List the steps we use to measure external transactions.
> Refer to the information in BE5–17, but now assume that the balance of Allowance for Uncollectible Accounts before adjustment is $4,000 (debit). The company still estimates future uncollectible accounts to be 3% of credit sales for the year. What adjustm
> Discuss basic controls for cash receipts.
> Describe how the purchase of items with a check is recorded.
> Define cash and cash equivalents.
> Is fraud more likely to occur when it is being committed by top-level employees? Explain.
> To what does collusion refer?
> What are some limitations of internal control?
> Who has responsibility for internal control in an organization? According to guidelines set forth in Section 404 of the Sarbanes-Oxley Act, what role does the auditor play in internal control?
> Define occupational fraud. Describe two common means of occupational fraud.
> Why are adjusting entries necessary under accrual-basis accounting?
> Consider the information in Question 7. Using cash-basis accounting, on which date would Peterson Law record the $100 expense for each scenario?
> At the end of the year, Brinkley Incorporated’s balance of Allowance for Uncollectible Accounts is $4,000 (credit) before adjustment. The company estimates future uncollectible accounts to be 3% of credit sales for the year. Credit sales for the year tot
> Peterson Law asks Executive Lawn to provide $100 of landscape maintenance. Executive Lawn provides the service on April 10. Consider three scenarios: a. Peterson pays for the lawn service in advance on March 28. b. Peterson pays for the lawn service on A
> Consider the information in Question 5. Using cash-basis accounting, on which date would Executive Lawn record the $100 revenue for each scenario?
> Executive Lawn provides $100 of landscape maintenance to Peterson Law on April 10. Consider three scenarios: a. Peterson pays for the lawn service in advance on March 28. b. Peterson pays for the lawn service on April 10, the day of service. c. Peterson
> Describe when revenues and expenses are recognized using cash-basis accounting. How does this differ from accrual-basis accounting?
> Samantha is a first-year accounting student. She doesn’t think it matters that expenses are reported in the same period’s income statement with the related revenues. She feels that “as long as revenues and expenses are recorded in any period, that’s good
> How do the adjusted trial balance and the post-closing trial balance differ? Which accounts are shown in the adjusted trial balance but not in the post-closing trial balance? Which account is shown in both trial balances but with a different balance on e
> Matt has been told by his instructor that dividends reduce retained earnings (and therefore stockholders’ equity). However, since he knows that stockholders are receiving the dividends, Matt doesn’t understand how paying dividends would decrease stockhol
> In its first four years of operations, Chance Communications reports net income of $300, $900, $1,500, and $2,400, respectively, and pays dividends of $200 per year. What would be the balance of Retained Earnings at the end of the fourth year?
> Describe the debits and credits for the three closing entries required at the end of a reporting period.
> What does it mean to close temporary accounts? Which of the following account types are closed: assets, liabilities, dividends, revenues, and expenses?
> On October 1, 2021, Oberley Corporation loans one of its employees $40,000 and accepts a 12-month, 9% note receivable. Calculate the amount of interest revenue Oberley will recognize in 2021 and 2022.
> What are the two purposes of preparing closing entries?
> At the end of the period, Sanders Company reports the following amounts: Assets = $12,000; Liabilities = $8,000; Revenues = $5,000; Expenses = $3,000. Calculate stockholders’ equity.
> Explain what is meant by the term classified when referring to a balance sheet.
> What is the purpose of the adjusted trial balance? How do the adjusted trial balance and the (unadjusted) trial balance differ?
> Discuss the major principle that describes recording expenses.
> Fill in the blank associated with each adjusting entry:
> At the end of May, Robertson Corporation has provided services to customers, but it has not yet billed these customers nor have any of them paid for those services. If Robertson makes no adjusting entry associated with these unpaid services provided, wil
> Global Printing publishes several types of magazines. Customers are required to pay for magazines in advance. On November 5, Global receives cash of $120,000 for prepaid subscriptions. By the end of November, Global has distributed $20,000 of magazines t
> Jackson Rental receives its September utility bill of $320 on September 30 but does not pay the bill until October 10. Jackson’s accountant records the utility expense of $320 on October 10 at the time of payment. Will this cause any of Jackson’s account
> Sequoya Printing purchases office supplies for $75 on October 2. The staff uses the office supplies continually on a daily basis throughout the month. By the end of the month, office supplies of $25 remain. Record the month-end adjusting entry for office
> Calculate the missing amount for each of the following notes receivable.
> Provide an example of an accrued revenue. Describe the adjusting entry associated with an accrued revenue.
> Provide an example of an accrued expense. Describe the adjusting entry associated with an accrued expense.
> Provide an example of a deferred revenue. Describe the adjusting entry associated with a deferred revenue.
> Provide an example of a prepaid expense. Describe the adjusting entry associated with a prepaid expense.
> There are two basic types of adjusting entries—prepayments and accruals. Describe each in terms of the timing of revenue and expense recognition versus the flow of cash.
> Discuss the major principle that describes recording revenues.
> For each of the following accounts, indicate whether we use a debit or a credit to decrease the balance of the account. (Compare your answers to those for Question 8.) a. Cash. b. Salaries Payable. c. Utilities Expense. d. Service Revenue.
> For each of the following accounts, indicate whether we use a debit or a credit to increase the balance of the account. a. Cash. b. Salaries Payable. c. Utilities Expense. d. Service Revenue.
> Jenny has learned that assets have debit balances, while liabilities have credit balances. Based on this, she believes that asset accounts can only be debited and liabilities can only be credited. Is Jenny correct? When would we credit an asset and when
> What is the normal balance (debit or credit) of assets, liabilities, stockholders’ equity, revenues, and expenses?
