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Accounting concepts and applications 11th Edition Albrecht Stice, Stice Swain - Solutions
Shop Rite Services is ready to prepare its financial statements for the year ended December 31, 2012. The following information can be determined by analyzing the accounts:1. On August 1, 2012, Shop Rite received a $4,800 payment in advance for rental of office space. The rental period is for one
Consider the following two independent situations:1. On June 1, Hatch Company received $3,600 cash for a two-year subscription to its monthly magazine. The term of the subscription begins on June 1. Make the entry to record the receipt of the subscription on June 1. Also make the necessary
Consider the following items for Trigo Rock Inc.:1. On July 1 of the current year, Trigo Rock borrowed $225,000 at 8% interest. As of December 31, no interest expense has been recognized.2. On September 1 of the current year, Trigo Rock rented to another company some excess space in one of its
Davis Company opened a Web page design business on January 1 of the current year. The following information relates to Davis Company’s operations during the current year:1. On February 1, Davis Company rented a new office. Before moving in, it prepaid a year’s rent of $24,000 cash.2. On March
Wallin Enterprises disclosed the following information on December 31, 2012 (before any adjusting entries were made):1. In June, Wallin purchased an insurance premium for $54,000 for the 18 months beginning July 1, 2012.2. On November 1, Wallin received $12,000 from Judy Phan for six months of rent
Consider the following information related to the Silver Scholar Company:1. At the beginning of the year, the company had $245 in supplies on hand. During the year, the company purchased $1,950 in supplies. At the end of the year, the company had $760 in supplies on hand.2. The company pays its
Consider the following information related to Pendleton Consulting:1. On October 1, 2012, Pendleton Consulting entered into an agreement to provide consulting services for six months to Soelberg Company. Soelberg agreed to pay Pendleton $750 for each month of service. Payment will be made at the
Answer the following questions:1. If office supplies on hand amounted to $2,750 at the beginning of the period and total purchases of office supplies during the period amounted to $14,200, determine the ending balance of office supplies on hand if office supplies expense for the period amounted to
For each of the following accounts, indicate whether it would be found in the income statement or in the balance sheet.1. Cash2. Inventory3. Salaries Expense4. Prepaid Salaries5. Retained Earnings6. Office Supplies Expense7. Accounts Receivable8. Cost of Goods Sold9. Maintenance Expense10. Interest
Classify each of the following accounts as either a real account (R) or a nominal account (N):1. Cash2. Sales Revenue3. Accounts Receivable4. Cost of Goods Sold5. Prepaid Insurance6. Capital Stock7. Retained Earnings8. Insurance Expense9. Salaries Payable10. Interest Expense11. Insurance Premiums
The income statement for Basket Weavers Inc. for the year ended June 30, 2012, is provided.Basket Weavers Inc.Income StatementFor the Year Ended June 30, 2012Sales revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 786,000Cost of goods sold. .
Revenue and expense accounts of Reschke Training Services for November 30, 2012, are given as follows. Prepare a compound journal entry that will close the revenue and expense accounts to the retained earningsaccount.
Johstoneaux, Inc., reports the following numbers for 2012:Johstoneaux, Inc.Income StatementFor the Year Ended December 31, 2012Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 420,300Cost of goods sold. . . . . . . . . . . . . .
The following information relates to the Wycherly Company:Wycherly CompanyIncome StatementFor the Year Ended December 31, 2012Sales revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 906,000Interest revenue . . . . . . . . . . . . . . . . . .
A listing of account balances taken from the adjusted ledger account balances of Contemporary Literature Enterprises shows the following:All revenue and expense accounts have been closed to Retained Earnings. Dividends has not yet been closed.1. Prepare the closing entry for Dividends.2. Prepare a
Below is a listing of account balances taken from the adjusted ledger account balances of Jolley Manufacturing Corporation.All revenues and expense accounts have been closed to Retained Earnings. Dividends has not yet been closed.1. Prepare the closing entry for Dividends.2. Prepare a post-closing
In the course of your examination of the books and records of Karen Company, you find the following data:Salaries earned by employees in 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 61,000Salaries paid in 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The information presented below is for MedQuest Pharmacy, Inc.a. Salaries for the period December 26, 2012, through December 31, 2012, amounted to $17,840 and have not been recorded or paid. (Ignore payroll taxes.)b. Interest of $5,225 is payable for three months on an 11%, $190,000 loan and has
The information presented below is for Steff en Sweet Shop.a. Interest of $12,600 is payable for September 2012 through December 2012 on a 7%, $540,000 loan and has not been recorded.b. Rent of $76,900 was credited to an unearned revenue account when received. Of this amount, $37,750 is still
An analysis of cash records and account balances of Wells, Inc., for 2012 is as follows:Required:Determine the amounts that should be included on the 2012 income statement for(1) Wages expense,(2) Rent revenue, and(3) Insuranceexpense.
