What guidance does the accounting constraint of conservatism offer?
> Refer to Apple’s balance sheet in Appendix A. What is the amount of Apple’s accounts payable as of September 28, 2013? Apple’s Balance Sheet from Appendix A: Apple Inc. CONSOLIDATED BALANCE SHEE
> What amount of income tax is withheld from the salary of an employee who is single with two withholding allowances and earning $725 per week? What if the employee earned $625 and has no withholding allowances? (Use Exhibit 11A.6.) Exhibit 11A.6: SI
> What is a wage bracket withholding table?
> What is the difference between a current and a long-term liability?
> What accounting concept justifies charging low-cost plant asset purchases immediately to an expense account?
> Why is the Modified Accelerated Cost Recovery System not generally accepted for financial accounting purposes?
> Why is the cost of a lump-sum purchase allocated to the individual assets acquired?
> What is different between land and land improvements?
> Refer to the December 31, 2013, balance sheet of Samsung in Appendix A. What long-term assets discussed in this chapter are reported by the company? Samsung’s Balance Sheet from Appendix A: / Samsung Electronics Co., Ltd. and i
> What is the general rule for cost inclusion for plant assets?
> Assume that a company buys another business and pays for its goodwill. If the company plans to incur costs each year to maintain the value of the goodwill, must it also amortize this goodwill?
> Refer to Samsung’s balance sheet in Appendix A. What does it title its plant assets? What is the book value of its plant assets at December 31, 2013? Samsung’s Balance Sheet from Appendix A: / /
> Refer to Google’s recent balance sheet in Appendix A. What property, plant and equipment assets does Google list on its balance sheet? What is the book value of its total net property, plant and equipment assets at December 31, 2013? G
> On its recent balance sheet in Appendix A, Apple lists its plant assets as “Property, plant and equipment, net.” What does “net” mean in this title? Apple Balance Sheet from Appendi
> How is total asset turnover computed? Why would a financial statement user be interested in total asset turnover?
> What are the characteristics of an intangible asset?
> Is the declining-balance method an acceptable way to compute depletion of natural resources? Explain.
> What is the process of allocating the cost of natural resources to expense as they are used?
> What characteristics of a plant asset make it different from other assets?
> Explain the accounting constraint of materiality.
> Why should cash receipts be deposited on the day of receipt?
> When do we know that a company has goodwill? When can goodwill appear in a company’s balance sheet?
> What is a petty cash receipt? Who should sign it?
> Which of the following assets—inventory, building, accounts receivable, or cash—is most liquid? Which is least liquid?
> What are the limitations of internal controls?
> When a store purchases merchandise, why are individual departments not allowed to directly deal with suppliers?
> Why should the person who keeps the records of an asset not be the person responsible for its custody?
> Why should responsibility for related transactions be divided among different departments or individuals?
> Internal control procedures are important in every business, but at what stage in the development of a business do they become especially critical?
> Apple’s statement of cash flows in Appendix A describes changes in cash and cash equivalents for the year ended September 28, 2013. What total amount is provided (used) by investing activities? What amount is provided (used) by financin
> List the seven broad principles of internal control.
> When a general journal entry is used to record sales returns, the credit of the entry must be posted twice. Does this cause the trial balance to be out of balance? Explain.
> What general procedures are applied in accounting for the acquisition and potential cost allocation of intangible assets?
> When special journals are used, they are usually used to record each of four different types of transactions. What are these four types of transactions?
> What purpose is served by the output devices of an accounting system?
> What is the difference between data that are stored off-line and data that are stored online?
> What is the purpose of an input device? Give examples of input devices for computer systems.
> What are source documents? Give two examples.
> Locate “Note 15” that reports Google’s geographical segments from its 2013 annual report on its website (Google.com). Identify its geographical segments and list the revenues for each.
> Why should sales to and receipts of cash from credit customers be recorded and posted immediately?
> Describe the procedures involving the use of copies of a company’s sales invoices as a sales journal.
> What are five basic components of an accounting system?
> When preparing interim financial statements, what two methods can companies utilize to estimate cost of goods sold and ending inventory?
> Samsung’s balance sheet in Appendix A reports the change in cash and equivalents for the year ended December 31, 2013. Identify the cash generated (or used) by operating activities, by investing activities, and by financing (funding) ac
> What factors contribute to (or cause) inventory shrinkage?
> Buyers negotiate purchase contracts with suppliers. What type of shipping terms should a buyer attempt to negotiate to minimize freight-in costs?
> Refer to the income statement of Samsung in Appendix A. Does its income statement report a gross profit figure? If yes, what is the amount? Income Statement of Samsung from Appendix A: Samsung Electronics Co, Ltd. and its subsidiaries CONSOLIDATED
> Refer to the income statement for Samsung in Appendix A. What does Samsung title its cost of goods sold account? Income Statement of Samsung from Appendix A: Samsung Electronics Co, Ltd. and its subsidiaries CONSOLIDATED STATEMENTS OF INCOME (In mi
> Refer to Google’s income statement in Appendix A. What title does it use for cost of goods sold? Google’s Income Statement from Appendix A: CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts
> What is the meaning of market as it is used in determining the lower of cost or market for inventory?
