Explain the relationships between adjustments and the following Chapter 3 concepts: (a) the time period assumption, (b) the revenue recognition principle, and (c) the expense recognition principle.
> Refer to the information for New Vision Company in E12-9. Required: 1. Present the operating activities section of the statement of cash flows for New Vision Company using the direct method. Assume that Accounts Payable relate to Utilities and Office
> Saskatchewan Forestry Company purchased a timber tract for $600,000 and estimates that it will be depleted evenly over its 10-year useful life with no residual value. Show the journal entry that would be recorded if 10 percent of the total timber is cut
> To compare statement of cash flows reporting under the direct and indirect methods, enter check marks to indicate which line items are reported on the statement of cash flows with each method.
> The Walt Disney Company reported the following in its 2016 annual report (in millions): Required: 1. Note that in all three years, net cash provided by operating activities is greater than net income. Given the above information and what you know about
> Gibraltar Industries, Inc., is a manufacturer of steel products for customers such as Home Depot, Lowe’s, Chrysler, Ford, and General Motors. In the year ended December 31, 2016, it reported the following activities: Required: Based o
> Rowe Furniture Corporation is a Virginia-based manufacturer of furniture. In a recent quarter, it reported the following activities: Required: Based on this information, present the cash flows from investing and financing activities sections of the ca
> The following information was reported by three companies. When completing the requirements, assume that any and all purchases on account are for inventory. Required: 1. What amount did each company deduct on the income statement related to inventory?
> Consultex, Inc., was founded in 2015 as a small financial consulting business. The company had done reasonably well in 2015–2017 but started noticing its cash dwindle early in 2018. In January 2018, Consultex had paid $16,000 to purchas
> A statement of cash flows contained the following information: Required: Determine whether the following account balances increased (I) or decreased (D) during the period: (a) Accounts Receivable, (b) Inventories, (c) Accounts Payable, and (d) Accrued
> Colgate-Palmolive was founded in 1806. Its statement of cash flows reported the following information (in millions) for the nine months ended September 30, 2016: Required: Based on the information reported in the operating activities section of the sta
> What is a contra-asset? Give an example of one.
> What is an annuity?
> The following information was reported by Amuse Yourself Parks (AYP): Compute the company’s fixed asset turnover ratio for the year. What can you say about AYP’s fixed asset turnover ratio when compared to Cedar Fair&
> Complete the following table by indicating which inventory costing method (FIFO or LIFO) would lead to the effects noted in the rows, for each of the circumstances described in the columns.
> Pizza International, Inc., reported the following information (in thousands): Required: 1. Based on this information, compute cash flow from operating activities using the indirect method. 2. What was the primary reason that Pizza International was ab
> NIKE, Inc., is the best-known sports shoe, apparel, and equipment company in the world because of its association with athletes such as LeBron James, Roger Federer, and Madison Keys. Some of the items included in its recent statement of cash flows presen
> The annual report for Malibu Beachwear reported the following transactions affecting stockholders’ equity: a. Purchased $350,000 of common stock now held in treasury. b. Declared cash dividends in the amount of $260,000. c. Paid the dividends in (b).
> The following selected transactions occurred for Corner Corporation: Feb. 1 Purchased 400 shares of the company’s own common stock at $20 cash per share; the stock is now held in treasury. July 15 Issued 100 of the shares purchased on February 1 for $30
> The stockholders’ equity section on the December 31 balance sheet of Chemfast Corporation reported the following amounts: Assume that no shares of treasury stock have been sold in the past. Required: Complete the following statements
> Ava School of Learning obtained a charter at the start of the year that authorized 50,000 shares of no-par common stock and 20,000 shares of preferred stock, par value $10. During the year, the following selected transactions occurred: a. Collected $40
> Inside Incorporated was issued a charter on January 15 authorizing the following capital stock: The following selected transactions were completed during the first year of operations in the order given: a. Issued 20,000 shares of the $6 par common stoc
> Shelby Corporation was organized in January to operate an air-conditioning sales and service business. The charter issued by the state authorized the following capital stock: During January and February, the following stock transactions were completed:
> North Wind Aviation received its charter during January authorizing the following capital stock: The following transactions occurred during the first year of operations in the order given: a. Issued a total of 40,000 shares of the common stock for $15
> Incentive Corporation was authorized to issue 12,000 shares of common stock, each with a $1 par value. During its first year, the following selected transactions were completed: a. Issued 6,000 shares of common stock for cash at $20 per share. b. Issue
> Taste-T Company has been in business for 30 years and has developed a large group of loyal restaurant customers. Down Home Foods made an offer to buy Taste-T Company for $6,000,000. The market value of Taste-T’s tangible assets, net of liabilities, on th
> Explain the effect of adjusting journal entries on cash.
