Question: At the end of January 2012, the

> Indicate whether the FIFO or LIFO inventory costing method would normally be selected when inventory costs are rising. Explain why.

> JCPenney Company, Inc., is a major retailer with department stores in all 50 states. The dominant portion of the company’s business consists of providing merchandise and services to consumers through department stores that include catalog departments. In

> The following list includes a series of accounts for Sanjeev Corporation, which has been operating for three years. These accounts are listed and numbered for identification. Following the accounts is a series of transactions. For each transaction, indic

> Match the type of inventory with the type of business in the following matrix: TYPE OF BUSINESS Type of Inventory Merchandising Manufacturing Work in process Finished goods Merchandise Raw materials

> For each transaction in M2-5 (including the sample), write the journal entry in the proper form. For each of the following transactions of Pitt Inc. for the month of January 2012, indicate the accounts, amounts, and direction of the effects on the accou

> Indicate the most likely effect of the following changes in inventory management on the inventory turnover ratio (use + for increase, − for decrease, and NE for no effect). ___ a. Have parts inventory delivered daily by suppliers instead of weekly. ___ b

> Knight Company had the following inventory items on hand at the end of the year. Computing the lower of cost or market on an item-by-item basis, determine what amount would be reported on the balance sheet for inventory. Cost Replacement Cost Quant

> Indicate whether the FIFO or LIFO inventory costing method normally produces each of the following effects under the listed circumstances. a. Declining costs Highest net income ______ Highest inventory ______ b. Rising costs Highest net income _____

> Operating costs incurred by a manufacturing company become either (1) part of the cost of inventory to be expensed as cost of goods sold at the time the finished goods are sold or (2) expenses at the time they are incurred. Indicate whether each of the

> Elite Apparel purchased 90 new shirts and recorded a total cost of $2,735 determined as follows: Invoice cost.....................................................................................................$2,250 Shipping charges....................

> Assume the 2011 ending inventory was understated by $100,000. Explain how this error would affect the 2011 and 2012 pretax income amounts. What would be the effects if the 2011 ending inventory were overstated by $100,000 instead of understated?

> Based on its physical count of inventory in its warehouse at year-end, December 31, 2011, Madison Company planned to report inventory of $34,500. During the audit, the independent CPA developed the following additional information: a. Goods from a suppl

> Misty Company reported beginning inventory of 100 units at a unit cost of $20. It engaged in the following purchase and sale transactions during 2011: Jan. 14 Sold 20 units at unit sales price of $47.50 on open account. April 9 Purchased 15 additional

> When expenses exceed revenues in a given period, a. Retained earnings are not impacted. b. Retained earnings are decreased. c. Retained earnings are increased. d. One cannot determine the impact on retained earnings without additional information.

> Brett’s Cycles sells merchandise on credit terms of 2/15, n/30. A sale invoiced at $900 (cost of sales $600) was made to Shannon Allen on February 1, 2011. The company uses the gross method of recording sales discounts. Required: 1. Give the journal en

> An annual report of ConocoPhillips contained the following note: During 2008, certain international inventory quantity reductions caused a liquidation of LIFO inventory values resulting in a $39 million benefit to our R&M segment net income. In 2007, a l

> Complete the following table by entering either the word debit or credit in each column. Increase Decrease Assets Liabilities Stockholder's equity

> Grants Corporation prepared the following two income statements (simplified for illustrative purposes): During the third quarter, it was discovered that the ending inventory for the first quarter should have been $4,400. Required: 1. What effect did

> Several years ago, the financial statements of Gibson Greeting Cards, now part of American Greetings, contained the following note: On July 1, the Company announced that it had determined that the inventory. . . had been overstated. . . . The overstatem

> Zocco Ski Company mistakenly recorded purchases of inventory on account received during the last week of December 2011 as purchases during January of 2012 (this is called a purchases cutoff error). Zocco uses a periodic inventory system, and ending inven

> The following note was contained in a recent Ford Motor Company annual report: Required: 1. What amount of ending inventory would have been reported in the current year if Ford had used only FIFO? 2. The cost of goods sold reported by Ford for the cu

> First Team Sports, Inc., is engaged in the manufacture (through independent contractors) and distribution of in-line roller skates, ice skates, street hockey equipment, and related accessory products. Its recent annual report included the following on it

> The records at the end of January 2012 for Captain Company showed the following for a particular kind of merchandise: Inventory, December 31, 2011, at FIFO: 19 Units @ $16 = $304 Inventory, December 31, 2011, at LIFO: 19 Units @ $12 = $228 Required:

> Dell Inc. is the leading manufacturer of personal computers. In a recent year, it reported the following in dollars in millions: Net sales revenue......................................$61,101 Cost of sales................................................

