Question: Peter’s Hardware maintains the following policies/

> What is an automatic transfer? How can this tool help you save money?

> What is an asset management account? Discuss the advantages of such an account as well as its requirements.

> What are money market funds (MMFs)? What types of securities do they invest in? What is commercial paper? Are MMFs risky investments? Are MMFs liquid?

> Explain the risks of using a credit card for your liquidity needs.

> Explain why you should not invest in the stock market if you expect to need the funds in the near future. Are stocks liquid?

> How does your individual tolerance for risk impact money management?

> What are Treasury securities? What is a T-bill? How is it denominated? How do you earn a return on a T-bill? How is the return calculated?

> How will overdraft protection affect bounced checks? Should you take advantage of this feature if your bank offers overdraft protection?

> How does a debit card transaction differ from writing a check?

> Why do individuals use checking accounts? What is the disadvantage of having funds in a checking account? Explain overdraft protection and stop payment orders. Are all bank fee structures the same?

> What two factors affect the return on short-term investments? What investments should you consider to achieve liquidity and an adequate return?

> Name some ways an individual might handle a cash flow deficiency. Which way would be preferable? Why?

> Why is it important to have sufficient liquidity during a weak economy?

> What steps should you take to determine the best allocation of your money market investments? What factors should you consider in determining your allocation?

> Generally compare the money market investments described in this chapter in terms of their vulnerability to credit risk, interest rate risk, and liquidity risk. Provide some examples of specific securities. What is the risk-return trade-off for these inv

> What are the three types of risk that affect money market investments?

> Compare the return and liquidity of the various money market investments. Give specific examples.

> Jason is in his mid-50s and was raised by parents of the Depression era. As a result, he is very risk adverse. He recently came into a very large amount of money, and he wants to put it where it will be safe, but where it will earn him some return. His b

> Jill placed $10,000 in a 90-day CD that offered an annualized return of 4%. How much interest will she earn on this CD?

> What is liquidity? How is your personal cash flow statement used to help manage your liquidity? How does money management relate to the cash flow statement?

> On June 1, Mia deposited $4,000 in an MMDA that pays 5% interest. On October 31, Mia invested $2,000 in a three-month CD that pays 6%. At the end of the year, how much interest will Mia have earned, assuming she hasn’t taken anything out of the money mar

> How does a money market deposit account (MMDA) differ from a NOW account? When might a depositor use an MMDA?

> What terms does a financial institution specify for certificates of deposit? Why are rates on CDs higher than those on savings accounts? What factor would most affect your choice of maturity date on a CD?

> What is a NOW account? How is it different from a regular checking account? How does a savings account compare with a NOW account?

> Bart is a college student who has never invested his funds. He has saved $1,000 and has decided to invest it in a money market fund with an expected return of 2.0%. Bart will need the money in one year. The MMF imposes fees that will cost Bart $20 at the

> Troy paid $9,600 for a T-bill with a face value of $10,000. What is Troy’s return if he holds the T-bill to maturity?

> Thomas can invest $10,000 by purchasing a 1-year T-bill for $9,275, or he can place the $10,000 in a 12-month CD paying 8%. Which investment will provide a higher return? In addition to return, what else should Thomas consider when making his investment

> What are the differences between an operating lease and a capital lease?

> On March 31, 2016, Titan Trucking purchased a used Kenworth truck at a cost of $52,000. Titan Trucking expects to drive the truck for 5 years and to have a residual value of $10,000. Compute Titan Trucking’s depreciation expense on the truck for the year

> Depletion is calculated in a manner similar to which depreciation method? a. Double-declining-balance method b. Units-of-production method c. Straight-line method d. Accelerated method

> If a machine that cost $10,000 was estimated to have a salvage value of zero after a useful life of 10 years and was sold for $4,500 after it had been owned for 6 complete years, what would be the amount of gain or loss recognized on the sale?

