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Survey of Accounting 2nd edition Edmonds, old, Mcnair, Tsay - Solutions
What is the formula for computing interest revenue?
What is accrued interest?
How does the accrual of interest revenue or expense illustrate the matching concept?
Assets are listed on the balance sheet in the order of their liquidity. Explain this statement.
When is an adjusting entry for accrued interest generally recorded?
Assume that on July 1, 2010, Big Corp. loaned Little Corp. $12,000 for a period of one year at 6 percent interest. What amount of interest revenue will Big report for 2010? What amount of cash will Big receive upon maturity of the note?
In which section of the statement of cash flows will Big report the cash collected in question 23?
Why is it generally beneficial for a business to accept major credit cards as payment for goods and services even when the fee charged by the credit card company is substantial?
What types of costs do businesses avoid when they accept major credit cards as compared with handling credit sales themselves?
How is the accounts receivable turnover ratio computed? What information does the ratio provide?
How is the average number of days to collect accounts receivable computed? What information does the ratio provide?
Is accounting terminology standard in all countries? What term is used in the United Kingdom to refer to sales? What term is used to refer to inventory? What is a gearing ratio? Is it important to know about these differences?
What is the operating cycle of a business?
Gold’s Carpet Cleaning began operation on January 1, 2012. The company experienced the following events for its first year of operations.1. Provided $150,000 of cleaning services on account.2. Collected $115,000 cash from accounts receivable.3. Paid salaries of $42,000 for the year.4. Adjusted
Businesses using the allowance method for the recognition of uncollectible accounts expense commonly experience four accounting events.1. Recognition of revenue on account.2. Collection of cash from accounts receivable.3. Recognition of uncollectible accounts expense through a year-end adjusting
Pete’s Auto Service was started on January 1, 2010. The company experienced the following events during its first year of operation.Events affecting 20101. Provided $50,000 of repair services on account.2. Collected $35,000 cash from accounts receivable.3. Adjusted the accounting records to
Duffy Bros. uses the allowance method to account for bad debts expense. Duffy experienced the following four events in 2008.1. Recognition of $64,000 of service revenue on account.2. Collection of $56,000 cash from accounts receivable.3. Determination that $900 of its accounts were not collectible
The following account balances come from the records of Springfield Company.During the accounting period, Springfield recorded $32,000 of service revenue on account. The company also wrote off a $300 account receivable.Requireda. Determine the amount of cash collected from receivables.b. Determine
The accounts receivable balance for T&M Lumber at December 31, 2010, was $96,000. Also on that date, the balance in the Allowance for Doubtful Accounts was $3,600. During 2011, $2,400 of accounts receivable were written off as uncollectible. In addition, T&M Lumber unexpectedly collected
Dixie Auto Parts sells new and used auto parts. Although a majority of its sales are cash sales, it makes a significant amount of credit sales. During 2012, its first year of operations, Dixie Auto Parts experienced the following.Sales on account $175,000Cash sales 550,000Collections
During the first year of operation, 2010, Holt Appliance Co. recognized $300,000 of service revenue on account. At the end of 2010, the accounts receivable balance was $58,000. For this first year in business, the owner believes uncollectible accounts expense will be about 1 percent of sales on
Posey Service Co. experienced the following transactions for 2011, its first year of operations:1. Provided $72,000 of services on account.2. Collected $56,000 cash from accounts receivable.3. Paid $30,000 of salaries expense for the year.4. Posey adjusted the accounts using the following
Guidry Inc. experienced the following events for the first two years of its operations.2012:1. Provided $80,000 of services on account.2. Provided $35,000 of services and received cash.3. Collected $65,000 cash from accounts receivable.4. Paid $21,000 of salaries expense for the year.5. Adjusted
Carlos, Incorporated, provided $86,000 of services during 2010. All customers paid for the services with major credit cards. Carlos turned the credit card receipts over to the credit card company immediately. The credit card company paid Carlos cash in the amount of face value less a 2 percent
Taylor Company accepted credit cards in payment for $7,250 of merchandise sold during March 2010. The credit card company charged Taylor a 3 percent service fee. The credit card company paid Taylor as soon as it received the invoices. Cost of goods sold amounted to $4,100.RequiredBased on this
Morris Enterprises loaned $60,000 to Faello Co. on October 1, 2012, for one year at 8 percent interest.RequiredShow the effects of the following transactions in a horizontal statements model like the one shown below.(1) The loan to Faello Co.(2) The adjusting entry at December 31, 2012.(3) The
On March 1, 2012, Sun Co. loaned $12,000 to Silena Co. for one year at 6 percent interest.RequiredAnswer the following questions.a. What is Sun Co.’s interest income for 2012?b. What is Sun Co.’s total amount of receivables at December 31, 2012?c. What amounts will be reported on Sun Co.’s
The following after-closing trial balance was drawn from the accounts of Oak Timber Co. as of December 31, 2011.Transactions for 20121. Acquired an additional $20,000 cash from the issue of common stock.2. Purchased $80,000 of inventory on account.3. Sold inventory that cost $65,000 for $110,000.
