 20X1. Schiff, Inc. operates in a state with no sales tax. BUSHELL COMPANY SCHIFF, INC. Both companies use the perpetual inventory system. Journalize
> On April 1, Manning Meat Distributors sold merchandise on account to Fichman’s Franks for $3,700 on Invoice 1001, terms 2/10, n/30. The cost of merchandise sold was $2,200. Payment was received in full from Fichman’s Franks, less discount, on April 10. R
> Record the following transactions of Fashion Park in a general journal. Use 1 as the page number for the general journal. Fashion Park must charge 8 percent sales tax on all sales. The company uses the perpetual inventory system.
> Wang Corporation operates in a state with no sales tax. The company uses the perpetual inventory system. Record the following transactions in a general journal. Use 1 as the page number for the general journal.
> Record the following transactions of Evelyn’s Designs in a general journal. The company uses the perpetual inventory system.
> Rubino Corporation engaged in the following transactions during June. The company uses the perpetual inventory system. Record these transactions in a general journal.
> Identify the normal balance of the following accounts. Use “Dr.” for debit or “Cr.” for credit. 1. _____ Merchandise Inventory 2. _____ Sales Tax Payable 3. _____ Sales 4. _____ Sales Discounts 5. _____ Sales Returns and Allowances 6. _____ Cost of Goods
> Matrix Toy Company sells toys and games to retail stores. The firm offers a trade discount of 40 percent on toys and 30 percent on games. Its credit sales and sales returns and allowances transactions for August are shown below. The general ledger accoun
> The following transactions took place at Nickie’s Sports Gear during the first week of October 20X1. Record these transactions in a cash receipts journal. Use 12 as the page number for the cash receipts journal.
> Complete the following schedule by supplying the missing information.
> The following errors were made in recording transactions in posting from the purchases journal. How will these errors be detected? a. A credit of $2,000 to the Thomastown Furniture Company account in the accounts payable ledger was posted as $200. b. The
> On June 30 the general ledger of Newport Clothiers, a clothing store, showed a balance of $65,895 in the Purchases account, a balance of $2,125 in the Freight In account, and a balance of $1,280 in the Purchases Returns and Allowances account. What was t
> On April 7, Fisher & Sons Appliances was given an allowance of $1,210 by Modern Kitchens, which issued Credit Memorandum 112. The allowance was for scratches on stoves that were originally purchased on Invoice 911 dated March 20. Prepare the general jour
> On March 19, Beautiful Kitchens, a retail store, received Credit Memorandum 244 for $4,125 from M & J Appliance Corporation. The credit memorandum covered a return of damaged trash compactors originally purchased on Invoice 4101 dated February 3. Prepare
> The following transactions took place at AutoQuest Car Parts during the first week of July. Indicate how these transactions would be entered in a purchases journal like the one shown in this chapter.
> The following transactions took place at Extreme Bikers. Indicate the general ledger account numbers that would be debited and credited to record each transaction. GENERAL LEDGER ACCOUNTS 101 Cash 205 Accounts Payable 501 Purchases 502 Freight In 503 Pur
> The accounting system of Rose and Tea Fine Kitchenware includes the following journals. Indicate which journal is used to record each transaction. JOURNALS Cash receipts journal Cash payments journal Purchases journal Sales journal General journal TRANSA
> The accounts receivable ledger for Modern Vintage Antiques follows below. 1. Prepare a schedule of accounts receivable as of January 31, 20X1. 2. What should be the balance in the Accounts Receivable (control) account?
> Kimberly Ashley, the bookkeeper for Interiors Designs, has just finished posting the closing entries for the year to the ledger. She is concerned about the following balances: Capital account balance in the general ledger: $194,200 Ending capital balance
> The balances of certain accounts of Camille Corporation on April 30, 20X1, were as follows: Sales $330,000 Sales Returns and Allowances 4,500 The firm’s net sales are subject to an 8 percent sales tax. Prepare the general journal entry to record payment
> Oliver’s English Gardens, a wholesale firm, made sales using the following list prices and trade discounts. What amount will be recorded for each sale in the sales journal? 1. List price of $7,000 and trade discounts of 30 and 10 percent 2. List price of
> Rossi Wholesalers made sales using the following list prices and trade discounts. What amount will be recorded for each sale in the sales journal? 1. List price of $950 and trade discount of 10 percent 2. List price of $3,080 and trade discount of 20 per
> The sales journal for Carolina Company is shown below. Describe how the amounts would be posted to the general ledger accounts.
> Record the general journal entries for the following transactions of The Linen Barn that occurred in July. Use 15 as the page number for the general journal.
