At the end of 2022, the following information is available for Great Adventures. • Additional interest for five months needs to be accrued on the $30,000, 6% loan obtained on August 1, 2021. Recall that annual interest is paid each July 31. • Assume that $10,000 of the $30,000 loan discussed above is due next year. • By the end of the year, $20,000 in gift cards have been redeemed. The company had sold gift cards of $25,000 during the year and recorded those as Deferred Revenue. • Great Adventures is a defendant in litigation involving a biking accident during one of its adventure races. The company believes the likelihood of payment occurring is probable, and the estimated amount to be paid is $12,000. • For sales of MU watches, Great Adventures offers a warranty against defect for one year. At the end of the year, the company estimates future warranty costs to be $4,000. Required: 1. Record each of the transactions above on December 31, 2022. 2. If the likelihood of payment for the litigation is determined to be reasonably possible, what should Great Adventures record for this possible payment? The Great Adventures continuing problem also can be assigned using the General Ledger software in Connect. Students will be given an existing trial balance and asked to prepare: (1) the journal entries for the transactions above in 2022, (2) financial statements, and (3) closing entries.
> Vail is one of the largest ski resorts in the United States. Suppose that on October 1, 2021, Vail sells gift cards (lift passes) for $100,000. The gift cards are redeemable for one day of skiing during the upcoming winter season. The gift cards expire o
> Apple Inc. is the number one online music retailer through its iTunes music store. Apple sells iTunes gift cards in $15, $25, and $50 increments. Assume Apple sells $21 million in iTunes gift cards in November, and customers redeem $14 million of the gif
> Match (by letter) the correct reporting method for each of the items listed below.
> Sub Sandwiches of America made the following expenditures related to its restaurant: 1. Replaced the heating equipment at a cost of $250,000. 2. Covered the patio area with a clear plastic dome and enclosed it with glass for use during the winter months.
> Listed below are several terms and phrases associated with operational assets. Pair each item from List A (by letter) with the item from List B that is most appropriately associated with it.
> Eugene Wright is CFO of Caribbean Cruise Lines. The company offers luxury cruises. It’s near year-end, and Eugene is feeling kind of queasy. The economy is in a recession, and demand for luxury cruises is way down. Eugene doesn’t want the company’s curre
> Satellite Systems modified its model Z2 satellite to incorporate a new communication device. The company made the following expenditures: During your year-end review of the accounts related to intangibles, you discover that the company has capitalized al
> Mainline Produce Corporation acquired all the outstanding common stock of Iceberg Lettuce Corporation for $30,000,000 in cash. The book values and fair values of Iceberg’s assets and liabilities were as follows: Required: Calculate the
> Brick Oven Corporation made the following expenditures during the first month of operations: Required: Record the $131,500 in cash expenditures.
> The Donut Stop purchased land and a building for $2 million. To maximize the company’s tax deduction for depreciation, management allocated only 10% of the purchase price to land and 90% of the purchase price to the building. A more reasonable allocation
> Red Rock Bakery purchases land, building, and equipment for a single purchase price of $600,000. However, the estimated fair values of the land, building, and equipment are $175,000, $455,000, and $70,000, respectively, for a total estimated fair value o
> 21 On January 1, 2021, the general ledger of TNT Fireworks includes the following account balances: During January 2021, the following transactions occur: January 1 Purchase equipment for $19,500. The company estimates a residual value of $1,500 and a
> Midwest Services, Inc., operates several restaurant chains throughout the Midwest. One restaurant chain has experienced sharply declining profits. The company’s management has decided to test the operational assets of the restaurants fo
> Orion Flour Mills purchased a new machine and made the following expenditures: The machine, including sales tax, was purchased on account, with payment due in 30 days. The other expenditures listed above were paid in cash. Required: Record the above expe
> Brad’s BBQ reported sales of $735,000 and net income of $28,000. Brad’s also reported ending total assets of $496,000 and beginning total assets of $389,000. Required: Calculate the return on assets, the profit margin, and the asset turnover ratio for Br
> Salad Express exchanged land it had been holding for future plant expansion for a more suitable parcel of land along distribution routes. Salad Express reported the old land on the previously issued balance sheet at its original cost of $70,000. Accordin
