Brown Cow Dairy uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $14,000; (2) up to 120 days past due, $4,500; and (3) more than 120 days past due, $2,500. Experience has shown that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectibility is (1) 2 percent, (2) 12 percent, and (3) 30 percent, respectively. At December 31 (end of the current year), the Allowance for Doubtful Accounts balance is $800 (credit) before the end-of-period adjusting entry is made. Data during the current year follow: a. During December, an Account Receivable (Patty’s Bake Shop) of $750 from a prior sale was determined to be uncollectible; therefore, it was written off immediately as a bad debt. b. On December 31, the appropriate adjusting entry for the year was recorded. Required: 1. Give the required journal entries for the two items listed above. 2. Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the income statement and balance sheet for the current year. Disregard income tax considerations. 3. On the basis of the data available, does the estimate resulting from the aging analysis appear to be reasonable? Explain.
> Campbell Soup Company is the world’s leading maker and marketer of soup and sells other well-known brands of food in 120 countries. Presented here are the items listed on its recent balance sheet (dollars in millions) presented in alpha
> Following are information items included in various financial reports. Match each information item with the report(s) where it would most likely be found by entering the appropriate letter(s) in the space provided. Information Item Report (1) Summari
> Following are the titles of various information releases. Match each definition with the related release by entering the appropriate letter in the space provided. Information Release Definitions (1) Form 10-Q (2) Quarterly report (3) Press release (4
> Match each player with the related definition by entering the appropriate letter in the space provided. Players Definitions (1) Financial analyst A. Financial institution or supplier that lends money to the (2) Creditor (3) Independent auditor (4) Pr
> Papa John’s is one of the fastest-growing pizza delivery and carry-out restaurant chains in the country. Presented here are selected income statement and balance sheet amounts (dollars in thousands). Required: 1. Compute ROA for the cu
> Penny’s Pool Service & Supply, Inc. (PPSS) is completing the accounting process for the year just ended, December 31 of the current year. The transactions during the year have been journalized and posted. The following data with respect to adjusting entr
> Explain briefly the application of the LCM concept to the ending inventory and its effect on the income statement and balance sheet when market is lower than cost.
> Contrast the effects of LIFO versus FIFO on cash outflow and inflow.
> The December 31, current year, bank statement for Rivas Company and the December current year ledger accounts for cash follow. The November current year bank reconciliation showed the following: correct cash balance at November 30, $64,100; deposits in t
> Contrast the income statement effect of LIFO versus FIFO (i.e., on pretax income) when (a) prices are rising and (b) prices are falling.
> Contrast the effects of LIFO versus FIFO on reported assets (i.e., the ending inventory) when (a) prices are rising and (b) prices are falling.
> Explain how income can be manipulated when the specific identification inventory costing method is used.
> The chapter discussed four inventory costing methods. List the four methods and briefly explain each.
> Define beginning inventory and ending inventory.
> Explain the application of the cost principle to an item in the ending inventory.
> Why is inventory an important item to both internal (management) and external users of financial statements?
> When a perpetual inventory system is used, unit costs of the items sold are known at the date of each sale. In contrast, when a periodic inventory system is used, unit costs are known only at the end of the accounting period. Why are these statements cor
> Refer to the financial statements of American Eagle Outfitters in Appendix B and Urban Outfitters in Appendix C. Financial statements of American Eagle: Financial statements of Urban Outfitters: Required: 1. Compute the inventory turnover ratio for bo
> Refer to the financial statements of Urban Outfitters in Appendix C at the end of this book Financial statements of Urban Outfitters: Required: 1. The company uses lower of cost or market to account for its inventory. At the end of the year, do you ex
> Perry Corporation is a local grocery store organized seven years ago as a corporation. At that time, a total of 10,000 shares of common stock were issued to the three organizers. The store is in an excellent location, and sales have increased each year.