An analysis of cash records and account balances of High-Rise Properties, Inc., for 2012 is as follows:Required:Determine the amounts that should be included on the 2012 income statement for (1) Salaries expense, (2) Rent revenue, and (3) Insuranceexpense.
Using the format provided, for each account identify (1) whether the account is a balance sheet (B/S) or an income statement (I/S) account; (2) whether it is an asset (A), a liability (L), an owners€™ equity (OE), a revenue (R), or an expense (E) account; (3) whether the account is a
The income statement for Joe€™s Asphalt, Inc., for the year ended December 31, 2012, is as follows:Dividends of $36,000 were paid on December 30, 2012.Required:1. Give the entry required on December 31, 2012, to properly close the income statement accounts.2. Give the entry required to
The income statement for Jiff y Woodworkers Inc., for the year ended December 31, 2012, is as follows:Dividends of $24,800 were paid on December 30, 2012.Required:1. Give the entry required on December 31, 2012, to properly close the income statement accounts.2. Give the entry required to close the
The unadjusted and adjusted trial balances of White Company as of December 31, 2012, are presented below.Required:1. Prepare the journal entries that are required to adjust the accounts at December 31, 2012.2. Prepare the journal entry that is required to close the accounts at December 31,2012.
The bookkeeper for Boomer Sky Company accidentally pressed the wrong computer key and erased the amount of Retained Earnings. You have been asked to analyze the following data and provide some key numbers for the board of directors meeting, which is to take place in 30 minutes. With the exception
At the end of November 2012, the general ledger of Peacock Clothing Company showed the following amounts:Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $103,070Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,300Owners’ Equity . . . . . . . . . . . . .
The post-closing trial balance of Anderson Company at December 31, 2011, is shown here.During 2012, Anderson Company had the following transactions:a. Inventory purchases were $80,000, all on credit (debit Inventory).b. An additional $10,000 of capital stock was issued for cash.c. Merchandise that
Several doctors are considering the purchase of a small real estate business as an investment. Because you have some training in the accounting cycle, they have hired you to review the real estate company’s accounting records and to prepare a balance sheet and an income statement for their use.
Silva and Juanita Rodriquez are the owners of Year-Round Landscape, Inc., a small landscape and yard service business in southern California. The business is three years old and has grown significantly, especially during the past year. To sustain this growth, Year-Round Landscape must expand
Recently, corporate accounting scandals have brought about an increased scrutiny of executive compensation. Companies are being criticized for their role in accounting for stock options, inflated salaries, and personal loans to executives. However, there is one hidden treasure that should not be
Intellectual property refers to creations of the mind. Examples include inventions, symbols, names, images, logos, and designs used in commerce. For example, the annual reports for a mutual fund company will often list all fund managers with their associated professional credentials, academic
Using Wal-Mart’s 2009 Form 10-K contained in Appendix A, answer the following questions:1. Find note #1 in Wal-Mart’s annual report. Specifically locate the “Revenue Recognition” heading. In the case of shopping cards, does the company recognize revenue when the card is purchased?2. Sam’s
Selected financial statement information for Home Depot is given in the table below. Using this information, answer the following questions: (all numbers in millions) Retained earnings balance €” 01/29/06 $28,686 million1. Compute Home Depot€™s retained earnings balance at the
As many firms increasingly operate in an international economy, not only are companies having transactions with others in foreign countries, but those transactions are sometimes denominated in a foreign currency. That is, if a company in the United States makes a purchase from a company in Japan,
Jex Varner, chief financial officer of Wyndam, Inc., is involved in a meeting with the firm’s newly hired external auditors, Ernst & Price. The external auditors have noted several adjusting entries that they believe should be reflected in the current period’s financial statements.
Why is the accounting for payroll-related liabilities more complicated than the accounting for other current liabilities?
If the period of time covered by a company’s payroll does not coincide with the last day of the year for financial reporting, how is accounting for the payroll affected by this situation?
What is a compensated absence?
What danger is there in basing a manager’s bonus on reported net income?
Why might a company offer stock options to an employee instead of simply paying the employee cash? Why might the employee accept stock options instead of asking to be paid in cash?
For a stock option to be valuable at some future point in time, what must happen to the company’s stock price?
Severance benefits resulting from a company restructuring are reported as an expense in the period that the employees are terminated rather than when the benefits are actually paid. Why?
What is the difference between a defined contribution pension plan and a defined benefit pension plan?
How is a company’s pension obligation reported in its balance sheet?
List and briefly discuss the three components of pension expense discussed in the chapter.
In what ways do postretirement health-care and life insurance benefit plans differ from postretirement pension plans?
Why is an end-of-year adjusting entry for property taxes often necessary?