> Refer to E11-12. Prepare the journal entry to record (a) the small 12 percent stock dividend and, alternatively, (b) the large 100 percent stock dividend mentioned in requirement 2 of E11-12. Data from E11-12: On December 31, the stockholdersâ
> Assume for each of the following independent cases that the annual accounting period ends on December 31 and that the total of all revenue accounts was $150,000 and the total of all expense accounts was $130,000. Case A: Assume that the business is a so
> Swimtech Pools Inc. (SPI) reported the following in its financial statements for the quarter ended March 31, 2018. During the quarter ended March 31, SPI reported Net Income of $5,000 and declared and paid cash dividends totaling $5,000. Required: 1.
> The following account balances were selected from the records of beverage maker Blake Corporation at December 31 after all adjusting entries were completed Net income for the year was $48,000. Required: 1. Prepare the statement of retained earnings fo
> Bogscraft Company has outstanding 60,000 shares of $10 par value common stock and 25,000 shares of $20 par value preferred stock (8 percent). On February 1, the board of directors voted in favor of an 8 percent cash dividend on the preferred stock. The c
> On July 1, Jones Corporation had the following capital structure: Required: Complete the following table based on two independent cases involving stock transactions: Case 1: The board of directors declared and issued a 100 percent stock dividend when t
> Stanley Black & Decker is a leading global manufacturer and marketer of power tools, hardware, and home improvement products. A press release contained the following announcement: At the time of the press release, the company had 300 million shares
> On December 31, the stockholders’ equity section of the balance sheet of R & B Corporation reflected the following: On February 1 of the following year, a 12 percent stock dividend was issued. The market value of the stock on Febru
> The annual report for Sneer Corporation disclosed that the company declared and paid preferred dividends in the amount of $100,000 in the current year. It also declared and paid dividends on common stock in the amount of $2 per share. During the current
> Most highly visible companies spend significant amounts of money to protect their intellectual property, ensuring that no one uses this property without direct permission. Discuss whether companies should capitalize or expense the money paid to employees
> The records of Hoffman Company reflected the following balances in the stockholders’ equity accounts at December 31, 2018: On January 1, 2019, the board of directors was considering the distribution of a $62,000 cash dividend. No divid
> List the two types of adjustments and give an example of an adjustment affecting revenues and expenses for each type.
> The 2016 annual report for General Mills disclosed that 1 billion shares of common stock have been authorized. At the end of 2015, 755 million shares had been issued and the number of shares in treasury stock was 156 million. During 2016, the only common
> Grocery Corporation received $300,328 for 11 percent bonds issued on January 1, 2018, at a market interest rate of 8 percent. The bonds had a total face value of $250,000, stated that interest would be paid each December 31, and stated that they mature i
> On January 1, Innovative Solutions, Inc., issued $200,000 in bonds at face value. The bonds have a stated interest rate of 6 percent. The bonds mature in 10 years and pay interest once per year on December 31. Required: 1. Prepare the journal entry to
> On January 1, Applied Technologies Corporation (ATC) issued $500,000 in bonds that mature in 10 years. The bonds have a stated interest rate of 10 percent. When the bonds were issued, the market interest rate was 10 percent. The bonds pay interest once p
> The Tennis Times (TTT) is a publisher of magazines. Its accounting policy for subscriptions follows: Assume TTT (a) collected $420 million in 2018 for magazines that will be distributed later in 2018 and 2019, (b) provided $204 million of services on th
> Bryant Company sells a wide range of inventories, which are initially purchased on account. Occasionally, a short-term note payable is used to obtain cash for current use. The following transactions were selected from those occurring during the year: a.
