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Accounting Tools For Business Decision Making 3rd Edition Paul D. Kimmel - Solutions
Goods costing $1,900 are purchased on account on July 15 with credit terms of 2/10, n/30. On July 18 the purchaser receives a $200 credit memo from the supplier for damaged goods. Give the journal entry on July 24 to record payment of the balance due within the discount period.
Medina Company reports net sales of $800,000, gross profit of $560,000, and net income of $260,000. What are its operating expenses?
Allison Company has always provided its customers with payment terms of 1/10, n/30. Members of its sale force have commented that competitors are offering customers 2/10, n/45. Explain what these terms mean, and discuss the implications to Allison of switching its payment terms to those of its
In its year-end earnings announcement press release, Optimistic Corp. announced that its earnings increased by $15 million relative to the previous year. This represented a 20% increase. Inspection of its income statement reveals that the company reported a $20 million gain under “Other revenues
Tim Messer, director of marketing, wants to reduce the selling price of his company’s products by 15% to increase market share. He says, “I know this will reduce our gross profit rate, but the increased number of units sold will make up for the lost margin.” Before this action is taken, what
Benny Kat is considering investing in Stevenson Pet Food Company. Stevenson’s net income increased considerably during the most recent year, even though many other companies in the same industry reported disappointing earnings. Benny wants to know whether the company’s earnings provide a
On July 15 a company purchases on account goods costing $1,900, with credit terms of 2/10, n/30. On July 18 the company receives a $200 credit memo from the supplier for damaged goods. Give the journal entry on July 24 to record payment of the balance due within the discount period assuming a
Presented here are the components in Pedersen Company€™s income statement.Determine the missingamounts.
Prior Company buys merchandise on account from Wood Company. The selling price of the goods is $900 and the cost of the goods sold is $630. Both companies use perpetual inventory systems. Journalize the transactions on the books of both companies.
Prepare the journal entries to record the following transactions on Ramirez Company’s books using a perpetual inventory system.(a) On March 2 Ramirez Company sold $800,000 of merchandise to Ikerd Company, terms 2/10, n/30. The cost of the merchandise sold was $540,000.(b) On March 6 Ikerd Company
From the information in BE5-3, prepare the journal entries to record these transactions on Ikerd Company’s books under a perpetual inventory system.
Carpenter Company provides this information for the month ended October 31, 2010: sales on credit $300,000; cash sales $150,000; sales discounts $5,000; and sales returns and allowances $22,000. Prepare the sales revenues section of the income statement based on this information.
Holmes Company sold goods with a total selling price of $800,000 during the year. It purchased goods for $380,000 and had beginning inventory of $70,000. A count of its ending inventory determined that goods on hand was $50,000. What was its cost of goods sold?
Assume that Lehman Company uses a periodic inventory system and has these account balances: Purchases $404,000; Purchase Returns and Allowances $11,000; Purchase Discounts $7,000; and Freight-in $16,000. Determine net purchases and cost of goods purchased.
Assume the same information as in BE5-8 and also that Lehman Company has beginning inventory of $60,000, ending inventory of $90,000, and net sales of $620,000. Determine the amounts to be reported for cost of goods sold and gross profit.
Maxfield Corporation reported net sales of $250,000, cost of goods sold of $150,000, operating expenses of $50,000, net income of $37,500, beginning total assets of $500,000, and ending total assets of $600,000. Calculate each of the following values and explain what they mean.(a) Profit margin
Davenport Corporation reported net sales $800,000; cost of goods sold $520,000; operating expenses $210,000; and net income $70,000. Calculate the following values and explain what they mean.(a) Profit margin ratio. (b) Gross profit rate.
Watson Corporation reported net income of $352,000, cash of $67,800, and net cash provided by operating activities of $221,200. What does this suggest about the quality of the company’s earnings? What further steps should be taken?
