Penny’s Pool Service & Supply, Inc. (PPSS) had the following transactions related to operating the business in its first year’s busiest quarter ended September 30: a. Placed and paid for $2,600 in advertisements with several area newspapers (including the online versions), all of which ran in the newspapers during the quarter. b. Cleaned pools for customers for $19,200, receiving $16,000 in cash with the rest owed by customers who will pay when billed in October. c. Paid Pool Corporation, Inc., a pool supply wholesaler, $10,600 for inventory received by PPSS in May. d. As an incentive to maintain customer loyalty, PPSS offered customers a discount for prepaying next year’s pool cleaning service. PPSS received $10,000 from customers who took advantage of the discount. e. Paid the office receptionist $4,500, with $1,500 owed from work in the prior quarter and the rest from work in the current quarter. Last quarter’s amount was recorded as an expense and a liability Wages Payable. f. Had the company van repaired, paying $310 to the mechanic. g. Paid $220 for phone, water, and electric utilities used during the quarter. h. Received $75 cash in interest earned during the current quarter on short-term investments. i. Received a property tax bill for $600 for use of the land and building in the quarter; the bill will be paid next quarter. j. Paid $2,400 for the next quarter’s insurance coverage. Required: 1. For each of the events, prepare journal entries, checking that debits equal credits. 2. Based only on these quarterly transactions, prepare a classified income statement (with income from operations determined separately from other items) for the quarter ended September 30. 3. Calculate the net profit margin ratio at September 30. What does this ratio indicate about the ability of PPSS to control operations?
> What is a post-closing trial balance? Is it a useful part of the accounting information processing cycle? Explain.
> A sale is made for $6,000; terms are 3/10, n/30. At what amount should the sale be recorded under the gross method of recording sales discounts? Give the required entry. Also give the collection entry, assuming that it is during the discount period.
> Starbucks Corporation purchases and roasts high-quality whole bean coffees and sells them along with fresh-brewed coffees, Italian-style espresso beverages, a variety of pastries and confections, coffee related accessories and equipment, and a line of pr
> South Bend Repair Service Co. keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period on December 31: Data not yet recorde
> Taos Company is completing the information processing cycle at the end of its fiscal year on December 31. Following are the correct balances at December 31 of the current year for the accounts both before and after the adjusting entries for the current y
> Refer to the information regarding Bill’s Catering Company in Alternative Problem 3. Data given in Alternative Problem 3: Bill’s Catering Company is at its accounting year-end on December 31. The following data that mu
> Refer to the information regarding Hannah Company in Alternative Problem 2. Data given in Alternative Problem 2 Hannah Company’s annual accounting year ends on June 30. All of the entries for the current year have been made, except the
> Bill’s Catering Company is at its accounting year-end on December 31. The following data that must be considered were developed from the company’s records and related documents: a. During the current year, office supplies amounting to $1,200 were purchas
> Hannah Company’s annual accounting year ends on June 30. All of the entries for the current year have been made, except the following adjusting entries: a. On March 30 of the current year, Hannah paid a six-month premium for property insurance, $3,200, f
> The following list includes a series of accounts for Sanjeev Corporation, which has been operating for three years. These accounts are listed and numbered for identification. Following the accounts is a series of transactions. For each transaction, indic
> Cedar Fair, L.P. (Limited Partnership) is one of the largest regional amusement park operators in the world, owning eleven amusement parks, three outdoor water parks, one indoor water park, and five hotels. The parks include Cedar Point in Ohio; Valleyfa
> Following are account balances (in millions of dollars) from a recent FedEx annual report, followed by several typical transactions. Assume that the following are account balances on May 31 (end of the prior fiscal year) Account
> What are the three major categories of notes or footnotes presented in annual reports? Cite an example of each.
