Rex Corporation accepted a $ 10,000, 5% interest bearing note from Brooks Inc. on December 1, 2018 in exchange for machinery with a list sales price of $9,500. The note is payable on December 1, 2021. If the prevailing interest rate is 8%, what revenues should Rex report in its income statement for the year ended December 3 1, 2018?
> What is one explanation for increased gross profit during periods of rising inventory costs when FIFO is used?
> On January 2, 2019, Magee, Inc., purchased, as a stock investment, 20,000 shares of Dye, lnc.'s common stock for $21 per share, including commissions and taxes. On December 31, 2019, Dye announced a net income of $280,000 for the year and declared a divi
> Why do relatively stable inventory costs reduce the importance of management's choice of an inventory costing method?
> Apple Inc., is one of the most successful enterprises of all time. Its computers, tablets, phones, and watches are all highly desired by consumers, and the company's product innovations keep arriving at a steady pace. Apple's financial success can also b
> LIFO liquidation is often discretionary. What motives might management have to liquidate LIFO inventory?
> For each of the situation below determine if the investment should be reported as a passive investment (P). an investment reflecting significant influence 151). or a i:ontrolling interest (C).
> Restaurant Brands International, Inc. reports the following in footnote 13 to their financial statements in their 2017 I 0-K related to redeemable preferred stock. Note 13 Redeemable Preferred Shares On December 12, 2014 we issued 68,530,939 Class A 9.0%
> LIFO liquidation may be involuntary-that is beyond the control of management. Suggest two situations that might lead to involuntary UFO liquidation.
> Liz Plummer, vice president and general counsel, chairs the Executive Compensation Committee for Sunlight Corporation. Four and one-half years ago, the compensation committee designed a performance bonus plan for top management that was approved by the b
> Analysts claim that it is more difficult to forecast net income for a company that uses LIFO. Why might this be true?
> The stockholders· equity section of Pillar Corporation ·s comparative balance sheet at the end of 2018 and 2019 is presented below. It is part of the financial data just reviewed at a stockholders' meeting. The following items
> Under what circumstances is it justified to include transportation costs in the value of the inventory purchased?
> Ron King. chair person of the board of directors and chief executive officer of Image. lnc .. is 1x.rndering a recommendation to make to the firm's board of directors in response to actions taken by Jack Hatcher. Hatcher recently informed King and other
> Explain how management can shift income from one period into another by its estimation of uncollectible accounts.
> Andrea Frame and her supervisor are sent on an out-of-town assignment by their employer. At the supervisor's suggestion, they stay at the Spartan Inn (across the street from the Luxury Inn). After three days of work, they settle their lodging bills and l
> How might earnings forecasts that are published by financial analysts encourage companies to manage earnings?
> Linda Reed, an executive at VIP Inc. has earned a performance bonus. She has the option of accepting $60,000 now or $100,000 5 years from now. What would you advise her to do? Explain and support with calculations.
> Sarah Penney operates the Wildlife Picture Gallery, selling original art and signed prints received on consignment (rather than purchased) from recognized wildlife artists throughout the country. The firm receives a 30% commission on all art sold and rem
> Why does GAAP allow management to make estimates of amounts that are included in financial statements? Does this improve the usefulness of financial statements? Explain.
> Northrop Grumman Corporation reports the following in footnote 4 to its 2008 I 0-K related to its convertible preferred stock. Conversion of Preferred Stock-On February 20, 2008, the company's board of directors approved the redemption of the 3.5 million
> What is the concept of non-GAAP income or proforma income and why has this income measure been criticized?
> Alphabet Inc. reported the following in note 14 to its 2018 10-K report: Note 14. Income Taxes Income from continuing operations before income taxes included income from domestic operations of $12.0 billion, $10.7 billion, and $15.8 billion for the years
> Why might companies want to manage earnings? Describe some of the tactics that some companies use to manage earnings.
