At the end of 2021, Worthy Co.’s balance for Accounts Receivable is $20,000, while the company’s total assets equal $1,500,000. In addition, the company expects to collect all of its receivables in 2022. In 2022, however, one customer owing $2,000 becomes a bad debt on March 14. Record the write off of this customer’s account in 2022 using the direct write-off method.
> Below are several transactions for Crimson Tide Corporation. A junior accountant, recently employed by the company, proposes to record the following transactions. Required: Assess whether the junior accountant correctly proposes how to record each transa
> Below are several transactions for Scarlet Knight Corporation. A junior accountant, recently employed by the company, proposes to record the following transactions. Required: Assess whether the junior accountant correctly proposes how to record each tran
> Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2022, for $12,000. They expect to use the Suburban for five years and then sell the vehicle for $4,500
> Bearcat Construction begins operations in March and has the following transactions. March 1 Issue common stock for $21,000. March 5 Obtain $9,000 loan from the bank by signing a note. March 10 Purchase construction equipment for $25,000 cash. March
> Sun Devil Hair Design has the following transactions during the month of February. February 2 Pay $700 for radio advertising for February. February 7 Purchase beauty supplies of $1,300 on account. February 14 Provide beauty services of $2,900 to custome
> Listed below are several terms and phrases associated with the measurement process for external transactions. Required: Pair each item from List A with the item from List B to which it is most appropriately associated.
> Tiger Trade has the following cash transactions for the period. Required: 1. Calculate the ending balance of cash, assuming the balance of cash at the beginning of the period is $5,000. 2. Prepare a statement of cash flows.
> Wolfpack Construction has the following account balances at the end of the year. Required: Use only the appropriate accounts to prepare a balance sheet.
> At the beginning of the year (January 1), Buffalo Drilling has $11,000 of common stock outstanding and retained earnings of $8,200. During the year, Buffalo reports net income of $8,500 and pays dividends of $3,200. In addition, Buffalo issues additional
> Below are the account balances for Cowboy Law Firm at the end of December. Required: Use only the appropriate accounts to prepare an income statement.
> Cougar’s Accounting Services provides low-cost tax advice and preparation to those with financial need. At the end of the current period, the company reports the following amounts: Assets = $19,000; Liabilities = $15,000; Revenues = $28,000; Expenses = $
> Eagle Corp. operates magnetic resonance imaging (MRI) clinics throughout the Northeast. At the end of the current period, the company reports the following amounts: Assets = $50,000; Liabilities = $27,000; Dividends = $3,000; Revenues = $14,000; Expenses
> The transactions in this problem are identical to those in E1–2, but now with a focus on Wildcat. Required: 1. For each transaction, indicate whether Wildcat would report the related account in the balance sheet or income statement. 2.
> Eddie’s Galleria sells billiard tables. The company has the following purchases and sales for 2021. Eddie is worried about the company’s financial performance. He has noticed an increase in the purchase cost of billiar
> Below are the four underlying assumptions of generally accepted accounting principles. Required: Match each business assumption with its description.
> Falcon Incorporated has the following transactions with Wildcat Corporation. Required: 1. For each transaction, indicate whether Falcon would report the related account in the balance sheet or income statement. 2. For accounts in the balance sheet, indic
> The qualitative characteristics outlined in the FASB’s conceptual framework include: Consider the following independent situations. 1. In deciding whether to invest in Southwest Airlines or American Airlines, investors evaluate the comp
> Below are concepts associated with the role of the auditor in financial reporting. Required: Match each concept with its description.
