What is the purpose of the Cash Short and Over account?
> Indicate whether each of the following costs is a product cost or a period (selling and administrative) cost: a. Goods purchased for resale. b. Salaries of salespersons. c. Advertising costs. d. Transportation-out. e. Interest on a note payable. f. Salar
> The following trial balance pertains to Benji’s Grocery as of January 1, Year 2: The following events occurred in Year 2. Assume that Benji’s uses the periodic inventory method. 1. Purchased land for $30,000 cash. 2.
> The following account titles and balances were taken from the adjusted trial balance of King Co. for Year 2. The company uses the periodic inventory system. Required: a. Prepare a schedule to determine the amount of cost of goods sold. b. Prepare a mul
> The following information was drawn from the records of Toner Sales Company: a. Prepare a multistep income statement for each year. b. Prepare a common size income statement for each year. c. At a recent meeting of the stockholders, Tonerâ€&
> At the beginning of Year 2, the Redd Company had the following balances in its accounts: During Year 2, the company experienced the following events: 1. Purchased inventory that cost $5,200 on account from Ross Company under terms 1/10, n/30. The merch
> Blooming Flower Company was started in Year 1 when it acquired $60,000 cash from the issue of common stock. The following data summarize the company’s first three years’ operating activities. Assume that all transactio
> During Year 1, Rondor Merchandising Company purchased $40,000 of inventory on account. The company sold inventory on account that cost $30,000 for $50,000. Cash payments on accounts payable were $24,500. There was $38,000 cash collected from accounts rec
> The Kroger Co. was founded in 1883 and is one of the largest retailers in the world, based on annual sales. Whole Foods Market claims to be the world’s largest retailer of natural and organic foods. Whole Foods offers specialty products
> Jason Kidd started a small merchandising business in Year 1. The business experienced the following events during its first year of operation. Assume that Kidd uses the perpetual inventory system. 1. Acquired $90,000 cash from the issue of common stock.
> The following information is available for two different types of businesses for the Year 1 accounting year. Diamond Consulting is a service business that provides consulting services to small businesses. University Bookstore is a merchandising business
> The following events apply to Sally’s Gift Shop for Year 1, its first year of operation: 1. Acquired $60,000 cash from the issue of common stock. 2. Issued common stock to Sally Quin, one of the owners, in exchange for merchandise inventory worth $3,200
> Far East Retailers uses the periodic inventory system to account for its inventory transactions. The following account titles and balances were drawn from Far East’s records for Year 2: beginning balance in inventory, $46,200; purchases, $352,400; purcha
> Rick Dove is the owner of RD Cleaning. At the beginning of the year, RD Cleaning had $4,800 in inventory. During the year, RD Cleaning purchased inventory that cost $26,000. At the end of the year, inventory on hand amounted to $3,600. Required: Calcula
> The following information is available for Billings and Phoenix companies: Required: a. Prepare a common size income statement for each company. b. Compute the return on assets and return on equity for each company. c. Which company is more profitable
> The following income statements were drawn from the annual reports of Athens Company and Boulder Company: Required: a. One of the companies is a high-end retailer that operates in exclusive shopping malls. The other operates discount stores located in
> What different kinds of expenditures might be included in the recorded cost of a building?
> Custom Auto Parts (CAP) started the Year 2 accounting period with the balances given in the financial statements model shown below. During Year 2, CAP experienced the following business events: 1.  Purchased $60,000 of merchandise inven
> Define amortization. Which kinds of assets are amortized?
> Why is it necessary to make an entry to reinstate a previously written-off account receivable before the collection is recorded?
> Why is it necessary to make an adjusting entry at the end of the accounting period for unpaid interest on a note payable?
> What type of account is Discount on Notes Payable?
> What items are included in compensation cost for a company in addition to the gross salaries of the employees?
> How does the amortization of a discount affect the income statement, balance sheet, and statement of cash flows?
> Why are amounts withheld from employees’ pay considered liabilities of the employer?
> How is the carrying value of a discount note computed?
> What is the operating cycle of a business?
> How is the average number of days to collect accounts receivable computed? What information does the ratio provide?
> Hollis Company began the Year 2 accounting period with $36,000 cash, $80,000 inventory, $70,000 common stock, and $46,000 retained earnings. During the Year 2 accounting period, Hollis experienced the following events: 1. Sold merchandise costing $51,500
> How is the accounts receivable turnover ratio computed? What information does the ratio provide?
> Give two examples of fringe benefits.
> Define deferred taxes. Where does the account Deferred Taxes appear in the financial statements?
> What is the purpose of the Federal Unemployment Tax? What is the maximum amount of wages subject to the tax?
> Assume that on July 1, Year 1, 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 Year 1? What amount of cash will Big receive upon maturity of the note?
> What two taxes are components of the FICA tax? What programs do they fund?
> What is the difference between wages and salaries?
> When is it acceptable to use the direct write-off method of accounting for uncollectible accounts?
> Does the recognition of depreciation expense affect cash flows? Why or why not?
> What is the purpose of internal controls in an organization?
