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Survey of Accounting 2nd edition Edmonds, old, Mcnair, Tsay - Solutions

Holiday, Inc., was started on January 1, 2009. The company experienced the following events during its first year of operation.1. Acquired $50,000 cash from the issue of common stock.2. Paid $12,000 cash to purchase land.3. Received $50,000 cash for providing tax services to customers.4. Paid
Jodi's Pet Store experienced the following events during its first year of operations, 2009.1. Acquired cash by issuing common stock.2. Purchased land with cash.3. Borrowed cash from a bank.4. Signed a contract to provide services in the future.5. Paid a cash dividend to the stockholders.6. Paid
Types of business entitiesRequiredGive an example of each of the following types of business entities.a. Service businessb. Merchandising businessc. Manufacturing business
The following business scenarios are independent from one another.1. Mary Poort purchased an automobile from Hayney Bros. Auto Sales for $9,000.2. John Rodman loaned $15,000 to the business in which he is a stockholder.3. First State Bank paid interest to Caleb Co. on a certificate of deposit that
Relating titles and accounts to financial statementsRequiredIdentify the financial statements on which each of the following items (titles, date descriptions, and accounts) appears by placing a check mark in the appropriate column. If an item appears on more than one statement, place a check mark
Susan's Consulting Services experienced the following transactions for 2010, the first year of operations, and 2011. Assume that all transactions involve the receipt or payment of cash.Transactions for 20101. Acquired $50,000 by issuing common stock.2. Received $100,000 for providing services to
Crawford Enterprises started the 2009 accounting period with $50,000 of assets (all cash), $18,000 of liabilities, and $4,000 of common stock. During the year, Crawford earned cash revenues of $38,000, paid cash expenses of $32,000, and paid a cash dividend to stockholders of $2,000. Crawford also
The following unrelated events are typical of those experienced by business entities.1. Acquire cash by issuing common stock.2. Borrow cash from the local bank.3. Pay office supplies expense.4. Make plans to purchase office equipment.5. Trade a used car for a computer with the same value.6. Pay
Doyer Corporation experienced the following transactions during 2010.1. Paid a cash dividend to the stockholders.2. Acquired cash by issuing additional common stock.3. Signed a contract to perform services in the future.4. Performed services for cash.5. Paid cash expenses.6. Sold land for cash at
Madden Company was started on January 1, 2011, and experienced the following events during its first year of operation.1. Acquired $30,000 cash from the issue of common stock.2. Borrowed $40,000 cash from National Bank.3. Earned cash revenues of $48,000 for performing services.4. Paid cash expenses
After closing on December 31, 2010, Direct Delivery Company (DDC) had $9,200 of assets, $4,000 of liabilities, and $1,400 of common stock. During January of 2011 DDC earned $1,500 of revenue and incurred $600 of expense. DDC closes it books each year on December 31.Requireda. Determine the balance
Understanding real world annual reportsRequiredUse the Topps Company’s annual report in Appendix B to answer the following questions.a. What was Topps’ net income for 2006?b. Did Topps’ net income increase or decrease from 2005 to 2006, and by how much?c. What was Topps’ accounting equation
The following selected financial information is available for ROC, Inc. Amounts are in millions of dollars.a. Divide the class into groups of four or five students each. Organize the groups into four sections. Assign Task 1 to the first section of groups, Task 2 to the second section, Task 3 to the
The following events occurred at five real-world companies. On March 17, 2008, H&R Block, Inc., announced that it had signed an agreement to sell the mortgage loan servicing business that is a part of its Option One Mortgage Corporation subsidiary for approximately $1 billion. Assume this sale was
The following information was drawn from the annual report of Machine Import Company (MIC):Requireda. Compute the percentage of growth in net income from 2009 to 2010. Can stockholders expect a similar increase between 2010 and 2011?b. Assuming that MIC collected $120,000 cash from earnings (net
Bob and his sister Marsha both attend the state university. As a reward for their successful completion of the past year (Bob had a 3.2 GPA in business, and Marsha had a 3.7 GPA in art), their father gave each of them 100 shares of The Walt Disney Company stock. They have just received their first
Assume that Jones has been working for you for five years. He has had an excellent work history and has received generous pay raises in response. The raises have been so generous that Jones is quite overpaid for the job he is required to perform. Unfortunately, he is not qualified to take on other,
The Curious Accountant story at the beginning of this chapter referred to the Coca-Cola Company and discussed who its stakeholders are. This chapter has introduced the basic structure of the four financial statements used by companies to annually keep their stakeholders informed as to their
What is the difference between the functions of long-term operational assets and investments?
What is the difference between tangible and intangible assets? Give an example of each.
What is the difference between goodwill and specifically identifiable intangible assets?
