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Questions and Answers of
Financial And Managerial Accounting
On January 4, 2010, Swifty Delivery Service purchased a truck at a cost of \($62,000\). Before placing the truck in service, Swifty spent \($2,200\) painting it, \($300\) replacing tires, and
Guilda Bell Associates surveys American eating habits. The company’s accounts include Land, Buildings, Office equipment, and Communication equipment, with a separate accumulated depreciation
Chapman Oil Company has an account titled Oil and Gas Properties. Chapman paid \($6,600,000\) for oil reserves holding an estimated 500,000 barrels of oil. Assume the company paid \($590,000\) for
Midtown Telecom provides communication services in Iowa, Nebraska, the Dakotas, and Montana. Midtown purchased goodwill as part of the acquisition of Surety Wireless Company, which had the following
On May 31, 2010, Ship It, the overnight shipper, had total assets of \($25\) billion and total liabilities of \($16\) billion. Included among the assets were property, plant, and equipment with a
We learned that Sherman Lawn Service, Inc., had purchased a lawn mower and weed whacker on August 3 and that they were expected to last four years.Requirements1. Calculate the amount of depreciation
We learned that Haupt Consulting, Inc., had purchased a Dell computer and office furniture on December 3 and 4, respectively, and that they were expected to last five years.Requirements1. Calculate
Advanced Automotive pays \($140,000\) for a group purchase of land, building, and equipment. At the time of your acquisition, the land has a market value of \($75,000\), the building \($60,000\), and
At the beginning of the year, Logan Services purchased a used airplane for \($65,000,000\). Logan Services expects the plane to remain useful for 4 years (6 million miles) and to have a residual
At the beginning of 2011, Texas Aero purchased a used airplane at a cost of \($59,000,000\). Texas Aero expects the plane to remain useful for 5 years (6 million miles) and to have a residual value
This exercise uses the Logan Services data from Short Exercise 9-3. Logan Services is deciding which depreciation method to use for income tax purposes.Requirements1. Which depreciation method offers
On February 28, 2011, Solar Energy Consulting purchased a Xerox copy machine for \($23,100\). Solar Energy Consulting expects the machine to last for 3 years and to have a residual value of
Assume that Smith’s Auto Sales paid \($50,000\) for equipment with a 10-year life and zero expected residual value. After using the equipment for 4 years, the company determines that the asset will
ABC Catering Service purchased equipment on January 1, 2010, for \($58,500\). ABC Catering Service expected the equipment to last for 6 years and to have a residual value of \($4,500\). Suppose ABC
Micron Precision purchased a computer for \($3,100\), debiting Computer equipment. During 2010 and 2011, Micron Precision recorded total depreciation of \($2,200\) on the computer. On January 1,
Use Amazon.com’s balance sheet and the Note 1 data on “Allowance for doubtful accounts”.Requirements 1. Do accounts receivable appear to be an important asset for Amazon.com? What about
British Tran bought four used Unlimited Airline airplanes. Each plane was worth \($39\) million, but the owner sold the combination for \($144\) million. How much is British Tran’s cost of each
An Unlimited Airlines jet costs \($42\) million and is expected to fly 370 million miles during its 8-year life. Residual value is expected to be zero because the plane was used when acquired. If the
A copy machine costs \($43,000\) when new and has accumulated depreciation of \($28,000\). Suppose Johnson Printing junks this machine, receiving nothing. What is the result of the disposal
Suppose Johnson Printing in the preceding question sold the machine for \($15,000\). What is the result of this disposal transaction?a. Loss of $5,000b. Gain of $36,000c. Gain of $5,000d. No gain or
During its first year of operations, World Class Sport Shoes earned revenue of \($388,000\) on account. Industry experience suggests that bad debts will amount to 4% of revenues. At December 31,
The Accounts receivable balance for Turning Leaves Furniture Restoration at December 31, 2010, was \($15,000\). During 2011, Turning Leaves completed the following transactions:a. Sales revenue on
Spring Garden Flowers had the following balances at December 31, 2011, before the year-end adjustments:The aging of accounts receivable yields the following data:Requirements1. Journalize Spring’s
Sheena Stone 1S an attorney in Los Angeles. Stone uses the direct write-off method to account for uncollectible receivables.At November 30, 2010, Stone’s accounts receivable totaled \($21,000\).