> Explain the following statement: “Inventory errors correct themselves.”
> What notations are entered into the Posting Reference column of a ledger account?
> Does the accounting concept of consistency preclude any changes from one accounting method to another?
> Locate “Note 11” that reports Apple’s segments from its September 28, 2013, annual report on its website (Apple.com). Compute the ratio “Operating income/Net sales” for each segment. Comment on the results.
> Can a company change its inventory method each accounting period? Explain.
> What does the full-disclosure principle prescribe if a company changes from one acceptable accounting method to another?
> If costs are declining, will the LIFO or FIFO method of inventory valuation yield the lower cost of goods sold? Why?
> What are the five fundamental principles of accounting information systems?
> Where is the amount of merchandise inventory disclosed in the financial statements?
> Describe how costs flow from inventory to cost of goods sold for the following methods: (a) FIFO and (b) LIFO.
> Management uses a voucher system to help control and monitor cash disbursements. Which of the four documents listed below are prepared as part of a voucher system of control? ______ a. Purchase order ______ b. Outstanding check ______ c. Invoice _____
> A good system of internal control for cash provides adequate procedures for protecting both cash receipts and cash disbursements. Identify each of the following statements as either true or false regarding this protection. ______ a. A basic guideline for
> Choose from the following list of terms/phrases to best complete the following statements. a. Cash b. Cash equivalents c. Outstanding check d. Liquidity e. Bank reconciliation f. Current assets 1. The ______ category includes currency and coins along
> An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies. Evaluate each of the following statements and indicate which are
> Refer to Google’s financial statements in Appendix A. Identify Google’s net earnings (income) for the year ended December 31, 2013. Is its net earnings equal to the increase in cash and cash equivalents for the year? E
> Enter the letter of each system principle in the blank next to its best description. A. Control principle B. Relevance principle C. Compatibility principle D. Flexibility principle E. Cost-benefit principle ______ 1. The principle prescribes the accoun
> Identify the most likely role in an accounting system played by each of the numbered items 1 through 12 by assigning a letter from the list A through E on the left. A. Source documents B. Input devices C. Information processors D. Information storage E.
> Wilcox Electronics uses a sales journal, a purchases journal, a cash receipts journal, a cash disbursements journal, and a general journal as illustrated in this chapter. Wilcox recently completed the following transactions a through h. Identify the jour
> A solar company invests in the following securities. Identify those investments as either an investment in debt (D) securities or equity (E) securities. ______ a. U.S. treasury bonds ______ b. Google stock ______ c. Certificate of deposit ______ d. Ap
> Complete the following descriptions by filling in the blanks. 1. The controlling investor is called the ______, and the investee is called the ______. 2. A long-term investment classified as equity securities with controlling influence implies that the i
> Which of the following statements a through g are true of long-term investments? ______ a. They are held as an investment of cash available for current operations. ______ b. They can include funds earmarked for a special purpose, such as bond sinking fun
> 1. Prepare the journal entry to record Tamasine Company’s issuance of 5,000 shares of $100 par value, 7% cumulative preferred stock for $102 cash per share. 2. Assuming the facts in part 1, if Tamasine declares a year-end cash dividend, what is the amoun
> The stockholders’ equity section of Jun Company’s balance sheet as of April 1 follows. On April 2, Jun declares and distributes a 10% stock dividend. The stock’s per share market value on April 2 is $
> Prepare the issuer’s journal entry for each of the following separate transactions. a. On March 1, Atlantic Co. issues 42,500 shares of $4 par value common stock for $297,500 cash. b. On April 1, OP Co. issues no-par value common stock for $70,000 cash.
> Prepare the journal entry to record Jevonte Company’s issuance of 36,000 shares of its common stock assuming the shares have a: a. $2 par value and sell for $18 cash per share. b. $2 stated value and sell for $18 cash per share.
> Locate “Note 11” that reports Apple’s segments from its September 28, 2013, annual report on its website (Apple.com). Identify its segments and list the net sales for each.
