What is a business liquidation?
> Davos Company performed services on account for $160,000 in Year 1. Davos collected $120,000 cash from accounts receivable during Year 1, and the remaining $40,000 was collected in cash during Year 2. Required: a. Record the Year 1 transactions in T-acc
> Required Record each of the following Fred Co. events in T-accounts, and then explain how the event affects the accounting equation: a. Received $20,000 cash by issuing common stock. b. Purchased supplies for $1,000 cash c. Purchased land for $10,000 ca
> Required: For each of the following T accounts, indicate the side of the account that should be used to record an increase or decrease in the account balance: Cash Account Payable Common Stock Debit Credit Debit Credit Debit Credit Accounts Recelvab
> Identify whether each of the following transactions is an asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Also explain how each event affects the accounting equation by placing a + for increase, − for de
> For each of the following independent events, identify the account that would be debited and the account that would be credited. The accounts for the first event are identified as an example. a. Received cash by issuing common stock. b. Received cash f
> a. In parallel columns, list the accounts that would be debited and credited for each of the following unrelated transactions: (1) Acquired cash from the issue of common stock. (2) Provided services for cash. (3) Paid cash for salaries expense. (4) Purch
> Indicate whether each of the following accounts normally has a debit balance or a credit balance: a. Salaries Expense b. Consulting Revenue c. Unearned Revenue d. Accounts Payable e. Dividends f. Land g. Salaries Payable h. Cash i. Prepaid Insurance j. C
> a. Describe some ways that U.S. GAAP and IFRS are different. b. How are U.S. GAAP and IFRS alike for reporting purposes?
> Assume that Kevin has been working for you for five years. He has had an excellent work history and has received generous pay raises in response. The raises have been so generous that Kevin is quite overpaid for the job he is required to perform. Unfortu
> The following information was drawn from the balance sheets of two companies: Required: a. Compute the debt-to-assets ratio to measure the level of financial risk of both companies. b. Compare the two ratios computed in Requirement a to identify which
> At the beginning of Year 2, Oak Consulting had the following normal balances in its accounts: The following events apply to Oak Consulting for Year 2: 1. Provided $185,000 of services on account. 2. Incurred $45,800 of operating expenses on account. 3.
> The following financial information was taken from the books of Zone Health Club, a small spa and fitness club: Required: a. Prepare the journal entries necessary to close the temporary accounts at December 31, Year 2, for Zone Health Club. b. What is
> Required: 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 ind
> On December 31, Year 2, Morgan Company had the following normal account balances in its general ledger. Use this information to prepare a trial balance. Land $30,000 Unearned Revenue 32,000 8,000 5,600 Dividends Prepaid Rent 90,000 18,000 7,000 80,0
> The following events apply to Equipment Services Inc. in its first year of operation: 1. Acquired $60,000 cash from the issue of common stock. 2. Received an $8,200 cash advance for services to be provided in the future. 3. Purchased $2,000 of supplies o
> The following events apply to Montgomery Company for Year 1, its first year of operation: 1. Received cash of $36,000 from the issue of common stock. 2. Performed $48,000 of services on account. 3. Incurred $6,500 of other operating expenses on account.
> On December 31, Year 1, BIG Company had accrued salaries of $6,400. Required: a. Record in general journal format the adjustment required as of December 31, Year 1. b. Show the above adjustment in a horizontal statements model like the following one:
> Cherokee Company began operations when it issued common stock for $80,000 cash. It paid $60,000 cash in advance for a one-year contract to lease delivery equipment for the business. It signed the lease agreement on March 1, Year 1, which was effective im
> Required: Record each of the following transactions in general journal form and then show the effect of the transaction in a horizontal statements model. The first transaction is shown as an example. a. Performed $8,200 of services on account. b. Colle
> The following data are based on information in the 2016 annual reports of Abercrombie & Fitch, Co. and American Eagle Outfitters, Inc. Dollar amounts are in thousands. Abercrombie & Fitch is a specialty retailer of apparel and accessories for men
> The Garden Company began the accounting period with a $60,000 credit balance in its Accounts Payable account. During the accounting period, Garden Company incurred expenses on account of $152,000. The ending Accounts Payable balance was $64,000. Require
> River Co. began the accounting period with a $132,000 debit balance in its Accounts Receivable account. During the accounting period, River Co. earned revenue on account of $180,000. The ending Accounts Receivable balance was $116,000. Required: Based o
> Raylan received a $60,000 cash advance payment on June 1, Year 1, for consulting services to be performed in the future. Services were to be provided for a one year term beginning June 1, Year 1. Required: a. Record the June 1 cash receipt in T-accounts.
