On December 1, Premium Electronics has three DVD players left in stock. All are identical, all are priced to sell at $85. One of the three DVD players left in stock, with serial #1012, was purchased on June 1 at a cost of $52. Another, with serial #1045, was purchased on November 1 for $48. The last player, serial #1056, was purchased on November 30 for $40. Instructions (a) Calculate the cost of goods sold using the FIFO periodic inventory method, assuming that two of the three players were sold by the end of December, Premium Electronics’ year-end. (b) If Premium Electronics used the specific identification method instead of the FIFO method, how might it alter its earnings by “selectively choosing” which particular players to sell to the two customers? What would Premium’s cost of goods sold be if the company wished to minimize earnings? Maximize earnings? (c) Which inventory method, FIFO or specific identification, do you recommend that Premium use? Explain why.
> Suppose the amounts presented here are basic fi nancial information (in millions) from the 2017 annual reports of Nike and adidas. Instructions Calculate the accounts receivable turnover and average collection period for both companies. Comment on the
> On July 4, Mazie’s Restaurant accepts a Visa card for a $250 dinner bill. Visa charges a 4% service fee. Instructions Prepare the entry on Mazie’s books related to the transaction.
> Presented below are data on three promissory notes. Determine the missing amounts. Date of Maturity Date Annual Total Note Terms Principal Interest Rate Interest (a) April 1 (b) July 2 (c) March 7 60 days 30 days 6 months $600,000 90,000 9% $600 ? 12
> On May 10, Keene Company sold merchandise for $4,000 and accepted the customer’s Best Business Bank MasterCard. At the end of the day, the Best Business Bank MasterCard receipts were deposited in the company’s bank account. Best Business Bank charges a 3
> Luke Roye is uncertain about the control features of a bank account. Explain the control benefits of (a) a checking account and (b) a bank statement.
> Thieu Co. has delivery equipment that cost $50,000 and has been depreciated $24,000. Instructions Record entries for the disposal under the following assumptions. (a) It was scrapped as having no value. (b) It was sold for $37,000. (c) It was sold for $2
> Prepare journal entries to record these transactions. (a) Echo Company retires its delivery equipment, which cost $41,000. Accumulated depreciation is also $41,000 on this delivery equipment. No salvage value is received. (b) Assume the same information
> The president of Mossy Enterprises asks if you could indicate the impact certain transactions have on the following ratios. Instructions Complete the table, indicating whether each transaction will increase (I), decrease (D), or have no effect (NE) on t
> On March 3, Plume Appliances sells $710,000 of its receivables to Western Factors Inc. Western Factors Inc. assesses a service charge of 4% of the amount of receivables sold. Instructions Prepare the entry on Plume Appliances’ books to record the sale of
> How do the components of revenues and expenses differ between a merchandising company and a service company?
> Sheldon Company just took its physical inventory on December 31. The count of inventory items on hand at the company’s business locations resulted in a total inventory cost of $300,000. In reviewing the details of the count and related inventory transact
> Your roommate is uncertain about the advantages of a promissory note. Compare the advantages of a note receivable with those of an account receivable.
> As the company accountant, explain the following ideas to the management of Ortiz Company. (a) The concept of reasonable assurance in internal control. (b) The importance of the human factor in internal control.
> Perth Inc.’s bank statement from Main Street Bank at August 31, 2017, gives the following information. A summary of the Cash account in the ledger for August shows the following: balance, August 1, $18,700; receipts $74,000; disburseme
> How is a gain or a loss on the sale of a plant asset computed?
> Suppose Nike, Inc. reported the following plant assets and intangible assets for the year ended May 31, 2017 (in millions): other plant assets $965.8, land $221.6, patents and trademarks (at cost) $515.1, machinery and equipment $2,094.3, buildings $974.
> In its first month of operations, McLanie Company made three purchases of merchandise in the following sequence: (1) 300 units at $6, (2) 400 units at $8, and (3) 500 units at $9. Assuming there are 200 units on hand at the end of the period, compute the
> These transactions took place for Bramson Co. 2016 May 1 Received a $5,000, 12-month, 6% note in exchange for an outstanding account receivable from R. Stoney. Dec. 31 Accrued interest revenue on the R. Stoney note. 2017 May 1 Received principal plus int
> If your school has a subscription to the FASB Codifi cation, go to http://aaahq.org/ascLogin.cfm to log in and prepare responses to the following. (a) How are receivables defi ned in the Codifi cation? (b) What are the conditions under which losses from
> (a) Explain the control principle of independent internal verification. (b) What practices are important in applying this principle?
