What are some of the uses of financial statements?
> Christopher Foley, an attorney, has a law corporation, Christopher Foley, Attorney, Inc.,that began the year with total assets of $145,000, total liabilities of $70,000, and stockholders’ equity of $75,000. During the year, Christopher Foley, Attorney, I
> True or false: If the trial balance is in balance, the financial statements will be accurate. Why or why not?
> Match each of the following items with its location in the expanded accounting equation. Use the most detailed category appropriate: ______ 1. Utilities Expense ______ 2. Accounts Receivable ______ 3. Common Stock ______ 4. Office Supplies ______ 5.
> The balance sheet reports a. financial position on a specific date. b. results of operations on a specific date. c. results of operations for a specific period. d. financial position for a specific period
> At December 31, 2014, Island Equipment understated ending inventory by $2,500. How does this error affect cost of goods sold and net income for 2014? a. Understates costs of goods sold and overstates net income b. Leaves both cost of goods sold and net i
> Under which of the inventory methods, periodic or perpetual, would a company be better equipped to detect inventory shrinkage? Why
> Suppose Paul’s Hardware sells merchandise on account, terms 1/10, n/45, for $920 (cost of the inventory is $550) on March 17, 2016. Paul’s Hardware later received $290 of goods (cost, $175) as sales returns on March 21, 2016. The customer paid the balanc
> Which journal entry records obtaining a bank loan of $10,000?
> The income statement format that shows important subtotals is referred to as a. a subtotaled income statement. b. a single-step income statement. c. a multi-step income statement. d. a classified income statement.
> What is the difference between a single-step and multi-step income statement? For what type of business is a multi-step income statement most appropriate?
> How is the accounting equation affected by each of these transactions? a. Owners contribute cash to start the business in exchange for common stock. b. The company borrows money from the bank. c. The company provides services for a client who promises to
> Journalize the following adjusting entries at August 31: 1. Services provided but not recorded, $2,700 2. Salaries earned by employees but not recorded, $3,200 3. Accrued interest on a note payable, $260
> What do closing entries accomplish? a. Bring the Retained Earnings account to its correct ending balance b. Transfer revenues, expenses, and dividends to retained earnings c. Zero out the revenues, expenses, and dividends to prepare them for the next acc
> Describe the type of transaction that gives rise to a deferred revenue journal entry during the year. Why might deferred revenues require adjustment?
> Complete the following table. For each account listed, identify the type of account, how the account is increased (debit or credit), and how the account is decreased (debit or credit). Use the most detailed account type appropriate.
> The Blue Ox Restaurant recorded a cash collection on account by debiting Cash and crediting Accounts Payable. What will the trial balance show for this error? a. Too much for liabilities b. Too much for assets c. The trial balance will not balance. d. Bo
> Distinguish between journalizing and posting.
> Sanchez Towing Service, Inc., earns service revenue by towing vehicles for AAA. Sanchez Towing Service’s main expenses are the salaries paid to its employees. Account for thefollowing transactions in the expanded accounting equation: a. Sanchez Towing Se
> You learned in this chapter that Cash is increased with a debit. When you deposit your paycheck in your account, however, the teller might say that he or she is going to credit your account. Why?
> Consider the overall effects of the transactions in questions 5, 6, and 7 on Wave Rider.What is Wave Rider’s net income or net loss? a. Net loss of $4,000 b. Net income of $46,000 c. Net income of $14,000 d. It cannot be determined from the data given.
> Which of the following is most closely linked to the accounting principle of conservatism? a. Consistency principle b. Disclosure principle c. Lower-of-cost-or-market rule d. Materiality concept
> Describe some business and economic conditions that might make the lower-of-cost-or market rule more likely to result in a write-down of inventory.
> Suppose Peter’s Hardware sells merchandise on account, terms 2/10, n/30, for $640 (cost of the inventory is $360) on March 17, 2016. Peter’s Hardware later received $185 of goods (cost, $110) as sales returns on March 21, 2016. The customer paid the bala
> An asset is classified as current if it a. will last longer than one year. b. will become cash, be sold, or be used up within 12 months. c. was purchased within the last six months. d. was purchased with cash
> What does the term “free on board” mean? Why is this an important term to understand if you are involved in making decisions about the purchasing of inventory or the setting of prices for your products?
> What is the fundamental accounting equation? Define each of the components of thisequation.