> 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. Calculate the current ratio for both companies for the year e
> Abbott Landscaping purchased a tractor at a cost of $42,000 and sold it three years later for $21,600. Abbott recorded depreciation using the straight-line method, a five-year service life, and a $3,000 residual value. Tractors are included in the Equipm
> On January 1, 2021, Weaver Corporation purchased a patent for $237,000. The remaining legal life is 20 years, but the company estimates the patent will be useful for only six more years. In January 2023, the company incurred legal fees of $57,000 in succ
> Tasty Subs acquired a delivery truck on October 1, 2021, for $21,500. The company estimates a residual value of $2,500 and a six-year service life. It expects to drive the truck 100,000 miles. Actual mileage was 5,000 miles in 2021 and 19,000 miles in 20
> The Donut Stop acquired equipment for $19,000. The company uses straight-line depreciation and estimates a residual value of $3,000 and a four-year service life. At the end of the second year, the company estimates that the equipment will be useful for f
> Tasty Subs acquired a delivery truck on October 1, 2021, for $21,600. The company estimates a residual value of $1,200 and a six-year service life. Required: Calculate depreciation expense using the straight-line method for 2021 and 2022, assuming a Dece
> Togo’s Sandwiches acquired equipment on April 1, 2021, for $18,000. The company estimates a residual value of $2,000 and a five-year service life. Required: Calculate depreciation expense using the straight-line method for 2021 and 2022, assuming a Decem
> Speedy Delivery Company purchases a delivery van for $36,000. Speedy estimates that at the end of its four-year service life, the van will be worth $6,400. During the four-year period, the company expects to drive the van 148,000 miles. Required: Calcula
> Super Saver Groceries purchased store equipment for $29,500. Super Saver estimates that at the end of its 10-year service life, the equipment will be worth $3,500. During the 10-year period, the company expects to use the equipment for a total of 13,000
> McCoy’s Fish House purchases a tract of land and an existing building for $1,000,000. The company plans to remove the old building and construct a new restaurant on the site. In addition to the purchase price, McCoy pays closing costs, including title in
> Littleton Books has the following transactions during May. May 2 Purchases books on account from Readers Wholesale for $3,300, terms 1/10, n/30. May 3 Pays cash for freight costs of $200 on books purchased from Readers. May 5 Returns books with a cost o
> Financial information for Buckle is presented in Appendix B at the end of the book. Required: 1. Calculate the current ratio for the past two years. Did the current ratio improve or weaken in the more recent year? 2. Calculate the acid-test (quick) ratio
> On June 5, Staley Electronics purchases 200 units of inventory on account for $19 each, with terms 2/10, n/30. Staley pays for the inventory on June 12. Required: 1. Record transactions for the purchase of inventory and payment on account using a perpetu
> On June 5, Staley Electronics purchases 200 units of inventory on account for $20 each. After closer examination, Staley determines 40 units are defective and returns them to its supplier for full credit on June 9. All remaining inventory is sold on acco
> Bingerton Industries began the year with inventory of $85,000. Purchases of inventory on account during the year totaled $310,000. Inventory costing $335,000 was sold on account for $520,000. Required: Record transactions for the purchase and sale of in
> During the year, Trombley Incorporated has the following inventory transactions. For the entire year, the company sells 81 units of inventory for $30 each. Required: 1. Using FIFO, calculate (a) ending inventory, (b) cost of goods sold, (c) sales revenue
> During the year, TRC Corporation has the following inventory transactions. For the entire year, the company sells 450 units of inventory for $70 each. Required: 1. Using FIFO, calculate (a) ending inventory, (b) cost of goods sold, (c) sales revenue, and
> Tisdale Incorporated reports the following amount in its December 31, 2021, income statement. Required: 1. Prepare a multiple-step income statement. 2. Explain how analyzing the multiple levels of profitability can help in understanding the future profit
> On January 1, 2021, the general ledger of Big Blast Fireworks includes the following account balances: The $30,000 beginning balance of inventory consists of 300 units, each costing $100. During January 2021, Big Blast Fireworks had the following invento
> Mulligan Corporation purchases inventory on account with terms FOB shipping point. The goods are shipped on December 30, 2021, but do not reach Mulligan until January 5, 2022. Mulligan correctly records accounts payable associated with the purchase but d
> Wayman Corporation reports the following amounts in its December 31, 2021, income statement. Required: Prepare a multiple-step income statement.
