If PetCo had net sales of $600,000, goods available for sale of $450,000, and cost of goods sold of $375,000, what is its gross margin? What amount of inventory will be shown on its balance sheet?
> Assume that Key Co. purchased 1,000 units of merchandise in its first year of operations for $25 per unit. The company sold 850 units for $40. What is the amount of cost of goods sold using FIFO? LIFO? Weighted average?
> Does the choice of cost flow method (FIFO, LIFO, or weighted average) affect the statement of cash flows? Explain.
> What is the difference between the flow of costs and the physical flow of goods?
> In an inflationary period, which inventory cost flow method will produce the highest net income? Explain.
> What are some advantages and disadvantages of using the LIFO method of inventory valuation?
> What are some advantages and disadvantages of using the FIFO method of inventory valuation?
> What are some advantages and disadvantages of the specific identification method of accounting for inventory?
> Name and describe the four cost flow methods discussed in this chapter.
> Define the following terms: a. Maker b. Payee c. Principal d. Interest e. Maturity date f. Collateral
> Victor Holt, the accounting manager of Sexton, Inc., gathered the following information for 2017. Some of it can be used to construct an income statement for 2017. Ignore items that do not appear on an income statement. Some computation may be required.
> What information is normally included in a bank statement?
> What procedures can help protect cash disbursements?
> What procedures can help protect cash receipts?
> Giving written copies of receipts to customers can help prevent what type of illegal acts?
> What is U.S. GAAP? What is IFRS?
> List and describe the four stages of the accounting cycle discussed earlier in this chapter.
> Identify the three types of accounting transactions discussed in this chapter. Provide an example of each type of transaction, and explain how it affects the accounting equation.
> What is the historical cost concept and how does it relate to verifiability?
> How do temporary accounts differ from permanent accounts? Name three temporary accounts. Is retained earnings a temporary or a permanent account?
> What is the advantage of using common size income statements to present financial information for several accounting periods?
> The following information was taken from GoPro, Inc.’s SEC filings. Required: a. Explain whether each line of information in the table would best be described as being primarily financial accounting or managerial accountin
> What does the term adjusting entry mean? Give an example.
> What three categories of cash receipts and cash payments do businesses report on the statement of cash flows? Explain the types of cash flows reported in each category.
> Why is the balance sheet dated as of a specific date when the income statement, statement of changes in stockholders’ equity, and statement of cash flows are dated with the phrase for the period ended?
> What is the main purpose of the balance sheet?
> What four general-purpose financial statements do business enterprises use?
> What are the similarities and differences between dividends and expenses?
> What is the purpose of the statement of changes in stockholders’ equity?
> Explain how the periodic inventory system works. What are some advantages of using the periodic inventory system? What are some disadvantages of using the periodic inventory system? Is it necessary to take a physical inventory when using the periodic inv
> What is the difference between a multistep income statement and a single-step income statement?
> How and when is the cost of the supplies used recognized in an accounting period?
> J. Talbot is the accounting manager for Kolla Waste Disposal Corporation. Kolla is having its worst financial year since its inception. The company is expected to report a net loss. In the midst of such bad news, Ms. Talbot surprised the company presiden
> Sam and his sister Blair both attend the state university. As a reward for their successful completion of the past year (Sam had a 3.2 GPA in business, and Blair had a 3.7 GPA in art), their father gave each of them 100 shares of The Walt Disney Company
> When does a cost become an expense? Do all costs become expenses?
> Explain the difference between gross margin and a gain.
> Explain the difference between purchase returns and sales returns. How do purchase returns affect the financial statements of both buyer and seller? How do sales returns affect the financial statements of both buyer and seller?
> Why may net cash flow from operating activities on the cash flow statement be different from the amount of net income reported on the income statement?
> What is the accounting equation? Describe each of its three components.
> How do companies determine the percentage estimate of uncollectible accounts when using the percent of revenue method?
> What is “aging of accounts receivable”?
> What procedures are important in the physical control of assets and accounting records?
> What is the difference between specific and general authorizations?
> Distinguish between elements of financial statements and accounts.
> The following ratios are for four companies in different industries. Some of these ratios have been discussed in the textbook and others have not, but their names explain how the ratio was computed. These data are for the companies’ 201
> Explain how a career in public accounting differs from a career in private accounting.
