What type of liabilities are not recorded on a company’s books?
> Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 100 units at $60 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 150-unit purchase at $68 per unit; the second
> Jones Co. started the year with no inventory. During the year, it purchased two identical inventory items at different times. The first purchase cost $1,060 and the other, $1,380. Jones sold one of the items during the year. Required: Based on this info
> Required: 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
> Luna Company accepted credit cards in payment for $6,000 of services performed during July 2018. The credit card company charged Luna a 4 percent service fee; it paid Luna as soon as it received the invoices. Required: Based on this information alone, w
> Ultra Day Spa provided $120,000 of services during 2018. All customers paid for the services with credit cards. Ultra submitted the credit card receipts to the credit card company immediately. The credit card company paid Ultra cash in the amount of fa
> The following post-closing trial balance was drawn from the accounts of Little Grocery Supplier (LGS) as of December 31, 2017: Cash……………………………………………..$9,000 Accounts Receivable………………………41,000 Allowance for Doubtful Accounts………2,500 Inventory………………………………
> On May 1, 2018, Benz’s Sandwich Shop loaned $10,000 to Mark Henry for one year at 6 percent interest. Required: Answer the following questions: a. What is Benz’s interest income for 2018? b. What is Benz’s total amount of receivables at December 31, 201
> Glenn’s Cleaning Services Company is experiencing cash flow problems and needs a loan. Glenn has a friend who is willing to lend him the money he needs provided she can be convinced that he will be able to repay the debt. Glenn has assu
> Rainey Enterprises loaned $20,000 to Small Co. on June 1, 2018, for one year at 6 percent interest. Required: Show the effects of the following transactions in a horizontal statements model like the one shown here. (1) The loan to Small Co. (2) The adju
> Roth Service Co. experienced the following transactions for 2018, its first year of operations: 1. Provided $110,000 of services on account. 2. Collected $89,000 cash from accounts receivable. 3. Paid $41,000 of salaries expense for the year. 4. Roth adj
> Holmes Cleaning Service began operation on January 1, 2018. The company experienced the following events for its first year of operations: Events Affecting 2018: 1. Provided $84,000 of cleaning services on account. 2. Collected $76,000 cash from accounts
> The Pet Store experienced the following events for the 2018 accounting period: 1. Acquired $60,000 cash from the issue of common stock. 2. Purchased $65,000 of inventory on account. 3. Received goods purchased in Event 2 FOB shipping point; freight cost
> Anna Chun was in charge of the returns department at The Luggage Company. She was responsible for evaluating returned merchandise. She sent merchandise that was reusable back to the warehouse, where it was restocked in inventory. Chun was also responsibl
> Selected financial information for Edwards Company for 2019 follows: Sales…………………………..…………..$800,000 Cost of goods sold…………..…………..500,000 Merchandise inventory Beginning of year………………………….37,500 End of yea
> The following data come from the financial records of Fargo Corporation for 2018: Sales………………………………………….$640,000 Interest expense………………………………6,000 Income tax expense………………………..12,000 Net income…………………………………….42,000 Required: How many times was interest
> Swartz Corporation wrote off a $1,600 uncollectible account receivable against the $48,000 balance in its allowance account. Required: Explain the effect of the write-off on Swartz’s current ratio.
> Identify which of the following items are added to or subtracted from the unadjusted bank balance to arrive at the true cash balance. Distinguish the additions from the subtractions by placing a + beside the items that are added to the unadjusted bank ba
> Identify which of the following items are added to or subtracted from the unadjusted book balance to arrive at the true cash balance. Distinguish the additions from the subtractions by placing a + beside the items that are added to the unadjusted book ba
> Complete the requirements below using the most recent financial statements available on the Internet for Netflix, Inc. Obtain the statements by following the steps below. (Be aware that the formatting of the company’s website may have changed since these
> Han’s Supplies’ bank statement contained a $270 NSF check that one of its customers had written to pay for supplies purchased.: Required: a. Show the effects of recognizing the NSF check on the financial statements by
> List and discuss effective internal control procedures that apply to cash.
> Winthrop Corporation reported the following operating results for two consecutive years: Required: a. Compute the percentage changes in Winthrop Corporation’s income statement components between the two years. Round percentages to one
> Sally Knox worked as the parts manager for East River Automobiles, a local automobile dealership. Sally was very dedicated and never missed a day of work. Since East River was a small operation, she was the only employee in the parts department. Her duti
> What effect does the purchase of treasury stock have on the equity of a company?
> Stan Oden is opening a new business that will sell sporting goods. It will initially be a small operation, and he is concerned about the security of his assets. He will not be able to be at the business all of the time and will have to rely on his employ
> How are sole proprietorships formed?
> If Best Co. issued 10,000 shares of $20 par value common stock for $30 per share, what amount is added to the Common Stock account? What amount of cash is received?
> Assume that Best Co. has issued and outstanding 1,000 shares of $100 par value, 10 percent, cumulative preferred stock. What is the dividend per share? If the preferred dividend is two years in arrears, what total amount of dividends must be paid before
> Why is it easier for a corporation to raise large amounts of capital than it is for a partnership?
> What is a contingent liability?
> When a business collects sales tax from customers, is it revenue? Why or why not?
> Assume that on October 1, 2018, Big Company borrowed $10,000 from the local bank at 6 percent interest. The note is due on October 1, 2019. How much interest does Big pay in 2018? How much interest does Big pay in 2019? What amount of cash does Big pay b
> Why is it necessary to make an adjustment at the end of the accounting period for unpaid interest on a note payable?
> Who is the maker of a note payable?
> What is a classified balance sheet?
> List and describe nine activities of a strong internal control system discussed in the chapter.
> How is the carrying value of a bond computed?
> How does recording accrued interest affect the accounting equation?
> If a bond is selling at 97½, how much cash will the company receive from the sale of a $1,000 bond?
> What type of transaction is the issuance of bonds by a company?
> What mechanism is used to adjust the stated interest rate to the market rate of interest?
> What are some disadvantages of issuing bonds?
> What are some advantages of issuing bonds versus borrowing from a bank?
> What is a current liability? Distinguish between a current liability and a long-term debt.
> What is the difference between classification of a note as short term or long term?
> When is warranty cost reported on the statement of cash flows?
> a. Discuss the requirements of Section 404 of the Sarbanes–Oxley Act and how it relates to COSO. b. These rules apply to what type of companies?
> What effect does recognizing future warranty obligations have on the balance sheet? On the income statement?
> What does the term warranty mean?
> What is the difference in accounting procedures for a liability that is probable and estimable and one that is reasonably possible but not estimable?
> Are contingent liabilities recorded on a company’s books? Explain.
> List the three categories of contingent liabilities.
> What type of transaction is a cash payment to creditors? How does this type of transaction affect the accounting equation?
> What different kinds of expenditures might be included in the recorded cost of a building?
> Define amortization. What kind of assets are amortized?
> Is land a depreciable asset? Why or why not?
> 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.
