Question: It is December 31, end of the

> Wilson Corporation reported the following for property and equipment (in millions, adapted): During 2011, Wilson paid $2,510 million for new property and equipment. Depreciation for the year totaled $1,546 million. During 2011, Wilson sold property and

> Buff Gym purchased exercise equipment at a cost of $107,000. In addition, Buff paid $3,000 for a special platform on which to stabilize the equipment for use. Freight costs of $1,600 to ship the equipment were borne by the seller. Buff will depreciate th

> All French Press (AFP) is a major French telecommunication conglomerate. Assume that early in year 1, AFP purchased equipment at a cost of 8 million euros (*8 million). Management expects the equipment to remain in service for four years and estimated re

> Norzani, Inc., has a popular line of sunglasses. Norzani reported net income of $66 million for 2010. Depreciation expense for the year totaled $32 million. Norzani, Inc., depreciates plant assets over eight years using the straight-line method and no re

> Suppose Trendy Now Fashions, a specialty retailer, had these records for ladies evening gowns during 2010. Assume sales of evening gowns totaled 130 units during 2010 and that Trendy Now uses the LIFO method to account for inventory. The income tax rat

> T Mart, Inc., declared bankruptcy. Let’s see why. T Mart reported these figures: Requirement 1. Evaluate the trend of T Marts results of operations during 2008 through 2010. Consider the trends of sales, gross profit, and net income.

> Radical Shirt Company sells on credit and manages its own receivables. Average experience for the past three years has been as follows: Jack Ryan, the owner, is considering whether to accept bankcards (VISA, MasterCard). Ryan expects total sales to incr

> Contemporary Co., Inc., the electronics and appliance chain, reported these figures in millions of dollars: Requirements 1. Compute Contemporarys average collection period during 2011. 2. Is Contemporarys collection period long or short? Kurzwel Netwo

> Navajo, Inc., reported the following items at December 31, 2010 and 2009: Requirement 1. Compute Navajos (a) acid-test ratio and (b) days sales in average receivables for 2010. Evaluate each ratio value as strong or weak. Navajo sells on terms of net

> Environmental Concerns, Inc., has poor internal control. Recently , Oscar Benz, the manager, has suspected the bookkeeper of stealing. Details of the businesss cash position at September 30 follow. a. The Cash account shows a balance of $10,402. This am

> Dan Davis, the chief financial officer, is responsible for The Furniture Marts cash budget for 2010. The budget will help Davis determine the amount of long-term borrowing needed to end the year with a cash balance of $130,000. Daviss assistants have ass

> Susan Healey, the owner of Susans Perfect Presents, has delegated management of the business to Louise Owens, a friend. Healey drops by to meet customers and check up on cash receipts, but Owens buys the merchandise and handles cash payments. Business ha

> Refer to Exercise 5-22A. From 22: On September 30, Hilly Mountain Party Planners had a $30,000 balance in Accounts Receivable and a $2,000 credit balance in Allowance for Uncollectible Accounts. During October, the store made credit sales of $161,000. O

> On September 30, Hilly Mountain Party Planners had a $30,000 balance in Accounts Receivable and a $2,000 credit balance in Allowance for Uncollectible Accounts. During October, the store made credit sales of $161,000. October collections on account were

> Beautiful Meadows Golf Company manufactures a popular line of golf clubs. Beautiful Meadows Golf employs 173 workers and keeps their employment records on time sheets that show how many hours the employee works each week. On Friday the shop foreman colle

> Radley stores use point-of-sale terminals as cash registers. The register shows the amount of each sale, the cash received from the customer, and any change returned to the customer. The machine also produces a customer receipt but keeps no record of tra

> Use the data from Exercise 4-32B to make the journal entries that Smith should record on September 30 to update his Cash account. Include an explanation for each entry From 32: Harry Smith operates a bowling alley. He has just received the monthly bank

> Harry Smith operates a bowling alley. He has just received the monthly bank statement at September 30 from City National Bank, and the statement shows an ending balance of $545. Listed on the statement are an EFT rent collection of $325, a service charge

> D. J. Hills checkbook and February bank statement show the following: Requirement 1. Prepare Hills bank reconciliation at February 28. Date Check No. Item Check Deposit Balance 2/1 $ 515 4 622 Art Cafe $ 15 500 9. Dividends received $ 115 615 13 62

> River Corporation, the investment banking company, often has extra cash to invest. Suppose River buys 600 shares of Eathen, Inc., stock at $40 per share. Assume River expects to hold the Eathen stock for one month and then sell it. The purchase occurs on

