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. Received $140,000 cash plus applicable sales tax from performing services. The services are subject to a sales tax rate of 6 percent. 3. Paid $84,000 cash for other operating expenses during the year. 4. Paid the sales tax due on $110,000 of the service revenue for the year. Sales tax on the balance of the revenue is not due until Year 2. 5. Recognized the accrued interest at December 31, Year 1. The following transactions apply to Barclay Co. for Year 2: 1. Paid the balance of the sales tax due for Year 1. 2. Received $155,000 cash plus applicable sales tax from performing services. The services are subject to a sales tax rate of 6 percent. 3. Repaid the principal of the note and applicable interest on April 1, Year 2. 4. Paid $96,000 of other operating expenses during the year. 5. Paid the sales tax due on $135,000 of the service revenue. The sales tax on the balance of the revenue is not due until Year 3. Required: a. Record the Year 1 transactions in general journal form. b. Post the transactions to T accounts. c. Prepare a balance sheet, statement of changes in stockholders’ equity, income statement, and statement of cash flows for Year 1. d. Prepare the closing entries and post them to the T accounts. e. Prepare a post-closing trial balance. f. Repeat Requirements a through e for Year 2.
> For each of the following situations, indicate whether FIFO, LIFO, or weighted average applies: a. In a period of falling prices, net income would be highest. b. In a period of falling prices, the unit cost of goods would be the same for ending inventory
> What is the purpose of the W-2 form? What is the purpose of the W-4 form?
> Raabe Sales experienced the following events during Year 1, its first year of operation: 1. Started the business when it acquired $80,000 cash from the issue of common stock. 2. Paid $35,000 cash to purchase inventory. 3. Sold inventory that cost $21,000
> Define the following terms: a. Maker b. Payee c. Principal d. Interest e. Maturity date f. Collateral
> What is the difference between the allowance method and the direct write-off method of accounting for uncollectible accounts?
> Explain straight-line, units-of-production, and double declining-balance depreciation. When is it appropriate to use each of these depreciation methods?
> How does issuing an $8,000 discount note with an 8 percent discount rate and a one-year term to maturity affect the accounting equation?
> Will the effective rate of interest be the same on a $10,000 face value, 6 percent interest-bearing note and a $10,000 face value, 6 percent discount note? Is the amount of cash received upon making these two loans the same? Why or why not?
> How do differences in expense recognition and industry characteristics affect financial performance measures?
> List some differences between U.S. GAAP and IFRS for long-term operational assets.
> What is the difference between an interest-bearing note and a discount note?
> The higher the company’s current ratio, the better the company’s financial condition. Do you agree with this statement? Explain.
> When a long-term operational asset is sold at a gain, how is the balance sheet affected? Is the statement of cash flows affected? If so, how?
> Wild Rose Co. experienced the following events for the Year 1 accounting period: 1. Acquired $20,000 cash from the issue of common stock. 2. Purchased $36,000 of inventory on account. 3. Received goods purchased in Event 2 FOB shipping point. Freight cos
> Does the method of depreciation required to be used for tax purposes reflect the use of a piece of equipment? Can you use double-declining-balance depreciation for tax purposes?
> Explain MACRS depreciation. When is its use appropriate?
> Who pays the FICA tax? Is there a ceiling on the amount of tax that is paid?
