Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinic participants wear multiuse (MU) watches. Beyond the normal timekeeping features of most watches, MU watches are able to report temperature, altitude, and barometric pressure. MU watches are waterproof, so moisture from kayaking, rain, fishing, or even diving up to 100 feet won’t damage them. Suzie decides to have MU watches available for sale at the start of each clinic. The following transactions relate to purchases and sales of watches during the second half of 2022. All watches are sold for $500 each. Jul. 17 Purchased 50 watches for $7,500 ($150 per watch) on account. Jul. 31 Sold 40 watches for $20,000 cash. Aug. 12 Purchased 40 watches for $6,400 ($160 per watch) cash. Aug. 22 Sold 30 watches for $15,000 on account. Sep. 19 Paid for watches purchased on July 17. Sep. 27 Receive cash of $9,000 for watches sold on account on August 22. Oct. 27 Purchased 80 watches for $13,600 ($170 per watch) cash. Nov. 20 Sold 90 watches for $45,000 cash. Dec. 4 Purchased 100 watches for $18,000 ($180 per watch) on account. Dec. 8 Sold 40 watches for $20,000 on account. Required: 1. (a) Calculate sales revenue, cost of goods sold, and ending inventory as of December 31, 2022, assuming Suzie uses FIFO to account for inventory. (b) Prepare the gross profit section of a partial income statement for transactions related to MU watches. 2. Late in December, the next generation of multiuse (MU II) watches is released. In addition to all of the features of the MU watch, the MU II watches are equipped with a global positioning system (GPS) and have the ability to download and play songs and videos off the Internet. The demand for the original MU watches is greatly reduced. As of December 31, the estimated net realizable value of MU watches is only $100 per watch. (a) Record any necessary adjustment on December 31, 2022, related to this information. (b) For what amount would MU inventory be reported in the December 31, 2022, balance sheet? (c) Prepare an updated gross profit section of a partial income statement accounting for this additional information. Compare your answer to requirement 1(b). The Great Adventures continuing problem also can be assigned using the General Ledger software in Connect. Students will be given an existing trial balance and asked to prepare (1) the journal entries above, (2) financial statements, and (3) closing entries.
> You would like to start saving for retirement. Assuming you are now 25 years old and you want to retire at age 55, you have 30 years to watch your investment grow. You decide to invest in the stock market, which has earned about 13% per year over the pas
> GMG Studios plans to invest $60,000 at the end of each year for the next three years. There are three investment options available. Required: Determine the accumulated investment amount by the end of the third year for each of the options.
> Lights, Camera, and More sells filmmaking equipment. The company offers three purchase options: (1) pay full cash today, (2) pay one-half down and the remaining one-half plus 10% in one year, or (3) pay nothing down and the full amount plus 15% in one ye
> Arnold and Helene would like to visit Austria in two years to celebrate their 25th wedding anniversary. Currently, the couple has saved $27,000, but they expect the trip to cost $31,000. If they put $27,000 in an account that earns 7% interest, compounde
> Horizon Corporation manufactures personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2019. Due primarily to increased competition and price slashing in the industry, 2020’s income statement reported a
> Dusty would like to buy a new car in six years. He currently has $15,000 saved. He’s considering buying a car for around $19,000 but would like to add a Turbo engine to increase the car’s performance. This would increase the price of the car to $23,000.
