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Using Financial Accounting Information The Alternative to Debits and Credits 7th Edition Gary A. Porter, Curtis L. Norton - Solutions

Prepare the journal entry to record each of the following independent transactions. (Use the number of the transaction in lieu of a date for identification purposes.)1. Services provided on account of $1,5302. Purchases of supplies on account for $1,3653. Services provided for cash of $7504.
Following is a list of transactions entered into during the first month of operations of Gardener Corporation, a new landscape service. Prepare in journal form the entry to record each transaction.April 1: Articles of incorporation are ﬁ led with the state, and 100,000 shares of common stock are
Refer to the income statement for Carnival Cruise Corporation shown in the chapter opener. Using the account titles reported there, prepare the journal entry for each of the following hypothetical transactions. Assume that all transactions include either a debit or a credit to Cash. 1. Fuel is
On June 1, Campbell Corporation purchased ten acres of land in exchange for a promissory note in the amount of $50,000. Using the formats shown in Example 3-6, prepare the journal entry to record this transaction in a general journal and post it to the appropriate general ledger accounts. The entry
The following events take place at Dillon’s Delivery Service: 1. Supplies are ordered from vendors who will deliver the supplies within the week.2. Vendors deliver supplies on account, payment due in 30 days.3. Customers’ deliveries are made, and the customers are billed.4. Trash is taken to
Expert Consulting Services Inc. was organized on March 1, 2010, by two former college roommates. The corporation provides computer consulting services to small businesses. The following transactions occurred during the first month of operations:March 2: Received contributions of $20,000 from each
The following financial statements are available for Elm Corporation for its first month of operations:RequiredUsing the format illustrated in Exhibit 3-1, prepare a table to summarize the transactions entered into by Elm Corporation during its first month of business. State any assumptions you
Identification of Events with Source Documents Many events are linked to a source document. The following is a list of events that occurred in an entity:a. Paid a one-year insurance policy.b. Paid employee payroll.c. Provided services to a customer on account.d. Identified supplies in the storeroom
Blue Jay Delivery Service is incorporated on January 2, 2010, and enters into the following transactions during its first month of operations:January 2: Filed articles of incorporation with the state and issued 100,000 shares of capital stock. Cash of $100,000 is received from the new owners for
Neveranerror Inc. was organized on June 2, 2010, by a group of accountants to provide accounting and tax services to small businesses. The following transactions occurred during the first month of business:June 2: Received contributions of $10,000 from each of the three owners of the business in
A list of accounts, with an identifying number for each, is provided. Following the list of accounts is a series of transactions entered into by a company during its first year of operations.RequiredFor each transaction, indicate the account or accounts that should be debited and credited.1. Cash2.
Four brothers organized Beverly Entertainment Enterprises on October 1, 2010. The following transactions occurred during the first month of operations:October 1: Received contributions of $10,000 from each of the four principal owners of the new business in exchange for shares of stock.October 2:
Refer to the table for Beverly Entertainment Enterprises in (1) of Problem 3-9.Required1. Prepare a trial balance at October 31, 2010.2. Prepare an income statement for the month ended October 31, 2010.3. Prepare a statement of retained earnings for the month ended October 31, 2010.4. Prepare a
Atkins Advertising Agency began business on January 2, 2010. The transactions entered into by Atkins during its first month of operations are as follows:a. Acquired its articles of incorporation from the state and issued 100,000 shares of capital stock in exchange for $200,000 in cash.b. Purchased
Refer to the transactions for Atkins Advertising Agency in Problem 3-11.Required1. Record each transaction directly in T accounts using the letters preceding the transactions to identify them in the accounts. Each account involved in the problem needs a separate T account.2. Prepare a trial balance
Malcolm Inc. was incorporated on January 1, 2010, with the issuance of capital stock in return for $90,000 of cash contributed by the owners. The only other transaction entered into prior to beginning operations was the issuance of a $75,300 note payable in exchange for building and equipment. The
Refer to the transactions for Blue Jay Delivery Service in Problem 3-6.Required1. Prepare journal entries on the books of Blue Jay to record the transactions entered into during the month. Ignore depreciation expense and interest expense.2. Prepare a trial balance at January 31, 2010.3. Prepare an
Refer to the transactions for Neveranerror Inc. in Problem 3-7.Required1. Prepare journal entries on the books of Neveranerror to record the transactions entered into during the month. Ignore depreciation expense and interest expense.2. Prepare a trial balance at June 30, 2010.3. Prepare the
What are the two major components of stockholders’ equity? Which accounts generally appear in each component?