> Backcountry, Inc., an outdoor magazine, collected $2,700 on June 1 for one-year subscriptions from subscribers in advance. Journalize and post the adjusting entry on December 31 to record the revenue that Backcountry, Inc., has earned, assuming no other
> Which of the following accounts is not closed? a. Salaries Expense b. Dividends c. Accumulated Depreciation, Equipment d. Service Revenue
> What type of account (asset, liability, revenue, or expense) would Joe’s Towing Company debit when it pays (credits) cash for each of the following transactions? a. Pays $100 to fill tow truck with gas b. Pays $1,000 to have a gas company deliver gas for
> Boehms, Inc., has cash of $36,000, supplies costing $1,500, and stockholders’ equityof $28,000. Determine the liabilities of the business. Write the accounting equation forBoehms, Inc.
> Calculate each account balance.
> RV Wholesale, Inc., paid $1,200 for supplies and purchased additional supplies on accountor $1,000. RV Wholesale, Inc., also paid $200 of the accounts payable. What is the balancen the Supplies account? a. $1,200 b. $1,000 c. $2,400 d. $2,200
> What would be the implications of a credit balance in the Cash account?
> Qwick Care Clinic, Inc., started a business when Dr. Hamm purchased $15,000 of commonstock in the business for cash. Before starting operations, Qwick Care Clinic, Inc., borrowed$18,000 cash by signing a note payable to 1st National Bank. Account for the
> Assume that Wave Rider paid expenses totaling $32,000. How does this transaction affectWave Rider’s accounting equation? a. Increases assets and decreases liabilities b. Decreases both assets and stockholders’ equity c. Increases both assets and stockhol
> Which of the following prevents a company from switching its inventory costing methodto a different method each year? a. Consistency principle b. Materiality concept c. Matching principle d. Disclosure principle
> Let’s say that two companies, identical in every way except that one used FIFO and one used LIFO, went into a bank on the same day to get a loan to deal with the rising cost of acquiring inventory. Despite the fact that they both engaged in the same tran
> Journalize the following transactions for the Pool Palace. Explanations are not required. a. Sold $81,000 of merchandise to Regal Spas, Inc., on account, terms 4/15, n/60; the merchandise cost the Pool Palace $44,500 b. Received payment for the goods fr
> If Holiboards, Inc., returned $2,750 of snowboards to a supplier, which of the following entries would be used to record the transaction?
> What is a credit memorandum? Give an example of the type of transaction in which it would be used.
> Assume that Wave Rider sold skateboards to another department store for $18,000 onaccount. Which parts of the accounting equation does a sale on account affect? a. Accounts Payable and Cash b. Accounts Receivable and Retained Earnings c. Accounts Receiva
> In a period of rising inventory costs, which cost-flow assumption would produce the highest net income? Why?
> Journalize the following transactions for Jammin’ Joe’s music store. a. Purchased $4,200 of merchandise on account, terms 3/15, n/30, FOB shipping point b. Paid $140 to the freight company for the delivery of the merchandise purchased c. Paid for the in
> Suppose Perfect Picture Photography Supply’s Inventory account showed a balance of $44,700. A physical count showed $43,300 of goods on hand. To adjust the inventory account, Perfect Picture Photography Supply, Inc., would make which of the following ent
> What kind of account is Sales Returns and Allowances? Where would it appear on thefinancial statements?
> The April 30, 2016, adjusted trial balance of The Grind Finale, Inc., is shown next. Requirements 1. Prepare the April closing entries for The Grind Finale, Inc. 2. Calculate the ending balance in Retained Earnings. 3. Prepare a post-closing trial ba
> The adjusted trial balance for Bayside Realty, Inc., at November 30, 2016, follows: Requirements 1. Prepare Bayside Realty’s income statement and statement of retained earnings for the year ended November 30, 2016, and year-end balance sheet. List ex
> Fischer Remodeling, Inc., completed the following selected transactions and prepared these adjusting entries during August: Requirements 1. State whether the transaction would increase revenues, decrease revenues, increase expenses, decrease expenses
> The trial balance of A-1 Web Design, Inc., at June 30, 2016, and the data needed for the month-end adjustments follow: a. Insurance coverage still remaining at June 30, $575 b. Supplies used during the month, $875 c. Depreciation for the month, $1,65
> Julie’s Flower Shop’s Office Supplies balance on October 1 is $1,200, and the balance in Office Supplies Expense is $0. On October 31, $480 of supplies are on hand. Journalize and post the adjusting entry on October 31 for the supplies used. Compute the
> Unearned Revenue is always a. revenue. b. stockholders’ equity. c. a liability. d. an asset.
> Why do companies prepare adjusting entries?
> Demonstrate your knowledge of accounting terminology by filling in the blanks toreview some key definitions. Dillon Baker is describing the accounting process for a friend who is a psychology major. Dillon states, “The basic summary device in accounting
> Posting a $500 purchase of supplies on account appears as which of the following? a. b. c. d.