> Refer to the transactions in E6–11. Required: 1. Record the transactions of DS Unlimited, assuming the company uses a periodic inventory system. 2. Record the period-end adjustment to cost of goods sold on August 31, assuming the company has no beginning
> Financial information for American Eagle is presented in Appendix A at the end of the book. Required: 1. Calculate the current ratio for the past two years. Did the current ratio improve or weaken in the more recent year? 2. Calculate the acid-test (quic
> Refer to the transactions in E6–10. Required: 1. Record the transactions of Sundance Systems, assuming the company uses a periodic inventory system. 2. Record the period-end adjustment to cost of goods sold on July 31, assuming the company has no beginni
> Refer to the transactions in E6–9. Required: 1. Record the transactions of Littleton Books, assuming the company uses a periodic inventory system. 2. Record the period-end adjustment to cost of goods sold on May 31, assuming the company has no beginning
> Below are amounts found in the income statements of three companies. Required: 1. For each company, calculate (a) gross profit, (b) operating income, (c) income before income taxes, and (d) net income. 2. For each company, calculate the gross profit rati
> Lewis Incorporated and Clark Enterprises report the following amounts for the year. Required: 1. Calculate cost of goods sold for each company. 2. Calculate the inventory turnover ratio for each company. 3. Calculate the average days in inventory for eac
> A company like Golf USA that sells golf-related inventory typically will have inventory items such as golf clothing and golf equipment. As technology advances the design and performance of the next generation of drivers, the older models become less mark
> Home Furnishings reports inventory using the lower of cost and net realizable value (NRV). Below is information related to its year-end inventory. Required: 1. Calculate the total recorded cost of ending inventory before any adjustments. 2. Calculate end
> Refer to the transactions in E6–11. Required: Prepare the transactions for GameGirl, Inc., assuming the company uses a perpetual inventory system. Assume the 70 game devices sold on August 6 to DS Unlimited had a cost to GameGirl of $180 each. The items
> DS Unlimited has the following transactions during August. August 6 Purchases 70 handheld game devices on account from GameGirl, Inc., for $200 each, terms 1/10, n/60. August 7 Pays $400 to Sure Shipping for freight charges associated with the August 6
> Sundance Systems has the following transactions during July. July 5 Purchases 40 LCD televisions on account from Red River Supplies for $2,500 each, terms 3/10, n/30. July 8 Returns to Red River two televisions that had defective sound. July 13 Pays the
> Russell Retail Group begins the year with inventory of $55,000 and ends the year with inventory of $45,000. During the year, the company has four purchases for the following amounts. Required: Calculate cost of goods sold for the year.
> Southwest Pediatrics has the following balances on December 31, 2021, before any adjustment: Accounts Receivable = $130,000; Allowance for Uncollectible Accounts = $2,100 (debit). On December 31, 2021, Southwest estimates uncollectible accounts to be 20%
> Physicians’ Hospital has the following balances on December 31, 2021, before any adjustment: Accounts Receivable = $60,000; Allowance for Uncollectible Accounts = $1,100 (credit). On December 31, 2021, Physicians’ estimates uncollectible accounts to be 1
> During 2021, its first year of operations, Pave Construction provides services on account of $160,000. By the end of 2021, cash collections on these accounts total $110,000. Pave estimates that 25% of the uncollected accounts will be uncollectible. In 20
> On April 25, Foreman Electric installs wiring in a new home for $3,500 on account. However, on April 27, Foreman’s electrical work does not pass inspection, and Foreman grants the customer an allowance of $600 because of the problem. The customer makes f
> Refer to the information in E5–4. Required: For Grace Hospital, record the purchase of services on account on March 12 and the payment of cash on March 31.
> Refer to the information in E5–3, but now assume that Grace does not pay for services until March 31, missing the 2% sales discount. Required: For Medical Waste Services, record the service on account on March 12 and the collection of cash on March 31.
