Which of the following qualities are characteristic of fixed assets? (a) tangible, (b) capable of repeated use in the normal operations of the business, (c) not held for sale in the normal course of business, (d) not used in the operations of the business, (e) useful life must be greater than 10 years.
> Based upon the financial transactions for McDonald’s Corp. (MCD), shown in Exercise 2-21, indicate whether the transaction would be reported in the cash flows from operating, investing, or financing sections of the statement of cash flows. Data from Exercis
> Amazon.com, Inc., (AMZN) operates as an online retailer in North America and internationally. Both Amazon and third parties, via the Amazon.com Web site, sell products across various product categories. The following items were adapted from a recent annu
> Describe how the following business transactions affect the three elements of the accounting equation. a. Received cash for services performed. b. Paid for utilities used in the business. c. Borrowed cash at local bank. d. Issued common stock for cash. e
> Campbell Soup Co. (CPB) had the following assets and liabilities (in millions) at the end of Year 1. Assets ……………………… $ 8,113 Liabilities …………………. 6,498 a. Determine the stockholders’ equity of Campbell Soup at the end of Year 1. b. If assets decreased
> Identify the primary business emphasis of each of the following companies as (a) a low cost emphasis or (b) a premium-price emphasis. If you are unfamiliar with the company, you may use the Internet to locate the company’s home page o
> Indicate whether each of the following activities would be reported on the statement of cash flows as (a) an operating activity, (b) an investing activity, or (c) a financing activity. 3. Cash paid for expenses 4. Cas
> Indicate whether each of the following cash activities would be reported on the statement of cash flows as (a) an operating activity, (b) an investing activity, or (c) a financing activity. 6. Sold excess office equip
> GameStop Corporation (GME) has over 6,500 retail stores worldwide and sells new and used video games. The following asset and liability data (in millions) were adapted from recent financial statements. 1. Compute quick assets for Years 2
> Each of the following items is shown in the financial statements of ExxonMobil Corporation. Identify the financial statement (balance sheet or income statement) in which each item would appear. i. Marketable securities
> The Walt Disney Company (DIS) had the following assets and liabilities (in millions) at the end of Year 1. Assets …….…………… $ 84,141 Liabilities ……………… 39, 183 a. Determine the stockholders’ equity of Walt Disney at the end of Year 1. b. If assets
> The income statement of a corporation for the month of February indicates a net income of $32,000. During the same period, $40,000 in cash dividends were paid. Would it be correct to say that the business incurred a net loss of $8,000 during the month? D
> On Time Delivery Service had the following selected transactions during November: 1. Received cash from issuance of common stock, $75,000. 2. Paid rent for November, $5,000. 3. Paid advertising expense, $3,000. 4. Received cash for providing delivery ser
> Determine the missing amount for each of the following: Assets Liabilities + Stockholders' Equity a. $715,000 $1,185,000 $ 510,000 b. $600,000 c. $112,400 $23,750 + + + || ||||
> Identify each of the following items as (a) an asset, (b) a liability, (c) revenue, (d) an expense, or (e) a dividend: 6. Equipment 7. Note payable owed to the bank 8. Rent paid for the month 9. Sales commissions paid to salespersons 1. Amounts
> Based on the data presented in Exercise 1-10, identify those items that would appear on the income statement. Data from Exercise 1-10: From the following list of selected items taken from the records of Flip Flop Sandals Inc. as of a speciï¬
> From the following list of selected items taken from the records of Flip Flop Sandals Inc. as of a specific date, identify those that would appear on the balance sheet. 1. Accounts Receivable 6. Salaries Expense 7. Salaries Payable 8.
> Indicate whether each of the following companies is primarily a service, merchandise, or manufacturing business. If you are unfamiliar with the company, you may use the Internet to locate the company’s home page or use the ï¬&#
> What is the objective of most businesses?