Just Rolling Along Inc. was organized on May 1, 2010, by two college students who recognized an opportunity to make money while spending their days at a beach along Lake Michigan. The two entrepreneurs plan to rent bicycles and in-line skates to weekend visitors to the lakefront. The following
The following events take place at Anaconda Accountants Inc.: 1. Supplies are ordered from vendors, who will deliver the supplies within the week.2. Vendors deliver supplies on account, payment due in 30 days.3. New computer system is ordered.4. Old computer system is sold for cash.5. Services are
Beachway Enterprises was organized on June 1, 2010, by two college students who recognized an opportunity to make money while spending their days at a beach in Florida. The two entrepreneurs plan to rent beach umbrellas. The following transactions occurred during the first month of operations:June
Dynamic Services Inc. was organized on March 1, 2010, by two former college roommates. The corporation will provide computer tax services to small businesses. The following transactions occurred during the first month of operations:March 2: Received contributions of $10,000 from each of the two
The following financial statements are available for Oak Corporation for its first month of operations:RequiredDescribe as many transactions as you can that were entered into by Oak Corporation during the first month of business. Alternate Multi-ConceptProblems
Many events are linked to a source document. The following is a list of events that occurred in an entity:a. Paid a security deposit and six months’ rent on a building.b. Hired three employees and agreed to pay them $400 per week.c. Provided services to a customer for cash.d. Reported a ﬁ re
Overnight Delivery Inc. is incorporated on February 1, 2010, and enters into the following transactions during its first month of operations:February 15: Received $8,000 cash from customer accounts.February 26: Provided $16,800 of services on account during the month.February 27: Received a $3,400
Krittersbegone Inc. was organized on July 1, 2010, by a group of technicians to provide termite inspections and treatment to homeowners and small businesses. The following transactions occurred during the first month of business:July 2: Received contributions of $3,000 from each of the six owners
A list of accounts, with an identifying number for each, is provided. Following the list of accounts is a series of transactions entered into by a company during its first year of operations.RequiredFor each transaction, indicate the account or accounts that should be debited and credited.1. Cash2.
Three friends organized Rapid City Roller Rink on October 1, 2010. The following transactions occurred during the first month of operations:October 1: Received contribution of $22,000 from each of the three principal owners of the new business in exchange for shares of stock.October 2: Purchased
Refer to the table for Rapid City Roller Rink in (1) of Problem 3-9A.Required1. Prepare a trial balance at October 31, 2010.2. Prepare an income statement for the month ended October 31, 2010.3. Prepare a statement of retained earnings for the month ended October 31, 2010.4. Prepare a classified
Castle Consulting Agency began business in February 2010. The transactions entered into by Castle during its first month of operations are as follows:a. Acquired articles of incorporation from the state and issued 10,000 shares of capital stock in exchange for $150,000 in cash.b. Paid monthly rent
Refer to the transactions for Castle Consulting Agency in Problem 3-11A. Required1. Record each transaction directly in T accounts using the letters preceding the transactions to identify them in the accounts. Each account involved in the problem needs a separate T account.2. Prepare a trial
Russell Company was incorporated on January 1, 2010, with the issuance of capital stock in return for $120,000 of cash contributed by the owners. The only other transaction entered into prior to beginning operations was the issuance of a $50,000 note payable in exchange for equipment and fixtures.
Refer to the transactions for Overnight Delivery Inc. in Problem 3-6A.Required1. Prepare journal entries on the books of Overnight to record the transactions entered into during February.2. Explain why you agree or disagree with the following: The transactions on February 28 all represent expenses
Refer to the transactions for Krittersbegone Inc. in Problem 3-7A.Required1. Prepare journal entries on the books of Krittersbegone to record the transactions entered into during the month. Ignore depreciation expense.2. Prepare a classified balance sheet dated July 31, 2010. From the balance
Refer to the income statements for Kellogg’s and General Mills reproduced at the end of the book. Required1. Which is the largest expense for each company in the most recent year? What is its dollar amount? Is it logical that this would be the largest expense given the nature of each company’s
Refer to General Mills’s statement of cash ﬂ ows for the year ended May 31, 2009, as reproduced at the end of the book.Required1. What amount did the company spend on purchases of land, buildings, and equipment during the year? Determine the effect on the accounting equation from these
The following item appears in the current liabilities section of Carnival Cruise Corporation’s balance sheet at November 30, 2008:Customer deposits $2,519 millionIn addition, Note 2 to the financial statements includes the following:Revenue and Expense RecognitionGuest cruise deposits represent
Shelia Young started a real estate business at the beginning of January. After approval by the state for a charter to incorporate, she issued 1,000 shares of stock to herself and deposited $20,000 in a bank account under the name Young Properties. Because business was booming, she spent all of her
Loan Request Simon Fraser started a landscaping and lawn-care business in April 2010 by investing $20,000 cash in the business in exchange for capital stock. Because his business is in the Midwest, the season begins in April and concludes in September. He prepared the following trial balance (with
You are controller for an architectural firm whose accounting year ends on December 31. As part of the management team, you receive a year-end bonus directly related to the firm’s earnings for the year. One of your duties is to review the transactions recorded by the bookkeepers. A new bookkeeper
As assistant controller for a small consulting firm, you are responsible for recording and posting the daily cash receipts and disbursements to the ledger accounts. After you have posted the entries, your boss, the controller, prepares a trial balance and the financial statements. You make the
Corporations disclose the number of shares authorized, issued, and outstanding. What is the meaning of each of those terms? What causes a difference between the number of shares issued and the number outstanding?