> On March 12, Medical Waste Services provides services on account to Grace Hospital for $11,000, terms 2/10, n/30. Grace pays for those services on March 20. Required: For Medical Waste Services, record the service on account on March 12 and the collectio
> The general ledger of Pop’s Fireworks includes the following account balances in 2021: In addition, the following transactions occurred during 2021 and are not yet reflected in the account balances above: 1. Provide additional services
> On January 1, 2021, the general ledger of 3D Family Fireworks includes the following account balances: During January 2021, the following transactions occur: January 2 Provide services to customers for cash, $35,100. January 6 Provide services to custom
> Refer to the information in E5–19, but now assume that the balance of the Allowance for Uncollectible Accounts on December 31, 2021, is $1,100 (debit) (before adjustment). Required: 1. Record the adjustment for uncollectible accounts using the percentage
> Edward L. Vincent is CFO of Energy Resources, Inc. The company specializes in the exploration and development of natural gas. It’s near year-end, and Edward is feeling terrific. Natural gas prices have risen throughout the year, and Energy Resources is s
> Merry Maidens Cleaning generally charges $300 for a detailed cleaning of a normal-size home. However, to generate additional business, Merry Maidens is offering a new-customer discount of 10%. On May 1, Ms. E. Pearson has Merry Maidens clean her house an
> Suzuki Supply reports the following amounts at the end of 2021 (before adjustment). Required: 1. Record the adjustment for uncollectible accounts using the percentage-of-receivables method. Suzuki estimates 12% of receivables will not be collected. 2. Re
> Below are amounts (in millions) from three companies’ annual reports. Required: For each company, calculate the receivables turnover ratio and the average collection period (rounded to one decimal place). Which company appears most effi
> On April 1, 2021, Shoemaker Corporation realizes that one of its main suppliers is having difficulty meeting delivery schedules, which is hurting Shoemaker’s business. The supplier explains that it has a temporary lack of funds that is slowing its produc
> Refer to the information in E5–15. Required: For Whole Grain Bakery, record the issuance of the note payable on March 1 and the cash payment on September 1.
> On March 1, Terrell & Associates provides legal services to Whole Grain Bakery regarding some recent food poisoning complaints. Legal services total $11,000. In payment for the services, Whole Grain Bakery signs a 9% note requiring the payment of the fac
> During 2021, LeBron Corporation accepts the following notes receivable. 1. On April 1, LeBron provides services to a customer on account. The customer signs a four- month, 9% note for $7,000. 2. On June 1, LeBron lends cash to one of the company’s vendor
> At the beginning of 2021, Brad’s Heating & Air (BHA) has a balance of $26,000 in accounts receivable. Because BHA is a privately owned company, the company has used only the direct write-off method to account for uncollectible accounts. However, at the e
> Consider the following transactions associated with accounts receivable and the allowance for uncollectible accounts. Required: For each transaction, indicate whether it would increase (I), decrease (D), or have no effect (NE) on the account totals. (Hin
> The Physical Therapy Center specializes in helping patients regain motor skills after serious accidents. The center has the following balances on December 31, 2021, before any adjustment: Accounts Receivable = $110,000; Allowance for Uncollectible Accoun
> At a recent luncheon, you were seated next to Mr. Fogle, the president of a local company that manufactures food processors. He heard that you were in a financial accounting class and asked: “Why is it that I’m forced to record depreciation expense on my
> Mercy Hospital has the following balances on December 31, 2021, before any adjustment: Accounts Receivable = $70,000; Allowance for Uncollectible Accounts = $1,400 (credit). Mercy estimates uncollectible accounts based on an aging of accounts receivable
> On May 7, Juanita Construction provides services on account to Michael Wolfe for $4,000. Michael pays for those services on May 13. Required: For Juanita Construction, record the service on account on May 7 and the collection of cash on May 13.
> Spielberg Company’s general ledger shows a checking account balance of $22,970 on July 31, 2021. The July cash receipts of $1,885, included in the general ledger balance, are placed in the night depository at the bank on July 31 and processed by the bank
> Janice Dodds opens the mail for Ajax Plumbing Company. She lists all customer checks on a spreadsheet that includes the name of the customer and the check amount. The checks, along with the spreadsheet, are then sent to Jim Seymour in the accounting depa
> Goldie and Kate operate a small clothing store that has annual revenues of about $100,000. The company has established the following procedures related to cash disbursements: The petty cash fund consists of $10,000. Employees place a receipt in the fund
> Douglas and Son, Inc., uses the following process for its cash receipts: The company typically receives cash and check sales each day and places them in a single drawer. Each Friday, the cash clerk records the amount of cash received and deposits the mon
> Below are several amounts reported at the end of the year. Required: Calculate the amount of cash to report in the balance sheet.
