In providing accounting services to small businesses, you encounter the following situations pertaining to cash sales: (a) Sue Jackson Company rings up sales and sales taxes separately on its cash register. On April 10, the register totals are sales $30,000 and sales taxes $2,000. (b) Person Company does not segregate sales and sales taxes. Its register total for April 15 is $28,800, which includes an 8 percent sales tax. Instructions: Prepare the entry to record the sales transactions and related taxes for each client.
> Estimate the interest rate paid by P&G on the 5/30 swap in Business Snapshot 5.4 if (a) the CP rate is 6.5% and the Treasury yield curve is flat at 6% and (b) the CP rate is 7.5% and the Treasury yield curve is flat at 7% with semiannual compounding.
> An investment bank has been asked to underwrite an issue of 10 million shares by a company. It is trying to decide between a firm commitment where it buys the shares for $10 per share and a best efforts arrangement where it charges a fee of 20 cents for
> What are the convexities of the portfolios in Problem 9.17? Problem 9.17: Portfolio A consists of a one-year zero-coupon bond with a face value of $2,000 and a 10-year zero-coupon bond with a face value of $6,000. Portfolio B consists of a 5.95-year z
> A company’s investments earn LIBOR minus 0.5%. Explain how it can use the quotes in Table 5.5 to convert them to (a) three-, (b) five-, and (c) 10-year fixed-rate investments.
> The price of gold is currently $1,500 per ounce. The forward price for delivery in one year is $1,700. An arbitrageur can borrow money at 5% per annum. What should the arbitrageur do? Assume that the cost of storing gold is zero and that gold provides no
> A bond issued by Standard Oil worked as follows. The holder received no interest. At the bond’s maturity the company promised to pay $1,000 plus an additional amount based on the price of oil at that time. The additional amount was equal to the product o
> The current price of a stock is $94, and three-month European call options with a strike price of $95 currently sell for $4.70. An investor who feels that the price of the stock will increase is trying to decide between buying 100 shares and buying 2,000
> A trader buys 200 shares of a stock on margin. The price of the stock is $20. The initial margin is 60% and the maintenance margin is 30%. How much money does the trader have to provide initially? For what share price is there a margin call?
> A company enters into a short futures contract to sell 5,000 bushels of wheat for 250 cents per bushel. The initial margin is $3,000 and the maintenance margin is $2,000. What price change would lead to a margin call? Under what circumstances could $1,50
> Portfolio A consists of a one-year zero-coupon bond with a face value of $2,000 and a 10-year zero-coupon bond with a face value of $6,000. Portfolio B consists of a 5.95-year zero-coupon bond with a face value of $5,000. The current yield on all bonds i
> Suppose that a bank has $10 billion of one-year loans and $30 billion of five-year loans. These are financed by $35 billion of one-year deposits and $5 billion of five-year deposits. The bank has equity totaling $2 billion and its return on equity is cur
> Consider again the situation in Problem 8.17. Suppose that a second traded option with a delta of 0.1, a gamma of 0.5, and a vega of 0.6 is available. How could the portfolio be made delta, gamma, and vega neutral? Problem 8.17: A financial institution
> The bidders in a Dutch auction are as follows: The number of shares being auctioned is 210,000. What is the price paid by investors? How many shares does each investor receive? Number of shares 60,000 20,000 30,000 40,000 40,000 40,000 50,000 50,00
> The comparative balance sheets for Mogilny Tours show the following changes in noncash current asset accounts: Accounts receivable decrease $75,000; prepaid expenses increase $16,000; and inventories increase $30,000. Compute net cash provided by operati
> Blair Restaurant Supply reported net income of $2.5 million in 2008. Depreciation for the year was $180,000, accounts receivable decreased $350,000, and accounts payable decreased $310,000. Compute net cash provided by operating activities using the indi
> In its income statement for the year ended December 31, 2008, Bach Resort & Spa reported the following condensed data. Instructions: (a) Prepare a multiple-step income statement. (b) Prepare a single-step income statement. $ 435,000 1,289,000 7
> Presented below are the components in Clearwater Seafood’s income statement. Determine the missing amounts. Cost of Gross Оperating Expenses Net Sales Goods Sold Profit Income (a) $75,000 (b) $108,000 $28,600 $10,800 $29,500 ? ? $7
> The current sections of Blues Traveler Co. balance sheets at December 31, 2007 and 2008, are presented below. Blues Traveler’s net income for 2008 was $163,000. Depreciation expense was $30,000. Instructions: Prepare the operating ac
> Ouro Johnson has the following transactions during August of the current year. Indicate (a) the basic analysis and (b) the debit–credit analysis illustrated on pages 82–86 of the text. Journalize the transactions.
