At the beginning of the year, Canon Company had total assets of $870,000 and total liabilities of $500,000. Answer the following questions. (a) If total assets increased $150,000 during the year and total liabilities decreased $80,000, what is the amount of stockholders’ equity at the end of the year? (b) During the year, total liabilities increased $100,000 and stockholders’ equity decreased $66,000. What is the amount of total assets at the end of the year? (c) If total assets decreased $80,000 and stockholders’ equity increased $120,000 during the year, what is the amount of total liabilities at the end of the year?
> The internal control procedures in Valentine Company result in the following provisions. Identify the principles of internal control that are being followed in each case. (a) Employees who have physical custody of assets do not have access to the account
> Jessica Mahan is the new owner of Penny Parking. She has heard about internal control but is not clear about its importance for her business. Explain to Jessica the four purposes of internal control and give her one application of each purpose for Penny
> What is a trial balance and what are its purposes?
> Identify and describe the steps in the accounting process.
> Shelly Eckert has prepared the following list of statements about internal control. (a) One of the objectives of internal control is to safeguard assets from employee theft, robbery, and unauthorized use. (b) One of the objectives of internal control is
> Match each situation with the fraud triangle factor—opportunity, financial pressure, or rationalization—that best describes it. (a) An employee’s monthly credit card payments are nearly 75% of his or her monthly earnings. (b) An employee earns minimum wa
> Gregory Department Store uses a perpetual inventory system. Data for product E2-D2 include the following purchases. On June 1, Gregory sold 26 units, and on August 27, 40 more units. Prepare the perpetual inventory schedule for the above transactions u
> At December 31, 2019, the following information was available for A. Kamble Company: ending inventory $40,000, beginning inventory $60,000, cost of goods sold $270,000, and sales revenue $380,000. Calculate inventory turnover and days in inventory for A.
> Central Appliance Center accumulates the following cost and net realizable value data at December 31. Compute the lower-of-cost-or-net realizable value for the company’s total inventory. Inventory Cost Net Realizable Categories Da
> Pettit Company reports net income of $90,000 in 2019. However, ending inventory was understated $7,000. What is the correct net income for 2019? What effect, if any, will this error have on total assets as reported in the balance sheet at December 31, 20
> In its first month of operation, Hoffman Company purchased 100 units of inventory for $6, then 200 units for $7, and finally 140 units for $8. At the end of the month, 180 units remained. Compute the amount of phantom profit that would result if the comp
> The management of Svetlana Corp. is considering the effects of inventory-costing methods on its financial statements and its income tax expense. Assuming that the price the company pays for inventory is increasing, which method will: (a) Provide the high
> Data for Bethke Company are presented in BE6-3. Compute the cost of the ending inventory under the average-cost method, assuming there are 360 units on hand. (Round average cost per unit to nearest cent.)
> In its first month of operations, Bethke Company made three purchases of merchandise in the following sequence: (1) 300 units at $6, (2) 400 units at $7, and (3) 200 units at $8. Assuming there are 360 units on hand, compute the cost of the ending inv
> “A company’s net income appears directly on the income statement and the retained earnings statement, and it is included indirectly in the company’s balance sheet.” Do you agree? Explain.
> Stallman Company took a physical inventory on December 31 and determined that goods costing $200,000 were on hand. Not included in the physical count were $25,000 of goods purchased from Pelzer Corporation, FOB shipping point, and $22,000 of goods sold t
> Farley Company identifies the following items for possible inclusion in the taking of a physical inventory. Indicate whether each item should be included or excluded from the inventory taking. (a) Goods shipped on consignment by Farley to another company
> Presented below is the format of the worksheet using the perpetual inventory system presented in Appendix 5A. Indicate where the following items will appear on the worksheet: (a) Cash, (b) Inventory, (c) Sales revenue, and (d) Cost of goods sold. Exampl
> Explain where each of the following items would appear on (1) a multiple step income statement, and on (2) a single-step income statement: (a) gain on sale of equipment, (b) interest expense, (c) casualty loss from vandalism, and (d) cost of goods sold.
> At year-end, the perpetual inventory records of Litwin Company showed merchandise inventory of $98,000. The company determined, however, that its actual inventory on hand was $95,700. Record the necessary adjusting entry.
