Question: Suppose Peter’s Hardware sells merchandise on

> GameStop issued the following press release when the company’s stock was selling for $27 per share: GRAPEVINE, Texas—(BUSINESS WIRE)—Feb. 12, 2007—GameStop Corp. (NYSE: GME), the world’s largest video game and entertainment software retailer, today annou

> On July 1, 2011, Davidson Corporation had the following capital structure: Common stock (par $3)................... $600,000 Capital in excess of par ......................900,000 Retained earnings.............................. 700,000 Treasury stock ..

> Two billion times a day, Proctor & Gamble (P&G) brands touch the lives of people around the world. The company has one of the largest and strongest portfolios of trusted, quality brands, including Pampers, Tide, Bounty, Pringles, Folgers, Charmin, Downy,

> Refer to the financial statements of American Eagle Outfitters given in Appendix B at the end of this book. Required: 1. How much interest was paid in cash during the most recent reporting year? 2. Explain why the company does not report bonds payable o

> At the beginning of the year, the stockholders’ equity section of the balance sheet of Solutions Corporation reflected the following: Common stock (par $12; authorized 65,000 shares, outstanding 30,000 shares) ...........................................

> Duke Energy is a utility company that provides gas and electric service in North Carolina, South Carolina, Ohio, Kentucky, and Indiana. The company’s dividend yield is 6.6 percent. Starbucks, a well known retailer of coffee products, does not pay dividen

> A recent annual report for Sears, Roebuck and Co. disclosed that the company paid preferred dividends in the amount of $119.9 million. It declared and paid dividends on common stock in the amount of $2 per share. During the year, Sears had 1,000,000,000

> Service Corporation has the following capital stock outstanding at the end of 2011: Preferred stock, 6 percent, par $15, outstanding shares, 8,000 Common stock, par $8, outstanding shares, 30,000 On October 1, 2011, the board of directors declared divi

> The records of Hollywood Company reflected the following balances in the stockholders’ equity accounts at December 31, 2010: Common stock, par $12 per share, 30,000 shares outstanding Preferred stock, 10 percent, par $10 per share, 5,000 shares outstand

> Peters and Associates is a small manufacturer of electronic connections for local area networks. Consider three independent situations. Case 1: Peters increases its cash dividends by 50 percent, but no other changes occur in the company’s operations. Cas

> During 2011 the following selected transactions affecting stockholders’ equity occurred for TARP Corporation: a. Feb. 1 Purchased in the open market 160 shares of the company’s own common stock at $20 cash per share. b. Jul. 15 Sold 80 of the shares pur

> During 2011 the following selected transactions affecting stockholders’ equity occurred for OrlandoCorporation: a.Apr. 1 Purchased in the market 200 shares of the company’s own common stock at $20 per share. b.Jun. 14 Sold 40 shares of treasury stock fo

> The following account balances were selected from the records of TEAC Corporation at December 31, 2011, after all adjusting entries were completed: Common stock (par $20; authorized 100,000 shares, issued 34,000 shares, of which 2,000 shares are held as

> The business section of The New York Times recently contained the following article: Freeport-McMoRan Copper & Gold Inc., one of the world’s largest copper producers, said yesterday that it would repurchase up to five million shares of its common stock

> JCPenney Company was one of the first companies to issue zero coupon bonds. It issued bonds with a face (maturity) value of $400 million due eight years after issuance. When the bonds were sold to the public, similar bonds paid 15 percent effective inter

> On January 1, 2011, Trucks R Us Corporation issued $2,000,000 in bonds that mature in five years. The bonds have a stated interest rate of 10 percent and pay interest on June 30 and December 31 each year. When the bonds were sold, the market rate of inte

> Which of the following prevents a company from switching its inventory costing method to a different method each year? a. Consistency principle b. Materiality concept c. Matching principle d. Disclosure principle

> What kind of account is accumulated depreciation? How is it reported on the financial statements?

> What is the primary way in which corporations differ from proprietorships and partnerships? What are some of the factors that might affect a person’s decision about the formof organization that would be best in a given situation?

> In order to purchase equipment and supplies, Sinclair Bike Shop, Inc., borrowed $28,000 on August 1 by signing a note payable to Community One Bank. Interest expense for Sinclair Bike Shop, Inc., is $140 per month. Journalize an adjusting entry to accrue

> The adjusted trial balance shows a. assets, liabilities, and common stock only. b. revenues and expenses only. c. amounts that may be out of balance. d. amounts that are ready for the financial statements.

> What are some similarities and differences between assets and expenses?

> In what order should the financial statements be prepared? Why?