> Use the following information to prepare a multistep income statement and a balance sheet for Trias Company for Year 2. $ 45,000 48,000 45,000 10,000 $ 6,500 350,000 9,600 92,000 10,500 4,500 Operating Expenses Accounts Payable Allowance for Doubtfu
> Thorne Inc. experienced the following transactions for Year 1, its first year of operations: 1. Issued common stock for $60,000 cash. 2. Purchased $210,000 of merchandise on account. 3. Sold merchandise that cost $165,000 for $310,000 on account. 4. Coll
> The following information pertains to Kee Cabinet Company’s sales on account and accounts receivable: After several collection attempts, Kee Cabinet Company wrote off $3,100 of accounts that could not be collected. Kee estimates that
> During the first year of operation, Year 1, Home Renovation recognized $261,000 of service revenue on account. At the end of Year 1, the accounts receivable balance was $46,300. Even though this is his first year in business, the owner believes he will c
> The following transactions apply to Sports Consulting for Year 1, the first year of operation: 1. Issued $5,000 of common stock for cash. 2. Recognized $70,000 of service revenue earned on account. 3. Collected $62,000 from accounts receivable. 4. Adjust
> Three different companies each purchased a machine on January 1, Year 1, for $64,000. Each machine was expected to last five years or 200,000 hours. Salvage value was estimated to be $6,000. All three machines were operated for 50,000 hours in Year 1, 55
> Bostick Co. acquired the assets of Belk Co. for $1,200,000 in Year 1. The estimated fair market value of the assets at the acquisition date was $1,000,000. Goodwill of $200,000 was recorded at acquisition. In Year 2, because of negative publicity, one-ha
> TRS Company experienced the following events: 1. Purchased merchandise inventory for cash. 2. Sold merchandise inventory on account. Label the revenue recognition 2a and the expense recognition 2b. 3. Returned merchandise purchased on account. 4. Purchas
> Doug’s Diner acquired a fast food restaurant for $1,500,000. The fair market values of the assets acquired were as follows. No liabilities were assumed. Required: a. Calculate the amount of goodwill acquired. b. Prepare the journal en
> 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 to
> Delta Manufacturing paid $62,000 to purchase a computerized assembly machine on January 1, Year 1. The machine had an estimated life of eight years and a $2,000 salvage value. Delta’s financial condition as of January 1, Year 4, is show
> Tringle Inc. recorded the following transactions over the life of a piece of equipment purchased in Year 1: Jan. 1, Year 1 Purchased the equipment for $38,000 cash. The equipment is estimated to have a five-year life and $3,000 salvage value and was to b
> Floyd Company made several purchases of long-term assets in Year 1. The details of each purchase are presented here. New Office Equipment 1. List price: $50,000; terms: 1/10 n/30; paid within the discount period. 2. Transportation-in: $1,200. 3. Install
> Todd Service Company purchased a copier on January 1, Year 1, for $25,000 and paid an additional $500 for delivery charges. The copier was estimated to have a life of four years or 1,000,000 copies. Salvage value was estimated at $1,500. The copier produ
> Friendly Corporation purchased a delivery van for $28,500 in Year 1. The firm’s financial condition immediately prior to the purchase is shown in the following horizontal statements model: The van was expected to have a useful life of
> Scott Company began operations when it acquired $40,000 cash from the issue of common stock on January 1, Year 1. The cash acquired was immediately used to purchase equipment for $40,000 that had a $4,000 salvage value and an expected useful life of four
> National Laundry Services purchased a new steam press on January 1 for $42,000. It is expected to have a five-year useful life and a $4,000 salvage value. National expects to use the steam press more extensively in the early years of its life. Required:
> The following trial balance was prepared for Village Cycle Sales and Service on December 31, Year 1, after the closing entries were posted: Village Cycle had the following transactions in Year 2: 1. Purchased merchandise on account for $260,000. 2. Sol
> Which of the following would be debited to the Inventory account for a merchandising business using the perpetual inventory system? Required: a. Transportation-in. b. Allowance received for damaged inventory. c. Purchase of inventory. d. Purchase of off
> Identify each of the following independent transactions as an asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Also explain how each event affects assets, liabilities, stockholders’ equity, net income, an
> Diamond Supply Company had the following transactions in Year 1: 1. Acquired $50,000 cash from the issue of common stock. 2. Purchased $120,000 of merchandise for cash in Year 1. 3. Sold merchandise that cost $95,000 for $180,000 during the year under th
> The following information comes from the accounts of Legoria Company: Required: a. There were $160,000 in sales on account during the accounting period. Writeoffs of uncollectible accounts were $1,200. What was the amount of cash collected from account