> Below are approximate amounts related to cash flow information reported by five companies in previous years. 1. KraftHeinz reports operating cash flows of $3.6 billion, investing cash flows of $0.6 billion, and financing cash flows of −$4.2 billion. What
> Below are approximate amounts related to balance sheet information reported by five companies in previous years. 1. ExxonMobil reports total assets of $228 billion and total liabilities of $107 billion. What is the amount of stockholders’ equity? 2. Citi
> Below are approximate amounts related to retained earnings reported by five companies in previous years. 1. Coca-Cola reports an increase in retained earnings of $3.2 billion and net income of $6.9 billion. What is the amount of dividends? 2. PepsiCo rep
> During its first five years of operations, Red Raider Consulting reports net income and pays dividends as follows. Required: Calculate the balance of retained earnings at the end of each year. Note that retained earnings will always equal $0 at the begin
> Each of the following independent situations represents amounts shown on the four basic financial statements. 1. Revenues = $27,000; Expenses = $18,000; Net income = . 2. Increase in stockholders’ equity = $17,000; Issuance of common stock = $11,000; Net
> Squirrel Tree Services reports the following amounts on December 31, 2021. In addition, the company reported the following cash flows. Required: 1. Prepare a balance sheet. 2. Prepare a statement of cash flows.
> You have just been hired as a consultant to Gilbert Industries, a newly formed company. The company president, Mindy Grayson, is seeking your advice as to the appropriate inventory method Gilbert should use to value its inventory and cost of goods sold.
> At the beginning of 2021, Artichoke Academy reported a balance in common stock ofv$150,000 and a balance in retained earnings of $50,000. During the year, the company issued additional shares of stock for $40,000, earned net income of $30,000, and paid d
> On December 31, 2021, Fighting Okra Cooking Services reports the following revenues and expenses. In addition, the balance of common stock at the beginning of the year was $200,000, and the balance of retained earnings was $32,000. During the year, the c
> The following provides a list of transactions and a list of business activities. Required: Match the transaction with the business activity by indicating the letter that corresponds to the appropriate business activity.
> As a long-term investment, Fair Company purchased 20% of Midlin Company’s 300,000 shares for $360,000 at the beginning of the reporting year of both companies. During the year, Midlin earned net income of $135,000 and distributed cash dividends of $0.25
> On January 1, Marcum’s Landscape purchased 10,000 shares (35%) of the common stock of Atlantic Irrigation for $600,000. Below are amounts reported by both companies for the year. Required: For Marcum’s Landscape, recor
> On January 1, Lifestyle Pools purchased 25% of Marshall Fence’s common stock for $700,000 cash. By the end of the year, Marshall Fence reported net income of $160,000 and paid dividends of $60,000 to all shareholders. Required: For Lifestyle Pools, recor
> Refer to the transactions in ED–4, but now assume the 1,000 shares are sold on February 1, 2022, for $80 per share. Required: 1. Record each of these transactions in 2021, including an adjustment on December 31 for the investment’s fair value, if appropr
> Gator Shoes, Inc., manufactures a line of stylish waterproof footwear. The following transactions relate to investments in common stock during 2021. March 1 Purchases 3,000 shares (10%) of Power Drive Corporation’s common stock for $62 per share. July 1
> Mr. T’s Fashions, once a direct competitor to Italian Stallion’s clothing line, has formed a friendship in recent years leading to a small investment (less than 5%) by Mr. T in the common stock of Italian Stallion. Mr. T’s engages in the following transa
> First National Bank buys and sells securities. The company’s fiscal year ends on December 31. The following selected transactions relating to First National’s trading account occurred during the year. December 20 Purchases 300,000 shares in Classic Compu
> Obtain copies of the annual reports of The Coca-Cola Company and PepsiCo for the most recent year. You can find the annual reports at the companies’ websites (www.coca-cola.com and www.pepsico.com) in the investor information section or at the Securities
> Consider the following statements. Required: Indicate whether each statement is true (T) or false (F).