Foleys Furniture Repair had trouble collecting its account receivable from Steve Stone. On July 19, 2012, Foley’s finally wrote off Stone’s \($900\) account receivable. Foley’s turned the
Lakeland Medical Center included the following items in its financial statements:Requirements1. How much net income did Lakeland earn for the month?2. Show two ways Lakeland can report receivables on
Restaurants do a large volume of business by credit cards and bankcards. Suppose Salad Company restaurant had these transactions on January 28, 2011:Suppose National Express charges merchants 2.00%
A table of notes receivable for 2012 follows:Requirement1. For each of the notes receivable, compute the amount of interest revenue earne during 2012. Use a 360-day year, and round to the nearest
Lantana Bank & Trust Company lent \($90,000\) to Sylvia Peters on a 30-day, 11% note. Requirement 1. Journalize the following transactions for the bank (explanations are not required):a. Lending the
West Highland Clothiers reported the following items at August 31, 2012 (amounts in thousands, with last year’s—2011—amounts also given as needed):Requirement1. Compute West Highland’s (a)
Suppose Big Trucks Dealership is opening a regional office in St. Louis. Lesa Carter, the office manager, is designing the internal control system. Carter proposes the following procedures for credit
At December 31, 2012, the Accounts receivable balance of Solar Energy Manufacturing is \($170,000\). The Allowance for doubtful accounts has a \($10,100\) credit balance. Solar Energy Manufacturing
At September 30, 2011, Eagle Mountain Flagpoles had Accounts receivable of \($33,000\) and Allowance for uncollectible accounts had a credit balance of \($4,000\). During October 2011, Eagle Mountain
Top Performance Cell Phones sold \($18,000\) of merchandise to Andrew Trucking Company on account. Andrew fell on hard times and paid only \($4,000\) of the account receivable. After repeated
Speedy Running Shoes reports the following:Requirement1. Journalize all entries required for Speedy Running Shoes. 2011 Jan 3 Oct 1 Dec 31 Recorded Estate bankcard sales of $104,000, less a 2%
On April 30, 2011, Statewide Bank loaned \($80,000\) to Kelsey Sperry on a one-year 11% note. ’Requirements 1. Journalize all entries related to the note for 2011 and 2012.2. Which party has aa.
The following selected transactions occurred during 2012 for Mediterranean Importers. The company ends its accounting year on June 30, 2012:Requirement1. Journalize all required entries from April 1
Beautiful Steam Cleaning performs service on account. When a customer account becomes four months old, Beautiful converts the account to a note receivable. During 2012, the company completed the
Abanaki Carpets reported the following amounts in its 2011 financial statements. The 2010 figures are given for comparison.Requirements1. Calculate Abanaki’s acid-test ratio for 2011. Determine
Modern Media Sign Company sells on account. Recently, Modern reported the following figures:Requirements1. Compute Modern’s average collection period on receivables during 2012.2. Suppose
Mail Plus performs mailing services on account, so virtually all cash receipts arrive m the mail. Gina Star, the owner, has just returned from a meeting with new ideas for the business. Among other
"Bad debts" are the same asa. Uncollectible accounts.b. Doubtful accounts.c. Neither of the aboved. Botha. and b.
Your company uses the allowance method to account for uncollectible receivables. At the beginning of the year, Allowance for uncollectible accounts had a credit balance of \($1,400\). During the year
Your ending balance of Accounts receivable is \($20,500\). Use the data in the preceding question to compute the net realizable value of Accounts receivable at year-end.a. $17,600b. $3,300c.
What is wrong with the direct write-off method of accounting for uncollectibles?a. The direct write-off method does not set up an allowance for uncollectibles.b. The direct write-off method
At December 31, you have a \($9,900\) note receivable from a customer. Interest of 7% has accrued for 7 months on the note. What will your financial statements report for this situation?a. Nothing,
Return to the data in the preceding question. What will the income statement report for this situation?a. Nothing, because you have not received the cash yetb. Interest revenue of $404c. Note
At year-end, your company has cash of \($11,800\), receivables of \($47,700\), inventory of \($36,200\), and prepaid expenses totaling \($4,800\). Liabilities of \($62,800\) must be paid next year.