> Suppose you are considering investing in two businesses, La Petite France Bakery and Burgers Ahoy! The two companies are virtually identical, and both began operations at the beginning of the current year. During the year, each company purchased inventor

> During 2010, Northern Satellite Systems, Inc., purchased two other companies for $16 million. Also during 2010, Northern made capital expenditures of $7 million to expand its market share. During the year, Northern sold its North American operations, rec

> This exercise summarizes the accounting for patents, which like copyrights, trademarks, and franchises, provide the owner with a special right or privilege. It also covers research and development costs. Suppose Solar Automobiles Limited paid $600,000 to

> On January 1, 2010, ABC Airline Service purchased an airplane for $37,700,000. ABC Airline Service expects the plane to remain useful for six years and to have a residual value of $2,900,000. ABC Airline Service uses the straight-line method to depreciat

> City Technology began the year with inventory of $244,000 and purchased $1,540,000 of goods during the year. Sales for the year are $4,000,000, and Citys gross profit percentage is 60% of sales. Compute Citys estimated cost of ending inventory by using t

> Sam Smith served as executive director of Downtown Scanlon, an organization created to revitalize Scanlon, Minnesota. Over the course of 11 years Smith embezzled $297,000. How did Smith do it? He did it by depositing subscriber cash receipts in his own b

> Mountain Company made sales of $35,482 million during 2010. Cost of goods sold for the year totaled $15,333 million. At the end of 2009, Mountains inventory stood at $1,641 million, and Mountain ended 2010 with inventory of $1,945 million. Compute Mount

> Binders $5.8 million cost of inventory at the end of last year was understated by $1.7 million. 1. Was last years reported gross profit of $3.8 million overstated, understated, or correct? What was the correct amount of gross profit last year? 2. Is th

> ABC, Inc., reported these figures for its fiscal year (amounts in millions): Suppose ABC later learns that ending inventory was overstated by $14 million. What are the correct amounts for (a) net sales, (b) ending inventory, (c) cost of goods sold,

> Greta Cassidy sells memberships to the Phoenix Symphony Association in Phoenix, Arizona. The Symphonys procedure requires Cassidy to write a patron receipt for all memberships sold. The receipt forms are prenumbered. Cassidy is having personal financial

> Barbara Smith manages Jones Advertising. Smith fears that a trusted employee has been stealing from the company . This employee receives cash from clients and also prepares the monthly bank reconciliation. To check up on the employee, Smith prepares her

> Assume Nation Airlines repaired a Boeing 777 aircraft at a cost of $1.5 million, which Nation paid in cash. Further, assume the Nation accountant erroneously capitalized this expense as part of the cost of the plane. Show the effects of the accounting er

> Foley Distribution Service pays $140,000 for a group purchase of land, building, and equipment. At the time of acquisition, the land has a current market value of $75,000, the buildings current market value is $45,000, and the equipment’s current market

> Susan Perry keeps the Accounts Receivable T-account of Abraham & Paige, a partnership. What duty will a good internal control system withhold from Perry? Why?

> McCarver Investments purchased Hoffman shares as a trading security on December 18 for $103,000. 1. Suppose the Hoffman shares decreased in value to $96,000 at December 31. Make the McCarver journal entry to adjust the Short-Term Investment account to m

> Journalize the following assumed transactions for The Pepson Company. Show amounts in billions. a. Cash purchases of inventory, $3.8 billion b. Sales on account, $19.7 billion c. Cost of goods sold (perpetual inventory system), $4.5 billion d. Collec

> The following situations describe two cash payment situations and two cash receipt situations. In each pair, one set of internal controls is better than the other. Evaluate the internal controls in each situation as strong or weak, and give the reason fo

> Ten Flags over Georgia paid $100,000 for a concession stand. Ten Flags started out depreciating the building straight-line over 20 years with zero residual value. After using the concession stand for three years, Ten Flags determines that the building wi

> Assume that on September 30, 2010, LoganAir, the national airline of Switzerland, purchased an Airbus aircraft at a cost of *45,000,000 (* is the symbol for the euro). LoganAir expects the plane to remain useful for six years (4,500,000 miles) and to hav

> This exercise uses the assumed Northeast USA data from Short Exercise 7-5. Assume Northeast USA is trying to decide which depreciation method to use for income tax purposes. The company can choose from among the following methods: (a) straight-line, (b