> Duggan Sports Bar reported net income of $195,000 for 2008. Duggan also reported depreciation expense of $25,000, and a loss of $5,000 on the sale of equipment. The comparative balance sheets show an increase in accounts receivable of $15,000 for the yea
> The adjusted trial balance of Lanza Company at the end of its fiscal year is as follows: Instructions: (a) Prepare the closing entries using page J15. (b) Post to Retained Earnings and No. 350 Income Summary accounts. (Use the three-column form.) (c) P
> The adjusted trial balance columns of the work sheet for Cajun Company are as follows: Instructions: Complete the work sheet. CAJUN COMPANY Work Sheet (partial) For the Month Ended April 30, 2008 Adjusted Trial Balance Income Statement Balance Shee
> The income statement of Health 24 City Club for the month ending August 31 shows Membership Dues Revenues of $25,000; Salaries Expense of $9,300; Repairs and Maintenance Expense of $2,400; and Net Income of $6,950. Prepare the entries to close the revenu
> The financial statements of PepsiCo and the Notes to Consolidated Financial statements appear in Appendix A. Financial statements of PepsiCo: Notes to Consolidated Financial statements: Instructions: Refer to PepsiCo’s financial st
> The ledger of W. S. Juice Bar includes the following unadjusted balances: Service Revenue $60,000; Salaries Expense $28,950; and Prepaid Rent $6,000. Adjusting entries are required for (a) services provided for $1,000 but not yet billed and collected;
> John Clais began operations as an event consultant on January 1, 2008. The trial balance columns of the work sheet on March 31 are as follows. Other data: 1. Supplies on hand total $500. 2. Depreciation is $250 per quarter. 3. Interest accrued on a six
> Michael Davidson started his own hospitality consulting firm, Star Company, on June 1, 2008. Star Company performs feasibility studies to determine if restaurants should be opened at certain locations. The trial balance at June 30 is as follows. In addi
> Jan Spears opened her decorating company on January 1, 2008. During the first month of operations, the following transactions occurred: 1. Performed services for country club clients. On January 31, $2,300 of such services was earned but not yet billed t
> Spring River Resort Inc. opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is as follows. In addition to those accounts listed on the trial balance, the chart of accounts for Spring River R
> Pho Saigon Noodles and Catering accumulates the following adjustment data at December 31. 1. Services provided but unbilled total $750. 2. Food supplies of $300 have been used. 3. Utility expenses of $300 are unpaid. 4. Unearned revenue of $450 has been
> Transactions for Milton’s Wings and Pizza for the month of June are presented below. Identify the accounts to be debited and credited for each transaction, and journalize the transactions. June 1 Milton Wolfe invests $20,000 cash i
> The trial balance of Hawaiian Catering Company includes the following balance sheet accounts. Identify the accounts that require adjustment. For each account that requires adjustment, indicate (a) the type of adjusting entry (prepaid expenses, unearned r
> Ross Clark, president of Clark Hotels, wishes to issue a press release to bolster his company’s image and maybe even its stock price, which has been gradually falling. As controller, you have been asked to provide a list of twenty financial ratios along
> PepsiCo’s financial information is presented in Appendix A. Based on such information, compute the account receivables turnover and average collection period for receivables of PepsiCo in 2006.What conclusions concerning the management of account receiva
> Surepar Miniature Golf and Driving Range was opened on March 1 by Bill Affleck. The following selected events and transactions occurred during March: Bill Affleck uses the following accounts: Cash; Prepaid Insurance; Land; Buildings; Equipment; Account
> The actual financial statements of PepsiCo, as presented in the company’s 2006 Annual Report, are contained in Appendix A (at the back of the textbook). Instructions: Refer to PepsiCo’s financial statements and answer the following questions: (a) What w
> A company’s annual report usually will identify the inventory method used. Knowing that, you can analyze the effects of the inventory method on the income statement and the balance sheet. Address: www. darden.com Steps 1. From Darden Restaurants’ homepag
> After Carl starts his own catering company, he realizes that there is a lot of demand for desserts from his clients. Therefore, he negotiates with another friend, Mike, who is a pastry chef at a five-star hotel, to become a partner with him in this new v
> Chris and Carl have been partners for more than five years in their catering business, where Chris put in 40 percent of the equity and Carl put in the other 60 percent. With the growth of the business, Chris and Carl decide to part ways and each open up
> Lori and Timothy combined their savings to open the Tres Leche Bakery. Lori invested $10,000 in cash, whereas Timothy put in $7,500 in cash and some kitchen equipment with a book value at $8,000, accumulated depreciation at $2,000, and a market value at
> Mia Fitness Club was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order. Instructions: Analyze the foregoing transactions using the following column headings. I
> Prepare journal entries to record the following: (a) Mayorga Fine Foods retires its delivery equipment, which cost $45,000. Accumulated depreciation is also $45,000 on this delivery equipment. No salvage value is received. (b) Assume the same information
> On January 1, 2008, the Villareal Mexican Bakery ledger shows Equipment $40,000 and Accumulated Depreciation $9,000. The depreciation resulted from using the straight-line method with a useful life of ten years and salvage value of $4,000. On this date,
> Foxx Saber Resorts was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order. Instructions: Analyze the foregoing transactions using the following column headings.