> The following transactions took place at Washington Outdoor Adventures during June. Enter these transactions in a sales journal like the one shown in Figure 7.2. Use 18 as the page number for the sales journal.
> The transactions below took place at Washington Outdoor Adventures, a retail business that sells outdoor clothing and camping equipment. Indicate the numbers of the general ledger accounts that would be debited and credited to record each transaction. GE
> Post the following journal entries to the appropriate ledger accounts. Assume the following account balances as of March 1, 20X1: Accounts Receivable (control account) $1,788 Accounts Receivable—Carol Fountain 940 Accounts Receivable&ac
> The accounting system of Great Harvest Healthy Foods includes the journals listed below. Indicate the specific journal in which each of the transactions listed below would be recorded. JOURNALS Cash receipts journal Sales journal Purchases journal Cash p
> Complete a chart of the accounting cycle by writing the steps of the cycle in their proper sequence.
> The Trial Balance section of the worksheet for Fashion World for the period ended December 31, 20X1, appears below. Adjustments data are also given. ADJUSTMENTS a. Supplies used, $7,200 b. Expired insurance, $4,800 c. Depreciation expense for machinery,
> On December 31, the Income Summary account of Ballon Company has a debit balance of $222,000 after revenue of $234,000 and expenses of $456,000 were closed to the account. Kenneth Ballon, Drawing has a debit balance of $24,000 and Kenneth Ballon, Capital
> The ledger accounts of Aveeno Company appear as follows on March 31, 20X1: All accounts have normal balances. Journalize and post the closing entries. Use 4 as the page number for the general journal in journalizing the closing entries. Use account numbe
> The Income Summary and Violante Autro, Capital accounts for Autro Production Company at the end of its accounting period follow. Complete the following statements: 1. Total revenue for the period is __________. 2. Total expenses for the period are ______
> Managers often consult financial statements for specific types of information. Indicate whether each of the following items would appear on the income statement, the statement of owner’s equity, or the balance sheet. Use I for the income statement, E for
> From the following list, identify the accounts that will appear on the postclosing trial balance. ACCOUNTS 1. Cash 2. Accounts Receivable 3. Supplies 4. Equipment 5. Accumulated Depreciation 6. Accounts Payable 7. Brianna Celina, Capital 8. Brianna Celin
> Following are the steps in the accounting cycle. Arrange the steps in the proper sequence. 1. Prepare a worksheet. 2. Journalize and post adjusting entries. 3. Analyze transactions. 4. Journalize the transactions. 5. Post the journal entries. 6. Journali
> On December 31, 20X1, the ledger of Hunter Company contained the following account balances: Cash $33,000 Jessica Hunter, Drawing $26,000 Accounts Receivable 2,900 Fees Income 53,750 Supplies 2,100 Depreciation Expense 2,750 Equipment 26,000 Salaries
> Lancaster Company must make three adjusting entries on December 31, 20X1. a. Supplies used, $11,000 (supplies totaling $18,000 were purchased on December 1, 20X1, and debited to the Supplies account). b. Expired insurance, $8,200; on December 1, 20X1, th
> Assume that a firm reports net income of $135,000 prior to making adjusting entries for the following items: expired rent, $10,500; depreciation expense, $12,300; and supplies used $5,400. Assume that the required adjusting entries have not been made. Wh
> On January 31, 20X1, the general ledger of Johnson Company showed the following account balances. Prepare the worksheet through the Adjusted Trial Balance section. Assume that every account has the normal debit or credit balance. The worksheet covers the
> The account balances for the Pittman International Company on January 31, 20X1, follow. The balances shown are after the first month of operations. INSTRUCTIONS 1. Prepare the Trial Balance section of the worksheet. 2. Record the following adjustments in
> For each of the following situations, determine the necessary adjustments. 1. A firm purchased a three-year insurance policy for $27,000 on July 1, 20X1. The $27,000 was debited to the Prepaid Insurance account. What adjustment should be made to record e
> Determine the necessary end-of-June adjustments for Conner Company. 1. On June 1, 20X1, Conner Company, a new firm, paid $16,800 rent in advance for a seven-month period. The $16,800 was debited to the Prepaid Rent account. 2. On June 1, 20X1, the firm b
> On August 22, 20X1, an employee of Bell Company mistakenly debited the Truck Expense account rather than the Repair Expense account when recording a bill of $1,025 for repairs. The error was discovered on October 1. Prepare a general journal entry to cor
> On June 10, 20X1, an employee of Williams Corporation mistakenly debited Telephone Expense rather than Utilities Expense when recording a bill of $2,000 for the May utility service. The error was discovered on June 30. Prepare a general journal entry to
> The following transactions took place at the Pimental Employment Agency during November 20X1. Record the general journal entries that would be made for these transactions. Use a compound entry for each transaction.