> Refer to Problem 4. Data from Problem 4: According to its annual report, The Wendy’s Company is “one quick-service restaurant that is ‘A Cut Above,’” serving hamburgers and other fresh food items including salads, chicken sandwiches, and baked potatoes
> Kaylee James, a connoisseur of fine chocolate, opened Kaylee’s Sweets in Collegetown on February 1. The shop specializes in a selection of gourmet chocolate candies and a line of gourmet ice cream. You have been hired as manager. Your d
> According to its annual report, The Wendy’s Company is “one quick-service restaurant that is ‘A Cut Above,’” serving hamburgers and other fresh food items including
> Ryan Terlecki organized a new Internet company, CapUniverse, Inc. The company specializes in baseball-type caps with logos printed on them. Ryan, who is never without a cap, believes that his target market is college and high school students. You have be
> The following transactions are July activities of Craig’s Bowling, Inc., which operates several bowling centers (for games and equipment sales). If expense is to be recognized in July, indicate the expense account title and amount. If e
> The following transactions are July activities of Craig’s Bowling, Inc., which operates several bowling centers (for games and equipment sales). If revenue is to be recognized in July, indicate the revenue account title and amount. If r
> Match each definition with its related term by entering the appropriate letter in the space provided. There should be only one definition per term (that is, there are more definitions than terms). Term Definition (1) Losses (2) Expense recognition pr
> The following is a series of accounts for Kruger & Laurenzo, Incorporated, which has been operating for two years. The accounts are listed and numbered for identification. Following the accounts is a series of transactions. For each transaction, indi
> The following are the summary account balances from a recent balance sheet of Exxon Mobil Corporation. The accounts have normal debit or credit balances, but they are not necessarily listed in good order. The amounts are shown in millions of dollars for
> Refer to Alternate Problem 4. Data from Alternate Problem 4: Alpine Stables, Inc., is established in Denver, Colorado, on April 1, 2017, to provide stables, care for animals, and grounds for riding and showing horses. You have been hired as the new assi
> For property, plant, and equipment, as reported on the balance sheet, explain (a) cost, (b) accumulated depreciation, and (c) net book value.
> Alpine Stables, Inc., is established in Denver, Colorado, on April 1, 2017, to provide stables, care for animals, and grounds for riding and showing horses. You have been hired as the new assistant controller. The following transactions for April 2017 ar
> Barnes & Noble is the nation’s largest bookseller and a leading retailer of digital media and electronic products, including the Nook for eReading. The following activities were inferred from a recent annual report. a. Example: Incu
> Jimmy Langenberger is the president of TemPro, Inc., a company that provides temporary employees for not-for-profit companies. TemPro has been operating for five years; its revenues are increasing with each passing year. You have been hired to help Jimmy
> Julio Estela started and operated a small boat repair service company during the current year. He is interested in obtaining a $100,000 loan from your bank to build a dry dock to store boats for customers in the winter months. At the end of the year, he
> Mike Lynch is the manager of an upstate New York regional office for an insurance company. As the regional manager, his compensation package comprises a base salary, commissions, and a bonus when the region sells new policies in excess of its quota. Mike
> The following information was provided by the records of Liberty Circle Apartments (a corporation) at the end of the current annual fiscal period, December 31: Rent a. Rent revenue collected in cash during the current year for occupancy in the current ye
> Crystal Mullinex owns and operates Crystal’s Day Spa and Salon, Inc. She has decided to sell the business and retire. She has had discussions with a representative from a regional chain of day spas. The discussions are at the complex st
> Carey Land Company, a closely held corporation, invests in commercial rental properties. Carey’s annual accounting period ends on December 31. At the end of each year, numerous adjusting entries must be made because many transactions completed during cur
> The pre-closing balances in the T-accounts of Naim Company at the end of the third year of operations follow. The current year’s adjusting entries are identified by letters. Required: 1. Develop three trial balances for Naim Company us
> In a recent annual report, General Electric reported the following in its inventory note: It also reported a $23 million change in cost of goods sold due to “lower inventory levels.” Required: 1. Compute the increase
> Briefly explain the normal sequence and form of financial reports produced by public companies in a typical year.
> The income statement for Pruitt Company summarized for a four-year period shows the following: An audit revealed that in determining these amounts, the ending inventory for 2017 was overstated by $18,000. The company uses a periodic inventory system. Re
> An annual report for International Paper Company included the following note: The last-in, first-out inventory method is used to value most of International Paper’s U.S. inventories. If the first-in, first-out method had been used, it would have increase
> Mears and Company has been operating for five years as an electronics component manufacturer specializing in cellular phone components. During this period, it has experienced rapid growth in sales revenue and in inventory. Mr. Mears and his associates ha
> Jaffa Company prepared its annual financial statements dated December 31 of the current year. The company applies the FIFO inventory costing method; however, the company neglected to apply LCM to the ending inventory. The preliminary current year income
> Income is to be evaluated under four different situations as follows: a. Prices are rising: (1) Situation A: FIFO is used. (2) Situation B: LIFO is used. b. Prices are falling: (1) Situation C: FIFO is used. (2) Situation D: LIFO is used. The basic data
> Pacific Company sells electronic test equipment that it acquires from a foreign source. During the year, the inventory records reflected the following: Inventory is valued at cost using the LIFO inventory method. Required: 1. Complete the following inco
> At the end of January of the current year, the records of Donner Company showed the following for a particular item that sold at $16 per unit: Required: 1. Assuming the use of a periodic inventory system, prepare a summarized income statement through gr
> Kirtland Corporation uses a periodic inventory system. At the end of the annual accounting period, December 31, the accounting records for the most popular item in inventory showed the following: Required: Compute the amount of (a) goods available for
> Travis Company has just completed a physical inventory count at year-end, December 31 of the current year. Only the items on the shelves, in storage, and in the receiving area were counted and costed on a FIFO basis. The inventory amounted to $80,000. Du
> Symbol Technologies, Inc., was a fast-growing maker of bar-code scanners. According to the federal charges, Tomo Razmilovic, the CEO at Symbol, was obsessed with meeting the stock market’s expectation for continued growth. His executive team responded by
> Define the following three users of financial accounting disclosures and the relationships among them: (a) financial analysts, (b) private investors, and (c) institutional investors.