> Wilson’s Auto Repair ended 2015 with Accounts Receivable of $85,000 and a credit balance in Allowance for Uncollectible Accounts balance of $11,000. During 2016, Wilson’s Auto Repair had the following activity: a. Service revenue earned on account, $545

> Which of the following is true regarding the direct write-off method of accounting for uncollectibles? a. The direct write-off method does not adhere to GAAP. b. The direct write-off method does not use an allowance for uncollectible accounts and thus o

> If a company with a 12/31 year end lends money in the form of a six-month note on 11/1, which accounts will be credited when the note is paid off on 4/30?

> The following situations suggest a strength or a weakness in internal control. Identify each as a strength or weakness, and give the reason for your answer. a. All employees must take at least five consecutive days off each year. b. The accounting depar

> Internal auditors focus on _______; external auditors are more concerned with _______. a. financial statements; laws and regulations b. company policies and procedures; financial statements c. e-commerce; fraud d. financial statements; risk assessment

> What effect does the Sarbanes-Oxley Act of 2002 have on the role and influence of the CEO in a corporation?

> Which item(s) appears as a reconciling item(s) to the bank balance in a bank reconciliation? a. Outstanding checks b. Deposits in transit c. Both a and b d. None of the above

> Match the terms with the definitions. a. Full-disclosure b. Materiality c. Consistency d. Conservatism ______ 1. A company must perform strictly proper accounting only for items significant to the business’s financial statements. ______ 2. Reporting th

> Bonds issued at a premium always have a. interest expense equal to the interest payments. b. interest expense less than the interest payments. c. interest expense greater than the interest payments. d. none of the above.

> What happens to the difference between the carrying amount of bonds and the principal amount of the bonds over time?

> Refer to the data for S8-7. Compute second-year depreciation expense on the truck using the following methods: First-year depreciation: Straight-line: ($48,000 - $8,000) / 4 years = $10,000 Units-of-production: [($48,000- $8,000) / 800,000 miles] × 160

> Using information from the preceding question, suppose Sun Graphics and Designs Center sold the machine for $6,000. What is the result of this disposal transaction? a. Loss of $4,000 b. Gain of $4,000 c. Gain of $6,000 d. Gain of $2,000

> What is the book value of an asset? How is gain or loss on disposal of assets calculated?

> During its first year of operations, World Wide Travel earned revenue of $620,000 on account. Industry experience suggests that World Wide Travel’s uncollectible accounts will amount to 3 percent of revenues. On December 31, 2016, accounts receivable tot

> Your business uses the allowance method to account for uncollectible receivables. At the beginning of the year, Allowance for Uncollectible Accounts had a credit balance of $1,800. During the year, you wrote off bad receivables of $2,000 and recorded Bad

> How would the net realizable value of Accounts Receivable change when an account is written off under the allowance method?

> On August 1, City Delivery creates a petty cash fund with a balance of $450. During August, Eva Unger, the fund custodian, signs the following petty cash tickets:
On August 31, prior to replenishment, the fund contains these tickets plus cash of $209

> What would be the surest way to eliminate the possibility of having any bad debts? Why don’t companies operate this way if it could help them eliminate this costly expense?

> Which of the following is not a limitation of internal control? a. Rationalization b. Tired employees c. Poorly designed controls d. Collusion

> You are the controller for Pro Clean Services, a company that provides janitorial services to large commercial customers. The company has been very successful during its first two years of operations, but in order to expand its customer base, the company

> What are the implications of the fact that every internal control structure has inherent limitations? That is, how does the knowledge that no internal control structure is perfect help management run the organization more effectively?

> Consider the FIFO, LIFO, and average cost inventory costing methods. Answer the following questions assuming inventory costs are increasing: 1. Which method of inventory costing will produce the lowest cost of goods sold? 2. Which method of inventory co

> Plavix Corporation’s bonds payable carry a stated interest rate of 7 percent, and the market rate of interest at the time of issuance is 8 percent. Plavix Corporation’s bonds will be sold at a. par value. b. a discount. c. maturity value. d. a premium.

> Will interest expense be greater than, less than, or equal to the interest payment made on bonds when the bonds are sold at a. par? b. a premium? c. a discount?