> Oprah is deciding between investment options. Both investments earn an interest rate of 7%, but interest on the first investment is compounded annually, while interest on the second investment is compounded semiannually. Which investment would you advise
> At the end of 2021, Worthy Co.’s balance for Accounts Receivable is $20,000, while the company’s total assets equal $1,500,000. In addition, the company expects to collect all of its receivables in 2022. In 2022, however, one customer owing $2,000 become
> Spade Agency separates its accounts receivable into three age groups for purposes of estimating the percentage of uncollectible accounts. 1. Accounts not yet due = $25,000; estimated uncollectible = 4%. 2. Accounts 1–60 days past due = $10,000; estimated
> Williamson Distributors separates its accounts receivable into three age groups for purposes of estimating the percentage of uncollectible accounts. 1. Accounts not yet due = $40,000; estimated uncollectible = 5%. 2. Accounts 1–30 days past due = $11,000
> The Giles Agency offers a 12% trade discount when providing advertising services of $1,000 or more to its customers. Audrey’s Antiques decides to purchase advertising services of $3,500 (not including the trade discount), while Michael’s Motors purchases
> Damon Company receives its monthly bank statement, which reports a balance of $2,000. After comparing this to the company’s cash records, Damon’s accountants determine that deposits outstanding total $4,200 and checks outstanding total $4,450. Required:
> Indicate whether the firm should add or subtract each item below from its balance of cash or the bank’s balance of cash in preparing a bank reconciliation. The first answer is provided as an example. If an item is not a reconciling item
> Match each term associated with a bank reconciliation with its description.
> Record the following transactions. 1. Pay employee salaries of $600 by issuing checks. 2. Purchase computer equipment of $1,000 using a credit card. 3. Pay for maintenance of $400 for a company vehicle using a debit card.
> Financial information for American Eagle is presented in Appendix A at the end of the book, and financial information for Buckle is presented in Appendix B at the end of the book. Required: 1. Which company carries a greater inventory balance as a percen
> During the year, the following sales transactions occur. There is a charge of 3% on all credit card transactions and a 1% charge on all debit card transactions. Calculate the amount recorded as cash receipts from these transactions. 1. Total cash sales =
> Determine whether the firm reports each of the following items as part of cash and cash equivalents in the balance sheet.
> Match each of the following control activities with its definition.
> Match each of the following components of internal control with its description.
> For each company, calculate the ratio of cash to noncash assets.
> Smith Law Firm specializes in the preparation of wills for estate planning. On October 1, 2021, the company begins operations by issuing stock for $11,000 and obtaining a loan from a local bank for $35,000. By the end of 2021, the company provides will p
> On January 12, Ferrell Incorporated obtains a permit to start a comedy club, which will operate only on Saturday nights. To prepare the club for the grand opening, Ferrell purchases tables and chairs for $13,000 cash on January 16. Ferrell also purchases
> Eastwood Enterprises offers horseback riding lessons. During the month of June, the company provides lessons on account totaling $5,100. By the end of the month, the company received on account $4,500 of this amount. In addition, Eastwood received $500 o
> Match each type of cash flow to its definition.
> Clooney Corp. establishes a petty cash fund for $225 and issues a credit card to its office manager. By the end of the month, employees made one expenditure from the petty cash fund (entertainment, $25) and three expenditures with the credit card (postag
> Financial information for Buckle is presented in Appendix B at the end of the book. Required: 1. For the most recent year, what is the amount of inventory in the balance sheet? What does this amount represent? 2. Buckle refers to its cost of goods sold u
> Larry has been the chief financial officer (CFO) of Maxima Auto Service for the past 10 years. The company has reported profits each year it’s been in business. However, this year has been a tough one. Increased competition and the rising costs of labor
> Brangelina Adoption Agency’s general ledger shows a cash balance of $4,593. The balance of cash in the March-end bank statement is $7,345. A review of the bank statement reveals the following information: checks outstanding of $2,803, bank service fees o
> Refer to the information in BE4–10. Required: Record the necessary entries to adjust the balance of cash.
> Bourne Incorporated reports a cash balance at the end of the month of $2,620. A comparison of the company’s cash records with the monthly bank statement reveals several additional cash transactions: bank service fees ($85), an NSF check from a customer (
> Match each of the following provisions of the Sarbanes-Oxley Act (SOX) with its description.