> Assume an employee of Rocco Rock Company earns $1,000 of gross wages during the current pay period and is required to remit to the government $100 for income tax and $50 for FICA. Consider the following two procedures for paying the employee: Required:
> Mc Loyd Company completed the salaries and wages payroll for March. The payroll provided the following details: Required: 1. Considering both employee and employer payroll taxes, use the preceding information to calculate the total labor cost for the c
> As part of a major renovation at the beginning of the year, Atiase Pharmaceuticals, Inc., sold shelving units (recorded as Equipment) that were 10 years old for $800 cash. The shelves originally cost $6,400 and had been depreciated on a straight-line bas
> Use the information in E10-1 to complete the following requirements. Required: 1. Give the journal entry to record the note on November 1, 2018. 2. Give any adjusting entry required on December 31, 2018. 3. Give the journal entry to record payment o
> The following amortization schedule indicates the interest and principal to be repaid on an installment note established January 1, 2018, for a company with a March 31 year-end. Required: 1. Assuming the company makes the required annual payments on De
> Refer to the information in E10-14 and assume Seton Corporation accounts for the bond using the simplified effective-interest method shown in Chapter Supplement 10C. Required: 1. Prepare the journal entry to record the bond issuance. 2. Prepare the j
> Refer to the information in E10-14 and assume Seton Corporation uses the effective-interest method to amortize the bond discount. Required: 1. Prepare the journal entry to record the bond issuance. 2. Prepare the journal entry to record the first int
> On January 1, when the market interest rate was 9 percent, Seton Corporation completed a $200,000, 8 percent bond issue for $187,163. The bonds pay interest each December 31 and mature in 10 years. Seton amortizes the bond discount using the straight-lin
> Refer to the information in E10-9 and assume Grocery Corporation accounts for the bond using the shortcut approach shown in Chapter Supplement 10C. Required: 1. Prepare the journal entry to record the bond issuance. 2. Prepare the journal entry to re
> Refer to the information in E10-9 and assume Grocery Corporation uses the effective-interest method to amortize the bond premium. Required: 1. Prepare the journal entry to record the bond issuance. 2. Prepare the journal entry to record the first int
> Refer to the information in E10-9 and assume Grocery Corporation uses the straight-line method to amortize the bond premium. Required: 1. Prepare the journal entry to record the bond issuance. 2. Prepare the journal entry to record the first interest
> At May 31, 2016, FedEx Corporation reported the following amounts (in millions) in its financial statements: Required: 1. Compute the debt-to-assets ratio and times interest earned ratio (to two decimal places) for 2016 and 2015. 2. Use your answers t
> For each of the following long-lived assets, indicate its nature and related cost allocation concept. Use the abbreviations shown on the right:
> Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. For example, Mattel builds up its inventory to meet the needs of retailers selling to Christmas shoppers. A large portion
> FedEx Corporation is the world’s leading express-distribution company. In addition to its 643 aircraft, the company has more than 57,000 ground vehicles that pick up and deliver packages. Assume that FedEx sold a delivery truck for $16,
> On January 1, the records of Tasty Treats Corporation (TTC) showed the following regarding production equipment Required: Based on the data given, compute the estimated useful life of the equipment.
> The owner of a local business complains that the adjustments process consumes a lot of time and delays reporting month-end financial results. How would you convince her of the importance of this process?
> Sonic Corporation purchased and installed electronic payment equipment at its drive-in restaurants in San Marcos, TX, at a cost of $27,000. The equipment has an estimated residual value of $1,500. The equipment is expected to process 255,000 payments ove
> Solar Innovations Corporation bought a machine at the beginning of the year at a cost of $22,000. The estimated useful life was five years and the residual value was $2,000. Assume that the estimated productive life of the machine is 10,000 units. Expect
> Refer to the information in E9-4. Required: 1. Give the adjusting journal entry that would have been made at the end of 2017 for depreciation on the manufacturing equipment. 2. Starting at the beginning of 2018, what is the remaining estimated life?
> Wiater Company operates a small manufacturing facility. On January 1, 2018, an asset account for the company showed the following balances: During the first week of January 2018, the following expenditures were incurred for repairs and maintenance The
> O’Connor Company ordered a machine on January 1 at a purchase price of $40,000. On the date of delivery, January 2, the company paid $10,000 on the machine and signed a long-term note payable for the balance. On January 3, it paid $350
> Bridge City Consulting bought a building and the land on which it is located for $182,000 cash. The land is estimated to represent 70 percent of the purchase price. The company paid $22,000 for building renovations before it was ready for use. Required
> Using the information in M8-7 and M8-8, prepare the journal entry to record the end-of-period adjustment for bad debts under the (a) percentage of credit sales method and (b) aging of accounts receivable method. Which of these methods is required by GAAP
> E9-4refer Data from E9-4 Wiater Company operates a small manufacturing facility. On January 1, 2018, an asset account for the company showed the following balances: During the first week of January 2018, the following expenditures were incurred for re
> Texas Oil Company (TOC) paid $3,000,000 for an oil reserve estimated to hold 50,000 barrels of oil. Oil production is expected to be 10,000 barrels in year 1, 30,000 barrels in year 2, and 10,000 barrels in year 3. TOC expects to begin selling barrels fr
> Torge Company bought a machine for $65,000 cash. The estimated useful life was five years and the estimated residual value was $5,000. Assume that the estimated useful life in productive units is 150,000. Units actually produced were 40,000 in year 1 and
> The following data were included in a recent Apple Inc. annual report (in millions): Required: 1. Compute Apple’s fixed asset turnover ratio for 2014, 2015, and 2016. Round your answer to one decimal place. 2. During 2016, Microsoft
> What is a post-closing trial balance? Is it a useful part of the accounting cycle? Explain.