> Suppose you work summers mowing yards. Most of your customers pay you immediately after their lawn is mowed, but a few customers ask you to bill them at the end of the month. It is now July 31, and you have collected $750 from cash-paying customers for s

> For each of the following accounts, indicate if the account’s normal balance is a debitbalance (DR) or a credit balance (CR). DR Cash 1. Rent Expense 2. Accounts Payable 3. Service Revenue 4. Office Furniture 5. Common Stock 6. Land 7. Dividends

> Which of the following is not a closing entry?

> Haskins, Inc., began operations on January 1, 2016. The seven transactions recorded during January by the company accountant are shown in the following T-accounts:

> Christopher Foley, an attorney, has a law corporation, Christopher Foley, Attorney, Inc.,that began the year with total assets of $145,000, total liabilities of $70,000, and stockholders’ equity of $75,000. During the year, Christopher Foley, Attorney, I

> True or false: If the trial balance is in balance, the financial statements will be accurate. Why or why not?

> Match each of the following items with its location in the expanded accounting equation. Use the most detailed category appropriate: ______ 1. Utilities Expense ______ 2. Accounts Receivable ______ 3. Common Stock ______ 4. Office Supplies ______ 5.

> The balance sheet reports a. financial position on a specific date. b. results of operations on a specific date. c. results of operations for a specific period. d. financial position for a specific period

> At December 31, 2014, Island Equipment understated ending inventory by $2,500. How does this error affect cost of goods sold and net income for 2014? a. Understates costs of goods sold and overstates net income b. Leaves both cost of goods sold and net i

> Under which of the inventory methods, periodic or perpetual, would a company be better equipped to detect inventory shrinkage? Why

> Suppose Paul’s Hardware sells merchandise on account, terms 1/10, n/45, for $920 (cost of the inventory is $550) on March 17, 2016. Paul’s Hardware later received $290 of goods (cost, $175) as sales returns on March 21, 2016. The customer paid the balanc

> Which journal entry records obtaining a bank loan of $10,000?

> The income statement format that shows important subtotals is referred to as a. a subtotaled income statement. b. a single-step income statement. c. a multi-step income statement. d. a classified income statement.

> What is the difference between a single-step and multi-step income statement? For what type of business is a multi-step income statement most appropriate?

> How is the accounting equation affected by each of these transactions? a. Owners contribute cash to start the business in exchange for common stock. b. The company borrows money from the bank. c. The company provides services for a client who promises to

> Journalize the following adjusting entries at August 31: 1. Services provided but not recorded, $2,700 2. Salaries earned by employees but not recorded, $3,200 3. Accrued interest on a note payable, $260

> What do closing entries accomplish? a. Bring the Retained Earnings account to its correct ending balance b. Transfer revenues, expenses, and dividends to retained earnings c. Zero out the revenues, expenses, and dividends to prepare them for the next acc

> Describe the type of transaction that gives rise to a deferred revenue journal entry during the year. Why might deferred revenues require adjustment?

> Complete the following table. For each account listed, identify the type of account, how the account is increased (debit or credit), and how the account is decreased (debit or credit). Use the most detailed account type appropriate.

> The Blue Ox Restaurant recorded a cash collection on account by debiting Cash and crediting Accounts Payable. What will the trial balance show for this error? a. Too much for liabilities b. Too much for assets c. The trial balance will not balance. d. Bo

> Distinguish between journalizing and posting.

> Sanchez Towing Service, Inc., earns service revenue by towing vehicles for AAA. Sanchez Towing Service’s main expenses are the salaries paid to its employees. Account for thefollowing transactions in the expanded accounting equation: a. Sanchez Towing Se

> You learned in this chapter that Cash is increased with a debit. When you deposit your paycheck in your account, however, the teller might say that he or she is going to credit your account. Why?

> Consider the overall effects of the transactions in questions 5, 6, and 7 on Wave Rider.What is Wave Rider’s net income or net loss? a. Net loss of $4,000 b. Net income of $46,000 c. Net income of $14,000 d. It cannot be determined from the data given.

> Which of the following is most closely linked to the accounting principle of conservatism? a. Consistency principle b. Disclosure principle c. Lower-of-cost-or-market rule d. Materiality concept

> Describe some business and economic conditions that might make the lower-of-cost-or market rule more likely to result in a write-down of inventory.

> An asset is classified as current if it a. will last longer than one year. b. will become cash, be sold, or be used up within 12 months. c. was purchased within the last six months. d. was purchased with cash

> What does the term “free on board” mean? Why is this an important term to understand if you are involved in making decisions about the purchasing of inventory or the setting of prices for your products?

> What is the fundamental accounting equation? Define each of the components of thisequation.