> Beaver Construction purchases new equipment for $50,400 cash on April 1, 2021. At the time of purchase, the equipment is expected to be used in operations for seven years (84 months) and have no resale or scrap value at the end. Beaver depreciates equipm
> Mountaineer Excavation operates in a low-lying area that is subject to heavy rains and flooding. Because of this, Mountaineer purchases one year of flood insurance in advance on March 1, paying $36,000 ($3,000/month). (1) Record the purchase of insurance
> Suppose Hoosiers, a specialty clothing store, rents space at a local mall for one year, paying $25,200 ($2,100/month) in advance on October 1. (1) Record the payment of rent in advance on October 1. (2) Record the adjusting entry on December 31. (3) Calc
> At the beginning of May, Golden Gopher Company reports a balance in Supplies of $500. On May 15, Golden Gopher purchases an additional $3,300 of supplies for cash. By the end of May, only $300 of supplies remains. (1) Record the purchase of supplies on M
> Rebel Technology maintains its records using cash-basis accounting. During the year, the company received cash from customers, $50,000, and paid cash for salaries, $21,900. At the beginning of the year, customers owe Rebel $1,100. By the end of the year,
> Consider the following set of transactions occurring during the month of May for Bison Consulting Company. For each transaction, indicate the impact on (1) the balance of cash, (2) cash-basis net income, and (3) accrual-basis net income for May. The firs
> Financial information for American Eagle is presented in Appendix A at the end of the book. Required: 1. For the most recent year, what is the amount of inventory in the balance sheet? What does this amount represent? 2. American Eagle refers to its cost
> Hoya Corporation reports the following amounts: Assets = $18,000; Liabilities = $3,000; Stockholders’ equity = $15,000; Dividends = $3,000; Revenues = $17,000; and Expenses = $12,000. What amount is reported for net income?
> The year-end adjusted trial balance of Hilltoppers Corporation included the following account balances: Cash, $5,000; Equipment, $17,000; Accounts Payable, $3,000; Common Stock, $11,000; Retained Earnings, $8,100; Dividends, $1,100; Service Revenue, $16,
> Below are transactions for Bronco Corporation during the month of June. Calculate the amount of expense to recognize in June. If the transaction does not require an expense to be recognized, indicate how the transaction would be reported. a. Pay $600 cas
> The year-end adjusted trial balance of Aggies Corporation included the following account balances: Retained Earnings, $230,000; Service Revenue, $900,000; Salaries Expense, $390,000; Rent Expense, $150,000; Interest Expense, $85,000; and Dividends, $60,0
> The following account balances appear in the 2021 adjusted trial balance of Blue Devils Corporation: Cash, $5,000; Accounts Receivable, $9,000; Supplies, $19,000; Equipment, $120,000; Accumulated Depreciation, $45,000; Accounts Payable, $26,000; Salaries
> The following account balances appear in the 2021 adjusted trial balance of Spiders Corporation: Common Stock, $30,000; Retained Earnings, $8,000; Dividends, $1,000; Service Revenue, $28,000; Salaries Expense, $16,000; and Rent Expense, $9,000. No common
> The following account balances appear in the 2021 adjusted trial balance of Beavers Corporation: Service Revenue, $275,000; Salaries Expense, $110,000; Supplies Expense, $20,000; Rent Expense, $26,000; Depreciation Expense, $44,000; and Delivery Expense,
> Below are the four primary financial statements. Match each financial statement with its primary purpose to investors.