> Why is it important that every employee periodically take a leave of absence or vacation?
> List several control activities of an effective internal control system.
> What are the effects of the following types of transactions on the accounting equation? Also identify the financial statements that are affected. (Assume that the perpetual inventory system is used.) a. Acquisition of cash from the issue of common stock
> Describe how the perpetual inventory system works. What are some advantages of using the perpetual inventory system? Is it necessary to take a physical inventory when using the perpetual inventory system?
> What is the difference between goodwill and specifically identifiable intangible assets?
> Name and briefly define the five components of COSO’s internal control framework.
> Explain the relationship between SOX and COSO.
> What is the difference between accounts receivable and notes receivable?
> In 2012 Duke Energy, a large utility company with its headquarters in North Carolina, completed its $32 billion acquisition of Progress Energy. To get an idea of the size of this deal, in 2011 Duke Energy reported revenues of $14.5 billion. In 2012, with
> Explain the term stakeholder. Distinguish between stakeholders with a direct versus an indirect interest in the companies that issue financial reports.
> Why is cost classification important to managers?
> How does a product cost differ from a general, selling, and administrative cost? Give examples of each.
> How do product costs affect the financial statements? How does the classification of product cost (as an asset vs. an expense) affect net income?
> What does the statement “costs can be assets or expenses” mean?
> How does product costing used in financial accounting differ from product costing used in managerial accounting?
> What does the value added principle mean as it applies to managerial accounting information? Give an example of value added information that may be included in managerial accounting reports but is not shown in publicly reported financial statements.
> What do the terms value added activity and non value-added activity mean? Provide an example of each type of activity. (Appendix)
> What does the term activity-based management mean? (Appendix)
> How has the Institute of Management Accountants responded to the need for high standards of ethical conduct in the accounting profession?
> Presented here are selected data from the 10-K reports of four companies for their 2015 fiscal years. The four companies, in alphabetical order, are: Caterpillar, Inc., a company that manufactures heavy machinery. Oracle Corporation, a company that devel
> What are the two dimensions of a total quality management (TQM) program? Why is TQM being used in business practice? (Appendix)
> What is a just-in-time (JIT) inventory system? Name some inventory costs that can be eliminated or reduced by its use.
> What costs should be considered in determining the sales price of a product?
> What are some of the common ethical conflicts that accountants encounter?
> What is cost allocation? Give an example of a cost that needs to be allocated.
> What are some differences between financial and managerial accounting?
> What are some limitations of the earnings per share figure?
> How do accounting principles affect financial statement analysis?
> Financial statements for Allendale Company follow: Required: Prepare a horizontal analysis of the balance sheet and income statement for 2019 and 2018. Round percentages to one decimal point. Balance Sheets As of December 31 2019 2018 Assets Curre
> The following percentages apply to Thornton Company for 2018 and 2019: Required: Assuming that sales were $800,000 in 2018 and $960,000 in 2019, prepare income statements for the two years. 2019 2018 Sales 100.0% 100.0% Cost of goods sold 61.0 64.0
> The following information relates to The Kroger Company for its 2015 and 2014 fiscal years, and Whole Foods Market, Inc. for its 2014 and 2013 fiscal years. Required: a. Compute the following ratios for the companies’ 2014 fiscal yea
> The following events were experienced by Sequoia, Inc.: 1. Issued cumulative preferred stock for cash. 2. Issued common stock for cash. 3. Issued noncumulative preferred stock for cash. 4. Paid cash to purchase treasury stock. 5. Sold treasury stock for
> Choctaw Co. completed the following transactions in 2018, the first year of operation: 1. Issued 20,000 shares of $10 par common stock for $10 per share. 2. Issued 3,000 shares of $20 stated value preferred stock for $20 per share. 3. Purchased 1,000 sha
> The stockholders’ equity section of the balance sheet for Mann Equipment Co. at December 31, 2016, is as follows. Note: The market value per share of the common stock is $42, and the market value per share of the preferred stock is $2
> Burk Corp. completed the following transactions in 2018, the first year of operation: 1. Issued 30,000 shares of $10 par common stock for $15 per share. 2. Issued 6,000 shares of $100 par, 5 percent, preferred stock at $101 per share. 3. Paid the annual