> As a team, select an industry to analyze. Reuters provides lists of industries under Sectors and Industries at www.reuters.com. (Click on an industry and then select Company Rankings for a list of members of that industry.) Each team member should acquir

> Parson Company was formed on January 1, 2012, and is preparing the annual financial statements dated December 31, 2012. Ending inventory information about the four major items stocked for regular sale follows: Required: 1. Compute the valuation that s

> Jones Company is preparing the annual financial statements dated December 31, 2012. Ending inventory information about the five major items stocked for regular sale follows: Required: Compute the valuation that should be used for the 2012 ending inven

> Following is partial information for the income statement of Lumber Company under three different inventory costing methods, assuming the use of a periodic inventory system: Required: 1. Compute cost of goods sold under the FIFO, LIFO, and average cos

> Complete the following table by entering either the word increases or decreases in each column. Debit Credit Assets Liabilities Stockholders' equity

> Daniel Company uses a periodic inventory system. Data for 2012: beginning merchandise inventory (December 31, 2011), 2,000 units at $38; purchases, 8,000 units at $40; expenses (excluding income taxes), $194,500; ending inventory per physical count at De

> Beck Inc. uses a periodic inventory system. At the end of the annual accounting period, December 31, 2012, the accounting records provided the following information for product 2: Required: 1. Prepare a separate income statement through pretax income

> Element Company uses a periodic inventory system. At the end of the annual accounting period, December 31, 2012, the accounting records provided the following information for product 2: Required: 1. Prepare a separate income statement through pretax i

> Hamilton Company uses a periodic inventory system. At the end of the annual accounting period, December 31, 2012, the accounting records provided the following information for product 1: Required: Compute ending inventory and cost of goods sold under

> Abercrombie and Fitch is a leading retailer of casual apparel for men, women, and children. Assume that you are employed as a stock analyst and your boss has just completed a review of the new Abercrombie annual report. She provided you with her notes, b

> Supply the missing dollar amounts for the income statement for each of the following independent cases: Pretax Sales Beginning Total Ending Inventory Goods Sold Profit Expenses Cost of Gross Income Cases Revenue Inventory $ 650 Purchases Available (

> The matching principle controls a. Where on the income statement expenses should be presented. b. When costs are recognized as expenses on the income statement. c. The ordering of current assets and current liabilities on the balance sheet. d. How co

> Supply the missing dollar amounts for the income statement for each of the following independent cases. Case A Case B Case C Net sales revenue $7.500 2$ $6,000 Beginning inventory $11,200 $ 6,500 $ 4,000 Purchases 5,000 9,500 Goods available for sal

> In its annual report, Caterpillar, Inc., a major manufacturer of farm and construction equipment, reported the following information concerning its inventories: Inventories are stated at the lower of cost or market. Cost is principally determined using t

> Dana Holding Corporation designs and manufactures component parts for the vehicular, industrial, and mobile off-highway original equipment markets. In a recent annual report, Dana’s inventory note indicated the following: Dana changed its method of acco

> A recent press release for Seneca Foods (licensee of the Libby’s brand of canned fruits and vegetables) included the following information: The current year’s net earnings were $8,019,000 or $0.65 per diluted share, compared with $32,067,000 or $2.63 pe

> For each of the following transactions of Pitt Inc. for the month of January 2012, indicate the accounts, amounts, and direction of the effects on the accounting equation. A sample is provided. a. (Sample) Borrowed $20,000 from a local bank. b. Lent $7

> Refer to AP2-3 . Ethan Allen Interiors, Inc., is a leading manufacturer and retailer of home furnishings in the United States and abroad. The following is adapted from Ethan Allen’s June 30, 2008, annual financial report. Dollars are i

> Micro Warehouse was a computer software and hardware online and catalog sales company. A Wall Street Journal article disclosed the following: Its Form 10-Q quarterly report filed with the Securities and Exchange Commission two days before indicated tha

> Refer to the financial statements of American Eagle Outfitters given in Appendix B at the end of this book. Required: 1. How much inventory does the company hold at the end of the most recent year? 2. Estimate the amount of merchandise that the compan

> Refer to the financial statements of American Eagle Outfitters (Appendix B) and Urban Outfitters (Appendix C) and the Industry Ratio Report (Appendix D) at the end of this book. Required: 1. Compute the inventory turnover ratio for both companies for t

> Refer to the financial statements of Urban Outfitters given in Appendix C at the end of this book. Required: 1. The company uses lower of cost or market to account for its inventory. At the end of the year, do you expect the company to write its invent