> For each of the following accounts, indicate whether the account is shown in the income statement or the balance sheet:
> Refer to the information in BE3–12. (1) Record the lending for Falcon on July 1, 2021. (2) Record the adjusting entry for Falcon on December 31, 2021. (3) Calculate the 2021 year-end adjusted balances of Interest Receivable and Interest Revenue (assumi
> Midshipmen Company borrows $15,000 from Falcon Company on July 1, 2021. Midshipmen repays the amount borrowed and pays interest of 12% (1%/month) on June 30, 2022. (1) Record the borrowing for Midshipmen on July 1, 2021. (2) Record the adjusting entry fo
> Fighting Irish Incorporated pays its employees $5,600 every two weeks ($400/ day). The current two-week pay period ends on December 28, 2021, and employees are paid $5,600. The next two-week pay period ends on January 11, 2022, and employees are paid $5,
> Suppose a customer rents a vehicle for three months from Commodores Rental on November 1, paying $6,000 ($2,000/month). (1) Record the rental for Commodores on November 1. (2) Record the adjusting entry on December 31. (3) Calculate the year-end adjusted
> Below are transactions for Lobos, Inc., during the month of December. Calculate the amount of revenue to recognize in December. If the transaction does not require the company to recognize a revenue, indicate how it would report the transaction. a. Recei
> Consider the following T-account for cash. 1. Compute the balance of the Cash account. 2. Give some examples of transactions that would have resulted in the $4,400 posting to the account. 3. Give some examples of transactions that would have resulted in
> The following transactions occur for Cardinal Music Academy during the month of October: 1. Provide music lessons to students for $17,000 cash. 2. Purchase prepaid insurance to protect musical equipment over the next year for $4,200 cash. 3. Purchase mus
> The following transactions occur for the Panther Detective Agency during the month of July: 1. Purchase a truck and sign a note payable, $15,000. 2. Purchase office supplies for cash, $600. 3. Pay $800 in rent for the current month. Record the transactio
> Fill in the blanks below with the word “debit” or “credit.” a. The balance of an asset account increases with a_____and decreases with a_____. b. The balance of a liability account increases with a ______and decreases with a_____ . c. The balance of a st
> For each of the following accounts, indicate whether a debit or credit is used to increase (+) or decrease (−) the balance of the account. The solution for the first one is provided as an example.
> The following transactions occur for Badger Biking Company during the month of June: a. Provide services to customers on account for $50,000. b. Receive cash of $42,000 from customers in (a) above. c. Purchase bike equipment by signing a note with the ba
> Ernie Upshaw is the supervising manager of Sleep Tight Bedding. At the end of the year, the company’s accounting manager provides Ernie with the following information, before any adjustment. In the previous year, Sleep Tight Bedding rep
> Suppose a local company has the following balance sheet accounts: Calculate the missing amounts assuming the business has total assets of $37,500.
> Using the notion that the accounting equation (Assets = Liabilities + Stockholders’ Equity) must remain in balance, indicate whether each of the following transactions is possible. a. Cash increases; Accounts Payable decreases. b. Service Revenue increas
> Your study partner is having trouble getting total debits to equal total credits in the trial balance. Prepare a corrected trial balance by placing each account balance in the correct debit or credit column.
> Using the following information, prepare a trial balance. Assume all asset, dividend, and expense accounts have debit balances and all liability, stockholders’ equity, and revenue accounts have credit balances. List the accounts in the
> The following transactions occur for the Wolfpack Shoe Company during the month of June: a. Provide services to customers for $30,000 and receive cash. b. Purchase office supplies on account for $20,000. c. Pay $7,000 in salaries to employees for work pe
> Below are the steps in the measurement process of external transactions. Arrange them from first (1) to last (6). a. Post the transaction to the T-accounts in the general ledger. b. Assess whether the impact of the transaction results in a debit or credi
> Each of these parties plays a role in the quality of financial reporting. Match each group with its function.
> Determine on which financial statement you find the following items.
> Match each financial statement with its description.
> For each transaction, indicate whether each account would be classified in the balance sheet as (a) an asset, (b) a liability, or (c) stockholders’ equity; in the income statement as (d) a revenue or (e) an expense; or in the statement
> You have been hired as a consultant by a parts manufacturing firm to provide advice as to the proper accounting methods the company should use in some key areas. In the area of receivables, the company president does not understand your recommendation to
> For each transaction, indicate whether each account would be classified in the balance sheet as (a) an asset, (b) a liability, or (c) stockholders’ equity; in the income statement as (d) a revenue or (e) an expense; or in the statement
> Match each account type with its description.
> Match each form of business organization with its description.
> Match each business activity with its description.
> Match each of the components of faithful representation with its definition.
> Match each of the components of relevance with its definition.
> Below are possible career opportunities for those earning a degree in accounting. Indicate whether the statement related to each career is true or false.
> Indicate which of the following are objectives of financial accounting.
> Indicate whether the definition provided is true or false. (True/False) Accounting can be defined as: 1. _______The language of business. 2. _______A measurement/communication process. 3. _______A mathematics course.
