On December 31, the end of the year, the accountant for Fireside Magazine was called away suddenly because of an emergency. However, before leaving, the accountant jotted down a few notes pertaining to the adjustments. Journalize the necessary adjusting entries. Assume that Fireside Magazine uses the periodic inventory system. a–b. A physical count of inventory revealed a balance of $199,830. The Merchandise Inventory account shows a balance of $202,839. c. Subscriptions received in advance amounting to $156,200 were recorded as Unearned Subscriptions. At year-end, $103,120 has been earned. d. Depreciation of equipment for the year is $12,300. e. The amount of expired insurance for the year is $1,612. f. The balance of Prepaid Rent is $2,400, representing four months’ rent. Three months’ rent has expired. g. Three days’ salaries will be unpaid at the end of the year; total weekly (five days’) salaries are $4,000. h. As of December 31, the balance of the supplies account is $1,800. A physical inventory of the supplies was taken, with an amount of $920 determined to be on hand.
> The Herbolt Company is considering a new line of business. Starting the business will require an initial investment in equipment of $355,000. It is expected that the new business will increase net income by $32,000 per year for 5 years. The equipment wil
> A company is making an investment of $2,500,000 that will yield the following cash flows: Year 1……………$ 250,000 Year 2……………$ 440,000 Year 3……………$ 650,000 Year 4……………$ 850,000 Year 5……………..$1,102,765 Required: What is the internal rate of return of the
> Newport Department Store is considering development of an e-commerce business. The company estimates that development will require an initial outlay of $1,300,000. Other cash flows will be as follows: Year 1…………… ($750,000) Year 2……………..$221,000 Year 3…
> Great Northern Fishing Company is contemplating the purchase of a new smoker. The smoker will cost $60,000 but will generate additional revenue of $34,000 per year for 6 years. Additional costs, other than depreciation, will equal $12,000 per year. The s
> WesternGear.com is expected to have operating losses of $350,000 in its first year of business and $270,000 in its second year. However, the company expects to have income before taxes of $400,000 in its third year and $650,000 in its fourth year. The co
> Examine Table B9-1 in Appendix B. Explain why the numbers decrease as you move from left to right in a given row. Explain why the numbers decrease as you move from top to bottom in a given column. Table B9-1: TABLE B9-1 Present value of $1 due in n
> Sally Omar is the manager of the office products division of Wallace Enterprises. In this position, her annual bonus is based on an appraisal of return on investment (ROI) measured as Division income ÷ End-of-year division assets (net of accumulated depr
> Reece Jewelry has 45 stores in major malls around the country. The company is considering starting an online business, ReeceJewelry.com, which will require a substantial investment in technology. Required: Identify a potential benefit of the online bus
> LowCostDrugs.com is an online drugstore. Recently the company used a computer program to analyze the purchase behavior of customers sorted by zip code and found that customers in some zip codes are, on average, less price sensitive than customers in othe
> Riemers Jewelry operates 45 stores in major shopping malls around the country, and Walter Chan is the manager of a store in Dallas. The company is in the third quarter of 2017 and is beginning preparation of its fiscal 2018 budget. Typically, the company
> What is the difference between the top-down and the bottom-up approach to developing a budget?
> Why are budgets useful in the control process?
> Why is there an inherent conflict between planning and control uses of budgets?
> How would performance be evaluated if there were no budgets?
> The number of defects in a manufacturing process is an example of a nonmonetary measure of employee performance. Describe a financial measure that captures the effect of defects.
> Explain the difference between a static and a flexible budget.
> What are the main purposes of preparing a cash budget?
> How does use of a spreadsheet program facilitate “what if” analysis in budgeting?
> What is meant by a zero-based budget?
> Determine the order in which the following budgets are generally prepared. a. Material purchases budget b. Sales budget c. Budgeted income statement d. Production budget
> Write a paragraph that explains why a budget-based compensation scheme may lead managers to create budget slack.
> Why are budgets useful in the planning process?
> Erin Chang, an employee of Solutions Company, worked 48 hours during the week of October 12 through 18. Her rate of pay is $17.50 per hour, and she receives time-and-a-half for all work in excess of 40 hours per week. Chang is married and claims two allo
> On December 31, Marchant Company took a physical count of its merchandise inventory. It operates under the perpetual inventory system. The physical count amounted to $185,294. The Merchandise Inventory account shows a balance of $187,936. Journalize the
> Explain the calculation of net sales and net purchases.