> Which of the following is not one of the four criteria that normally must be met for revenue to be recognized according to the revenue principle for accrual basis accounting? a. Cash has been collected. b. Services have been performed. c. The price is

> The income statements for four consecutive years for Colca Company reflected the following summarized amounts: Subsequent to development of these amounts, it has been determined that the physical inventory taken on December 31, 2012, was understated by

> Income is to be evaluated under four different situations as follows: a. Prices are rising: (1) Situation A: FIFO is used. (2) Situation B: LIFO is used. b. Prices are falling: (1) Situation C: FIFO is used. (2) Situation D: LIFO is used. The basic

> Dixon Company uses a periodic inventory system. At the end of the annual accounting period, December 31, 2011, the accounting records for the most popular item in inventory showed the following: Required: Compute the cost of (a) goods available for s

> Under the gross method of recording sales discounts discussed in this chapter, is the amount of sales discount taken recorded (a) at the time the sale is recorded or (b) at the time the collection of the account is recorded?

> The following are accounts of Rosa-Perez Company: In the space provided, classify each as it would be reported on a balance sheet. Use: (1) Accounts Payable (2) Accounts Receivable (9) Long-Term Investments (10) Notes Payable (due in three years)

> Which of the following is not a specific account in a company’s chart of accounts? a. Gains b. Revenue c. Net Income d. Unearned Revenue

> Differentiate accounts receivable from notes receivable.

> What are the purposes of a bank reconciliation? What balances are reconciled?

> Why should cash-handling and cash-recording activities be separated? How is this separation accomplished?

> Summarize the primary characteristics of an effective internal control system for cash.

> Match each definition with its related term by entering the appropriate letter in the space provided. There should be only one definition per term (that is, there are more definitions than terms). Term Definition (1) Journal entry (2) A = L + SE, an

> This period a company collects $100 cash on an account receivable from a customer for a sale last period. How would the receipt of cash impact the following two financial statements this period? Income Statement..............................Statement of

> Briefly explain how the total amount of cash reported on the balance sheet is computed.

> At what point should revenue be recognized in each of the following independent cases? Case A. For Christmas presents, a Wendy’s restaurant sells coupon books for $15. Each of the $1 coupons may be used in the restaurant any time during the following 12

> Use the data presented in P6-2, which were selected from the records of Sykes Company for the year ended December 31, 2011. Data from P6-2: The following data were selected from the records of Sykes Company for the year ended December 31, 2011. Balanc

> The August 2011 bank statement for Allison Company and the August 2011 ledger account for cash follow: Outstanding checks at the end of July were for $270, $430, and $320. No deposits were in transit at the end of July. Required: 1. Compute the depo

> The bookkeeper at Wood Company has not reconciled the bank statement with the Cash account, saying, “I don’t have time.” You have been asked to prepare a reconciliation and review the procedures with

> Tungsten Company, Inc., sells heavy construction equipment. There are 10,000 shares of capital stock outstanding. The annual fiscal period ends on December 31. The following condensed trial balance was taken from the general ledger on December 31, 2011:

> Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three time periods as follow

> Match each definition with its related term by entering the appropriate letter in the space provided. There should be only one definition per term (that is, there are more definitions than terms). Term Definition (1) Separate-entity assumption A. =

> Peet’s Coffee & Tea, Inc., is a specialty coffee roaster and marketer of branded fresh roasted whole bean coffee. It recently disclosed the following information concerning the Allowance for Doubtful Accounts on its Form 10-K Annual

> Cash payments for salaries are reported in what section of the Statement of Cash Flows? a. Operating. b. Investing. c. Financing. d. None of the above.

> Stacey’s Piano Rebuilding Company has been operating for one year (2010). At the start of 2011, its income statement accounts had zero balances and its balance sheet account balances were as follows: Required: 1. Create T-accounts fo

> The following data presented in income statement order were taken from the year-end records of Berugu Export Company. Fill in all of the missing amounts and show computations. Independent Cases Income Statement Items Case A Case B Gross sales revenu

> The following data were selected from the records of Sykes Company for the year ended December 31, 2011. Balances January 1, 2011 Accounts receivable (various customers)....................................$115,000 Allowance for doubtful accounts........

> Which of the following is not a component of net sales? a. Sales returns and allowances b. Sales discounts c. Cost of goods sold d. Credit card discounts

> Which of the following best describes the proper presentation of accounts receivable in the financial statements? a. Gross accounts receivable plus the allowance for doubtful accounts in the asset section of the balance sheet. b. Gross accounts receivabl

> When using the allowance method, as bad debt expense is recorded, a. Total assets remain the same and stockholders’ equity remains the same. b. Total assets decrease and stockholders’ equity decreases. c. Total assets increase and stockholders’ equity

> Which of the following is not a step toward effective internal control over cash? a. Require signatures from a manager and one financial officer on all checks. b. Require that cash be deposited daily at the bank. c. Require that the person responsible

> Upon review of the most recent bank statement, you discover that you recently received an “insufficient funds check” from a customer. Which of the following describes the actions to be taken when preparing your bank reconciliation? Balance per Books....

