Question: Refer to the opening feature about Kendra
Refer to the opening feature about Kendra Scott. Assume the business reports current annual sales at approximately $1 million and prepares the following income statement.
Assume the business sells to individuals and retailers, ranging from small shops to large chains. Assume that it currently offers credit terms of 1∕15, n∕60, and ships FOB destination. To improve its cash flow, it is considering changing credit terms to 3∕10, n∕30. In addition, it proposes to change shipping terms to FOB shipping point. It expects that the increase in discount rate will increase net sales by 9%, but the gross margin ratio (and ratio of cost of sales divided by net sales) is expected to remain unchanged. It also expects that delivery expenses will be zero under this proposal; thus, expenses other than cost of sales are expected to increase only 6%.
Required
1. Prepare a forecasted income statement for the next year ended December 31 based on the proposal.
2. Based on the forecasted income statement alone (from your part 1 solution), do you recommend that the business implement the new sales policies? Explain.
3. What else should the business consider before deciding whether to implement the new policies? Explain.
> Match each document in a voucher system with its description. Document 1. Purchase requisition 2. Purchase order 3. Invoice 4. Receiving report 5. Invoice approval 6. Voucher Description A. An itemized statement of goods prepared by the vendor listing th
> Dexter Company uses the direct write-off method. Prepare journal entries to record the following transactions. Mar. 11 Dexter determines that it cannot collect $45,000 of its accounts receivable from Leer Co. 29 Leer Co. unexpectedly pays its account in
> A solar panel dealer acquires a used panel for $9,000, with terms FOB shipping point. Compute total inventory costs assigned to the used panel if additional costs include $1,500 for sales staff salaries. $135 for shipping insurance. $280 for transportat
> In taking a physical inventory at the end of Year 1, Grant Company forgot to count certain units and understated ending inventory by $10,000. Determine how this error affects each of the following. a. Year 1 cost of goods sold c. Year 2 cost of goods sol
> Spade Co. is considering either FIFO or LIFO. Determine which method results in the lowest income tax expense in the current year when (a) inventory costs are rising and (b) inventory costs are falling. The income tax rate is 20% and is calculated as a p
> Complete the following table by indicating whether FIFO or LIFO results in the lower reported amount for each of the three accounting measures.
> Compute the missing amounts in the separate income statements A, B, and C.
> On December 31, Hawkin’s records show the following accounts. Use this information to prepare a December income statement for Hawkin.
> Identify the inventory costing method (SI, FIFO, LIFO, or WA) best described by each of the following separate statements. Assume a period of increasing costs. 1. Results in the highest cost of goods sold. 2. Yields the highest net income. 3. Has the low
> Refer to the information in QS 5-11 and assume the perpetual inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on specific identification. Of the units sold, eight are from the December 7 purchase an
> Refer to Apple’s financial statements in Appendix A to answer the following. 1. What percent of the original cost of Apple’s Property, Plant and Equipment account remains to be depreciated as of (a) September 29, 2018, and (b) September 30, 2017? Assume
> Refer to the information in QS 5-11 and assume the perpetual inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on the weighted average method. (Round per unit costs and inventory amounts to cents.)
> Grande Co. had credit sales of $20,000 in the current period. Accounts Receivable had a beginning balance of $4,000 and an ending balance of $5,000. Compute its cash collections from its credit sales for the current period.
> Indicate whether each statement best describes the allowance method or the direct write-off method. 1. Does not predict bad debts expense. 2. Accounts receivable on the balance sheet is reported at net realizable value. 3. The write-off of a specific acc
> As of December 31 of the current year, Audi Company’s records show the following. Required Prepare the income statement for Audi Company for the current year ended December 31.
> The following financial statement information is from five separate companies. Required 1. Answer the following questions about Company V. a. What is the amount of equity at the beginning of the year? b. What is the amount of equity at the end of the yea
> The asset accounts from Ridley Co.’s adjusted trial balance for its December 31 year-end follow. Prepare the assets section of its classified balance sheet.
