Question: Taylor Company recently purchased a piece of

> LaGarde Company has a machine that it purchased for $125,000 on January 1. Annual depreciation on the machine is estimated to be $14,500. Required: 1. Prepare the adjusting entry needed at the end of the year. 2. What is the book value of themachine rep

> Pain-Free Dental Group Inc. purchased dental supplies of $18,200 during the year. At the end of the year, a physical count of supplies showed $4,125 of supplies on hand. Required: 1. Prepare the adjusting entry needed at the end of the year. 2. What is

> Best Company had the following items that require adjustment at year end. a. Cash for equipment rental in the amount of $3,800 was paid in advance. The $3,800 was debited to prepaid rent when paid. At year end, $2,950 of the prepaid rent had expired. b.

> Olney Cleaning Company had the following items that require adjustment at year end. a. For one cleaning contract, $14,520 cash was received in advance. The cash was credited to Unearned Service Revenue upon receipt. At year end, $1,210 of the service rev

> Manning Manufacturing Inc. had the following items that require adjustment at year end. a. Salaries of $5,320 that were earned in December are unrecorded and unpaid. b. Used $1,970 of utilities in December, which are unrecorded and unpaid. c. Interest of

> Powers Rental Service had the following items that require adjustment at year end. a. Earned $9,880 of revenue from the rental of equipment for which the customer had not yet paid. b. Interest of $650 on a note receivable has been earned but not yet rece

> Listed below are the forms of business organization and several related advantages or disadvantages. Form of Business Advantage or Disadvantage Organization 1. Sole proprietorship a. Most complex to organize 2. Partnership b. Owner(s) have p

> Singleton Inc. uses the accrual basis of accounting and had the following transactions during the year. a. Merchandise was sold to customers on credit. b. Purchased equipment to be used in the operation of its business. c. A 2-year insurance contract was

> Speedy Delivery Company provides next-day delivery across the southeastern United States. During May, Speedy incurred $132,600 in fuel costs. Speedy paid $95,450 of the fuel cost in May, with the remainder paid in June. In addition, Speedy paid $15,000 i

> McDonald Music sells used CDs for $4.00 each. During the month of April, McDonald sold 7,650 CDs for cash and 13,220 CDs on credit. McDonald’s cash collections in April included $30,600 for the CDs sold for cash, $12,800 for CDs sold on credit during the

> Refer to the information for Sparrow Company. Required: 1. Prepare the closing entries for Sparrow at December 31, 2019. 2. How does the closing process affect retained earnings? Use the following information for Cornerstone Exercises 3-24 through 3

> Below are the steps of the accounting cycle. Journalize transaction. Analyze transaction. Close the accounts. Prepare financial statements. Adjust the account. Post to the ledger. Prepare a trial balance. Required: List these steps of the accounting

> A classified balance sheet contains the following categories: Current assets Other assets Long-term investments Current liabilities Property, plant, and equipment Long-term liabilities Intangible assets Stockholders’ e

> Refer to the information presented in Brief Exercise 3-33 for Pelton Company. The balance in Retained Earnings of $12,200 represents the balance as of January 1, 2019. Required: Prepare a retained earnings statement for Pelton for 2019.

> The adjusted trial balance of Pelton Company at December 31, 2019, includes the following accounts: Wages Expense, $22,400; Service Revenue, $38,400; Rent Expense, $3,200; Dividends, $4,000; Retained Earnings, $12,200; and Prepaid Rent, $1,000. Required

> Tyndal Company had the following items that required adjustment at December 31, 2019. a. Purchased equipment for $40,000 on January 1, 2019. Tyndal estimates annual depreciation expense to be $3,100. b. Paid $2,400 for a 2-year insurance policy on July 1

> Nichols Company had the following items that required adjustment at December 31, 2019. a. Electricity used during December was estimated to be $320. This amount will be paid in January. b. Owed wages to employees of $3,250 that were earned in December bu

> Listed below are several users of accounting information and decisions that user may make. User of Accounting Decision Information 1. Manager a. Determines whether the company paid the proper amount of taxes. 2. Employee

> Examine the following accounts. a. Prepaid Insurance b. Inventory c. Interest Payable d. Unearned Service Revenue e. Accumulated Depreciation Required: Identify and explain why each account may or may not require adjustment.