Prepare the journal entries to record these transactions on Kesler Company’s books using a periodic inventory system.(a) On March 2, Kesler Company purchased $800,000 of merchandise from Rice Company, terms 2/10, n/30.(b) On March 6 Kesler Company returned $110,000 of the merchandise purchased on
On October 5, Lane Company buys merchandise on account from O’Brien Company. The selling price of the goods is $5,000, and the cost to O’Brien Company is $3,000. On October 8, Lane returns defective goods with a selling price of $700 and a scrap value of $250. Record the transactions on the
Assume information similar to that in Do It! 5-1. That is: On October 5, Lane Company buys merchandise on account from O’Brien Company. The selling price of the goods is $5,000, and the cost to O’Brien Company is $3,000. On October 8, Lane returns defective goods with a selling price of $700
The following information is available for Juneau Corp. for the year ended December 31, 2010:Other revenues and gains ...... $ 12,700Other expenses and losses ....... 2,300Cost of goods sold ......... 156,000Operating expenses ........ 186,000Net sales ............. $552,000Prepare a
Grand Lake Corporation’s accounting records show the following at year-end December 31, 2010:Purchase Discounts ....... $ 5,700Freight-in ........... 8,400Freight-out .......... 11,100Purchases ............ 162,500Beginning Inventory ...... $31,720Ending Inventory ........
The following transactions are for Mack Company.1. On December 3 Mack Company sold $500,000 of merchandise to Pickert Co., terms 1/10, n/30. The cost of the merchandise sold was $320,000.2. On December 8 Pickert Co. was granted an allowance of $28,000 for merchandise purchased on December 3.3. On
Assume that on September 1 Office Depot had an inventory that included a variety of calculators. The company uses a perpetual inventory system. During September these transactions occurred.Sept. 6 Purchased calculators from Green Box Co. at a total cost of $1,620, terms n/30.9 Paid freight of $50
This information relates to Prophet Co.1. On April 5 purchased merchandise from Lombard Company for $25,000, terms 2/10, n/30.2. On April 6 paid freight costs of $900 on merchandise purchased from Lombard.3. On April 7 purchased equipment on account for $30,000.4. On April 8 returned some of April
On June 10 Hopson Company purchased $8,000 of merchandise from Gore Company, terms 3/10, n/30. Hopson pays the freight costs of $400 on June 11. Goods totaling $500 are returned to Gore for credit on June 12. On June 19 Hopson Company pays Gore Company in full, less the purchase discount. Both
The adjusted trial balance of Davisen Company shows these data pertaining to sales at the end of its fiscal year, October 31, 2010: Sales $900,000; Freight-out $12,000; Sales Returns and Allowances $18,000; and Sales Discounts $13,500.InstructionsPrepare the sales revenues section of the income
Presented below is information for Yates Co. for the month of January 2010.Cost of goods sold ........$212,000Freight-out ............ 7,000Insurance expense ......... 12,000Salary expense ........... 62,000Rent expense ........... $32,000Sales discounts ........... 8,000Sales returns and
Financial information is presented here for two companies.Instructions(a) Fill in the missing amounts. Show all computations.(b) Calculate the profit margin ratio and the gross profit rate for each company.(c) Discuss your findings in part(b).
In its income statement for the year ended December 31, 2010, Maris Company reported the following condensed data.Instructions(a) Prepare a multiple-step income statement.(b) Calculate the profit margin ratio and gross profit rate.(c) In 2009 Maris had a profit margin ratio of 5%. Is the decline in
In its income statement for the year ended June 30, 2007, The Clorox Company reported the following condensed data (dollars in millions).Instructions(a) Prepare a multiple-step income statement.(b) Calculate the gross profit rate and the profit margin ratio and explain what each means.(c) Assume
The trial balance of Perine Company at the end of its fiscal year, August 31, 2010, includes these accounts: Beginning Merchandise Inventory $19,200; Purchases $154,000; Sales $190,000; Freight-in $8,000; Sales Returns and Allowances $3,000; Freight-out $1,000; and Purchase Returns and Allowances
Below is a series of cost of goods sold sections for companies A, F, L, and V.InstructionsFill in the lettered blanks to complete the cost of goods soldsections.