> Presented below are the components in determining cost of goods sold. Determine the missing amounts. Cost of Goods Beginning Inventory Ending Inventory Cost of Purchases Available for Sale Goods Sold (a) $80,000 (b) $50,000 (c) $100,000 ? ? $120,000
> The steps in the accounting cycle are listed in random order below. List the steps in proper sequence, assuming no worksheet is prepared, by placing numbers 1–9 in the blank spaces. (a) ________ Prepare a trial balance. (b) ________ Journalize the trans
> Using the data in BE4-3, identify the accounts that would be included in a post-closing trial balance. Reference Data BE4-3: The following selected accounts appear in the adjusted trial balance columns of the worksheet for Goulet Company: Accumulated De
> The income statement for Weeping Willow Golf Club for the month ending July 31 shows Service Revenue $16,400, Salaries and Wages Expense $8,200, Maintenance and Repairs Expense $2,500, and Net Income $5,700. Prepare the entries to close the revenue and e
> Using the data in BE4-4, enter the balances in T-accounts, post the closing entries, and underline and balance the accounts.
> In February 2019, Rachel Paige invested an additional $10,000 in Drumlin Company. Drumlin’s accountant, Liz Cooke, recorded this receipt as an increase in cash and revenues. Is this treatment appropriate? Why or why not?
> The following selected accounts appear in the adjusted trial balance columns of the worksheet for Goulet Company: Accumulated Depreciation—Equipment, Depreciation Expense, Common Stock, Dividends, Service Revenue, Supplies, and Accounts Payable. Indicate
> The steps in using a worksheet are presented in random order below. List the steps in the proper order by placing numbers 1–5 in the blank spaces. (a) _____ Prepare a trial balance on the worksheet. (b) _____ Enter adjusted balances. (c) _____ Extend adj
> Select the response that completes the following statement correctly. The full disclosure principle dictates that: (a) financial statements should disclose all assets at their cost. (b) financial statements should disclose only those events that can be m
> Here are some qualitative characteristics of useful accounting information: 1. Predictive value 3. Verifiable 2. Neutral 4. Timely Match each qualitative characteristic to one of the following statements. ________ (a) Accounting information should hel
> Given the characteristics of useful accounting information, complete each of the following statements. (a) For information to be _____, it should have predictive value, confirmatory value, and be material. (b) _____ is the quality of information that giv
> The accompanying chart shows the qualitative characteristics of useful accounting information. Fill in the blanks. Fundamental Qualities Enhancing Qualities Usefulness Relevance (f) (a) (g) (b) (h) (c) Understandability Faithful Representation (d) Ne
> The trial balance of Yewlett Company includes the following balance sheet accounts, which may require adjustment. For each account that requires adjustment, indicate (a) the type of adjusting entry (prepaid expense, unearned revenue, accrued revenue, or
> Moteki Company accumulates the following adjustment data at December 31. Indicate (a) the type of adjustment (prepaid expense, accrued revenue, and so on), and (b) the status of accounts before adjustment (for example, “assets understated and revenues
> The ledger of Jung Company includes the following accounts. Explain why each account may require adjustment. (a) Prepaid Insurance. (b) Depreciation Expense. (c) Unearned Service Revenue. (d) Interest Payable.
> Selected journal entries for the Nikolai Company are presented in BE2-7. Post the transactions using the standard form of account. Reference Data BE 2-7: J1 Date Account Titles and Explanation Ref. Debit Credit Мay 5 Accounts Receivable 5,000 Servic
> (a) What is a ledger? (b) What is a chart of accounts and why is it important?
> Bombeck Inc. has the following transactions during August of the current year. Indicate (a) the effect on the accounting equation and (b) the debit-credit analysis illustrated on pages 64–68 of the textbook. Aug. 1 Opens an office as a financial advisor
> Evan Saunders, a fellow student, is unclear about the basic steps in the recording process. Identify and briefly explain the steps in the order in which they occur.
> Transactions for the Sheldon Cooper Company, which provides welding services, for the month of June are presented below. Identify the accounts to be debited and credited for each transaction. June 1 Sheldon Cooper invests $4,000 cash in exchange for
> For each of the following accounts indicate the effects of (a) a debit and (b) a credit on the accounts and (c) the normal balance of the account. 1. Accounts Payable. 4. Accounts Receivable. 2. Advertising Expense. 5. Common Stock. 3. Service Revenue.