> Use the Northeast USA data in Short Exercise 7-5 to compute Northeast USAs third-year depreciation on the plane using the following methods: a. Straight-line b. Units-of-production c. Double-declining balance from 7-5: Assume that at the beginning of

> Assume that at the beginning of 2010, Northeast USA, a FedEx competitor, purchased a used Boeing 737 aircraft at a cost of $53,000,000. Northeast USA expects the plane to remain useful for five years (six million miles) and to have a residual value of $5

> This chapter lists the costs included for the acquisition of land on pages 411 412. First is the purchase price of the land, which is obviously included in the cost of the land. The reasons for including the other costs are not so obvious. For example, p

> Vector, Inc., dominates the snack-food industry with its Tangy-Chip brand. Assume that Vector, Inc., purchased Concord Snacks, Inc., for $8.8 million cash. The market value of Concord Snacks assets is $15 million, and Concord Snacks has liabilities of $8

> North Coast Petroleum, the giant oil company, holds reserves of oil and gas assets. At the end of 2010, assume the cost of North Coast Petroleums mineral assets totaled $120 billion, representing 10 billion barrels of oil in the ground. 1. Which depreci

> Examine Round Rocks assets. 1. What is Round Rocks largest category of assets? List all 2011 assets in the largest category and their amounts as reported by Round Rock. 2. What was Round Rocks cost of property and equipment at May 31, 2011? What was th

> This exercise tests your understanding of the four inventory methods. List the name of the inventory method that best fits the description. Assume that the cost of inventory is rising. 1. Generally associated with saving income taxes. 2. Results in a c

> Identify the internal control weakness in the following situations. State how the person can hurt the company. a. Jason Monroe works as a security guard at CITY parking in Dayton. Monroe has a master key to the cash box where customers pay for parking.

> Smith Saxophone Company is nearing the end of its worst year ever. With two weeks until year-end, it appears that net income for the year will have decreased by 25% from last year. Joe Smith, the president and principal stockholder, is distressed with th

> Microdata.com uses the LIFO method to account for inventory. Microdata is having an unusually good year, with net income well above expectations. The company’s inventory costs are rising rapidly. What can Microdata do immediately before the end of the ye

> This exercise should be used in conjunction with Short Exercise 6-4. Jefferson is a corporation subject to a 30% income tax. Compute Jeffersons income tax expense under the average, FIFO, and LIFO inventory costing methods. Which method would you select

> Jeffersons Copy Center uses laser printers. Assume Jefferson started the year with 92 containers of ink (average cost of $9.00 each, FIFO cost of $8.90 each, LIFO cost of $8.05 each). During the year, Jefferson purchased 680 containers of ink at $9.80 an

> Determine whether each of the following actions in buying, selling, and accounting for inventories is ethical or unethical. Give your reason for each answer. 1. In applying the lower-of-cost-or-market rule to inventories, Tewksbury Financial Industries

> Short Exercise 5-14, show how the Green Interstate Bank will report the following: a. Whatever needs to be reported on its classified balance sheet at June 30, 2011. b. Whatever needs to be reported on its income statement for the year ended June 30, 2

> Norbert Medical Service reported the following items, (amounts in thousands): Requirements 1. Classify each item as (a) income statement or balance sheet and as (b) debit balance or credit balance. 2. How much net income (or net loss) did Norbert re

> West Highland Clothiers reported the following amounts in its 2011 financial statements. The 2010 amounts are given for comparison. Requirements 1. Compute West Highlands acid-test ratio at the end of 2011. Round to two decimal places. How does the aci

> Gretchen Rourke, an accountant for Dublin Limited, discovers that her supervisor, Billy Dunn, made several errors last year. In total, the errors overstated the company’s net income by 25%. It is not clear whether the errors were deliberate or accidental

> Record the following note receivable transactions in the journal of Aegean Realty. How much interest revenue did Aegean earn this year? Use a 365-day year for interest computations, and round interest amounts to the nearest dollar. Loaned $15,000 cas

> On August 31, 2010, Nancy Thompson borrowed $2,000 from Green Interstate Bank. Thompson signed a note payable, promising to pay the bank principal plus interest on August 31, 2011. The interest rate on the note is 10%. The accounting year of Green Inters

> 1. Compute the amount of interest during 2010, 2011, and 2012 for the following note receivable: On April 30, 2010, BCDE Bank lent $170,000 to Carl Abbott on a two-year, 7% note. 2. Which party has a (an) a. note receivable? b. note payable? c. inter