> Lauhl Corporation provides janitorial services to several office buildings. During April, Lauhl engaged in the following transactions: a. On April 1, Lauhl received $24,000 from Metro Corporation to provide cleaning services over the next 6 months. b. On

> The following are several transactions for Halpin Advertising Company. a. Purchased $1,000 of supplies. b. Sold $5,000 of advertising services, on account, to customers. c. Used $250 of supplies. d. Collected $3,000 from customers in payment of their acc

> At December 31, 2019, the ledger of Aulani Company includes the following accounts, all having normal balances: Sales Revenue, $59,000; Cost of Goods Sold, $31,000; Retained Earnings, $20,000; Interest Expense, $3,200; Dividends, $5,000; Wages Expense $8

> Mulberry Services sells electronic data processing services to firms too small to own their own computing equipment. Mulberry had the following accounts and account balances as of January 1, 2019: Accounts Payable........................................

> Sweetwater Temporary Clerical Help Service opened for business in June 2019. From the opening until the end of the year, Sweetwater engaged in the activities described below. So that a realistic trial balance can be prepared, the events described below a

> Findlay Testing Inc. provides water testing and maintenance services for owners of hot tubs and swimming pools. During September the following transactions occurred: Sept. 1 Issued common stock for $20,000. 2 Purchased chemical supplies for $1,880 cash.

> Monilast Chemicals engaged in the following transactions during December 2019: Dec. 2 Paid rent on office furniture, $1,200. 3 Borrowed $25,000 on a 9-month, 8% note. 7 Provided services on credit, $42,600. 10 Purchased supplies on credit, $2,850. 13 C

> A list of accounts for Montgomery Inc. appears below. Accounts Payable Accounts Receivable Bonds Payable Building Cash Common Stock Copyright Cost of Goods Sold Depreciation Expense Income Taxes Expense Income Taxes Payable Insurance Expense Interest Exp

> The following T-accounts summarize the operations of Brilliant Minds Inc., a tutoring service, for April 2019. ' 1. Assuming that only one transaction occurred on each day (beginning on April 3) and that no dividends were paid, describe the transaction t

> Parker Company has a balance of $35,000 in retained earnings on January 1. During the year, Parker reported revenues of $82,000 and expenses of $55,000. Parker also paid a dividend of $8,000. Required: What is the amount of retained earnings on December

> Why is there a demand for accounting information? Name five groups that create demand for accounting information about businesses, and describe how each group uses accounting information.

> Several years ago, Mary Emerson founded Emerson Consulting Inc., a consulting business specializing in financial planning for young professionals. The following captions and amounts summarize Emerson Consulting’s balance sheet at Decemb

> The following list contains events that occurred during January 2019 at the local Ford dealer, Malcom Motors: a. California Central University (CCU) signed a contract to purchase a fleet of Ford Crown Victoria vehicles from Malcom Motors at a total price

> The accountant for Boatsman Products Inc. received the following information: a. Boatsman sent its customers a new price list. Prices were increased an average of 3% on all items. b. Boatsman accepted an offer of $150,000 for land that it had purchased 2

> Western Sound Studios records and masters audio tapes of popular artists in live concerts. The performers use the tapes to prepare ‘‘live’’ albums, CDs, and MP3s. The following account balances were available at the beginning of 2019: Accounts Payable..

> Karleen’s Catering Service provides catered meals to individuals and businesses. Karleen’s purchases its food ready to serve from Mel’s Restaurant. In order to prepare a realistic trial balance, the events described below are aggregations of many individ

> Cincinnati Painting Service Inc. specializes in painting houses. During June, its first month of operations, Cincinnati Painting engaged in the following transactions: June 1 Issued common stock for $25,000. 3 Purchased painting supplies fr

> Monroe Company rents and sells electronic equipment. During September, Monroe engaged in the transactions described below. Sept. 5 Purchased a Chevrolet truck for $38,900 cash. 8 Purchased inventory for $4,200 on account. 10 Purc

> A list of accounts for Montgomery Inc. appears below. Accounts Payable Accounts Receivable Accumulated Depreciation Cash Common Stock Depreciation Expense Equipment Income Taxes Expense Interest Expense Land Notes Payable Prepaid Rent Retained Earnings S

> The following T-accounts summarize the operations of Chen Construction Company for July 2019. Required: 1. Assuming that only one transaction occurred on each day (beginning on July 2) and that no dividends were paid, describe the transactions that most

> Luis Madero, after working for several years with a large public accounting firm, decided to open his own accounting service. The business is operated as a corporation under the name Madero Accounting Services. The following captions and amounts summariz

> An analysis of the transactions of Canary Cola Inc. yields the following information: service revenue, $78,000; supplies expense, $33,200; rent expense, $20,500; and dividends, $7,000. Required: What is the amount of net income reported by Canary Cola?

> A trial balance: a. lists only revenue and expense accounts. b. lists all accounts and their balances. c. will help detect omitted journal entries. d. detects all errors that could be made during the journalizing or posting steps of the accounting cycle.

> Posting: a. involves transferring the information in journal entries to the general ledger. b. is an optional step in the accounting cycle. c. is performed after a trial balance is prepared. d. involves transferring information to the trial balance.

