Ricci’s Pizza operates strictly on a carryout basis. Customers pick up their orders at a counter where a clerk exchanges the pizza for cash. While at the counter, the customer can see other employees making the pizzas and the large ovens in which the pizzas are baked. Instructions Identify the six principles of internal control and give an example of each principle that you might observe when picking up your pizza. (Note: It may not be possible to observe all the principles.)
> Condensed balance sheets for Phillips Company and Solina Company on January 1, 2013, are as follows: On January 1, 2013, the stockholders of Phillips and Solina agreed to a consolidation. Because FASB requires that one party be recognized as the acquir
> A 90% interest in Saxton Corporation was purchased by Palm Incorporated on January 2, 2014. The capital stock balance of Saxton Corporation was $3,000,000 on this date, and the balance in retained earnings was $1,000,000. The cost of the investment to Pa
> Pascal Corporation purchased 90% of the stock of Salzer Company for $2,070,000 on January 1, 2015. On this date, the fair value of the assets and liabilities of Salzer Company was equal to their book value except for the inventory and equipment accounts.
> A 90% interest in Saxton Corporation was purchased by Palm Incorporated on January 2, 2014. The capital stock balance of Saxton Corporation was $3,000,000 on this date, and the balance in retained earnings was $1,000,000. The cost of the investment to Pa
> On January 1, 2013, Piper Company acquired an 80% interest in Sand Company for $2,276,000. At that time the capital stock and retained earnings of Sand Company were $1,800,000 and $700,000, respectively. Differences between the fair value and the book va
> On January 2, 2013, Page Corporation acquired a 90% interest in Salcedo Company for $3,500,000. At that time Salcedo Company had capital stock of $2,250,000 and retained earnings of $1,250,000. The book values of Salcedo Company’s assets and liabilities
> On January 1, 2013, Pam Company purchased an 85% interest in Shaw Company for $540,000. On this date, Shaw Company had common stock of $400,000 and retained earnings of $140,000. An examination of Shaw Company’s assets and liabilities r
> On October 1, 2015, Para Company purchased 90% of the outstanding common stock of Star Company for $210,000. Additional data concerning Star Company for 2015 follows: Common stock …………………………………………….$70,000 Other contributed capital……………………………….. 30,000
> (Note that this is the same problem as Problem 4-7, but assuming the use of the partial equity method.) Price Company purchased 90% of the outstanding common stock of Score Company on January 1, 2011, for $450,000. At that time, Score Company had stockho
> On May 1, 2015, Peters Company purchased 80% of the common stock of Smith Company for $50,000. Additional data concerning these two companies for the years 2015 and 2016 are: Any difference between book value and the value implied by the purchase price
> Continue the situation in Exercise 4-6 and assume that during 2015 Sales Company earned $190,000 and declared and paid a $50,000 dividend. Required: A. Prepare the investment-related entries on Pert Company’s books for 2015. B. Prepare the workpaper elim
> On January 1, 2014, Pert Company purchased 85% of the outstanding common stock of Sales Company for $350,000. On that date, Sales Company’s stockholders’ equity consisted of common stock, $100,000; other contributed capital, $40,000; and retained earning
> On January 1, 2014, Plate Company purchased a 90% interest in the common stock of Set Company for $650,000, an amount $20,000 in excess of the book value of equity acquired. The excess relates to the understatement of Set Company’s land
> Poco Company purchased 85% of the outstanding common stock of Serena Company on December 31, 2014, for $310,000 cash. On that date, Serena Company’s stockholders’ equity consisted of the following: Common stock……………………………………………. $240,000 Other contribu
> At the beginning of 2009, Presidio Company purchased 95% of the common stock of Succo Company for $494,000. On that date, Succo Company’s stockholders’ equity consisted of the following: Common stock…………………………………………. $300,000 Other contributed capital
> Park Company purchased 90% of the stock of Salt Company on January 1, 2014, for $465,000, an amount equal to $15,000 in excess of the book value of equity acquired. This excess payment relates to an undervaluation of Salt Company’s land. On the date of p
