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fundamentals of financial accounting 7th edition
Questions and Answers of
Fundamentals Of Financial Accounting 7th Edition
When stock is purchased with cash and held in treasury, what is the impact on the balance sheet equation?a. No change—the reduction of the asset Cash is offset with the addition of the asset
In what situation does total stockholders’ equity decrease?a. When a cash dividend is declared.b. When a stock dividend is declared.c. When a stock split is announced.d. When a previously declared
Swimtech Pools Inc. (SPI) reported the following in its financial statements for the quarter ended March 31, 2018.During the quarter ended March 31, SPI reported Net Income of $5,000 and declared and
Refer to the financial statements of The Home Depot in Appendix A at the end of this book.Required:1. Which of the two basic reporting approaches for the cash flows from operating activities did The
Where is the overall change in cash shown in the statement of cash flows?a. In the top part, before the operating activities section.b. In one of the operating, investing, or financing activities
Hamburger Heaven’s income statement for the current year and selected balance sheet data for the current and prior years ended December 31 are presented below.Required:Prepare the cash flows from
In what order do the three sections of the statement of cash flows appear when reading from top to bottom?a. Financing, investing, operating.b. Investing, operating, financing.c. Operating,
Total cash inflow in the operating section of the statement of cash flows should include which of the following?a. Cash received from customers at the point of sale.b. Cash collections from customer
If the balance in Prepaid Expenses increased during the year, what action should be taken on the statement of cash flows when following the indirect method, and why?a. The change in the account
Which of the following would not appear in the investing section of the statement of cash flows?a. Purchase of inventory.b. Sale of investments.c. Purchase of land.d. All of the above would appear in
Refer to the information in CP12-2.Required:Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.Data From CP12-2Hamburger Heaven’s income
Refer to the information in PA12-2.Required:Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.Data From PA12-2The income statement and
Refer to the information in PB12-2.Required:Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.Data From PB12-2The income statement and
This case is available online in the Connect eBook. To complete this case, you will evaluate two alternatives for increasing a sports club’s reported operating cash flows.
If a company engages in a material noncash transaction, which of the following is required?a. The company must include an explanatory narrative or schedule accompanying the statement of cash flows.b.
The total change in cash shown on the statement of cash flows for the year should agree with which of the following?a. The difference in Retained Earnings when reviewing the comparative balance
If a company’s current assets (such as accounts receivable and inventories) are allowed to grow out of control, which of the following would occur?a. Cash flows from investing activities would be
Pizza International, Inc., reported the following information (in thousands):Required:1. Based on this information, compute cash flow from operating activities using the indirect method.2. What was
Mountain Gear, Inc., buys bikes, tents, and climbing supplies from Rugged Rock Corporation for sale to consumers. What type of company is Mountain Gear, Inc.?a. Service b. Retail merchandiserc.
PCM, Inc., is a direct marketer of computer hardware, software, peripherals, and electronics. In a recent annual report, the company reported that its revenue is “recognized upon receipt of the
This year your company has purchased less expensive merchandise inventory but has not changed its selling prices. What effect will this change have on the company’s gross profit percentage this
Complete the following table, indicating the amount and direction of effect (+ for increase, − for decrease, and NE for no effect) of each transaction on each item in Rockland Shoe Company’s
What is gross profit? How is the gross profit percentage computed? Illustrate its calculation and interpretation assuming Net Sales is $100,000 and Cost of Goods Sold is $60,000.
Wolverine World Wide, Inc., prides itself as being the “world’s leading marketer of U.S. branded non-athletic footwear.” The following data (in millions) were reported for the third quarter of
Using the information in E6-10, prepare journal entries to record the transactions, assuming Solitare records discounts using the gross method in a perpetual inventory system.Data From E6-10During
Nicole’s Getaway Spa (NGS) has been so successful that Nicole has decided to expand her spa by selling merchandise. She sells things such as nail polish, at-home spa kits, cosmetics, and
Each period, the Cost of Goods Available for Sale is allocated betweena. Assets and Liabilities.b. Assets and Expenses.c. Assets and Revenues.d. Expenses and Liabilities.
The Gap, Inc., is a specialty retailer that operates stores selling clothes under the trade names Gap, Banana Republic, Athleta, and Old Navy. Assume that you are employed as a stock analyst and your
Define goods available for sale. How does it differ from cost of goods sold?
A company that purchases inventory costing $10,000 onterms 2/30, n/60, but first returns one-half of those goods,will receive a discount of what amount if it pays on the last day of the discount
Campus Stop, Inc., is a student co-op. Campus Stop uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis:Required:1. Compute Net Sales and Gross
Hair supplies. Hair World uses a Hair World Inc. is a wholesaler of perpetual inventory system. The following transactions (summarized) have been selected for analysis:Required:1. Compute Net Sales
If beginning inventory is $200 and purchases are $800, which of the following could be true?a. Ending inventory is $400 and Cost of Goods Sold is $600.b. Ending inventory is $800 and Cost of Goods
Which of the following is false regarding a perpetual inventory system?a. Physical counts are never needed because records are maintained on a transaction-by-transaction basis.b. The Inventory
Big Tommy Corporation is a local grocery store organized seven years ago as a corporation. The bookkeeper prepared the following statement at year-end (assume that all amounts are correct, but note
Which of the following does not affect Net Sales?a. Sales Returns and Allowancesb. Sales Discountsc. Cost of Goods Soldd. Sales Revenue
A $1,000 sale is made on May 1 with terms 2/30, n/60. Items with a $100 selling price are returned on May 3. What amount, if received on May 9, will be considered payment in full?a. $700 b.
