Review the following accounting practices and indicate whether you believe that the practice is correct or incorrect. Justify your answer with an accounting concept, principle, or assumption. a. Citera Company, a large multinational corporation, expensed the acquisition of a $4,000 computer system. b. Mason Manufacturing acquired a new metal stamping machine at a cost of $50,000. Mason will depreciate the asset over its 10-year useful life c. Gabriel Grocery Stores needed to overhaul one of its stores at a cost of $75,000. The company decided to expense this amount as repairs and maintenance. d. Dina Design Studios charged the $600 cost of a new laptop for the owner’s daughter to office equipment expense. e. Walsh Water Services issues financial statements on both a quarterly and an annual basis to its shareholders.
> Choco-Delite Cookies Company (Choco) declared a $1,600,000 cash dividend on December 15, Year 2, payable to all stockholders on record the following month. On December 31, Year 2, the company completed a two-for-one stock split (Note: Prior to the split
> Why is a conceptual framework of accounting necessary and justifiable?
> The Cougars football team sells season tickets in advance for $480 each. The season consists of 16 games. Half of these games are home games, and half of them are away games. For Year 3, the team has sold and collected payment for 10,000 season tickets.
> Embree Corp. purchased a four-year insurance policy on May 1, Year 2, for $12,000, effective immediately. The company expensed the full cost of the policy in Year 2. The correct journal entry for Year 2 (ending December 31) will include a: a. Debit to p
> On July 15, Year 1, Southeastern University hired an associate professor for its Math Department at an annual (12-month) salary of $150,000. The salary is effective for its new school year, which commences August 16, and is payable in four quarterly cale
> Sampson Manufacturing Company (SMC) has an empty warehouse that it rents out to a local beer distributor for a monthly rental fee of $6,000. Terms of the rental agreement include a 10-day payment grace period and an additional $200 monthly utility expens
> During the fourth quarter ended December 31, Year 1, Lighting Fixtures Inc. (LFI) had average outstanding revolving bank loans of $1.2 million. Assume that the quarterly interest charges associated with these loans was $7,500. If LFI makes the interest p
> State University sold all of its basketball tickets to its students for 15 home games on September 30 for $1,200,000 (basketball season starts November 1). Assuming the college basketball team played six home games prior to year-end, what adjusting journ
> Windy Harbor Boat Company pays its employees on a weekly basis each Friday. During the week ended Friday, January 3, Year 2, the company had a weekly payroll of $125,750. Assuming that the company is on a calendar basis, has a five-day workweek, and that
> Vikram Patel, one of your friends from high school who is a finance major, is surprised that you are learning about international accounting. Explain why it is important for an accountant in the United States to learn International Financial Reporting St
> Alicia O’Malley, a sociology major, is considering changing her major to accounting. Alicia is having some doubts because she fears that accounting and financial reporting are concerned only with numbers and are isolated from society. Convince Alicia to
> Define financial accounting and describe the four main elements in that definition.
> Are the FASB and IASB conceptual frameworks fully converged? Explain.
> G&S Auto Body, Inc. started 2018 with the following balances: The following transactions occurred during the current year: a. On January 1, the owners invested a total of $150,000 (the par value of the stock) as an additional capital contribution. I
> Using the information provided in E4-7, prepare CC&C’s t-accounts for all relevant accounts for the year ended December 31, 2018. Post journal entries in E4-7 to the general ledger Data from E4-7: Assets 100 Cash 101 Accounts Receivable 102 Supplies 1
> Cookies, Cakes & Crumbs Bakery (CC&C) ended its first year of operations on December 31, 2018. During 2018, the following transactions occurred: CC&C uses the following chart of accounts: Assets 100 Cash 101 Accounts Receivable 102 Supplies
> Using the information provided in E4-5, post Dover Direct Insurance Agency’s journal entries to the general ledger for all relevant accounts for the month ended June 30, 2018. You do not need to provide explanations. Data From E4-5:
> The Dover Direct Insurance Agency began operations on June 1, 2018. In the month of June, the following transactions occurred: June 2: Dover Direct’s owner invested $80,000 (the par value of the stock) cash and acquired 4,000 shares of
> Using the information provided in E4-3, prepare Master Mind’s t-accounts for each transaction.