> Sye Chase started and operated a small family architectural firm in Year 1. The firm was affected by two events: (1) Chase provided $25,000 of services on account, and (2) he purchased $2,800 of supplies on account. There were $250 of supplies on hand as
> Required: Complete the following table by indicating whether a debit or credit is used to increase or decrease the balance of accounts belonging to each category of financial statement elements. The appropriate debit/credit terminology has been identifie
> In Year 1, Lee Inc. billed its customers $72,000 for services performed. The company collected $55,000 of the amount billed. Lee incurred $42,000 of other operating expenses on account. Lee paid $34,000 of the accounts payable. Lee acquired $44,000 cash
> Cordell Inc. experienced the following events in Year 1, its first year of operation: 1. Received $40,000 cash from the issue of common stock. 2. Performed services on account for $82,000. 3. Paid a $6,000 cash dividend to the stockholders. 4. Collected
> The following transactions pertain to the operations of Ewing Company for Year 1: 1. Acquired $30,000 cash from the issue of common stock. 2. Provided $65,000 of services on account. 3. Paid $22,000 cash on accounts payable. 4. Performed services for $8,
> Norell Inc. experienced the following accounting events during its Year 1 accounting period: 1. Recognized revenue on account. 2. Issued common stock. 3. Paid cash to purchase supplies. 4. Collected a cash advance for services that will be provided durin
> On October 1, Year 1, Josh Smith, attorney, accepted a $10,800 cash advance from his client, James Company, for services to be performed over the next six months. Required: a. Record the deferral and the related December 31, Year 1, adjustment for Josh
> The following information was drawn from the annual report of Machine Imports Company (MIC): Required: a. Compute the percentage of growth in net income from Year 1 to Year 2. Can stockholders expect a similar increase between Year 2 and Year 3? b. Ass
> Hart, Attorney at Law, experienced the following transactions in Year 1, the first year of operations: 1. Accepted $36,000 on April 1, Year 1, as a retainer for services to be performed evenly over the next 12 months. 2. Performed legal services for cash
> Lan, an accounting major, and Pat, a marketing major, are watching a Matlock rerun on late night TV. Of course, there is a murder and the suspect wants to hire Matlock as the defense attorney. Matlock will take the case but requires an advance payment of
> Yard Designs (YD) experienced the following events in Year 1, its first year of operation: 1. On October 1, Year 1, YD collected $54,000 for consulting services it agreed to provide during the coming year. 2. Adjusted the accounts to reflect the amount o
> Leach Company borrowed $80,000 cash by issuing a note payable on June 1, Year 1. The note had an 8 percent annual rate of interest and a one-year term to maturity. Required: a. What amount of interest expense will Leach recognize for the year ending Dec
> Ben Bradley started Bradley Company on January 1, Year 1. The company experienced the following events during its first year of operation: 1. Earned $2,000 of cash revenue for performing services. 2. Borrowed $8,000 cash from the bank. 3. Adjusted the ac
> On January 1, Year 1, Your Ride Inc. paid $36,000 cash to purchase a taxi cab. The taxi had a four-year useful life and a $4,000 salvage value. Required: a. Determine the amount of depreciation expense that would appear on the Year 1 and Year 2 income s
> The following events apply to Tracey’s Restaurant for the Year 1 fiscal year: 1. Started the company when it acquired $21,000 cash from the issue of common stock. 2. Purchased a new cook top that cost $22,000 cash. 3. Earned $32,000 in cash revenue. 4. P
> On April 1, Year 1, Maine Corporation paid $18,000 cash in advance for a one-year lease on an office building. Assume that Maine records the prepaid rent as an asset and that the books are closed on December 31. Required: a. Show the payment for the one
> Required: Identify whether each of the following transactions is an asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Also show the effects of the events on the financial statements using the horizontal statements model. In
> Required: a. Name an asset use transaction that will not affect the income statement. b. Name an asset exchange transaction that will affect the statement of cash flows. c. Name an asset source transaction that will not affect the income statement. d. Na