> Cripple Creek Company has one trusted employee who, as the owner said, “handles all of the bookkeeping and paperwork for the company.” This employee is responsible for counting, verifying, and recording cash receipts and payments; making the weekly bank
> Refer to the annual report for American Eagle Outfitters in Appendix B. Financial Statements of American Eagle Outfitters: Required: 1. The annual report or 10-K report for American Eagle Outfitters provides selected financial data for the last five ye
> The October 4, 2004, edition of BusinessWeek presented an article titled “Fuzzy Numbers” on issues related to accrual accounting and its weaknesses that have led some corporate executives to manipulate estimates in their favor, sometimes fraudulently. Yo
> Refer to the financial statements of American Eagle Outfitters in Appendix B at the end of this book. At the bottom of each statement, the company warns readers to “Refer to Notes to Consolidated Financial Statements.”
> Refer to the financial statements of American Eagle Outfitters in Appendix B and Urban Outfitters in Appendix C. Financial statements of American Eagle: Financial statements of Urban Outfitters: Required: 1. Compute return on assets for the most recent
> Refer to the financial statements of Urban Outfitters in Appendix C at the end of this book. At the bottom of each statement, the company warns readers that “The accompanying notes are an integral part of these financial statements.&aci
> Stoscheck Moving Corporation has been in operation since January 1, 2017. It is now December 31, 2017, the end of the annual accounting period. The company has not done well financially during the first year, although revenue has been fairly good. The th
> You are the regional sales manager for Miga News Company. Miga is making adjusting entries for the year ended March 31, 2018. On September 1, 2017, customers in your region paid $36,000 cash for three-year magazine subscriptions beginning on that date. T
> What are the purposes of a bank reconciliation? What balances are reconciled?
> Describe the roles and responsibilities of management and independent auditors in the financial reporting process.
> Why should cash-handling and cash-recording activities be separated? How is this separation accomplished?
> Summarize the primary characteristics of an effective internal control system for cash.
> Define cash and cash equivalents in the context of accounting. Indicate the types of items that should be included and excluded.
> What is the distinction between sales allowances and sales discounts?
> What is a sales discount? Use 1/10, n/30 in your explanation.
> What is a credit card discount? How does it affect amounts reported on the income statement?
> Briefly explain how the total amount of cash reported on the balance sheet is computed.
> Indicate whether the following items would be added (+) or subtracted (-) from the company’s books or the bank statement during the construction of a bank reconciliation. Reconciling Item Company's Books Bank Statement Outstanding c
> Indicate the most likely effect of the following changes in credit policy on the receivables turnover ratio (+ for increase, - for decrease, and NE for no effect). a. Granted credit with shorter payment deadlines. b. Increased effectiveness of collection
> Using the following categories, indicate the effects of the following transactions. Use + for increase and - for decrease and indicate the accounts affected and the amounts. a. At the end of the period, bad debt expense is estimated to be $15,000. b. Dur
> Briefly define return on assets and what it measures.
> Prepare journal entries for each transaction listed. a. During the period, bad debts are written off in the amount of $14,500. b. At the end of the period, bad debt expense is estimated to be $16,000.
> Total gross sales for the period include the following: Credit card sales (discount 3%) $ 9,400 Sales on account (2/15, n/60) $12,000 Sales returns related to sales on account were $650. All returns were made before payment. One half of the remaining sal
> Merchandise invoiced at $9,500 is sold on terms 1/10, n/30. If the buyer pays within the discount period, what amount will be reported on the income statement as net sales?
> (Chapter Supplement) Under the gross method of recording sales discounts discussed in this chapter, is the amount of sales discount taken recorded (a) at the time the sale is recorded or (b) at the time the collection of the account is recorded?
> Does an increase in the receivables turnover ratio generally indicate faster or slower collection of receivables? Explain.
> What is the effect of the write-off of bad debts (using the allowance method) on (a) net income and (b) accounts receivable, net?
> Using the allowance method, is bad debt expense recognized in (a) the period in which sales related to the uncollectible account are made or (b) the period in which the seller learns that the customer is unable to pay?