> The following transactions apply to Cheng Co. for Year 1, its first year of operations: 1. Issued $60,000 of common stock for cash. 2. Provided $94,000 of services on account. 3. Collected $84,500 cash from accounts receivable. 4. Loaned $10,000 to Swan
> During the first year of operation, Year 1, Direct Service Co. recognized $290,000 of service revenue on account. At the end of Year 1, the accounts receivable balance was $46,000. For this first year in business, the owner believes uncollectible account
> The following transactions apply to Jova Company for Year 1, the first year of operation: 1. Issued $10,000 of common stock for cash. 2. Recognized $210,000 of service revenue earned on account. 3. Collected $162,000 from accounts receivable. 4. Paid $12
> The following trial balance was prepared for Tile, Etc., Inc. on December 31, Year 1, after the closing entries were posted: Tile, Etc. had the following transactions in Year 2: 1. Purchased merchandise on account for $580,000. 2. Sold merchandise that
> Northwest Sales had the following transactions in Year 1: 1. The business was started when it acquired $200,000 cash from the issue of common stock. 2. Northwest purchased $900,000 of merchandise for cash in Year 1. 3. During the year, the company sold m
> The following transactions apply to Hooper Co. for Year 1, its first year of operations: 1. Issued $60,000 of common stock for cash. 2. Provided $90,000 of services on account. 3. Collected $78,000 cash from accounts receivable. 4. Loaned $20,000 to Mosb
> Use the following information to prepare a multistep income statement and a balance sheet for Sherman Equipment Co. for Year 2. $ 69,000 Operating Expenses 100,000 Cash Flow from Investing Activities 24,000 Prepaid Rent 7,800 Land 8,100 Cash Salarle
> Musgrove Basket Company had an $8,500 beginning balance in its Merchandise Inventory account. The following information regarding Musgrove’s purchases and sales of inventory during its Year 1 accounting period was drawn from the company’s accounting reco
> Roth Inc. experienced the following transactions for Year 1, its first year of operations: 1. Issued common stock for $50,000 cash. 2. Purchased $140,000 of merchandise on account. 3. Sold merchandise that cost $110,000 for $250,000 on account. 4. Collec
> The following information is available for Quality Book Sales’ sales on account and accounts receivable: After several collection attempts, Quality Book Sales wrote off $2,850 of accounts that could not be collected. Quality Book Sale
> Ingals Co. issued $10,000 of common stock when the company was started. In addition, Ingals borrowed $20,000 from the local bank on April 1, Year 1. The note had an 8 percent annual interest rate and a one-year term to maturity. Ingals Co. recognized $54
> Ball Company was started in Year 1. The following summarizes transactions that occurred during Year 1: 1. Issued a $40,000 face value discount note to Golden Savings Bank on April 1, Year 1. The note had a 6 percent discount rate and a one-year term to m
> The following accounting information exists for Collie and Spaniel companies: Required: a. Identify the current assets and current liabilities and compute the current ratio for each company. b. Assuming that all assets and liabilities are listed here,
> Use the following information to prepare a multistep income statement and a classified balance sheet for Brown Company for Year 1. (Hint: Some of the items will not appear on either statement, and ending retained earnings must be calculated.) $ 45,0
> The following information is available for the employees of Yui Company for the first week of January Year 1: 1. Sam earns $32 per hour and 1½ times his regular rate for hours over 40 per week. He worked 46 hours the first week in January. Sam’s federal
> 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 $110,000 of salaries, while the
> The following selected transactions were taken from the books of Dodson Company for Year 1: 1. On March 1, Year 1, borrowed $60,000 cash from the local bank. The note had a 6 percent interest rate and was due on September 1, Year 1. 2. Cash sales for the
> On March 6, Year 1, Salon Express purchased merchandise from Hair Fashions with a list price of $19,000, terms 2/10, n/45. On March 10, Salon returned merchandise to Hair Fashions for credit. The list price of the returned merchandise was $8,500. Salon p
> How should each of the following situations be reported in the financial statements? a. It has been determined that one of the company’s products has caused a safety hazard. It is considered probable that liabilities have been incurred and a reasonable e
> The following selected transactions were taken from the books of Ripley Company for Year 1: 1. On February 1, Year 1, borrowed $70,000 cash from the local bank. The note had a 6 percent interest rate and was due on June 1, Year 1. 2. Cash sales for the y
> a. Give an example of a contingent liability that is probable and reasonably estimable. How would this type of liability be shown in the accounting records? b. Give an example of a contingent liability that is reasonably possible or probable but not reas
> 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.