> Refer to the financial statements of American Eagle Outfitters in Appendix B at the end of this book. Financial Statement of American Eagle Outfitters: Required: 1. How much inventory does the company hold at the end of the most recent year? 2. Estim
> Dixon Company uses a periodic inventory system. At the end of the annual accounting period, December 31, the accounting records for the most popular item in inventory showed the following: Required: Compute the cost of (a) goods available for sale, (b
> 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, 2017, 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 data
> At the end of January of the current year, the records of NewRidge Company showed the following for a particular item that sold at $16 per unit: Required: 1. Assuming the use of a periodic inventory system, prepare a summarized income statement through
> 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 de
> 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 fo
> 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 same
> A company has been successful in reducing the amount of sales returns and allowances. At the same time, a credit card company reduced the credit card discount from 3 percent to 2 percent. What effect will these changes have on the company’s net sales, al
> Briggs & Stratton Engines Inc. uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/45. The balance of each account receivable is aged on the basis of four time periods as f
> Gross sales total $300,000, one-half of which were credit sales. Sales returns and allowances of $15,000 apply to the credit sales, sales discounts of 2 percent were taken on all of the net credit sales, and credit card sales of $100,000 were subject to
> 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 within
> 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
> Using the following categories, indicate the effects of the transactions listed in E6-8. Use + for increase and - for decrease and indicate the accounts affected and the amounts. Assets = Liabilities + Stockholders’ Equity
> During the current year, Sun Electronics, Incorporated, recorded credit sales of $5,000,000. Based on prior experience, it estimates a 2 percent bad debt rate on credit sales. Required: Prepare journal entries for each transaction: a. On November 13 of
> During the current year, Adams Assembly, Inc., recorded credit sales of $1,300,000. Based on prior experience, it estimates a 1 percent bad debt rate on credit sales. Required: Prepare journal entries for each transaction: a. On September 29 of the curr
> 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
> Brazen Shoe Company records Sales Returns and Allowances, Sales Discounts, and Credit Card Discounts as contra-revenues. Complete the following tabulation, indicating the effect (+ for increase, - for decrease, and NE for no effect) and amount of the eff
> The following transactions were selected from among those completed by Cadence Retailers in November and December: Required: Assume that Sales Returns and Allowances, Sales Discounts, and Credit Card Discounts are treated as contra-revenues; compute net
> Under various registered brand names, Saucony, Inc., and its subsidiaries develop, manufacture, and market bicycles and component parts, athletic apparel, and athletic shoes. It recently disclosed the following information concerning the allowance for do
> Match each definition with its related term by entering the appropriate letter in the space provided. Definition Term А. Ассrued expense B. Deferred expense C. Accrued revenue (1) A revenue not yet earned; collected in advance. (2) Rent not yet colle
> The following transactions were selected from the records of OceanView Company: Required: Assuming that Sales Discounts and Credit Card Discounts are treated as contra-revenues, compute net sales for the two months ended August 31. 12 Sold merchandi
> During the months of January and February, Hancock Corporation sold goods to three customers. The sequence of events was as follows: Required: Assuming that Sales Discounts is treated as a contra-revenue, compute net sales for the two months ended Febru
> Bentley Company’s June 30 bank statement and June ledger accounts for cash are summarized below: Required: 1. Reconcile the bank account. A comparison of the checks written with the checks that have cleared the bank shows outstanding c
> Stride Rite Corporation manufactures and markets shoes under the brand names Stride Rite, Keds, and Sperry Top-Sider. Three recent years produced a combination of declining sales revenue and net income culminating in a net loss of $8,430,000. Each year,