> Which basic accounting principle is the allowance method of accounting for bad debts designed to satisfy?
> Differentiate accounts receivable from notes receivable.
> What is gross profit or gross margin on sales? In your explanation, assume that net sales revenue was $100,000 and cost of goods sold was $60,000.
> Match each financial statement with the items presented on it by entering the appropriate letter in the space provided. Elements of Financial Statements Financial Statements (1) Expenses (2) Cash from operating activities (3) Losses A. Income stateme
> For each of the transactions in Mini Exercise 6, indicate the amounts and the direction of effects of the adjusting entry on the elements of the balance sheet and income statement. Using the following format, indicate + for increase, −
> According to its annual report, P&G’s billion-dollar brands include Pampers, Tide, Ariel, Always, Pantene, Bounty, Charmin, Downy, Olay, Crest, Vicks, Gillette, Duracell, and others. The following are items taken from its recent balance sheet and income
> Match each definition with its related term or abbreviation by entering the appropriate letter in the space provided. Term or Abbreviation Definition (1) SEC (2) Audit (3) Sole proprietorship B. Measurement of information about an entity in terms of
> The following items were taken from a recent cash flow statement. Note that different companies use slightly different titles for the same item. Without referring to Exhibit 1.5, mark each item in the list as a cash flow from operating activities (O), in
> Penny Cassidy is considering forming her own pool service and supply company, Penny’s Pool Service & Supply, Inc. (PPSS). She has decided to incorporate the business to limit her legal liability. She expects to invest $20,000 of her own savings and recei
> Choice Chicken Company was organized on January 1. At the end of the first quarter (three months) of operations, the owner prepared a summary of its activities as shown in transaction (a) of the following table: Required: 1. For items (b) through (g), e
> Upon graduation from high school, Sam List immediately accepted a job as an electrician’s assistant for a large local electrical repair company. After three years of hard work, Sam received an electrician’s license and decided to start his own business.
> Assume that you are the president of Influence Corporation. At the end of the first year (December 31) of operations, the following financial data for the company are available: Cash………………………………………………………………………………………………………..$ 13,150 Receivables from custo
> Refer to the financial statements of American Eagle Outfitters in Appendix B and Urban Outfitters in Appendix C. Financial statements of American Eagle: Financial statements of Urban Outfitters: Required: 1. Total assets is a common measure of the size
> Refer to the financial statements of Urban Outfitters in Appendix C at the end of this book Financial statements of Urban Outfitters: Required: 1. What is the amount of net income for the most recent year? 2. What amount of revenue was earned in the mo
> Refer to the financial statements of American Eagle Outfitters in Appendix B at the end of this book. Financial Statement of American Eagle Outfitters: Required: Skim the annual report. Look at the income statement, balance sheet, and cash flow statem
> State the equation for the net profit margin ratio and explain how it is interpreted.
> Which of the following regarding GAAP is true? a. U.S. GAAP is the body of accounting knowledge followed by all countries in the world. b. Changes in GAAP can affect the interests of managers and stockholders. c. GAAP is the abbreviation for generally ac
> Which of the following is false regarding the balance sheet? a. The accounts shown on a balance sheet represent the basic accounting equation for a particular business entity. b. The retained earnings balance shown on the balance sheet must agree with th
> Which of the following is true regarding the income statement? a. The income statement is sometimes called the statement of operations. b. The income statement reports revenues, expenses, and liabilities. c. The income statement reports only revenue for
> Which of the following is not a typical note included in an annual report? a. A note describing the auditor’s opinion of the management’s past and future financial planning for the business. b. A note providing more detail about a specific item shown in
> Which of the following statements regarding the statement of cash flows is true? a. The statement of cash flows separates cash inflows and outflows into three major categories: operating, investing, and financing. b. The ending cash balance shown on the
> Which of the following is not one of the four items required to be shown in the heading of a financial statement? a. The financial statement preparer’s name. b. The title of the financial statement. c. The unit of measure in the financial statement. d. T
> Which of the following regarding retained earnings is false? a. Retained earnings is increased by net income and decreased by a net loss. b. Retained earnings is a component of stockholders’ equity on the balance sheet. c. Retained earnings is an asset o
> Which of the following is true? a. FASB creates SEC. b. GAAP creates FASB. c. SEC creates AICPA. d. FASB creates U.S. GAAP.
> As stated in the audit report, or Report of Independent Accountants, the primary responsibility for a company’s financial statements lies with a. The owners of the company. b. Independent financial analysts. c. The auditors. d. The company’s management.
> Which of the following is not one of the four basic financial statements? a. Balance sheet b. Audit report c. Income statement d. Statement of cash flows