The following data were taken from Hershey Foods Corporation's 2007 annual report. All dollar amounts are in thousands.Requireda. Compute Hershey's accounts receivable ratios for 2007 and 2006.b. Compute Hershey's average days to collect accounts receivables for 2007 and 2006.c. Based on the ratios
The following transactions apply to Puretz Consulting for 2010, the first year of operation.1. Recognized $75,000 of service revenue earned on account.2. Collected $62,000 from accounts receivable.3. Adjusted accounts to recognize uncollectible accounts expense. Puretz uses the allowance method of
The following information pertains to Royal Carpet Company’s sales on account and accounts receivable.Accounts receivable balance, January 1, 2010 $ 64,500Allowance for doubtful accounts, January 1, 2010 2,800Sales on account, 2010 756,000Cost of goods sold, 2010 505,000Collections of accounts
Huggins Inc. experienced the following transactions for 2010, its first year of operations.1. Issued common stock for $60,000 cash.2. Purchased $210,000 of merchandise on account.3. Sold merchandise that cost $130,000 for $245,000 on account.4. Collected $215,000 cash from accounts receivable.5.
During the first year of operation, 2012, Steve's Garage recognized $256,000 of service revenue on account. At the end of 2012, the accounts receivable balance was $62,300. Even though this is his first year in business, the owner believes he will collect all but about 5 percent of the ending
Morris Supply Company had the following transactions in 2010.1. Acquired $50,000 cash from the issue of common stock.2. Purchased $210,000 of merchandise for cash in 2010.3. Sold merchandise that cost $140,000 for $265,000 during the year under the following terms.$ 60,000 Cash sales175,000 Credit
The following transactions apply to Baker Co. for 2010, its first year of operations.1. Issued $60,000 of common stock for cash.2. Provided $128,000 of services on account.3. Collected $113,200 cash from accounts receivable.4. Loaned $12,000 to BBC on September 1, 2010. The note had a one-year term
Effect of transactions on the elements of financial statementsRequiredIdentify each of the following independent transactions as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Also explain how each event affects assets, liabilities, stockholders€™
Multistep income statement and balance sheetRequiredUse the following information to prepare a multistep income statement and a classified balance sheet for Reza Equipment Co. for2010.