> Sun Corporation received a charter that authorized the issuance of 100,000 shares of $10 par common stock and 50,000 shares of $50 par, 5 percent cumulative preferred stock. Sun Corporation completed the following transactions during its first two years
> The following information pertains to Ming Corp. at January 1, 2018: Common stock, $10 par, 50,000 shares authorized, 3,000 shares issued and outstanding………………………………………..$30,000 Paidin capital in excess of par, common stock……………………………
> No well Inc. had the following stock issued and outstanding at January 1, 2018: 1. 150,000 shares of no-par common stock. 2. 30,000 shares of $50 par, 4 percent, cumulative preferred stock. (Dividends are in arrears for one year, 2017.) On March 8, 2018,
> Cascade Company was started on January 1, 2018, when it acquired $60,000 cash from the owners. During 2018, the company earned cash revenues of $35,000 and incurred cash expenses of $18,100. The company also paid cash distributions of $4,000. Required:
> Sea Coast Plumbing Company (SCPC) is a national company that provides residential plumbing services. SCPC is considering making a substantial investment in Rake land Distributors, Inc. (RDI). RDI sells plumbing supplies throughout the United States. Re
> Cal Cagle was working to establish a business enterprise with four of his wealthy friends. Each of the five individuals would receive a 20 percent ownership interest in the company. A primary goal of establishing the enterprise was to minimize the amount
> Louise Stinson, the chief financial officer of Bostonian Corporation, was on her way to the president’s office. She was carrying the latest round of bad news. There would be no executive bonuses this year. Corporate profits were down. Indeed, if the late
> Show the effect of each of the following independent accounting events on the financial statements using a horizontal statements model like the following one. Use + for increase, − for decrease, and NA for not affected. The first event
> Mott Company has a line of credit with Bay Bank. Mott can borrow up to $400,000 at any time over the course of the 2018 calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid d
> Elite Boat Sales uses a line of credit to help finance its inventory purchases. Elite Boat Sales sells boats and equipment and uses the line of credit to build inventory for its peak sales months, which tend to be clustered in the summer months. Account
> The following transactions apply to Pecan Co. for 2018, its first year of operations: 1. Received $100,000 cash in exchange for issuance of common stock. 2. Secured a $300,000 five-year installment loan from State Bank. The interest rate is 5 percent and
> On January 1, 2018, Brown Co. borrowed cash from First Bank by issuing a $100,000 face value, four-year term note that had an 8 percent annual interest rate. The note is to be repaid by making annual cash payments of $30,192 that include both interest an
> The following selected transactions were taken from the books of Ripley Company for 2018: 1. On February 1, 2018, borrowed $70,000 cash from the local bank. The note had a 6 percent interest rate and was due on June 1, 2018. 2. Cash sales for the year am
> a. Give an example of a contingent liability that is probable and reasonably estimable. How would this type of liability be shown in the accounting records? b. Give an example of a contingent liability that is reasonably possible or probable but not reas
> The following transactions apply to Walnut Enterprises for 2018, its first year of operations: 1. Received $50,000 cash from the issue of a short-term note with a 6 percent interest rate and a one year maturity. The note was made on April 1, 2018. 2. Rec
> On January 1, 2018, Reese Incorporated issued bonds with a face value of $120,000, a stated rate of interest of 8 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 7 per
> Required: Use the following information to prepare a multistep income statement and a classified balance sheet for Eller Equipment Company for 2018. $ 72,000 Beginning retained earnings Warranties payable (short term) Gain on sale of equipment Opera
> Jim Baku and Scott Hanson are thinking about opening a new restaurant. Baku has extensive marketing experience but does not know that much about food preparation. However, Hanson is an excellent chef. Both will work in the business, but Baku will provide
> During 2018 and 2019, Kale Co. completed the following transactions relating to its bond issue. The company’s fiscal year ends on December 31. 2018 Mar. 1 Issued $200,000 of 8 year, 6 percent bonds for $194,000. The semiannual cash payment for interest i
> Pine Land Co. was formed when it acquired cash from the issue of common stock. The company then issued bonds at a premium on January 1, 2018. Interest is payable annually on December 31 of each year, beginning December 31, 2018. On January 2, 2018, Pine