> On January 1, Ralston Corp. issues $800,000 of 8% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. Price Investment Company purchases all of the bonds and classifies them as available-for-sale. Required: As
> ED–11 On January 1, Splash City issues $500,000 of 7% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. T. Bone Investment Company (TBIC) purchases all of the bonds in a private placement. Required: Assuming
> On January 1, Dora purchases 175 of the $1,000, 7%, 15-year bonds issued by Splash City, with interest receivable semiannually on June 30 and December 31 each year. Required: Assuming the market interest rate on the issue date is 8%, Dora will purchase t
> Alpha has made the following investments. Required: Indicate with an “X” which of the companies above would be accounted for using the consolidation method.
> Denzel needs a new car. At the dealership, he finds the car that he likes. The dealership gives him two payment options: 1. Pay $35,000 for the car today. 2. Pay $4,000 at the end of each quarter for three years. Required: Assuming Denzel uses a discount
> You would like to start saving for retirement. Assuming you are now 25 years old and you want to retire at age 55, you have 30 years to watch your investment grow. You decide to invest in the stock market, which has earned about 13% per year over the pas
> GMG Studios plans to invest $60,000 at the end of each year for the next three years. There are three investment options available. Required: Determine the accumulated investment amount by the end of the third year for each of the options.
> Lights, Camera, and More sells filmmaking equipment. The company offers three purchase options: (1) pay full cash today, (2) pay one-half down and the remaining one-half plus 10% in one year, or (3) pay nothing down and the full amount plus 15% in one ye
> Arnold and Helene would like to visit Austria in two years to celebrate their 25th wedding anniversary. Currently, the couple has saved $27,000, but they expect the trip to cost $31,000. If they put $27,000 in an account that earns 7% interest, compounde
> Horizon Corporation manufactures personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2019. Due primarily to increased competition and price slashing in the industry, 2020’s income statement reported a
> Dusty would like to buy a new car in six years. He currently has $15,000 saved. He’s considering buying a car for around $19,000 but would like to add a Turbo engine to increase the car’s performance. This would increase the price of the car to $23,000.
> Oprah is deciding between investment options. Both investments earn an interest rate of 7%, but interest on the first investment is compounded annually, while interest on the second investment is compounded semiannually. Which investment would you advise
> Spade Agency separates its accounts receivable into three age groups for purposes of estimating the percentage of uncollectible accounts. 1. Accounts not yet due = $25,000; estimated uncollectible = 4%. 2. Accounts 1–60 days past due = $10,000; estimated
> Williamson Distributors separates its accounts receivable into three age groups for purposes of estimating the percentage of uncollectible accounts. 1. Accounts not yet due = $40,000; estimated uncollectible = 5%. 2. Accounts 1–30 days past due = $11,000
> The Giles Agency offers a 12% trade discount when providing advertising services of $1,000 or more to its customers. Audrey’s Antiques decides to purchase advertising services of $3,500 (not including the trade discount), while Michael’s Motors purchases
> Damon Company receives its monthly bank statement, which reports a balance of $2,000. After comparing this to the company’s cash records, Damon’s accountants determine that deposits outstanding total $4,200 and checks outstanding total $4,450. Required:
> Indicate whether the firm should add or subtract each item below from its balance of cash or the bank’s balance of cash in preparing a bank reconciliation. The first answer is provided as an example. If an item is not a reconciling item
> Match each term associated with a bank reconciliation with its description.
> Record the following transactions. 1. Pay employee salaries of $600 by issuing checks. 2. Purchase computer equipment of $1,000 using a credit card. 3. Pay for maintenance of $400 for a company vehicle using a debit card.
> Financial information for American Eagle is presented in Appendix A at the end of the book, and financial information for Buckle is presented in Appendix B at the end of the book. Required: 1. Which company carries a greater inventory balance as a percen
> During the year, the following sales transactions occur. There is a charge of 3% on all credit card transactions and a 1% charge on all debit card transactions. Calculate the amount recorded as cash receipts from these transactions. 1. Total cash sales =
> Determine whether the firm reports each of the following items as part of cash and cash equivalents in the balance sheet.
> Match each of the following control activities with its definition.
> Match each of the following components of internal control with its description.
> For each company, calculate the ratio of cash to noncash assets.
