The accounting firm of Brooke & Doggett, CPAs, recently completed the audits of three separate companies. During these audits, the following events were discovered, and Brooke & Doggett is trying to decide if each event is material. If an item is material, the CPA firm will insist that the company modify the financial statements. 1. In 2020, Major Company reported service revenues of $7,000,000 and earnings before tax of $560,000. Because of an accounting error, the company recorded $42,000 as revenue in 2020 for services that will not be performed until early 2021. 2. Willis Company plans to report a cash balance of $150,000. Because of an accounting error, this amount is $10,700 too high. Willis also plans to report total assets of $8,600,000 and net earnings of $890,000. 3. Adams Company’s 2020 balance sheet shows a cash balance of $500,000 and total assets of $19,000,000. For 2020, the company had a net income of 1,700,000. These balances are all correct, but they would have been $14,000 higher if the president of the company had not claimed business travel expenses that were, in fact, the cost of personal vacations for him and his family. He charged the costs of these trips on the company’s credit card. The president of Adams Company owns 25 percent of the business. Required Write a memorandum to the partners of Brooke & Doggett, explaining whether each of these events is material.
> Milea Inc. experienced the following events in Year 1, its first year of operations: 1. Received $20,000 cash from the issue of common stock. 2. Performed services on account for $56,000. 3. Paid the utility expense of $2,500. 4. Collected $48,000 of the
> On June 1, Year 1, Hamlin, Inc. paid $12,000 for 12 months rent on its warehouse in Huntsville, Alabama. In addition, on October 1, Year 1, Hamlin paid $3,000 for a one-year insurance policy on the warehouse. Hamlin’s reporting period ends on December 31
> Troy Company earned $15,000 of cash revenue. Troy incurred $12,000 of utility expense on account during Year 1. The company made cash payments of $8,000 to reduce its accounts payable during Year 1. Required Based on this information alone, determine the
> Obtain Target Corporation’s annual report for its 2018 fiscal year (year ended February 2, 2019) at http://investors.target.com using the instructions in Appendix B, and use it to answer the following questions: a. Which accounts on Target’s balance shee
> The Containers Inc. experienced the following events during its first year of operations, Year 1: 1. Acquired $42,000 cash by issuing common stock. 2. Earned $25,000 revenue on account. 3. Paid $18,000 cash for operating expenses. 4. Borrowed $10,000 cas
> Selected data from Emporia Company follow: Required Compute the following and round computations to two decimal points: a. The accounts receivable turnover for Year 3. b. The inventory turnover for Year 3. c. The net margin for Year 2.
> The following balances were drawn from the accounts of Carter Company. The accounts and balances shown here are presented in random order: Equipment–$14,000; Cash–$25,000; Depreciation Expense–$7,000; Notes Payable–$22,000; Common Stock–$41,000; Accumula
> The following information was drawn from the accounting records of Chapin Company. 1. On January 1, Year 1, Chapin paid $56,000 cash to purchase a truck. The truck had a five-year useful life and a $6,000 salvage value. 2. As of December 31, Year 1, Chap
> Explain how each of the following posting errors affects a trial balance. State whether the trial balance will be out of balance because of the posting error, and indicate which side of the trial balance will have a higher amount after each independent e
> In July 2015, H. J. Heinz Company and Kraft Foods Group completed their merger. The new company, named The Kraft Heinz Company (KHC), became the fifth largest food and beverage company in the world. Prior to the merger, Kraft had been much larger than He
> J. Talbot is the accounting manager for Kolla Waste Disposal Corporation. Kolla is having its worst financial year since its inception. The company is expected to report a net loss. In the midst of such bad news, Ms. Talbot surprised the company presiden
> The following ratios are for four companies in different industries. Some of these ratios have been discussed in the textbook and others have not, but their names explain how the ratio was computed. The four sets of ratios, presented randomly, are as fol
> Presented as follows are 12 financial ratios for two companies in separate industries. Ford Motor Company manufactures automobiles and sells them to retail dealers. AutoZone, Inc. sells automobile parts and car-care products directly to consumers. Requir
> Presented as follows are 12 financial ratios for two companies in the sane industry. Colgate-Palmolive Co. (Colgate) and Procter & Gamble Co. (P&G). Both of these companies sell health, beauty, and other household consumer goods. Required a. Dete
> Corola Corporation reported $34,000 of net income and $25,000 of net cash flow from operating activities. All revenue is earned on account. Required Write a brief memo that explains how earning revenue on account could have caused the difference between
> Presented here is selected information from the 2018 fiscal-year 10-K reports of four companies. The four companies, in alphabetical order, are: AT&T, Inc., a company that provides communications and digital entertainment; Deere & Company, a manu
> The following information relates to Home Depot, Inc., and Lowe’s Companies, Inc. for their 2017 and 2016 fiscal years. Required a. Compute the following ratios for the companies’ 2017 fiscal years (years ending in Jan