In your opinion, what is the primary objective of determining pretax financial accounting income? How does this objective differ from the objectives of determining taxable income as defined by the IRS?
When and how does a company record the amount owed to the government for income taxes for a given year?
What causes deferred income taxes?
What is the difference between a “contingent liability” and a “liability”?
Escalating environmental liabilities are a major concern of companies today. How does a company know when to record such liabilities?
Many companies spend a tremendous amount of money on research and development costs to continuously develop new products. How are such R&D costs accounted for?
XYZ Corporation pays for advertising costs all the time. Sometimes the company records these payments as assets, and sometimes it records them as expenses. Why would XYZ use different accounting treatments?
What types of items would be included on an income statement as “other revenues and expenses”?
More than ever before, tremendous attention is being paid to a company’s earnings per share number. Why do you think investors and creditors pay so much attention to earnings per share?
Using the following data, compute salaries expense.State withholding taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,100FICA taxes payable, employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,503Salaries payable . . . . . . . . . . . . . . . . .
Refer to the data in PE 8-1. Make the journal entry necessary to record salaries expense for the period.Data from PE 8-1State withholding taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,100FICA taxes payable, employer. . . . . . . . . . . . .
Refer to the data in PE 8-1. Compute payroll tax expense.Data from PE 8-1State withholding taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,100FICA taxes payable, employer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Refer to the data in PE 8-1. Make the journal entry necessary to record payroll tax expense for the period.Data from PE 8-1State withholding taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,100FICA taxes payable, employer. . . . . . . . . . . .
Refer to the data in PE 8-1. Make the journal entries necessary to record the payment of the payable accounts related to salaries expense and payroll tax expense to(1) The federal government,(2) The state government, and(3) The employees.Data from PE 8-1State withholding taxes payable . . . . . . .
Assume an employee earns $300 per day and accrues one sick day each month. Make the journal entry necessary at the end of the quarter to record the accrual of the sick days during the quarter.
The employee mentioned in PE 8-6 used two sick days. For simplicity, combine the various taxes into one account called “Various Taxes Payable.” The effective tax rate for all of the various taxes is 25%. Make the journal entry necessary to record the use of the sick days.
An employee receives stock options as part of her compensation package. Those options allow the employee to purchase 1,000 shares of stock for $40 per share. If after one year the stock price has increased to $58 per share and the employee elects to exercise all of her stock options, how much will
Because of a drop in demand for its products, Company A found it necessary to lay off 200 employees. The employment contract grants termination benefits worth an estimated $12,000 to each employee. Make the journal entry necessary to record the termination of the employees.
Identify which one of the following terms correctly matches the following definition: The amount a company’s pension obligation increases as a result of employees working and earning more benefits.a. Pension fundb. Pension-related interest costc. Service costd. Pension expensee. Return on pension
Companies A, B, and C report the following information:For each of the companies, determine the amount of the net pension asset/liability. Be sure to specify whether the amount is an asset or aliability.
Using the following numbers, compute pension expense.Expected return on fund assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 495Pension benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,200Service cost . . . . . . . . .
Periwinkle Company sold merchandise for $448; this price does not include sales tax. The state sales tax rate is 6.25%. Make the journal entry necessary to record this transaction.
Azure Company paid $10,800 in advance for one year of property taxes on September 24. The property taxes are for the one-year period beginning October 1. Make the journal entries necessary to record(1) The payment of the property taxes and(2) The year-end adjusting entry on December 31.
Which one of the following statements correctly describes income tax expense?a. The amount of cash paid for income taxes during the yearb. The amount of income tax owed as of the end of the yearc. The amount of cash that will be paid for income taxes next yeard. The amount of income taxes
Mauve Company invested $6,000 in a mutual fund on April 1. By December 31, the value of the mutual fund had increased to $7,300, and the company did not sell any portion of the mutual fund during the year. The company’s income tax rate is 30%. Prepare the journal entry necessary to record the
Shiraz Company invested $12,100 in a mutual fund on August 1. By December 31, the value of the mutual fund had declined to $8,800, and the company did not sell any portion of the mutual fund during the year. The company’s income tax rate is 35%. Prepare the journal entry necessary to record the
Which one of the following correctly describes the circumstances in which a contingent liability should be recognized as a liability in the financial statements?a. The chance of the future event occurring is remote.b. The chance of the future event occurring is possible.c. The chance of the future
Which one of the following statements is correct?a. When there is significant uncertainty about whether an expenditure should be capitalized or expensed, capitalize it.b. When there is significant uncertainty about whether an expenditure should be capitalized or expensed, expense it.c. Generally,
Using the following data, prepare a classified income statement. The income tax rate on all items is 25%. Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,000Sales returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Saratoga Company had 650,000 shares of stock outstanding throughout the year. In addition, as of January 1 the company had issued stock options that allowed employees to receive 75,000 shares of stock for free at a time of their choosing in the future. As of the end of the year, none of the options
Swordstone Market, Inc., has three employees, Kindal Boyd, Brent Debenham, and Cesar Gaona. Summaries of their 2012 salaries and withholdings are as follows:1. Prepare the summary entry for salaries paid to the employees for the year 2012.2. Assume that, in addition to FICA taxes, the employer has
Chris Anger is the president of Anger Company, and his brother, George Anger, is the vice president. Their compensation package includes bonuses of 5% for Chris Anger and 4% for George Anger of net income that exceeds $325,000. Net income for the year 2012 has just been computed to be $745,000.1.
