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College Accounting 20th Edition Heintz and Parry - Solutions

Screpcap Co. had the following transactions during the first week of June:June 1 Purchased merchandise on account from Acme Supply, $2,700, plus freight charges of $160.1 Issued Check No. 219 to Denver Wholesalers for merchandise purchased on account, $720, less 1% discount.1 Sold merchandise on
What financial statements are affected by an error in the ending inventory?
What is the main difference between the periodic system of accounting for inventory and the perpetual system of accounting for inventory?
Is a physical inventory necessary under the periodic system? Why or why not?
Is a physical inventory necessary under the perpetual system? Why or why not?
In a period of rising prices, which inventory method will result in:(a) The highest cost of goods sold?(b) The lowest cost of goods sold?(c) The highest ending inventory?(d) The lowest ending inventory?(e) The highest gross profit?(f) The lowest gross profit?
What two factors are taken into account by the weighted-average method of merchandise cost allocation?
Which inventory method always follows the actual physical flow of merchandise?
When lower-of-cost-or-market is assigned to the items that comprise the ending merchandise inventory, what does “cost” mean? What does “market” mean?
List the three steps followed under the gross profit method of estimating inventory.
List the five steps followed under the retail method of estimating inventory.
Assume that in year 1, the ending merchandise inventory is overstated by $50,000. If this is the only error in years 1 and 2, indicate which items will be understated, overstated, or correctly stated for years 1 and2.
Bill Diamond owns a business called Diamond Distributors. The following transactions took place during January of the current year. Journalize the transactions in a general journal using the periodic inventory method.Jan. 5 Purchased merchandise on account from Prestigious Jewelers, $3,700.8 Paid
Sandy Johnson owns a small variety store. The following transactions took place during March of the current year. Journalize the transactions in a general journal using the perpetual inventory method.Mar. 3 Purchased merchandise on account from City Galleria, $2,700.7 Paid freight charge on
Sandy Chen owns a small specialty store, named Chen’s Chattel, whose year-end is June 30. Determine the total amount that should be included in Chen’s Chattel’s year-end inventory. A physical inventory taken on June 30 reveals the following:Cost of merchandise on the showroom floor and in the
Stalberg Company's beginning inventory and purchases during the fiscal year ended December 31, 20--, were as follows:There are 10 units of inventory on hand on December 31.1. Calculate the total amount to be assigned to the ending inventory under each of the following periodic inventory methods:(a)
Hamilton Company's beginning inventory and purchases during the fiscal year ended September 30, 20-2, were as follows:Use the following information for the specific identification method.There are 1,000 units of inventory on hand on September 30, 20-2. Of these 1,000 units:100 are from October 18,
Douglas Company's beginning inventory and purchases during the fiscal year ended December 31, 20--, were as follows:There are 1,000 units of inventory on hand on December 31.REQUIRED1. Calculate the total amount to be assigned to the ending inventory and cost of goods sold on December 31 under each
A fire completely destroyed all the inventory of Glisan Lumber Yard on August 5, 20--. Fortunately, the accounting records were not destroyed in the fire. The following information is provided by Glisan Lumber Yard for the time period January 1 through August 5:Beginning inventory, January 1, 20--
The following information is provided by Raynette's Pharmacy for the last quarter of its fiscal year ending on March 31, 20--:REQUIRED1. Estimate the ending inventory as of March 31 using the retail inventory method.2. Estimate the cost of goods sold for the time period January 1 through March 31
Assume that in year 1, the ending merchandise inventory is understated by $40,000. If this is the only error in years 1 and 2, indicate which items will be understated, overstated, or correctly stated for years 1 and2.