> Your parents are considering investing in PepsiCo, Inc., common stock. They ask you, as an accounting expert, to make an analysis of the company for them. Fortunately, excerpts from a current annual report of PepsiCo are presented in Appendix A of this t
> Ellen catering acquires a delivery truck at a cost of $36,000.The truck is expected to have a salvage value of $2,000 at the end of its four-year useful life. Compute annual depreciation for the first and second years using the straight-line method.
> Presented here are two independent situations. (a) On March 3, Hinckley Appliances sells $580,000 of its receivables to Marsh Factors, Inc. Marsh Factors assesses a finance charge of 3 percent of the amount of receivables sold. Prepare the entry on Hinck
> On December 31,2008, Crawford Resorts estimated that 1.5 percent of its net sales of $400,000 would become uncollectible. The company recorded this amount as an addition to Allowance for Doubtful Accounts. On May 11, 2009, Crawford Co. determined that Ke
> Leland Hotels has accounts receivable of $98,100 at March 31. An analysis of the accounts shows the following: Month of Sale ………………………………………………………………… Balance, March 31 March ……………………………………………………………………………………………. $65,000 February ………………………………………………………………
> On June 1, Padillio Pasta borrows $80,000 from First Bank on a six-month, $80,000, 12 percent note. Instructions: (a) Prepare the entry on June 1. (b) Prepare the adjusting entry on June 30. (c) Prepare the entry at maturity (December 1), assuming month
> Puebla Corporation is a medium-sized hotel corporation. It has ten stockholders, who have been paid a total of $1 million in cash dividends for eight consecutive years. The policy of the board of directors requires that in order for this dividend to be d
> In January, gross earnings in Yoon Company totaled $90,000. All earnings are subject to 8% FICA taxes, 5.4% state unemployment taxes, and 0.8% federal unemployment taxes. Prepare the entry to record January payroll tax expense.
> Data for Sandy Teter are presented in 11-1. Prepare the journal entries to record (a) Sandy’s pay for the period and (b) the payment of Sandy’s wages. Use January 15 for the end of the pay period and the payment date. Presented in 11-1: Sandy Teter’s
> Sandy Teter’s regular hourly wage rate is $16, and she receives an hourly rate of $24 for work in excess of 40 hours. During a January pay period, Sandy works 45 hours. Sandy’s federal income tax withholding is $95, and she has no voluntary deductions. C
> Refer to the financial statements of PepsiCo, presented in Appendix A, and answer the following questions: Financial statements of PepsiCo: (a) What was the amount of net cash provided by operating activities for the year ended December 30, 2006? For
> On April 30, the bank reconciliation of Ottawa Travel shows three outstanding checks: no. 254, $650; no. 255, $720; and no. 257, $410. The May bank statement and the May cash payments journal show the following: Instructions: Using step 2 in the reconc
> George Hunting Lodge has the following internal control procedures over cash disbursements. Identify the internal control principle that is applicable to each procedure. 1. Company checks are prenumbered. 2. The bank statement is reconciled monthly by an
> Sycamore Resorts has the following internal control procedures over cash receipts. Identify the internal control principle that is applicable to each procedure. 1. All over-the-counter receipts are registered on cash registers. 2. All cashiers are bonded
> On May 31, Stuart Dining has net sales of $330,000 and cost of goods available for sale of $230,000. Compute the estimated cost of the ending inventory, assuming the gross profit is 40 percent.
