What is the purpose of a bank reconciliation?
> The December 31, 2019, balance sheet for Burdette Corporation is presented here. These are the only accounts on Burdette’s balance sheet. Amounts indicated by question marks (?) can be calculated using the following additional information:
> When are natural resources expensed?
> Define depreciation. What kind of asset depreciates?
> What is the difference between tangible and intangible assets? Give an example of each.
> How is the book value of an asset determined?
> What is salvage value?
> John Smith mistakenly expensed the cost of a long term tangible fixed asset. Specifically, he charged the cost of a truck to a delivery expense account. How will this error affect the income statement and the balance sheet in the year in which the mistak
> Does the recognition of depreciation expense affect cash flows? Why or why not?
> What effect does the recognition of depreciation expense have on total assets? On total equity?
> What are the stages in the life cycle of a long-term operational asset?
> What is the difference between the functions of long-term operational assets and investments?
> The balance sheet for Shankland Corporation follows: Current assets…………………………………………………………$ 600,000 Long-term assets (net)……………………………………………..1,900,000 Total assets…………………………………………………………….$2,500,000 Current liabilities…………………………………………………….$ 400,000 Long
> What is the effect on the accounting equation of recognizing uncollectible accounts expense?
> What are some factors considered in estimating the amount of uncollectible accounts receivable?
> Why is it necessary to reinstate a previously written-off account receivable before the collection is recorded?
> What is the most common format for reporting accounts receivable on the balance sheet? What information does this method provide beyond showing only the net amount?
> When using the allowance method, why is uncollectible accounts expense an estimated amount?
> What are two ways in which estimating uncollectible accounts improves the accuracy of the financial statements?
> In an inflationary period, which cost flow method, FIFO or LIFO, produces the larger cash flow? Explain
> In an inflationary period, which inventory cost flow method will produce the largest amount of total assets on the balance sheet? Explain.
> What type of account is the Allowance for Doubtful Accounts?
> What types of costs do businesses avoid when they accept major credit cards as compared with handling credit sales themselves?
> On June 30, 2018, Franza Company’s total current assets were $900,000 and its total current liabilities were $360,000. On July 1, 2018, Franza issued a long-term note to a bank for $72,000 cash. Required: Round computations to one decimal point. a. Comp
> The following financial highlights were drawn from the 2014 annual reports of ExxonMobil Corporation and Apple Inc. Even so, as of December 11, 2015, Wall Street valued ExxonMobil at $310 billion and Apple at $631 billion. Divide the class into groups
> Why is it generally beneficial for a business to accept major credit cards as payment for goods and services even when the fee charged by the credit card company is substantial?
> In which section of the statement of cash flows will Big report the cash collected in Question 23?
> Assume that on July 1, 2018, Big Corp. loaned Little Corp. $12,000 for a period of one year at 6 percent interest. What amount of interest revenue will Big report for 2018? What amount of cash will Big receive upon maturity of the note?
> When is an adjusting entry for accrued interest generally recorded?
> Assets are listed on the balance sheet in the order of their liquidity. Explain this statement.
> How does the accrual of interest revenue or expense illustrate the matching concept?
> What is the net realizable value of receivables?
> What is accrued interest?
> What is the formula for computing interest revenue?
> What is a promissory note?
> On June 30, 2018, Franza Company’s total current assets were $900,000 and its total current liabilities were $360,000. On July 1, 2018, Franza issued a short-term note to a bank for $72,000 cash. Required: a. Compute Franza’s working capital before and
> What is an advantage of using the percent of receivables method of estimating uncollectible accounts expense?
> What is the advantage of using the allowance method of accounting for uncollectible accounts?
> How does the recovery of a previously written-off account affect the income statement when the allowance method is used? How does the recovery of a previously written-off account affect the statement of cash flows when the allowance method is used?
> What is the effect on the accounting equation of writing off an uncollectible account receivable when the allowance method is used?
> What is a fidelity bond? Explain its purpose.
> What are the attributes of a high-quality employee?
> What is meant by separation of duties? Give an illustration.
> Explain how COSO’s Enterprise Risk Management––An Integrated Framework project relates to COSO’s Internal Control––An Integrated Framework project.
> Name and comment on the three elements of the fraud triangle.
> How is an NSF check accounted for in the accounting records?
> Income statements for Burch Company for 2018 and 2019 follow: Required: Round all percentages to one decimal point. a. Perform a horizontal analysis, showing the percentage change in each income statement component between 2018 and 2019. b. Perform a v
> What is a certified check?