> Use the information from the following journal entries of Turning Leaves Furniture Restoration to answer the questions below: Requirements 1. Start with Accounts Receivables beginning balance ($38,000) and then post to the Accounts Receivable T-accou

> Answer these questions about receivables and uncollectibles. For the true-false questions, explain any answers that turn out to be false. 1. True or false? Credit sales increase receivables. Collections and write-offs decrease receivables. 2. Which rec

> Perform the following accounting for the receivables of Evans and Tanner, a law firm, at December 31, 2010. Requirements 1. Start with the beginning balances for these T-accounts: Accounts Receivable, $97,000 Allowance for Uncollectible Accounts, $5,

> During 2011, Turning Leaves Furniture Restoration completed these transactions: 1. Sales revenue on account, $1,000,000 2. Collections on account, $870,000 3. Write-offs of uncollectibles, $12,000 4. Uncollectible-account expense, 4% of sales revenue

> The Cash account of Randell Corp. reported a balance of $2,400 at October 31. Included were outstanding checks totaling $500 and an October 31 deposit of $200 that did not appear on the bank statement. The bank statement, which came from Park Bank, liste

> Crow Company requires that all documents supporting a check be cancelled by punching a hole through the packet. Why is this practice required? What might happen if it were not?

> During its first year of operations, Turning Leaves Furniture Restoration, Inc., had sales of $312,000, all on account. Industry experience suggests that Turning Leaves Furniture Restorations uncollectibles will amount to 4% of credit sales. At December

> As a recent college graduate, you land your first job in the customer collections department of Countryroads Publishing. Zach Peters, the manager, asked you to propose a system to ensure that cash received from customers by mail is handled properly. Draf

> At December 31, 2010, Darcis Travel has an accounts receivable balance of $88,000. Allowance for Doubtful Accounts has a credit balance of $900 before the year-end adjustment. Service revenue for 2010 was $900,000. Darcis Travel estimates that doubtful-a

> Identify the other control procedures usually found in a company’s system of internal control besides separation of duties, and tell why each is important.

> Continental Sporting Goods started April with an inventory of nine sets of golf clubs that cost a total of $1,260. During April Continental purchased 25 sets of clubs for $4,000. At the end of the month, Continental had 8 sets of golf clubs on hand. The

> Summer Kluxon, Inc., purchased inventory costing $120,000 and sold 75% of the goods for $150,000. All purchases and sales were on account. Kluxon later collected 30% of the accounts receivable 1. Journalize these transactions for Kluxon, which uses the p

> Define fraud. List and briefly discuss the three major components of the fraud triangle.

> For each of the following situations, identify the inventory method that you would use or, given the use of a particular method, state the strategy that you would follow to accomplish your goal: a. Inventory costs are increasing. Your company uses LIFO a

> Toyland prepares budgets to help manage the company. Toyland is budgeting for the fiscal year ended January 31, 2010. During preceding year ended January 31, 2009, sales totaled $9,700 million and cost of goods sold was $6,200 million. At January 31, 200

> Assume Birch Leaf Foods, Inc., experienced the following revenue and accounts receivable write-offs: Suppose Birch Leaf estimates that 1% of revenues will become uncollectible. Requirement 1. Journalize service revenue (all on account), bad-debt expen

> Assume Dans Drums borrowed $19 million from Need It Now Bank and agreed to (a) pay an interest rate of 7.1% and (b) maintain a compensating balance amount equal to 5.8% of the loan. Determine Dans Drums actual effective interest rate on this loan.

> On November 16, SRO, Inc., paid $98,000 for an investment in the stock of Northwest Pacific Railway (NPR). SRO intends to account for these shares as trading securities. On December 12, SRO received a $700 cash dividend from NPR. It is now December 31, a

> The following items appear on a bank reconciliation. Classify each item as (a) an addition to the bank balance, (b) a subtraction from the bank balance, (c) an addition to the book balance, or (d) a subtraction from the book balance. 1. ___ Outstandi

> Green Grass Golf Company manufactures a popular line of golf clubs. Green Grass Golf employs 188 workers and keeps their employment records on time sheets that show how many hours the employee works each week. On Friday the shop foreman collects the time

> Toys Plus prepares budgets to help manage the company. Toys Plus is budgeting for the fiscal year ended January 31, 2010. During the preceding year ended January 31, 2009, sales totaled $9,300 million and cost of goods sold was $6,500 million. At January

> Assume Port City Credit Union completed these transactions: Show what the company would report for these transactions on its 2010 and 2011 balance sheets and income statements. 2010 Apr 1 Loaned $125,000 to Lee Franz on a one-year, 12% note. Dec 31

> Assume Lennys Lanes borrowed $14 million from Greenback Bank and agreed to (a) pay an interest rate of 7.7% and (b) maintain a compensating balance amount equal to 5.7% of the loan. Determine Lennys Lanes actual effective interest rate on this loan.