Return to the data in the preceding question. A year ago receivables stood at \($66,900\), and sales for the current year totaled \($706,600\). How many days did it take you to collect your average
On April 1, Rockin’ Salad Dressings creates a petty cash fund with an imprest balance of \($500\). During April, Melody Tau, the fund custodian, signs the following petty cash tickets:On April 30,
Suppose that on June 1, Cool Gyrations, a disc jockey service, creates a petty cash fund with an imprest balance of \($500\). During June, Jackson Demers, fund custo¬ dian, signs the following petty
North Bank has a loan receivable from Westminster Publishing Company. Westminster is late making payments to the bank, and Richard Connelly, a North Bank vice president, is helping Westminster
During October, Sherman Lawn Service decided that it needed a petty cash fund. Sherman started the fund by cashing a check from her business bank account for \($150\). At the end of October, Sherman
Haupt performs systems consulting. Haupt’s February Cash from its general ledger appears below:Haupt’s bank statement dated February 28 follows:Requirements1. Prepare the February bank
Consider the April 2009 transactions for Crystal Clear Cleaning. The bank statement dated April 30, 2009, for Crystal Clear follows.Requirements1. Prepare bank reconciliation.2. Journalize any
There are 5 characteristics identified in the chapter as pitfalls of e-commerce.Requirement1. List the 5 characteristics identified in the chapter as pitfalls of e-commerce.
The Cash account of Safe and Secure Security Systems reported a balance of \($2,490\) at May 31, 2011. There were outstanding checks totaling \($500\) and a May 31 deposit in transit of \($300\). The
The following petty cash transactions of Lexite Laminated Surfaces occurred m August.Requirement1. Prepare journal entries without explanations. Aug 1 31 Established a petty cash fund with a $300
Gwen O’Malley, an accountant for Ireland Limited, discovers that her supervisor, Blarney Stone, made several errors last year. Overall, the errors overstated the company s net income by 20%. It is
Lori Root owns Root’s Boot City. She fears that a trusted employee has been stealing from the company. This employee receives cash from customers and also prepares the monthly bank reconciliation.
The following items could appear on a bank reconciliation:a. Outstanding checksb. Deposits in transitc. NSF checkd. Bank collection of our note receivablee. Interest earned on bank balancef. Service
D. J. Hill’s checkbook lists the following:Hill’s May bank statement shows the following:Requirements1. Prepare Hill’s bank reconciliation at May 31, 2012.2. How much cash does Hill actually
Fred Root operates four bowling alleys. He just received the February 28 bank statement from City National Bank, and the statement shows an ending balance of \($890\). Listed on the statement are an
Louise’s Dance Studio created a \($200\) imprest petty cash fund. During the month, the fund custodian authorized and signed petty cash tickets as follows:Requirement 1.Make the general journal
Steppin’ Out Night Club maintains an imprest petty cash fund of \($150\), which is under the control of Brenda Montague. At December 31, the fund holds \($14\) cash and petty cash tickets for
The April cash records of Donald Insurance follow:Donald Insurance’s Cash account shows a balance of \($17,040\) at April 30. On April 30, Donald Insurance received the following bank
The May 31 bank statement of Wood’s Healthcare has just arrived from Federal Bank. To prepare the bank reconciliation, you gather the following data.Data list:a. The May 31 bank balance is
Pendley Productions makes all sales on credit. Cash receipts arrive by mail. Larry Padgitt in the mailroom opens envelopes and separates the checks from the accompanying remittance advices. Padgitt
On November 1, Fab Salad Dressings creates a petty cash fund with an imprest balance of \($400\). During November, Sunny Lewis, the fund custodian, signs the following petty cash tickets:On November
Suppose that on April 1, Party Gyrations, a disc jockey service, creates a petty cash fund with an imprest balance of \($250\). During April, Michael Martell, fund custo¬ dian, signs the following
Federal Credit Bank has a loan receivable from Hawthorne Construction Company. Hawthorne is late making payments to the bank, and Robert Wheeler, a Federal Credit Bank vice president, is helping
Each of the following situations has an internal control weakness:a. Techno Dot Applications sells purchasing software. Recently, development of a new program stopped while the programmers redesigned
The July cash records of Dickson Insurance follow:Dickson Insurance’s Cash account shows a balance of \($16,520\) at July 31. On July 31, Dickson Insurance received the following bank
The notes are an important part of a company’s financial statements, giving valuable details that would clutter the tabular data presented in the statements. This case will help you learn to use a
Darice Goodrich receives cash from customers. Her other assigned job is to post the collections to customer accounts receivable. Her company has weaka. Ethicsb. Assignment of responsibilitiesc.