> What is a “normal balance”? What are normal balances for the following accounts? a. Accounts Receivable b. Prepaid Expenses c. Notes Payable d. Retained Earnings e. Salaries Expense
> Ellen Beach owns Ellen’s Lawncare Service. The business has cash of $13,000 andequipment that costs $35,000. Debts of the business include accounts payable of$9,000 and a $5,000 note payable. Determine the amount of stockholders’ equity Ellenhas in the b
> Assume that Wave Rider sold skateboards to a department store for $28,000 cash. Howwould this transaction affect Wave Rider’s accounting equation? a. Increase both assets and stockholders’ equity by $28,000 b. Will not affect the accounting equation beca
> Assume BAL, Inc., began March with 95 units of inventory that cost a total of $1,710. During March, BAL, Inc., purchased and sold goods as follows: BAL, Inc., uses perpetual inventory. Under the average cost inventory method, how much is BAL’s cost o
> If a company had two units that cost $1 each in its beginning inventory and purchased two more units for $2 each, what would be the gross profit reported on the income statement under each of the following assumptions if three units were sold for $3 each
> Regal Spas, Inc., purchased $11,800 worth of inventory from the Pool Palace on account, terms of 2/10, n/30. Some of the goods are damaged in shipment, so Regal Spas, Inc., returns $2,300 of the merchandise to the Pool Palace. Journalize the following tr
> Suppose Riley Electronics, Inc., had sales of $280,000 and sales returns of $26,000. Cost of goods sold was $112,000. How much gross profit did Riley Electronics, Inc., report? a. $168,000 b. $142,000 c. $194,000 d. $254,000
> How many accounts are involved in recording the sale of merchandise on credit?
> Assume the unadjusted and adjusted trial balances for Affordable Pet Dental, Inc., at September 30, 2016, show the following data: Requirement 1. Journalize the adjusting entries that account for the differences between the two trial balances.
> Use the data for Lake City Industries, Inc., from P4-48B. Information P4-48B: The accounts for the year ended October 31, 2016, for Lake City Industries, Inc., are listed next: Requirements 1. Calculate the earnings per share for Lake City Industries
> Journalize the adjusting entries needed at December 31, the end of the current accounting year, for each of the following independent cases affecting Canyon Motorsports, Inc. No other adjusting entries have been made for the year. a. Prior to making the
> The accounts for the year ended October 31, 2016, for Lake City Industries, Inc., are listed next: Requirements 1. Prepare Lake City Industries, Inc.’s multi-step income statement. 2. Prepare Lake City Industries, Inc.’s statement of retained earning
> The September 30, 2016, adjusted trial balance of Java Hut, Inc., is shown next. Requirements 1. Prepare the September closing entries for Java Hut, Inc. 2. Calculate the ending balance in Retained Earnings. 3. Prepare a post-closing trial balance
> The adjusted trial balance Checker Flag Auto, Inc., as of January 31, 2016, is presented next: Requirements 1. Prepare the multi-step income statement for January for Checker Flag Auto, Inc. 2. Calculate the gross profits percentage for January for C
> The adjusted trial balance of Valley Realty, Inc., at December 31, 2016, follows: Requirements 1. Prepare Valley Realty’s income statement and statement of retained earnings for the year ending December 31, 2016, and year-end balance sheet. List expe
> The following transactions for Westcoast Tire, Co., occurred during July: Requirements 1. Journalize the transactions on the books of Westcoast Tire, Co. 2. What was Westcoast Tire’s gross proft for the month of July?
> Warren Enterprises, Inc., completed the following selected transactions and prepared these adjusting entries during March: Requirements 1. State whether the transaction would increase revenues, decrease revenues, increase expenses, decrease expenses,
> The following transactions occurred between Sasaki’s Fine Furnishings and C & C Furniture Warehouse during May of the current year: Requirements 1. Journalize these transactions on the books of Sasaki’s Fine Furnishings. 2. Journalize these transacti
> The trial balance of Designs by Jill, Inc., at September 30, 2016, and the data needed for the month-end adjustments follow: a. Insurance coverage still remaining at September 30, $1,950 b. Supplies used during the month, $900 c. Depreciation for the
> The following sale-related transactions for Olympia Hardware, Inc., occurred during the month of October. Requirement 1. Journalize the transactions for Olympia Hardware, Inc. Omit explanations.
> Assume the unadjusted and adjusted trial balances for Davis Chiropractic, Inc., at April 30, 2016, show the following data: Requirement 1. Journalize the adjusting entries that account for the differences between the two trial balances.