> Master Mind Games, Inc. is a new corporation started on January 1, 2018. The following transactions occurred during the first year of operations. a. On January 1, the owners invested a total of $50,000 (the par value of the stock) to start the company. I
> Using the adjusted trial balance for Diane’s Dairy Sales & Delivery in E4-22, prepare a single-step income statement, a statement of shareholders’ equity, and a balance sheet. Data from E4-22:
> Diane’s Dairy Sales & Delivery finished its first year of operations on December 31, 2018. After adjusting journal entries, the company presented the following adjusted trial balance. Using this trial balance, prepare Dianeâ&#
> Using the information provided in E4-18, prepare a worksheet including the columns for the unadjusted trial balance, adjustments, the adjusted trial balance, income statement, and balance sheet. Data From E4-18:
> When is financial information considered “understandable”?
> Using the information provided in E4-18: Required a. Prepare the necessary closing entries for Magic Cleaning Services at year-end. Omit explanations. b. Prepare the post-closing trial balance for Magic Cleaning Services at year-end. Data from E4-18:
> Using the information given in E4-1, prepare the journal entry for each transaction for Miller Manufacturing. Omit explanations. Data from E4-1: a. Bought office equipment with cash, $30,000. b. Bought supplies on credit from a vendor, $15,000. c. Sold
> Using the adjusted trial balance for Magic Cleaning Services in E4-18, prepare a single-step income statement, a statement of shareholders’ equity, and a balance sheet. Data from E4-18:
> Magic Cleaning Services (MCS) has a fiscal year-end of December 31. It is the first year of operations. As of year-end, MCS has the following unadjusted trial balance: In addition, it has not adjusted for the following transactions: •
> Using the information provided in E4-14, prepare a worksheet including the columns for the unadjusted trial balance, adjustments, the adjusted trial balance, income statement, and balance sheet. Data from E4-14: • Cash: $430,000 • Accounts Receivable: $
> Using the information provided in E4-14: Required a. Prepare the necessary closing entries for MPS, Inc. at December 31, 2018. Omit explanations. b. Prepare the post-closing trial balance for MPS, Inc. at December 31, 2018. Data from E4-14: • Cash: $430
> Using the information provided in E4-14: Required a. Prepare an unadjusted trial balance for MPS, Inc. as of December 31, 2018. b. Prepare an adjusted trial balance for MPS, Inc. as of December 31, 2018. Data From E4-14: • Cash: $430,000 • Accounts Rec
> MPS, Inc. has the following unadjusted account balances as of December 31, 2018, the company’s year-end: • Cash: $430,000 • Accounts Receivable: $2,000 • Prepaid Insurance: $14,000 • Prepaid Rent: $22,000 • Equipment: $60,000 • Accumulated Deprecia
> Using the information provided in E4-12, prepare an adjusted trial balance for Fanatical Fashions as of December 31, 2018. Data From E4-12:
> Fanatical Fashions, a department store, has the following unadjusted account balances as of December 31, 2018, the company’s year-end: At year-end, Fanatical Fashions makes necessary adjusting journal entries to properly record revenues
> What is the conceptual framework for financial reporting?
> Using the information provided in E4-6, prepare Dover Direct Insurance Agency’s unadjusted trial balance at June 30, 2018. Data from E4-6:
> Hartman Housewares Company began the current year with the following account balances: The following transactions were completed during the current year. a. Bought office equipment with cash, $10,000. b. Bought supplies on credit from a vendor, $5,000.
> The following transactions are taken from the books of Miller Manufacturing. a. Bought office equipment with cash, $30,000. b. Bought supplies on credit from a vendor, $15,000. c. Sold goods for cash, $40,000 (ignore the inventory and cost of goods sold
> Using the information in E4-22, prepare the post-closing trial balance for Diane’s Dairy Sales & Delivery. Data from E4-22:
> What is the objective of the statement of cash flows? Provide the Codification reference.
> How does FASB define cash equivalents? Provide the Codification reference.
> To what entity types does ASC 330-10: Inventory – Overall not apply? Provide the Codification reference.
> Provide the reference to the Codification paragraph where you can find a listing of the items that should appear in other comprehensive income.
> Provide the reference to the topic, subtopic and section in the Codification where you would most likely begin your research for the following areas. a. Determine what amount to record upon acquisition of a receivable that you received when you sold serv
> A team of accounting students is working on a case where they are required to assess a set of information to determine the useful life used to depreciate a company’s machinery used to produce smart phone cases. The students have many pieces of informatio
> Explain the going concern concept.