> The following information is taken from Williams-Sonoma, lnc.'s 10-K . Note D: Income Taxes The components of earnings before income taxes, by tax jurisdiction, are as follows: The provision for income taxes consists of the following: We have historicall
> Explain the concept of a big bath and why restructuring costs are often identified with this event.
> Identify the two typical categories of restructuring costs and their effects on the balance sheet and the income statement.
> Debra Wilcox won $7 million in the California lottery. She must choose how she wants the prize to be paid to her. First, Debra can elect to receive 26 annual payments, with the first payment due immediately. Second, she can elect to receive a single paym
> Foster Corporation is in the third quarter of the current year. and projections are that net income will be down about $600.000 from the previous year. Foster's return on assets is also projected to decline from its usual 15% to approximately 13%. lf ear
> Why are discontinued operations reported separately from continuing operations in the income statement?
> Estimating the bad debts expense by aging accounts receivable generally results in smaller errors than the percentage of credit sales approach. Can you explain why?
> The following is from the most recent I 0-K report of 3M Company for the year ended December 31, 2017. In its footnotes, 3M provided the following information about the gain on sale of businesses in the income statement. Gain on Sale of Businesses: In 20
> Under what circumstances would it be correct to say that a company would be better off with more uncollectible accounts?
> John Wiley and Sons, Inc. publishes books, periodicals, software, and other digital content. Its April 30, 2018, balance sheet reported the following amounts for accounts receivable ($ thousands): Wiley's income statement provided the following detail of
> During an examination of Wallace Company's financial statements, you notice that the allowance for uncollectible accounts has decreased as a percentage of accounts receivable. What are the possible explanations for this change?
> What is the process that guides firms in the recognition of revenue? What does each of the steps mean? How does this process work for a company like Abercrombie & Fitch Co., a clothing retailer? How would it work for a construction company that builds of
> Rye Company is considering purchasing a new machine with a useful life of ten years, at which time its salvage value is estimated to be $50,000. Management estimates a net increase in operating cash inflow due to the new machine at $200,000 per year. Wha
> Lundholm Company's comparative balance sheets, income statement, and statement of cash flows for July are presented below: REQUIRED a. Set up T-accounts and enter beginning and ending balances for each account in Lundholm Company's balance sheet. b. Prov
> What is meant by the term "net" in net operating assets (NOA)?
> How does a firm go about increasing its AT ratio? What strategies are likely to be most effective?
> What are common-size financial statements? What role do they play in financial statement analysis?
> Lady G's Fashions, a specialty retailer of women's apparel, markets its products through retail stores and catalogs. Selected information from its 2019 and 2018 balance sheets is as follows. The following excerpts are from Lady G's Fashions accompanying
> Explain what it means when a company's ROE exceeds its ROA.
> It is the end of the accounting year for Juliet Javetz, controller of a medium-sized, publicly held corporation specializing in toxic waste cleanup. Within the corporation, only Javetz and the president know that the firm has been negotiating for several
> Describe the concept of asset turnover. What does the concept mean and why is it so important to understanding and interpreting financial performance?
> Dawn Riley deposited $4,000 in a money market account on January 2, 2019. How much will her savings be worth on January 2, 2025 if the money market account earns a return of a. 4%? b. 6%? C. 8%?
> What is the difference between a purchase invoice and a sales invoice?
> Why is using the Purchases Returns and Allowances account preferred to crediting these transactions to Purchases?
> On what financial statement do the accounts related to purchases of merchandise appear? In which section of this statement are they reported?
> What is the normal balance of the Purchases accounts?
> What account should be debited for transportation charges related to equipment purchases?
> What major safeguards should be built into a system of internal control for purchases of goods?
> In a particular state, the sales tax rate is 5 percent of sales. The retailer is allowed to record both the selling price and the tax in the same account. Explain how to compute the sales tax due when this method is used.