> Malco Enterprises issued $10,000 of common stock when the company was started. In addition, Malco borrowed $36,000 from a local bank on July 1, Year 1. The note had a 6 percent annual interest rate and a one-year term to maturity. Malco Enterprises recog
> Don Terry opened Terry Company, an accounting practice, in Year 1. The following summarizes transactions that occurred during Year 1: 1. Issued a $120,000 face value discount note to First National Bank on July 1, Year 1. The note had an 8 percent discou
> The following accounting information exists for Aspen and Willow companies: Required: a. Identify the current assets and current liabilities and compute the current ratio for each company. b. Assuming that all assets and liabilities are listed here, co
> Rossie Equipment Manufacturing Co. acquired the assets of Alba Inc., a competitor, in Year 1. It recorded goodwill of $70,000 at acquisition. Because of defective machinery Alba had produced prior to the acquisition, it has been determined that all of th
> Use the following information to prepare a multistep income statement and a classified balance sheet for Eller Equipment Co. for Year 1.
> Flannery Company 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 for $1,500,000 a silver mine estimated to contain 100,000
> Jones Shoe shop experienced the following events during Year 1, its first year of operation: 1. Acquired $25,000 cash from the issue of common stock. 2. Purchased inventory for $32,000 cash. 3. Sold inventory costing $19,000 for $36,000 cash. 4. Paid $3,
> Presented here is selected information from the 2013 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
> 000 Tower Company owned a service truck that was purchased at the beginning of Year 1 for $31,000. It had an estimated life of three years and an estimated salvage value of $4,000. Tower Company uses straight-line depreciation. Its financial condition as
> Morris Inc. recorded the following transactions over the life of a piece of equipment purchased in Year 1: Jan. 1, Year 1 Purchased equipment for $90,000 cash. The equipment was estimated to have a five-year life and $5,000 salvage value and was to be de
> The following transactions relate to Academy Towing Service. Assume the transactions for the purchase of the wrecker and any capital improvements occur on January 1 of each year. Year 1 1. Acquired $70,000 cash from the issue of common stock. 2. Purchas
> Banko Inc. manufactures sporting goods. The following information applies to a machine purchased on January 1, Year 1: During Year 1, the machine produced 36,000 units, and during Year 2 it produced 38,000 units. Required: Determine the amount of depr
> Sabel Co. purchased assembly equipment for $500,000 on January 1, Year 1. Sabel’s financial condition immediately prior to the purchase is shown in the following horizontal statements model: The equipment is expected to have a useful
> Bensen Company started business by acquiring $60,000 cash from the issue of common stock on January 1, Year 1. The cash acquired was immediately used to purchase equipment for $50,000 that had a $10,000 salvage value and an expected useful life of four y
> Becker Office Service purchased a new computer system in Year 1 for $40,000. It is expected to have a five-year useful life and a $5,000 salvage value. The company expects to use the system more extensively in the early years of its life. Required: a. C
> 700 Three different companies each purchased trucks on January 1, Year 1, for $50,000. Each truck was expected to last four years or 200,000 miles. Salvage value was estimated to be $5,000. All three trucks were driven 66,000 miles in Year 1, 42,000 mile
> Trinkle Co., Inc. made several purchases of long-term assets in Year 1. The details of each purchase are presented here. New Office Equipment 1. List price: $60,000; terms: 2/10 n/30; paid within discount period. 2. Transportation-in: $1,500. 3. Install
> The following information is available for the employees of Webber Packing Company for the first week of January Year 1: 1. Kayla earns $28 per hour and 1½ times her regular rate for hours over 40 per week. Kayla worked 52 hours the first week in January
> On April 6, Year 1, Home Furnishings purchased $25,200 of merchandise from Una Imports, terms 2/10 n/45. On April 8, Home returned $2,400 of the merchandise to Una Imports for credit. Home paid cash for the merchandise on April 15, Year 1. Required: a.