On January 1, 2012, Magily Company established a stock option plan for its senior employees. A total of 60,000 options were granted that permit employees to purchase 60,000 shares of stock at $48 per share. Each option had a fair value of $11 on the date the options were granted. The market price
Refer to the information in E 8-24. If those holding stock options can purchase a share of stock for $48 and the market value of a share of stock on January 1, 2012, is $50, how can the option to purchase the share be worth $11? What factors would cause the option to be worth more than $2 ($50 –
Pension plan information for Brassfield Company is as follows:December 31, 2012Pension obligation liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,300,000December 31, 2012Pension fund assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chanelle Company reports the following pension information for 2012:Pension-related interest cost for the year . . . . . . . . . . . . . . . . . . . . . . . $ 65,000Pension fund assets, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 895,000Pension obligation liability,
The following pension information is for three different companies. For each company, compute the missing amount oramounts.
In June 2011, Distancia Company received a bill from the county government for property taxes on its land and buildings for the period July 1, 2011, through June 30, 2012. The amount of the tax bill is $24,750, and payment is due August 1, 2011. Distancia Company uses the calendar year for
Yosef Company began operating on January 1, 2012. At the end of the first year of operations, Yosef reported $750,000 income before income taxes on its income statement but only $660,000 taxable income on its tax return. This difference arose because $90,000 in income earned during 2012 was not yet
Joffy Company began operating on January 1, 2012. At the end of the first year of operations, Joffy reported $875,000 income before income taxes on its income statement but taxable income of $940,000 on its tax return. This difference arose because $65,000 in expenses incurred during 2012 were not
Rayn Company is involved in the following legal matters:a. A customer is suing Rayn for allegedly selling a faulty and dangerous product. Rayn’s attorneys believe that there is a 40% chance of Rayn’s losing the suit.b. A federal agency has accused Rayn of violating numerous employee safety
Determining whether an expenditure should be expensed or capitalized is often difficult. Consider each of the following independent situations and indicate whether you would recommend that the cost be expensed or capitalized as an asset. Explain your answer.1. Splash.com has spent $1.5 million for
Holdaway Company is preparing financial statements for the calendar year 2012. The following totals for each account have been verified as correct:Office Supplies on Hand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 820Insurance Expense . . . . . . . . . . . .
Use the following information to prepare an income statement for Fairchild Corporation for the year ended December 31, 2012. You should show separate classifications for revenues, cost of goods sold, gross margin, selling expenses, general and administrative expenses, operating income, other
Orange County Bank has three employees, Albert Myers, Juan Moreno, and Michi Endo. During January 2012, these three employees earned $6,000, $4,200, and $4,000, respectively. The following table summarizes the required withholding rates on each individual's income for the month of January:You are
Parley Pharmaceuticals pays its salespeople a base salary of $2,000 per month plus a commission. Each salesperson starts with a commission of 1.5% of total gross sales for the month. The commission is increased thereafter according to seniority and productivity, up to a maximum of 5%. Parley has
On January 1, 2012, Guaymas Company established a stock option plan for its senior employees. A total of 550,000 options were granted that permit employees to purchase 550,000 shares of stock at $23 per share. Each option had a fair value of $6 on the grant date. The market price for Guaymas stock
The following information is available from John Gammon Company relating to its defined benefit pension plan:Balances as of January 1, 2012:Pension obligation liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,300Pension fund assets . . . . . . . . . . . . . . . .
Marseille Company reported the following information relating to its pension plan for the years 2010 through 2013:Required:1. Compute the amount of pension expense to be reported on the income statement for each of the years 2011 through 2013.2. Determine the net pension amount to be reported on
Sandtrap Company recorded certain revenues of $12,000 and $16,000 on its books in 2010 and 2011, respectively. However, these revenues were not subject to income taxation until 2012. Company records reveal pretax financial accounting income and taxable income for the three-year period as
From the following information, prepare an income statement for Understory, Inc., for the year ended December 31,2012.
The following table represents portions of the income statements of Brinkerhoff Company for the years 2010–2012:Required:Fill in the missing numbers. Assume that gross margin is 40% of net salesrevenue.
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