> A team of accounting students is working on a case where they are required to assess a set of information to determine a company’s allowance for bad debts. The students have many pieces of information to analyze, including: • The company’s allowance for
> To compare entities in the same industry, it is important to determine the accounting methods used by each firm. Answer the following questions regarding accounting methods. a. Where do firms provide information about their accounting methods? b. Provide
> Top Notch Services was founded on January 2 and offers computer consulting and other technology-related services. During its first quarter of operations, the following events occurred: a. In January, Top Notch provided and billed clients for $40,000 of c
> Complete the following statements by identifying the appropriate term or concept. a. A sets forth theory, concepts, and principles to ensure that accounting standards are coherent and uniform. b. Information has if decisio
> Determine the concept that is violated in each of the following cases: a. Management examined registration and legal fees for a trademark, and determined that it should record a trademark for $5,000. b. Katia Clothing, a U.S. GAAP reporter, purchased lan
> Using the following table, match the enhancing characteristics (comparability, verifiability, timeliness, or understandability) with the following four scenarios. Also indicate if the enhancing characteristic is either satisfied or violated.
> Referring to the qualitative characteristics of accounting information, indicate the fundamental characteristic (relevance or representationally faithful) and its related attribute (confirmatory value, completeness, materiality, neutrality, or predictive
> Noeleen Auto Mall, Ltd. recently completed an initial public offering (IPO) for $23,000,000 by listing its common shares on the New York Stock Exchange. Prior to its IPO, Noeleen was a privately held family business. As a public company, Noeleen faces in
> You are provided the following information for the Del Campo Consulting Associates. Required: Assume that all supplies purchased were used in operations in the year of purchase. Rental payments pertain to rental space used in the year of payment. a. P
> Explain the historical cost concept.
> Review the following statements and indicate if the statement is referring to a principles-based or a rules-based accounting standard.
> Consider the following comment: “Accounting standards have always focused on the asset/liability approach and still do today.” Do you agree or disagree with this comment? Explain your answer.
> Provide the key characteristics of rules-based standards and principles-based standards.
> Joe Choi, a history major, is considering transferring to your school of business to study accounting. Joe is having some doubts because he is uncertain if there is any room for history in accounting. Convince Joe to major in accounting by providing a hi
> The third level of the U.S. GAAP Hierarchy involves nonauthoritative materials such as textbooks. Read paragraph 3 of ASC 105-10-05, Generally Accepted Accounting Principles Overall Overview and Background. What examples of nonauthoritative sources does
> PharmY, Inc. is a U.S. GAAP reporter that is in the pharmaceutical industry. In the current year, PharmY incurred expenditures related to laboratory experiments designed to discover a new drug. The expenditures were as follows: Laboratory equipment that
> Abtos Company is a U.S. manufacturer that is publicly traded. Abtos reports $12 million of inventory on its balance sheet. Inventory includes raw materials, work-in-process, and finished goods. Is Abtos required to disclose the amounts for each class of
> Unlike U.S. GAAP, IFRS requires that an entity disclose (a) management’s judgments with the most significant effect on the financial statements and (b) information about the major sources of estimation uncertainty that may result in a material adjustment
> Part 1: Read paragraph OB11 of Statement of Financial Accounting Concepts No. 8, Conceptual Framework for Financial Reporting: Chapter 1, The Objective of General-Purpose Financial Reporting, and Chapter 3, Qualitative Characteristics of Useful Financial
> Unlike U.S. GAAP, IFRS requires that an entity disclose (a) management’s judgments with the most significant effect on the financial statements and (b) information about the major sources of estimation uncertainty that may result in a material adjustment
> How are transactions recorded under accrual accounting?
> Certain transactions require a choice about which financial statement is more important—the income statement or the balance sheet. Read paragraphs BC1.31 and BC1.32 in the basis for conclusions of Statement of Financial Accounting Concepts No. 8, Concept
> Mario’s Grocery began operations on December 1, 2018, and has a year-end of December 30. On December 1, the owners invested $50,000 (the par value of the stock) in return for 5,000 shares of common stock. On December 7, the company took out a loan from t
> Using the information provided in BE4-7, assume that Jones Journals is now in its second year of operations. In the second year, Jones incurred a net loss of $124,000 and paid no dividends. What is the retained earnings balance as of December 31 of Year
> In its first year of operations, Jones Journals, Inc. recorded net income in the amount of $470,000. Jones Journals also declared and paid a $25,000 dividend at year-end on December 31. What is the balance in Jones’ retained earnings account after it rec
> Using the information provided in BE4-4 and BE4-5, show the t-accounts for the cash, accounts receivable, and service revenue accounts reflecting the revenue transaction in May and the payment in June, assuming no other transactions have taken place.