> On December 31, 2008, the following information was available for Simon Hotels: ending inventory $40,000; beginning inventory $60,000; cost of goods sold $300,000; and sales revenue $380,000. Calculate inventory turnover and days in inventory for Simon H
> Data for Rusch BBQ are presented in 9-2. Compute the cost of the ending inventory under the average-cost method, assuming there are 450 pounds on hand. Presented in 9-2: In its first month of operations Rusch BBQ made three purchases of sausages in the
> The ledger of Perez Company includes the following items: (a) Freight-in, (b) Purchase Returns and Allowances, (c) Purchases, (d) Sales Discounts, and (e) Purchase Discounts. Identify the items that are included in inventoriable costs.
> Harry Smith owns and manages Harry’s Restaurant, a twenty-four-hour restaurant near the city’s medical complex. Harry employs nine full-time employees and sixteen part-time employees. He pays all the full-time employees by check, the amounts of which are
> Augusta Catering had net income of $11.44 million and net revenue of $88 million in 2008. Its assets were $14 million at the beginning of the year and $18 million at the end of the year. What were (a) Augusta’s asset turnover and (b) profit margin for
> If Helene Cruises had net income of $650,000 in 2008 and it experienced a 30 percent increase in net income over 2007, what was its 2007 net income?
> The financial statements of PepsiCo are presented in Appendix A at the end of this textbook. Financial statements of PepsiCo: Instructions: Answer the following questions using the Consolidated Statement of Income: (a) What was the percentage change i
> Net income was $500,000 in 2006; $400,000 in 2007; and $508,000 in 2008.What is the percentage of change from (a) 2006 to 2007 and (b) 2007 to 2008? Is the change an increase or a decrease?
> Using the same data presented above in 7-1 for Solais, illustrate vertical analysis. Data 7-1: Using the following data from the comparative balance sheet of Solais Bed & Breakfast, illustrate horizontal analysis. December 31, 2008 December 31
> The income statement for J and T Seafood appears below. Additional information: 1. The weighted average common shares outstanding in 2008 were 30,000 shares. 2. The market price of J and T Seafood stock was $13 in 2008. 3. Cash dividends of $23,000 wer
> Selected comparative statement data for Isabel Wedding Consultant are presented below. All balance sheet data are as of December 31. Instructions: Compute the following ratios for 2008: (a) Profit margin (b) Asset turnover (c) Return on assets (d) Retu
> Sophia Gourmet has the following comparative balance sheet data. Additional information for 2008: 1. Net income was $25,000. 2. Sales on account were $420,000. Sales returns and allowances were $20,000. 3. Cost of goods sold was $198,000. 4. The allowa
> Selected financial statement data for Jamestown Resorts for the year ending January 31, 2008, are as follows: For the year, net sales were $5,634 million, and cost of goods sold was $3,766 million. Instructions: Compute the four liquidity ratios at th
> Using the following data from the comparative balance sheet of Solais Bed & Breakfast, illustrate horizontal analysis. December 31, 2008 December 31, 2007 Accounts receivable Inventory Total assets $ 540,000 $ 840,000 $ 3,640,000 $ 400,000 $ 600
> Classify the following items as an operating, an investing, or a financing activity. Assume all items involve cash unless there is information to the contrary. (a) Purchase of equipment. (b) Sale of building. (c) Redemption of bonds. (d) Depreciation. (e
> You are the assistant controller in charge of general ledger accounting at Springtime Bottling Company. Your company has a large loan from an insurance company. The loan agreement requires that the company’s cash account balance be maintained at $200,000
> Each of the following items must be considered in preparing a statement of cash flows for Janeway Travel for the year ended December 31, 2008. For each item, state how it should be shown in the statement of cash flows for 2008. (a) Issued bonds for $300,
> The financial statements of PepsiCo, Inc., are presented in Appendix A at the end of this textbook. Instructions: Answer the following questions using the Consolidated Balance Sheet and the Notes to Consolidated Financial Statements section. (a) What we
> The net income for Karen Gourmet Foods for 2008 was $280,000. For 2008, depreciation on plant assets was $60,000, and the company incurred a loss on sale of plant assets of $10,000. Compute net cash provided by operating activities under the indirect met
> The T-accounts for Equipment and the related Accumulated Depreciation for Stone Kitchen Equipment Company at the end of 2008 are as follows. Stone Kitchen Equipment Company’s income statement reported a loss on the sale of equipment o
> Antoine Winery had the following transactions during 2008: 1. Issued $50,000 par value common stock for cash. 2. Collected $11,000 of accounts receivable. 3. Declared and paid a cash dividend of $25,000. 4. Sold a long-term investment with a cost of $15,