> Smith Law Firm specializes in the preparation of wills for estate planning. On October 1, 2021, the company begins operations by issuing stock for $11,000 and obtaining a loan from a local bank for $35,000. By the end of 2021, the company provides will p
> On January 12, Ferrell Incorporated obtains a permit to start a comedy club, which will operate only on Saturday nights. To prepare the club for the grand opening, Ferrell purchases tables and chairs for $13,000 cash on January 16. Ferrell also purchases
> Eastwood Enterprises offers horseback riding lessons. During the month of June, the company provides lessons on account totaling $5,100. By the end of the month, the company received on account $4,500 of this amount. In addition, Eastwood received $500 o
> Match each type of cash flow to its definition.
> Clooney Corp. establishes a petty cash fund for $225 and issues a credit card to its office manager. By the end of the month, employees made one expenditure from the petty cash fund (entertainment, $25) and three expenditures with the credit card (postag
> Financial information for Buckle is presented in Appendix B at the end of the book. Required: 1. For the most recent year, what is the amount of inventory in the balance sheet? What does this amount represent? 2. Buckle refers to its cost of goods sold u
> Larry has been the chief financial officer (CFO) of Maxima Auto Service for the past 10 years. The company has reported profits each year it’s been in business. However, this year has been a tough one. Increased competition and the rising costs of labor
> Brangelina Adoption Agency’s general ledger shows a cash balance of $4,593. The balance of cash in the March-end bank statement is $7,345. A review of the bank statement reveals the following information: checks outstanding of $2,803, bank service fees o
> Refer to the information in BE4–10. Required: Record the necessary entries to adjust the balance of cash.
> Bourne Incorporated reports a cash balance at the end of the month of $2,620. A comparison of the company’s cash records with the monthly bank statement reveals several additional cash transactions: bank service fees ($85), an NSF check from a customer (
> Match each of the following provisions of the Sarbanes-Oxley Act (SOX) with its description.
> Beaver Construction purchases new equipment for $50,400 cash on April 1, 2021. At the time of purchase, the equipment is expected to be used in operations for seven years (84 months) and have no resale or scrap value at the end. Beaver depreciates equipm
> Mountaineer Excavation operates in a low-lying area that is subject to heavy rains and flooding. Because of this, Mountaineer purchases one year of flood insurance in advance on March 1, paying $36,000 ($3,000/month). (1) Record the purchase of insurance
> Suppose Hoosiers, a specialty clothing store, rents space at a local mall for one year, paying $25,200 ($2,100/month) in advance on October 1. (1) Record the payment of rent in advance on October 1. (2) Record the adjusting entry on December 31. (3) Calc
> At the beginning of May, Golden Gopher Company reports a balance in Supplies of $500. On May 15, Golden Gopher purchases an additional $3,300 of supplies for cash. By the end of May, only $300 of supplies remains. (1) Record the purchase of supplies on M
> Rebel Technology maintains its records using cash-basis accounting. During the year, the company received cash from customers, $50,000, and paid cash for salaries, $21,900. At the beginning of the year, customers owe Rebel $1,100. By the end of the year,
> Consider the following set of transactions occurring during the month of May for Bison Consulting Company. For each transaction, indicate the impact on (1) the balance of cash, (2) cash-basis net income, and (3) accrual-basis net income for May. The firs
> Financial information for American Eagle is presented in Appendix A at the end of the book. Required: 1. For the most recent year, what is the amount of inventory in the balance sheet? What does this amount represent? 2. American Eagle refers to its cost
> Hoya Corporation reports the following amounts: Assets = $18,000; Liabilities = $3,000; Stockholders’ equity = $15,000; Dividends = $3,000; Revenues = $17,000; and Expenses = $12,000. What amount is reported for net income?
