How is the cost of an insurance policy recorded when the policy is purchased?
> 1. An officer of Westway Corporation recently commented that when he receives the firm’s financial statements, he looks at just the bottom line of the income statement—the line that shows the net income or net loss for the period. He said that he does no
> What groups consistently offer opinions about proposed FASB statements?
> What is the purpose of the Financial Accounting Standards Board?
> What are the three major areas of accounting?
> What is tax planning?
> What are the major functions or activities performed by accountants in private industry?
> What are the three types of business entities, and how do they differ?
> What is the purpose of the postclosing trial balance?
> What account balances or other amounts are included on two different financial statements for the period? Which statements are involved?
> What information is provided by the statement of owner’s equity?
> Edward Foster is a building contractor. He and his customer have agreed that he will submit a bill to them when he is 25 percent complete, 50 percent complete, 75 percent complete, and 100 percent complete. For example, he has a $300,000 room addition. W
> Selecting the right employees is a critical step for enhancing the entity’s system of internal control and fraud prevention. Reflected below are several possible ways to check the background of employees. For each item listed, indicate why the background
> How do current liabilities and long-term liabilities differ?
> Give examples of some current assets that usually are classified as Current Assets on the balance sheet.
> What is the purpose of the balance sheet?
> What are operating expenses? Are financing expenses included in operating expenses?
> Which section of the income statement contains information about the purchases made during the period and the beginning and ending inventories?
> Fuji Company had a current ratio of 2.0 in 20X1 and 2.2 in 20X2. Does this signify an improvement or decline in Fuji Company’s liquidity from 20X1 to 20X2?
> Jarrett Company’s inventory turnover ratio was nine times in 20X1 and eight times in 20X2. Did Jarrett Company sell its inventory more quickly, or more slowly, in 20X2 compared to 20X1?
> What are the steps in the accounting cycle?
> If the owner invests additional capital in the business during the month, how would that new investment be shown in the financial statements?
> DuPont reported depreciation expense of $1,308 million on its consolidated financial statements for the period ended December 31, 2018. The following excerpt is taken from the company’s consolidated balance sheet for the same year: Ana
> On December 31, Klein Company made an adjusting entry debiting Interest Receivable and crediting Interest Income for $300 of accrued interest. What reversing entry, if any, should be recorded for this item on January 1?
> What types of adjustments are reversed?
> If the totals of the adjusted trial balance Debit and Credit columns are equal, but the postclosing trial balance does not balance, what is the likely cause of the problem?
> What types of accounts, permanent or temporary, appear on the postclosing trial balance?
> Give an example of an expense that is classified as Other Expense in the income statement.
> What adjustment is made to record accrued salaries?
> What is an accrued expense? Give three examples of items that often become accrued expenses.
> What adjustment is made for depreciation on office equipment?
> Explain the meaning of the following terms that relate to depreciation: a. Salvage value b. Depreciable base c. Useful life d. Straight-line method
> What types of assets are subject to depreciation? Give three examples of such assets.
> Journal entries and adjusting journal entries can be used to conceal theft of company assets as well as to inflate a company’s profits or deflate company losses. One of the biggest bankruptcies and biggest accounting scandals in the United States occurre
> Why is depreciation recorded?
> Income Summary amounts are extended to which statement columns on the worksheet?
> Unearned Fees Income is classified as which type of account?
> When a specific account receivable is deemed uncollectible, it is written off by debiting _____and crediting______.
> What is the alternative method of handling unearned income?
> What adjustment is made to record income earned during a period?
> How is unearned income recorded when it is received?
> What is unearned income? Give two examples of items that would be classified as unearned income
> What adjustment is made for accrued interest on a note receivable?
> 1. A building owned by Hopewell Company was recently valued at $850,000 by a real estate expert. The president of the company is questioning the accuracy of the firm’s latest balance sheet because it shows a book value of $550,000 for the building. How w
> What is accrued income? Give an example of an item that might produce accrued income.
> What is the alternative method of handling prepaid expenses?
> What adjustment is made to record expired insurance?
> What is a prepaid expense? Give three examples of prepaid expense items.
> When must Form W-2 be issued? To whom is it sent?
> What is the purpose of Form W-3? When must it be issued? To whom is it sent?