> Using the transactions listed in P3-1 for San Mateo Health Care, indicate the effects of each transaction on the liquidity metric Quick Assets and profitability metric Net Income – Accrual Basis. Data from Problem 3-1: S
> Favorable business conditions may bring about certain seemingly unfavorable ratios, and unfavorable business operations may result in apparently favorable ratios. For example, Shaddox Company increased its sales and net income substantially for the curre
> The price-earnings ratio for the common stock of In-Work Company was 15 at December 31, the end of the current fiscal year. What does the ratio indicate about the selling price of the common stock in relation to current earnings?
> The net income (after income tax) of Fleming Inc. was $4.80 per common share in the latest year and $7.50 per common share for the preceding year. At the beginning of the latest year, the number of shares outstanding was doubled by a stock split. There w
> Deere & Company (DE), a company well known for manufacturing farm equipment, reported more than $800 million of product warranties in recent financial statements. How would costs of repairing a defective product be recorded?
> When should the liability associated with a product warranty be recorded? Discuss.
> The following data relate to an $8,000,000, 7% bond issue for a selected semiannual interest period: a. Were the bonds issued at a discount or at a premium? b. What expense account is affected by the amortization of the discount or premium? Bond ca
> A corporation issues $40,000,000 of 6% bonds to yield an effective interest rate of 8%. a. Was the amount of cash received from the sale of the bonds more or less than $40,000,000? b. Identify the following amounts related to the bond issue: (1) face amo
> Identify the two distinct obligations incurred by a corporation when issuing bonds.
> To match revenues and expenses properly, should the expense for employee vacation pay be recorded in the period during which the vacation privilege is earned or during the period in which the vacation is taken?
> For each of the following payroll-related taxes, indicate whether it generally applies to (1) employees only, (2) employers only, or (3) both employees and employers: a. Federal income tax b. Federal unemployment compensation tax c. Medicare tax d. Socia
> Using the transactions listed in E3-5 for Health Services, P.C., indicate the effects of each transaction on the liquidity metric Quick Assets and profitability metric Net Income Accrual Basis. Data from Exercise 3-5: Margie Van Epps esta
> When are short-term notes payable issued?
> What is the primary purpose of a stock split?
> An owner of 300 shares of Colorado Spring Company common stock receives a stock dividend of 6 shares. a. What is the effect of the stock dividend on the stockholder’s proportionate interest (equity) in the corporation? b. How does the total equity of 30
> A corporation with preferred stock and common stock outstanding has a substantial balance in its retained earnings account at the beginning of the current fiscal year. Although net income for the current year is sufficient to pay the preferred dividen
> The treasury stock in Question 14 is resold for $2,400,000. a. What is the effect on the corporation’s revenue of the period? b. What is the effect on stockholders’ equity?
> A corporation reacquires 18,000 shares of its own $50 par common stock for $2,250,000, recording it at cost. a. What effect does this transaction have on revenue or expense of the period? b. What effect does it have on stockholders’ equity?
> a. In what respect does treasury stock differ from unissued stock? b. How should treasury stock be presented on the balance sheet?
> When a corporation issues stock at a premium, is the premium income? Explain.
> Of two corporations organized at approximately the same time and engaged in competing businesses, one issued $75 par common stock, and the other issued $1 par common stock. Do the par designations provide any indication as to which stock is preferable as
> For most companies, what two types of transactions make up the largest percent of their current liabilities?
> The following end-of-the-year balance sheets (in millions) were adapted from recent financial statements of Apple (AAPL). 1. Prepare common-sized balance sheets for Apple for Years 1 and 2. Round to one decimal place. 2. Comment on your
> Deere & Company (DE) produces and sells tractors, loaders, combines, lawnmowers, and a variety of other equipment. The following data (in millions) were adapted from recent financial statements of Deere. 1. Compute the gross profit p
> Backyard Company purchased a machine that has a manufacturer’s suggested life of 30 years. The company plans to use the machine on a special project that will last 18 years. At the completion of the project, the machine will be sold. Over how
> Lanier Company solicited bids from several contractors to construct an addition to its office building. The lowest bid received was for $600,000. Lanier Company decided to construct the addition itself at a cost of $475,000. What amount should be recorde
> The Stone Store Co. acquired an adjacent vacant lot with the hope of selling it in the future at a gain. The lot is not intended to be used in The Stone Store’s business operations. Where should such real estate be listed in the balance sheet?