Amy Douglas owns a business called Douglas Distributors. The following transactions took place during January of the current year. Journalize the transactions in a general journal using the periodic inventory method.Jan. 5 Purchased merchandise on account from Elite Warehouse, $4,100.8 Paid freight
Doreen Woods owns a small variety store. The following transactions took place during March of the current year. Journalize the transactions in a general journal using the perpetual inventory method.Mar. 3 Purchased merchandise on account from Corner Galleria, $3,500.7 Paid freight charge on
Danny Steele owns a small specialty store, named Steele’s Storeroom, whose year-end is June 30. Determine the total amount that should be included in Steele’s Storeroom’s year-end inventory. A physical inventory taken on June 30 reveals the following:Cost of merchandise on the showroom floor
Bouie Company's beginning inventory and purchases during the fiscal year ended December 31, 20--, were as follows:There are 20 units of inventory on hand on December 31.1. Calculate the total amount to be assigned to the ending inventory under each of the following periodic inventory methods:(a)
Boyce Company's beginning inventory and purchases during the fiscal year ended September 30, 20-2, were as follows:Use the following information for the specific identification method.There are 900 units of inventory on hand on September 30, 20-2. Of these 900 units:50 are from October 18, 20-1 ...
Hall Company's beginning inventory and purchases during the fiscal year ended December 31, 20--, were as follows:There are 1,100 units of inventory on hand on December 31.REQUIRED1. Calculate the total amount to be assigned to the ending inventory and cost of goods sold on December 31 under each of
A flood completely destroyed all the inventory of Bayside Waterworks Company on July 1, 20--. Fortunately, the accounting records were not destroyed in the flood. The following information is provided by Bayside Waterworks for the time period January 1 through July 1, 20--.Beginning inventory,
The following information is provided by Beverly'sBasket Corner for the last quarter of its fiscal year ending on March 31, 20--:REQUIRED1. Estimate the ending inventory as of March 31 using the retail inventory method.2. Estimate the cost of goods sold for the time period January 1 through March
Most major grocery chains have optical scanning devices at the checkout stands and they certainly reduce the time required to check out. What benefits do they provide to the business? Next time you go to the grocery store, take a few minutes to chat with the manager. Ask the manager to describe the
Electronics, Inc., is a high-volume, wholesale merchandising company. Most of its inventory turns over four or five times a year. The company has had 50 units of a particular brand of computers on hand for over a year. These computers have not sold and probably will not sell unless they are
Tiller Company's beginning inventory and purchases during the fiscal year ended December 31, 20-2, were as follows:There are 1,200 units of inventory on hand on December 31, 20-2.REQUIRED1. Calculate the total amount to be assigned to the cost of goods sold for 20-2 and ending inventory on December
Bhushan Company has been using LIFO for inventory purposes because it would prefer to keep gross profits low for tax purposes. In its second year of operation (20-2), the controller pointed out that this strategy did not appear to work and suggested that FIFO cost of goods sold would have been
Explain the primary difference between the periodic and perpetual inventory systems when calculating cost of goods sold and merchandise inventory.
The beginning inventory, purchases, and sales for Myrl Sign Company for the month of April follow.REQUIREDCalculate the total amount to be assigned to cost of goods sold for April and the ending inventory on April 30, under each of the following methods:1. Perpetual LIFO inventory method2.
Kelley Company began business on January 1, 20-1. Purchases and sales during the month of January follow.REQUIREDCalculate the total amount to be assigned to cost of goods sold for January and the ending inventory on January 31, under each of the following methods:1. Perpetual LIFO inventory
The beginning inventory, purchases, and sales for Harrington Equipment Company for the month of August follow.REQUIREDCalculate the total amount to be assigned to cost of goods sold for August and the ending inventory on August 31, under each of the following methods:1. Perpetual LIFO inventory
Vozniak Company began business on January 1, 20-1. Purchases and sales during the month of January follow.REQUIREDCalculate the total amount to be assigned to cost of goods sold for January and the ending inventory on January 31, under each of the following methods:1. Perpetual LIFO inventory
A firm is preparing to make adjusting entries at the end of the accounting period. The balance of the merchandise inventory account is $200,000. If the firm is using the periodic inventory system, what does this balance represent?
What work sheet amounts are used to compute cost of goods sold?