> The sales tax on a credit sale is not collected from the customer immediately. When is this tax usually entered in a firm’s accounting records? What account is used to record this tax?
> What kind of account is Sales Returns and Allowances?
> 1. In discussing a firm’s latest financial statements, a manager says that it is the “results on the bottom line” that really count. What does the manager mean? 2. If a firm’s expenses equal or exceed its revenue, what actions might management take? 3. H
> What kind of account is Sales Discounts?
> Why is a sales return or allowance usually recorded in the Sales Returns and Allowances account rather than being debited to the Sales account?
> What purposes does the schedule of accounts receivable serve?
> How are the net sales for an accounting period determined?
> What is a trade discount? Why do some firms offer trade discounts to their customers?
> What is open-account credit?
> What is the name of the account used to record the fees charged by the credit card company to the seller?
> Why are bank credit card sales similar to cash sales for a business?
> When a firm makes a sale involving a credit card issued by a credit card company, does the firm have an account receivable with the cardholder or with the credit card company?
> What document does a business submit to a credit card company to collect amounts owed for purchases by customers using a credit card issued by a credit card company?
> Gloria’s Fabrics is a large fabric provider to the general public. The accounting office has three employees: accounts receivable clerk, accounts payable clerk, and full charge bookkeeper. The accounts receivable clerk creates the sales invoices and reco
> How do retail and wholesale businesses differ?
> What accounts appear on a postclosing trial balance?
> How is the Income Summary account used in the closing procedure?
> What is the accounting cycle?
> Why does the accountant record closing entries at the end of a period?
> Programs Plus is a retail firm that sells computer programs for home and business use. Programs Plus operates in a state with no sales tax. On December 31, 20X1, its general ledger contained the accounts and balances shown below: The following accounts h
> Review the following excerpt from the 2018 consolidated statement of income for Southwest Airlines Co. Answer the questions that follow. Analyze: 1. Although the format for the heading of an income statement can vary from company to company, the heading
> The unadjusted trial balance of Ben’s Jewelers on December 31, 20X1, the end of its fiscal year, appears below. INSTRUCTIONS 1. Copy the unadjusted trial balance onto a worksheet and complete the worksheet using the following informatio
> The Valley Voice is a local newspaper that is published Monday through Friday. It sells 90,000 copies daily. The paper is currently in a profit squeeze, and the publisher, Tom Turkey, is looking for ways to reduce expenses. A review of current distributi
> In each of the following independent situations, decide whether the business organization should treat the person being paid as an employee and should withhold social security, Medicare, and employee income taxes from the payment made. 1. George Jacobs o
> Several years ago, Kat Cortz opened Ocho Tacos, a restaurant specializing in homemade tacos. The restaurant was so successful that the company expanded, and now operates eight restaurants in the local area. Cortez tells you that when she first started, s
> Delta Company pays salaries and wages on the last day of each month. Payments made on December 31, 20X1, for amounts incurred during December are shown below. Cumulative amounts paid prior to the December 31 payroll for the persons named are also shown.