> Iconix Brand Group owns and markets various brands and trademarks, including Joe Boxer, London Fog, Ocean Pacific, Ecko Unltd., Umbro, Ed Hardy, Lee Cooper, Buffalo, and Peanuts. The company’s financial statements for the year ended Dec
> Bluestone Company had three intangible assets at the end of the current year: a. A patent purchased this year from Miller Co. on January 1 for a cash cost of $9,300. When purchased, the patent had an estimated life of 15 years. b. A trademark was regis
> Refer to the data in E9-10. Assume each company spent $319,800 at the beginning of the current year for additional Developed Technology. Because of its proprietary nature, the technology is estimated to have no residual value at the end of its estimated
> Amazon, Alphabet, and TripAdvisor rely on various intangible assets to operate their businesses. These companies amortize the cost of these assets using the straight-line method over the following average estimated useful lives (in years), as reported in
> The following is a list of account titles and amounts (in millions) reported at December 27, 2015, by Hasbro, Inc., a leading manufacturer of games, toys, and interactive entertainment software for children and families: Required: 1. Prepare the asset
> Assume that Simple Co. had credit sales of $250,000 and cost of goods sold of $150,000 for the period. Simple uses the aging method and estimates that the appropriate ending balance in the Allowance for Doubtful Accounts is $3,000. Before the end-of-peri
> Fraud Investigators Inc. operates a fraud detection service. Required: 1. Prepare journal entries for each transaction below. a. On March 31, 10 customers were billed for detection services totaling $25,000. b. On October 31, a customer balance of $
> Innovative Tech Inc. (ITI) has been using the percentage of credit sales method to estimate bad debts. During November, ITI sold services on account for $100,000 and estimated that ½ of 1 percent of those sales would be uncollectible. Required: 1. Pr
> Brown Cow 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) 1–30 days old, $12,000; (2) 31–90 days old, $5,000; and (3) more than 90 days old, $3,
> Young and Old Corporation (YOC) uses two aging categories to estimate uncollectible accounts. Accounts less than 60 days are considered young and have a 5% uncollectible rate. Accounts more than 60 days are considered old and have a 40% uncollectible rat
> For each transaction listed in E8-4, indicate the amount and direction (+ or −) of effects on the financial statement accounts and on the overall accounting equation. Data from E8-4: Prior to recording the following, Elite Electronics
> Why are the income statement accounts closed but the balance sheet accounts are not?
> Prior to recording the following, Elite Electronics, Inc., had a credit balance of $2,000 in its Allowance for Doubtful Accounts. Required: Prepare journal entries for each transaction. a. On August 31, a customer balance for $300 from a prior year w
> During the year ended December 31, 2018, Kelly’s Camera Shop had sales revenue of $170,000, of which $85,000 was on credit. At the start of 2018, Accounts Receivable showed a $10,000 debit balance and the Allowance for Doubtful Accounts showed a $600 cre
> For each transaction listed in E8-1, indicate the amount and direction (+ or −) of effects on the financial statement accounts and on the overall accounting equation.
> Trevorson Electronics is a small company privately owned by Jon Trevorson, an electrician who installs wiring in new homes. Because the company’s financial statements are prepared only for tax purposes, Jon uses the direct write-off method. During 2018,
> Which of the four basic accounting reports indicates that it is appropriate to consider revenues and expenses as subcategories of retained earnings? Explain.
> FedEx Corporation reported the following rounded amounts (in millions): Required: 1. Determine the receivables turnover ratio and days to collect for 2016. Round your answers to one decimal place. 2. Do the measures calculated in requirement 1 represe
> Refer to the information about Sears given in E8-14. Required: Complete the following table indicating the direction of the effect (+ for increase, − for decrease, and NE for no effect) of each transaction during 2016: Data from E8-
> The annual report for Sears Holdings Corporation contained the following information: Assume that accounts receivable write-offs amounted to $1 during 2016 and $9 during 2015 and that Sears did not record any recoveries. Required: Determine the Bad D
> Microsoft Corporation develops, produces, and markets a wide range of computer software including the Windows operating system. Microsoft reported the following information about Net Sales Revenue and Accounts Receivable (all amounts in millions). Accor
> To attract retailers to its shopping center, the Marketplace Mall will lend money to tenants under formal contracts, provided that they use it to renovate their store space. On November 1, 2017, the company loaned $100,000 to a new tenant on a one-year n
> The following transactions took place for Parker’s Grocery Required: Prepare the journal entries Parker’s Grocery would record for the above transactions.
> How do permanent accounts differ from temporary accounts?
> The following transactions took place for Smart Solutions Inc. Required: Prepare the journal entries that Smart Solutions Inc. would record for the above transactions.
> Blackhorse Productions, Inc., used the aging of accounts receivable method to estimate that its Allowance for Doubtful Accounts should be $19,750. The account had an unadjusted credit balance of $10,000 at that time. Required: Prepare journal entries
> Use the following information to complete this exercise: sales, 550 units for $12,500; beginning inventory, 300 units; purchases, 400 units; ending inventory, 150 units; and operating expenses, $4,000. Begin by setting up the following table and then com