> Indicate whether the following items would appear on the income statement (IS), balance sheet (BS), or retained earnings statement (RE). _______ (a) Notes payable _______ (d) Cash _______ (b) Advertising expense _______ (e) Service revenue _______ (c)
> Presented below are three transactions. Mark each transaction as affecting common stock (C), dividends (D), revenue (R), expense (E), or not affecting stockholders’ equity (NSE). _______ (a) Received cash for services performed. _______ (b) Paid cash to
> Classify each of the following items as dividends (D), revenue (R), or expense (E). _______ (a) Advertising expense _______ (e) Dividends _______ (b) Service revenue _______ (f) Rent revenue _______ (c) Insurance expense _______ (g) Utilities exp
> Follow the same format as BE1-6 above. Determine the effect on assets, liabilities, and stockholders’ equity of the following three transactions. (a) Stockholders invested cash in the business for common stock. (b) Paid a cash dividend. (c) Received cash
> Presented below are three business transactions. On a sheet of paper, list the letters (a), (b), and (c) with columns for assets, liabilities, and stockholders’ equity. For each column, indicate whether the transactions increased (+), decreased (−), or h
> Indicate whether each of the following items is an asset (A), liability (L), or part of stockholders’ equity (SE). _______ (a) Accounts receivable _______ (d) Supplies _______ (b) Salaries and wages payable _______ (e) Dividends _______ (c) Equipment
> (a) Should business transaction debits and credits be recorded directly in the ledger accounts? (b) What are the advantages of first recording transactions in the journal and then posting to the ledger?
> Use the accounting equation to answer each of the following questions. (a) The liabilities of Olga Company are $90,000. Common stock account is $150,000; dividends are $40,000; revenues, $450,000; and expenses, $320,000. What is the amount of Olga Compan
> Dan Fineman, the president of King Company, is pleased. King substantially increased its net income in 2019 while keeping its unit inventory relatively the same. Howard Gross, chief accountant, cautions Dan, however. Gross says that since King changed it
> (a) What is the primary objective of financial reporting? (b) Identify the characteristics of useful accounting information.
> Why is it possible to prepare financial statements directly from an adjusted trial balance?
> “An adjusting entry may affect more than one balance sheet or income statement account.” Do you agree? Why or why not?
> One-half of the adjusting entry is given below. Indicate the account title for the other half of the entry. (a) Salaries and Wages Expense is debited. (b) Depreciation Expense is debited. (c) Interest Payable is credited. (d) Supplies is credited. (e) Ac
> For each of the following items before adjustment, indicate the type of adjusting entry (prepaid expense, unearned revenue, accrued revenue, or accrued expense) that is needed to correct the misstatement. If an item could result in more than one type of
> On January 9, a company pays $5,000 for salaries and wages of which $2,000 was reported as Salaries and Wages Payable on December 31. Give the entry to record the payment.
> A company makes an accrued revenue adjusting entry for $900 and an accrued expense adjusting entry for $700. How much was net income understated prior to these entries? Explain.
> Are the following events recorded in the accounting records? Explain your answer in each case. (a) The president of the company dies. (b) Supplies are purchased on account. (c) An employee is fired.
> A company fails to recognize an expense incurred but not paid. Indicate which of the following accounts is debited and which is credited in the adjusting entry: (a) asset, (b) liability, (c) revenue, or (d) expense.
> Whistler Corp. performed services for a customer but has not yet recorded payment, nor has it recorded any entry related to the work. Which of the following accounts are involved in the adjusting entry: (a) asset, (b) liability, (c) revenue, or (d) e
> What is the debit/credit effect of an unearned revenue adjusting entry?
> J. Brownlee Company purchased equipment for $18,000. By the current balance sheet date, $6,000 had been depreciated. Indicate the balance sheet presentation of the data.
> “Depreciation is a valuation process that results in the reporting of the fair value of the asset.” Do you agree? Explain.
> Indicate whether the following accounts generally will have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries. (1) Cash. (2) Accounts Receivable. (3) Dividends. (4) Accounts Payable. (5) Salaries and Wages Expense. (
> For the following transactions, indicate the account debited and the account credited. (a) Supplies are purchased on account. (b) Cash is received on signing a note payable. (c) Employees are paid salaries in cash.