> Banks charge fees for “bounced” checks—that is, checks that exceed the balance in the account. It has been estimated that processing bounced checks costs a bank roughly $1.50 per check. Thus, the prof
> The following expenditures relating to plant assets were made by Glenn Company during the first 2 months of 2017. 1. Paid $7,000 of accrued taxes at the time the plant site was acquired. 2. Paid $200 insurance to cover a possible accident loss on new fac
> The following situations are independent of one another. 1. An accounting student recently employed by a small company doesn’t understand why the company is only depreciating its buildings and equipment, but not its land. The student prepared journal ent
> An article in the Wall Street Journal indicated that companies are selling their receivables at a record rate. Why do companies sell their receivables?
> Moses Supply Co. has the following transactions related to notes receivable during the last 2 months of the year. The company does not make entries to accrue interest except at December 31. Nov 1 Loaned $60,000 cash to C. Bohr on a 12-month, 7% note. Dec
> Credit card usage in the United States is substantial. Many startup companies use credit cards as a way to help meet short-term fi nancial needs. The most common forms of debt for startups are use of credit cards and loans from relatives. Suppose that yo
> During its first year of operations, Fertig Company had credit sales of $3,000,000, of which $400,000 remained uncollected at year-end. The credit manager estimates that $18,000 of these receivables will become uncollectible. (a) Prepare the journal entr
> The cash records of Upton Company show the following. For July: 1. The June 30 bank reconciliation indicated that deposits in transit total $580. During July, the general ledger account Cash shows deposits of $16,900, but the bank statement indicates tha
> An item must possess two characteristics to be classified as inventory. What are these two characteristics?
> As a new auditor for the CPA firm of Blacke and Whyte, you have been assigned to review the internal controls over mail cash receipts of Simon Company. Your review reveals that checks are promptly endorsed “For Deposit Only,” but no list of the checks is
> Shown below are the T-accounts relating to equipment that was purchased for cash by a company on the first day of the current year. The equipment was depreciated on a straight-line basis with an estimated useful life of 10 years and a salvage value of $1
> JCPenney Company accepts both its own credit cards and national credit cards. What are the advantages of accepting both types of cards?
> Hummer Company purchased a delivery truck. The total cash payment was $30,020, including the following items. Negotiated purchase price $24,000 Installation of special shelving 1,100 Painting and lettering 900 Motor vehicle licen
> As its year-end approaches, it appears that Mendez Corporation’s net income will increase 10% this year. The president of Mendez Corporation, nervous that thestockholders might expect the company to sustain this 10% growth rate in net income in future ye
> How do documentation procedures contribute to good internal control?
> This information relates to the Cash account in the ledger of Howard Company. Balance September 1—$16,400; Cash deposited—$64,000 Balance September 30—$17,600; Checks written—$62,800
> Alternative Distributor Corp., a distributor of groceries and related products, is headquartered in Medford, Massachusetts. During a recent audit, Alternative Distributor Corp. was advised that existing internal controls necessary for the company to deve
> Here are selected 2017 transactions of Akron Corporation. Jan. 1 Retired a piece of machinery that was purchased on January 1, 2007. The machine cost $62,000 and had a useful life of 10 years with no salvage value. June 30 Sold a computer that was purcha
> Antone Company sells office equipment on July 31, 2017, for $21,000 cash. The office equipment originally cost $72,000 and as of January 1, 2017, had accumulated depreciation of $42,000. Depreciation for the first 7 months of 2017 is $4,600. Prepare the
> Tawnya Dobbs, the vice president of sales for Tropical Pools and Spas, wants the company’s credit department to be less restrictive in granting credit. “How can we sell anything when you guys won’t approve anybody?” she asks. Discuss the pros and cons of
> LaTour Inc. is based in France and prepares its financial statements (in euros) in accordance with IFRS. In 2017, it reported cost of goods sold of €578 million and average inventory of €154 million. Briefly discuss how analysis of LaTour’s inventory tur
> Milton Company closes its books on its July 31 year-end. The company does not make entries to accrue for interest except at its year-end. On June 30, the Notes Receivable account balance is $23,800. Notes Receivable include the following. During July, t
> Chien Corporation is a recently formed business selling the “World’s Best Doormat.” The corporation is selling doormats faster than Chien can make them. It has been selling the product on a credit basis, telling customers to “pay when they can.” Oddly, e
> Rianna.com uses the allowance method of accounting for bad debts. The company produced the following aging of the accounts receivable at year-end. Instructions (a) Calculate the total estimated bad debts based on the above information. (b) Prepare the y
> A Bastille Corporation prepares monthly cash budgets. Here are relevant data from operating budgets for 2017. All sales and purchases are on account. Budgeted collections and disbursement data are given below. All other expenses are paid in the month in
> The following information pertains to Lance Company. 1. Cash balance per bank, July 31, $7,328. 2. July bank service charge not recorded by the depositor $38. 3. Cash balance per books, July 31, $7,364. 4. Deposits in transit, July 31, $2,700. 5. $2,016
> The website www.cpa2biz.com has an article dated February 4, 2010, by Mary Schaeffer entitled “Emerging Issues: Demise of Paper Checks.” Instructions Go to the website and do a search on the article title. Read the article and answer the following questi
> Nona Hat Shop received a shipment of hats for which it paid the wholesaler $2,940. The price of the hats was $3,000, but Nona was given a $60 cash discount and required to pay freight charges of $75. What amount should Nona include in inventory? Why?