> Jim Moss, an employee of Jones International, worked 49 hours during the week of April 4 through 10. His rate of pay is $15 per hour, and he receives time and a half for work in excess of 40 hours per week. Jim is married and claims four allowances on hi
> For the third quarter of the year, Barney Construction, 715 Red Rock Boulevard, San Francisco, California 94121, received Form 941 from the District Office of the Internal Revenue Service. The identification number for Barney Construction is 91-7382476.
> Basga Company uses the periodic inventory system. Beginning inventory amounted to $241,072. A physical count reveals that the latest inventory amount is $256,339. Record the adjusting entries, using T accounts.
> When the bank statement is received on July 3, it shows a balance, before reconciliation, of $5,200 as of June 30. After reconciliation, the adjusted balance is $3,100. If one deposit in transit amounted to $1,200, what was the total of the outstanding c
> On October 31, the Vermillion Igloos Hockey Club received $800,000 in cash in advance for season tickets for eight home games. The transaction was recorded as a debit to Cash and a credit to Unearned Admissions. By December 31, the end of the fiscal year
> Rick Davis, an employee of ABC Motors, worked 42 hours during the week of September 12 through 18. His rate of pay is $30 per hour, and he receives time-a-half for work in excess of 40 hours per week. Rick is married and claims zero allowances on his W-4
> For the third quarter of the year, Johnson Company, 415 Circle Avenue, Chicago, Illinois 60652, received Form 941 from the Internal Revenue Service. The identification number of Johnson Company is 91-4213171. Its payroll for the quarter ended September 3
> Jennifer Ross, an employee of Hampton Company, worked 44 hours during the week of February 9 through 15. Her rate of pay is $30 per hour, and she receives time-and-a-half for work in excess of 40 hours per week. She is married and claims two allowances o
> Using the following information, prepare the Cost of Goods Sold section of an income statement. Purchases Discounts …………………………………………….. $ 8,500 Merchandise Inventory, December 31 ……………………. 189,000 Purchases ……………………………………………………………. 476,000 Merchandise I
> Calculate the missing items in the following:
> In the closing procedure, what happens to (a) Purchases Discounts, (b) Sales Returns and Allowances, (c) Freight In, and (d) Gain on Disposal of Property and Equipment?
> On an income statement, what is the difference between income from operations and net income? Which is more useful in comparing the results of operations over a number of years?
> On a balance sheet, what is the difference between Current Liabilities and Long-Term Liabilities? Give an example of an account in each classification.
> What is the difference between the cost of goods available for sale and the cost of goods sold?
> What could happen if a business spent the cash it received in advance for services it promised to perform at a later date?
> The owner of a motorcycle shop allows his two sons to take motorcycles home to try them out on different types of surfaces because he believes that his sons need to be familiar with the products they sell. Sometimes the motorcycles are not returned to th
> On November 1, an exterior painting company received $5,310 for a paint job that will not be finished for a few months. As of December 31, which is the end of the fiscal period, $2,400 worth of painting will not have been completed. The bookkeeper comple
> You have a friend who is a seamstress specializing in Renaissance costumes. She receives cash well in advance of the required date, often in the fiscal period prior to the date of delivery of the costume, not only to enable her to purchase material but a
> Hosung Company’s Cash account shows a balance of $801.65 as of August 31 of this year. The balance on the bank statement on that date is $1,383. Checks for $260.50, $425.10, and $331.00 are outstanding. The bank statement shows a check issued by another
> Burt’s Bees describes itself as an “Earth-Friendly, Natural Personal Care Company” that produces products for health, beauty, and personal hygiene. The company manufactures over 197 products distributed in nearly 30,000 retail outlets worldwide. As a mer
> A portion of Johnson’s Farm Supply work sheet for the year ended December 31 follows: Required 1. Determine the entries that appeared in the Adjustments columns and prepare the general journal entries for the adjustments in the genera
> A portion of the work sheet of Habib Company for the year ended December 31 follows. Required 1. Determine the entries that appeared in the Adjustments columns and present them in general journal form on page 41. 2. Determine the net income for the yea
> A portion of Anderson Publishing’s work sheet for the year ended December 31 follows: Required 1. Determine the entries that appeared in the Adjustments columns and prepare the general journal entries for the adjustments. If using Wor
> A portion of the work sheet of Sadie’s Flowers for the year ended December 31 is as follows: Required 1. Determine the entries that appeared in the Adjustments columns and present them in general journal form on page 41. 2. Determine
> Journalize the required adjusting entries for the year ended December 31 for Butler Spa and Pool Accessories. Butler Spa and Pool Accessories uses the periodic inventory system. a–b. On December 31, a physical count of inventory was taken. The physical c
> Indicate the work sheet columns (Income Statement Debit, Income Statement Credit, Balance Sheet Debit, Balance Sheet Credit) in which the balances of the following accounts should appear: a. S. Moon, Drawing b. Utilities Expense c. Merchandise Inventory
> Explain what is meant by unearned revenue. Why it is treated as a liability?