> What is a deposit in transit?
> What is an outstanding check?
> Why might a bank statement reflect a balance that is larger than the balance recorded in the depositor’s books? What could cause the bank balance to be smaller than the book balance?
> What effect does a debit memo in a bank statement have on the Cash account? What effect does a credit memo in a bank statement have on the Cash account?
> Define the term internal control.
> Why is cash more susceptible to theft or embezzlement than other assets?
> What items are considered cash?
> What is the purpose of independent verification of performance?
> Sharma Company reported the following operating results for two consecutive years: Required: Express each income statement component for each of the two years as a percentage of sales. Round percentages to one decimal point. 2018 Amount Percentage
> Why should documents (checks, invoices, receipts) be prenumbered?
> What are the purpose and importance of a procedures manual?
> What motivated Congress to pass the Sarbanes–Oxley Act (SOX) of 2002?
> Northern Merchandising Company sold inventory that cost $12,000 for $20,000 cash. How does this event affect the accounting equation? What financial statements and accounts are affected? (Assume that the perpetual inventory system is used.)
> When are period costs expensed? When are product costs expensed?
> What portion of cost of goods available for sale is shown on the balance sheet? What portion is shown on the income statement?
> How is the cost of goods available for sale determined?
> Why does the periodic inventory system impose a major disadvantage for management in accounting for lost, stolen, or damaged goods?
> What is the purpose of preparing a schedule of cost of goods sold?
> What is the difference between a product cost and a selling and administrative cost?
> Indicate the effect of each of the following transactions on (1) the current ratio, (2) working capital, (3) stockholders’ equity, (4) book value per share of common stock, and (5) retained earnings. Assume that the current ratio is greater than 1:1. a.
> Ball Co. purchased inventory with a list price of $4,000 with the terms 2/10, n/30. What amount will be added to the Merchandise Inventory account?
> Define transportation-out. Is it a product cost or a period cost for the seller?
> What is the purpose of giving a cash discount to charge customers?
> Eastern Discount Stores incurred a $5,000 cash cost. How does the accounting for this cost differ if the cash were paid for inventory versus commissions to sales personnel?
> Dyer Department Store purchased goods with the terms 2/10, n/30. What do these terms mean?
> Why would a seller grant an allowance to a buyer of his merchandise?
> Quality Cellular Co. paid $80 for freight on merchandise that it had purchased for resale to customers (transportation-in) and paid $135 for freight on merchandise delivered to customers (transportation out). The $80 payment is added to what account? Th
> Define transportation-in. Is it a product or a period cost?
> If goods are shipped FOB shipping point, which party (buyer or seller) is responsible for the shipping costs?
> Define merchandise inventory. What types of costs are included in the Merchandise Inventory account?
> Match each of the following ratios with the formula used to compute it: 1. Working capital a. Net income - Average total stockholders' equity b. Cost of goods sold - Average inventory c. Current assets – Current liabilities d. 365 - Inventory turnov
> When is revenue recognized under accrual accounting?
> Give an example of an asset source transaction. What is the effect of this transaction on the accounting equation?
> How does the recognition of revenue on account (accounts receivable) affect the income statement compared to its effect on the statement of cash flows?
> What effect does the issue of common stock have on the accounting equation?
> What does the term asset source transaction mean?
> If cash is collected in advance of performing services, when is the associated revenue recognized?
> Give several examples of period costs.
> What types of accounts are closed at the end of the accounting period? Why is it necessary to close these accounts?
> What does the term deferral mean?
> What does the statement of cash flows explain?
> Compute the specified ratios using Duluth Company’s balance sheet for 2018: Assets Cash…………………………………………..………………..$ 36,000 Marketable securities………………...……………………..24,000 Accounts receivable………………………………………….50,000 Inve
> In what order are assets listed on the balance sheet?
> What does the term revenue mean?
> What does the term expense mean?
> What is the difference between a cost and an expense?
> Define recognition. How is it independent of collecting or paying cash?
> How does net income affect the stockholders’ claims on the business’s assets?
> What type of information does a business typically include in its annual report?
> What is the relationship between the income statement and changes in assets and liabilities?
> When are expenses recognized under accrual accounting?
> Give an example of a cost that can be directly matched with the revenue produced by an accounting firm from preparing a tax return.
> During 2018, Blue Ridge Corporation reported after-tax net income of $4,150,000. During the year, the number of shares of stock outstanding remained constant at 15,000 of $100 par, 9 percent preferred stock and 400,000 shares of common stock. The company