> Backcountry, Inc., an outdoor magazine, collected $2,700 on June 1 for one-year subscriptions from subscribers in advance. Journalize and post the adjusting entry on December 31 to record the revenue that Backcountry, Inc., has earned, assuming no other

> Which of the following accounts is not closed? a. Salaries Expense b. Dividends c. Accumulated Depreciation, Equipment d. Service Revenue

> What type of account (asset, liability, revenue, or expense) would Joe’s Towing Company debit when it pays (credits) cash for each of the following transactions? a. Pays $100 to fill tow truck with gas b. Pays $1,000 to have a gas company deliver gas for

> Boehms, Inc., has cash of $36,000, supplies costing $1,500, and stockholders’ equityof $28,000. Determine the liabilities of the business. Write the accounting equation forBoehms, Inc.

> Calculate each account balance.

> RV Wholesale, Inc., paid $1,200 for supplies and purchased additional supplies on accountor $1,000. RV Wholesale, Inc., also paid $200 of the accounts payable. What is the balancen the Supplies account? a. $1,200 b. $1,000 c. $2,400 d. $2,200

> What would be the implications of a credit balance in the Cash account?

> Qwick Care Clinic, Inc., started a business when Dr. Hamm purchased $15,000 of commonstock in the business for cash. Before starting operations, Qwick Care Clinic, Inc., borrowed$18,000 cash by signing a note payable to 1st National Bank. Account for the

> Assume that Wave Rider paid expenses totaling $32,000. How does this transaction affectWave Rider’s accounting equation? a. Increases assets and decreases liabilities b. Decreases both assets and stockholders’ equity c. Increases both assets and stockhol

> Which of the following prevents a company from switching its inventory costing methodto a different method each year? a. Consistency principle b. Materiality concept c. Matching principle d. Disclosure principle

> Let’s say that two companies, identical in every way except that one used FIFO and one used LIFO, went into a bank on the same day to get a loan to deal with the rising cost of acquiring inventory. Despite the fact that they both engaged in the same tran

> Journalize the following transactions for the Pool Palace. Explanations are not required. a. Sold $81,000 of merchandise to Regal Spas, Inc., on account, terms 4/15, n/60; the merchandise cost the Pool Palace $44,500 b. Received payment for the goods fr

> If Holiboards, Inc., returned $2,750 of snowboards to a supplier, which of the following entries would be used to record the transaction?

> What is a credit memorandum? Give an example of the type of transaction in which it would be used.

> Assume that Wave Rider sold skateboards to another department store for $18,000 onaccount. Which parts of the accounting equation does a sale on account affect? a. Accounts Payable and Cash b. Accounts Receivable and Retained Earnings c. Accounts Receiva

> In a period of rising inventory costs, which cost-flow assumption would produce the highest net income? Why?

> Journalize the following transactions for Jammin’ Joe’s music store. a. Purchased $4,200 of merchandise on account, terms 3/15, n/30, FOB shipping point b. Paid $140 to the freight company for the delivery of the merchandise purchased c. Paid for the in

> Suppose Perfect Picture Photography Supply’s Inventory account showed a balance of $44,700. A physical count showed $43,300 of goods on hand. To adjust the inventory account, Perfect Picture Photography Supply, Inc., would make which of the following ent

> What kind of account is Sales Returns and Allowances? Where would it appear on thefinancial statements?

> The April 30, 2016, adjusted trial balance of The Grind Finale, Inc., is shown next.
Requirements 1. Prepare the April closing entries for The Grind Finale, Inc. 2. Calculate the ending balance in Retained Earnings. 3. Prepare a post-closing trial ba

> The adjusted trial balance for Bayside Realty, Inc., at November 30, 2016, follows:
Requirements 1. Prepare Bayside Realty’s income statement and statement of retained earnings for the year ended November 30, 2016, and year-end balance sheet. List ex

> Fischer Remodeling, Inc., completed the following selected transactions and prepared these adjusting entries during August:
Requirements 1. State whether the transaction would increase revenues, decrease revenues, increase expenses, decrease expenses

> The trial balance of A-1 Web Design, Inc., at June 30, 2016, and the data needed for the month-end adjustments follow:
a. Insurance coverage still remaining at June 30, $575 b. Supplies used during the month, $875 c. Depreciation for the month, $1,65

> What are some of the uses of financial statements?

> Julie’s Flower Shop’s Office Supplies balance on October 1 is $1,200, and the balance in Office Supplies Expense is $0. On October 31, $480 of supplies are on hand. Journalize and post the adjusting entry on October 31 for the supplies used. Compute the

> Unearned Revenue is always a. revenue. b. stockholders’ equity. c. a liability. d. an asset.