> For each of the following cases, state whether the statement is true for LIFO or for FIFO. Assume that prices are rising. (a) Results in a higher quality of earnings ratio. (b) Results in higher phantom profits. (c) Results in higher net income. (d) Resu
> The July 15, 2010, edition of CFO.com contains an article by Marie Leone entitled “Sucking the LIFO out of Inventory.” Instructions Read the article, which can be found at www.cfo.com/printable/article.cfm/14508745, and answer the following questions. (a
> Owen Wise, Inc. reported the following in its 2017 and 2016 income statements. Determine the company’s gross profit rate and profit margin for both years. Discuss the cause for changes in the ratios. 2017 2016 Net sales $150,000 90,
> Three years ago, Karen Suez and her brother-in-law Reece Jones opened Gigasales Department Store. For the first 2 years, business was good, but the following condensed income statement results for 2017 were disappointing. Karen believes the problem lies
> Condensed balance sheet and income statement data for Danke Corporation are presented as follows. Instructions Compute these values and ratios for 2016 and 2017. (a) Earnings per share. (b) Working capital. (c) Current ratio. (d) Debt to assets ratio. (e
> (a) Geena Lowe believes that the analysis of financial statements is directed at two characteristics of a company: liquidity and profitability. Is Geena correct? Explain. (b) Are short-term creditors, long-term creditors, and stockholders primarily inter
> These items are taken from the financial statements of Longhorn Co. at December 31, 2017. Buildings……………………………………….……$105,800 Accounts receivable…………………………………12,600 Prepaid insurance………………………………..……3,200 Cash……………………………………………………..…11,840 Equipment…………………
> How are bad debts accounted for under the direct write-off method? What are the disadvantages of this method?
> Discuss how the Sarbanes-Oxley Act has increased the importance of internal control to top managers of a company.
> Explain the difference between the “nature-of-expense” and “function-of-expense” classifications.
> Identify the two parts of stockholders’ equity in a corporation and indicate the purpose of each.
> Breton Inc. needs to upgrade its diagnostic equipment. At the time of purchase, Breton had expected the equipment to last 8 years. Unfortunately, it was obsolete after only 4 years. Nolan Rush, CFO of Breton Inc., is considering leasing new equipment rat
> Purpose: To learn about the functions of the Securities and Exchange Commission (SEC). Address: www.sec.gov/about/whatwedo.shtml, or go to www.wiley.com/college/kimmelInstructions Use the information in this site to answer the following questions. (a) W
> Rusthe Inc. uses a periodic inventory system. Its records show the following for the month of May, in which 74 units were sold. Instructions Calculate the ending inventory at May 31 using the (a) FIFO, (b) LIFO, and (c) average cost methods. (For averag
> In its first month of operation, Hoffman Company purchased 100 units of inventory for $6, then 200 units for $7, and finally 140 units for $8. At the end of the month, 180 units remained. Compute the amount of phantom profit that would result if the comp
> A review of the ledger of Lewis Company at December 31, 2017, produces these data pertaining to the preparation of annual adjusting entries. 1. Prepaid Insurance $15,200. The company has separate insurance policies on its buildings and its motor vehicles
> Transactions that affect earnings do not necessarily affect cash. Identify the effect, if any, that each of the following transactions would have upon cash and net income. The first transaction has been completed as an example. (a) Purchased $100 of supp
> What is the basic form of a worksheet?
> Emilio and René Santos own Club Fandango. From its inception, Club Fandango has sold merchandise on either a cash or credit basis, but no credit cards have been accepted. During the past several months, the Santos have begun to question thei
> (a) Bonita Company ships merchandise to Myan Corporation on December 30. The merchandise reaches the buyer on January 5. Indicate the terms of sale that will result in the goods being included in (1) Bonita’s December 31 inventory and (2) Myan’s December
> What is the purpose of a worksheet?
> Give examples of how companies manage earnings.
> Explain the terms earnings management and quality of earnings.
> Identify, in the sequence in which they are prepared, the three trial balances that are required in the accounting cycle.
> Indicate, in the sequence in which they are made, the three required steps in the accounting cycle that involve journalizing.
> Which of these accounts would not appear in the post- closing trial balance? Interest Payable, Equipment, Depreciation Expense, Dividends, Unearned Service Revenue, Accumulated Depreciation— Equipment, and Service Revenue.