> A recent annual report for Dell, Inc., contained the following data: Required: 1. Determine the receivables turnover ratio and average days sales in receivables for the current year. 2. Explain the meaning of each number. (dollars in thousands) Curr
> A recent annual report for FedEx contained the following data: Required: 1. Determine the receivables turnover ratio and average days’ sales in receivables for the current year. 2. Explain the meaning of each number. (dollars in th
> During the current year, Bob’s Ceramics Shop had sales revenue of $60,000, of which $25,000 was on credit. At the start of the current year, Accounts Receivable showed a $3,500 debit balance, and the Allowance for Doubtful Accounts showed a $300 credit b
> During the current year, Robby’s Camera Shop had sales revenue of $170,000, of which $75,000 was on credit. At the start of the current year, Accounts Receivable showed a $16,000 debit balance, and the Allowance for Doubtful Accounts showed a $900 credit
> A recent annual report for Target contained the following information (dollars in thousands) at the end of its fiscal year: A footnote to the financial statements disclosed that uncollectible accounts amounting to $414,000 and $854,000 were written off a
> After completing her first year of operations, Penny Cassidy used a number of ratios to evaluate the performance of Penny’s Pool Service & Supply, Inc. She was particularly interested in the effects of the following transactions fro
> 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
> On its recent financial statements, Hassell Fine Foods reported the following information about net sales revenue and accounts receivable (amounts in thousands): Answer: Req. 1 Allowance for Doubtful Accounts 117 Beg. balance Write-offs 52 88 Bad
> Skechers designs and markets lifestyle and performance footwear for men, women, and children. Its products are sold through department stores and specialty and Internet retailers. In a recent annual report, it disclosed the following information concerni
> 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
> Chou Company uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $295,000; (2) up to 120 days past due, $55,000; and (3) more than
> Casilda Company uses the aging approach to estimate bad debt expense. The ending 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 tha
> Lin’s Dairy uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $22,000; (2) up to 120 days past due, $6,500; and (3) more than 120
> During the current year, Giatras Electronics recorded credit sales of $680,000. Based on prior experience, it estimates a 3.5 percent bad debt rate on credit sales. Required: 1. Prepare journal entries for each of the following transactions. a. On Octob
> At the end of the prior year, Durney’s Outdoor Outfitters reported the following information. Accounts Receivable, Dec. 31 prior year Accounts Receivable (Gross) (A)………………………………………. $48,067 Allowance for Doubtful Accounts (XA)…………………………………..8,384 Account
> Clark’s Landscaping bills customers subject to terms 3/10, n/50. Required: 1. Compute the annual interest rate implicit in the sales discount. (Round to two decimal places.) 2. If his bank charges 15 percent interest, should the customer borrow from the
> Pool Corporation, Inc., is the world’s largest wholesale distributor of swimming pool supplies and equipment. It is a publicly traded corporation that trades on the NASDAQ exchange under the symbol POOL. It sells these products to swimm
> The following transactions were selected from among those completed by Hailey Retailers in the current year: Required: Give the appropriate journal entry for each of these transactions, assuming the company records sales revenue under the gross method.
> The September 30 bank statement for Bennett Company and the September ledger accounts for cash are summarized here: No outstanding checks and no deposits in transit were carried over from August; however, there are deposits in transit and checks outstand
> Explain why the income statement accounts are closed but the balance sheet accounts are not.
> Differentiate among (a) permanent, (b) temporary, (c) real, and (d) nominal accounts.
> What are the purposes for closing the books?
> Explain the effect of adjusting entries on cash
> What is the equation for each of the following statements: (a) income statement, (b) balance sheet, and (c) statement of stockholders’ equity?
> Explain how the financial statements relate to each other.
> List the four types of adjusting entries, and give an example of each type.
> What is a post-closing trial balance? Is it a useful part of the accounting information processing cycle? Explain.
> A sale is made for $6,000; terms are 3/10, 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.