> Between the end of one month and the 15th day of the next month, the balance in the employer’s business bank account has been getting smaller and smaller. An employee prepares the next payroll and correctly computes the necessary withholding taxes. The e
> What are real accounts? What are nominal accounts? Give examples of each.
> TruGreen is the world’s largest lawn and landscape company, employing over 10,000 employees and serving more than 1.7 million customers. The Pawtucket Red Sox is a minor league baseball affiliate of the Boston Red Sox. The team’s current roster consists
> Sharon’s Dance Studio has the following information related to its current year payroll as of December 31: a. Federal Unemployment Tax Payable as of December 31, $110.00 b. FUTA taxable earnings limit of $7,000, rate 0.6 percent (0.006) c. First-quarter
> Grande Company has the following balances in its general ledger as of March 1 of this year: a. FICA Taxes Payable (liability for February), $9,180.00 (total for employee and employer). The FICA Social Security Tax Payable is $7,440.00, and the FICA Medic
> Kovarik Company had the following payroll for the week ended March 21: Assumed tax rates are as follows: a. FICA: Social Security, (employer) 6.2 percent (0.062) and (employee) 6.2 percent (0.062) on the first $118,500 for each employee, and Medicare,
> Jack’s Lawn Service Company has the following information related to its current year payroll as of December 31: a. Federal Unemployment Tax Payable as of December 31, $336.00 b. FUTA taxable earnings limit of $7,000, rate 0.6 percent (0.006) c. First-qu
> Lynden Company has the following balances in its general ledger as of June 1 of this year: a. FICA Social Security Tax Payable (employee and employer) is $1,393.50. FICA Medicare Tax Payable (employee and employer) is $325.90. b. Employeesâ€&#
> Mooney Labs had the following payroll for the week ended February 28: a. FICA: Social Security, (employer) 6.2 percent (0.062) and (employee) 6.2 percent (0.062) on the first $118,500 for each employee, and Medicare, 1.45 percent (0.0145) on all earnin
> Great Manufacturing Company received and paid a premium notice on January 2 for workers’ compensation insurance stating the rates for the new year. Estimated employees’ earnings for the year are as follows: At the en
> On September 30, Hilltop Company’s selected payroll accounts are as follows: Prepare general journal entries to record the following: Oct. 15 Payment of federal tax deposit of FICA taxes and the federal income tax. 31 Payment of state
> On September 30, Cody Company’s selected account balances are as follows: In general journal form, prepare the entries to record the following: Oct. 15 Payment of liabilities for FICA taxes and the federal income tax. 31 Payment of li
> Why is there generally a difference between the balance in the Cash account on the company’s books and the balance on the bank statement?
> Selected columns of Envirocon Company’s payroll register for March are as follows. The employer’s Social Security tax amount has already been calculated as $3,124.34. The employees’ FICA Medicare tax
> The information on earnings and deductions for the pay period ended December 14 from King Company’s payroll records is as follows: For each employee, the Social Security tax is 6.2 percent of the first $118,500, and the employerâ
> Go Systems had the following payroll data for wages for the week ended February 5. The state income tax is assumed to be 20% of the federal income tax. a. Prepare the general journal entry to record the payroll. b. Prepare the general journal entry to
> On January 14, at the end of the second week of the year, the totals of Castle Company’s payroll register showed that its store employees’ wages amounted to $33,482 and that its warehouse wages amounted to $13,560. Withholdings consisted of federal incom
> Signature Company’s partial payroll register for the week ended Practice Exercise 1 January 7 is as follows: Assume that the payroll is subject to an employer’s Social Security tax of 6.2 percent on the first $118,50
> Explain how payroll fraud can be prevented.
