Due to ineffective controls while counting its inventory, Walker & Comer, Inc., double-counted $50,000 of inventory at the end of the current year. Before discovering this error, the company’s ending inventory was $670,000. How will correction of this error affect the company’s inventory and cost of goods sold figures?
> A regional airline and a furniture manufacturer each generate annual revenue of $120 million and earn net income of $10 million. Which company probably has the higher break-even point? Explain.
> Jefferson Mountain is a small ski resort located in central Pennsylvania. In recent years, the resort has experienced two major problems: (1) unusually low annual snowfalls and (2) long lift lines. To remedy these problems, management is considering two
> You are the purchasing agent for a U.S. business that purchases merchandise on account from companies in Mexico. The exchange rate for the Mexican peso has been falling against the U.S. dollar and the trend is expected to continue for at least several mo
> Explain how an increase in a foreign exchange rate will affect a U.S. company that makes: a. Credit sales to a foreign company at prices stated in the foreign currency. b. Credit purchases from a foreign company at prices stated in the foreign currency.
> A recent newspaper shows the exchange rate for the British pound at $1.4135 and the yen at $0.008843. Does this indicate that the pound is stronger than the yen? Explain.
> Assume that a U.S. company makes a purchase from a British company and agrees to pay a price of £2 million. a. How will the U.S. company determine the cost of this purchase for the purpose of recording it in its accounting records? b. Briefly explain how
> A U.S. company purchased a shipment of fabrics from Bahrain for 3,500,000 dinars. According to the current exchange rate, what is the value of this contract in U.S. dollars?
> Translate the following amounts of foreign currency into an equivalent number of U.S. dollars using the exchange rates in Exhibit 15–7. a. £800,000. b. ¥350,000. c. €50,000.
> The following data are taken from the income statement and balance sheet of Freeman Machinery, Inc. Using this information, prepare a partial statement of cash flows for the year ended December 31, 2021, showing the computation of net cash flows from op
> Flanders Company’s operating income for the current year was $475,000. The company’s average total assets for the same period were $3,500,000, and its total liabilities were $1,000,000. Calculate the company’s return on assets.
> Multi-Star, Inc., had sales of $890,000, cost of sales and operating expenses of $450,000 and $225,000, respectively, and 10,000 shares of common stock outstanding. Calculate the amount of earnings per share.
> Lone Star, Inc., reported sales of $560,000, cost of sales of $255,000, and operating expenses of $130,000 for the current year. Using this information, calculate the amount of net income and net income as a percentage of sales.
> Jarman Company had current and noncurrent liabilities of $50,000 and $160,000, respectively. The company’s current assets were $76,000, out of a total asset figure of $457,000. Calculate the company’s debt ratio.
> Doctors Hanson, Dominick, and Borchard are radiologists living in Fargo, North Dakota. They realize that many of the state’s small rural hospitals cannot afford to purchase their own magnetic resonance imaging devices (MRIs). Thus, the
> Explain why the selection of cost drivers is an important part of identifying non–value-added activities.
> Foster Company had current assets and current liabilities as follows. Calculate the current and quick ratios using the information provided.
> Harrisonburg Company had current and total assets of $470,000 and $1,000,000, respectively. The company’s current and total liabilities were $267,000 and $600,000, respectively. Calculate the amount of working capital and the current ratio using this inf
> Moon, Inc., had the following income statement figures. Calculate component percentages for this information.
> Star, Inc., had depreciation expenses on its plant assets as follows for 2019, 2020, and 2021, respectively: $267,000, $289,000, and $368,000. Compute the trend percentages for these years, assuming 2019 is the base year.
> Wallace Company’s statement of cash flows for the current year is summarized as follows. a. Briefly explain what is included in each of the first three categories listed (i.e., the cash from operating, investing, and financing activiti
> Prince Company had net income of $45,500 in a year when its stockholders’ equity averaged $450,000 and its total assets averaged $2,500,000. Calculate the company’s return on equity for the period.
> Galaxy Company had net sales of $150,000 in its first year and $189,500 in its second year. Calculate the amount of change in terms of both dollars and percentage.
> Melcher, Inc., originally sold 100,000 shares of its $10 par value common stock at $25 per share. Several years later the company repurchased 10,000 of these shares at $45 per share. Melcher currently holds those shares in treasury. Prepare the company’s
> Smelling Company declared a 2-for-1 stock split on its common stock in order to intentionally reduce the market value of its stock so that it would be an attractive investment for a larger set of investors. The company’s common stock before the split is
> Franks, Inc., has preferred and common stock outstanding as follows. Calculate the book value on common stock, assuming preferred dividends are cumulative and are currently one year in arrears.