> Foxburo Company expects to pay a $2.34 per share cash dividend this year on its common stock. The current market value of Foxburo stock is $32.50 per share. Compute the expected dividend yield on the Foxburo stock. Would you classify the Foxburo stock as
> Answer the following questions related to a company’s activities for the current year: 1. A review of the notes payable files discovers that three years ago the company reported the entire amount of a payment (principal and interest) on an installment no
> On May 3, Zirbal Corporation purchased 4,000 shares of its own stock for $36,000 cash. On November 4, Zirbal reissued 850 shares of this treasury stock for $8,500. Prepare the May 3 and November 4 journal entries to record Zirbal’s purchase and reissuanc
> Howe and Duley’s company is organized as a partnership. At the prior year-end, partnership equity totaled $150,000 ($100,000 from Howe and $50,000 from Duley). For the current year, partnership net income is $24,990 ($20,040 allocated to Howe and $4,950
> The Field, Brown & Snow partnership was begun with investments by the partners as follows: Field, $131,250; Brown, $165,000; and Snow, $153,750. The operations did not go well, and the partners eventually decided to liquidate the partnership, sharing all
> Amy and Lester are partners in operating a store. Without consulting Amy, Lester enters into a contract to purchase merchandise for the store. Amy contends that she did not authorize the order and refuses to pay for it. The vendor sues the partners for t
> Merger Co. has 10 employees, each of whom earns $2,000 per month and has been employed since January 1. FICA Social Security taxes are 6.2% of the first $117,000 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. FUTA taxes are 0.6% a
> On November 7, 2015, Mura Company borrows $160,000 cash by signing a 90-day, 8% note payable with a face value of $160,000. (1) Compute the accrued interest payable on December 31, 2015, (2) prepare the journal entry to record the accrued interest expe
> Dextra Computing sells merchandise for $6,000 cash on September 30 (cost of merchandise is $3,900). The sales tax law requires Dextra to collect 5% sales tax on every dollar of merchandise sold. Record the entry for the $6,000 sale and its applicable sal
> Garcia Co. owns equipment that cost $76,800, with accumulated depreciation of $40,800. Garcia sells the equipment for cash. Record the sale of the equipment assuming Garcia sells the equipment for (1) $47,000 cash, (2) $36,000 cash, and (3) $31,000 ca
> Refer to Samsung’s balance sheet in Appendix A. How does its cash (titled “Cash and cash equivalents”) compare with its other current assets (both in amount and percent) as of December 31, 2013? Compare and assess its cash at December 31, 2013, with its
> 1. Classify the following as either a revenue expenditure or a capital expenditure. ______ a. Paid $40,000 cash to replace a compressor on a refrigeration system that extends its useful life by four years. ______ b. Paid $200 cash per truck for the cost
> A fleet of refrigerated delivery trucks is acquired on January 5, 2015, at a cost of $830,000 with an estimated useful life of eight years and an estimated salvage value of $75,000. Compute the depreciation expense for the first three years using the dou
> Answer each of the following related to international accounting standards. a. Accounting for plant assets involves cost determination, depreciation, additional expenditures, and disposals. Is plant asset accounting broadly similar or dissimilar between
> Caleb Co. owns a machine that costs $42,400 with accumulated depreciation of $18,400. Caleb exchanges the machine for a newer model that has a market value of $52,000. (1) Record the exchange assuming Caleb paid $30,000 cash and the exchange has commerc
> On August 2, 2015, Jun Co. receives a $6,000, 90-day, 12% note from customer Ryan Albany as payment on his $6,000 account. (1) Compute the maturity date for this note. (2) Prepare Jun’s journal entry for August 2.
> Warner Company’s year-end unadjusted trial balance shows accounts receivable of $99,000, allowance for doubtful accounts of $600 (credit), and sales of $280,000. Uncollectibles are estimated to be 1.5% of accounts receivable. 1. Prepare the December 31 y
> Gomez Corp. uses the allowance method to account for uncollectibles. On January 31, it wrote off an $800 account of a customer, C. Green. On March 9, it receives a $300 payment from Green. 1. Prepare the journal entry or entries for January 31. 2. Prepar
> Answer each of the following related to international accounting standards. a. Explain (in general terms) how the accounting for recognition of receivables is different between IFRS and U.S. GAAP. b. Explain (in general terms) how the accounting for valu
> The following data are taken from the comparative balance sheets of Ruggers Company. Compute and interpret its accounts receivable turnover for year 2015 (competitors average a turnover of 7.5). 2015 2014 Accounts receivable, net. $153,400 $138,500
> The following annual account balances are taken from Armour Sports at December 31. What is the change in the number of days’ sales uncollected between years 2014 and 2015? (Round the number of days to one decimal.) According to this a
> Credits to customer accounts and credits to Other Accounts are individually posted from a cash receipts journal such as the one in Exhibit 7.7. Why not put both types of credits in the same column and save journal space? Exhibit 7.7: Tasks Reports
> An entrepreneur commented that a bank reconciliation may not be necessary as she regularly reviews her online bank statement for any unusual items and errors. a. Describe how a bank reconciliation and an online review (or reading) of the bank statement a
> For each of the following items a through g, indicate whether its amount (1) affects the bank or book side of a bank reconciliation, (2) represents an addition or a subtraction in a bank reconciliation, and (3) requires an adjusting journal entry.