> The following information was drawn from the Year 1 accounting records of Cozart Merchandisers. 1. Inventory with a list price of $40,000 was purchased under terms 2/10, net/30. 2. Cozart returned $4,200 of the inventory to the supplier five days after p
> Bloomin’ Brands, Inc. is the corporation behind five restaurant chains: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse and Wine Bar, and Roy’
> In what circumstances can an auditor disclose confidential information about a client without the client’s permission?
> When might an auditor issue a disclaimer on financial statements?
> What are the implications of an unqualified audit opinion?
> What is the difference between the liquidity and the solvency of a business?
> What makes an error in the financial statements material?
> What is an independent auditor? Why must auditors be independent?
> What is a financial statement audit? Who is qualified to perform it?
> What types of expenditures are usually made from a petty cash fund?
> What is the purpose of a petty cash fund?
> The following information was taken from the accounts of Adams’s Eatery, a delicatessen, at December 31, Year 1. The accounts are listed in alphabetical order, and each has a normal balance. Required: First, prepare an income statemen
> Is accounting terminology standard in all countries? What term is used in the United Kingdom to refer to sales? What term is used to refer to inventory? What is a gearing ratio? Is it important to know about these differences?
> Ripley Lumber Company purchased $240,000 of equipment on September 1, Year 1. Required: a. Compute the amount of depreciation expense that is deductible under MACRS for Year 1 and Year 2, assuming that the equipment is classified as a seven-year propert
> Crossroads Eye Care Company purchased $60,000 of equipment on March 1, Year 1. Required: a. Compute the amount of depreciation expense that is deductible under MACRS for Year 1 and Year 2, assuming that the equipment is classified as a seven-year proper
> What information is provided by the net income percentage (return-on-sales ratio)?
> What is the purpose of independent verification of performance?
> Consider the following events: 1. A petty cash fund of $200 was established on April 1, Year 1. 2. Employees were reimbursed when they presented petty cash vouchers to the petty cash custodian. 3. On April 30, Year 1, the petty cash fund contained vouche
> What is an example of a business that would have a high inventory turnover? A low inventory turnover?
> What information does inventory turnover provide?
> Suda Company sold land that cost $40,000 for $37,000 cash. Explain how this transaction would be shown on the statement of cash flows.
> Explain the difference between losses and expenses.
> In Year 1, Image Incorporated sold land for $82,000 cash. The land had originally cost $50,000. Also, Image sold inventory that had cost $176,000 for $265,000 cash. Operating expenses amounted to $41,000. Required: a. Prepare a Year 1 multistep income s
> Explain the difference between gains and revenues.
> Suzanne Hurley discovered significant fraud in the accounting records of a high profile client. Due to her client’s prestige, the story aired in the mainstream media. Unable to resolve her client’s remaining concerns with the company’s management team, H
> Consider the following events: 1. A petty cash fund of $200 was established on April 1, Year 1. 2. Employees were reimbursed when they presented petty cash vouchers to the petty cash custodian. 3. On April 30, Year 1, the petty cash fund contained vouche
> What is the purpose of giving credit terms to customers?
> If some merchandise declines in value because of damage or obsolescence, what effect will the lower-of-cost-or-market rule have on the income statement? Explain.
> How does the phrase lower-of-cost-or-market apply to inventory valuation?
> Why do you think natural resources are called wasting assets?
> What is the advantage of using the allowance method of accounting for uncollectible accounts? What is the advantage of using the direct write-off method?
> Assume that on October 1, Year 1, Big Company borrowed $10,000 from the local bank at 6 percent interest. The note is due on October 1, Year 2. How much interest does Big pay in Year 1? How much interest does Big pay in Year 2? What amount of cash does B
> What is meant by segregation of duties? Give an illustration.
> The trial balance for The Bolt Co. as of January 1, Year 2, was as follows: The following events affected the company during the Year 2 accounting period: 1. Purchased merchandise on account that cost $8,200. 2. The goods in Event 1 were purchased FOB
> What is the difference between accounting controls and administrative controls?
> Sarah Johnson was a trusted employee of Evergreen Trust Bank. She was involved in everything. She worked as a teller, accounted for the cash at the other teller windows, and recorded many of the transactions in the accounting records. She was so loyal th
> Determine which party (buyer or seller) is responsible for freight charges in each of the following situations: a. Purchased merchandise, freight terms, FOB destination. b. Purchased merchandise, freight terms, FOB shipping point. c. Sold merchandise, fr
> For each of the following events, indicate whether the freight terms are FOB destination or FOB shipping point. a. Sold merchandise and the buyer paid the freight costs. b. Purchased merchandise and the seller paid the freight costs. c. Sold merchandise
> List the internal control procedures that pertain to the protection of business equipment.
> Regional Medical Centers (RMC) hired a new physician, Fred Clark, who was an immediate success. Everyone loved his bedside manner; he could charm the most cantankerous patient. Indeed, he was a master salesman, as well as an expert physician. Unfortunate
> What is included in the entry to record accrued interest expense? How does it affect the accounting equation?
> Required For each of the following situations, fill in the blank with FIFO, LIFO, or weighted average: a. ______would produce the highest amount of net income in an inflationary environment. b. ______would produce the highest amount of assets in an infla
> 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