> You have determined that Company X estimates bad debt expense with an aging of accounts receivable schedule. Company X’s estimate of uncollectible receivables resulting from the aging analysis equals $250. The beginning balance in the allowance for doubt

> When a company using the allowance method writes off a specific customer’s $100,000 account receivable from the accounting system, which of the following statements are true? 1. Total stockholders’ equity remains the same. 2. Total assets remain the sa

> Calculate the current ratio for Sal’s Pizza Company at the end of 2007 and 2008, based on the following data: What does the result suggest about the company over time? What can you say about Sal’s Pizza Company&acirc

> You have observed that the total asset turnover ratio for a retail chain has increased steadily over the last three years. The most likely explanation is which of the following? a. Salaries for upper management as a percentage of total expenses have decr

> A company has been successful in reducing the costs of its manufacturing process by relocating the factory to another locale. What effect will this factor have on the company’s gross profit percentage ratio, all other things equal? a. The ratio will not

> Gross sales total $250,000, one-half of which were credit sales. Sales returns and allowances of $15,000 apply to the credit sales, sales discounts of 2% were taken on all of the net credit sales, and credit card sales of $100,000 were subject to a credi

> Sales discounts with terms 2/10, n/30 mean: a. 10 percent discount for payment within 30 days. b. 2 percent discount for payment within 10 days, or the full amount (less returns) due within 30 days. c. Two-tenths of a percent discount for payment with

> Prepare journal entries for each transaction listed. a. During the period, bad debts are written off in the amount of $19,000. b. At the end of the period, bad debt expense is estimated to be $13,000.

> Merchandise invoiced at $8,500 is sold on terms 1/10, n/30. If the buyer pays within the discount period, what amount will be reported on the income statement as net sales?

> Indicate whether the following items would be added (+) or subtracted (−) from the company’s books or the bank statement during the construction of a bank reconciliation. Reconciling Item Company's Books Bank Stat

> Indicate the most likely effect of the following changes in credit policy on the receivables turnover ratio (+ for increase, − for decrease, and NE for no effect). a. Granted credit with shorter payment deadlines. b. Increased effectiveness of collection

> Using the following categories, indicate the effects of the following transactions. Use + for increase and − for decrease and indicate the accounts affected and the amounts. a. At the end of the period, bad debt expense is estimated to

> Net sales for the period was $45,000 and cost of sales was $28,000. Compute the gross profit percentage for the current year. What does this ratio measure?

> Total gross sales for the period include the following: Credit card sales (discount 3%).............................$ 9,400 Sales on account (2/15, n/60)...............................$10,500 Sales returns related to sales on account were $500. All ret

> Which of the following is the entry to be recorded by a law firm when it receives a $2,000 retainer from a new client at the initial client meeting? a. Debit to Cash, $2,000; credit to Legal Fees Revenue, $2,000. b. Debit to Accounts Receivable, $2,000

> For the transactions in M2-5, identify each as an investing (I) activity or financing (F) activity on the statement of cash flows. In M2-5, For each of the following transactions of Pitt Inc. for the month of January 2012, indicate the accounts, amount

> Indicate the most likely time you expect sales revenue to be recorded for each of the listed transactions. Indicate the most likely time you expect sales revenue to be recorded for each of the listed transactions. Transaction Point A Point B a. Sale

> A sale is made for $8,000; terms are 2/10, n/30. At what amount should the sale be recorded under the gross method of recording sales discounts? Give the required entry. Also give the collection entry, assuming that it is during the discount period.

> Microsoft develops, produces, and markets a wide range of computer software, including the Windows operating system. On its recent financial statements, Microsoft reported the following information about net sales revenue and accounts receivable (amounts

> Siemens is one of the world’s largest electrical engineering and electronics companies. Headquartered in Germany, the company has been in business for over 160 years and operates in 190 countries. In a recent annual report, it disclosed

> Frederick Company uses the aging approach to estimate bad debt expense. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $275,000, (2) up to 120 days past due, $50,000, and (3) more than 12

> Casilda Company uses the aging approach to estimate bad debt expense. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $50,000, (2) up to 180 days past due, $14,000, and (3) more than 180 d

> Gary’s Dairy uses the aging approach to estimate bad debt expense. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $16,000, (2) up to 120 days past due, $5,500, and (3) more than 120 days pas