> On January 1, Titan Trucking purchased a used Kenworth truck at a cost of $48,000. Titan Trucking expects the truck to remain useful for four years (800,000 miles) and to have a residual value of $8,000. Titan Trucking expects the truck to be driven 160,

> A copy machine cost $36,000 when new and has accumulated depreciation of $34,000. Suppose Sun Graphics and Designs Center junks this machine, receiving nothing in return. What is the result of the disposal transaction? a. Loss of $36,000 b. Gain of $34,0

> What makes a repair “extraordinary” (as opposed to ordinary)? Give an example of an extraordinary and an ordinary repair. What is the financial statement effect of recording a repair as an extraordinary repair instead of an ordinary repair?

> Lori’s Music School created a $200 petty cash fund on May 1. During the month, the fund custodian authorized and signed petty cash tickets as follows:
 Requirements 1. Record the journal entry to create the petty cash fund. 2. Assuming that the cash

> Amy Macintosh, an attorney, uses the direct write-off method to account for uncollectible receivables. On September 30, Macintosh’s accounts receivable were $16,500. During October, she earned service revenue of $21,000 on account and collected $19,000 f

> Which method of estimating uncollectible receivables focuses on net credit sales? a. Aging approach b. Net realizable value approach c. Percent-of-sales approach d. All of the above

> Under which method, percent of sales or aging, would the balance in Allowance for Doubtful Accounts, just before the adjusting entry, affect the amount of the adjusting entry? Why?

> On March 1, The Party Place creates a petty cash fund with a balance of $325. During March, Sue Bemis, the fund custodian, signs the following petty cash tickets:
On March 31, prior to replenishment, the fund contains these tickets plus cash of $23.

> Identify each of the following as an internal control objective (O), an internal control activity (A), or a limitation of internal control (L). _______ 1. Separation of duties _______ 2. Collusion _______ 3. Proper authorization _______ 4. Report financ

> Darice Goodrich receives cash from customers as part of her job duties. Her other duty is to post the receipts to customer accounts receivable. Based on these duties, her company has (a) weak a. disbursement schemes. b. fraud triangle. c. ethics. d. sepa

> Kelly Straton, a trusted employee of Simpson Supply Company, found himself in a difficult financial situation. His son’s college tuition had to be paid in full by the end of the month. The family had experienced some unexpected expenses, and the money wa

> What part of the fraud triangle is most closely associated with the control activities component of internal control? That is, if control activities are improved, which corner of the fraud triangle is most affected? Why?

> Score More Sports uses the (perpetual) LIFO inventory method. Score More Sports started December with 10 helmets that cost $54 each. On December 19, Score More Sports bought 15 helmets at $52 each. On December 28, Score More Sports sold 12 helmets. 1. Th

> Which interest rate on a bond determines the amount of the semi-annual interest payment? a. Effective rate b. Market rate c. Stated rate d. None of the above

> Internal controls are designed to safeguard assets, encourage employees to follow company policies, promote operational effciency, and ensure accurate records. Which objective is most important? What must the internal controls accomplish for the business

> What do we know about the relationship between the market rate of interest and the stated interest rate for a particular bond when the bond is sold at a. par? b. a premium? c. a discount?

> Jody Martin just slept through the class in which Professor Ibanez explained the concept of depreciation. Because the next test is scheduled for Wednesday, Jody Martin telephones Hanna Svensen to get her notes from the lecture. Hanna Svensen’s notes are

> Which depreciation method is generally preferable for income tax purposes? Why? a. Double-declining-balance because it gives higher depreciation deductions in earlier years b. Straight-line because it is simplest c. Double-declining-balance because it gi

> Which depreciation method would be most appropriate for each of the following assets? a. This machine is used as a backup to the other machines in the production process. As a result, there are some years where it sees a lot of action and others where i

> Match the term with its definition by placing the corresponding letter in the space provided: ______ Example: Amounts owed to a business by another business or individual ______ 1. A contra-account, related to accounts receivable, that holds the estimat

> Uncollectible accounts are the same as a. notes receivable. b. bad debts. c. both a and b. d. none of the above.

> Why is the percent of sales method called the “income statement approach” while the aging method is called the “balance sheet approach”?