Why are both the debit and credit amounts in the Adjustments columns on the Income Summary line of the work sheet extended to the Adjusted Trial Balance columns?
What is an unearned revenue?
Give three examples of unearned revenue.
List the five steps taken to prepare a work sheet.
What does the difference between the totals of the Income Statement columns represent? What does the difference between the Balance Sheet column totals represent?
A firm is preparing to make adjusting entries at the end of the accounting period. The balance of the merchandise inventory account is $100,000. If the firm is using the perpetual inventory system, what does this balance represent?
Sam Baker owns a business called Sam’s Sporting Goods. His beginning inventory as of January 1, 20--, was $47,000, and his ending inventory as of December 31, 20--, was $53,000. Set up T accounts for Merchandise Inventory and Income Summary and perform the year-end adjustment for Merchandise
Prepare the cost of goods sold section for Adams Gift Shop. The following amounts are known:Beginning merchandise inventory ....... $26,000Ending merchandise inventory ........... 23,000Purchases .................. 71,000Purchases returns and allowances ........ 3,500Purchases discounts
Set up T accounts for Cash, Unearned Ticket Revenue, and Ticket Revenue. Post the following two transactions to the appropriate accounts, indicating each transaction by letter:(a) Sold 1,500 season tickets at $30 each, receiving cash of $45,000.(b) An end-of-period adjustment is needed to recognize
The following partial work sheet is taken from Kevin's Gift Shop for the year ended December 31, 20--. The ending merchandise inventory is $50,000.1. Complete the Adjustments columns for the merchandise inventory.2. Extend the merchandise inventory to the Adjusted Trial Balance and Balance Sheet
From the following partial work sheet, indicate the dollar amount of beginning and ending merchandiseinventory:
The following partial work sheet is taken from the books of Kelly's Kittens, a local pet kennel, for the year ended December 31, 20--. Journalize the adjustments in a generaljournal.
Bhushan Building Supplies entered into the following transactions. Prepare journal entries under the perpetual inventory system.June 1 Purchased merchandise on account from Brij Builder’s Materials, $500,000.3 Purchased merchandise for cash, $400,000.5 Sold merchandise on account to Champa
On December 31, Anup Enterprises completed a physical count of its inventory. Although the merchandise inventory account shows a balance of $350,000, the physical count comes to $325,000. Prepare the appropriate adjusting entry under the perpetual inventory system.
The trial balance for the Seaside Kite Shop, a business owned by Joyce Kennington, is shown on page 548. Year-end adjustment information is as follows:(a and b) Merchandise inventory costing $30,000 is on hand as of December 31, 20--. (The periodic inventory system is used.)(c) Supplies remaining
The trial balance for Cascade Bicycle Shop, a business owned by David Lamond, is shown below. Year-end adjustment information is as follows:(a and b) Merchandise inventory costing $22,000 is on hand as of December 31, 20--. (The periodic inventory system is used.)(c) Supplies remaining at the end
The partial work sheet shown below is taken from the books of Stark Street Computers, a business owned by Logan Cowart, for the year ended December 31, 20--.REQUIRED1. Determine the adjusting entries by analyzing the difference between the adjusted trial balance and the trial balance.2. Journalize
The partially completed work sheet from the books of Lewis Music Store, a business owned by Hugo Lewis, for the year ended December 31, 20--, is shown on page 552.REQUIRED1. Analyze the work sheet and determine the adjusted trial balance and the adjusting entries by working backward from the Income
Sandra Owens owns a business called Sandra’s Sporting Goods. Her beginning inventory as of January 1, 20--, was $33,000, and her ending inventory as of December 31, 20--, was $36,000. Set up T accounts for Merchandise Inventory and Income Summary and perform the year-end adjustment for
Prepare the cost of goods sold section for Havens Gift Shop. The following amounts are known:Beginning merchandise inventory ....... $29,000Ending merchandise inventory ......... 27,000Purchases ................. 62,000Purchases returns and allowances ......... 2,800Purchases discounts
Set up T accounts for Cash, Unearned Ticket Revenue, and Ticket Revenue. Post the following two transactions to the appropriate accounts, indicating each transaction by letter:(a) Sold 1,200 season tickets at $20 each, receiving cash of $24,000.(b) An end-of-period adjustment is needed to recognize
The following partial work sheet is taken from Nicole's Gift Shop for the year ended December 31, 20--. The ending merchandise inventory is $37,000.1. Complete the Adjustments columns for the merchandise inventory.2. Extend the merchandise inventory to the Adjusted Trial Balance and Balance Sheet
From the following partial work sheet, indicate the dollar amount of beginning and ending merchandise inventory.