> What items are disclosed on a post-closing trial balance. What is its purpose?
> Describe the nature of the Income Summary account, and identify the types of summary data that may be posted to this account.
> Some companies employ technologies that allow them to do a so-called “virtual close.” This enables them to close their books nearly instantaneously any time during the year. What advantages does a “virtual close” provide?
> Compute interest and find the maturity date for the following notes. Date of Interest Note Principal Rate (%) Terms (a) June 10 (b) July 14 (c) April 27 $80,000 $50,000 $12,000 60 days 90 days 75 days 6% 7% 8%
> Identify the account(s) debited and credited in each of the four closing entries, assuming the company has net income for the year.
> Ross Music Inc. reported the following selected information at March 31.2017 Total current assets………………………….……………. $262,787 Total assets……………………………………………….……439,832 Total current liabilities………………………………….…293,625 Total liabilities…………………………………………………. 376
> What is the relationship, if any, between the amount shown in the adjusted trial balance column for an account and that account’s ledger balance?
> (a) What information do accrual-basis financial statements provide that cash-basis statements do not? (b) What information do cash-basis financial statements provide that accrual-basis statements do not?
> The adjusted trial balance for Ryan Company is given in E4-21. (given below) Instructions Prepare the closing entries for the temporary accounts at August 31. RYAN COMPANY Trial Balance August 31, 2017 Before After Adjustment Dr. Adjustment Dr. Cr.
> Why is it possible to prepare financial statements directly from an adjusted trial balance?
> The adjusted trial balance for Ryan Company is given below. Instructions Prepare the income and retained earnings statements for the year and the classified balance sheet at August 31. RYAN COMPANY Trial Balance August 31, 2017 Before After Adjustme
> Review the transactions listed in E3-3 for Persimmon Corp. Classify each transaction as either an operating activity, investing activity, or financing activity, or if no cash is exchanged, as a noncash event. Data from E3-3: 1. Issued shares of common st
> Two students are discussing the use of a trial balance. They wonder whether the following errors, each considered separately, would prevent the trial balance from balancing. What would you tell them? (a) The bookkeeper debited Cash for $600 and credited
> Which balance sheet account provides evidence that Apple records sales on an accrual basis rather than a cash basis? Explain.
> You are provided with the following information taken from Moynahan Inc.’s March 31, 2017, balance sheet. Cash $ 11,000 Accounts receivable 20,000 Inventory 36,000 Property, plant, and equipment, net of deprecia
> The trial balances shown below are before and after adjustment for Ryan Company at the end of its fiscal year. Instructions Prepare the adjusting entries that were made. RYAN COMPANY Trial Balance August 31, 2017 Before After Adjustment Dr. Adjustme
> Review the transactions listed in E3-1 for Thyme Advertising Company. Classify each transaction as an operating activity, investing activity, or financing activity, or if no cash is exchanged, as a noncash event. Data fromE3-1 given below: 1. Issued comm
> The following are financial statements of Ohara Company. Additional information: The net cash provided by operating activities for 2017 was $190,800. The cash used for capital expenditures was $92,000. The cash used for dividends was $31,000. The weight
> Brad Tyler is confused about how accounting information flows through the accounting system. He believes information flows in this order: (a) Debits and credits are posted to the ledger. (b) Accounting transaction occurs. (c) Information is entered in th
> “An adjusting entry may affect more than one balance sheet or income statement account.” Do you agree? Why or why not?
> The accounts in the ledger of Rapid Delivery Service contain the following balances on July 31, 2017. Accounts Receivable………………………………$13,400 Prepaid Insurance………………………………….$ 2,200 Accounts Payable………………………………………8,400 Service Revenue……………………………………….15,50
> One-half of the adjusting entry is given below. Indicate the account title for the other half of the entry. (a) Salaries and Wages Expense is debited. (b) Depreciation Expense is debited. (c) Interest Payable is credited. (d) Supplies is credited. (e) Ac
> What is a trial balance and what are its purposes?
> Selected year-end account balances from the adjusted trial balance as of December 31, 2017, for Tippy Corporation is provided below. Instructions (a) Prepare closing entries (b) Determine the post-closing balance in Retained Earnings. Debit Credit Ac
> The bookkeeper for Birmingham Corporation made these errors in journalizing and posting. 1. A credit posting of $400 to Accounts Receivable was omitted. 2. A debit posting of $750 for Prepaid Insurance was debited to Insurance Expense. 3. A collection on
> The Public Company Accounting Oversight Board (PCAOB) was created as a result of the Sarbanes-Oxley Act. It has oversight and enforcement responsibilities over accounting firms in the United States. Address: http://www.pcaobus.org/, or go to www.wiley.co