> On January 1, 2014, Plenty Company purchased a 70% interest in the common stock of Set Company for $650,000, an amount $20,000 in excess of the book value of equity acquired. The excess relates to the understatement of Set Company’s lan
> Badco Inc. purchased a 90% interest in Lazytoo Company for $600,000 cash on January 1, 2016. Any excess of implied over book value was attributed to depreciable assets with a 15-year remaining life (straight-line depreciation). To help pay for the acquis
> The following accounts appeared in the separate financial statements at the end of 2014 for Pressing Inc. and its wholly-owned subsidiary, Stressing Inc. Stressing was acquired in 2009. Required: 1. How can you determine whether Pressing is using the c
> Poco Company purchased 80% of Solo Company’s common stock on January 1, 2012, for $250,000. On December 31, 2012, the companies prepared the following trial balances: Required: Prepare a consolidated statements workpaper on December
> Plantation Homes Company is considering the acquisition of Condominiums, Inc. early in 2015. To assess the amount, it might be willing to pay, Plantation Homes makes the following computations and assumptions. A. Condominiums, Inc. has identifiable asse
> This information relates to Rice Co. 1. On April 5, purchased merchandise from Jax Company for $28,000 on account. 2. On April 7, purchased equipment on account for $30,000. 3. On April 8, returned $3,600 of April 5 merchandise to Jax Company. 4. On Apri
> Barto Company provides this information for the month ended October 31, 2017: sales on credit $300,000, cash sales $150,000, sales discounts $5,000, and sales returns and allowances $19,000. Prepare the sales section of the income statement based on this
> Use a tabular summary to record the following transactions for Jarvis Co. (Omit recording cost of goods sold.) (a) On July 1, Jarvis Co. sold merchandise on account to Stacey Inc. for $23,000. (b) On July 8, Stacey Inc. returned merchandise worth $2,400
> The following information is available for Bonkers Company for the month of January: expected cash receipts $59,000, expected cash disbursements $67,000, and cash balance on January 1, $12,000. Management wishes to maintain a minimum cash balance of $9,0
> In the month of November, Fiesta Company Inc. wrote checks in the amount of $9,750. In December, checks in the amount of $11,762 were written. In November, $8,800 of these checks were presented to the bank for payment, and $10,889 in December. What is th
> At July 31, Planter Company has this bank information: cash balance per bank $7,291, outstanding checks $762, deposits in transit $1,350, and a bank service charge $40. Determine the adjusted cash balance per bank at July 31.
> The following comparative information is available for Rose Company for 2017. Instructions (a) Determine net income under each approach. Assume a 30% tax rate. (b) Determine net cash provided by operating activities under each approach. Assume that all
> Jeters Company reports the following for the month of June. Instructions (a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO, (2) LIFO, and (3) average-cost. (Round average unit cost to three decimal places.) (b) Whi
> On December 1, Premium Electronics has three DVD players left in stock. All are identical, all are priced to sell at $85. One of the three DVD players left in stock, with serial #1012, was purchased on June 1 at a cost of $52. Another, with serial #1045,
> Rusthe Inc. uses a periodic inventory system. Its records show the following for the month of May, in which 74 units were sold. Instructions Calculate the ending inventory at May 31 using the (a) FIFO, (b) LIFO, and (c) averagecost methods. (For ave
> Mather sells a snowboard, EZslide, that is popular with snowboard enthusiasts. Below is information relating to Mather’s purchases of EZslide snowboards during September. During the same month, 102 EZslide snowboards were sold. Mather u
> The following transactions are for Alonzo Company. 1. On December 3, Alonzo Company sold $500,000 of merchandise to Arte Co. on account. The cost of the merchandise sold was $330,000. 2. On December 8, Arte Co. returned $25,000 of merchandise purchased o
> Indicate how each business transaction affects the basic accounting equation. (a) Paid cash for janitorial services. (b) Purchased equipment for cash. (c) Issued common stock to investors in exchange for cash. (d) Paid an account payable in full.