> Which of the following statements are true? I. A journal provides a chronological record of a transaction. II. A journal entry contains the complete effect of a transaction. III. The first step in preparing a journal entry involves analyzing the transact

> Debits will: a. increase assets, expenses, and dividends. b. decrease liabilities, revenues, and dividends. c. increase assets, liabilities, revenues, expenses, and dividends. d. decrease assets, liabilities, revenues, expenses, and dividends.

> Which of the following statements are true? I. Debits represent decreases, and credits represent increases. II. Debits must always equal credits. III. Assets have normal debit balances while liabilities and stockholders’ equity have normal credit balance

> Which of the following statements is false? a. The left side of a T-account is called the credit side. b. All T-accounts have both a debit and a credit side. c. Transactions are frequently analyzed using a T-account. d. The amount in an account at any ti

> The effects of paying salaries for the current period are to: a. increase assets and increase stockholders’ equity. b. increase assets and increase liabilities. c. decrease assets and decrease liabilities. d. decrease assets and decrease stockholders’ eq

> The effects of purchasing inventory on credit are to: a. increase assets and increase liabilities. b. increase assets and increase stockholders’ equity. c. decrease assets and decrease stockholders’ equity. d. decrease assets and decrease liabilities.

> Which principle requires that expenses be recorded and reported in the same period as the revenue that it helped generate? a. Historical cost b. Revenue recognition c. Conservatism d. Expense recognition

> An analysis of the transactions of Cavernous Homes Inc. yields the following totals at December 31, 2019: cash, $3,200; accounts receivable, $4,500; notes payable, $5,000; supplies, $8,100; common stock, $7,000; and retained earnings, $3,800. Required:

> Which of the following is not an assumption that underlies accounting? a. Historical cost b. Economic entity c. Time-period d. Going-concern

> Relevant information possesses this quality: Freedom from Error Predictive Value a. Yes Yes b. No Yes c. Yes No d. No No

> Information that provides feedback about prior expectations is: Relevant Faithfully Represented a. Yes Yes b. No Yes c. Yes No d. No No

> Which of the following is not a characteristic of useful information? a. Comparability b. Relevance c. Faithful representation d. Conservatism

> Which of the following is not a benefit derived from the conceptual framework? a. Supports the objective of providing information useful for making business and economic decisions. b. Provides a logical structure to aid in the understanding of complex ac

> Presented below are the four assumptions and four principles used in measuring and reporting accounting information. Assumptions Principles a. Economic entity e. Historical cost b. Going-concern f. Revenue recognition c. Time-period g. Expense r

> The following accounts and account balances are available for Badger Auto Parts at December 31, 2019: Accounts Payable $ 8,500 Income Taxes Payable $ 3,600 Accounts Receivable 40,800 Interest Expense 6,650 Accumulated Depreciation 47,300 I

> Rosenthal Decorating Inc. is a commercial painting and decorating contractor that began operations in January 2019. The following transactions occurred during the year: a. On January 15, Rosenthal sold 500 shares of its common stock to WilliamHensley for

> Pasta House Inc. was organized in January 2019. During the year, the transactions below occurred: a. On January 14, Pasta House sold Martin Halter, the firm’s founder and sole owner, 10,000 shares of its common stock for $8 per share. b. On the same day,

> Remington Communications has been providing cellular phone service for several years. During November and December, the following transactions occurred: Nov. 2 Remington received $2,400 for November phone service from Enrico Company. 6 Remington purchas

> Balance Sheet listed below are items that may appear on a balance sheet. Item Classification 1. Accounts payable........................................ a. Current assets 2. Machinery................................................... b. Property,

> Kauai Adventures rents and sells surfboards, snorkeling, and scuba equipment. During March, Kauai engaged in the following transactions: March 2 Received $51,500 cash from customers for rental. 3 Purchased on credit ten new surfboards (which Kauai class

> Jefferson Framers engaged in the following transactions: a. Purchased land for $35,200 cash. b. Purchased equipment for $16,400 in exchange for a 1-year, 8% note payable. c. Purchased office supplies on credit for $1,500 from Office Depot. d. Paid the $1

> Lincoln Corporation was involved in the following transactions during the current year: a. Lincoln borrowed cash from the local bank on a note payable. b. Lincoln purchased operating assets on credit. c. Lincoln paid dividends in cash. d. Lincoln purchas

> The following accounts are available for Haubstadt Shoe Works: Accounts Payable Accounts Receivable Accumulated Depreciation (Equipment) Advertising Expense Cash Common Stock Cost of Goods Sold Depreciation Expense (Equipment) Equipment Interest Expense