> Assume Dogwood Leaf Foods, Inc., experienced the following revenue and accounts receivable write-offs: Suppose Dogwood Leaf estimates that 1% of revenues will become uncollectible. Requirement 1. Journalize service revenue (all on account), bad-debt e

> On November 16, ACA, Inc., paid $95,000 for an investment in the stock of American Pacific Railway (APR). ACA plans to account for these shares as trading securities. On December 12, ACA received a $400 cash dividend from APR. It is now December 31, and

> Sponsor Corporation reports short-term investments on its balance sheet. Suppose a division of Sponsor completed the following short-term investment transactions during 2010: Requirement 1. Prepare T-accounts for Cash, Short-Term Investment, Dividend R

> The following items appear on a bank reconciliation: 1. ___ Outstanding checks 2. ___ Bank error: The bank credited our account for a deposit made by another bank customer. 3. ___ Service charge 4. ___ Deposits in transit 5. ___ NSF check 6. ___ Ban

> Use the data for Kens in Exercise 6-16A to illustrate Kens income tax advantage from using LIFO over FIFO. Sales revenue is $6,600, operating expenses are $1,500, and the income tax rate is 35%. How much in taxes would Kens save by using the LIFO method

> Assume Candy Corner, Inc., purchased conveyor-belt machinery . Classify each of the following expenditures as a capital expenditure or an immediate expense related to machinery: a. Sales tax paid on the purchase price b. Transportation and insurance whi

> Suppose Timely Delivery pays $64 million to buy Guaranteed Overnight. Guaranteeds assets are valued at $74 million, and its liabilities total $16 million. How much goodwill did Timely Delivery purchase in its acquisition of Guaranteed Overnight? a. $48 m

> McCall stores use point-of-sale terminals as cash registers. The register shows the amount of each sale, the cash received from the customer, and any change returned to the customer. The machine also produces a customer receipt but keeps no record of tra

> A company purchased mineral assets costing $840,000, with estimated residual value of $30,000, and holding approximately 300,000 tons of ore. During the first year, 48,000 tons are extracted and sold. What is the amount of depletion for the first year? a

> Hill Company purchased a machine for $8,600 on January 1, 2010. The machine has been depreciated using the straight-line method over a 10-year life and $600 residual value. Hill sold the machine on January 1, 2012, for $7,700. What is straight-line depr

> Hill Company purchased a machine for $8,600 on January 1, 2010. The machine has been depreciated using the straight-line method over a 10-year life and $600 residual value. Hill sold the machine on January 1, 2012, for $7,700. Journalize Hills sale of th

> Hill Company purchased a machine for $8,600 on January 1, 2010. The machine has been depreciated using the straight-line method over a 10-year life and $600 residual value. Hill sold the machine on January 1, 2012, for $7,700. What gain or loss should Hi

> An error understated Regan Corporations December 31, 2010, ending inventory by $42,000. What effect will this error have on total assets and net income for 2010? Assets………………….Net income a. Understate………..No effect b. No effect……………No effect c. Unders

> Shipley Tank Company had the following beginning inventory , net purchases, net sales, and gross profit percentage for the first quarter of 2010: By the gross profit method, the ending inventory should be a. $80,000. b. $78,000. c. $81,000. d. $79,00

> Trigger, Inc., reported the following data: Triggers gross profit percentage is a. 46.3. b. 52.7. c. 47.3. d. 57.4. Freight in.. Purchases $ 25,000 208,000 57,000 $ 7,000 6,200 450,000 Sales returns..... . Purchase returns...... ...... Beginning i

> Sales are $540,000 and cost of goods sold is $330,000. Beginning and ending inventories are $29,000 and $34,000, respectively . How many times did the company turn its inventory over during this period? a. 17.1 times b. 6.7 times c. 7.2 times d. 10.5

> Two financial ratios that clearly distinguish a discount chain such as Kmart from a high-end retailer such as Saks Fifth Avenue are the gross profit percentage and the rate of inventory turnover. Which set of relationships is most likely for Saks Fifth A