A company bundles a product and service that separately sell for $40 and $60, respectively. If the bundled price is $80, how much revenue is recognized for delivering the product?a. $32 b. $40c.
Use the information in M5-10 to identify outstanding deposits that should be included in the May 31 bank reconciliation.Data From M5-10Use the following bank statement and T-account to identify
Which of the following correctly describes how to report cash?a. Restricted cash is always reported as a current asset.b. Cash can be combined with cash equivalents.c. Cash can be combined with
Upon review of the most recent bank statement, you discover that a check was made out to your supplier for $76 but was recorded in your Cash and Accounts Payable accounts as $67. Which of the
Upon review of your company’s bank statement, you discover that you recently deposited a check from a customer that was rejected by your bank as NSF. Which of the following describes the actions to
What document signals that a company should record the purchase of goods on account?a. Purchase requisitionb. Purchase orderc. Receiving reportd. Supplier invoice
A company indicates the condition of goods obtained on which of the following documents?a. Purchase requisitionb. Purchase orderc. Receiving reportd. Supplier invoice
This case is available online in the Connect eBook. By completing this case, you will learn to quantify cash embezzlement, identify missing cash controls, and recommend control improvements.
Which of the following internal control principles underlies the requirement that all customers be given a sales receipt?a. Segregate dutiesb. Establish responsibilityc. Restrict accessd. Document
Which of the following does not enhance internal control?a. Assigning different duties to different employeesb. Ensuring adequate documentation is maintainedc. Allowing access only when required to
Which of the following is not a component of internal control?a. Environmental assessmentb. Control activitiesc. Information and communicationd. Monitoring activities
The December bank statement and cash T-account for Stewart Company follow:There were no deposits in transit or outstanding checks at November 30.Required:1. Identify and list the deposits in transit
Which of the following is not a Sarbanes-Oxley Act requirement intended to reduce fraud opportunities?a. Increase fines and jail sentences for fraud perpetrators.b. All public companies establish an
Which of the following is not an element of the fraud triangle?a. Opportunityb. Control environmentc. Incentived. Rationalization
Refer to the financial statements of The Home Depot in Appendix A at the end of this book.Required:1. How much does The Home Depot report for Cash and Cash Equivalents and Restricted Cash (in
The following relates to a magazine company called My Style Mag (MSM). You will use your understanding of the relationships among (1) Business activities, (2) Accounting equation
Refer to E4-16.Required:Using the adjusted balances in E4-16, prepare an income statement, statement of retained earnings, and classified balance sheet for the year ended December 31.Data From
What is a post-closing trial balance? Is it a useful part of the accounting cycle? Explain.
Which of the following trial balances is used as a source for preparing the income statement?a. Unadjusted trial balanceb. Pre-adjusted trial balancec. Adjusted trial balanced. Post-closing trial
Dyer, Inc., completed its first year of operations on December 31, 2018. Because this is the end of the annual accounting period, the company bookkeeper prepared the following preliminary income
Assume a company receives a bill for $10,000 for advertising done during the current year. If this bill is not yet recorded at the end of the year, what will the adjusting journal entry include?a.
Assume the balance in Prepaid Insurance is $2,500, but it should be $1,500. The adjusting journal entry should include which of the following?a. Debit to Prepaid Insurance for $1,000b. Credit to
Company A has owned a building for several years. Which of the following statements regarding depreciation is false from an accounting perspective?a. Depreciation Expense for the year will equal
An adjusted trial balancea. Shows the ending balances in a debit and credit format before posting the adjusting journal entries.b. Is prepared after closing entries have been posted.c. Is a tool used
Complete this case, available online at the Connect eBook. By completing this case, you will learn to identify misstatements and make adjustments to correct the financial statements.
An adjusting journal entry to recognize accrued salaries payable would cause which of the following?a. A decrease in assets and stockholders’ equityb. A decrease in assets and liabilitiesc. An
What is a contra-asset? Give an example of one.
On December 31, an adjustment is made to reduce Deferred Revenue and report Service Revenue generated. How many accounts will be included in this adjusting journal entry?a. Noneb. Onec. Twod. Three
Learn to Play, Inc., is a one-person company that provides private piano lessons. Its unadjusted trial balance at December 31, 2018, follows, along with information about selected
Golf Academy, Inc., provides private golf lessons. Its unadjusted trial balance at December 31, 2018, follows, along with information about selected accounts.Required:1. Calculate the (preliminary)
When a concert promotions company collects cash for ticket sales two months in advance of the show date, which of the following accounts is affected?a. Accounts Payableb. Accounts Receivablec.