> Identify how each of the following separate transactions 1 through 10 affects financial statements. For increases, place a “+” and the dollar amount in the column or columns. For decreases, place a “&
> Key figures for Samsung follow. Required 1. Compute cash and cash equivalents as a percent (rounded to one decimal) of total current assets, total assets, total current liabilities, and total shareholders’ equity for both years. 2. Comp
> Coca-Cola and PepsiCo both produce and market beverages that are direct competitors. Key financial figures for these businesses for a recent year follow. Required 1. Compute return on assets for (a) Coca-Cola and (b) PepsiCo. 2. Which company is more suc
> Following is selected financial information of Kia Company for the current year ended December 31. Required Prepare the statement of cash flows for KIA Company for the current year ended December 31.
> As of December 31 of the current year, Armani Company’s records show the following. Required Prepare the income statement for Armani Company for the current year ended December 31.
> Identify each of the following as an accounting Principle, Assumption, or Constraint. 1. Full disclosure 2. Time period 3. Going-concern 4. Revenue recognition
> The following financial statement information is from five separate companies. Required 1. Answer the following questions about Company A. a. What is the amount of equity at the beginning of the year? b. What is the amount of equity at the end of the yea
> Identify how each of the following separate transactions 1 through 10 affects financial statements. For increases, place a “+” and the dollar amount in the column or columns. For decreases, place a “&
> Mahomes Co. reported the following data at the end of its first year of operations on December 31. (a) Prepare its year-end statement of retained earnings. (b) Prepare its year-end balance sheet using retained earnings calculated in part a.
> Classify each of the following items as revenues, expenses, or dividends. 1. Utilities expense 2. Service revenue 3. Wages expense 4. Cash dividends 5. Rent expense 6. Rental revenue 7. Insurance expense 8. Consulting revenue
> Terrell Co. reported the following data at the end of its first year of operations on December 31. (a) Pre- pare its year-end income statement. (b) Prepare its year-end statement of retained earnings using net income calculated in part a.
> Selected accounts from Westeros Co.’s adjusted trial balance for the year ended December 31 follow. Prepare its income statement.
> Key comparative figures for Apple and Google follow. Required 1. Compute days’ sales uncollected (rounded to one decimal) for the current year and the prior year for (a) Apple and (b) Google. 2. Which company had more success collecting
> Jarvis began operations on January 1, Year 1. In its first two years of operations, it reported the following at its December 31 year-end. Prepare the statement of retained earnings for (a) Year 1 and (b) Year 2.
> Use the information in Exercise 1-18 to prepare a December statement of cash flows for Ernst Consulting. Assume the following additional information. a. The owner’s initial investment consists of $38,000 cash and $46,000 in land in exchange for its commo
> Use the information in Exercise 1-18 to prepare a December 31 balance sheet for Ernst Consulting. Hint: The solution to Exercise 1-19 can help.
> Use the information in Exercise 1-18 to prepare a December statement of retained earnings for Ernst Consulting.
