Question: The equation below shows the transactions of

> Why is using the Purchases Returns and Allowances account preferred to crediting these transactions to Purchases?

> On what financial statement do the accounts related to purchases of merchandise appear? In which section of this statement are they reported?

> What is the normal balance of the Purchases accounts?

> What account should be debited for transportation charges related to equipment purchases?

> What major safeguards should be built into a system of internal control for purchases of goods?

> In a particular state, the sales tax rate is 5 percent of sales. The retailer is allowed to record both the selling price and the tax in the same account. Explain how to compute the sales tax due when this method is used.

> The sales tax on a credit sale is not collected from the customer immediately. When is this tax usually entered in a firm’s accounting records? What account is used to record this tax?

> What kind of account is Sales Returns and Allowances?

> 1. In discussing a firm’s latest financial statements, a manager says that it is the “results on the bottom line” that really count. What does the manager mean? 2. If a firm’s expenses equal or exceed its revenue, what actions might management take? 3. H

> What kind of account is Sales Discounts?

> Why is a sales return or allowance usually recorded in the Sales Returns and Allowances account rather than being debited to the Sales account?

> What purposes does the schedule of accounts receivable serve?

> How are the net sales for an accounting period determined?

> What is a trade discount? Why do some firms offer trade discounts to their customers?

> What is open-account credit?

> What is the name of the account used to record the fees charged by the credit card company to the seller?

> Why are bank credit card sales similar to cash sales for a business?

> When a firm makes a sale involving a credit card issued by a credit card company, does the firm have an account receivable with the cardholder or with the credit card company?

> What document does a business submit to a credit card company to collect amounts owed for purchases by customers using a credit card issued by a credit card company?

> Gloria’s Fabrics is a large fabric provider to the general public. The accounting office has three employees: accounts receivable clerk, accounts payable clerk, and full charge bookkeeper. The accounts receivable clerk creates the sales invoices and reco

> How do retail and wholesale businesses differ?

> What accounts appear on a postclosing trial balance?

> How is the Income Summary account used in the closing procedure?

> What is the accounting cycle?

> Why does the accountant record closing entries at the end of a period?

> Programs Plus is a retail firm that sells computer programs for home and business use. Programs Plus operates in a state with no sales tax. On December 31, 20X1, its general ledger contained the accounts and balances shown below: The following accounts h

> Review the following excerpt from the 2018 consolidated statement of income for Southwest Airlines Co. Answer the questions that follow. Analyze: 1. Although the format for the heading of an income statement can vary from company to company, the heading

> The unadjusted trial balance of Ben’s Jewelers on December 31, 20X1, the end of its fiscal year, appears below. INSTRUCTIONS 1. Copy the unadjusted trial balance onto a worksheet and complete the worksheet using the following informatio

> The Valley Voice is a local newspaper that is published Monday through Friday. It sells 90,000 copies daily. The paper is currently in a profit squeeze, and the publisher, Tom Turkey, is looking for ways to reduce expenses. A review of current distributi

> In each of the following independent situations, decide whether the business organization should treat the person being paid as an employee and should withhold social security, Medicare, and employee income taxes from the payment made. 1. George Jacobs o

> Several years ago, Kat Cortz opened Ocho Tacos, a restaurant specializing in homemade tacos. The restaurant was so successful that the company expanded, and now operates eight restaurants in the local area. Cortez tells you that when she first started, s

> Delta Company pays salaries and wages on the last day of each month. Payments made on December 31, 20X1, for amounts incurred during December are shown below. Cumulative amounts paid prior to the December 31 payroll for the persons named are also shown.

> Mike Ryan is the owner of Ryan Contractors, a successful small construction company. He spends most of his time out of the office supervising work at various construction sites, leaving the operation of the office to the company’s offic

> John Saldanha is the owner and manager of The Car Spa. The Car Spa provides various car wash and car detailing services. The Car Spa also sells snacks and gift items in its waiting area. The Car Spa has one cash register, where all payments from customer

> Celeste Renard, owner of Sensual Linens Shop, was preparing checks for payment of the current month’s purchase invoices when she realized that there were two invoices from Passionate Linens Company, each for the purchase of 100 red, heart-imprinted king-

> Bill Evans began Evans Distributors, a sporting goods distribution company, in January 20X1 and engaged in the transactions below. Assume Evans Distributors and its customers take advantage of all cash discounts. INSTRUCTIONS Record the transactions in a

> Benjamin Ocampo is the owner of In Style Housewares, a housewares store that sells a wide variety of items for the kitchen, bathroom, and home. In Style Housewares offers a company credit card to its customers. The company has experienced an increase in