Powderhorn Corporation reported sales of $257,000, net income of $45,300, cash of $9,300, and net cash provided by operating activities of $21,200. Accounts receivable have increased at three times the rate of sales during the last 3 years.Instructions(a) Explain what is meant by high quality of
This information relates to Emley Co.1. On April 5 purchased merchandise from Hatcher Company for $25,000, terms 2/10, net/30.2. On April 6 paid freight costs of $900 on merchandise purchased from Hatcher Company.3. On April 7 purchased equipment on account for $30,000.4. On April 8 returned some
Stein Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, Stein’s ledger showed Cash of $8,000 and Common Stock of $8,000.May 1 Purchased merchandise on account from Hilton Wholesale Supply for $8,000, terms 2/10, n/30.2 Sold merchandise
Goldenrod Warehouse distributes hardback books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. During the month of June the following merchandising transactions occurred.June 1 Purchased books on account for $960 (including freight) from Barnum Publishers, terms
At the beginning of the current season on April 1, the ledger of Wichita Pro Shop showed Cash $2,500; Merchandise Inventory $3,500; and Common Stock $6,000. The following transactions were completed during April 2010.Apr. 5 Purchased golf bags, clubs, and balls on account from Roland Co. $1,500,
Lowry Department Store is located in midtown Metropolis. During the past several years, net income has been declining because suburban shopping centers have been attracting business away from city areas. At the end of the company’s fiscal year on November 30, 2010, these accounts appeared in its
An inexperienced accountant prepared this condensed income statement for Hight Company, a retail firm that has been in business for a number of years.HIGHT COMPANYIncome StatementFor the Year Ended December 31, 2010RevenuesNet sales ............ $850,000Other revenues ........... 22,000
The trial balance of Save-Mart Wholesale Company contained the accounts shown at December 31, the end of the company's fiscal year.Adjustment data:1. Depreciation is $12,000 on buildings and $9,000 on equipment. (Both are operating expenses.)2. Interest of $4,500 is due and unpaid on notes payable
At the end of Kane Department Store’s fiscal year on November 30, 2010, these accounts appeared in its adjusted trial balance.Freight-in .................. $ 5,060Merchandise Inventory (beginning) ........ 42,200Purchases ................... 616,000Purchase Discounts ...............
Pierson Inc. operates a retail operation that purchases and sells snowmobiles, amongst other outdoor products. The company purchases all merchandise inventory on credit and uses a perpetual inventory system. The accounts payable account is used for recording inventory purchases only; all other
At the beginning of the current season on April 1, the ledger of Wichita Pro Shop showed Cash $2,500; Merchandise Inventory $3,500; and Common Stock $6,000.These transactions occured during April 2010.Apr. 5 Purchased golf bags, clubs, and balls on account from Roland Co. $1,500, terms 3/10, n/60.7
Cordell Distributing Company completed these merchandising transactions in the month of April. At the beginning of April, the ledger of Cordell showed Cash of $9,000 and Common Stock of $9,000.Apr. 2 Purchased merchandise on account from Lang Supply Co. $8,300, terms 2/10, n/30.4 Sold merchandise
Travelers Warehouse distributes suitcases to retail stores and extends credit terms of 1/10, n/30 to all of its customers. During the month of July the following merchandising transactions occurred.July 1 Purchased suitcases on account for $2,700 from Valise Manufacturers, terms 2/15, n/30.3 Sold
At the beginning of the current season, the ledger of Colorado Tennis Shop showed Cash $2,500; Merchandise Inventory $1,700; and Common Stock $4,200. The following transactions were completed during April.Apr. 4 Purchased racquets and balls from Helton Co. $980, terms 2/10, n/30.6 Paid freight on
Flanagin Department Store is located near the Crystal Shopping Mall. At the end of the company’s fiscal year on December 31, 2010, the following accounts appeared in its adjusted trial balance.Accounts Payable ................ $ 73,300Accounts Receivable .............. 50,300Accumulated
A part-time bookkeeper prepared this income statement for Chowdhury Company for the year ending December 31, 2010.As an experienced, knowledgeable accountant, you review the statement and determine the following facts.1. Sales include $12,000 of deposits from customers for future sales orders.2.