> Why do companies prepare adjusting entries?

> Demonstrate your knowledge of accounting terminology by filling in the blanks toreview some key definitions. Dillon Baker is describing the accounting process for a friend who is a psychology major. Dillon states, “The basic summary device in accounting

> Posting a $500 purchase of supplies on account appears as which of the following? a.
b.
c.
d.

> What is a “normal balance”? What are normal balances for the following accounts? a. Accounts Receivable b. Prepaid Expenses c. Notes Payable d. Retained Earnings e. Salaries Expense

> Ellen Beach owns Ellen’s Lawncare Service. The business has cash of $13,000 andequipment that costs $35,000. Debts of the business include accounts payable of$9,000 and a $5,000 note payable. Determine the amount of stockholders’ equity Ellenhas in the b

> Assume that Wave Rider sold skateboards to a department store for $28,000 cash. Howwould this transaction affect Wave Rider’s accounting equation? a. Increase both assets and stockholders’ equity by $28,000 b. Will not affect the accounting equation beca

> Assume BAL, Inc., began March with 95 units of inventory that cost a total of $1,710. During March, BAL, Inc., purchased and sold goods as follows:
BAL, Inc., uses perpetual inventory. Under the average cost inventory method, how much is BAL’s cost o

> If a company had two units that cost $1 each in its beginning inventory and purchased two more units for $2 each, what would be the gross profit reported on the income statement under each of the following assumptions if three units were sold for $3 each

> Regal Spas, Inc., purchased $11,800 worth of inventory from the Pool Palace on account, terms of 2/10, n/30. Some of the goods are damaged in shipment, so Regal Spas, Inc., returns $2,300 of the merchandise to the Pool Palace. Journalize the following tr

> Suppose Riley Electronics, Inc., had sales of $280,000 and sales returns of $26,000. Cost of goods sold was $112,000. How much gross profit did Riley Electronics, Inc., report? a. $168,000 b. $142,000 c. $194,000 d. $254,000

> How many accounts are involved in recording the sale of merchandise on credit?

> Assume the unadjusted and adjusted trial balances for Affordable Pet Dental, Inc., at September 30, 2016, show the following data:
Requirement 1. Journalize the adjusting entries that account for the differences between the two trial balances.

> Use the data for Lake City Industries, Inc., from P4-48B. Information P4-48B: The accounts for the year ended October 31, 2016, for Lake City Industries, Inc., are listed next:
Requirements 1. Calculate the earnings per share for Lake City Industries

> Journalize the adjusting entries needed at December 31, the end of the current accounting year, for each of the following independent cases affecting Canyon Motorsports, Inc. No other adjusting entries have been made for the year. a. Prior to making the

> The accounts for the year ended October 31, 2016, for Lake City Industries, Inc., are listed next:
Requirements 1. Prepare Lake City Industries, Inc.’s multi-step income statement. 2. Prepare Lake City Industries, Inc.’s statement of retained earning

> The September 30, 2016, adjusted trial balance of Java Hut, Inc., is shown next.
Requirements 1. Prepare the September closing entries for Java Hut, Inc. 2. Calculate the ending balance in Retained Earnings. 3. Prepare a post-closing trial balance

> The adjusted trial balance Checker Flag Auto, Inc., as of January 31, 2016, is presented next:
Requirements 1. Prepare the multi-step income statement for January for Checker Flag Auto, Inc. 2. Calculate the gross profits percentage for January for C

> The adjusted trial balance of Valley Realty, Inc., at December 31, 2016, follows:
Requirements 1. Prepare Valley Realty’s income statement and statement of retained earnings for the year ending December 31, 2016, and year-end balance sheet. List expe

> The following transactions for Westcoast Tire, Co., occurred during July:
Requirements 1. Journalize the transactions on the books of Westcoast Tire, Co. 2. What was Westcoast Tire’s gross proft for the month of July?

> Warren Enterprises, Inc., completed the following selected transactions and prepared these adjusting entries during March:
Requirements 1. State whether the transaction would increase revenues, decrease revenues, increase expenses, decrease expenses,

> The following transactions occurred between Sasaki’s Fine Furnishings and C & C Furniture Warehouse during May of the current year:
Requirements 1. Journalize these transactions on the books of Sasaki’s Fine Furnishings. 2. Journalize these transacti

> The trial balance of Designs by Jill, Inc., at September 30, 2016, and the data needed for the month-end adjustments follow:
a. Insurance coverage still remaining at September 30, $1,950 b. Supplies used during the month, $900 c. Depreciation for the