> A good system of internal control requires business entities to have well-documented (written) policies and procedures on accounts receivables. These policies and procedures should cover segregation of duties of staff, credit and collection policies, and

> Sports Junction began operations March 1, 20X1. The firm sells its merchandise for cash; on open account; to customers using bank credit cards, such as MasterCard and Visa; and to customers using American Express. Merchandise sales are subject to an 8 pe

> Kimberly Ashley, the bookkeeper for Interiors Designs, has just finished posting the closing entries for the year to the ledger. She is concerned about the following balances: Ashley knows that these amounts should agree and asks for your assistance in r

> Assume you are the accountant for Catalina Industries. John Catalina, the owner of the company, is in a hurry to receive the financial statements for the year ended December 31, 20X1, and asks you how soon they will be ready. You tell him you have just c

> On June 1, 20X1, Jenna Davis opened the Leadership Coaching Agency. She plans to use the chart of accounts given below. INSTRUCTIONS 1. Journalize the transactions. Be sure to number the journal pages and write the year at the top of the Date column. Inc

> Brenda Jo Smith is an architect who operates her own business. The accounts and transactions for the business follow. INSTRUCTIONS (1) Analyze the transactions for January 20X1. Record each in the appropriate T accounts. Identify each entry in the T acco

> At the beginning of the summer, Humphrey Nelson was looking for a way to earn money to pay for his college tuition in the fall. He decided to start a lawn service business in his neighborhood. To get the business started, Humphrey used $6,000 from his sa

> Rayshanti Williamson is opening a tax preparation service on December 1, which will be called Williamson’s Tax Service. Williamson plans to open the business by depositing $50,000 cash into a business checking account. The following assets will also be o

> The following account balances are for Ping Chung, Certified Public Accountant, as of April 30, 20X1. INSTRUCTIONS Using the accounting equation form, determine the balance for Ping Chung, Capital, April 1, 20X1. Prepare an income statement and a stateme

> 1. After examining financial data for a monthly period, the owner of a small business expressed surprise that the firm’s cash balance had decreased during the month even though there was substantial net income. Do you think this owner is right to expect

> Obtain all data that is necessary from the worksheet prepared for Whatnots in Problem 12.5B at the end of Chapter 12. Then follow the instructions to complete this problem. INSTRUCTIONS 1. Record adjusting entries in the general journal as of December 31

> Obtain all data necessary from the worksheet prepared for Gamer’s Paradise in Problem 12.6B at the end of Chapter 12. Then follow the instructions to complete this problem. INSTRUCTIONS 1. Prepare a classified income statement for the year ended December

> Hog Wild is a retail firm that sells motorcycles, parts, and accessories. The adjusted trial balance data given below is from the firm’s worksheet for the year ended December 31, 20X1. INSTRUCTIONS 1. Prepare a classified income stateme

> ComputerGeeks.com is a retail store that sells computers, laptops, supplies, and other electronic devices. The adjusted trial balance data given below is from the firm’s worksheet for the year ended December 31, 20X1. INSTRUCTIONS 1. Pr

> Gamer’s Paradise is a retail store that sells computer games, owned by Matt Huffman. On December 31, 20X1, the firm’s general ledger contained the accounts and balances below. All account balances are normal. INSTRUCTI

> Whatnots is a retail seller of cards, novelty items, and business products. On December 31, 20X1, the firm’s general ledger contained the following accounts and balances. INSTRUCTIONS 1. Prepare the Trial Balance section of a 10-column

> Fun Depot is a retail store that sells toys, games, and bicycles. On December 31, 20X1, the firm’s general ledger contained the following accounts and balances. INSTRUCTIONS 1. Prepare the Trial Balance section of a 10-column worksheet.

> On September 30, 20X1, after one month of operation, the general ledger of Cross Country Travels contained the accounts and balances shown below. INSTRUCTIONS 1. Prepare a partial worksheet with the following sections: Trial Balance, Adjustments, and Adj

> Based on the information below, record the adjusting journal entries that must be made for D. Johnson Products, LLC, on December 31, 20X1. The company has a December 31 fiscal year-end. Use 18 as the page number for the general journal. a.–b. Merchandise

> Ratios are an important part of financial analysis. Divide into groups of two or three. Each person should choose one year from the The Home Depot Annual Report in Appendix A. Calculate the current ratio, gross profit percentage, and inventory turnover.