> Indicate whether each of the following accounts is an asset, a liability, or a stockholders’ equity account and whether it has a normal debit or credit balance: (a) Accounts Receivable, (b) Accounts Payable, (c) Equipment, (d) Dividends, and (e) Sup
> State the rules of debit and credit as applied to (a) asset accounts, (b) liability accounts, and (c) the stockholders’ equity accounts (revenue, expenses, dividends, common stock, and retained earnings).
> Olga Conrad, a beginning accounting student, believes debit balances are favorable and credit balances are unfavorable. Is Olga correct? Discuss.
> Can a business enter into a transaction in which only the left side of the basic accounting equation is affected? If so, give an example.
> The basic accounting equation is Assets = Liabilities + Stockholders’ equity. Replacing the words in that equation with dollar amounts, what is Apple’s accounting equation at September 26, 2015?
> What are the normal balances for Apple’s Cash, Accounts Payable, and Interest Expense accounts?
> 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? (a) The bookkeeper debited Cash for $600 and credited
> Juan Kirby is confused about how accounting information flows through the accounting system. He believes the flow of information is as follows. (a) Debits and credits posted to the ledger. (b) Business transaction occurs. (c) Information entered in the j
> Describe a compound entry, and provide an example.
> Listed below are some items found in the financial statements of Jonas Co. Indicate in which financial statement(s) the following items would appear. (a) Service revenue. (e) Retained earnings. (b) Equipment. (f) Salaries and wages (c) Advertising ex
> Indicate how the following business transactions affect the basic accounting equation. (a) Paid cash for janitorial services. (b) Purchased equipment for cash. (c) Invested cash in the business for stock. (d) Paid accounts payable in full.
> The account number is entered as the last step in posting the amounts from the journal to the ledger. What is the advantage of this step?
> (a) When entering a transaction in the journal, should the debit or credit be written first? (b) Which should be indented, the debit or credit?
> Which of the following items are liabilities of jewelry stores? (a) Cash. (f) Equipment. (b) Accounts payable. (h) Service revenue. (c) Dividends. (g) Salaries and wages payable. (d) Accounts receivable. (e) Supplies. (i) Rent expense.
> (a) What is the primary source document for recording (1) cash sales and (2) credit sales? (b) Using XXs for amounts, give the journal entry for each of the transactions in part (a).
> (a) Define the terms assets, liabilities, and stockholders’ equity. (b) What items affect stockholders’ equity?
> What is the basic accounting equation?
> What are the basic steps in the recording process?
> What are the three basic forms of profit-oriented business organizations?
> What is the economic entity assumption?
> What is the monetary unit assumption?
> What is the normal balance for each of the following accounts? (a) Accounts Receivable. (b) Cash. (c) Dividends. (d) Accounts Payable. (e) Service Revenue. (f) Salaries and Wages Expense. (g) Common Stock.
> “Bookkeeping and accounting are the same.” Do you agree? Explain.
> What uses of financial accounting information are made by (a) investors and (b) creditors?
> Tom Dingel, a fellow student, contends that the double-entry system means each transaction must be recorded twice. Is Tom correct? Explain.
> Explain the differences between depreciation expense and accumulated depreciation.
> “The terms debit and credit mean increase and decrease, respectively.” Do you agree? Explain.
> “Accounting is ingrained in our society and it is vital to our economic system.” Do you agree? Explain.
> Liz Kelso is reviewing the principle of segregation of duties. What are the two common applications of this principle?
> In the corner grocery store, all sales clerks make change out of one cash register drawer. Is this a violation of internal control? Why?
> What principles of internal control apply to most organizations?
> Discuss how the Sarbanes-Oxley Act has increased the importance of internal control to top managers of a company.
> “Internal control is concerned only with enhancing the accuracy of the accounting records.” Do you agree? Explain.
> At what amount does Apple report cash and cash equivalents in its 2015 consolidated balance sheet?
> Riverside Fertilizer Co. owns the following assets at the balance sheet date. Cash in bank—savings account……………$ 8,000 Cash on hand………………………………………….850 Cash refund due from the IRS………………. 1,000 Checking account balance……………………14,000 Postdated checks…………