Which account is least likely to appear in an adjusting journal entry?a. Cashb. Interest Receivablec. Income Tax Expensed. Salaries and Wages Expense
Refer to the financial statements of The Home Depot in Appendix A and Lowe’s in Appendix B at the end of this book.Required:1. Refer to the notes to the financial statements to determine how much
Refer to the financial statements of The Home Depot in Appendix A at the end of this book.Required:1. How much did The Home Depot owe for salaries and related expenses at January 29, 2017? Was this
Assume it is now December 31, 2018, and Nicole has just completed her first year of operations at Nicole’s Getaway Spa. After looking through her trial balance, she noticed that there are some
Which of the following is not one of the four basic financial statements?a. The balance sheetb. The audit reportc. The income statementd. The statement of cash flows
Nicole Mackisey is thinking of forming her own spa business, Nicole’s Getaway Spa (NGS). Nicole expects that she and two family members will each contribute $10,000 to the business and receive
Val is opening a hair salon, but she does not know what business form it should take. Tell her about the advantages and disadvantages of operating as a sole proprietorship versus a corporation.
Which of the following is true regarding the income statement?a. The income statement is sometimes called the statement of operations.b. The income statement reports revenues, expenses, and
Refer to the financial statements of The Home Depot in Appendix A and Lowe’s in Appendix B at the end of this book.Required:1. Was Lowe’s net income for the year ended February 3, 2017, greater
Which of the following is false regarding the balance sheet?a. The accounts shown on a balance sheet represent the basic accounting equation for a particular business.b. The retained earnings balance
Fitbit, Inc., reported the following information for the nine-month period ended October 1, 2016. Items are listed alphabetically and are in thousands of dollars.Required:Prepare the four basic
Cheese Factory Incorporated reported the following information for the fiscal year ended August 31, 2018.Required:Prepare the four basic financial statements for the fiscal year ended August 31,
The accounting process generates financial reports for both internal and external users. Describe some of the specific groups of internal and external users.
Which of the following regarding retained earnings is false?a. Retained earnings is increased by net income.b. Retained earnings is a component of stockholders’ equity on the balance sheet.c.
Refer to PB1-3.Required:1. Did Cheese Factory’s cash balance increase or decrease during the year ended August 31, 2018? Which financial statement shows the reasons for this change?2. What would
Which of the following is not one of the items required to be shown in the heading of a financial statement?a. The financial statement preparer’s nameb. The title of the financial statementc. The
Which of the following statements regarding the statement of cash flows is false?a. The statement of cash flows separates cash inflows and outflows into three major categories: operating, investing,
Which of the following regarding GAAP is true?a. GAAP is an abbreviation for generally applied accounting principles.b. Changes in GAAP always affect the amount of income reported by a company.c.
Which of the following is true?a. FASB creates SEC.b. GAAP creates FASB.c. SEC creates CPA.d. FASB creates GAAP.
Which of the following would not be a goal of external users reading a company’s financial statements?a. Understanding the current financial state of the companyb. Assessing the company’s
Which of the following is not required by the Sarbanes-Oxley Act?a. Top managers of public companies must sign a report certifying their responsibilities for the financial statements.b. Public
Refer to the financial statements of The Home Depot in Appendix A at the end of this book. Required:1. What were the year-end dates for the “Fiscal 2016” and “Fiscal 2015” periods?2.
Refer to the financial statements of The Home Depot in Appendix A and Lowe’s in Appendix B.Required:1. Use the companies’ fiscal 2016 balance sheets to determine the amounts in the accounting
Which of the following statements describes transactions that would be recorded in the accounting system?a. An exchange of an asset for a promise to payb. An exchange of a promise for another
Total assets on a balance sheet prepared on any date must agree with which of the following?a. The sum of total liabilities and net income as shown on the income statementb. The sum of total
The duality of effects can best be described as follows:a. When a transaction is recorded in the accounting system, at least two effects on the basic accounting equation will result.b. When an
Refer to E2-4.Required:For each of the events in E2-4, prepare journal entries, checking that debits equal credits.Data From E2-4The following events occurred for Favata Company:a. Received $10,000
The T-account is used to summarize which of the following?a. Increases and decreases to a single account in the accounting systemb. Debits and credits to a single account in the accounting systemc.
Refer to E2-6.Required:1. For each of the events in E2-6, prepare journal entries, checking that debits equal credits.2. Explain your response to event (c).Data From E2-6NIKE, Inc., with headquarters
A company was recently formed with $50,000 cash contributed to the company by stockholders for common stock. The company then borrowed $20,000 from a bank and bought $10,000 of supplies on account.
Which of the following statements would be considered true regarding debits and credits?a. In any given transaction, the total dollar amount of the debits and the total dollar amount of the credits
What is a T-account? What is its purpose?
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