> Certain transactions and procedures relating to federal and state unemployment taxes are given below for Latest Greatest, a retail store owned by John Marion. The firm’s address is 4560 LBJ Freeway, Dallas, TX 75232-6002. The firm&acirc

> 1. On October 15, the firm made a deposit through EFTPS for the federal income tax withheld and the FICA tax (both employees’ withholding and employer’s matching portion). Based on your computations in Problem 11.2B, record the issuance of the check in g

> A payroll summary for Today’s Teen owned by Nikki Davis, for the quarter ending September 30, 20X1, appears below. The business made the following electronic deposits of payroll taxes: a. August 15 for July taxes. b. September 15 for Au

> The payroll register of Auto Detailers showed total employee earnings of $6,000 for the week ended April 8. INSTRUCTIONS 1. Compute the employer’s payroll taxes for the period. The tax rates are as follows: Social security 6.2 percent 2

> Daily Operations pays its employees monthly. Payments made by the company on November 30, 20X1, follow. Cumulative amounts paid to the persons named prior to the November 30 payroll are also given 1. Dave Orlando, president, gross monthly salary of $18,0

> Barbara Merino operates Merino Consulting Services. She has four employees and pays them on an hourly basis. During the week ended November 12, 20X1, her employees worked the number of hours shown below. Information about their hourly rates, marital stat

> Alan Johnson works for CAT Commercial Builders, Inc. His pay rate is $14.00 per hour and he receives overtime pay at one and one-half times his regular hourly rate for any hours worked beyond 40 in a week. During the pay period ended December 31, 20X1, A

> McCormick & Company, Inc., is a global leader in the manufacture, marketing, and distribution of spices, seasoning mixes, condiments, and other products to the food industry. McCormick & Company, Inc., reported the following in its 2018 Annual Re

> On December 1, 20X1, Sofia Sartori, the accountant for Classic Appliances, downloaded the company’s November 30, 20X1, bank statement from the bank’s website. The balance shown on the bank statement was $30,734. The November 30, 20X1, balance in the Cash

> On July 31, 20X1, the balance in Northwest Appliance’s checkbook and Cash account was $9,318.59. The balance shown on the bank statement on the same date was $10,442.03. NOTES a. The following checks were issued but have not yet been paid by the bank: Ch

> On October 7, 20X1, Peter Chen, attorney-at-law, received his September bank statement from First Texas National Bank. Enclosed with the bank statement, which appears below, was a debit memorandum for $118 that covered an NSF check issued by Annette Cole

> The Asian Tales Gift Shop, a retail business, started a $250 petty cash fund on September 4. Below are descriptions of the transactions to establish the petty cash fund, disburse petty cash during September, and replenish the petty cash fund on September

> The Polynesian Gift Shop, a retail business, started business on April 25, 20X1. It keeps a $225 change fund in its cash register. The cash receipts for the period from April 25 to April 30, 20X1, are below. INSTRUCTIONS 1. Open the general ledger accoun

> The following transactions took place at Grow-Right Garden Center during June 20X1. Grow-Right Garden Center uses a perpetual inventory system. Record the transactions in a general journal. Use 10 as the page number for the general journal. Analyze: Assu

> Brown Company (buyer) and Stone Corp. (seller) engaged in the following transactions during February 20X1: INSTRUCTIONS 1. Open the accounts payable ledger account and accounts receivable ledger account indicated below for both Brown Company and Stone Co

> 1. Open the general ledger accounts and accounts payable ledger accounts indicated below. Enter the balances as of August 1, 20X1. 2. Post the entries in Problem 8.4B to the appropriate accounts in the general ledger and the accounts payable subsidiary l

> Dental Supplies, Inc., is a wholesale supplier of dental supplies and materials that commenced business on August 1, 20X1. The company purchases merchandise for cash and on open account. In August 20X1, Dental Supplies, Inc., engaged in the following pur

> Generally accepted accounting principles require that the principal amount due in the upcoming year on long-term debt be presented as a current liability on the balance sheet. This requires the accountant to make a journal entry to remove the current yea

> 1. Open the general ledger accounts and accounts payable ledger accounts indicated below. Enter the balance of Cash as of April 1, 20X1. 2. Post the entries in Problem 8.2B from the general journal to the appropriate accounts in the general ledger and in

> Sarah’s Card and Supplies Shop is a retail card, novelty, and business supply store. Sarah’s Card and Supplies Shop commenced business on April 1, 20X1. The firm purchases merchandise on open account. The firmâ&#

> Floral Delights is a retail store that sells garden equipment, furniture, and supplies. The company began operations June 1, 20X1. The firm purchases its merchandise for cash and on open account. During June, Floral Delights engaged in the following tran

> The Olde English China Shop sells china, stemware, and other gift items. Sales to retail customers are subject to an 8 percent sales tax. The firm sells its merchandise for cash; to customers using bank credit cards, such as MasterCard and Visa; and to c