The trial balance of Calhoun Fashion Center contained the following accounts at November 30, the end of the company's fiscal year.Adjustment data:1. Store supplies on hand total $3,500.2. Depreciation is $14,000 on the store equipment and $6,000 on the delivery equipment.3. Interest of $5,000 is
At the end of Eisenhaver Department Store’s fiscal year on December 31, 2010, these accounts appeared in its adjusted trial balance.Freight-in ............... $ 5,600Merchandise Inventory (beginning) ...... 40,500Purchases ............... 456,000Purchase Discounts ............ 12,000Purchase
Barbara Brislen operates a clothing retail operation. She purchases all merchandise inventory on credit and uses a perpetual inventory system. The accounts payable account is used for recording inventory purchases only; all other current liabilities are accrued in separate accounts. You are
At the beginning of the current season, the ledger of Colorado Tennis Shop showed Cash $2,500; Merchandise Inventory $1,700; and Common Stock $4,200. The following transactions were completed during April.Apr. 4 Purchased racquets and balls from Helton Co. $980, terms 2/10, n/30.6 Paid freight on
On December 1, 2010, Sleezer Distributing Company had the following account balances.During December the company completed the following summary transactions.Dec. 6 Paid $1,600 for salaries due employees, of which $600 is for December and $1,000 is for November salaries payable.8 Received $1,800
The July 31, 2006, issue of the Wall Street Journal includes an article by Justin Lahart titled “Ahead of the Tape.”InstructionsRead the article and answer the following questions.(a) During the period discussed in the article, by what percentage did sales increase? By what percentage did
Three years ago Sue Gilligan and her brother-in-law Dan Laurent opened Mallmart Department Store. For the first 2 years, business was good, but the following condensed income statement results for 2010 were disappointing.Sue believes the problem lies in the relatively low gross profit rate of 20%.
Angie Oaks was just hired as the assistant treasurer of Yorkshire Stores, a specialty chain store company that has nine retail stores concentrated in one metropolitan area. Among other things, the payment of all invoices is centralized in one of the departments Angie will manage. Her primary
There are many situations in business where it is difficult to determine the proper period in which to record revenue. Suppose that after graduation with a degree in finance, you take a job as a manager at a consumer electronics store called Atlantis Electronics. The company has expanded rapidly in
Steve Rondelli, a fellow student, contends that the double-entry system means each transaction must be recorded twice. Is Steve correct? Explain.
Marie Likert, a beginning accounting student, believes debit balances are favorable and credit balances are unfavorable. Is Marie correct? Discuss.
Pete Riser is confused about how accounting information flows through the accounting system. He believes information flows in this order:(a) Debits and credits are posted to the ledger.(b) Accounting transaction occurs.(c) Information is entered in the journal.(d) Financial statements are
During 2010, Bleeker Corp. entered into the following transactions.1. Borrowed $60,000 by issuing bonds.2. Paid $9,000 cash dividend to stockholders.3. Received $17,000 cash from a previously billed customer for services provided.4. Purchased supplies on account for $3,100.Using the following
During 2010, Estes company entered into the following transactions.1. Purchased property, plant, and equipment for $286,176 cash.2. Issued common stock to investors for $137,590 cash.3. Purchased inventory of $77,662 on account.Using the following tabular analysis, show the effect of each
Transactions for Marquis Company for the month of June are presented next. Identify the accounts to be debited and credited for each transaction.June 1 Issues common stock to investors in exchange for $5,000 cash.2 Buys equipment on account for $1,100.3 Pays $500 to landlord for June rent.12 Bills
Terry Rolen, a fellow student, is unclear about the basic steps in the recording process. Identify and briefly explain the steps in the order in which they occur.