> Rigley Company expects to have a cash balance of $46,000 on January 1, 2017. These are the relevant monthly budget data for the first two months of 2017. 1. Collections from customers: January $71,000 and February $146,000. 2. Payments to suppliers: Janu
> Lance, Art, and Wayne have joined together to open a law practice but are struggling to manage their cash flow. They haven’t yet built up sufficient clientele and revenues to support their legal practice’s ongoing costs. Initial costs, such as advertisin
> A new accountant at Wyne Inc. is trying to identify which of the following amounts should be reported as the current asset “Cash and cash equivalents” in the year-end balance sheet, as of April 30, 2017. 1. $60 of currency and coin in a locked box used f
> The Public Company Accounting Oversight Board (PCAOB) was created as a result of the Sarbanes-Oxley Act. It has oversight and enforcement responsibilities over accounting fi rms in the United States. Address: http://www.pcaobus.org Instructions Answer t
> Perth Inc.’s bank statement from Main Street Bank at August 31, 2017, gives the following information. A summary of the Cash account for August shows the following: balance, August 1, $18,700; receipts $74,000; disbursements $73,570;
> The cash records of Upton Company show the following. For July: 1. The June 30 bank reconciliation indicated that deposits in transit total $580. During July, the Cash account shows deposits of $16,900, but the bank statement indicates that only $15,600
> This information relates to the Cash account for Howard Company. Balance September 1—$16,500; Cash deposited—$64,000 Balance September 30—$17,600; Checks written—$62,800 The Septembe
> The following information pertains to Lance Company. 1. Cash balance per bank, July 31, $7,328. 2. July bank service charge not recorded by the depositor $38. 3. Cash balance per books, July 31, $7,364. 4. Deposits in transit, July 31, $2,700. 5. $2,016
> At April 30, the bank reconciliation of Back 40 Company shows three outstanding checks: No. 254 $650, No. 255 $700, and No. 257 $410. The May bank statement and the May cash payments record are given here. Instructions Using step 2 in the reconciliatio
> Rachel Sells is unable to reconcile the bank balance at January 31. Rachel’s reconciliation is shown as follows. Instructions (a) What is the proper adjusted cash balance per bank? (b) What is the proper adjusted cash balance per book
> At Martinez Company, checks are not prenumbered because both the purchasing agent and the treasurer are authorized to issue checks. Each signer has access to unissued checks kept in an unlocked file cabinet. The purchasing agent pays all bills pertaining
> What are the essential features of the allowance method of accounting for bad debts?
> The following control procedures are used in Bunny’s Boutique Shoppe for cash disbursements. 1. Each week, 100 company checks are left in an unmarked envelope on a shelf behind the cash register. 2. The store manager personally approves all payments befo
> The following control procedures are used in Keaton Company for over-the-counter cash receipts. 1. Each store manager is responsible for interviewing applicants for cashier jobs. They are hired if they seem honest and trustworthy. 2. All over-the-counter
> The Financial Accounting Standards Board (FASB) is a private organization established to improve accounting standards and financial reporting. The FASB conducts extensive research before issuing a “Statement of Financial Accounting Standards,” which repr
> Bank employees use a system known as the “maker-checker” system. An employee will record a transaction, and then a supervisor will verify and approve it. These days, as all of a bank’s accounts are computerized, the employee first enters a batch of trans
> Greenock Limited has the following information available for accruals for the year ended December 31, 2017. The company adjusts its accounts annually. 1. The December utility bill for $425 was unrecorded on December 31. Greenock paid the bill on January
> Action Quest Games Inc. adjusts its accounts annually. The following information is available for the year ended December 31, 2017. 1. Purchased a 1-year insurance policy on June 1 for $1,800 cash. 2. Paid $6,500 on August 31 for 5 monthsâ€
> On December 31, 2017, Waters Company prepared an income statement and balance sheet, but failed to take into account three adjustments. The balance sheet showed total assets $150,000, total liabilities $70,000, and stockholders’ equity
> The following lists selected accounts and their adjusted balances for Ramon Company on January 31, 2017. Insurance Expense………………. $520 Prepaid Insurance…………………1,560 Salaries and Wages Expense ... 1,800 Salaries and Wages Payable …. 1,060 Service Revenue
> The income statement of Norski Co. for the month of July shows net income of $2,000 based on Service Revenue $5,500, Salaries and Wages Expense $2,100, Supplies Expense $900, and Utilities Expense $500. In reviewing the statement, you discover the follow
> A partial tabular summary for Armour Lake Lumber Supply on July 31, 2017, includes the accounts below before adjustments have been prepared. An analysis of the company’s accounts shows the following. 1. The investment in the notes rec
> Oscar Geer, a mid-level product manager for Theresa’s Shoes, thinks his company should switch from LIFO to FIFO. He says, “My bonus is based on net income. If we switch it will increase net income and increase my bonus. The company would be better off an
> The unadjusted tabular summary of transactions for Sierra Corp. is shown in Illustration 4-4 (page 115). Instead of the adjustments shown in the textbook at October 31, assume the following adjustment data. 1. Supplies on hand at October 31 total $500. 2