The following information comes from the accounts of Jersey Company.Requireda. There were $170,000 in sales on account during the accounting period. Write-offs of uncollectible accounts were $1,400. What was the amount of cash collected from accounts receivable? What amount of uncollectible
The following trial balance was prepared for Gifts, Etc., Inc., on December 31, 2010, after the closing entries were posted.Gifts, Etc. had the following transactions in 2011.1. Purchased merchandise on account for $360,000.2. Sold merchandise that cost $250,000 for $465,000 on account.3. Sold for
AutoZone, Inc., claims to be "the nation's leading specialty retailer and a leading distributor of automotive replacement parts and accessories." It sells replacement auto parts directly to the consumer. BorgWarner, Inc., has over 17,000 employees and produces automobile parts, such as
Understanding real-world annual reportsRequiredUse the Topps Company’s annual report in Appendix B to answer the following questions.a. How long did it take Topps to collect accounts receivable during the year ended February 25, 2006?b. Approximately what percentage of accounts receivable, as
The following selected financial information is available for three companies.Requireda. Divide the class into three sections and divide each section into groups of three to five students. Assign one of the companies to each of the sections.Group Tasks(1) Determine the missing amounts for your
Presented here are the average days to collect accounts receivable for four companies in different industries. The data are for 2007.RequiredWrite a brief memorandum that provides answers to the following questions.a. Why would a company that manufactures large expensive items such as cars (Ford)
The following information was drawn from the accounting records of Hedges and Latour.Requireda. Determine the average number of days to collect accounts receivable for each company.b. Which company is likely to incur more costs associated with extending credit?c. Identify and discuss some of the
The following accounting information exists for Anjou and Bartlett companies at the end of 2010.Requireda. For each company, compute the gross margin percentage and the average number of days to collect accounts receivable (use the net realizable value of receivables to compute the average days to
Paul Smith is opening a plumbing supply store in University City. He plans to sell plumbing parts and materials to both wholesale and retail customers. Since contractors (wholesale customers) prefer to charge parts and materials and pay at the end of the month, Paul expects he will have to offer
Alonzo Saunders owns a small training services company that is experiencing growing pains. The company has grown rapidly by offering liberal credit terms to its customers. Although his competitors require payment for services within 30 days, Saunders permits his customers to delay payment for up to
Using the most current annual reports or the Forms 10-K for Toro Company, complete the requirements below. To obtain the Forms 10-K use either the EDGAR system following the instructions in Appendix A or the companies’ websites. The annual reports can be found on the companies’
Compare and contrast public accounting with private accounting.
Explain the term stakeholder.
What type of compensation does an investor expect to receive in exchange for providing financial resources to a business? What type of compensation does a creditor expect from providing financial resources to an organization or business?
How do financial and managerial accounting differ?
What are the U.S. rules of accounting measurement called?
Is there a global GAAP (generally accepted accounting principles)? Explain your answer.
What body has the primary responsibility for establishing GAAP in the United States?
Distinguish between elements of financial statements and accounts.
What is the most basic form of the accounting equation?
What role do assets play in business profitability?
To whom do the assets of a business belong?
Explain the order of priority for asset distributions in a business liquidation.
Name the element used to describe the ownership interest in a business.
Name the element used to describe creditors’ claims on the assets of a business.
What is the accounting equation? Describe each of its three components.
Who ultimately bears the risk and collects the rewards associated with operating a business?
What does double-entry bookkeeping mean?
Identify the three types of accounting transactions discussed in this chapter. Provide an example of each type of transaction, and explain how it affects the accounting equation.
How does acquiring resources from owners affect the accounting equation?
Name the two primary components of stockholders’ equity.
How does earning revenue affect the accounting equation?
What are the three primary sources of assets?
What is included in retained earnings?
How does distributing assets (paying dividends) to owners affect the accounting equation?
What are the similarities and differences between dividends and expenses?
What four general-purpose financial statements do business enterprises use to communicate information to stakeholders?
Which of the general-purpose financial statements provides information about the enterprise at a specific designated date?
What causes a net loss?
What three categories of cash receipts and cash payments do businesses report on the statement of cash flows? Explain the types of cash flows reported in each category.
How are asset accounts usually arranged in the balance sheet?
What type of information does a business typically include in its annual report?
Accountants establish careers in either the public or private sectors of the economy.Requireda. Explain how a career in public accounting differs from a career in private accounting.b. Name and describe three areas of service provided by public accountants.c. Identify four typical duties performed
Assume that Brandy Company acquires $1,400 cash from creditors and $1,800 cash from investors (stockholders). The company then has an operating loss of $2,000 cash and goes out of business.Requireda. Define the term business liquidation.b. What amount of cash will Brandy’s creditors receive?c.
Carlos Bueso recently started a business. During the first few days of operation, Mr. Bueso transferred $30,000 from his personal account into a business account for a company he named Bueso Enterprises. Bueso Enterprises borrowed $40,000 from the State Bank of Texas. Mr. Bueso’s father-in-law,
Annual reports normally include an income statement, statement of changes in equity, balance sheet, and statement of cash flows.RequiredIdentify the financial statements on which each of the following titles or accounts would appear. If a title or an account appears on more than one statement,
Components of the accounting equationRequiredThe following three requirements are independent of each other.a. Michael’s Motors has assets of $4,550 and net assets of $3,200. What is the amount of liabilities? What is the amount of claims?b. Sweet Tooth Bakery has liabilities of $4,800 and equity
Olive Enterprises experienced the following events during 2010.1. Acquired cash from the issue of common stock.2. Paid cash to reduce the principal on a bank note.3. Sold land for cash at an amount equal to its cost.4. Provided services to clients for cash.5. Paid utilities expenses with cash.6.