> Pathways Appliance Company is planning to introduce a built-in blender to its line of small home appliances. Annual sales of the blender are estimated at 12,000 units at a price of $35 per unit. Variable manufacturing costs are estimated at $15 per unit,
> A store using the retail inventory method takes its physical inventory by applying current retail prices as marked on the merchandise to the quantities counted. Does this procedure mean that the inventory will appear in the financial statements at retail
> Mensa Company has stockholders’ equity accounts as follows. Calculate the amount of book value per share for common stock and briefly describe what that figure means in relation to the current market value of the stock.
> Why does cost-volume-profit analysis focus on operating income instead of net income?
> Baker Company has common and preferred stock outstanding as follows. Dividends on preferred stock have not been paid for the last three years (in addition to the current year). If the company pays a total of $120,000 in dividends, how much will the comm
> Johnston, Inc., engaged in the following transactions involving treasury stock. a. Prepare general journal entries to record these transactions. b. Compute the amount of retained earnings that should be restricted because of the treasury stock still ow
> Mega, Inc., has common and 6 percent preferred stock outstanding as follows. The company declares a total dividend of $225,000. If the dividends on preferred stock are one year in arrears (in addition to the current year), how will the total dividend be
> Zeta Co. has outstanding 100,000 shares of $100 par value cumulative preferred stock, which has a dividend rate of 7 percent. The company has not declared any cash dividends on the preferred stock for the last three years. Calculate the amount of dividen
> Beta Co. sold 10,000 shares of common stock, which has a par value of $25, for $28 per share. The company also sold 1,000 shares of $100 par value preferred stock for $110. Assume the balance in retained earnings is $80,000. Prepare the stockholders’ equ
> Weller, Inc., sold 1,000,000 shares of $25 par value common stock at $32. It subsequently repurchased 100,000 of those shares at $50 per share and then sold 70,000 of those shares at $55. Calculate the total amount of stockholders’ equity given these tra
> Omega Co. sold 10,000 shares of common stock, which has a par value of $8, for $13 per share. The company’s balance in retained earnings is $75,000. Prepare the stockholders’ equity section of the company’s balance sheet.
> Joseph Max, Inc., sold 10-year, 5 percent bonds for $1,000,000 at 98. On the interest payment date at the end of the fifth year the bonds were outstanding, 40 percent ($400,000) of the bonds were retired by Max at 102 under an early retirement option tha
> Joseph Max, Inc., sold 10-year, 5 percent bonds for $1,000,000 at 98. On the interest payment date at the end of the fifth year the bonds were outstanding, 40 percent ($400,000) of the bonds were retired by Max at 102 under an early retirement option tha
> V. S. Yogurt is considering two possible expansion plans. Proposal A involves opening 10 stores in northern California at a total cost of $3,150,000. Under another strategy, Proposal B, V. S. Yogurt would focus on southern California and open six stores
> Wolfe Company has debt totaling $2,000,000 and total stockholders’ equity of $4,200,000. Tiger Company has debt totaling $3,100,000 and stockholders’ equity of $5,000,000. a. Calculate the debt ratio for each company. (Hint: You will find an explanation
> Lewis Company sold $500,000 of bonds at 97 on an interest payment date. Assuming the bonds will be retired in 10 years and interest is paid annually, calculate the amount of cash that will be received and paid by Lewis in the first year, as well as the i
> The following information is necessary to compute the net assets (stockholders’ equity) and book value per share of common stock for Rothschild Corporation. a. Compute the amount of net assets (stockholders’ equity).
> What is life-cycle costing and why should it be used in the target costing process?
> Lewis Company sold $500,000 of bonds at 97 on an interest payment date. Assuming the bonds will be retired in 10 years and interest is paid annually, calculate the amount of cash that will be received and paid by Lewis in the first year, as well as the i
> Crosby, Inc., sells $1,000,000 general obligation bonds for 98. The interest rate on the bonds, paid quarterly, is 6 percent. Calculate (a) the amount that the company will actually receive from the sale of the bonds, and (b) the amount of both the quart
> One of the advantages of borrowing is that interest is deductible for income tax purposes. a. If a company pays 5 percent interest to borrow $500,000, but is in an income tax bracket that requires it to pay 30 percent income tax, what is the actual net-o
> Grammar, Inc., offers its full-time employees pension and other postretirement benefits, primarily health insurance. During the current year, pension benefits for the employees totaled $250,000. Other postretirement benefits totaled $140,000. The pension
> Jansen Company borrowed $12,000 on a 1-year, 5 percent note payable from the local bank on April 1. Interest was paid quarterly, and the note was repaid one year from the time the money was borrowed. Calculate the amount of cash payments Jansen was requi
> Alamo Company has sales, cost of goods sold, and average ending inventory for the current year in the following amounts: $650,000, $500,000, and $128,000, respectively. Calculate the amount of the company’s inventory turnover for the year. What is the co
> Marengo is a popular restaurant located in Chilton Resort. Management feels that enlarging the facility to incorporate a large outdoor seating area will enable Marengo to continue to attract existing customers as well as handle large banquet parties that
> Bring Company’s inventory is subject to shrinkage via evaporation. At the end of the current financial reporting period, the company’s inventory had a cost of $100,000. Management estimates that evaporation has resulted in a 6 percent inventory loss. Ass
> Three events pertaining to Lean Machine Co. are described as follows. a. Issued common stock for cash. b. The market value of the corporation’s stock increased. c. Declared and paid a cash dividend to stockholders. Indicate the immed
> Franklin Co. had 10 units of an inventory item on hand at the beginning of the current year, each of which had a per-unit cost of $10. During the year, 20 additional units were purchased at $11, and 25 units were sold. What is the amount of the ending in
> Murphy, Inc., purchased a new inventory item two times during the month of April, as follows. a. What is the amount of the ending inventory of this item on April 30 if the company has sold 75 units and uses the LIFO inventory method? b. How would this
> Explain why businesses normally can reduce unit costs by utilizing their facilities more intensively.