Ankiel Corporation has the following transactions during August of the current year. Indicate(a) The basic analysis and(b) The debit–credit analysis illustrated on pages 121–126.Aug. 1 Issues shares of common stock to investors in exchange for $10,000.4 Pays insurance in advance for 3 months,
Selected transactions for Martinez Company are presented on page 139 in journal form (without explanations). Post the transactions to Taccounts.
From the ledger balances below, prepare a trial balance for Trowman Company at June 30, 2010. All account balances are normal.Accounts Payable ........$ 3,000Cash .............. 5,400Common Stock ......... 18,000Dividends ........... 1,200Equipment ........... 15,000Service Revenue ..........
An inexperienced bookkeeper prepared the following trial balance that does not balance. Prepare a correct trial balance, assuming all account balances arenormal.
Selected transactions for Ruiz Advertising Company, Inc., are listed here.1. Issued common stock to investors in exchange for cash received from investors.2. Paid monthly rent.3. Received cash from customers when service was provided.4. Billed customers for services performed.5. Paid dividend to
McBride Company entered into these transactions during May 2010.1. Purchased computers for office use for $30,000 from Dell on account.2. Paid $4,000 cash for May rent on storage space.3. Received $12,000 cash from customers for contracts billed in April.4. Provided computer services to Brieske
During 2010, its first year of operations as a delivery service, Lopez Corp. entered into the following transactions.1. Issued shares of common stock to investors in exchange for $100,000 in cash.2. Borrowed $45,000 by issuing bonds.3. Purchased delivery trucks for $60,000 cash.4. Received $16,000
A tabular analysis of the transactions made during August 2010 by Witten Company during its first month of operations is shown below. Each increase and decrease in stockholders€™ equity is explained.Instructions(a) Describe each transaction.(b) Determine how much stockholders€™
The tabular analysis of transactions for Witten Company is presented in E3-4.InstructionsPrepare an income statement and a retained earnings statement for August and a classified balance sheet at August 31, 2010.
Selected transactions for Loving Home, an interior decorator corporation, in its first month of business, are as follows.1. Issued stock to investors for $15,000 in cash.2. Purchased used car for $8,000 cash for use in business.3. Purchased supplies on account for $300.4. Billed customers $3,600
This information relates to Pickert Real Estate Agency. Oct. 1 Stockholders invest $30,000 in exchange for common stock of the corporation.2 Hires an administrative assistant at an annual salary of $42,000.3 Buys office furniture for $4,600, on account.6 Sells a house and lot for M.E. Petty;
Transaction data for Pickert Real Estate Agency are presented in E3-7.InstructionsJournalize the transactions. Do not provide explanations.
Transaction data and journal entries for Pickert Real Estate Agency are presented in E3-7 and E3-8.Instructions(a) Post the transactions to T accounts.(b) Prepare a trial balance at October 31, 2010.
Selected transactions for A. B. Coors Corporation during its first month in business are presented below.Sept. 1 Issued common stock in exchange for $20,000 cash received from investors.5 Purchased equipment for $10,000, paying $2,000 in cash and the balance on account.25 Paid $5,000 cash on
The T accounts on page 143 summarize the ledger of Sutton's Gardening Company, Inc. at the end of the first month of operations.Instructions(a) Prepare in the order they occurred the journal entries (including explanations) that resulted in the amounts posted to the accounts.(b) Prepare a trial
Selected transactions from the journal of Gipson Inc. during its first month of operations are presented here.Instructions(a) Post the transactions to T accounts.(b) Prepare a trial balance at August 31,2010.
Here is the ledger for Brumbaugh Co.Instructions(a) Reproduce the journal entries for only the transactions that occurred on October 1, 10, and 20, and provide explanations for each.(b) Prepare a trial balance at October 31, 2010.
The bookkeeper for Biggio Corporation made these errors in journalizing and posting.1. A credit posting of $400 to Accounts Receivable was omitted.2. A debit posting of $750 for Prepaid Insurance was debited to Insurance Expense.3. A collection on account of $100 was journalized and posted as a
The accounts in the ledger of Thornton Delivery Service contain the following balances on July 31, 2010.Instructions(a) Prepare a trial balance with the accounts arranged as illustrated in the chapter, and fill in the missing amount for Cash.(b) Prepare an income statement, a retained earnings
Review the transactions listed in E3-1 for Ruiz Advertising Company, and classify each transaction as either an operating activity, investing activity, or financing activity, or if no cash is exchanged, as a non-cash event.