> Starbucks Corporation purchases and roasts high-quality whole bean coffees and sells them along with fresh-brewed coffees, Italian-style espresso beverages, a variety of pastries and confections, coffee related accessories and equipment, and a line of pr
> South Bend Repair Service Co. keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period on December 31: Data not yet recorde
> Taos Company is completing the information processing cycle at the end of its fiscal year on December 31. Following are the correct balances at December 31 of the current year for the accounts both before and after the adjusting entries for the current y
> Refer to the information regarding Bill’s Catering Company in Alternative Problem 3. Data given in Alternative Problem 3: Bill’s Catering Company is at its accounting year-end on December 31. The following data that mu
> Refer to the information regarding Hannah Company in Alternative Problem 2. Data given in Alternative Problem 2 Hannah Company’s annual accounting year ends on June 30. All of the entries for the current year have been made, except the
> Bill’s Catering Company is at its accounting year-end on December 31. The following data that must be considered were developed from the company’s records and related documents: a. During the current year, office supplies amounting to $1,200 were purchas
> Hannah Company’s annual accounting year ends on June 30. All of the entries for the current year have been made, except the following adjusting entries: a. On March 30 of the current year, Hannah paid a six-month premium for property insurance, $3,200, f
> 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
> Cedar Fair, L.P. (Limited Partnership) is one of the largest regional amusement park operators in the world, owning eleven amusement parks, three outdoor water parks, one indoor water park, and five hotels. The parks include Cedar Point in Ohio; Valleyfa
> Following are account balances (in millions of dollars) from a recent FedEx annual report, followed by several typical transactions. Assume that the following are account balances on May 31 (end of the prior fiscal year) Account
> What are the three major categories of notes or footnotes presented in annual reports? Cite an example of each.
> Refer to Problem 4. Data from Problem 4: According to its annual report, The Wendy’s Company is “one quick-service restaurant that is ‘A Cut Above,’” serving hamburgers and other fresh food items including salads, chicken sandwiches, and baked potatoes
> Kaylee James, a connoisseur of fine chocolate, opened Kaylee’s Sweets in Collegetown on February 1. The shop specializes in a selection of gourmet chocolate candies and a line of gourmet ice cream. You have been hired as manager. Your d
> According to its annual report, The Wendy’s Company is “one quick-service restaurant that is ‘A Cut Above,’” serving hamburgers and other fresh food items including
> Ryan Terlecki organized a new Internet company, CapUniverse, Inc. The company specializes in baseball-type caps with logos printed on them. Ryan, who is never without a cap, believes that his target market is college and high school students. You have be
> The following transactions are July activities of Craig’s Bowling, Inc., which operates several bowling centers (for games and equipment sales). If expense is to be recognized in July, indicate the expense account title and amount. If e
> The following transactions are July activities of Craig’s Bowling, Inc., which operates several bowling centers (for games and equipment sales). If revenue is to be recognized in July, indicate the revenue account title and amount. If r
> 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) Losses (2) Expense recognition pr
> The following is a series of accounts for Kruger & Laurenzo, Incorporated, which has been operating for two years. The accounts are listed and numbered for identification. Following the accounts is a series of transactions. For each transaction, indi
> The following are the summary account balances from a recent balance sheet of Exxon Mobil Corporation. The accounts have normal debit or credit balances, but they are not necessarily listed in good order. The amounts are shown in millions of dollars for
> Refer to Alternate Problem 4. Data from Alternate Problem 4: Alpine Stables, Inc., is established in Denver, Colorado, on April 1, 2017, to provide stables, care for animals, and grounds for riding and showing horses. You have been hired as the new assi
> For property, plant, and equipment, as reported on the balance sheet, explain (a) cost, (b) accumulated depreciation, and (c) net book value.
> Alpine Stables, Inc., is established in Denver, Colorado, on April 1, 2017, to provide stables, care for animals, and grounds for riding and showing horses. You have been hired as the new assistant controller. The following transactions for April 2017 ar
> Barnes & Noble is the nation’s largest bookseller and a leading retailer of digital media and electronic products, including the Nook for eReading. The following activities were inferred from a recent annual report. a. Example: Incu
> Jimmy Langenberger is the president of TemPro, Inc., a company that provides temporary employees for not-for-profit companies. TemPro has been operating for five years; its revenues are increasing with each passing year. You have been hired to help Jimmy