> Each of the balance sheet changes below is associated with a particular transaction: a. Equipment increases by $5,000 and cash decreases by $5,000. b. Cash increases by $4,100 and stockholders’ equity increases by $4,100. c. Supplies increases by $400 an

> During December, Cynthiana Refrigeration Service engaged in the following transactions: a. On December 3, Cynthiana sold a 1-year service contract to Cub Foods for $12,000 cash. b. On December 10, Cynthiana repaired equipment of the A&W Root Beer Dri

> Goal Systems, a business consulting firm, engaged in the following transactions: a. Issued common stock for $75,000 cash. b. Borrowed $35,000 from a bank. c. Purchased equipment for $12,000 cash. d. Prepaid rent on office space for 6 months in the amount

> Each of the following balance sheet changes is associated with a particular transaction: a. Cash decreases by $22,000 and land increases by $22,000. b. Cash decreases by $9,000 and retained earnings decreases by $9,000. c. Cash increases by $100,000 and

> The accountant for Compton Inc. has collected the following information: a. Compton purchased a tract of land from Jacobsen Real Estate for $875,000 cash. b. Compton issued 2,000 shares of its common stock to George Micros in exchange for $125,000 cash.

> Amanda Webb opened a home health care business under the name Home Care Inc. During its first month of operations, the business had the following transactions: a. Issued common stock to Ms. Webb and other stockholders in exchange for $30,000 cash. b. Pai

> Financial Statements listed below are elements of the financial statements. a. Liabilities b. Net change in cash c. Assets d. Revenue e. Cash flow from operating activities f. Expenses g. Stockholders’ equity h. Dividends Required: Match each financial

> The following events occurred for Parker Company. a. Performed consulting services for a client in exchange for $3,200 cash. b. Performed consulting services for a client on account, $1,700. c. Paid $30,000 cash for land. d. Purchased office supplies on

> The following economic events related to K&B Grocery Store occurred during 2019: a. On February 7, K&B received a bill from Indianapolis Power and Light indicating that it had used electric power during January 2019 at a cost of $220; the bill need not b

> Several events are listed below. a. Common stock is issued to investors. b. An agreement is signed with a janitorial service to provide cleaning services over the next 12 months. c. Inventory is purchased. d. Inventory is sold to customers. e. Two invest

> Listed below are the fundamental and enhancing qualitative characteristics that make accounting information useful. . Relevance . Faithful representation . Comparability . Verifiability . Timeliness . Understandability Required: 1. Match the appropriate

> The bookkeeper for Riley Inc. made the following errors: a. A cash purchase of supplies of $348 was recorded as a debit to Supplies for $384 and a credit to Cash of $384. b. A cash sale of $3,128 was recorded as a debit to Cash of $3,128 and a credit to

> What kinds of errors will a trial balance detect? What kinds of errors will not be detectable by a trial balance?

> Why is the term double-entry an appropriate expression for describing an accounting system?

> When a journal entry is made, what must be equal? Why?

> All accounts have normal balances. What is the normal balance of each of these accounts? a. Cash b. Sales c. Notes payable d. Inventory e. Retained earnings f. Salary expense g. Equipment h. Unearned revenue

> Describe the constraint on providing useful information.

> At the beginning of the year, Morgan Company had total assets of $425,000 and total liabilities of $260,000. Required: Use the fundamental accounting equation to answer the following independent questions: 1. What is total stockholders’ equity at the be

> Can accounting transactions be directly recorded in the general ledger? If so, why do most companies initially record transactions in the journal?

> The words debit and credit are used in two ways in accounting: ‘‘to debit an account’’ and ‘‘a debit balance.’’ Explain both usages of the terms debit and credit.

> Do you agree with the statement that ‘‘debits mean increase and credits mean decrease’’? If not, what do debit and credit mean?

> What is a T-account? Describe the basic components of any account.

> How do revenues and expenses affect the accounting equation?

> In analyzing a transaction, can a transaction only affect one side of the accounting equation? If so, give an example.

> What is the basic process used in transaction analysis?

> In order for a transaction to be recorded in a business’ accounting records, the effects of the transaction must be faithfully represented. What is faithful representation, and why is it important?

> Of all the events that occur each day, how would you describe those that are recorded in a firm’s accounting records?

> How are the financial statements related to generally accept accounting principles?

> Listed below are three independent scenarios. Required: Use the fundamental accounting equation to find the missing amounts. Scenario Assets Liabilities Equity $ (a) 115,000 54,000 $42,000 (b) 18,500 $56,000 77,000 (c) 2 3

> Discuss the four principles that are used to measure and record business transactions.

> Identify the four assumptions that underlie accounting.

> Distinguish between comparability and consistency.

> Discuss the trade-offs that may be necessary between the qualitative characteristics.

> Identify the characteristics of useful information.