> Below are several scenarios related to control activities of a company. 1. A manufacturing company compares total sales in the current year to those in the previous year but does not compare the cost of production. 2. So that employees can have easy acce
> Below are several statements about internal controls. 1. The components of internal control are built on the foundation of the ethical tone set by top management. 2. Once every three months, managers need to review operations to ensure that control proce
> Below are amounts (in millions) for Glasco Company and Sullivan Company. Both companies have total revenues of $2,500, $3,000, and $3,500 in each year. Required: Make a prediction as to which firm will have the higher ratio of cash to noncash assets at t
> Companies are increasingly making their accounting information, especially their annual reports, available through their websites. Select a well-known publicly traded company and go to its website. Look for the investment section, and then click on annua
> Below are several statements about the Sarbanes-Oxley Act (SOX). 1. SOX represents legislation passed in response to several accounting scandals in the early 2000s. 2. The requirements outlined in SOX apply only to those companies expected to have weak i
> 1. Service Revenue for the year = $80,000. Of this amount, $70,000 is collected during the year and $10,000 is expected to be collected next year. 2. Salaries Expense for the year = $40,000. Of this amount, $35,000 is paid during the year and $5,000 is e
> Refer to the information in E4–16. Required: Calculate cash flows from financing activities.
> Refer to the information in E4–16. Required: Calculate cash flows from investing activities.
> Below are cash transactions for Goldman Incorporated, which provides consulting services related to mining of precious metals. a. Cash used for purchase of office supplies, $2,400. b. Cash provided from consulting to customers, $50,600. c. Cash used for
> Below are several transactions for Meyers Corporation for 2021. Required: 1. For each transaction, determine the amount of cash flows (indicate inflows with a “+” and outflows with a “âˆ
> Below are several transactions for Witherspoon Incorporated, a small manufacturer of decorative glass designs. Required: For each transaction, indicate (1) whether cash is involved (yes or no), and, if cash is involved, (2) whether Witherspoon should c
> T. L. Jones Trucking Services establishes a petty cash fund on April 3 for $200. By the end of April, the fund has a cash balance of $97. The company has also issued a credit card and authorized its office manager to make purchases. Expenditures for the
> Halle’s Berry Farm establishes a $200 petty cash fund on September 4 to pay for minor cash expenditures. The fund is replenished at the end of each month. At the end of September, the fund contains $30 in cash. The company has also issu
> On October 31, 2021, Damon Company’s general ledger shows a checking account balance of $8,397. The company’s cash receipts for the month total $74,320, of which $71,295 has been deposited in the bank. In addition, the company has written checks for $72,
> Companies often are under pressure to meet or beat Wall Street earnings projections in order to increase stock prices and also to increase the value of stock options. Such pressure may cause some managers to alter their estimates for depreciation to arti
> Obtain a copy of the annual report of Apple Inc. for the most recent year. You can find the annual report at the company’s website (www.apple.com) in the investor information section or at the Securities and Exchange Commission’s website (www.sec.gov) us
> On August 31, 2021, the general ledger of The Dean Acting Academy shows a balance for cash of $7,944. Cash receipts yet to be deposited into the checking account total $3,338, and checks written by the academy but not yet processed by the bank total $1,4
> Below are several statements about occupational fraud. 1. For most large companies, occupational fraud is minimal and internal control procedures are unnecessary. 2. Managers have a variety of reasons for manipulating the numbers in financial statements,
> Refer to the information in E3–8. Required: For each of the adjustments in E3–8, indicate by how much net income in the income statement is higher or lower if the adjustment is not recorded.
> Consider the following transactions for Huskies Insurance Company: 1. Equipment costing $42,000 is purchased at the beginning of the year for cash. Depreciation on the equipment is $7,000 per year. 2. On June 30, the company lends its chief financial off
> Golden Eagle Company prepares monthly financial statements for its bank. The November 30 adjusted trial balance includes the following account information: The following information is known for the month of December: 1. Purchases of supplies during Dece
> Listed below are all the steps in the accounting cycle. Required: List the steps in proper order.