> Electronics Service Co. pays salaries monthly on the last day of the month. The following information is available from Electronics for the month ended December 31, Year 1: Assume the Social Security tax rate is 6 percent on the first $110,000 of salar
> Tull Bros. uses the allowance method to account for uncollectible accounts expense. Tull experienced the following four events in Year 1: 1. Recognized $68,000 of revenue on account. 2. Collected $62,000 cash from accounts receivable. 3. Determined that
> Reliable Auto Service was started on January 1, Year 1. The company experienced the following events during its first two years of operation: Events Affecting Year 1: 1. Provided $45,000 of repair services on account. 2. Collected $32,000 cash from acco
> The following account balances come from the records of Stone Company: During the accounting period, Stone recorded $21,000 of service revenue on account. The company also wrote off a $180 account receivable. Required: a. Determine the amount of cash
> Sandy’s Accounting Service began operation on January 1, Year 1. The company experienced the following events for its first year of operations: Events Affecting Year 1: 1. Provided $96,000 of accounting services on account. 2. Collected $80,000 cash fro
> Hardin Services Co. experienced the following events in Year 1: 1. Provided services on account. 2. Collected cash for accounts receivable. 3. Attempted to collect an account and, when unsuccessful, wrote off the amount to uncollectible accounts expense.
> Wilkins Enterprises has two hourly employees: Marcia and Clark. Both employees earn overtime at the rate of 1½ times the hourly rate for hours worked in excess of 40 per week. Assume the Social Security tax rate is 6 percent on the first $1
> The following transactions apply to Farmer’s Equipment Sales Corp. for Year 1: 1. The business was started when Farmer’s received $60,000 from the issue of common stock. 2. Purchased $160,000 of merchandise on account.
> The Malon Appliance Co. provides a 120-day parts-and labor warranty on all merchandise it sells. Malon estimates the warranty expense for the current period to be $2,450. During this period, a customer returned a product that cost $1,950 to repair. Requ
> To support himself while attending school, Steve Owens sold computers to other students. During the year, Steve purchased computers for $150,000 and sold them for $280,000 cash. He provided his customers with a one-year warranty against defects in parts
> Milo Clothing experienced the following events during Year 1, its first year of operation: 1. Acquired $30,000 cash from the issue of common stock. 2. Purchased inventory for $15,000 cash. 3. Sold inventory costing $9,000 for $20,000 cash. 4. Paid $1,500
> The following legal situations apply to Zier Corp. for Year 1: 1. A customer slipped and fell on a slick floor while shopping in the retail store. The customer has filed a $5 million lawsuit against the company. Zier’s attorney knows that the company wil
> The following selected transactions apply to Fast Stop for November and December Year 1. November was the first month of operations. Sales tax is collected at the time of sale but is not paid to the state sales tax agency until the following month. 1. Ca
> The Tiger Book Store sells books and other supplies to students in a state where the sales tax rate is 7 percent. The Tiger Book Store engaged in the following transactions for Year 1. Sales tax of 7 percent is collected on all sales. 1. Book sales, not
> Danny Bell started Bell Company on January 1, Year 1. The company experienced the following events during its first year of operation: 1. Earned $3,000 of cash revenue for performing services. 2. Borrowed $4,800 cash from the bank. 3. Adjusted the accoun
> Bricca Co. issued a $60,000 face value discount note to First Bank on June 1, Year 1. The note had a 6 percent discount rate and a one year term to maturity. Required: Prepare general journal entries for the following transactions: a. The issuance of th
> Jim Hanks borrowed money by issuing two notes on January 1, Year 1. The financing transactions are described next. 1. Borrowed funds by issuing a $60,000 face value discount note to State Bank. The note had an 8 percent discount rate, a one-year term to
> Mark Miller started a moving company on January 1, Year 1. On March 1, Year 1, Miller borrowed cash from a local bank by issuing a one-year $80,000 face value note with annual interest based on a 12 percent discount. During Year 1, Miller provided servic
> The following information was drawn from the balance sheets of the Augusta and Reno companies: Required: a. Compute the current ratio for each company. b. Which company has the greater likelihood of being able to pay its bills? c. Assume that both comp
> Use the following information to prepare a classified balance sheet for Latimer Co. at the end of Year 1: $36,200 12,400 29,650 50,000 45,500 38,300 36,400 36,250 3,600 Accounts receivable Accounts payable Cash Common stock Long-term notes payable M