> Fox Company purchased items of inventory as follows. May 3 100 units @ $3.05 May 10 150 units @ $3.10 May 15 120 units @ $3.15 By the end of the month of May, Fox had sold 125 units. If the company uses the average-cost method of accounting for invent
> Mason Company purchased items of inventory as follows. Dec. 2 50 units @ $20 Dec. 12 12 units @ $21 Mason sold 15 units on December 20. Determine the cost of goods sold for the month under the LIFO inventory method.
> Rouse Incorporated reported sales, cost of sales, and inventory figures for last year and the current year as follows (all dollars in thousands). What is the amount of inventory turnover for each year, and in which year did Rouse manage its inventory mo
> Smalley, Inc., purchased items of inventory as follows. Smalley sold 50 units on January 28. Compute the cost of goods sold for the month under the FIFO inventory method
> On September 1, year 1, Health Wise International acquired a 6 percent, 9-month note receivable from Herbal Innovations, a credit customer, in settlement of a $22,000 account receivable. Prepare journal entries to record the following. a. The receipt of
> Following are the average accounts receivable and net sales reported recently by two large beverage companies (dollar amounts are stated in millions) a. Compute the accounts receivable turnover rate for each company (round your results to one decimal pl
> Willie Industries is evaluating two alternative investment opportunities. The controller of the company has prepared the following analysis of the two investment proposals. Items in addition to depreciation may have attributed to differences in the estim
> Ed Winslow is considering investing in a sandwich machine operation involving 50 sandwich machines located in various locations throughout the city. The machine manufacturer reports that similar sandwich machine routes have produced a sales volume rangin
> Wilson Corporation uses an income statement approach to estimate credit losses. Its gross Accounts Receivable of $5,000,000 at the beginning of the period had a net realizable value of $4,925,000. During the period, the company wrote off actual accounts
> Pacher Corporation reports the following information pertaining to its accounts receivable. The company uses a balance sheet approach to estimate credit losses. a. Record the company’s uncollectible accounts expense, assuming it has a
> Match the department on the left to the task that the department performs on the right, all of which relate to accounts receivable and cash collections. Each department should be used only once.
> Mumford Corporation invested $30,000 in marketable securities at various times during the year. On December 9, it sold some of these investments for $10,000, and on December 18, it sold more of these investments for $5,000. The securities sold on Decembe
> List and describe the four components of the cost of quality and provide examples of each.
> Franklin, Inc., accumulates large amounts of excess cash throughout the year. It typically invests these funds in marketable securities, both short term and long term. The company’s most recent financial statements revealed a net unrealized loss on marke
> The Cash account of Lycos Corporation showed a balance of $21,749 at December 31 prior to preparing a bank reconciliation. The company’s bank statement showed a balance of $22,000 at the same date. The only reconciling items consisted of: (1) a $5,000 de
> Explain why Sprint’s percentages are so much larger than Weis Markets’ percentages. Cromley Corporation reports annual sales of $1,800,000. Its accounts receivable throughout the year averaged $150,000. a. Compute the company’s accounts receivable turno
> The following percentages were computed using figures from recent annual reports of Weis Markets, a large grocery store chain, and Sprint Corporation, a provider of telecommunication services.
> The following footnote appeared in a recent financial statement of The Coca-Cola Company. We classify time deposits and other investments that are highly liquid and have maturities of three months or less at the date of purchase as cash equivalents. We m
> Shown are selected financial data for Another World and Imports, Inc., at the end of the current year. Assume that the year-end balances shown for accounts receivable and for inventory approximate the average balances of these items throughout the year.