> 1. Open the general ledger accounts and accounts receivable ledger accounts indicated below. Enter the balances as of May 1, 20X1. 2. Post the entries from the general journal in Problem 7.4B to the appropriate accounts in the general ledger and in the a

> The Urban Florist is a wholesale shop that sells flowers, plants, and plant supplies. Transactions involving sales and cash receipts for the firm during May 20X1 follow. The firm sells its merchandise for cash and on open account. During May, The Urban F

> 1. Open the general ledger accounts and accounts receivable ledger accounts indicated below. 2. Post the entries from the general journal in Problem 7.2B to the appropriate accounts in the general ledger and in the accounts receivable ledger. 3. Prepare

> Appliances Unlimited began operations November 1, 20X1. The firm sells its merchandise for cash and on open account. Sales are subject to a 6 percent sales tax. During November, Appliances Unlimited engaged in the following transactions: INSTRUCTIONS Rec

> OfficePro Business Supplies began operations October 1, 20X1. The firm sells its merchandise for cash and on open account. Sales are subject to a 5 percent sales tax. During October, OfficePro Business Supplies engaged in the following transactions: INST

> 1. Why should management be concerned about the efficiency of the end-of-period procedures? 2. Spectrum Company had an increase in sales and net income during its last fiscal year, but cash decreased and the firm was having difficulty paying its bills by

> On December 31, after adjustments, The Pollock Family Farm’s ledger contains the following account balances. INSTRUCTIONS 1. Record the balances in the ledger accounts as of December 31. 2. Journalize the closing entries in the general

> A completed worksheet for Elegant Lawn Nursery and Landscape is shown below. INSTRUCTIONS 1. Record the balances as of December 31 in the ledger accounts. 2. Journalize (use 3 as the page number) and post the adjusting entries. Use account number 131 for

> Christopher Foster owns Estate Planning and Investments Company. The trial balance of the firm for June 30, 20X1, the first month of operations, is shown below. INSTRUCTIONS 1. Complete the worksheet for the month. 2. Prepare an income statement, stateme

> The adjusted trial balance of Sergio Mendez, Attorney-at-Law, as of November 30, 20X1, after the company had completed the first month of operations, appears below. Appropriate adjustments have been made for the following items: a. Supplies used during t

> The trial balance of Lazo Company as of February 28, 20X1, appears below. INSTRUCTIONS 1. Record the trial balance in the Trial Balance section of the worksheet. 2. Complete the worksheet by making the following adjustments: supplies on hand at the end o

> Several transactions that occurred during December 20X1, the first month of operation for Wells’ Accounting Services, follow. The company uses the general ledger accounts listed below. INSTRUCTIONS Record the transactions in the general

> In June 20X1, Chan Lee opened a photography studio that provides services to public and private schools. His firm’s financial activities for the first month of operations and the chart of accounts appear below. INSTRUCTIONS 1. Journaliz

> Accruals and deferrals can vary for each company. The adjusting entries for a service company will differ from those of a merchandising company. Brainstorm the adjusting entries’ similarities and differences for a service company and a merchandising comp

> The transactions listed below took place at Prasad Building Cleaning Service during September 20X1. This firm cleans commercial buildings for a fee. INSTRUCTIONS Analyze and record each transaction in the general journal. Choose the account names from th

> The accounts and transactions of Brian Carter, Counselor and Attorney at Law, follow. INSTRUCTIONS Analyze the transactions. Record each in the appropriate T accounts. Use plus and minus signs in front of the amounts to show the increases and decreases.

> The following transactions took place at P and W Capital Investments. INSTRUCTIONS Analyze each of the transactions. For each transaction, decide what accounts are affected and set up T accounts. Record the effects of the transaction in the T accounts. T

> The following transactions occurred at several different businesses and are not related. INSTRUCTIONS Analyze each of the transactions. For each transaction, set up T accounts. Record the effects of the transaction in the T accounts. TRANSACTIONS 1. A fi

> The accountant for the firm owned by Brian Carter prepares financial statements at the end of each month. INSTRUCTIONS Use the figures in the T accounts for Problem 3.4B to prepare a trial balance, an income state- ment, a statement of owner’s equity, an

> Carter Wilson is a painting contractor who specializes in painting commercial buildings. At the beginning of June, his firm’s financial records showed the following assets, liabilities, and owner’s equity. INSTRUCTIONS

> On July 1, Alfred Herron established Herron Commercial Appraisal Services, a firm that provides expert commercial appraisals and represents clients in commercial appraisal hearings. INSTRUCTIONS Analyze the following transactions. Record in equation form