> The following cash transactions occurred in five real-world companies: 1. During the third quarter of 2016 (July 1 through September 30) Ford Motor Company paid approximately $31.5 billion in expenses related to the production for the vehicles it sold. 2
> Life, Inc. experienced the following events in Year 1, its first year of operation: 1. Performed counseling services for $36,000 cash. 2. On February 1, Year 1, paid $18,000 cash to rent office space for the coming year. 3. Adjusted the accounts to refle
> Give an example of a transaction that will do the following: a. Increase an asset and increase equity (asset source event). b. Decrease an asset and decrease equity (asset use event). c. Increase an asset and decrease another asset (asset exchange event)
> Composite Fabricators, Inc. is a U.S.-based company that develops its financial statements under GAAP. The total amount of the company’s assets shown on its balance sheet for the current year was approximately $370 million. The president of Composite Fab
> The Candle Shop experienced the following events during its first year of operations, Year 1: 1. Acquired cash by issuing common stock. 2. Paid a cash dividend to the stockholders. 3. Paid cash for operating expenses. 4. Borrowed cash from a bank. 5. Pro
> Explain the matching concept.
> Critz Company was started on January 1, Year 1. During the month of January, Critz earned $7,500 of revenue and incurred $4,800 of expenses. During the remainder of Year 1, Critz earned $86,000 and incurred $51,000 of expenses. Critz closes its books on
> What is the going concern doctrine?
> Which of the general-purpose financial statements provides information about the enterprise at a specific designated date?
> What information does the return-on-assets ratio provide about a company?
> If a company has $2,000 cash, $1,200 liabilities, and $800 retained earnings, can it pay a dividend of $1,000?
> What information does the debt-to-assets ratio provide about a company?
> How does net income affect the stockholders’ claims on the business’ assets?
> What does the term posting mean?
> When should a trial balance be prepared?
> What is the purpose of a trial balance?
> The trial balance of Pacilio Security Services, Inc. as of January 1, Year 3, had the following normal balances: During Year 3, Pacilio Security Services experienced the following transactions: 1. Paid the salaries payable from Year 2. 2. Paid the bal
> At a minimum, what information is recorded in the general journal?
> What is a ledger? What is its function in the accounting system?
> What is the difference between the general journal and special journals?
> Give an example of an asset exchange transaction. What is the effect of this transaction on the accounting equation?
> What is the primary source of information for preparing the financial statements?
> What accounts normally have debit balances? What accounts normally have credit balances?
> How does a debit to an expense account ultimately affect retained earnings? Stockholders’ equity?
> Give an example of an asset exchange transaction.
> What are the three primary ways a business may use assets?
> What are the three primary sources of business assets?
> The trial balance of Pacilio Security Services, Inc. as of January 1, Year 2, was as follows: During Year 2, Pacilio Security Services experienced the following transactions: 1. Acquired an additional $2,000 from the issue of common stock. 2. Paid $3,0
> How is the balance of an account determined?
> Two introductory accounting students were arguing about how to record a transaction involving an exchange of cash for land. Laura stated that the transaction should have a debit to Land and a credit to Cash; Clark argued that the reverse (debit to Cash a
> What are the two fundamental equality requirements of the double-entry accounting system?
> Define debit and credit. How are assets, liabilities, common stock, retained earnings, revenues, expenses, and dividends affected (increased or decreased) by debits and by credits?
> What is U.S. GAAP? What is IFRS?
> Identify the three types of accounting transactions discussed in this chapter. Provide an example of each type of transaction, and explain how it affects the accounting equation.
> Why are temporary accounts closed at the end of the accounting period?
> List and describe the four stages of the accounting cycle discussed in Chapter 2.