> In 2017 and 2016, Sears Holding Corporation reported net losses and negative cash flows from operating activities. Using the company’s Form 10-K for the fiscal year ended February 3, 2018 (2017), complete the requirements shown as follows. The Form 10-K
> The following information was taken from the annual reports of Pfizer, Inc. and Ford Motor Company. These data are for 2018, and all amounts are in millions. Required a. Calculate the amount of inventory that Pfizer purchased during 2018. b. Calculate ho
> The following financial statements and information are available for Blythe Industries Inc.: Additional Information 1. Sold land that cost $40,000 for $44,000. 2. Sold equipment that cost $30,000 and had accumulated depreciation of $20,000 for $18,000. 3
> Tesla, Inc. began operations in 2003 but did not begin selling its stock to the public until June 28, 2010. It has lost money every year it has been in existence, and by December 31, 2016, it had total lifetime losses of approximately $5 billion. In addi
> Obtain Target Corporation’s annual report for its 2018 fiscal year (year ended February 2, 2019) at http://investors.target.com using the instructions in Appendix B, and use it to answer the following questions: a. For the year ended February 2, 2019 (20
> Using either Bed Bath & Beyond, Inc.’s most current Form 10-K or the company’s annual report, answer the following questions. To obtain the Form 10-K, use either the EDGAR system, following the instructions in Appendix A, or the company’s website. The co
> There were 37,855 McDonald’s Company restaurants in over 100 countries as of December 31, 2018. Chipotle Mexican Grill, Inc., a much newer fast-food restaurant company, began operations with one restaurant in 1993. At one time, McDonald
> Listed here are data for five companies. These data are for the companies’ 2017 fiscal years. The market price per share is the closing price of the companies’ stock as of February 28, 2018, two months after the end of
> The following data are based on information in the 2017 annual report of YUM! Brands, Inc. YUM! Brands is the parent company of KFC, Pizza Hut, and Taco Bell. As of December 31, 2017, the parent company owned or franchised over 45,000 restaurants in 135
> Listed here are the stockholders’ equity sections of three public companies for fiscal years ending in 2017 and 2016. Note that for General Mills these data are for the fiscal years ended on May 27, 2018 (2017) and May 28, 2017 (2016).
> Obtain Target Corporation’s annual report for its 2018 fiscal year (year ended February 2, 2019) at http:// investors.target.com using the instructions in Appendix B, and use it to answer the following questions: Required a. What is the par value per sha
> Interest rates in the United States were at historic lows for much of the period from 2013 through 2019. The economy was slowly recovering from the recession of 2008 and 2009, and the Federal Reserve kept interest rates low to encourage this recovery. Be
> Mack Company plans to invest $50,000 in land that will produce annual rent revenue equal to 15 percent of the investment, starting on January 1, Year 1. The revenue will be collected in cash at the end of each year, starting December 31, Year 1. Mack can
> Apple, Inc. manufactures and markets mobile phones, personal computers, and related software. The following data were taken from the company’s 2018 and 2015 annual reports. All dollar amounts are in millions. Required a. Calculate the E
> The following three companies issued the following bonds: 1. Carr, Inc. issued $100,000 of 8 percent, five-year bonds at 102¼ on January 1, Year 1. Interest is payable annually on December 31. 2. Kim, Inc. issued $100,000 of 8 percent, five-year bonds at
> Obtain Target Corporation’s annual report for its 2018 fiscal year (year ended February 2, 2019) at http:// investors.target.com using the instructions in Appendix B, and use it to answer the following questions: Required a. What was the average interest
> Advanced Micro Devices, Inc. (AMD) is “a global semiconductor company with facilities around the world.” AMD began operations in 1969. Texas Instruments, Inc. is the company that invented the integrated circuit over 45
> In the liabilities section of its 2017 balance sheet, Bank of America reported “Deposits in U.S. offices: Noninterest-bearing” in U.S. offices of over $430 billion. Bank of America is a very large banking company. In the liabilities section of its 2017 b
> Obtain Target Corporation’s annual report for its 2018 fiscal year (year ended February 2, 2019) at http:// investors.target.com using the instructions in Appendix B, and use it to answer the following questions: a. What was Target’s current ratio for it
> The following cash transactions occurred in six real-world companies: 1. In January, 2018 Ford Motor Company announced that it was acquiring Autonomic and TransLoc to enhance its development of driverless automobiles. No price was given. Assume this was
> Electronic Arts, Inc. (commonly know as EA Sports) develops, markets, and publishes electronic games. Union Pacific Corporation is one of the largest railway networks in the nation, with 32,122 miles of railroads. The following data were taken from one o
> The following ratios are for four companies in different industries. Some of these ratios have been dis- cussed in the textbook, others have not, but their names explain how the ratio was computed. These data are for the companies’ 2017
> Obtain Target Corporation’s annual report for its 2018 fiscal year (year ended February 2, 2019) at http:// investors.target.com using the instructions in Appendix B, and use it to answer the following questions: a. What method of depreciation does Targe