> Brady is hired in 2021 to be the accountant for Anderson Manufacturing, a private company. At the end of 2021, the balance of Accounts Receivable is $29,000. In the past, Anderson has used only the direct write-off method to account for bad debts. Based
> Jerry believes that “dual effect” indicates that, for all transactions, one account will increase and one account will decrease. Is Jerry correct? Explain.
> Describe the impact of each of these external transactions on the accounting equation. a. Receive a loan from the bank. b. Pay employee salaries for the current period. c. Receive cash from customers for services provided in the current period. d. Purcha
> Each external transaction will have a dual effect on the accounting equation. Explain what this means.
> If total debits equal total credits in the trial balance, does this indicate that all transactions have been properly accounted for? Explain.
> What is a trial balance? To what does the term “balance” refer?
> What is a general ledger? How does it relate to the chart of accounts?
> Describe what we mean by posting. Post the transactions in Question 15 to appropriate T-accounts.
> What does a T-account represent? What is the left side of the T-account called? What is the right side called?
> Describe the events that correspond to the following transactions.
> Sanders Inc. is a small brick manufacturer that uses the direct write-off method to account for uncollectible accounts. At the end of 2021, its balance for Accounts Receivable is $35,000. The company estimates that of this amount, $4,000 is not likely to
> Record each of the following external transactions using debits and credits. a. Receive cash of $1,200 for providing services to a customer. b. Pay rent of $500 for the current month. c. Purchase a building for $10,000 by signing a note with the bank.
> Explain the phrase “debits equal credits” with regard to journal entries.
> Provide the proper format for recording a transaction.
> What is a journal? What is a journal entry?
> Suzanne knows that an increase to an expense reduces retained earnings (a stockholders’ equity account). However, she also knows that expense accounts have a debit balance, while retained earnings normally has a credit balance. Are these two pieces of in
> Explain the difference between external transactions and internal transactions. If a company purchases supplies from a local vendor, would this be classified as an external or internal transaction?
> What are the three major legal forms of business organizations? Which one is chosen by most of the largest companies in the United States?
> What are a few of the typical operating activities for a company like Oracle Corporation, one of the world’s leading suppliers of software for information management?
> What are a few of the typical investing activities for a company like Caesars Entertainment, developer and operator of high end hotels and casinos?
> What are a few of the typical financing activities for a company like United Parcel Service, Inc. (UPS), the world’s largest package delivery company and a leading global provider of specialized transportation and logistics services?
> Major League Products provides merchandise carrying the logos of each fan’s favorite major league team. In recent years, the company has struggled to compete against new Internet- based companies selling products at much lower prices. Andrew Ransom, in h
> What are the three basic business activities that financial accounting seeks to measure and communicate to external parties? Define each.
> What are the two primary functions of financial accounting?
> What is the basic difference between financial accounting and managerial accounting?
> What is the role of the auditor in the financial reporting process?
> What was the primary reason for the establishment of the 1933 Securities Act and the 1934 Securities Exchange Act? What power does the Securities and Exchange Commission (SEC) have?
> In general terms, explain the terms U.S. GAAP and IFRS.
> Which body is primarily responsible for the establishment of GAAP in the United States? What body serves this function on an international basis?
> What is meant by GAAP? Why should companies follow GAAP in reporting to external users?
> How does financial accounting have an impact on society?
> Identify some of the people interested in making decisions about a company.
> Roseburg Corporation manufactures cardboard containers. In 2017, the company purchased several large tracts of timber for $20 million with the intention of harvesting its own timber rather than buying timber from outside suppliers. However, in 2021, Rose
> In addition to financial statements, what are some other ways to disclose financial information to external users?
> What are the three types of cash flows reported in the statement of cash flows? Give an example of each type of activity for a company like Oakley, Inc., a designer, manufacturer, and distributor of high-performance eyewear, footwear, watches, and athlet
> “The retained earnings account is a link between the income statement and the balance sheet.” Explain what this means.
> Give some examples of the basic assets and liabilities of a company like Walmart.
> What is the accounting equation? Which financial statement reports the accounting equation?
> Give some examples of the basic revenues and expenses for a company like The Walt Disney Company.
> What does it mean to say that the income statement, statement of stockholders’ equity, and statement of cash flows measure activity over an interval of time, but the balance sheet measures activity at a point in time?
> What are the four primary financial statements? What basic information is shown on each?
> What are the major advantages and disadvantages of each of the legal forms of business organizations?
> Provide the basic definition for each of the account types: assets, liabilities, stockholders’ equity, dividends, revenues, and expenses.
> Did you know that you can get lots of financial information free of charge? Go to finance.yahoo.com. Use the quote lookup located on the left side to get financial information about any publicly traded company. Required: 1. For your company of choice, ob
> Explain what it means to say that an accounting class is not the same as a math class.
> Define the four basic assumptions underlying GAAP.
> What is meant by the term cost effectiveness in financial reporting?
> What are the three components/aspects of relevance? What are the three components/aspects of faithful representation?
> Discuss the terms relevance and faithful representation as they relate to financial accounting information.
> What are some of the benefits to obtaining a degree in accounting? What is the difference between a career in public accounting and private accounting? What are some of the traditional careers of accounting graduates? What new areas are accountants expan
> What are the three primary objectives of financial reporting?
> What is the “flip side” of an investment in equity securities?
> Provide an example of an equity investment in another company undertaken for strategic purposes.
> How might the investing activity for a company that operates a ski resort vary throughout the year?
> After years of steady growth in net income, Performance Drug Company reported a preliminary net loss in 2021. The CEO, Joe Mammoth, notices the following estimates are included in reported performance: 1. Warranty expense and liability for estimated futu
> Financial information for Buckle is presented in Appendix B at the end of the book. Required: 1. For the most recent year, what amount does Buckle report for current assets? What is the ratio of current assets to total assets? 2. For the most recent year