> Explain how financial leverage impacts the return-on-equity ratio.
> Discuss the two views of the right side of the accounting equation.
> The following information is available for Pacilio Security Services, Inc. for Year 1, its first year of operations. Pacilio provides security services for local sporting events. The following summary transactions occurred during Year 1: 1. Acquired $6,0
> What does a double-entry bookkeeping system mean?
> Do all companies close their books on December 31? Why or why not?
> The following business scenarios are independent from one another: 1. Chris Hann purchased an automobile from Classic Auto Sales for $10,000. 2. Sal Pearl loaned $15,000 to the business in which he is a stockholder. 3. First State Bank paid interest to S
> Jan Perkins is a business consultant. She analyzed the business processes of one of her clients, Diamond Companies, in November Year 1. She prepared a report containing her recommendation for changes in some of the company’s business practices. She prese
> Daley Company was started on January 1, Year 1, and experienced the following events during its first year of operation: 1. Acquired $52,000 cash from the issue of common stock. 2. Borrowed $20,000 cash from National Bank. 3. Earned cash revenues of $42,
> Blix Corp. started the Year 2 accounting period with total assets of $50,000 cash, $20,000 of liabilities, and $20,000 of retained earnings. During the Year 2 accounting period, the Retained Earnings account increased by $8,500. The bookkeeper reported t
> Marco’s Consulting experienced the following transactions for Year 1, its first year of operations, and Year 2. Assume that all transactions involve the receipt or payment of cash. Transactions for Year 1 1. Acquired $50,000 by issuing
> The following unrelated events are typical of those experienced by business entities: 1. Pay cash for operating expenses. 2. Pay an office manager’s salary with cash. 3. Receive cash for services that have been performed. 4. Pay cash fo
> The following information is from the records of Floral Design. Write a brief explanation of the accounting event represented in each of the general journal entries. Date Account Titles Debit Credit Cash Common Stock Jan. 1 18,750 18,750 Feb. 1 Prep
> Required: The preceding 13 different accounting events are presented in general journal format. Use a horizontal statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. Indicate whether the event
> Many companies must file financial reports with the SEC. Many of these reports are available electronically through the EDGAR database. EDGAR is an acronym for Electronic Data Gathering, Analysis, and Retrieval system, and it is accessible through the Wo
> The following accounting events apply to Little Co. for Year 1: Asset Source Transactions 1. Began operations when the business acquired $40,000 cash from the issue of common stock. 2. Performed services and collected cash of $2,000. 3. Collected $9,000
> The following events apply to Un Enterprises: 1. Acquired $30,000 cash from the issue of common stock. 2. Recognized $28,000 of service revenue on account. 3. Paid cash to rent office space for the next 12 months: $7,800. 514 4. Paid cash of $9,200 for
> Required 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
> Oaks Company had the following balances in its accounting records as of December 31, Year 1: The following accounting events apply to Oaks’ Year 2 fiscal year: Jan.  1 Acquired an additional $70,000 cash from the iss
> Iowa Service Company was formed on January 1, Year 1. Events Affecting the Year 1 Accounting Period 1. Acquired cash of $60,000 from the issue of common stock. 2. Purchased $1,200 of supplies on account. 3. Purchased land that cost $18,000 cash. 4. Paid
> The following accounts and balances were drawn from the records of Shearer Company at December 31, Year 2: Required: Use the accounts and balances from Shearer Company to construct an income statement, statement of changes in stockholdersâ€&
> Gossett Company had the following beginning balances in its accounting records as of January 1, Year 2: The following accounting events apply to Gossett for Year 2: Jan.  1 Acquired an additional $30,000 cash from the issue of common
> The following events pertain to Weaver Cleaning Company: 1. Acquired $15,000 cash from the issue of common stock. 2. Provided services for $6,000 cash. 3. Provided $18,000 of services on account. 4. Collected $11,000 cash from the account receivable cre
> The following selected accounts and account balances were taken from the records of Wages Company. Except as otherwise indicated, all balances are as of December 31, Year 2, before the closing entries were recorded. Required: a. Prepare the income stat