> Wendy Day Kite Company owns 100% of the outstanding stock of Strong String Company. At the end of the year, Wendy Day has total inventory of $14,000 and Strong String has total inventory of $8,000. Determine the amount of inventory that would be reported
> Obtain a copy of the annual report of Avon Products, Inc., for the most recent year. You can find the annual report at the company’s website (www.avon.com) in the investor information section or at the Securities and Exchange Commission’s website (www.se
> Wendy Day Kite Company owns 40% of the outstanding stock of Strong String Company. During the current year, Strong String paid a $10 million cash dividend on its common shares. What effect does Strong String’s dividend have on Wendy Day’s financial state
> Wendy Day Kite Company owns 40% of the outstanding stock of Strong String Company. During the current year, Strong String reported net income of $20 million. What effect does Strong String’s reported net income have on Wendy Day’s financial statements? E
> On December 29, 2021, Adams Apples purchased 1,000 shares of General Electric common stock for $19 per share. On December 31, the market value of the stock increased to $20 per share. On January 24, 2022, all of the shares are sold for $16 per share. Rec
> On December 29, 2021, Adams Apples purchased 1,000 shares of General Electric common stock for $19 per share. On December 31, the market value of the stock increased to $20 per share. On January 24, 2022, all of the shares are sold for $22 per share. Rec
> On December 28, Summit purchased Microsoft common shares for $485,000. On December 31, the shares had a fair value of $487,000. Record the initial investment by Summit and, if appropriate, an adjustment to record the investment at fair value.
> On December 28, Summit purchased Microsoft common shares for $485,000. On December 31, the shares had a fair value of $483,000. Record the initial investment by Summit and, if appropriate, an adjustment to record the investment at fair value.
> On September 1, Leather Suppliers, Inc., purchases 150 shares of Western Wear Clothing for $13 per share. On November 1, Leather Suppliers sells the investment for $17 per share. Record the transactions made by Leather Suppliers for the purchase and sale
> Salt Foods purchases forty $1,000, 7%, 10-year bonds issued by Pretzelmania, Inc., for $42,975 on January 1. The market interest rate for bonds of similar risk and maturity is 6%. Salt Foods receives interest semiannually on June 30 and December 31. 1. R
> Salt Foods purchases forty $1,000, 7%, 10-year bonds issued by Pretzelmania, Inc., for $37,282 on January 1. The market interest rate for bonds of similar risk and maturity is 8%. Salt Foods receives interest semiannually on June 30 and December 31. 1. R
> Salt Foods purchases forty $1,000, 7%, 10-year bonds issued by Pretzelmania, Inc., for $40,000 on January 1. The market interest rate for bonds of similar risk and maturity is 7%. Salt Foods receives interest semiannually on June 30 and December 31. 1. R
> You have recently been hired as the assistant controller for Stanton Industries. Your immediate superior is the controller who, in turn, reports to the vice president of finance. The controller has assigned you the task of preparing the year-end adjustme
> Indicate with an “X” any of the following that represent a common reason why companies invest in other companies. 1. To invest excess cash created by operating in seasonal industries. 2. To increase employees’ morale. 3. To build strategic alliances. 4.
> Calculate the present value of the following annuities, assuming each annuity payment is made at the end of each compounding period.
> Monroe Corporation is considering the purchase of new equipment. The equipment will cost $35,000 today. However, due to its greater operating capacity, Monroe expects the new equipment to earn additional revenues of $5,000 by the end of each year for the
> Tatsuo has just been awarded a four-year scholarship to attend the university of his choice. The scholarship will pay $8,000 each year for the next four years to reimburse normal school-related expenditures. Each $8,000 payment will be made at the end of
> Calculate the future value of the following annuities, assuming each annuity payment is made at the end of each compounding period.
> Matt plans to start his own business once he graduates from college. He plans to save $3,000 every six months for the next five years. If his savings earn 10% annually (or 5% every six months), determine how much he will save by the end of the fifth year
> Tom and Suri decide to take a worldwide cruise. To do so, they need to save $30,000. They plan to invest $4,000 at the end of each year for the next seven years to earn 8% compounded annually. Determine whether Tom and Suri will reach their goal of $30,0