> On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $84,000 in assets in exchange for its common stock to launch the business. On December 31, the company’s records show the following items and a
> For each transaction, (a) determine whether the transaction appears on the statement of cash flows under cash flows from operating activities, cash flows from investing activities, or cash flows from financing activities and (b) Indicate whether the tr
> Identify the fraud triangle risk factor (Opportunity, Pressure, or Rationalization) in each situation. 1. The business has no cameras or security devices at its warehouse. 2. Managers are expected to grow business or be fired. 3. A worker sees other empl
> Shep Company’s records show the following information for the current year. Determine net income (loss) for each of the following separate situations. a. Additional common stock of $3,000 was issued and dividends of $7,000 were paid dur
> For each transaction a through f, identify its impact on the accounting equation (select from 1 through 5 below). 1. Decreases an asset and decreases equity. 2. Increases an asset and increases a liability. 3. Decreases an asset and decreases a liability
> During the current year, Reed Consulting acquired long-term available-for-sale debt securities on July 1 at a $70,000 cost. At its December 31 year-end, these securities had a fair value of $58,000. This is the first and only time the company purchased s
> Anna’s Cookies combines cash and cash equivalents on the balance sheet. Using the following information, determine the amount reported for cash and cash equivalents. $100 in coins held in store registers $600 in accounts payable to suppliers $1,000 cash
> A&J Co. incurred the following expenses related to patented drugs. 1. Indicate costs that are reported as research and development expenses on the income statement. 2. Indicate costs that are capitalized and reported in the Patent account on the bala
> The following table shows the effects of transactions 1 through 5 on the assets, liabilities, and equity of Mulan’s Boutique. Identify the explanation from a through j that best describes each transaction 1 through 5. a. The company pu
> Zen began a new consulting firm on January 5. Following is a financial summary, including balances, for each of the company’s first five transactions (using the accounting equation form). Identify the explanation from a through j that
> a. On January 1, Lumia Company’s liabilities are $60,000 and its equity is $40,000. On January 3, Lumia purchases and installs solar panel assets costing $10,000. For the panels, Lumia pays $4,000 cash and promises to pay the remaining $6,000 in six mont
> a. Byrde Co. purchased a truck. The seller asked for $11,000, but Byrde paid only $10,000 after negotiation. The owner of Byrde Co. believes he got a great deal and the truck is really worth $15,000. What amount does Byrde record on its financial stateme
> Analyze each transaction in QS 49 by indicating its effects on the components of the income statement— specifically, identify the accounts and amounts (including + or −) for each transaction.
> Prepare journal entries to record each of the following sales transactions of EcoMart Merchandising. EcoMart uses a perpetual inventory system and the gross method. Oct. 1 Sold merchandise for $1,500, with credit terms n∕30, invoice dated October 1. The
> Arrange an interview (in person or by phone) with the manager of a retail shop in a mall or in the downtown area of your community. Explain to the manager that you are a student studying merchandising activities and the accounting for sales returns and s
> Official Brands’s general ledger and supplementary records at the end of its current period reveal the following. Required 1. Each member of the team is to assume responsibility for computing one of the following items. You are not to
> Use Apple’s financial statements in Appendix A to answer the following. 1. Identify the total amount of cash and cash equivalents for fiscal years ended (a) September 29, 2018, and (b) September 30, 2017. 2. Compute cash and cash equivalents as a percent
> Access the SEC’s EDGAR database (SEC.gov) and obtain the March 21, 2017, filing of its fiscal 2017 10K report (for year ended January 28, 2017) for J. Crew Group, Inc. (ticker: JCG). Required Prepare a table that reports the gross margin ratios for J. C
> Team up with one or more classmates for this activity. Identify companies in your community or area that must account for at least one of the following assets: natural resource, patent, lease, leasehold improvement, copyright, trademark, or goodwill. You
> Prepare journal entries to record each of the following sales transactions of a merchandising company. The company uses a perpetual inventory system and the gross method. Apr. 1 Sold merchandise for $3,000, with credit terms n∕30; invoice dated April 1.
> You are the financial officer for Music Plus, a retailer that sells goods for home entertainment needs. The business owner, Vic Velakturi, recently reviewed the annual financial statements you prepared and sent you an email stating that he thinks you ov
> Amy Martin is a student who plans to attend approximately four professional events a year at her college. Each event necessitates a financial outlay of $100 to $200 for a new suit and accessories. After incurring a major hit to her savings for the first
> Identify the accounting principle or assumption that best reflects each situation. 1. A company reports details behind financial statements that would impact users’ decisions. 2. Financial statements reflect the assumption that the business continues ope
> Refer to Apple’s balance sheet and income statement in Appendix A. What does the company title its inventory account? Does the company present a detailed calculation of its cost of goods sold?