> AutoZone, Inc. claims to be the nation’s leading auto parts retailer. It sells replacement auto parts directly to the consumer. BorgWarner, Inc. has over 30,000 employees and produces automobile parts, such as transmissions and cooling
> Presented here are the average days to collect accounts receivable for four companies in different industries. The data are for 2017. Required Write a brief memorandum that provides possible answers to each of the following questions: a. Why would a comp
> Obtain Target Corporation’s annual report for its 2018 fiscal year (year ended February 2, 2019) at http://investors.target.com using the instruction in Appendix B. Anyone who has shopped at Target knows that many of its customers use a credit card to pa
> The following transactions apply to Barclay Co. for Year 1, its first year of operations: 1. Received $50,000 cash from the issue of a short-term note with a 5 percent interest rate and a one-year maturity. The note was made on April 1, Year 1. 2. Receiv
> The accounting records of Octavia’s Flower Shop reflected the following balances as of January 1, Year 3: The following five transactions occurred in Year 3: 1. First purchase (cash): 130 units @ $140 2. Second purchase (cash): 180 unit
> Use the financial statements for Bluffton Company from Problem 14-17B to perform a vertical analysis (based on total assets, total equities, and sales) of both the balance sheets and income statements for Year 4 and Year 3. Round computations to one deci
> Required For each of the following fraudulent acts, describe one or more internal control procedures that could have prevented (or helped prevent) the problems. a. Linda Hinson, the administrative assistant in charge of payroll, created a fictitious empl
> Use the financial statements for Bluffton Company from Problem 14-17B to compute the following for Year 4. Round percentages to two decimal points. a. Current ratio. b. Quick (acid-test) ratio. c. Average days to collect accounts receivable, assuming all
> The December 31, Year 2, balance sheet for Mason Dixon Corp. (MDC) showed Cash of $80,000, Common Stock of $30,000, and Retained Earnings of $50,000. During Year 3, MDC experienced the following accounting events: 1. MDC purchased merchandise inventory f
> As of January 1, Year 5, the accounting records for High Tech Supply (HTS) showed Cash of $180,000, Common Stock of $120,000, and Retained Earnings of $60,000. During Year 5, HTS experienced the following accounting events: 1. HTS purchased merchandise i
> Indicate whether each of the following accounts normally has a debit or credit balance: a. Retained Earnings b. Prepaid Insurance c. Insurance Expense d. Accounts Receivable e. Salaries Payable f. Cash g. Common Stock h. Rent Expense i. Salaries Expense
> On January 1, Year 1, Lakeview Company is started when it issues 100 shares of $20 par value stock for a cash price of $25 per share. Also, on January 1 Year 1, Lakeview borrows $45,000 cash by issuing a note payable to the Metropolitan Bank. Lakeview im
> The Corners Corporation experienced three events that affected its financial statements, as shown in the following table. Assume that the original issue (Event 1) was for 400,000 shares, and the treasury stock was acquired for $4 per share (Event 2). Req
> Show the effect of each of the following independent accounting events on the financial statements using a horizontal statements model like the following one. Use + for increase, − for decrease, and NA for not affected. The first event
> Whitten Company was started when it issued bonds with $300,000 face value on January 1, Year 1. The bonds were issued for cash at 103. Whitten uses the straight-line method of amortization. They had a 15-year term to maturity and a 6 percent annual inter
> Dame Co. issued $250,000 of 10-year, 6 percent, callable bonds on January 1, Year 1, with interest payable annually on December 31. The bonds were issued at their face amount. The bonds are callable at 101½. The fiscal year of the corporati
> Mott Company has a line of credit with Bay Bank. Mott can borrow up to $400,000 at any time over the course of the Year 1 calendar year. The following table shows the prime rate expressed as an annual percentage, along with the amounts borrowed and repai
> The following transactions apply to Ritter Co. for Year 1: 1. Received $40,000 cash from the issue of common stock. 2. Purchased inventory on account for $128,000. 3. Sold inventory for $200,000 cash that had cost $110,000. Sales tax was collected at the
> Maddox Co. pays salaries monthly on the last day of the month. The following information is available from Maddox Co. for the month ended December 31, Year 1. Assume the Social Security tax rate is 6 percent on the first $130,000 of salaries, while the M
> Required Obtain Target Corporation’s annual report for its 2018 fiscal year (year ended February 2, 2019) at http://investors.target.com using the instructions in Appendix B, and use it to answer the following questions: a. Who are the independent audito
> Metals Exploration Corporation engages in the exploration and development of many types of natural resources. In the last two years, the company has engaged in the following activities: Jan. 1, Year 1 Purchased a coal mine estimated to contain 300,000
> The following transactions pertain to Accounting Solutions Inc. Assume the transactions for the purchase of the computer and any capital improvements occur on January 1 each year. Year 1 1. Acquired $80,000 cash from the issue of common stock. 2. Purchas
> Fill in the blanks (indicated by the alphabetic letters in parentheses) in the following financial statements. Assume the company started operations January 1, Year 1, and all transactions involve cash.