> What is the lookback period?
> What are the four taxes levied on employers?
> An audit trail allows an individual to track a transaction from the journal entry to the general ledger through to the financial statements. The audit trail can also find all the transactions that comprise the dollar amount for each account listed on the
> What is a business tax identification number?
> What is EFTPS? When is EFTPS required?
> What does “semiweekly” refer to in the Semiweekly Deposit Schedule Rule?
> What does “monthly” refer to in the Monthly Deposit Schedule Rule?
> Why was the unemployment insurance system established?
> What is the purpose of allowing a credit against the FUTA for state unemployment taxes?
> What is the purpose of Form 940? How often is it filed?
> A state charges a basic SUTA tax rate of 5.4 percent. Because of an excellent experience rating, an employer in the state has to pay only 1.0 percent of the taxable payroll as state tax. What is the percentage to be used in computing the credit against t
> Is the employer required to deposit the federal unemployment tax during the year? Explain.
> What is Form 941? How often is the form filed?
> Review the following excerpt taken from the Walmart consolidated balance sheet as of January 31, 2018. Analyze: 1. When the accountant for Walmart records a purchase of property and equipment, what type of account is debited? If Walmart purchases equipme
> Who pays for workers’ compensation insurance?
> When is the premium for workers’ compensation insurance usually paid?
> How can an employer keep informed about changes in the rates and bases for the social security, Medicare, and FUTA taxes?
> What happens if the employer fails to deduct enough employee income tax or FICA tax from employee earnings?
> Which of the following are withheld from employees’ earnings? a. FUTA b. income tax c. Medicare d. social security e. SUTA f. workers’ compensation
> What is the purpose of the Medicare tax?
> How are earnings determined when employees are paid on the hourly rate basis?
> Give two examples of common payroll fraud.
> Does the employee bear any part of the SUTA tax? Explain.
> How are the federal and state unemployment taxes related?
> An essential element of a strong system on internal control and fraud prevention is the segregation of duties of employees. Segregation of duties increases the likelihood that a single employee does not have the ability to steal assets of the business an
> What is an exempt employee?
> What aspects of employment are regulated by the Fair Labor Standards Act? What is another commonly used name for this act?
> What factors affect how much federal income tax must be withheld from an employee’s earnings?
> How does the salary basis differ from the hourly rate basis of paying employees?
> What publication of the Internal Revenue Service provides information about the current federal income tax rates and the procedures that employers should use to withhold federal income tax from an employee’s earnings?
> What is the simplest method for finding the amount of federal income tax to be deducted from an employee’s gross pay?
> What are the four bases for determining employee gross earnings?
> How does the direct deposit method of paying employees operate?
> What is the purpose of the social security tax?
> How does the Fair Labor Standards Act affect the wages paid by many firms? What types of firms are regulated by the act?
> 1. How might a poor set of recording procedures affect the flow of information to management? 2. Why should management be concerned about the efficiency of a firm’s procedures for journalizing and posting transactions? 3. Why should management insist tha
> Why are MICR numbers printed on deposit slips and checks?
> What type of information is entered on a check stub? Why should a check stub be prepared before the check is written?
> What is a check?
> What procedures are used to achieve internal control over banking activities?
> Why are journal entries sometimes needed after the bank reconciliation statement is prepared?
> Give some reasons why the bank balance and the book balance of cash might differ.
> What information is shown on the bank statement?
> Why is a bank reconciliation prepared?
> Explain the meaning of the following terms: a. Canceled check b. Outstanding check c. Deposit in transit d. Debit memorandum e. Credit memorandum f. Dishonored check g. Blank endorsement h. Deposit slip i. Drawee j. Restrictive endorsement k. Payee l. Dr
> Describe the major controls for cash payments.
> A chart of accounts varies with each type of business as well as each company. In a group, compare and contrast the accounts that would appear in Cole’s Real Estate Office, Sarah’s Clothing Emporium, Neal’s Grocery Store, and Tanner Plumbing Service. Wha
> Describe the major controls for cash receipts.
> Explain what bonding means. How does bonding relate to safeguarding cash?
> What is a promissory note? What entry is made to record the collection of a promissory note and interest?
> When are petty cash expenditures entered in a firm’s accounting records?