Why do firms designate an amount as the par value of stock? Does par value indicate the selling price or market value of the stock?
If a firm has a net income for the year, will the balance in the Retained Earnings account equal the net income? What is the meaning of the balance of the account?
What is the meaning of the statement that preferred stock has a preference to dividends declared by the corporation? Do preferred stockholders have the right to dividends in arrears on preferred stock?
Why might some stockholders be inclined to buy preferred stock rather than common stock? What are the advantages of investing in preferred stock?
Why are common shareholders sometimes called residual owners when a company has both common and preferred stock outstanding?
When stock is issued in exchange for an asset, at what amount should the asset be reported? How could the fair market value be determined?
What is treasury stock? Why do firms use it? Where does it appear on a corporation’s financial statements?
When treasury stock is bought and sold, the transactions do not result in gains or losses reported on the income statement. What account or accounts are used instead? Why are no income statement amounts recorded?
Many firms operate at a dividend payout ratio of less than 50%. Why do firms not pay a larger percentage of income as dividends?
What is a stock dividend? How should it be recorded?
Would you rather receive a cash dividend or a stock dividend from a company? Explain.
What is the difference between stock dividends and stock splits? How should stock splits be recorded?
How is the book value per share calculated? Does the amount calculated as book value per share mean that stockholders will receive a dividend equal to the book value?
Can the market value per share of stock be determined by the information on the income statement?
What is the difference between a statement of stockholders’ equity and a retained earnings statement?
What is an advantage of organizing a company as a corporation rather than a partnership? Why don’t all companies incorporate? (Appendix)
What are some ways that partnerships could share income among the partners? (Appendix)
Components of Stockholders’ Equity Nash Company has the following accounts among the items on its balance sheet at December 31, 2010:Common Stock, $10 par, 10,000 shares authorized, 9,000 issued, 8,000 outstandingPreferred Stock, $100 par, 8%, cumulative, 1,000 shares authorized, issued, and
Common and Preferred Stock Fielder Company has the following accounts in the Stockholders’ Equity category of the balance sheet: Common Stock, $10 no par, 10,000 shares authorized, 9,000 issued, 8,000 outstanding Preferred Stock, $100 par, 8%, cumulative, participating, 1,000 shares authorized,
Stock Issuance Morris had the following transactions during 2010:1. Issued 2,000 shares of $10 par common stock for cash at $17 per share.2. Issued 1,000 shares of preferred stock to acquire land. The preferred stock has a par value of $5 per share. The land has been appraised at $7,000.3. Issued
Treasury Stock Indicate whether the following transactions increase, decrease, or have no effect on (a) Total assets and on (b) Total stockholders’ equity. _____ Issue 1,000 shares of common stock at $10 per share _____ Purchase 500 shares of common stock as treasury stock at $15 per share _____
Cash Dividends At December 31, 2010, Black Company has the following: Common Stock, $10 par, 10,000 shares authorized, 9,000 issued, 8,000 outstanding Preferred Stock, $100 par, 8%, cumulative, 1,000 shares authorized, issued, and outstanding The company did not pay any dividend during 2009 or
Cash and Stock Dividends At December 31, 2010, White Company has the following: Common Stock, $10 par, 10,000 shares authorized, 9,000 issued, 8,000 outstanding RequiredIndicate whether the following would increase, decrease, or have no effect on (a) assets, (b) retained earnings, and (c) total