Define depreciation. What kind of asset depreciates?
Why are natural resources called wasting assets?
Is land a depreciable asset? Why or why not?
Define amortization. What kind of assets are amortized?
Explain the historical cost concept as it applies to longterm operational assets. Why is the book value of an asset likely to be different from the current market value of the asset?
What different kinds of expenditures might be included in the recorded cost of a building?
What is a basket purchase of assets? When a basket purchase is made, how is cost assigned to individual assets?
What are the stages in the life cycle of a long-term operational asset?
Explain straight-line, units-of-production, and doubledeclining- balance depreciation. When is it appropriate to use each of these depreciation methods?
What effect does the recognition of depreciation expense have on total assets? On total equity?
Does the recognition of depreciation expense affect cash flows? Why or why not?
MalMax purchased a depreciable asset. What would be the difference in total assets at the end of the first year if MalMax chooses straight-line depreciation versus doubledeclining-balance depreciation?
John Smith mistakenly expensed the cost of a long-term tangible fixed asset. Specifically, he charged the cost of a truck to a delivery expense account. How will this error affect the income statement and the balance sheet in the year in which the mistake is made?
What is salvage value?
What type of account (classification) is Accumulated Depreciation?
How is the book value of an asset determined?
Why is depreciation that has been recognized over the life of an asset shown in a contra account? Why not just reduce the asset account?
Assume that a piece of equipment cost $5,000 and had accumulated depreciation recorded of $3,000. What is the book value of the equipment? Is the book value equal to the fair market value of the equipment? Explain.
Why would a company choose to depreciate one piece of equipment using the double-declining-balance method and another piece of equipment using straight-line depreciation?
Why may it be necessary to revise the estimated life of a plant asset? When the estimated life is revised, does it affect the amount of depreciation per year? Why or why not?
How are capital expenditures made to improve the quality of a capital asset accounted for? Would the answer change if the expenditure extended the life of the asset but did not improve quality? Explain.
When a long-term operational asset is sold at a gain, how is the balance sheet affected? Is the statement of cash flows affected? If so, how?
Define depletion. What is the most commonly used method of computing depletion?
List several common intangible assets. How is the life determined that is to be used to compute amortization?
List some differences between U.S. GAAP and GAAP of other countries.
How do differences in expense recognition and industry characteristics affect financial performance measures?
Long-term operational assets used in a businessRequiredGive some examples of long-term operational assets that each of the following companies is likely to own: (a) Chico’s, (b) John Deere, (c) Amtrak, and (d) Malco Theatre.
Identifying long-term operational assetsRequiredWhich of the following items should be classified as long-term operational assets?a. Prepaid insuranceb. Coal minec. Office equipmentd. Notes receivable (short-term)e. Suppliesf. Copyrightg. Delivery vanh. Land held for investmenti. 10-year treasury
Classifying tangible and intangible assetsRequiredIdentify each of the following long-term operational assets as either tangible (T) or intangible (I).a. Pizza ovenb. Landc. Franchised. Filing cabinete. Copyrightf. Silver mineg. Office buildingh. Drill pressi. Patentj. Oil wellk. Deskl. Goodwill
Pine Logging Co. purchased an electronic saw to cut various types and sizes of logs. The saw had a list price of $160,000. The seller agreed to allow a 5 percent discount because Pine paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $4,200. Pine had to hire an individual
Illinois Company purchased a building and the land on which the building is situated for a total cost of $1,200,000 cash. The land was appraised at $600,000 and the building at $1,000,000.Requireda. What is the accounting term for this type of acquisition?b. Determine the amount of the purchase
Keenum Company purchased a restaurant building, land, and equipment for $900,000. Keenum paid $100,000 in cash and issued a 20-year, 8 percent note to First Bank for the balance. The appraised value of the assets was as follows.Land $ 240,000Building 600,000Equipment 360,000Total
The following events apply to R&L Logging Company for the 2010 fiscal year.1. The company started when it acquired $80,000 cash from the issue of common stock.2. Purchased a new skidder that cost $75,000 cash.3. Earned $98,000 in cash revenue.4. Paid $52,000 cash for salaries expense.5. Paid
Miller Company started operations by acquiring $200,000 cash from the issue of common stock. The company purchased equipment that cost $200,000 cash on January 1, 2010. The equipment had an expected useful life of five years and an estimated salvage value of $20,000. Miller Company earned $92,000
Cook Wrecker Co. purchased a truck on January 1, 2010, for $37,000. In addition, Cook paid sales tax and title fees of $2,000 for the truck. The truck is expected to have a four-year life and a salvage value of $7,000.Requireda. Using the straight-line method, compute the depreciation expense for