Navarro Company’s Cash account shows an ending balance of \($850\). The bank statement shows a \($26\) service charge and an NSF check for \($190\). A \($300\) deposit is in transit, and out¬
Shepherd Cycles used the FIFO inventory method in 2010. Shepherd Cycles plans to continue using the FIFO method in future years. Requirement 1. Which inventory principle is most relevant to
Shepherd Cycles does not expect prices to change dramatically and wants to use a method that averages price changes. Requirements 1. Which inventory method would best meet Shepherd's goal? 2. What
Innovation Cycles uses the FIFO inventory method. Innovation started March with 10 bicycles that cost \($60\) each. On March 16, Innovation bought 20 bicycles at \($70\) each. On March 31, Innovation
Review the facts on Innovation Cycles in Short Exercise 6-3. Requirement 1. Prepare a perpetual inventory record for the LIFO method.Data From Shot Exercise 6-3:Innovation Cycles uses the FIFO
Review the facts on Innovation Cycles in Short Exercise 6-3. Requirement 1.Prepare a perpetual inventory record for the average-cost method. Round average cost per unit to the nearest cent and all
Use the Innovation Cycles data in Short Exercise 6-3 to journalize. Requirements 1. The March 16 purchase of inventory on account.2. The March 31 sale of inventory on account. Innovation sold each
Use the Innovation Cycles data in Short Exercise 6-4 to journalize.Requirements1. The March 16 purchase of inventory on account.2. The March 31 sale of inventory on account. Innovation sold each
Use the Innovation Cycles data in Short Exercise 6-5 to journalize. Requirements 1. The March 16 purchase of inventory on account.2. The March 31 sale of inventory on account. Innovation sold each
Assume that a Queen Burger restaurant has the following perpetual inventory record for hamburger patties:Requirements1. At April 30, the accountant for the restaurant determines that the current
Boston Cycles’ inventory data for the year ended December 31, 2011, follow:Assume that the ending inventory was accidentally overstated by $2,200.Requirement 1. What are the correct amounts for
Refer back to the Boston Cycles’ inventory data in Short Exercise 6-11.Requirement1. How would the inventory error affect Boston Cycles’ cost of goods sold and gross profit for the year ended
Electronic Company began the year with inventory of \($55,800\) and purchased \($277,000\) of goods during the year. Sales for the year are \($476,000\), and Electronic s gross profit percentage is
Putter’s Paradise carries an inventory of putters and other golf clubs. Putter’s Paradise uses the FIFO method and a perpetual inventory system. The sales price of each putter is \($135\).
Accounting records for Rich’s Shopping Bags yield the following data for the year ended July 31, 2011:Requirements1. Journalize the inventory transactions for the company using the data given.2.
Assume that an RK Toys store bought and sold a line of dolls during December as follows:RK Toys uses the perpetual inventory system.Requirements1. Compute the cost of ending inventory under FIFO.2.
Rapid Resources, which uses the FIFO method, has the following account balances at December 31, 2012, prior to releasing the financial statements for the year:Rapid has determined that the
Hudson River Bakery reported sales revenue of \($29,000\) and cost of goods sold of $11,000.Requirement 1. Compute Hudson River’s correct gross profit if the company made either of the following
Earth Foods Grocery reported the following comparative income statement for the years ended June 30, 2012 and 2011:During 2012, Earth Foods discovered that ending 2011 inventory, as previously
All Makes Auto Parts holds inventory all over the world. Assume that the records for one auto part show the following:Suppose this inventory, stored in the United States, was lost in a
New Life Landscaping and Nursery began December with inventory of \($47,000\). During December, New Life made net purchases of \($30,300\) and had net sales of \($63,000\). Lor the past several
Some of L and M Electronics’ merchandise is gathering dust. It is now December 31 2012, and the current replacement cost of the ending inventory is \($25,000\) below the business’s cost of the
Vitamin World began January with an inventory of 90 crates of vitamins that cost a total of \($3,600\). During the month, Vitamin World purchased and sold merchandise on account as follows:Vitamin
Fancy Iron Industries began October with 54 units of iron inventory that cost \($39\) each. During October, the company completed the following inventory transactions:Requirements 1. Prepare a
Rocky Bayou Golf Clubs, which uses the FIFO method, has the following account balances at October 31, 2012, prior to releasing the financial statements for the year:Rocky Bayou has determined that
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