> Using the information provided in BE4-4, assume now that Cal’s customer pays off the balance owed of $120,000 in full on June 23, 2018. What is the effect of this transaction on the accounting equation? What is the journal entry for this transaction? Omi
> Cal’s Computer Servicing, Inc., a service company that provides installation services for computer programs, had a service revenue transaction in the amount of $120,000 on May 31, 2018, with one customer. This customer chose to put the balance owed on it
> Using the information provided in BE4-2, prepare Florence’s journal entries for the month of January. Omit explanations.
> Mueller Consulting is under contract to provide consulting services for $150,000 to Ames Computers. At the end of the current year, Mueller provided $30,000 of the services. It completes the services in the next year and receives the $150,000 payment on
> Thomas and Associates, a law firm, accrued $4,000 for four days of wages on December 31. On January 7, it paid two weeks of wages, totaling $10,000, to employees. The company’s fiscal year-end is December 31. Prepare the journal entries for the accrued w
> When are expenses recognized under IFRS?
> Using the information provided in BE4-21, prepare the t-accounts for Subscription Revenue and Unearned Subscription Revenue for Gerhard News as of December 31, before and after preparing adjusting entries.
> Gerhard News collects payments from customers for newspaper subscriptions on a yearly basis, that is, in one-year subscriptions. On March 1, Gerhard collected $24,000 cash for oneyear subscriptions. Gerhard recorded the full amount as revenue. Prepare th
> Using the information provided in BE4-19, prepare the t-accounts for Rent Expense and Prepaid Rent for Barnard and Associates as of December 31 after adjusting journal entries. Data From BE4-19: Barnard and Associates, a law firm, paid $18,000 for twelv
> Florence’s Floral Arrangements, Inc. had the following transactions in the month of January: The owners invested $100,000 (the par value of the stock) for 20,000 shares of common stock; the company purchased furniture for the florist shop in the amount o
> Barnard and Associates, a law firm, paid $18,000 for twelve months’ rent in advance on October 1 of the current year. Barnard recorded the full amount as rent expense. The company’s fiscal year-end is December 31. Prepare the entry made on October 1 and
> Readers, Inc., an online bookstore, had the following account balances at year-end: Sales Revenue of $420,000; Cost of Goods Sold of $240,000; Salary Expense of $120,000; Insurance Expense of $5,000. Also, it declared and paid a dividend in the amount of
> At year-end, Nelson’s Nursery, Inc. had account balances as follows: Sales Revenue of $220,000; Wage Expense of $74,000; Administrative Expense of $12,000; Utility Expense of $6,000; and Rent Expense of $10,000. Prepare the necessary year-end closing ent
> Using the information provided in BE4-10, prepare the necessary year-end closing entries for Medical Supplies, Inc. Omit explanations.
> Pat’s Auto Dealership purchased a building on January 15 for $300,000 to be used for the business. The residual value on the building is $0 and its expected useful life is 30 years. Prepare the adjusting entry required at year-end to record a full year o
> Using the information provided in BE4-13, prepare the t-accounts for Subscription Revenue and Unearned Subscription Revenue for Gerhard News as of March 31, before and after preparing the adjusting entries.
> When are expenses recognized under U.S. GAAP?
> Gerhard News collects payments from customers for newspaper subscriptions on a yearly basis (specifically, in one-year subscriptions). Each month, Gerhard must record an adjusting entry to recognize the monthly revenue that has been provided. On March 1,
> Using the information provided in BE4-11, prepare the t-accounts for Rent Expense and Prepaid Rent for Barnard and Associates as of December 31 after adjusting journal entries.
> Barnard and Associates, a law firm, paid $18,000 for 12 months’ rent in advance on October 1 of the current year. The company’s fiscal year-end is December 31. Prepare the journal entries for the rent payment on October 1 and the necessary adjusting jour
> Over the course of 2018, the first year of operations, Medical Supplies, Inc. had the following income transactions: Sales Revenue of $4,340,000; Cost of Goods Sold of $1,936,000; Wage Expense of $876,000; Insurance Expense of $324,000; Administrative Ex
> At the beginning of the year, Buxton Builders purchased raw materials in the amount of $15,000 to produce goods to sell. Buxton paid cash. What is the effect of this transaction on the accounting equation?
> Explain why research is important in accounting. Discuss the research process.
> Referencing Appendix, A, determine the topics, subtopics and sections of the Codification for the following balance sheet events.
> Put the four levels of the IFRS literature hierarchy in correct order (use 1, 2, 3, 4):
> Identify the level of the literature hierarchy for U.S. GAAP to which each item belongs.
> Put the three levels of the literature hierarchy for U.S. GAAP in correct order (use 1, 2, 3):
> What is the revenue recognition principle and when is revenue considered recognized?