> Key comparative figures for Samsung, Apple, and Google follow. Required 1. Compute the gross margin ratio for each of the three companies. 2. Is Samsung’s gross margin ratio better or worse than that for (a) Apple? (b) Google? 3. Is the
> Key comparative figures for Apple and Google follow. Required 1. Compute the amount of gross margin and the gross margin ratio for the two years shown for each of these companies. 2. Which company earns more in gross margin for each dollar of net sales
> Refer to Apple’s financial statements in Appendix A to answer the following. Required 1. Assume that the amounts reported for inventories and cost of sales reflects items purchased in a form ready for resale. Compute the net cost of goods purchased for t
> Santana Rey receives the March bank statement for Business Solutions on April 11, 2021. The March 31 bank statement shows an ending cash balance of $67,566. The general ledger Cash account, No. 101, shows an ending cash balance per books of $68,057 as of
> Santana Rey created Business Solutions on October 1, 2020. The company has been successful, and its list of customers has grown. To accommodate the growth, the accounting system is modified to set up separate accounts for each customer. The following cha
> The following unadjusted trial balance is prepared at fiscal year­end for Foster Products Company. Foster Products Company uses a perpetual inventory system. It categorizes the following accounts as selling expenses: Depreciation Expenseâ
> Review the chapter’s opening feature involving Elon Musk and SpaceX. Assume that the company currently has net sales of $8,000,000 and that it is planning an expansion that will increase net sales by $4,000,000. To accomplish this expansion, the company
> Yoshi Company completed the following transactions and events involving its delivery trucks. Year 1 Jan. 1 Paid $20,515 cash plus $1,485 in sales tax for a new delivery truck estimated to have a five-year life and a $2,000 salvage value. Delivery truck c
> Use the data for Barkley Company in Problem 4-3B to complete the following requirement. Required Prepare closing entries as of March 31 (the perpetual inventory system is used).
> Barkley Company’s adjusted account balances from its general ledger on March 31, its fiscal year-end, follows. It categorizes the following accounts as selling expenses: Sales Salaries Expense, Rent Expense— Selling Sp
> Prepare journal entries to record each of the following transactions. The company records purchases using the gross method and a perpetual inventory system. Sep. 15 purchased merchandise with an invoice price of $35,000 and credit terms of 2∕5, n∕15. 2
> Prepare journal entries to record the following merchandising transactions of Menards, which applies the perpetual inventory system and gross method. Hint: It will help to identify each receivable and payable; for example, record the purchase on July 3 i
> Determine whether each description best refers to a sole proprietorship, partnership, corporation, or limited liability company. a. Micah and Nancy own Financial Services, which pays a business income tax. Micah and Nancy do not have personal responsibil
> Prepare journal entries to record the following merchandising transactions of IKEA, which uses the perpetual inventory system and gross method. Hint: It will help to identify each receivable and payable; for example, record the purchase on May 2 in Accou
> Shamara Systems most recently reconciled its bank balance on April 30 and reported two checks outstanding at that time, No. 1771 for $781 and No. 1780 for $1,425.90. Check No. 1780 was still outstanding as of May 31. The following information is availabl
> Using the information in Exercise 6-12, prepare the adjusting journal entries that Del Gato Clinic must record as a result of preparing the bank reconciliation.
> The following unadjusted trial balance is prepared at fiscal year­end for Nelson Company. Nelson Company uses a perpetual inventory system. It categorizes the following accounts as selling expenses: Depreciation Expense—Store
> Use the data for Valley Company in Problem 43A to complete the following requirement. Required Prepare closing entries as of August 31 (the perpetual inventory system is used).