> The international accounting firm Ernst & Young performed a global survey on fraud. The results of that survey are summarized in a report titled “Driving Ethical Growth—New Markets, New Challenges” (Ernst & Young, 13th Global Fraud Survey). You can find
> Al Medina, D.D.S., opened an incorporated dental practice on January 1, 2017. During the first month of operations, the following transactions occurred. 1. Performed services for patients who had dental plan insurance. At January 31, $760 of such service
> A partial tabular summary for Howard Rental Agency on March 31 of the current year includes the accounts below before adjustments have been prepared. An analysis of the accounts shows the following. 1. The equipment depreciates $280 per month. 2. Half
> Wang Company accumulates the following adjustment data at December 31. (a) Services performed but unbilled total $600. (b) Store supplies of $160 are on hand. The supplies account shows a $1,900 balance. (c) Utility expenses of $275 are unpaid. (d) Servi
> BizCon, a consulting firm, has just completed its first year of operations. The company’s sales growth was explosive. To encourage clients to hire its services, BizCon offered 180-day financing—meaning its largest customers do not pay for nearly 6 months
> Franken Company, a ski tuning and repair shop, opened on November 1, 2016. The company carefully kept track of all its cash receipts and cash payments. The following information is available at the end of the ski season, April 30, 2017. The repair shop
> In its first year of operations, Gomes Company recognized $28,000 in service revenue, $6,000 of which was on account and still outstanding at year-end. The remaining $22,000 was received in cash from customers. The company incurred operating expenses of
> Your examination of the records of a company that follows the cash basis of accounting tells you that the company’s reported cash-basis earnings in 2017 are $33,640. If this firm had followed accrual-basis accounting practices, it would
> Here are some accountings reporting situations. (a) East Lake Company recognizes revenue at the end of the production cycle but before sale. The price of the product, as well as the amount that can be sold, is not certain. (b) Hilo Company is in its fift
> These accounting concepts were discussed in this and previous chapters. 1. Economic entity assumption. 6. Materiality. 2. Expense recognition principle. 7. Full disclosure principle. 3. Monetary unit assumption. 8. Going concern assumption. 4. Period
> (a) Describe cash equivalents and explain how they are reported. (b) How should restricted cash funds be reported on the balance sheet?
> The financial statements of Columbia Sportswear Company are presented in Appendix B. Financial statements of VF Corporation are presented in Appendix C. Instructions Answer the following questions for each company. (a) What is the balance in cash and ca
> The following independent situations require professional judgment for determining when to recognize revenue from the transactions. (a) Southwest Airlines sells you an advance-purchase airline ticket in September for your flight home in December. (b) Ult
> An analysis of transactions for Foley & Co. is presented in E3–8. Assume that August is the company’s first month of business. Instructions Prepare an income statement and a retained earnings statement for August and a balance sheet at August 31, 2017.
> An analysis of the transactions made by Foley & Co., a certified public accounting firm, for the month of August is shown below. Each change in revenues or expenses is explained. Instructions (a) Describe each transaction. (b) Determine how much s
> A tabular analysis of the transactions made during August 2017 by Wolfe Company during its first month of operations is shown below. Each change in revenues or expenses is explained. Instructions (a) Describe each transaction. (b) Determine how much st
> During 2017, its first year of operations as a delivery service, Persimmon Corp. entered into the following transactions. 1. Issued shares of common stock to investors in exchange for $100,000 in cash. 2. Borrowed $45,000 by issuing a note. 3. Purchased
> Brady Company, a computer services company, entered into these transactions during May 2017, its first month of operations. 1. Stockholders invested $40,000 in the business in exchange for common stock of the company. 2. Purchased computers for office us
> Selected transactions for Thyme Advertising Company, Inc. are listed here. 1. Issued common stock to investors in exchange for cash received from investors. 2. Paid monthly rent. 3. Received cash from customers when service was performed. 4. Billed custo
> Keystone Computer Timeshare Company entered into the following transactions during May 2017. 1. Purchased computers for $20,000 from Data Equipment on account. 2. Paid $3,000 cash for May rent on storage space. 3. Received $15,000 cash from customers for
> Lopez Co. had three major business transactions during 2017. (a) Reported at its fair value of $260,000 merchandise inventory with a cost of $208,000. (b) The president of Lopez Co., Victor Lopez, purchased a truck for personal use and increased the comp
> Presented below are assumptions and principles discussed in this chapter. 1. Full disclosure principle 4. Periodicity assumption 2. Going concern assumption 5. Historical cost principle 3. Monetary unit assumption 6. Economic entity assumption Instructi
> “An adjustment may affect more than one balance sheet or income statement account.” Do you agree? Why or why not?