> Explain the advantage of establishing a tax calendar.
> Generally, what is the time schedule for payment of workers’ compensation insurance premiums?
> How many copies are made of a Form W-2? Who uses the copies of the W-2 form?
> Explain the deposit requirement for federal unemployment tax.
> What is the purpose of closing entries? What is a consequence of forgetting to make closing entries?
> Describe the journal entry to: a. Record the payroll. b. Record the employer’s payroll tax contributions. c. Pay the payroll. d. Pay the state and federal unemployment taxes. e. Pay the FICA (Social Security and Medicare) and Federal Income Tax withholdi
> An employee who is married and has three children submits a W-4 form to his employer. He checks the box that says “Single” and writes zero in the “Deductions Claimed” box. Is this action ethical, unethical, or illegal? Explain your reasoning.
> Southern Company pays its employees weekly by issuing checks on its regular bank account. The owner thinks it would be too much trouble to have a second checking account. Explain to the owner why having this account might be worth the additional effort.
> Attracting and retaining the best employees is crucial to operating a business. Employees will join a company based on opportunities for advancement, training, company culture, and salary and benefits provided. One business that is often listed in Fortun
> For the week ended September 7, the totals of the payroll register for Benton, Inc., are presented below. The regular and overtime earnings are correct. List six errors that exist. None of the employees have earned more than $118,500, so all earnings are
> Using the income tax withholding table in Figure 3, for each employee of Miller Company, determine the net pay for the week ended January 21. Assume a Social Security tax of 6.2 percent and a Medicare tax of 1.45 percent. All employees have cumulative ea
> Lisa Meilo works for Pacific Company, which pays its employees time-and-a-half for all hours worked in excess of 40 per week. Meilo’s pay rate is $37 per hour. Her wages are subject to federal income tax, a Social Security tax deduction
> Determine the gross pay for each employee listed below. a. Clay Jones is paid time-and-a-half for all hours over 40. He worked 45 hours during the week. His regular pay rate is $25 per hour. b. Mary James worked 48 hours during the week. She is entitled
> Why is it necessary to make general journal entries for the ledger balance side of the bank reconciliation?
> Assume that the employees in Exercise 7–7 are paid from the company’s regular bank account (check numbers 981 and 982). Prepare the entry to record and pay the payroll in general journal form, dated September 30. In E
> Ellie Harrod, owner of Harrod’s Dry Cleaners, makes bank deposits in the night depository at the close of each business day. The following information for the last four days of July is available. Required In general journal form, reco
> Indicate whether the following items in a bank reconciliation should be (1) Added to the Cash account balance, (2) Deducted from the Cash account balance, (3) Added to the bank statement balance, or (4) Deducted from the bank statement balance. a. NSF ch
> Precision Labs has two employees. The following information was taken from its individual earnings records for the month of September. Determine the missing amounts assuming that the Social Security tax is 6.2 percent, the Medicare tax is 1.45 percent, a
> What is the purpose of endorsing a check?
> On January 21, the column totals of the payroll register for Great Products Company showed that its sales employees had earned $14,960, its truck driver employees had earned $10,692, and its office employees had earned $8,670. Social Security taxes were
> Why does a bank keep a signature card on file for customers’ accounts?
> For tax purposes, assume that the maximum taxable earnings are $118,500 for Social Security and $7,000 for the unemployment tax and that all earnings are taxable for Medicare. For the payroll register for the month of November for Shelby, Inc., determine
> What are internal controls designed to do?
> What is the difference between an employee and an independent contractor? List two examples of an independent contractor.
> You work as a cashier for a service business. Some days you are short of cash at the end of the day, and some days you have more cash than the cash register tape says was earned. You are embarrassed when your cash is short and don’t want the owner to kno
> The bookkeeper has completed a work sheet and has journalized and posted the closing entries, but he forgot to journalize and post the adjusting entries from the work sheet. What are the effects of these actions and omissions? How would these actions and
> List the steps in the closing procedure in the correct order.
> As the new bookkeeper for a small business, you find that several people access the Petty Cash Fund, usually without anyone leaving a written explanation of what the money was used for. The amount of cash does not match the recorded amount of the fund. E
> The post-closing trial balance submitted to you by the bookkeeper of Tafoya Consulting Company is shown below. Assume that the debit total ($41,048) is correct. a. Analyze the work and prepare a response to what you have reviewed. b. Journalize the closi