> Valley Company’s adjusted account balances from its general ledger on August 31, its fiscal year-end, follows. It categorizes the following accounts as selling expenses: Sales Salaries Expense, Rent Expense— Selling Sp
> Prepare journal entries to record the following merchandising transactions of Lowe’s, which uses the perpetual inventory system and the gross method. Hint: It will help to identify each receivable and payable; for example, record the purchase on August 1
> Refer to the transactions in Problem C-5B. Assume that although Brinkley owns 25% of Bloch’s outstanding stock, circumstances indicate that it does not have a significant influence over the investee. Required Prepare journal entries to record these trans
> Prepare journal entries to record the following merchandising transactions of Cabela’s, which uses the perpetual inventory system and the gross method. Hint: It will help to identify each receivable and pay able; for example, record the purchase on July
> Piere Imports uses the perpetual system in accounting for merchandise inventory and had the following transactions during the month of October. Prepare entries to record these transactions assuming that Piere Imports records invoices (a) at gross amounts
> Refer to Exercise 410 and prepare journal entries to record each of the merchandising transactions assuming that the perpetual inventory system and the net method are used by both the buyer and the seller.
> Lopez Company reports unadjusted first year merchandise sales of $100,000 and cost of merchandise sales of $30,000. a. Compute gross profit (using the unadjusted numbers above). b. The company expects future returns and allowances equal to 5% of sales an
> Prepare journal entries to record each of the following transactions. The company records purchases using the gross method and a perpetual inventory system. Aug. 1 purchased merchandise with an invoice price of $60,000 and credit terms of 3∕10, n∕30. 1
> The following information is available to reconcile Severino Co.’s book balance of cash with its bank statement cash balance as of December 31. a. The December 31 cash balance according to the accounting records is $32,878.30, and the bank statement cash
> Match each of the descriptions with the term or phrase it best reflects. A. Ethics B. Fraud triangle C. Prevention D. Internal controls E. Audit 1. Examines whether financial statements are prepared using GAAP; it does not ensure
> Chico Company allows its customers to return merchandise within 30 days of purchase. At December 31, the end of its first year of operations, Chico estimates futureperiod merchandise returns of $60,000 (cost of $22,500) related to its currentyear sales
> Med Labs has the following December 31 yearend unadjusted balances: Allowance for Sales Discounts, $0; and Accounts Receivable, $5,000. Of the $5,000 of receivables, $1,000 are within a 2% discount period, meaning that it expects buyers to take $20 in f
> Refer to Exercise 410 and prepare journal entries to record each of the merchandising transactions assuming that the periodic inventory system and the gross method are used by both the buyer and the seller.
> Refer to Exercise 49 and prepare journal entries to record each of the merchandising transactions assuming that the periodic inventory system and the gross method are used by both the buyer and the seller.
> Refer to the information in QS C-4. (1) After the fair value adjustment is made, prepare the assets section of Kitty Company’s December 31 classified balance sheet. (2) In which income statement section is the unrealized gain (or loss) on the portfolio o
> Refer to Exercise 43 and prepare journal entries to record each of the merchandising transactions assuming that the buyer uses the periodic inventory system and the gross method.
> Compute the acid test ratio for each of the following separate cases. (b) Which company is in the best position to meet short-term obligations?
> Refer to the information in Exercise 415 and indicate whether the failure to include in transit inventory as part of the physical count results in an overstatement, understatement, or no effect on the following ratios. a. Gross margin ratio b. Profit ma
> Adams Co. reports the following balance sheet accounts as of December 31. Prepare a classified balance sheet.
> On February 19 of the current year, Quartzite Co. pays $5,400,000 for land estimated to contain 4 million tons of recoverable ore. It installs and pays for machinery costing $400,000 on March 21. The company removes and sells 254,000 tons of ore during i
> Fit­for­Life Foods reports the following income statement accounts for the year ended December 31. Pre­ pare a multiple step income statement that includes separate categories for net sales; cost of goods sold; selling ex
> Prepare journal entries to record each of the following transactions of a merchandising company. The company uses a perpetual inventory system and the gross method. Nov. 5 Purchased 600 units of product at a cost of $10 per unit. Terms of the sale are 2∕
> Match each of the descriptions with the term or phrase it best reflects. A. Audit B. GAAP C. Ethics D. FASB E. SEC F. Public accountants G. Net income H. IASB 1. An assessment of whether financial statements follow GAAP. 2. Amount a business earns in e
> A company reports the following sales related information. Compute and prepare the net sales portion only of this company’s multiple step income statement.