> Trisha Massey asks for your help concerning an NSF check. Explain to Trisha (a) what an NSF check is, (b) how it is treated in a bank reconciliation, and (c) whether it will require an adjustment on the company’s books.
> Suppose the following data were taken from the 2017 and 2016 financial statements of American Eagle Outfitters. (All numbers, including share data, are in thousands.) Instructions Perform each of the following. (a) Calculate the current ratio for each
> The chief financial officer (CFO) of Myeneke Corporation requested that the accounting department prepare a preliminary balance sheet on December 30, 2017, so that the CFO could get an idea of how the company stood. He knows that certain debt agreements
> Nordstrom, Inc. operates department stores in numerous states. Selected financial statement data (in millions of dollars) for a recent year follow. Instructions (a) Compute working capital and the current ratio at the beginning of the year and at the e
> These financial statement items are for Fairview Corporation at year-end, July 31, 2017. Salaries and wages payable……………………...$ 2,080 Salaries and wages expense………………………57,500 Supplies expense………………………………………15,600 Equipment………………………………………………. 18,500 Acc
> Suppose the following information is available for Callaway Golf Company for the years 2017 and 2016. (Dollars are in thousands, except share information.) There were 73,139,000 shares outstanding at the end of 2015. Instructions (a) What was the comp
> Suppose the following items were taken from the 2017 financial statements of Texas Instruments, Inc. (All dollars are in millions.) Common stock $2,826 Accumulated depreciation— Prepaid rent 164 equipment $3,547 Equipment 6,705 Accounts
> These items are taken from the financial statements of Longhorn Co. at December 31, 2017. Buildings……………………………………………..$105,800 Accounts receivable…………………………………. 12,600 Prepaid insurance………………………………………3,200 Cash………………………………………………………..11,840 Equipment…………
> Suppose the following information (in thousands of dollars) is available for H. J. Heinz Company—famous for ketchup and other fine food products—at April 30, 2017. Prepaid insurance $ 125,765 Buildings $4,033,369 Land 76,193 Cash 373,145 Goo
> Suppose the following items were taken from the December 31, 2017, assets section of the Boeing Company balance sheet. (All dollars are in millions.) Inventory $16,933 Patents $12,528 Notes receivable—due after Buildings 21,579
> The financial statements of Apple Inc. are presented in Appendix A. Instructions for accessing and using the company’s complete annual report, including the notes to its financial statements, are also provided in Appendix A. Instructions Using the finan
> The major balance sheet classifications are listed in E2-1. Reference Data E2-1: The following are the major balance sheet classifications. Current assets (CA) Current liabilities (CL) Long-term investments (LTI) Long-term liabilities (LTL) Proper
> Mamosa Corporation has been using the FIFO cost fl ow method during a prolonged period of infl ation. During the same time period, Mamosa has been paying out all of its net income as dividends. What adverse effects may result from this policy?
> The following are the major balance sheet classifications. Current assets (CA) Current liabilities (CL) Long-term investments (LTI) Long-term liabilities (LTL) Property, plant, and equipment (PPE) Stockholders’ equity (SE) Intangible assets (IA)
> The annual report provides financial information in a variety of formats, including the following. Management discussion and analysis (MD&A) Financial statements Notes to the financial statements Auditor’s opinion Instructions For each of the follow
> The summaries of data from the balance sheet, income statement, and retained earnings statement for two corporations, Walco Corporation and Gunther Enterprises, are presented as follows for 2017. Instructions Determine the missing amounts. Assume all c
> Suppose the following items were taken from the balance sheet of Nike, Inc. (All dollars are in millions.) 1. Cash $2,291.1 7. Inventory $2,357.0 2. Accounts receivable 2,883.9 8. Income taxes payable 86.3 3. Common stock 2,874.2 9. Equipment
> Wayne Holtz is the bookkeeper for Beeson Company. Wayne has been trying to get the following balance sheet of Beeson Company to balance. It finally balanced, but now he’s not sure it is correct. Instructions Prepare a correct balance
> Suppose the following data are derived from the 2017 financial statements of Southwest Airlines. (All dollars are in millions.) Southwest has a December 31 year-end. Cash balance, January 1, 2017…………………………. $1,390 Cash paid for repayment of debt………………………