Joseph Company was started in 2009 when it acquired $15,000 cash by issuing common stock. The cash acquisition was the only event that affected the business in 2009.Requireda. Write an accounting equation, and record the effects of the stock issue under the appropriate general ledger account
East Asia Company was started in 2011 when it issued a note to borrow $6,200 cash.Requireda. Write an accounting equation, and record the effects of the borrowing transaction under the appropriate general ledger account headings.b. What is the amount of net income reported on the income statement?
Ruff Company was started on January 1, 2009. During 2009, the company experienced the following three accounting events: (1) earned cash revenues of $13,500, (2) paid cash expenses of $9,200, and (3) paid a $500 cash dividend to its stockholders. These were the only events that affected the company
Classifying items for the statement of cash flowsRequiredIndicate how each of the following would be classified on the statement of cash flows as operating activities (OA), investing activities (IA), financing activities (FA), or not applicable (NA).a. Borrowed $8,000 cash from State Bank.b. Paid
At the beginning of 2011, T & M Corp.'s accounting records had the following general ledger accounts and balances.T & M Corp. completed the following transactions during 2011.1. Purchased land for $5,000 cash.2. Acquired $25,000 cash from the issue of common stock.3. Received $75,000 cash for
Dakota Company experienced the following events during 2010.1. Acquired $30,000 cash from the issue of common stock.2. Paid $12,000 cash to purchase land.3. Borrowed $10,000 cash.4. Provided services for $20,000 cash.5. Paid $1,000 cash for rent expense.6. Paid $15,000 cash for other operating
Vera Company experienced the following events during its first year of operations.1. Acquired $16,000 cash from the issue of common stock.2. Paid $3,500 cash for salary expenses.3. Borrowed $10,000 cash from New South Bank.4. Paid $6,000 cash to purchase land.5. Provided boarding services for
West Company was organized when it acquired $2,000 cash from the issue of common stock. During its first accounting period the company earned $800 of cash revenue and incurred $500 of cash expenses. Also, during the accounting period the company paid its owners a $200 cash dividend.Requireda.
JMD, Inc., purchased land in January 2009 at a cost of $270,000. The estimated market value of the land is $350,000 as of December 31, 2011.Requireda. Name the December 31, 2011, financial statement(s) on which the land will be shown.b. At what dollar amount will the land be shown in the financial
Sharp Company was started in 2009 when it acquired $25,000 cash by issuing common stock to Katie Sharp.Requireda. Was this event an asset source, use, or exchange transaction for Sharp Company?b. Was this event an asset source, use, or exchange transaction for Katie Sharp?c. Was the cash flow an
Firwood Company was started on January 1, 2010. During the month of January, Firwood earned $4,600 of revenue and incurred $3,000 of expense. Firwood closes its books on December 31 of each year.Requireda. Determine the balance in the Retained Earnings account as of January 31, 2010.b. Comment on
As of December 31, 2010, Thomas Company had total assets of $156,000, total liabilities of $85,600, and common stock of $52,400. During 2011 Thomas earned $36,000 of cash revenue, paid $20,000 for cash expenses, and paid a $2,000 cash dividend to the stockholders.Requireda. Determine the amount of
The December 31, 2009, balance sheet for Crow Company showed total stockholders’ equity of $82,500. Total stockholders’ equity increased by $53,400 between December 31, 2009, and December 31, 2010. During 2010 Crow Company acquired $13,000 cash from the issue of common stock. Crow Company paid
Tim's Auto Service experienced the following events during 2011.1. Purchased land for cash.2. Issued common stock for cash.3. Collected cash for providing auto repair services to customers.4. Paid a cash dividend to the stockholders.5. Paid cash for operating expenses.6. Paid cash to reduce the
Arnett Co. was started in 2011. During 2011, the company (1) acquired $11,000 cash from the issue of common stock, (2) earned cash revenue of $18,000, (3) paid cash expenses of $10,500, and (4) paid a $1,000 cash dividend to the stockholders.Requireda. Record these four events in a horizontal
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