> Elm Street Motors maintains a petty cash fund of $200. On December 31, the fund holds $12 cash, and petty cash tickets for office supplies totaling $121 and delivery expense totaling $55. Requirements 1. Make the journal entry to replenish the petty ca

> Look at each of the following employees of Anthony’s Restaurant. Which of the elements of the fraud triangle apply? Perceived pressure (P) Perceived opportunity (O) Rationalization (R) _______ 1. As the bartender puts $20 in tips in her pocket, she thi

> Which of the following is not a control activity? a. Proper authorization b. Security measures c. Risk assessment d. Mandatory vacations

> Internal control is a. the act of stealing a business’s assets. b. the process that helps a business achieve its objectives, such as operating efficiently and effectively. c. the reconciliation of the bank’s cash balance to the book’s cash balance. d. th

> Assume you were recently hired as a staff accountant for Advanced Energy Solutions, Inc. You report to Tina, the director of financial reporting, who in turn reports to the CFO. One of your first assignments is to prepare the adjusting entries for the en

> What is the control environment? Discuss how the control environment had a strong influence over a situation with which you are personally familiar (e.g., a place where you work, your family, your living group in college, a classroom, etc.).

> Score More Sports uses the average cost inventory method. Score More Sports started December with 10 helmets that cost $54 each. On December 19, Score More Sports bought 15 helmets at $52 each. On December 28, Score More Sports sold 12 helmets. Prepare a

> Ling Company issued a $280,000, 4 percent mortgage on January 1, 2016, to purchase a building. Payments of $8,055 are made semi-annually. Complete the following amortization schedule (partial) for Ling Company. Round to the nearest dollar.

> What is the term used to describe an unsecured bond? a. Mortgage bond b. Debenture bond c. Serial bond d. Callable bond

> What is the distinguishing feature of the following types of bonds? a. Convertible b. Callable c. Secured d. Unsecured e. Serial f. Term

> Noxon, Inc., repaired a piece of equipment at a cost of $3,000, which Noxon, Inc., paid in cash. Noxon, Inc., erroneously capitalized this cost as part of the cost of the equipment. Requirements 1. Journalize both the incorrect entry the accountant mad

> An airplane costs $75 million and is expected to fly 750 million miles during its 12-year life. Residual value is expected to be zero because the plane was used when acquired. If the plane travels 45 million miles the first year, how much depreciation ex

> Are useful life and physical life the same thing relative to fixed assets? Provide some examples that illustrate your answer.

> Prepare the current assets section of the balance sheet as of May 31, 2016, for Spices and More, Inc., using the following information:

> Sam Olson is the manager of a Stop and Go convenience store. He has been employed by the company for 14 years, the last 4 years as a store manager. Sam applied for a promotion to regional manager, who oversees all 30 store locations, but was once again d

> After performing a bank reconciliation, journal entries are required for a. all items on the book side of the reconciliation. b. all items on the bank side of the reconciliation. c. all items on the reconciliation. d. no items from the reconciliation be

> How is Allowance for Doubtful Accounts reported on the financial statements? Why is it important for companies to report net realizable value of Accounts Receivable on the balance sheet?

> Lynn’s Music School created a $250 petty cash fund on August 1. During the month, the fund custodian authorized and signed petty cash tickets as follows:
Requirements 1. Record the journal entry to create the petty cash fund. 2. Assuming that the ca

> Explain why separation of duties is often described as the cornerstone of internal control for safeguarding assets. Describe what can happen if the same person has custody of an asset and also accounts for the asset.

> Separation of duties refers to separating all of these functions except which of the following? a. Keeping accounting records b. Hiring personnel c. Authorizing transactions d. Maintaining custody of assets

> Jennifer Sims was hired as the new store manager for Bargain Hunter. The store used four cash registers, and 10 cashiers worked various shifts in the store. Store operations include the following procedures: • At the start of each shift, a cashier counts

> Do you think the risk factors for management fraud are the same as the risk factors for employee fraud? Why or why not?

> On January 1, 2016, you borrowed $15,000 on a five-year, 9 percent note payable. At December 31, 2016, you should record a journal entry that includes which of the following? a. Note Payable of $15,000 b. Nothing; the note has already been recorded c. I