> The following purchase-related transactions for Chandler Industries, Inc., occurred during the month of March Requirement 1. Journalize the transactions for Chandler Industries, Inc. Omit explanations
> The following errors occurred in the accounting records of Wilburton Electronics, Inc.: a. The company accountant recorded the receipt of cash for service revenue by debit ing Cash for $1,640 instead of the correct amount of $1,460. Service Revenue was a
> Use the data for River City Fabrication, Inc., from P4-41A. Information P4-41A: The account balances for the year ended December 31, 2016, for River City Fabrication, Inc., are listed next: Requirements 1. Calculate the earnings per share for River C
> Journalize the adjusting entry needed at December 31, the end of the current accounting year, for each of the following independent cases affecting Premier Powersports, Inc. No other adjusting entries have been made for the year. a. Prior to making the a
> The accounts of Wellington Electronics Repair, Inc., follow with their normal balances at October 31, 2016. The accounts are listed in no particular order. Requirements 1. Prepare the company’s trial balance at October 31, 2016, listing accounts in t
> The account balances for the year ended December 31, 2016, for River City Fabrication, Inc., are listed next: Requirements 1. Prepare River City Fabrication, Inc.’s multi-step income statement. 2. Prepare River City Fabrication, Inc.’s statement of r
> The following is the adjusted trial balance of Health Services, Inc., for December 31, 2016. Requirement 1. Journalize the closing entries at December 31.
> The IT manager of Highland Realty, Inc., prepared the balance sheet of the company while the accountant was ill. The balance sheet contains numerous errors. In particular, the IT manager knew that the balance sheet should balance, so she plugged in the r
> The adjusted trial balance for Motion Auto, Inc., as of June 30, 2016, is presented next: Requirements 1. Prepare the multi-step income statement for June for Motion Auto, Inc. 2. Calculate the gross profit percentage for June for Motion Auto, Inc. 3
> The following post-closing trial balance was prepared for Speedy Prints, Inc., but some balances were entered in the wrong column. Prepare a corrected post-closing trial balance. Assume all accounts have normal balances and the amounts are correct.
> The trial balance for Security Systems, Inc., at May 15, 2016, follows: During the remainder of May, Security Systems, Inc., completed the following transactions: Requirements 1. Journalize the transactions that occurred May 16 to May 31 on page
> What are some reasons why accounting has adopted “historical” financial statements asthe model? What are some disadvantages associated with presenting “historical” financial statements?
> Julie’s Flower Shop’s Prepaid Rent balance is $4,500 on July 1. This prepaid rent represents six months’ rent. Journalize and post the adjusting entry on July 31 to record one month’s rent. Compute the balances of the two accounts involved on July 31.
> Assume the weekly payroll of ASR, Inc., is $4,500. Employees work five days per week, Monday through Friday. December 31, the end of the year, falls on Wednesday, but the company won’t pay employees for the full week until its usual payday, Friday. What
> What is a deferral? Under which basis of accounting, cash or accrual, would deferrals come into play? Under what circumstances would a company record a deferral?
> For each of the following accounts, indicate the account type by labeling it as an asset (A), liability (L), stockholders’ equity (SE), revenue (R), or expense (E). Also give the digiteach account number would begin with in the chart of accounts. Use the
> Cathy’s Catering, Inc., purchased $200 of supplies on account. The journal entry to recordthis transaction is denoted by which of the following?
> Distinguish between an event and a transaction. Are all transactions events? Are all events transactions? Why or why not? What are the implications of your answers with respect to journal entries?
> Determine the missing amounts in the following accounting equations.
> Wave Rider is famous for custom skateboards. At the end of a recent year, Wave Rider’stotal assets added up to $884,000 and stockholders’ equity was $187,000. How muchdid Wave Rider owe creditors? a. $1,071,000 b. $884,000 c. $697,000 d. $187,000
> Assume BAL, Inc., began March with 95 units of inventory that cost a total of $1,710. During March, BAL, Inc., purchased and sold goods as follows: BAL, Inc., uses perpetual inventory. Under the FIFO inventory method, how much is BAL’s cost of goods
> If a company had two units that cost $1 each in its beginning inventory and purchased two more units for $2 each, what would be the cost of goods sold associated with a sale of three units under each of the following assumptions? a. FIFO b. LIFO c. Avera
> Regal Spas, Inc., purchased $17,400 worth of inventory from the Pool Palace on account, terms of 1/10, n/30. Some of the goods are damaged in shipment, so Regal Spas, Inc., returns $1,600 of the merchandise to the Pool Palace. How much must Regal Spas, I
> Water Works Pool Supply, Inc., purchased inventory for $2,700 and paid $70 freight to have the inventory delivered. Water Works Pool Supply, Inc., returned $125 of the goods to the seller and later took a 3 percent purchase discount. What is the final co
> What do the terms 2/10, n/30 mean? If you were advising a company that bought goods under these terms, what would you advise it to do with respect to payment? Why?