Review the transactions listed in E3-3 for Lopez Corp. and classify each transaction as either an operating activity, investing activity, or financing activity, or if no cash is exchanged, as a non-cash event.
On April 1 Flint Hills Travel Agency Inc. was established. These transactions were completed during the month.1. Stockholders invested $25,000 cash in the company in exchange for common stock.2. Paid $900 cash for April office rent.3. Purchased office equipment for $2,800 cash.4. Purchased $200 of
Diana Kuhlmann started her own consulting firm, Kuhlmann Consulting Inc., on May 1, 2010. The following transactions occurred during the month of May. May 1 Stockholders invested $15,000 cash in the business in exchange for common stock.2 Paid $700 for office rent for the month.3 Purchased $500 of
Dick Reber created a corporation providing legal services, Dick Reber Inc., on July 1, 2010. On July 31 the balance sheet showed: Cash $4,000; Accounts Receivable $2,500; Supplies $500; Office Equipment $5,000; Accounts Payable $4,200; Common Stock $6,200; and Retained Earnings $1,600. During
Four Oaks Miniature Golf and Driving Range Inc. was opened on March 1 by Tiger Woodley. These selected events and transactions occurred during March.Mar. 1 Stockholders invested $50,000 cash in the business in exchange for common stock of the corporation.3 Purchased Arnie’s Golf Land for $38,000
Sunflower Architects incorporated as licensed architects on April 1, 2010. During the first month of the operation of the business, these events and transactions occurred:Apr. 1 Stockholders invested $15,000 cash in exchange for common stock of the corporation.1 Hired a secretary-receptionist at a
This is the trial balance of Slocombe Company on September 30.The October transactions were as follows.Oct. 5 Received $1,300 in cash from customers for accounts receivable due.10 Billed customers for services performed $5,100.15 Paid employee salaries $1,400.17 Performed $600 of services for
This trial balance of Titus Co. does not balance.Each of the listed accounts has a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors:1. Cash received from a customer on account was debited for $590, and Accounts Receivable was credited for
The Star-Lite Theater Inc. was recently formed. It began operations in March 2010. The Star-Lite is unique in that it will show only triple features of sequential theme movies. On March 1, the ledger of The Star-Lite showed: Cash $16,000; Land $38,000; Buildings (concession stand, projection room,
The bookkeeper for Sandy McClain€™s dance studio made the following errors in journalizing and posting.1. A credit to Supplies of $600 was omitted.2. A debit posting of $300 to Accounts Payable was inadvertently debited to Accounts Receivable.3. A purchase of supplies on account of $450
Hermesch Window Washing Inc. was started on May 1. Here is a summary of the May transactions.1. Stockholders invested $20,000 cash in the company in exchange for common stock.2. Purchased equipment for $7,000 cash.3. Paid $700 cash for May office rent.4. Paid $400 cash for supplies.5. Purchased
Richard Mordica started his own delivery service, Speedy Service Inc., on June 1, 2010. The following transactions occurred during the month of June. June 1 Stockholders invested $15,000 cash in the business in exchange for common stock.2 Purchased a used van for deliveries for $15,000. Richard
Nancy Grey opened Grey Company, a veterinary business in Neosho, Wisconsin, on August 1, 2010. On August 31 the balance sheet showed: Cash $9,000; Accounts Receivable $1,700; Supplies $600; Office Equipment $5,000; Accounts Payable $3,600; Common Stock $12,000; and Retained Earnings $700. During
RV Haven was started on April 1 by Tom Larkin. These selected events and transactions occurred during April.Apr. 1 Stockholders invested $70,000 cash in the business in exchange for common stock.4 Purchased land costing $50,000 for cash.8 Purchased advertising in local newspaper for $1,200 on
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