> Post the journal entries that you prepared for Exercise 4.2 to the general ledger. Use the account names shown in Exercise 4.2. Data from Exercise 4.2: Selected accounts from the general ledger of Martin Consulting Services follow. Record the general jo
> Selected accounts from the general ledger of Martin Consulting Services follow. Record the general journal entries that would be made to record the following transactions. Be sure to include dates and descriptions in these entries. 101 Cash 111 Accounts
> Selected accounts from the general ledger of the Escobedo Shipping Service follow. Analyze the following transactions and indicate by number what accounts should be debited and credited for each transaction. 101 Cash 111 Accounts Receivable 121 Supplies
> The accounts that will be used by Metro Moving Company follow. Prepare a chart of accounts for the firm. Classify the accounts by type, arrange them in an appropriate order, and assign suitable account numbers. Salaries Expense Office Supplies Prepaid
> From the trial balance and the net income or net loss determined in Exercise 3.6, prepare a statement of owner’s equity and a balance sheet for Residential Relocators as of December 31, 20X1. Data from Exercise 3.6: Using the account b
> The cost accountant for Bruin Manufacturing, Inc., has prepared the following analysis of the profitability of each of the firm’s three products. All fixed costs are allocated costs and are not related to specific products. Management h
> Using the account balances from Exercise 3.5, prepare a trial balance and an income statement for Residential Relocators. The trial balance is for December 31, 20X1, and the income statement is for the month ended December 31, 20X1. Data from Exercise 3
> The following T accounts show transactions that were recorded by Residential Relocators, a firm that specializes in local housing rentals. The entries for the first transaction are labeled with the letter (a), the entries for the second transaction with
> In each of the following sentences, fill in the blanks with the word debit or credit: 1. Revenue accounts normally have ___ balances. These accounts increase on the ___ side and decrease on the ? side. 2. Liability accounts normally have ___ balances. Th
> Indicate whether each of the following accounts normally has a debit balance or a credit balance: 1. Cash 2. Blaine Brownell, Capital 3. Fee Income 4. Accounts Payable 5. Supplies 6. Equipment 7. Accounts Receivable 8. Salaries Expense
> Haden Fry decided to start a dental practice. The first five transactions for the business follow. For each transaction, (1) determine which two accounts are affected, (2) set up T accounts for the affected accounts, and (3) enter the debit and credit am
> Johnson Cleaning Service has the following account balances on December 31, 20X1. Set up a T account for each account and enter the balance on the proper side of the account. Cash $ 76,000 Accounts Payable 96,800 Equipment 184,000 Elicia Johnson, Capita
> Using the information provided in Exercise 2.8, prepare a statement of owner’s equity for the month of September and a balance sheet for Rojas Wealth Management Consulting as of September 30, 20X1.
> What led to the passage of the Public Company Accounting Reform and Investor Protection Act of 2002?
> What is the function of the Securities and Exchange Commission?
> What groups consistently offer opinions about proposed FASB statements?
> Healthy Hair Inc. makes and distributes hair products to retail stores, beauty salons, and barber shops. Early in 20X1, officers of the company decided to develop and market a line of shampoos and hair conditioners under their own private brand. They con
> What is the purpose of the Financial Accounting Standards Board?
> What are the three major areas of accounting?
> What types of services do public accountants provide?
> What is tax planning?
> What are the major functions or activities performed by accountants in private industry?
> What are the three types of business entities, and how do they differ?
> Why is it important for business records to be separate from the records of the business’s owner or owners? What is the term accountants use to describe this separation of personal and business records?
> What types of people or organizations are interested in financial information about a firm, and why are they interested in this information?
> Why is a sales return or allowance usually recorded in a special Sales Returns and Allowances account rather than being debited to the Sales account?
> How do retail and wholesale businesses differ?
> New Millennium Industries, a manufacturer of sports shoes, uses a standard cost system. When Michelle Nicole, the cost accountant for the company, started to analyze the labor variances for May, she discovered that some of the data had inadvertently been
> What purposes does the schedule of accounts receivable serve?
> What is a trade discount? Why do some firms offer trade discounts to their customers?
> What is open-account credit?
> Why are bank credit card sales similar to cash sales for a business?
> What is the discount on credit card sales? What type of account is used to record this item?
> When a firm makes a sale involving a credit card issued by a credit card company, does the firm have an account receivable with the cardholder or with the credit card company?
> What procedure does a business use to collect amounts owed to it for sales on credit cards issued by credit card companies?