At the beginning of 2009, Expert Manufacturing purchased a new computerized drill press for $65,000. It is expected to have a five-year life and a $5,000 salvage value.Requireda. Compute the depreciation for each of the five years, assuming that the company uses(1) Straight-line depreciation.(2)
A plant asset with a cost of $50,000 and accumulated depreciation of $42,000 is sold for $6,000.Requireda. What is the book value of the asset at the time of sale?b. What is the amount of gain or loss on the disposal?c. How would the sale affect net income (increase, decrease, no effect) and by how
On January 1, 2010, Reese Enterprises purchased a parcel of land for $22,000 cash. At the time of purchase, the company planned to use the land for future expansion. In 2011, Reese Enterprises changed its plans and sold the land.Requireda. Assume that the land was sold for $25,000 in 2010.(1) Show
Copy Service Co. purchased a new color copier at the beginning of 2010 for $42,000. The copier is expected to have a five-year useful life and a $6,000 salvage value. The expected copy production was estimated at 2,000,000 copies. Actual copy production for the five years was as follows.2010
On January 1, 2010, Miller Machining Co. purchased a compressor and related installation equipment for $56,000. The equipment had a three-year estimated life with a $5,000 salvage value. Straight-line depreciation was used. At the beginning of 2012, Miller revised the expected life of the asset to
Uber’s Shredding Service has just completed a minor repair on a shredding machine. The repair cost was $1,200, and the book value prior to the repair was $5,000. In addition, the company spent $9,000 to replace the roof on a building. The new roof extended the life of the building by five years.
Commercial Construction Company purchased a forklift for $115,000 cash. It had an estimated useful life of four years and a $5,000 salvage value. At the beginning of the third year of use, the company spent an additional $10,000 that was related to the forklift. The company€™s financial
On January 1, 2010, Grayson Construction Company overhauled four cranes resulting in a slight increase in the life of the cranes. Such overhauls occur regularly at two-year intervals and have been treated as maintenance expense in the past. Management is considering whether to capitalize this
Define merchandise inventory. What types of costs are included in the Merchandise Inventory account?
Southwest Sand and Gravel paid $800,000 to acquire 1,000,000 cubic yards of sand reserves. The following statements model reflects Southwest's financial condition just prior to purchasing the sand reserves. The company extracted 420,000 cubic yards of sand in year 1 and 360,000 cubic yards in year
Nevada's Manufacturing paid cash to purchase the assets of an existing company. Among the assets purchased were the following items.Patent with 5 remaining years of legal life ...... $32,000Goodwill ................... 36,000Nevada's financial condition just prior to the purchase of these assets is
Be Sands purchased the business Regional Supply Co. for $285,000 cash and assumed all liabilities at the date of purchase. Regional's books showed assets of $280,000, liabilities of $40,000, and equity of $240,000. An appraiser assessed the fair market value of the tangible assets at $270,000 at
American Greetings Corporation manufactures and sells greeting cards and related items such as gift wrapping paper. CSX Corporation is one of the largest railway networks in the nation. The following data were taken from one of the companies€™ December 28, 2007, annual report and from the
Moon Co., Inc., made several purchases of long-term assets in 2010. The details of each purchase are presented here.New Office Equipment1. List price: $60,000; terms: 2/10 n/30; paid within discount period.2. Transportation-in: $1,600.3. Installation: $2,200.4. Cost to repair damage during
NEC Company began operations when it acquired $60,000 cash from the issue of common stock on January 1, 2008. The cash acquired was immediately used to purchase equipment for $60,000 that had a $5,000 salvage value and an expected useful life of four years. The equipment was used to produce the
The following transactions pertain to ALFA Solutions, Inc. Assume the transactions for the purchase of the computer and any capital improvements occur on January 1 each year.20101. Acquired $50,000 cash from the issue of common stock.2. Purchased a computer system for $30,000. It has an estimated
Swanson Service Company purchased a copier on January 1, 2011, for $18,000 and paid an additional $500 for delivery charges. The copier was estimated to have a life of four years or 800,000 copies. Salvage was estimated at $2,500. The copier produced 230,000 copies in 2011 and 250,000 copies in
One Hour Laundry Services purchased a new steam press machine on January 1, for $45,000. It is expected to have a five-year useful life and a $5,000 salvage value. One Hour expects to use the equipment more extensively in the early years.Requireda. Calculate the depreciation expense for each of the
Brees Corporation purchased a delivery van for $35,500 in 2010. The firm's financial condition immediately prior to the purchase is shown in the following horizontal statements model.The van was expected to have a useful life of 150,000 miles and a salvage value of $5,500. Actual mileage was as
Three different companies each purchased a machine on January 1, 2008, for $42,000. Each machine was expected to last five years or 200,000 hours. Salvage value was estimated to be $2,000. All three machines were operated for 50,000 hours in 2008, 55,000 hours in 2009, 40,000 hours in 2010, 44,000