> The following information was drawn from the Year 5 balance sheets of two companies: During Year 5, Steelman’s net income was $45,800, while Bingum’s net income was $22,300. Required a. Compute the debt-to-assets ratio
> After reconciling its bank account, Addy Equipment Company made the following adjustments to its cash account: Required Identify the event depicted in each adjustment as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Als
> On January 1, Year 4, Franklin Company paid $200,000 cash to purchase a new theme ride. The ride has a $5,000 salvage value and a six-year useful life. Assume that Franklin earns $70,000 of cash revenue per year for Year 4 through Year 10 of the asset’s
> At the beginning of Year 2, the Dotson Company had the following balances in its accounts: During Year 2, the company experienced the following events: 1. Purchased inventory that cost $18,600 on account from Richburg Company under terms 2/10, n/30. The
> Singleton Company was started in Year 1 when it acquired $94,000 cash from the issue of common stock. The following data summarize the company’s first three years’ operating activities. Assume that all transactions wer
> Identify the financial statements on which each of the following items (titles, date descriptions, and accounts) appears by placing a check mark in the appropriate column. If an item appears on more than one statement, place a check mark in every applica
> The following account balances pertain to Frank’s Hardware as of January 1, Year 2: The following events occurred in Year 2. Assume that Frank’s uses the periodic inventory method. 1. Purchased land for $45,000 cash. 2
> Ruby Tuesday’s, Inc. operated 605 casual dining restaurants across the United States as of June 6, 2017. Signet Jewelers Limited claims to be the world’s largest retailer of diamond jewelry. Its stores include Zales, J
> Indicate whether each of the following costs is a product cost or a period cost: a. Cleaning supplies for the office. b. Transportation on goods purchased for resale. c. Salary of the marketing director. d. Transportation on goods sold to customer with t
> For each of the following events, determine the amount of transportation paid by Cycle Parts House. Also indicate whether the transportation is classified as a product or period cost. a. Purchased merchandise with costs of $500, FOB shipping point. b. So
> Graphic Design Inc. had a beginning balance of $2,000 in its Accounts Receivable account. The ending balance of Accounts Receivable was $2,400. During the period, Graphic Design recognized $40,000 of revenue on account. The Salaries Payable account has a
> The following information was drawn from the records of Tristan Company: Required a. Use the appropriate accounts and balances from Tristan Company to construct an end of period income statement, a statement of changes in stockholders’
> Matchstix was started on January 1, Year 1. Year 1 Transactions 1. Acquired $50,000 cash by issuing common stock. 2. Earned $24,000 of revenue on account. 3. On October 1, Year 1, borrowed $22,000 cash from the local bank. 4. Incurred $10,500 of operatin
> Waddell Company had the following balances in its accounting records as of December 31, Year 1: The following accounting events apply to Waddell Company’s Year 2 fiscal year: Jan. 1 Acquired $35,000 cash from the issue of common stock.