> The balance sheet debit column of the work sheet for Empanada Supreme includes the following accounts: Prepaid Insurance $4,600; Cash $24,080; Supplies $6,200; Short-term Investments $7,240; and Accounts Receivable $15,670. Prepare the current assets sec
> At Fred’s Fish Chips, the following errors were discovered after the transactions had been journalized and posted. Prepare the correcting entries. 1. A collection on account from a customer for $850 was recorded as a debit to Cash of $850 and a credit to
> Sam Perroni, owner of Perroni’s Harbor Cruise, found the following errors that his bookkeeper made after the transactions had been journalized and posted. Prepare the correcting entries. 1. A collection on account from a customer for $1,280 was recorded
> Using the data in Exercise 5-3, identify the accounts that would be included in a postclosing trial balance. Exercise 5-3: The income statement of Health 24 City Club for the month ending August 31 shows Membership Dues Revenues of $25,000; Salaries Ex
> Indicate which of the following statements are true or false regarding the work sheet. _____ The work sheet is essentially a working tool of the accounting. _____ The work sheet cannot be used as a basis for posting to ledgers. _____ The work sheet is di
> The bookkeeper for Royal Cruises asks you to prepare the following accrued adjusting entries at December 31. 1. Interest on notes payable of $500 is accrued. 2. Services provided but unbilled total $2,520. 3. Salaries earned by employees of $1,800 have n
> J. K. Leask Wholesale Corp. uses the LIFO method of inventory costing. In the current year, profit at J. K. Leask is running unusually high. The corporate tax rate is also high this year, but it is scheduled to decline significantly next year. In an effo
> The financial statements of PepsiCo are presented in Appendix A. The statements contain the following selected accounts for the year ended, 2006 stated in millions of dollars. Instructions: (a) Answer the following questions. (1) What is the increase a
> Professional Design Company specializes in uniform design for foodservices. Its trial balance on December 31 shows Supplies $9,000 and Supplies Expense $0. On December 31, there are $2,000 of supplies on hand. Prepare the adjusting entry at December 31;
> Selected transactions for Y. K. Catering are presented in journal form below. Post the transactions to T accounts. J1 Date Account Titles and Explanation Ref. Debit Credit May 10 Accounts Receivable 7,200 Service Revenue 7,200 15 Cash 5,500 Accounts
> Presented below are six business transactions. On a sheet of paper, list the letters (a), (b), (c) with columns for assets, liabilities, and stockholders’ equity. For each column, indicate whether the transactions increased (+), decreased (-), or had no
> The operating guidelines of accounting have three parts: assumptions, principles, and constraints. Please match these guidelines with the following by indicating “A” for assumptions, “P” for principles, and “C” for constraints. _____ Going concern _____
> Presented below are four concepts. Please match each one with the correct scenario. Relevance Reliability Comparability Consistency _____ Hotel Del Sol uses the Uniform System of Accounts so that it can assess how it is performing financially against lik
> Which of the following is (Yes) or is not (No) a part of the three objectives of financial reporting under FASB? _____ The information is useful to the employees only. _____ The managerial forms are helpful in assessing current cash flows. _____ The econ
> Which of the following is (Yes) or is not (No) part of the FASB conceptual framework? _____ Objectives of managerial reporting _____ Elements of financial statements _____ Quantitative characteristics of accounting information
> Indicate whether each of the following statements is true (T) or false (F). _____ GAAP stands for generally accepted accounting practices. _____ FASB stands for Financial Accounting Standards Board. _____ Together with the Securities and Exchange Commiss
> Indicate whether each of the following statements is true (T) or false (F) in the foodservice or club environment. _____ Purchasing and yield analysis are the two most important items for a foodservice operations that are related to accounting. _____ It
> Indicate whether each of the following statements is true (T) or false (F) in a hotel accounting department. _____ The night auditors get their name because of the long hours they work. _____ There is no difference between a city ledger and a guest ledge
> Purpose: Learn about the Securities and Exchange Commission (SEC). Address: www.sec.gov/index.html Step From the SEC homepage, choose About the SEC. Instructions: Answer the following questions: (a) How many enforcement actions does the SEC take each ye
> When the Financial Accounting Standards Board issues new standards, the required implementation date is usually 12 months or more from the date of issuance, with early implementation encouraged. Richard Keith, accountant at Manchester Corporation, discus