Stock Dividends and Stock Splits At December 31, 2010, Green Company and Blue Company have identical amounts of common stock and retained earnings as follows: Common Stock, $10 par, 50,000 shares authorized, 9,000 issued, 9,000 outstanding Retained Earnings, $500,000 At December 31, 2011, Green
Develop Stockholders’ Equity Nash Company has the following accounts among the items on the balance sheet at January 1, 2010: Common Stock, $10 par, 10,000 shares authorized, 9,000 issued, 8,000 outstanding Preferred Stock, $100 par, 8%, cumulative, 1,000 shares authorized, issued, and
Book Value per Share Deer Company has the following amounts in the Stockholders’ Equity category of the balance sheet at December 31, 2010: Preferred Stock, $100 par, 8%, noncumulative (liquidation value of $110 per share) ..... $100,000 Paid-In Capital—Preferred .......... 50,000 Common
Cash Flow Effects For each of the following items, indicate (a) in what category of the statement of cash flows the item will be reported and (b) whether it will appear as a cash inflow, cash outflow, or neither. Issuance of common stock for cash Purchase of treasury stock Issuance of a stock
Sole Proprietorship (Appendix) Furyk Company opened business as a sole proprietorship on January 1, 2010. The owner contributed $500,000 cash on that date. During the year, the company had a net income of $10,000. The company purchased equipment of $100,000 during the year. The owner also withdrew
Stockholders’ Equity Accounts MJ Company has identified the following items. Indicate whether each item is included in an account in the Stockholders’ Equity category of the balance sheet and identify the account title. Also, indicate whether the item would increase or decrease stockholders’
Solve for Unknowns The Stockholders’ Equity category of Zache Company’s balance sheet appears below. Common stock, $10 par, 10,000 shares issued, 9,200 outstanding ............$ ? Additional paid-in capital ........? Total contributed capital .......$350,000 Retained earnings 100,000
Stock Issuance Horace Company had the following transactions during 2010, its first year of business.a. Issued 5,000 shares of $5 par common stock for cash at $15 per share.b. Issued 7,000 shares of common stock on May 1 to acquire a factory building from Barkley Company. Barkley had acquired the
The following transactions are for Weber Corporation in 2010:a. On March 1, the corporation was organized and received authorization to issue 5,000 shares of 8%, $100 par value preferred stock and 2,000,000 shares of $10 par value common stock.b. On March 10, Weber issued 5,000 shares of common
The Stockholders’ Equity category of Bradford Company’s balance sheet on January 1, 2010, appeared as follows:Common stock, $10 par, 10,000 shares issued and outstanding ......$100,000Additional paid-in capital .......................... 50,000Retained earnings .............................
Treasury Stock Transactions The Stockholders’ Equity category of Little Joe’s balance sheet on January 1, 2010, appeared as follows:Common stock, $5 par, 40,000 shares issued and outstanding ....$200,000Additional paid-in capital ................... 90,000Retained earnings
Cash Dividends Kerry Company has 1,000 shares of $100 par value, 9% preferred stock and 10,000 shares of $10 par value common stock outstanding. The preferred stock is cumulative and nonparticipating. Dividends were paid in 2006. Since 2006, Kerry has declared and paid dividends as follows: 2007
Cash Dividends The Stockholders’ Equity category of Jackson Company’s balance sheet as of January 1, 2010, appeared as follows:Preferred stock, $100 par, 8%,2,000 shares issued and outstanding ................$200,000Common stock, $10 par, 5,000 shares issued and outstanding .....
Stock Dividends The Stockholders’ Equity category of Worthy Company’s balance sheet as of January 1, 2010, appeared as follows:Common stock, $10 par, 40,000 shares issued and outstanding ....$400,000Additional paid-in capital ................. 100,000Retained earnings ....................