The following partial work sheet is taken from the books of Carmen's Collies, a local pet kennel, for the year ended December 31, 20--. Journalize the adjustments in a generaljournal.
Sunita Computer Supplies entered into the following transactions. Prepare journal entries under the perpetual inventory system.May 1 Purchased merchandise on account from Anju Enterprises, $200,000.8 Purchased merchandise for cash, $100,000.15 Sold merchandise on account to Salil’s Pharmacy for
On December 31, Anup Enterprises completed a physical count of its inventory. Although the merchandise inventory account shows a balance of $200,000, the physical count comes to $210,000. Prepare the appropriate adjusting entry under the perpetual inventory system.
A trial balance for the Basket Corner, a business owned by Linda Palermo, is shown on page 567. Year-end adjustment information is provided below. (a and b) Merchandise inventory costing $24,000 is on hand as of December 31, 20--.(The periodic inventory system is used.)(c) Supplies remaining at the
The trial balance for Oregon Bike Company, a business owned by Craig Moody, is shown on page 556. Year-end adjustment information is provided below. (a and b) Merchandise inventory costing $26,000 is on hand as of December 31, 20--.(The periodic inventory system is used.)(c) Supplies remaining at
The partial work sheet shown below is taken from the books of Burnside Auto Parts, a business owned by Barbara Davis, for the year ended December 31, 20--.REQUIRED1. Determine the adjusting entries by analyzing the difference between the adjusted trial balance and the trial balance.2. Journalize
The partial work sheet shown on page 559 is taken from the books of Diamond Music Store, a business owned by Ned Diamond, for the year ended December 31, 20--.REQUIRED1. Analyze the work sheet and determine the adjusted trial balance and the adjusting entries by working backward from the Income
A friend of yours recently opened Abracadabra, a sportswear shop specializing in monogrammed athletic gear. Most merchandise is special ordered for customers. However, a small inventory is on hand. Your friend does not understand why a physical inventory is necessary before preparing the financial
Jason Tierro, an inventory clerk at Lexmar Company, is responsible for taking a physical count of the goods on hand at the end of the year. He has been performing this duty for several years. This year, Jason was very busy due to a shortage of personnel at the company, so he decided to just
John Neff owns and operates Waikiki Surf Shop. A year-end trial balance. Year-end adjustment data for the Waikiki Surf Shop are shown below. (a and b) A physical count shows merchandise inventory costing $45,000 on hand as of December 31, 20--. Neff uses the periodic inventory system.(c) Supplies
Block Food’s, a retail grocery store, has agreed to purchase all of its merchandise from Square Wholesalers. In return, Block receives a special discount on purchases. Over recent months, Square noticed that purchases by Block had been falling off. At first, Square simply thought that business
Davidson's Food Mart paid $1,200 in advance to the local newspaper for advertisements that will appear monthly. The following entry was made:At the end of the year, December 31, 20--, Davidson received notification that advertisements costing $800 had been run. Prepare the adjustingentry.
Ryan’s Fish House purchased supplies costing $3,000 for cash. This amount was debited to the supplies expense account. At the end of the year, December 31, 20--, an inventory showed that supplies costing $500 remained. Prepare the adjusting entry.
Describe the nature of the two forms of an income statement.