Favre Exploration Corporation engages in the exploration and development of many types of natural resources. The company has engaged in the following activities:Jan. 1, 2010 Purchased a coal mine estimated to contain 200,000 tons of coal for $900,000.Feb. 1, 2010 Purchased a silver mine estimated
Sam's Outdoor, Inc., recorded the following transactions over the life of a piece of equipment purchased in 2010.Jan. 1, 2010 Purchased the equipment for $39,000 cash. The equipment is estimated to have a five-year life and $4,000 salvage value and was to be depreciated using the straight-line
Shaw Manufacturing paid $62,000 to purchase a computerized assembly machine on January 1, 2008. The machine had an estimated life of eight years and a $2,000 salvage value. Shaw's financial condition as of January 1, 2011, is shown in the following financial statements model. Shaw uses the
Le Gormet Company purchased a fast-food restaurant for $1,700,000. The fair market values of the assets purchased were as follows. No liabilities were assumed.Equipment ...... $420,000Land ........ 300,000Building ....... 650,000Franchise (5-year life) . 120,000RequiredCalculate the amount of
Green Leaf purchased the assets of Flower Co. for $1,200,000 in 2010. The estimated fair market value of the assets at the purchase date was $1,000,000. Goodwill of $200,000 was recorded at purchase. In 2012, because of negative publicity, one-half of the goodwill purchased from Flower Co. was
Cooper Tire Rubber Company claims to be the fourth largest tire manufacturer in North America. Goodyear Tire & Rubber Company is the largest tire manufacturer in North America. The following information was taken from these companies€™ December 31, 2007, annual reports. All dollar amounts
Understanding real-world annual reportsRequiredUse the Topps Company’s annual report in Appendix B to answer the following questions.a. What method of depreciation does Topps use?b. What types of intangible assets does Topps have?c. What are the estimated lives that Topps uses for the various
Sweet’s Bakery makes cakes, pies, and other pastries that it sells to local grocery stores. The company experienced the following transactions during 2010.1. Started business by acquiring $60,000 cash from the issue of common stock.2. Purchased bakery equipment for $46,000.3. Had sales in 2010
The following ratios are for four companies in different industries. Some of these ratios have been discussed in the textbook; others have not, but their names explain how the ratio was computed. The four sets of ratios, presented randomly, areThe four companies to which these ratios relate, listed
Campus Video Games (CVG) was started on January 1, 2010, when it acquired $62,500 cash from the issue of common stock. The company immediately purchased video games that cost $62,500 cash. The games had an estimated salvage value of $7,500 and an expected useful life of five years. CVG used the
Rucky Company and Stone Company experienced the exact same set of economic events during 2010. Both companies purchased machines on January 1, 2010. Except for the effects of this purchase, the accounting records of both companies had the following accounts and balances.As of January 1, 2010Total
What is the difference between a product cost and a selling and administrative cost?
How is the cost of goods available for sale determined?
Assume that you are examining the balance sheets of two companies and note the following information.Maxie Smith, a student who has had no accounting courses, remarks that Company A and Company B have the same amount of equipment.RequiredIn a short paragraph, explain to Maxie that the two companies
What portion of cost of goods available for sale is shown on the balance sheet? What portion is shown on the income statement?
When are period costs expensed? When are product costs expensed?
Several years ago, Wilson Blowhard founded a communications company. The company became successful and grew by expanding its customer base and acquiring some of its competitors. In fact, most of its growth resulted from acquiring other companies. Mr. Blowhard is adamant about continuing the
If PetCo had net sales of $600,000, goods available for sale of $450,000, and cost of goods sold of $375,000, what is its gross margin? What amount of inventory will be shown on its balance sheet?
Describe how the perpetual inventory system works. What are some advantages of using the perpetual inventory system? Is it necessary to take a physical inventory when using the perpetual inventory system?
This chapter discussed how companies in different industries often use different proportions of current versus long-term assets to accomplish their business objective. The technology revolution resulting from the silicon microchip has often been led by two well-known companies: Microsoft and Intel.
What are the effects of the following types of transactions on the accounting equation? Also identify the financial statements that are affected. (Assume that the perpetual inventory system is used.)a. Acquisition of cash from the issue of common stock.b. Contribution of inventory by an owner of a
Northern Merchandising Company sold inventory that cost $12,000 for $20,000 cash. How does this event affect the accounting equation? What financial statements and accounts are affected? (Assume that the perpetual inventory system is used.)
If goods are shipped FOB shipping point, which party (buyer or seller) is responsible for the shipping costs?
Define transportation-in. Is it a product or a period cost?

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