> Mike Ryan is the owner of Ryan Contractors, a successful small construction company. He spends most of his time out of the office supervising work at various construction sites, leaving the operation of the office to the company’s offic
> John Saldanha is the owner and manager of The Car Spa. The Car Spa provides various car wash and car detailing services. The Car Spa also sells snacks and gift items in its waiting area. The Car Spa has one cash register, where all payments from customer
> Celeste Renard, owner of Sensual Linens Shop, was preparing checks for payment of the current month’s purchase invoices when she realized that there were two invoices from Passionate Linens Company, each for the purchase of 100 red, heart-imprinted king-
> Bill Evans began Evans Distributors, a sporting goods distribution company, in January 20X1 and engaged in the transactions below. Assume Evans Distributors and its customers take advantage of all cash discounts. INSTRUCTIONS Record the transactions in a
> Benjamin Ocampo is the owner of In Style Housewares, a housewares store that sells a wide variety of items for the kitchen, bathroom, and home. In Style Housewares offers a company credit card to its customers. The company has experienced an increase in
> A good system of internal control requires business entities to have well-documented (written) policies and procedures on accounts receivables. These policies and procedures should cover segregation of duties of staff, credit and collection policies, and
> Sports Junction began operations March 1, 20X1. The firm sells its merchandise for cash; on open account; to customers using bank credit cards, such as MasterCard and Visa; and to customers using American Express. Merchandise sales are subject to an 8 pe
> Kimberly Ashley, the bookkeeper for Interiors Designs, has just finished posting the closing entries for the year to the ledger. She is concerned about the following balances: Ashley knows that these amounts should agree and asks for your assistance in r
> Assume you are the accountant for Catalina Industries. John Catalina, the owner of the company, is in a hurry to receive the financial statements for the year ended December 31, 20X1, and asks you how soon they will be ready. You tell him you have just c
> On June 1, 20X1, Jenna Davis opened the Leadership Coaching Agency. She plans to use the chart of accounts given below. INSTRUCTIONS 1. Journalize the transactions. Be sure to number the journal pages and write the year at the top of the Date column. Inc
> Brenda Jo Smith is an architect who operates her own business. The accounts and transactions for the business follow. INSTRUCTIONS (1) Analyze the transactions for January 20X1. Record each in the appropriate T accounts. Identify each entry in the T acco
> At the beginning of the summer, Humphrey Nelson was looking for a way to earn money to pay for his college tuition in the fall. He decided to start a lawn service business in his neighborhood. To get the business started, Humphrey used $6,000 from his sa
> The equation below shows the transactions of Kathryn Proctor, Attorney and Counselor at Law, during August. This law firm is owned by Kathryn Proctor. INSTRUCTIONS Analyze each transaction carefully. Prepare an income statement and a statement of owner&a
> Rayshanti Williamson is opening a tax preparation service on December 1, which will be called Williamson’s Tax Service. Williamson plans to open the business by depositing $50,000 cash into a business checking account. The following assets will also be o
> The following account balances are for Ping Chung, Certified Public Accountant, as of April 30, 20X1. INSTRUCTIONS Using the accounting equation form, determine the balance for Ping Chung, Capital, April 1, 20X1. Prepare an income statement and a stateme
> 1. After examining financial data for a monthly period, the owner of a small business expressed surprise that the firm’s cash balance had decreased during the month even though there was substantial net income. Do you think this owner is right to expect
> Obtain all data that is necessary from the worksheet prepared for Whatnots in Problem 12.5B at the end of Chapter 12. Then follow the instructions to complete this problem. INSTRUCTIONS 1. Record adjusting entries in the general journal as of December 31
> Obtain all data necessary from the worksheet prepared for Gamer’s Paradise in Problem 12.6B at the end of Chapter 12. Then follow the instructions to complete this problem. INSTRUCTIONS 1. Prepare a classified income statement for the year ended December
> Hog Wild is a retail firm that sells motorcycles, parts, and accessories. The adjusted trial balance data given below is from the firm’s worksheet for the year ended December 31, 20X1. INSTRUCTIONS 1. Prepare a classified income stateme
> ComputerGeeks.com is a retail store that sells computers, laptops, supplies, and other electronic devices. The adjusted trial balance data given below is from the firm’s worksheet for the year ended December 31, 20X1. INSTRUCTIONS 1. Pr
> Gamer’s Paradise is a retail store that sells computer games, owned by Matt Huffman. On December 31, 20X1, the firm’s general ledger contained the accounts and balances below. All account balances are normal. INSTRUCTI
> Whatnots is a retail seller of cards, novelty items, and business products. On December 31, 20X1, the firm’s general ledger contained the following accounts and balances. INSTRUCTIONS 1. Prepare the Trial Balance section of a 10-column