Stock Dividends versus Stock Splits Campbell Company wants to increase the number of shares of its common stock outstanding and is considering a stock dividend versus a stock split. The Stockholders’ Equity section of the firm’s most recent balance sheet appeared as follows:Common stock, $10
Stock Dividends and Stock Splits Whitacre Company’s Stockholders’ Equity section of the balance sheet on December 31, 2009, was as follows: Common stock, $10 par value, 60,000 shares issued and outstanding .. $ 600,000Additional paid-in capital .................... 480,000Retained earnings
Reporting Changes in Stockholders’ Equity Items On May 1, 2009, Ryde Inc. had common stock of $345,000, additional paid-in capital of $1,298,000, and retained earnings of $3,013,000. Ryde did not purchase or sell any common stock during the year. The company reported net income of $556,000 and
Comprehensive Income Assume that you are the accountant for Ellis Corporation, which has issued its 2010 annual report. You have received an inquiry from a stockholder who has questions about several items in the annual report, including why Ellis has not shown certain transactions on the income
Payout Ratio and Book Value per Share Divac Company has developed a statement of stockholders€™ equity for the year 2010 as follows:Divac€™s preferred stock is $100 par, 8% stock. If the stock is liquidated or redeemed, stockholders are entitled to $120 per share. There are no
Impact of Transactions Involving Issuance of Stock on Statement of Cash Flows From the following list, identify each item as operating (O), investing (I), financing (F), or not separately reported on the statement of cash flows (N). _____ Issuance of common stock for cash _____ Issuance of
Impact of Transactions Involving Treasury Stock on Statement of Cash Flows From the following list, identify each item as operating (O), investing (I), financing (F), or not separately reported on the statement of cash flows (N). _____ Repurchase of common stock as treasury stock _____ Reissuance
Impact of Transactions Involving Dividends on Statement of Cash Flows From the following list, identify each item as operating (O), investing (I), financing (F), or not separately reported on the statement of cash flows (N). _____ Payment of cash dividend on common stock _____ Payment of cash
Determining Dividends Paid on Statement of Cash Flows Clifford Company’s comparative balance sheet included dividends payable of $80,000 at December 31, 2009, and $100,000 at December 31, 2010. Dividends declared by Clifford during 2010 amounted to $400,000. Required1. Calculate the amount of
Sole Proprietorships (Appendix) Terry Woods opened Par Golf as a sole proprietor by investing $50,000 cash on January 1, 2010. Because the business was new, it operated at a net loss of $10,000 for 2010. During the year, Terry withdrew $20,000 from the business for living expenses. Terry also had
Partnerships (Appendix) Sports Central is a sporting goods store owned by Lewis, Jamal, and Lapin in partnership. On January 1, 2010, their capital balances were as follows: Lewis, Capital ...$20,000 Jamal, Capital .....50,000 Lapin, Capital .....30,000 During 2010, Lewis withdrew $5,000; Jamal,
Stockholders’ Equity Category Peeler Company was incorporated as a new business on January 1, 2010. The corporate charter approved on that date authorized the issuance of 1,000 shares of $100 par, 7% cumulative, nonparticipating preferred stock and 10,000 shares of $5 par common stock. On January
Evaluating Alternative Investments Ellen Hays received a windfall from one of her investments. She would like to invest $100,000 of the money in Linwood Inc., which is offering common stock, preferred stock, and bonds on the open market. The common stock has paid $8 per share in dividends for the
Dividends for Preferred and Common Stock The Stockholders’ Equity category of Greenbaum Company’s balance sheet as of December 31, 2010, appeared as follows: Preferred stock, $100 par, 8%, 1,000 shares issued and outstanding ... $ 100,000Common stock, $10 par, 20,000 shares issued and
Effect of Stock Dividend Favre Company has a history of paying cash dividends on its common stock. However, the firm did not have a particularly profitable year in 2010. At the end of the year, Favre found itself without the necessary cash for a dividend and therefore declared a stock dividend to
Dividends and Stock Splits On January 1, 2010, Frederiksen Inc.’s Stockholders’ Equity category appeared as follows: Preferred stock, $80 par value, 7%, 3,000 shares issued and outstanding ....$ 240,000 Common stock, $10 par value, 15,000 shares issued and outstanding ......150,000 Additional
Statement of Stockholders’ Equity Refer to all of the facts in Problem 11-1.RequiredDevelop a statement of stockholders’ equity for Peeler Company for 2010. The statement should start with the beginning balance of each stockholders’ equity account and explain the changes that occurred in each
Wal-Mart€™s Comprehensive Income Following is the consolidated statement of shareholders€™ equity of Wal-Mart Stores, Inc., for the year ended January 31, 2009:Required1. Which items were included in comprehensive income? If these items had been included on the income statement
Effects of Stockholders’ Equity Transactions on Statement of Cash Flows Refer to all of the facts in Problem 11-1.RequiredIndicate how each transaction affects the cash flow of Peeler Company by preparing the Financing Activities section of the 2010 statement of cash flows. Provide an explanation
Income Distribution of a Partnership (Appendix) Louise Abbott and Buddie Costello are partners in a comedy club business. The partnership agreement specifies the manner in which income of the business is to be distributed. Louise is to receive a salary of $20,000 for managing the club. Buddie is to

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