> Enterprise Supplies Co. has a fleet of automobiles and trucks for use by salespersons and for delivery of office supplies and equipment. Bizarro Auto Sales Co. has automobiles and trucks for sale. Under what caption would the automobiles and trucks be re
> How is depletion determined?
> Classify each of the following expenditures as either a revenue or capital expenditure: (a) installation of a video messaging system on a semitrailer, (b) changing oil in a delivery truck, (c) purchase of a color copier.
> Immediately after a used truck is acquired, a new motor is installed and the tires are replaced at a total cost of $4,300. Is this a capital expenditure or a revenue expenditure?
> A firm has consistently adjusted its allowance account at the end of the fiscal year by adding a fixed percent of the period’s sales on account. After 10 years, the balance in Allowance for Doubtful Accounts has become very large in relationship to the b
> What kind of an account (asset, liability, etc.) is Allowance for Doubtful Accounts?
> Using your answers to MBA 2-6 and MBA 2-7, compare and analyze Year 2 common-sized income statements of Kellogg (K) to those of General Mills (GIS). Data from MBA 2-6: Kellogg Company (K) produces, markets, and distributes cereal and food products inclu
> Which of the two methods of accounting for uncollectible accounts provides for the recognition of the expense at the earlier date?
> Carter’s Hardware is a small hardware store in the rural township of Oglethorpe that rarely extends credit to its customers in the form of an account receivable. The few customers that are allowed to carry accounts receivable are long-time residents of O
> Give two examples of other receivables.
> In what section of the balance sheet should a note receivable be listed if its term is (a) 90 days, (b) 12 years?
> What types of transactions give rise to accounts receivable?
> How is the method of determining the cost of inventory and the method of valuing it disclosed in the financial statements?
> Under what section should accounts receivable be reported on the balance sheet?
> What is the LIFO reserve, and why would an analyst be careful in interpreting the earnings of a company that has liquidated some of its LIFO reserve?
> If inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing—FIFO, LIFO, or average cost will yield the lowest annual income tax expense? Explain.
> Which of the three methods of inventory costing—FIFO, LIFO, or average cost—will in general yield an inventory cost most nearly approximating current replacement cost?
> General Mills Inc. (GIS) produces, markets, and distributes cereal and food products including Cheerios, Wheaties, Cocoa Puffs, Yoplait, and Pillsbury branded products. The following partial income statements (in millions) were adapted from recent ï
> If inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing—FIFO, LIFO, or average cost—will yield (a) the highest inventory cost, (b) the lowest inventory cost, (c) the highest gross profit, (d) th
> Does the term last-in in the LIFO method mean that the items in the inventory are assumed to be the most recent (last) acquisitions? Explain.
> Do the terms FIFO and LIFO refer to techniques used in determining quantities of the various classes of merchandise on hand? Explain.
> What are the three classifications of receivables?
> How does a policy of rotating clerical employees from job to job aid in strengthening the control procedures within the control environment? Explain.
> Define internal control.
> (a) How are cash equivalents reported on the financial statements? (b) What are some examples of cash equivalents?
> Do items reported as a credit memorandum on the bank statement represent (a) additions made by the bank to the company’s balance or (b) deductions made by the bank from the company’s balance? Explain.
> The balance of Cash is likely to differ from the bank statement balance. What two factors are likely to be responsible for the difference?
> The accounting clerk pays all obligations by pre numbered checks. What are the strengths and weaknesses in the internal control over cash payments in this situation?
> Kellogg Company (K) produces, markets, and distributes cereal and food products including Cheez-It, Coco Pops, Rice Krispies, and Pringles. The following partial income statements (in millions) were adapted from recent financial statements
> Before a voucher for the purchase of merchandise is approved for payment, supporting documents should be compared to verify the accuracy of the liability. Give an example of a supporting document for the purchase of merchandise.