> Marshall Technology is considering two alternative proposals for modernizing its production facilities. To provide a basis for selection, the cost accounting department has developed the following data regarding the expected annual operating results for
> Smith & Sons Inc. is a sporting goods manufacturer. The firm uses a periodic inventory system. Smith & Sons shipped $30,000 of defective goods to a retailer. The retailer and Smith & Sons agreed that the retailer would keep the goods in exchange for a $3
> Pig Inc. is a clothing retailer and it has terms from one of its vendors of 1/10, n/30. Compute the equivalent annual rate of return that Pig earns by always paying its bills within the discount period. Should Pag, Inc. establish a consistent practice of
> Fun Land Inc. is a retailer of toys and games. Fun Land’s beginning inventory is $192,000 and its purchases during the year are $600,000. Its ending inventory is $72,000. Make the closing entries necessary given that Fun Land uses a periodic inventory sy
> Yang & Min Inc. is a retailer of contemporary furniture. You are told that Yang & Min’s ending inventory is $200,000 and its cost of goods sold is $500,000. Yang & Min had $100,000 of inventory at the beginning of the year. What was the dollar amount of
> Murphy Co. is a high-end retailer of fine fashions for men. Murphy’s inventory balance at the beginning of the year is $300,000, and Murphy purchases $600,000 of goods during the year. Its inventory balance at the end of the year is $250,000. What is the
> An executive of a large American steel company put the blame for lower net income for a recent fiscal period on the “shift in product mix to a higher proportion of export sales.” Sales for the period increased slightly while net income declined by 28 per
> Home Sweet Home Inc. is a retailer of home accessories. The company’s inventory balance at the beginning of the year was $720,000; Home Sweet Home purchased $600,000 of goods during January, and sales during January were $960,000. What is the balance tha
> Alberto & Sons, Inc., a retailer of antique figurines, engages in the following transactions during October of the current year.
> The accounts receivable subsidiary ledger for Ravalli’s Lawn Care has the following customer accounts and balances at the end of the current year. What should be the Accounts Receivable balance in the general ledger? [Hint: Customer acc
> Easy Money, Inc., has the following capital structure. The number of issued and outstanding shares of both preferred and common stock have been the same for the last two years. Dividends on preferred stock are 8 percent of par value and have been paid e
> You are the assistant controller for a public company. Wall Street stock analysts are projecting an earnings per share figure of $0.25 for your company. On December 29, a large customer returns a very large shipment of your goods that were defective. You
> Toying With Nature wants to take advantage of children’s fascination with dinosaurs by adding several scale-model dinosaurs to its existing product line. Annual sales of the dinosaurs are estimated at 80,000 units at a price of $6 per u
> List three special journals often used in accounting to facilitate the recording of repetitive transactions.
> Office today is an office supply store. Office Today’s revenue in the current year is $800 million and its cost of goods sold is $640 million. Compute Office Today’s gross profit and its gross profit percentage.
> The following revenue figures were taken from Rosemont Corporation’s adjusted trial balance at the end of the following months (adjusting entries are performed monthly whereas closing entries are performed annually, on December 31). Co
> Indicate whether each of the following accounts appears in the debit column or in the credit column of an after-closing trial balance. Use the symbols D for debit column, C for credit column, and N if the account does not appear in an after-closing trial
> The following account balances were taken from Long Tail Consulting’s year-end adjusted trial balance (assume these are the company’s only temporary accounts). Prepare the company’s necessary closing
> The following account balances were taken from Hendersonville Corporation’s year-end adjusted trial balance (assume these are the company’s only temporary accounts). Prepare the company’s necessary c
> What are three important criteria for successful business process management?
> Indicate whether a debit or credit is required to close each of the following accounts. Use the symbolls D if a debit is required, C if a credit is required, and N if the account is not closed at the end of the period. a. Salary Expense b. Unexpired In
> What is a rolling budget? Why do some companies choose to use rolling budgets?
> Indicate the effect of the following errors on each of the financial statement elements described in the column headings in the following table. Use the following symbols: O = overstated, U = understated, and NE = no effect.
> Indicate in which section of the balance sheet each of the following accounts is classified. Use the symbols CA for current assets, NCA for noncurrent assets, CL for current liabilities, LTL for long-term liabilities, and SHE for stockholders’ equity. a
> On November 1 of the current year, Sunbury Corporation invested 90,000 in a new delivery truck. The truck is being depreciated at a monthly rate of $625. During the year, the company issued additional stock for $200,000 and declared dividends of $50,000.
> In anticipation of declining inventory replacement costs, the management of Computer Products Co. elects to use the FIFO inventory method rather than LIFO. Explain how this decision should affect the company’s future. a. Rate of gross profit. b. Net ca