Name and describe the calculation of two measures that provide an indication of a business’s ability to pay current obligations.
Describe how to calculate the following ratios:(a) Return on owner’s equity(b) Accounts receivable turnover(c) Inventory turnover
Where is the information obtained that is needed in journalizing the closing entries?
Explain the function of each of the four closing entries made by Northern Micro.
What is the purpose of a post-closing trial balance?
What is the primary purpose of reversing entries?
What is the customary date for reversing entries?
What adjusting entries should be reversed?
Based on the information that follows, prepare the revenue section of a multiple-step income statement.Sales ............... $140,000Sales Returns and Allowances ..... 3,500Sales Discounts .......... 2,800
Based on the information that follows, prepare the cost of goods sold section of a multiple-step income statement.Merchandise Inventory, January 1, 20-- ......... $ 34,000Purchases ..................... 102,000Purchases Returns and Allowances ........... 4,200Purchases Discounts ................
STATEMENT Use the following information to prepare a multiple-step income statement, including the revenue section and the cost of goods sold section, for Rau Office Supplies for the year ended December 31, 20--.Sales ................. $148,300Sales Returns and Allowances ....... 1,380Sales
Based on the financial statements for Jackson Enterprises (income statement, statement of owner's equity, and balance sheet) shown on the next pages, prepare the following financial ratios. All sales are credit sales. The Accounts Receivable balance on January 1, 20--, was $21,600.1. Working
From the work sheet, prepare the following:1. Closing entries for Gimbel's Gifts and Gadgets in a general journal.2. A post-closing trialbalance.
From the work sheet used in Exercise 15-5A, identify the adjusting entry(ies) that should be reversed and prepare the reversing entry(ies).
Prepare entries for (a), (b), and (c) listed below using two methods. First, prepare the entries without making a reversing entry. Second, prepare the entries with the use of a reversing entry. Use T-accounts to assist your analysis.(a) Wages paid during 20-1 are $20,800.(b) Wages earned but not
Paulson's Pet Store completed the work sheet on page 600 for the year ended December 31, 20--. Owner's equity as of January 1, 20--, was $21,900. The current portion of Mortgage Payable is $500.REQUIRED1. Prepare a multiple-step income statement.2. Prepare a statement of owner's equity.3. Prepare a
Use the work sheet and financial statements prepared in Problem 15-8A. All sales are credit sales. The Accounts Receivable balance on January 1, 20--, was $3,800.REQUIREDPrepare the following financial ratios:(a) Working capital(b) Current ratio(c) Quick ratio(d) Return on owner’s equity(e)
Ellis Fabric Store shows the trial balance on page 601 as of December 31, 20-1. At the end of the year, the following adjustments need to be made:(a and b) Merchandise inventory as of December 31, $28,900.(c) Unused supplies on hand, $1,350.(d) Insurance expired, $300.(e) Depreciation expense for
Based on the information that follows, prepare the revenue section of a multiple-step income statement.Sales ............ $ 86,200Sales Returns and Allowances . 2,280Sales Discounts ....... 1,724
Based on the information that follows, prepare the cost of goods sold section of a multiple-step income statement.Merchandise Inventory, January 1, 20-- ... $13,800Purchases ................ 71,300Purchases Returns and Allowances ....... 3,188Purchases Discounts ............ 1,460Freight-In
Use the following information to prepare a multiple-step income statement, including the revenue section and the cost of goods sold section, for Aeito’s Plumbing Supplies for the year ended December 31, 20--.Sales ................ $166,000Sales Returns and Allowances ........ 1,620Sales Discounts
Based on the financial statements, shown on pages 603-604, for McDonald Carpeting Co. (income statement, statement of owner's equity, and balance sheet), prepare the following financial ratios. All sales are credit sales. The balance of Accounts Receivable on January 1, 20--, was $6,800.1. Working
From the work sheet on page 605 prepare the following:1. Closing entries for Balloons and Baubbles in a general journal.2. A post-closing trialbalance.

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