> Electronic Enterprises (EE) experienced eight accounting events during Year 6. These events affected EE’s financial statements as shown in the following horizontal financial statements model: Match the event number shown in the horizont
> Electronic Enterprises (EE) experienced eight accounting events during Year 6. These events affected EE’s financial statements, as shown in the following horizontal financial statements model: Required Match the event number shown in th
> Maben Company was started on January 1, Year 1, and experienced the following events during its first year of operation: 1. Acquired $30,000 cash from the issue of common stock. 2. Borrowed $40,000 cash from National Bank. 3. Earned cash revenues of $48,
> The accounting records of Wall’s China Shop reflected the following balances as of January 1, Year 3: The following five transactions occurred in Year 3: 1. First purchase (cash): 150 units @ $155 2. Second purchase (cash): 160 units @
> The following data were extracted from the 2017 financial statements of Penske Automotive Group, Inc. This company operates automobile dealerships, mostly in the United States, Canada, and Western Europe, and commercial truck dealerships in Australia, Ne
> The following selected financial information is available for Best, Inc. Amounts are in millions of dollars. Required a. Divide the class into groups of four or five students each. Organize the groups into four sections. Assign Task 1 to the first sectio
> Financial statements for Allendale Company follow: Required Prepare a horizontal analysis of the balance sheet and income statement for Year 4 and Year 3. Round percentages to one decimal point.
> The following information was drawn from the year-end balance sheets of Mass Trading Company: The following is additional information regarding transactions that occurred during Year 2: 1. Investment securities that had cost $6,100 were sold. The Year 2
> The following financial statements apply to Karl Company: Required Calculate the following ratios for Year 3 and Year 4. When data limitations prohibit computing averages, use year-end balances in your calculations. Round computations to two decimal poin
> Otis Company’s income statement information follows: The average number of shares outstanding was 9,600 for Year 3 and 8,000 for Year 2. Required Compute the following ratios for Otis for Year 3 and Year 2 and round the computation to t
> The December 31, Year 2, balance sheet for Shannon’s Lamps, Inc. (SLI) showed Cash of $64,000, Common Stock of $24,000, and Retained Earnings of $40,000. During Year 3, SLI experienced the following accounting events: 1. SLI purchased merchandise invento
> As of January 1, Year 5, the accounting records for Antique Art, Inc. (AAI) showed Cash of $130,000, Common Stock of $100,000, and Retained Earnings of $30,000. During Year 5, AAI experienced the following accounting events: 1. AAI purchased merchandise
> Indicate whether each of the following accounts normally has a debit or credit balance: a. Interest Receivable b. Interest Revenue c. Prepaid Insurance d. Land e. Salaries Payable f. Salaries Expense g. Supplies Expense h. Consulting Revenue i. Utilities
> On January 1, Year 1, Eastwood Company is started when it issues 100 shares of $10 par value stock for a cash price of $15 per share. Also, on January 1 Year 1, Eastwood borrows $35,000 cash by issuing a note payable to the Metropolitan Bank. Eastwood im
> Sun Corporation received a charter that authorized the issuance of 100,000 shares of $10 par common stock and 50,000 shares of $50 par, 5 percent cumulative preferred stock. Sun Corporation completed the following transactions during its first two years
> The Corners Corporation experienced three events that affected its financial statements as shown below. Assume that the original issue (Event 1) was for 400,000 shares, and the treasury stock was acquired for $5 per share (Event 2). Required a. What was
> Obtain Target Corporation’s annual report for its 2018 fiscal year (year ended February 2, 2019) at http://investors.target.com using the instructions in Appendix B, and use it to answer the following questions: a. What was Target’s inventory turnover ra
> Nowell Inc. had the following stock issued and outstanding at January 1, Year 1: 1. 150,000 shares of no-par common stock. 2. 30,000 shares of $50 par, 4 percent, cumulative preferred stock. (Dividends are in arrears for one year.) On March 8, Year 1, No
> Arnold Corp. issued $600,000 of 20-year, 8 percent, callable bonds on January 1, Year 1, with interest payable annually on December 31. The bonds were issued at their face amount. The bonds are callable at 104. The fiscal year of the corporation ends Dec
> On January 1, Year 1, Brown Co. borrowed cash from First Bank by issuing a $100,000 face value, four- year term note that had an 8 percent annual interest rate. The note is to be repaid by making annual cash payments of $30,192 that include both interest
> The following transactions apply to Park Co. for Year 1: 1. Received $50,000 cash from the issue of common stock. 2. Purchased inventory on account for $180,000. 3. Sold inventory for $250,000 cash that had cost $140,000. Sales tax was collected at the r
> The following transactions apply to Walnut Enterprises for Year 1, its first year of operations: 1. Received $50,000 cash from the issue of a short-term note with a 6 percent interest rate and a one-year maturity. The note was made on April 1, Year 1. 2.
> The following trial balance was prepared for Tile, Etc., Inc. on December 31, Year 2, after all account adjustments had been made: Tile, Etc. had the following transactions in Year 3: 1. Purchased merchandise on account for $580,000. 2. Sold merchandise