> The year-end adjusted trial balance of Hilltoppers Corporation included the following account balances: Cash, $5,000; Equipment, $17,000; Accounts Payable, $3,000; Common Stock, $11,000; Retained Earnings, $8,100; Dividends, $1,100; Service Revenue, $16,
> Below are transactions for Bronco Corporation during the month of June. Calculate the amount of expense to recognize in June. If the transaction does not require an expense to be recognized, indicate how the transaction would be reported. a. Pay $600 cas
> The year-end adjusted trial balance of Aggies Corporation included the following account balances: Retained Earnings, $230,000; Service Revenue, $900,000; Salaries Expense, $390,000; Rent Expense, $150,000; Interest Expense, $85,000; and Dividends, $60,0
> The following account balances appear in the 2021 adjusted trial balance of Blue Devils Corporation: Cash, $5,000; Accounts Receivable, $9,000; Supplies, $19,000; Equipment, $120,000; Accumulated Depreciation, $45,000; Accounts Payable, $26,000; Salaries
> The following account balances appear in the 2021 adjusted trial balance of Spiders Corporation: Common Stock, $30,000; Retained Earnings, $8,000; Dividends, $1,000; Service Revenue, $28,000; Salaries Expense, $16,000; and Rent Expense, $9,000. No common
> The following account balances appear in the 2021 adjusted trial balance of Beavers Corporation: Service Revenue, $275,000; Salaries Expense, $110,000; Supplies Expense, $20,000; Rent Expense, $26,000; Depreciation Expense, $44,000; and Delivery Expense,
> Below are the four primary financial statements. Match each financial statement with its primary purpose to investors.
> For each of the following accounts, indicate whether the account is shown in the income statement or the balance sheet:
> Refer to the information in BE3–12. (1) Record the lending for Falcon on July 1, 2021. (2) Record the adjusting entry for Falcon on December 31, 2021. (3) Calculate the 2021 year-end adjusted balances of Interest Receivable and Interest Revenue (assumi
> Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinic participants wear multiuse (MU) watches. Beyond the normal timekeeping features of most watch
> Midshipmen Company borrows $15,000 from Falcon Company on July 1, 2021. Midshipmen repays the amount borrowed and pays interest of 12% (1%/month) on June 30, 2022. (1) Record the borrowing for Midshipmen on July 1, 2021. (2) Record the adjusting entry fo
> Fighting Irish Incorporated pays its employees $5,600 every two weeks ($400/ day). The current two-week pay period ends on December 28, 2021, and employees are paid $5,600. The next two-week pay period ends on January 11, 2022, and employees are paid $5,
> Suppose a customer rents a vehicle for three months from Commodores Rental on November 1, paying $6,000 ($2,000/month). (1) Record the rental for Commodores on November 1. (2) Record the adjusting entry on December 31. (3) Calculate the year-end adjusted
> Below are transactions for Lobos, Inc., during the month of December. Calculate the amount of revenue to recognize in December. If the transaction does not require the company to recognize a revenue, indicate how it would report the transaction. a. Recei
> Consider the following T-account for cash. 1. Compute the balance of the Cash account. 2. Give some examples of transactions that would have resulted in the $4,400 posting to the account. 3. Give some examples of transactions that would have resulted in
> The following transactions occur for Cardinal Music Academy during the month of October: 1. Provide music lessons to students for $17,000 cash. 2. Purchase prepaid insurance to protect musical equipment over the next year for $4,200 cash. 3. Purchase mus
> The following transactions occur for the Panther Detective Agency during the month of July: 1. Purchase a truck and sign a note payable, $15,000. 2. Purchase office supplies for cash, $600. 3. Pay $800 in rent for the current month. Record the transactio
> Fill in the blanks below with the word “debit” or “credit.” a. The balance of an asset account increases with a_____and decreases with a_____. b. The balance of a liability account increases with a ______and decreases with a_____ . c. The balance of a st
> For each of the following accounts, indicate whether a debit or credit is used to increase (+) or decrease (−) the balance of the account. The solution for the first one is provided as an example.