> Assume that Leslie Hunter, accounts payable clerk for Campland Inc., stole $185,000 by paying fictitious invoices for goods that were never received. The clerk set up accounts in the names of fictitious companies and cashed the checks at a local bank. De
> Differentiate between the multiple and single-step forms of the income statement.
> When you purchase a new car, the “sticker price” includes a “destination” charge. Are you purchasing the car FOB shipping point or FOB destination? Explain.
> Office Outfitters Inc., which uses a perpetual inventory system, experienced an inventory shrinkage of $3,750. What accounts would be increased and decreased to record the adjustment for the inventory shrinkage at the end of the accounting period?
> What type of revenue is reported in the “Other revenue” section of the multiple-step income statement?
> Can a business earn a gross profit but incur a net loss? Explain.
> Why are adjustments needed at the end of an accounting period?
> Is the Land balance before the accounts have been adjusted the amount that should normally be reported on the balance sheet? Explain.
> Which of the following accounts would appear only in an accrual basis accounting system, and which could appear in either a cash basis or an accrual basis accounting system? (a) Common Stock, (b) Fees Earned, (c) Accounts Receivable, (d) Land, (e) Utilit
> Using your answers to MBA 2-3 and MBA 2-4, compare and comment on the operating results of Delta and Southwest. Data from MBA 2-3: Delta Air Lines, Inc. (DAL) provides cargo and passenger services throughout the world. The following operating data (in m
> Fees for services provided are billed to a customer during 20Y6. The customer remits the amount owed in 20Y7. During which year would the revenues be reported on the income statement under (a) the cash basis? (b) the accrual basis?
> Does every adjustment have an effect on determining the amount of net income for a period? Explain.
> Land with an assessed value of $500,000 for property tax purposes is acquired by a business for $600,000. Four years later, the plot of land has an assessed value of $750,000 and the business receives an offer of $975,000 for it. Should the monetary amou
> On October 1, Wok Repair Service extended an offer of $100,000 for land that had been priced for sale at $150,000. On December 19, Wok Repair Service accepted the seller’s counteroffer of $110,000. Describe how Wok Repair Service should record the land.
> Billy Jessop is the owner of Valley Delivery Service. Recently, Billy paid interest of $6,000 on a personal loan of $75,000 that he used to begin the business. Should Valley Delivery Service record the interest payment? Explain.
> If the effect of an adjustment is to increase the balance of a liability account, which of the following statements describes the effect of the adjustment on the other account? a. Increases the balance of a revenue account b. Increases the balance of an
> For a recent year ending January 31, Target Corporation had revenues of $72,618 million and total expenses of $74,254 million. Did Target Corporation report a net loss or a net income?
> If the effect of an adjustment is to increase the balance of an asset account, which of the following statements describes the effect of the adjustment on the other account? a. Increases the balance of a revenue account b. Increases the balance of a liab
> Assume that as of January 1, 20Y8, Sylvester Consulting has total assets of $500,000 and total liabilities of $150,000. As of December 31, 20Y8, Sylvester has total liabilities of $200,000 and total stockholders’ equity of $400,000. (a) What was Sylveste
> Identify the four different categories of adjustments frequently required at the end of an accounting period.
> Southwest Airlines Co. (LUV) provides passenger services throughout the United States, Mexico, Jamaica, The Bahamas, Aruba, and the Dominican Republic. The following operating data (in millions) were adapted from recent financial statement
> (a) How does the payment of dividends of $15,000 affect the three elements of the accounting equation? (b) Is net income affected by the payment of dividends? Explain.
> What services does eBay offer its customers?
> Capstone Consulting Services acquired land 5 years ago for $200,000. Capstone recently signed an agreement to sell the land for $375,000. In accordance with the sales agreement, the buyer transferred $375,000 to Capstone’s bank account on February 20. Ho
> What is a primary control for determining the accuracy of a business’s record keeping?
